Opinion
17000-03.
Decided on November 15, 2005.
Leland L. Greene, Esq., Garden City, New York, Irwin Popkin, Esq., Shirley, New York, M. Scott Berrett, Esq., Chicago, IL, Hart L. Robinovitch, Esq. Scottsdale, AZ, Counsel for Plaintiffs.
Gilmartin, Poster Shefto, LLP New York, New York, Pope Hughes, P.A., Towson, MD, Counsel for Defendant.
Defendant moves pursuant to CPLR 3211(a)(7) for an order dismissing the complaint on the ground that if fails to state a cause of action.
BACKGROUND
On July 3, 2003, Plaintiffs James and Christine Fuchs (collectively "Fuchs") refinanced the mortgage on their one-family house in Floral Park. The lender on the refinance was Wachovia Mortgage Corporation ("Wachovia"). Wachovia is a subsidiary of Wachovia National Bank, N.A., a federally chartered bank with its principal offices in North Carolina.
In connection with the loan, Wachovia charged Fuchs a document preparation fee of $100. Wachovia charged and collected a separate legal fee for legal services rendered by Wachovia's attorneys from Fuchs.
Fuchs alleges that the charging of a document preparation fee constitutes the unlawful practice of law in violation of Judiciary Law §§ 478, 484 and 495(3).
Plaintiffs commenced this class action seeking to recover for themselves, and on behalf of the other members of the class, the document preparation fee charged by Wachovia.
The complaint alleges five causes of action; to wit: violation of General Business Law ("GBL") § 349 (first cause of action); breach of contract (second cause of action); unjust enrichment (third cause of action); conversion (fourth cause of action); and a declaration that the practice of charging a document preparation fee is illegal (fifth cause of action). Plaintiffs also seek to permanently enjoin Wachovia from charging such a fee in the future.
Wachovia moves to dismiss the complaint asserting that the federal banking laws pre-empt state regulation of a federally chartered bank and that the charging of a document preparation fee does not constitute the unlawful practice of law in violation of Judiciary Law §§ 478, 484 and 495(3).
DISCUSSION
The gravamen of Plaintiffs' complaint is that Wachovia is violating various provisions of the Judiciary Law by charging a document preparation fee. That theory permeates each cause of action pleaded by Plaintiffs.
A. Legal Standard — Motion to Dismiss
When deciding a motion made pursuant to CPLR 3211(a)(7), the court must determine whether the pleader has a cognizable cause of action and not whether the action has been properly plead. Guggenheimer v. Ginzburg, 43 NY2d 268 (1977); and Rovello v. Orofino Realty Co., 40 NY2d 633 (1976); and Well v. Yeshiva Rambam, 300 AD2d 580 (2nd Dept. 2002). The court must accept as true all of the facts alleged in the complaint. 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 (2002: and Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001). The complaint must be liberally construed, and the Plaintiff must be given the benefit of every favorable inference which can be drawn from the complaint. Leon v. Martinez, 84 NY2d 83 (1994); and Paterno v. CYC, LLC, 8 AD3d 544 (2nd Dept. 2004).
Since Wachovia moved to dismiss the complaint and not each specific cause of action, the motion must be denied in its entirety if any of the causes of action is legally sufficient. Anand v. Soni, 215 AD2d 420 (2nd Dept. 1995); and Maritarano Construction Corp. v. Briar Contracting Corp., 104 AD2d 1028 (2nd Dept. 1984).
B. Judiciary Law §§ 478 and 484
To the extent that Plaintiffs' causes of action are premised upon violations of Judiciary Law §§ 478 and 484, they must be dismissed since these statutes do not apply to Wachovia.
Judiciary Law § 478 makes it ". . . unlawful for any natural person . . ." to practice law, appear in court on behalf of another person or to hold oneself out as an attorney or counselor-at-law unless and until the person has been licensed and admitted to practice and taken the constitutional oath.
