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Estate of Izzo v. Vanguard Funding, LLC

United States District Court, E.D. New York

March 30, 2017

The Estate of GENNARO SALVATORE IZZO, GENNARO V. IZZO and the heirs of GENNARO SALVATORE IZZO, Plaintiffs,
v.
VANGUARD FUNDING, LLC f/k/a FIDELITY BORROWING MORTGAGE BANKERS, URBAN FINANCIAL GROUP, INC. a/k/a URBAN FINANCIAL OF AMERICA, REVERSE MORTGAGE SOLUTIONS INC. a/k/a SECURITY ONE LENDING, MCCABE WEISBERG & CONWAY, P.C., NATALIE GIRALDO, ESQ., DEANA CHELI, ESQ., TERRANCE J. MCCABE, ESQ., MARC S. WEISBERG, ESQ., EDWARD D. CONWAY, ESQ., LISA L. WALLACE, ESQ., LAURA H.G. SULLIVAN, ESQ., JANET Z. CHARLTON, ESQ., JOSEPH FILIPONE, RICHARD CACCIATORE, NANCY RADELMAN, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. MERS, DONNA AKINRELE, ESQ., LAURA SMITH, John Does 1-10 and Jane Does 1-10, which Doe defendants are not now known to the plaintiffs who played a roles on the affairs of the enterprise and participated in the operation and/or management of the enterprise, Defendants.

          David A. Bythewood, Esq. Attorney for the Plaintiffs

          Westerman Ball Ederer Miller & Sharfstein LLP Attorneys for the Defendants Vanguard Funding, LLC f/k/a Fidelity Borrowing Mortgage Bankers; Joseph Filipone; and Richard Cacciatore By: Richard F. Harrison, Esq., Of Counsel

          Fein Such & Crane, LLP Attorneys for the Defendants Urban Financial Group, Inc. a/k/a Urban Financial of America; Reverse Mortgage Solutions a/k/a Security One Lending; Mortgage Electronic Registration Systems, Inc. (MERS); and Laura Smith By: Andre S. Haynes, Esq., Of Counsel

          McCabe Weisberg & Conway, PC Attorneys for the Defendants McCabe Weisberg & Conway, PC; Natalie Giraldo, Esq.; Deanne Cheli, Esq.; Terrance J. McCabe, Esq.; Marc S. Weisberg, Esq.; Edward D. Conway, Esq.; Lisa L. Wallace, Esq.; Laura H.G. Sullivan, Esq.; Janet Z. Charlton, Esq.; and Donna Akinrele, Esq. By: Kiyam J. Poulson, Esq., Of Counsel

          Nancy Radelman Defendant

          MEMORANDUM OF DECISION & ORDER

          ARTHUR D. SPATT United States District Judge

         On December 11, 2015, the Estate (the “Estate”) of Gennaro S. Izzo (the “Decedent”), by its Executor Gennaro V. Izzo (“G.V. Izzo”), on its own behalf and on behalf of unnamed heirs (collectively, the “Plaintiffs”), commenced this action against the Defendants, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.; the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq.; the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., and its implementing regulations, namely, 12 C.F.R. § 266.33; the federal regulations pertaining to the Home Equity Conversion Mortgage statute, namely, 24 C.F.R. § 206; and multiple theories of New York statutory and common law liability.

         On July 2, 2016, the Court dismissed the complaint for failing to comply with Federal Rule of Civil Procedure (“Fed. R. Civ. P.”) 8 and granted the Plaintiffs leave to replead. See Estate of Izzo v. Vanguard Funding, LLC, No. 15-cv-7084, 2016 U.S. Dist. LEXIS 86567 (E.D.N.Y. July 2, 2016) (Spatt, J.).

         On July 25, 2016, the Plaintiffs filed an amended complaint.

         Presently before the Court is a series of motions seeking to dismiss the amended complaint.

         Namely, on August 2, 2016, the Defendants Vanguard Funding, LLC, formerly known as Fidelity Borrowing Mortgage Bankers (“Vanguard”); Joseph Filipone (“Filipone”); and Richard Cacciatore (“Cacciatore, ” together with Vanguard and Filipone, the “Vanguard Defendants”) renewed an earlier-filed motion to dismiss the pleading under Fed.R.Civ.P. 12(b)(1) and 12(b)(6), on the grounds that federal subject matter jurisdiction is lacking and that the amended complaint fails to state a claim for relief. See Docket Entry (“DE”) [74, 94].

         On August 15, 2016, the Defendants Urban Financial Group, Inc. a/k/a Urban Financial of America (“Urban Financial”); Reverse Mortgage Solutions a/k/a Security One Lending (“Security One”); Mortgage Electronic Registration Systems, Inc. (“MERS”); and Laura Smith (“Smith, ” together with Urban Financial, Security One, and MERS, the “Urban Defendants”) filed a motion to dismiss under Rule 12(b)(6), contending that the amended complaint fails to state a claim for relief. See DE [99].

