Opinion
No. 04 CV 0775 (SJ).
February 18, 2005
LORI R. SOMEKH, Queens Village, NY, Attorney for Plaintiffs.
ROSNER NOSERA RAGONE, LLP, New York, NY, Peter Ragone, John P. Foudy, Attorneys for Defendants.
MEMORANDUM AND ORDER
On February 25, 2004, Rodolfo Doural and Josefina M. Doural ("Plaintiffs" or "the Dourals") filed a complaint for damages against The Bank of New York ("the Bank") (incorrectly sued as "Bank of New York") and HomeEq Servicing Corporation ("HomeEq") (incorrectly sued as "The Money Store/Empire State Inc., a/k/a HomeEq/The Money Store, a/k/a HomeEq") (collectively, "Defendants"). Plaintiffs' claims arise out of the origination and servicing of Plaintiffs' loan and the Bank's attempted foreclosures of their residential property. Currently before this Court is Defendants' Motion for Summary Judgment, which Plaintiffs did not oppose.
FACTUAL AND PROCEDURAL BACKGROUND
On January 18, 1995, Plaintiffs executed and delivered a promissory note secured by a mortgage to The Money Store/Empire State Inc. ("TMS") in return for a loan in the principal amount of $175,000.00. (Defs'. Mot. Summ. J. at 1; see also Compl. ¶¶ 10, 11.) According to the "Adjustable Rate Note" signed by Plaintiffs, their initial interest rate was set at 7.75%, was to "change on the 1st day of August 1995, and on that day every 6th month thereafter," and would be calculated "by adding four and 70/100 percentage points (4.700%) to the Current Index." (Defs.' Mot. Summ. J., Ex. 17.) The note and mortgage were assigned to The Bank of New York under a pooling and servicing agreement dated February 28, 1995. (Defs.' Mot. Summ J. at 1;see also Compl. ¶ 8.)
On July 29, 1998, after a third, uncured default by Plaintiffs, the Bank commenced a foreclosure action in the Supreme Court of the State of New York, Queens County ("the state action"). (Defs.' Mot. Summ. J. at 2.) On April 28, 2000, Hon. Simeon Golar issued a judgment of foreclosure and sale. (Id.) On July 28, 2000, the date on which a foreclosure sale was scheduled, Rodolfo Doural filed for bankruptcy protection. (Id.) That application was dismissed on December 18, 2000 based on the bankruptcy judge's determination that "the debtor's Schedules and Statement of Financial Affairs were prepared with a reckless disregard of the truth and accuracy of the information provided." (Id., Ex. 4.) On February 16, 2001, the date of the second foreclosure sale, Rodolfo Doural again filed for bankruptcy protection. (Id. at 2.) This application was dismissed on April 26, 2001, with prejudice for a period of one year. (Id., Ex. 5.) On June 15, 2001, the date on which a third foreclosure sale was scheduled, Josefina Doural filed for bankruptcy protection. (Id. at 2-3.) This bankruptcy action was dismissed on August 16, 2001, with prejudice for a period of one year. (Id., Ex. 6.)
In the wake of the tragedy on September 11, 2001, the Bank voluntarily cancelled another scheduled foreclosure sale. (Id. at 3.) On March 22, 2002, a fourth foreclosure sale was finally held and the highest bid was for $290,000. (Id.) However, on May 24, 2002, the Dourals moved, via an order to show cause, to vacate the judgment of foreclosure on the ground, inter alia, that the Bank had failed to provide the interest rate initially promised to them. (Id.) On May 2, 2003, the Dourals withdrew their order to show cause as part of a stipulation that was entered into the record at a hearing. (Id.)
On October 16, 2003, the day prior to the fifth scheduled foreclosure sale, the Dourals brought a second order to show cause in which they claimed to have meritorious defenses under federal law regarding the origination and servicing of the loan from TMS. (Id., Ex. 13.) On February 26, 2004, Hon. Simeon Golar denied the Dourals' application and ruled that the judgment of foreclosure and sale was final and binding. (Id., Ex. 14.) On that date, Josefina Doural again filed a second bankruptcy petition, which was subsequently dismissed. (Id. at 4.)