Judiciary Law § 484 prohibits a "natural person" from asking for or receiving compensation ". . . for preparing deeds, mortgages . . . or any other instruments affecting real estate . . ." unless that person has been duly admitted to practice law in this state.
Neither § 478 nor § 484 of the Judiciary Law apply to Wachovia because it is a corporation; not a natural person. A corporation is an artificial entity; a creature of statute. See, Community Board No. 7 v. Schaffer, 84 NY2d 148 (1994); Kossoff v. Samsung Co., Ltd., 123 Misc 2d 177 (Sup.Ct., NY Co., 1984); and 14 NY Jur 2d, Business Relationships § 2. The term "natural person" when used in statutes refers to human beings and not statutorily created entities. See and compare CPLR 308 and 311(a)(1). See also, Favarelli v. Bankers Trust Co., 85 AD2d 335 (1st Dept. 1982); and Pinto v. House, 79 AD2d 361 (1st Dept. 1981) (discussing, comparing and contrasting the differences and distinctions of service upon a natural person and a corporation).
Since Judiciary Law §§ 478 and 484 are not applicable to Wachovia, to the extent that Plaintiffs' causes of action are premised upon those statutes, they fail to state a cause of action and must be dismissed.
Plaintiffs' first cause of action must be dismissed because, no matter what statute upon which it is premised, it fails to state a cause of action.
The first cause of action alleges a claim under GBL § 349. GBL § 349 prohibits deceptive business practices. The statute makes actionable conduct which does not rise to the level of common law fraud. Gaidon v. Guardian Life Ins. Co. Of America, 94 NY2d 330 (1999).
The statute provides a remedy to consumers who have been subject to deceptive or misleading acts or business practices. Oswego Laborers Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 NY2d 20 (1985). A deceptive act or practice, for the purposes of GBL § 349, is one which is likely to mislead a reasonably prudent consumer. Karlin v. IVF America, Inc., 93 NY2d 282 (1999).
In order to establish a cause of action under GBL § 349, a plaintiff must establish that the activity or practice was consumer oriented; that the activity was misleading in a material way; and that the plaintiff suffered injury as a result of the deceptive practice or act. Stutman v. Chemical Bank, 95 NY2d 24 (2000).
This cause of action must be dismissed because Wachovia did not engage in any deceptive business practices as that term is defined. The complaint does not allege that the charging of a document preparation fee is a deceptive practice. The complaint simply alleges that Fuchs and the other members of the purported class were "deceived" or "mislead" by Wachovia's failure to advise them that the charging of a document preparation fee violated the provision of the Judiciary Law.
Fuchs cannot reasonably allege that they was deceived or mislead by the actual payment of the document preparation fee since Wachovia clearly indicated the nature of the fee and the amount collected on the HUD-1 Settlement Statement. Id. at 31.
The Fuchs complaint presupposes an obligation to disclose the provisions of the above-mentioned provisions of the Judiciary Law to Plaintiffs. No such duty exists. Absent a fiduciary relationship, an affirmative duty to disclose arises only when one party's superior knowledge of the facts renders a transaction inherently unfair without disclosure. See, Jana L. v. West 129th Street Realty Corp., ___ A.D.3d ___, 2005 WL 2495897 (1st Dept. 2005); and Strasser v. Prudential Securities, Inc., 218 AD2d 526 (1st Dept. 1995). Fuchs does not allege that Wachovia made any misrepresentation of the facts. Fuchs concedes that they were advised Wachovia was charging a document preparation fee.
No claim can be made pursuant to GBL § 349 when the allegedly deceptive activity is fully disclosed. Broder v. MBNA Corp., 281 AD2d 369 (1st Dept. 2001); and Sands v. Ticketmaster-New York, Inc., 207 AD2d 687 (1st Dept. 1994), lv. dism. in part and den. in part, 85 NY2d 904 (1995). Fuchs does not contend or allege that they were not advised by Wachovia of the document preparation fee. Furthermore, a person is chargeable with knowledge of the law. See, Hrick v. McMahon, 247 AD2d 935 (4th Dept. 1998); and Stauber v. Antelo, 163 AD2d 246 (1st Dept. 1990).