         Also on August 15, 2016, the Defendants McCabe Weisberg & Conway, PC (the “McCabe Law Firm”); Natalie Giraldo, Esq. (“Giraldo”); Deanne Cheli, Esq. (“Cheli”); Terrance J. McCabe, Esq. (“McCabe”); Marc S. Weisberg, Esq. (“Weisberg”); Edward D. Conway, Esq. (“Conway”); Lisa L. Wallace, Esq. (“Wallace”); Laura H.G. Sullivan, Esq. (“Sullivan”); Janet Z. Charlton, Esq. (“Charlton”); and Donna Akinrele, Esq. (“Akinrele, ” together with the McCabe Law Firm, Giraldo, Cheli, McCabe, Weisberg, Conway, Wallace, Sullivan, Charlton, and Akinrele, the “Law Firm Defendants”) filed a motion to dismiss under Rule 12(b)(6) on the ground that the amended complaint fails to state a claim for relief. See DE [100].

         For the reasons that follow, the Court grants the Defendants' motions to dismiss as to the federal claims over which the Court has original jurisdiction, and declines to exercise supplemental jurisdiction over the remaining state law causes of action.

         I. Background

         A. Materials Considered

         Except where otherwise noted, the facts are drawn from the amended complaint and construed in favor of the Plaintiffs.

         However, as cautioned in the Court's July 2, 2016 Decision & Order; and consistent with controlling authority regarding the form and content of pleadings, in considering these motions the Court has disregarded the abundance of conclusory and argumentative allegations, as well as all other non-factual content contained in the amended complaint. See Ashcroft v. Iqbal, 556 U.S. 662, 664, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

         The Court has found that after setting aside this surplussage, few well-pled facts remained.

         Thus, in its discretion, the Court has also relied on the extrinsic evidence submitted by the parties to aid in its understanding of the underlying facts. In particular, the Court has reviewed and considered relevant hospital records; mortgage documents which form the heart of the Plaintiffs' complaint; and publicly-available court filings in a related foreclosure action, all of which were either appended to the original complaint, or incorporated by reference and relied upon by the Plaintiffs in framing the amended complaint. See Goel v. Bunge, Ltd., 820 F.3d 554, 558-59 (2d Cir. 2016).

         B. The Relevant Facts

         On April 26, 2011, the Decedent, then 80 years old, was admitted to South Nassau Communities Hospital. Admission records reflect that, at the time of the Decedent's arrival, hospital personnel were unable to ascertain his symptoms due to “AMS, ” which is sometimes shorthand for “altered mental state.” However, according to the amended complaint, at the time of his admission, the Defendant suffered from numerous ailments that left him immobile, confined to his bed, and unable to speak. For months, he had been under round-the-clock medical care.

         The morning after his admission, on April 27, 2011, at approximately 7:30 A.M., an attending physician at the hospital signed a form attesting to the fact that, due to “Dementia, ” the Decedent lacked the capacity to make vital medical decisions, such as whether to resuscitate him or withdraw him from life support in the case of an emergency.

         On April 29, 2011, at 6:30 P.M. a second licensed practitioner signed the same form, concurring with the prior assessment of the Decedent's capacity.

         In view of the Decedent's condition, his son, G.V. Izzo, was identified as the Decedent's surrogate health care decision-maker.

         Sadly, it appears that the Decedent never left the hospital. A death certificate shows that on May 7, 2011, at 9:30 A.M., he died of acute respiratory failure, secondary to bronchopneumonia and myelodysplastic syndrome.

         The gravamen of this case involves certain acts attributed to the Decedent during the period of time, immediately preceding his death, when the staff at South Nassau Communities Hospital apparently believed he was incapacitated. Specifically, the record contains documentation purportedly reflecting a reverse mortgage transaction between the Decedent and the Defendant Vanguard on April 30, 2011.

         In this regard, the record includes a Home Equity Conversion Fixed Rate Note (the “Note”), which, in turn, references a Home Equity Conversion Loan Agreement (the “Loan Agreement”). Apparently, under the terms of the Loan Agreement, Vanguard agreed to make capital advances totaling $570, 000 to the Decedent, which the Decedent obligated himself to repay, with interest, by executing the Note.

         The record also includes a Fixed Rate Home Equity Conversion Mortgage (the “Mortgage”), pursuant to which the Decedent apparently pledged his home at 121 Oak Street in Lynbrook (the “Lynbrook Property”) as collateral to secure repayment of the Note. Relevant here, Section 9(a) of the Mortgage provides that Vanguard may accelerate the debt and require immediate payment-in-full of the Note upon the Decedent's death, so long as none of his heirs continues utilizing the Lynbrook Property as his or her principal residence.

         The Court further notes that, although the Mortgage identifies Vanguard as the lender, the Mortgage was issued to the Defendant MERS, in the capacity of “nominee” - an apparently administrative title - for Vanguard.

         Of prime importance, each of these documents was purportedly signed by the Decedent on April 30, 2011. However, in this lawsuit, the Plaintiffs allege that the Decedent's signature was forged in all cases.