Plaintiffs filed the instant action on February 25, 2004, one day prior to Judge Golar's final decision. Their Complaint alleges seven causes of action against Defendants for: (1) violations of the Truth in Lending Act and Regulation Z based on alleged failures to disclose the requisite documents (Compl. ¶¶ 12, 13); (2) "breach of contract and bad faith, oppressive and unconscionable conduct" based on Defendants' alleged failure to close pursuant to an undocumented agreement, misrepresentations and dilatory tactics (id. ¶¶ 14-24); (3) "fraud and deceit in the form of a `bait and switch scheme'" based on alleged misrepresentations concerning the applicable interest rate (id. ¶¶ 25-28); (4) "fraud, delays and unconscionable bad faith conduct . . . calculated to escalate plaintiffs' debt" (id. ¶¶ 29-31); (5) violation of the Real Estate Settlement Procedures Act based on alleged failures to respond to Plaintiffs' inquiries "into inaccuracies in the interest rate changes" (id. ¶¶ 32-34); (6) violations of the New York General Business Law §§ 349 and 350 based on alleged deceptive practices regarding the interest rate (id. ¶¶ 35-38); and (7) violation of the Fair Debt Collection Practices Act based on an alleged "refus[al] to obtain verification of the debt and mail same to the consumer despite numerous letters disputing the amounts due by the plaintiffs." (Id. ¶¶ 39, 40.)
On May 20, 2004, subsequent to the commencement of the instant action, Plaintiffs tendered and HomeEq accepted a sum of $314,433.40 to discharge the mortgage "following the purported sale of the mortgaged premises." (Defs.' Mot. Summ. J. at 4.) Despite this resolution, Plaintiffs have continued the instant litigation. On October 19, 2004, Defendants filed a Motion for Summary Judgment asserting that Plaintiffs' first and last causes of action are time-barred and alternatively, fail to state a claim upon which relief may be granted, and that Plaintiffs' second, third, fourth, fifth, and sixth causes of action are barred by the doctrine of collateral estoppel.
DISCUSSION
I. Standard of Review for Unopposed Summary Judgment Motion
Under Rule 56(c), summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A dispute regarding a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court's responsibility in assessing the merits of a summary judgment motion is not to try the issues of fact, but rather to "`determine whether there are issues of fact to be tried.'"Sutera v. Schering Corp., 73 F.3d 13, 16 (2d Cir. 1995) (quoting Katz v. Goodyear Tire Rubber Co., 737 F.2d 238, 244 (2d Cir. 1984)). The Court must draw all reasonable inferences and resolve all ambiguities in the nonmoving party's favor, and construe the facts in the light most favorable to the nonmoving party. See Anderson, 477 U.S. at 255; see also Sutera, 73 F.3d at 16.
The same standard applies where, as here, the nonmoving party "chooses the perilous path" of failing to oppose a summary judgment motion. Amaker v. Foley, 274 F.3d 677, 681 (2d Cir. 2001); Vermont Teddy Bear Co., Inc. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004) ("[W]e hold that the failure to oppose a motion for summary judgment alone does not justify the granting of summary judgment. Instead, the district court must still assess whether the moving party has fulfilled its burden of demonstrating that there is no genuine issue of material fact and its entitlement to judgment as a matter of law.") The district court "may not rely solely on the statement of undisputed facts contained in the moving party's Rule 56.1 statement. It must be satisfied that the citation to evidence in the record supports the assertion." Vermont Teddy Bear Co., 373 F.3d at 244.
II. Res Judicata
This Court concludes that each of Plaintiffs' causes of action is barred by res judicata given that they were or could have been adjudicated in the state action. See Federated Dep't Stores v. Moitie, 452 U.S. 394, 398 (1981); accord Zull v. Rudder Finn, Inc. 2003 WL 22283839 at **4-6 (S.D.N.Y. Oct. 2, 2003).