Since Plaintiff has failed to allege a cause of action pursuant to GBL § 349, the first cause of action must be dismissed.
The Court must now determine whether the charging of a document preparation fee violates Judiciary Law § 495 and, if it does, whether the federal banking law preempts state regulation of these practices.
Judiciary Law § 495(3) prohibits a corporation or voluntary association from charging a fee for the preparation of ". . . deeds, mortgages, assignments, discharges, leases, or any other instruments affecting real estate."
"The practice of law involves the rendering of legal advice and opinions directed to particular clients." Matter of Rowe, 80 NY2d 336, 341-2 (1992). See also, El Gemayel v. Seaman, 72 NY2d 701 (1988); and Matter of New York Co. Lawyers Assn. v. Dacey, 21 NY2d 694 (1967), revg. on dissenting opn. below, 28 AD2d 161 (1st Dept. 1967). The purpose of the statutes preventing laymen or persons not licensed to practice law from practicing law in New York is to protect the public from being represented by or receiving legal advice from ". . . persons not trained, examined and licensed for such work." Spivak v. Sachs, 16 NY2d 163, 168 (1965). See also Matter of New York Co. Lawyers Assn. (Roel), 3 NY2d 224 (1957).
The courts have distinguished between the mere filling out and completion of forms by a non-lawyer, which is not a violation of the Judiciary Law, and acts which require independent judgment regarding whether documents have been prepared in accordance with New York law, which constitutes the unlawful practice of law. People v. Jakubowitz, 184 Misc 2d 559 (Sup.Ct., Bronx Co., 2000); and Sussman v. Grado, 192 Misc 2d 628 (Dist.Ct., Nassau Co., 2002). The line is crossed when the person who is not licensed to practice law provides professional advice to a specific client on a specific legal problem or issue. State v. Winder, 42 AD2d 1039 (4th Dept. 1973); Matter of New York Co. Lawyers Assn. v. Dacey, supra; and Sussman v. Grado, supra.
Non-lawyers, such as paralegals, may assist attorneys in preparing documents such as mortgages and contracts and other documents related to real estate transactions, provided that the work is properly and adequately supervised by an attorney. See, The Association of the Bar of the City of New York, Committee on Professional and Judicial Ethics, Formal Opinion 1995-11.
When viewed against this background, the Court concludes that the mortgage procedures of Wachovia do not constitute the practice of law for the purposes of Judiciary Law § 495(3). Fuchs does not specifically allege, nor are there any facts alleged, in the complaint, from which the Court can infer that Wachovia provided Fuchs or any of the other members of the purported class with specific legal advise relating to the refinancing of their mortgage. On this motion, Fuchs did not supplement their complaint with any factual submissions which demonstrate that Wachovia provided them with legal services. See, Guggenheimer v. Ginzburg, supra.
The documents in question are "fill in the blank" type documents. The mortgage and mortgage note are pre-printed New York — Single Family — Fannie Mae/Freddie Mae Uniform Instruments. The terms and provisions of these documents were not subject to negotiation nor is there any independent judgment involved in preparing or completing these documents. The information which is placed in these documents includes the name and address of the borrower and lender, the date of the loan, the amount being borrowed, the monthly payments due and the interest rate. None of this information is subject to negotiation at the time of closing. In fact, all of the information contained in these forms had been agreed to well before the closing.
The relationship between Fuchs and Wachovia was that of debtor-creditor; not attorney-client. Thus, that portion of the fifth cause of action or any other cause of action which is predicated upon Judiciary Law § 495(3) must be dismissed.