         Each document was also purportedly witnessed by the Defendants Filipone and Cacciatore, as agents for Vanguard, and notarized by the Defendant Nancy Radelman (“Radelman”) on the same date, namely, April 30, 2011.

         By means not specified in the amended complaint or supporting materials, it appears that sometime between May 7, 2011 and August 29, 2011, Urban Financial received notice of the Decedent's death.

         Thus, on August 29, 2011, the Default Department at Urban Financial sent a letter to G.V. Izzo stating, in pertinent part, the following:

We would like to extend our condolences for your loss. Thank you for keeping us informed on the status of the [Lynbrook] property. If you have not already done so, please forward a copy of the death certificate and proof of probate documents as soon as possible for our file.
There will be no further advances made from the account. However, please be aware that Interest and Service Fees will continue to accrue until the mortgage is paid in full. It is in the best interest of the estate to repay the loan as soon as possible. The taxes and homeowners insurance must be current and are the responsibility of the estate. We will need the executor/administrator of the estate to provide us with the estate tax identification number for IRS reporting purposes.
As of 8/29/11, the amount required to payoff the loan balance in full by 9/28/11 is $271, 186.46. If you believe that this figure is more than the value of the property, it is your responsibility to arrange for an appraisal at your expense.

         It is not clear what interest Urban Financial had in the Mortgage at the time it sent the August 29, 2011 letter. In fact, it was not until two years later, on September 27, 2013, that the original mortgagee, MERS, assigned its interest in the Mortgage to Urban Financial by way of a written Assignment of Mortgage (the “Assignment”). The Defendant Laura Smith, in her capacity as an Assistant Vice President of MERS, executed that Assignment on behalf of the company.

         It is also not clear how any of these entities actually learned of the Decedent's death. Even viewed in the Plaintiffs' favor, the August 29, 2011 letter would appear to support the inference that G.V. Izzo acknowledged the existence of the Note and Mortgage, and duly advised the lender of his father's death. While generally consistent with the Plaintiffs' allegation that G.V. Izzo handled most of his ailing father's financial affairs, G.V. Izzo's acknowledgment of the Note and Mortgage would seem to contradict the Plaintiffs' core allegation that the Decedent's signature was forged by Vanguard and its agents, thereby rendering the transaction invalid.

         In any event, on or about February 20, 2014, Urban Financial, as the assignee of the Mortgage, commenced a foreclosure action in the New York Supreme Court for Nassau County (the “Foreclosure Action”), naming as a Defendant G.V. Izzo, in his capacity as the Executor of the Decedent's Estate. Relevant here, the Summons and Complaint were signed by the individual Defendant Natalie Giraldo of the McCabe Law Firm, as counsel for Urban Financial. A related Notice of Pendency, also signed by Giraldo, was filed against the Lynbrook Property the same day.

         In general, the complaint in the Foreclosure Action alleged that the Decedent's Estate had been in default under the Note and Mortgage since at least May 7, 2011.

         Affidavits of service indicate that, on February 28, 2014, personal service of the Summons and Complaint in the Foreclosure Action was made on G.V. Izzo at his home at 12 Allen Street in Lynbrook. On March 6, 2014 and March 21, 2014, respectively, an additional copy of the Summons and the typewritten notice of foreclosure required by Section 1303 of the New York Real Property Actions and Proceedings Law were mailed to G.V. Izzo at his home address.

         After G.V. Izzo failed to answer or otherwise appear in the Foreclosure Action, on January 7, 2015, Urban Financial filed a motion for a default judgment and appointment of a referee to compute the amounts due to Urban Financial under the Note and Mortgage. The motion papers were signed by the individual Defendant Donna Akinrele of the McCabe Law Firm, as counsel for Urban Financial.

         This motion was apparently supported with an affidavit by Laura Smith, which does not appear to be a part of the current record.

         On May 12, 2015, Justice Thomas A. Adams of the State Supreme Court signed an Order of Reference, finding G.V. Izzo in default and referring the Foreclosure Action to Referee Michael Annibale, Esq. for a computation of damages.

         Pursuant to this order, on or about October 9, 2015, Smith submitted a second affidavit, this time attesting to the amounts claimed to be due and owing by the Estate to Urban Financial.

         The Court pauses to note that Smith's role in these underlying events is somewhat unclear. As noted above, on September 27, 2013, acting in the capacity of Assistant Vice President of MERS, Smith executed the Assignment of the Mortgage in favor of Urban. However, it appears that she may have been on both sides of the transaction, as she continued signing pertinent documentation after the Assignment in a different capacity, namely, as an Assistant Vice President of the Defendant Security One, which, in turn, was assertedly acting as the attorney-in-fact for Urban Financial.

         In any event, on November 6, 2015, Referee Annibale issued a report, finding that, as of August 20, 2015, the sum of $389, 370.57 was owed to Urban Financial under the Note and Mortgage, together with various expenses, attorneys' fees, and continuing ...


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