Although Defendants' motion refers to "collateral estoppel" (issue preclusion), this Court has decided the instant motion on the principle of "res judicata" (claim preclusion). In addition, while Defendants do not assert that Plaintiffs' first and seventh causes of action are barred by res judicata, this Court finds that the principle applies to those claims as well.See, e.g., Salahuddin v. Jones, 992 F.2d 447, 449 (2d Cir. 1993) (holding that "the strong public interest in economizing the use of judicial resources by avoiding relitigation" justifies a court's sua sponte raising of res judicata, and that "[t]he failure of a defendant to raise res judicata in answer does not deprive a court of the power to dismiss a claim on that ground").
On May 24, 2002, the Dourals moved to set aside the foreclosure sale of March 22, 2002 on the ground, inter alia, that they had a meritorious defense under federal law. (Defs.' Mot. Summ. J., Ex. 8.) Mrs. Doural's sworn affidavit in support of the motion states:
This sale must be set aside in that there have been numerous violations by defendants in the enforcement of the loan as well as the notice of the foreclosure sale. . . . The bank accepted our offer of $206,000.00. . . . On or about March 13, 2002 [The Bank of New York] indicated [it] required an additional $15,000.00 towards the satisfaction of the mortgage and it was agreed to pay it. . . . The mortgage we negotiated for was a fixed rate and instead we received an adjustable interest rate mortgage. The interest [The Bank of New York] alleged that is due and owing is in far excess of what is truly due and owing. The bank was always attempting to charge more for interest [than] what they were entitled to.
(Id.) (emphasis added). On May 2, 2003, Plaintiffs withdrew that order to show cause as part of a stipulation made in open court in which the parties agreed that "[i]f [the matter] is brought back to court, the sole issue before the court are figures that are in dispute." (Id., Ex. 12) (quoting Hon. Simeon Golar). On February 16, 2004, Honorable Simeon Golar (of New York Supreme Court, Queens County) ruled on the Dourals' motion to vacate the judgment of foreclosure and sale, finding:
[D]efendants Rodolfo Doural and Josefina M. Doural have failed to point to any errors or omissions in the documentation of the calculations of interest and fees provided by plaintiff. . . . Lastly, to the extent defendants Rodolfo Doural and Josefina M. Doural contend the mortgage loan violated the Home Ownership and Equity Protection Act of 1994 (codified as an amendment to the Federal Truth in Lending Act ["TILA"], at 15 USC § 1601 et seq.) and Regulation Z (12 CFR 226 et seq.), the implementing regulation of TILA, they defaulted in answering the complaint. . . . [T]he judgment of foreclosure and sale is binding upon them and may not be questioned."
(Defs.' Mot. Summ. J., Ex. 14) (emphasis added).
"Under both New York law and federal law, the doctrine of res judicata, or claim preclusion, provides that `[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.'" Maharaj v. Bankamerica Corp., 128 F.3d 94, 97 (2d Cir. 1997) (quoting Federated Dep't Stores, 452 U.S. at 398 (1981)). In the instant matter, all of Plaintiffs' claims could have been adjudicated in the state action. Indeed, to the extent that Plaintiffs' claims sound in Defendants' alleged misrepresentations of and failures to disclose the requisite information regarding the interest rate, those claims were already adjudicated in the state action. Judge Golar's ruling was final and binding on the parties. Therefore, Plaintiffs' attempt to relitigate the state action is barred by res judicata.
Even if Plaintiffs' claims were not barred by res judicata, this Court finds that they each lack merit and are belied by the uncontroverted documentary evidence in this case.
As the Supreme Court has long recognized, "public policy dictates that there be an end of litigation; that those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled as between the parties." Baldwin v. Traveling Men's Ass'n, 283 U.S. 522, 525 (1931). Furthermore, "[t]here is simply `no principle of law or equity which sanctions the rejection by a federal court of the salutary principle of res judicata.'"Federated Dep't Stores, 452 U.S. at 401 (quoting Heiser v. Woodruff, 327 U.S. 726, 733 (1946)). Accordingly, res judicata precludes this Court from addressing Plaintiffs' claims and therefore Plaintiff's Complaint is dismissed in its entirety.
CONCLUSION
For the reasons stated herein, Defendants' Motion for Summary Judgment is GRANTED and Plaintiffs' Complaint is dismissed in its entirety.
SO ORDERED.