E. Preemption
Wachovia Bank, N.A. is a federally chartered bank. Wachovia is a wholly owned subsidiary of Wachovia Bank, N.A. The National Banking Act grants national banks the authority to ". . . make, arrange, purchase or sell loans or extensions of credit secured by lines on interests in real estate, subject to Section 1828(o) of this title and such restrictions and requirements as the Comptroller of the Currency may prescribe by regulation or order. 12 U.S.C. § 24 (Seventh). Congress has expressly delegated to the Office of the Controller of the Currency the oversight, supervision and regulation of national banks. 12 U.S.C. 481.
Courts have long and consistently held that states may limit or restrict the activities of national banks only to the extent that Congress permits. See, Beneficial National Bank v. Anderson, 539 U.S. 1 (2003); Easton v. State of Iowa, 188 U.S. 220 (1903); Farmers Mechanics National Bank v. Dearing, 91 U.S. 29 (1875); and Tiffany v. National Bank of Missouri, 85 U.S. 409 (1873).
One of the primary functions of the National Banking Act is to ". . . prevent inconsistent or intrusive state regulation" of national banks. See, Wachovia Bank, N.A. v. Burke, 414 F.3d 305, 311 (2nd Cir. 2005); and Office of the Comptroller of the Currency v. Spitzer, ___ F.Supp. 2d ___, 2005 WL 2513815 (S.D.NY 2005).
National banks may conduct their business through operating subsidiaries. 12 U.S.C. § 24a(g)(3); and 12 C.F.R. § 5.34(3). The operating subsidiaries of a national bank are subject to the same regulations as is the parent bank. 12 C.F.R. § 5.34(3)(e). State laws and regulations apply to the operating subsidiaries of a national bank only to the extent that state law would apply to the parent national bank. 12 C.F.R. § 7.4006. National banks may assess such charges and fees as the bank determines is appropriate in accordance with "safe and sound" banking principles. 12 C.F.R. §§ 7.4002(a)(b). One of the factors to be considered by the bank in determining what constitutes a "safe and sound" banking practice is "the cost incurred by the bank in providing the service." 12 C.F.R. § 7.4002(b)(2)(I).
Wachovia asserts that these statutory and regulatory grants of authority pre-empt any state legislation that purports to limit Wachovia's ability to charge and collect a document preparation fee.
Federal preemption may be express or implied. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985). Express preemption occurs when Congress explicitly states that state law has been preempted. Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992); and Jones v. Rath Packing Co., 430 U.S. 519 (1977). Implied preemption occurs when the federal legislation does not expressly preempt state law, but a review of the legislation indicates that Congress intended federal law to fully occupy the field (field preemption) or state law is in conflict with federal law (conflict preemption). Freightliner Corp. v. Myrick, 514 U.S. 280, 286 (1995); and English v. General Electric Co., 496 U.S. 72, 79 (1990).
State laws or regulations which attempt to limit or restrict the fees a national bank may charge in connection with its banking activities are preempted by federal law and regulation. See, Wells Fargo Bank of Texas NA, v. James, 321 F.3d 488 (5th Cir. 2003) (Texas law prohibiting banks from charging check cashing fees to non-depositors are preempted); and Bank of America v. City and County of San Francisco, 309 F.3d 551 (9th Cir. 2002), cert. den., 538 U.S. 1069 (2003) (San Francisco ordinances limiting ATM fees national banks may charge are preempted).
In view of the foregoing, this Court finds that charging a document preparation fee is permitted under the federal law and regulations as a "safe and sound" banking practice. To the extent that any New York statute purports to prevent federally chartered banks from collecting such a fee, they are preempted by federal statutes and regulations. New York's ability to regulate and prevent the unlawful practice of law is not offended by such preemption or the fees charged by Wachovia. Nor does New York's regulation of the practice of law impact Wachovia's regular banking business as contemplated by the federal statutory scheme.
F. Breach of Contract
The second cause of action is based upon Paragraph 14 of the Mortgage and Paragraph 5 of the Note. Both of these paragraphs provide that if any loan charge collected is found to exceed legal limits, the charge will either be refunded to mortgagor or applied to the principal due at the option of the mortgagor.
Fuchs asserts that the document preparation fee should be refunded to them because it was charged in violation of Judiciary Law § 495(3). Since the charging of a document preparation fee does not constitute a violation of the Judiciary Law, the fee need not be refunded. Thus, the second cause of action fails to state a cause of action and must be dismissed.
G. Unjust Enrichment
Unjust enrichment is based upon quasi-contract. A party may not obtain recovery for unjust enrichment unless the written agreement between the parties ". . . has been rescinded, is unenforceable or abrogated." Waldman v. Englishtown Sportswear, Ltd., 92 AD2d 833, 836 (1st Dept. 1983).
The relationship between Fuchs and Wachovia is governed by the Note and Mortgage, neither of which have been rescinded, abrogated or found to be unenforceable.
To establish a cause of action for unjust enrichment, plaintiff must prove that plaintiff has performed services for the defendant resulting in the defendant receiving a unfair or unjust benefit. Clark v. Daby, 300 AD2d 732 (3rd Dept. 2002); and Kagan v. K-Tel Entertainment, Inc., 172 AD2d 375 (1st Dept. 1991). Plaintiff must also establish that the services were rendered at the request of the defendant. Prestige Caterers v. Kaufman, 290 AD2d 295 (1st Dept. 2002); and Lakeville Pace Mechanical, Inc. v. Elmar Realty Corp., 276 AD2d 673 (2nd Dept. 2000).
Since Fuchs does not allege that they, or any of the other members of the purported class, performed any services on behalf and at the request of Wachovia, the complaint fails to state a cause of action for unjust enrichment.
When deciding a motion to dismiss, the court must decided whether plaintiff has a cause of action, not whether it has been properly plead. Guggenheimer v. Ginzburg, supra; and McGuire v. Sterling Doubleday Enterprises, L.P., 19 AD3d 660 (2nd Dept. 2005).
Plaintiff is actually seeking restitution or the recovery of money that Wachovia should not, in good conscience, be permitted to retain. See, Wiener v. Lazard Freres Co., 241 AD2d 114 (2nd Dept. 1998). Fuchs' allegations are that Wachovia charged a fee that it was not legally permitted to charge. Since the charging of a document preparation fee is not prohibited by the Judiciary Law, the third cause of action fails to state a cause of action and must be dismissed.
H. Conversion
In order to establish a cause of action for conversion, the plaintiff must establish that it is the legal owner or have the immediate right of possession of tangible personal property or specific money and that the defendants have interfered with plaintiff's rights of ownership or possession. Batsidis v. Batsidis, 9 AD3d 342 (2nd Dept. 2004); and Fiorenti v. Central Emergency Physicians, PLLC, 305 AD2d 453 (2nd Dept. 2003). When the item sought to be recovered is money, plaintiff must seek to recover the specific amount of the claimed loss. Independence Discount Corp. v. Bressner, 47 AD2d 756 (2nd Dept. 1975); and Laurent v. Williamsburgh Savings Bank, 28 Misc 2d 140 (Sup.Ct., Kings Co., 1954).
Plaintiffs do not seek to recover specific money, but rather money damages. See, Fiorenti v. Central Emergency Physicians, PLLC, supra. Therefore, the fourth cause of action fails to state a cause of action and must be dismissed.
I. Declaratory Judgment and Permanent Injunction
Plaintiffs seek a judgment declaring that Wachovia's charging and collecting of a document preparation fee is a violation of the Judiciary Law. Plaintiffs urge that since such a practice is illegal, Wachovia should be enjoined from collecting a document preparation fee in the future.
The underlying premise of Plaintiffs' claim is incorrect. Wachovia is permitted, under the federal banking laws and regulations, to charge a document preparation fee and the charging of such a fee is not a violation of Judiciary Law § 495(3). Thus, Plaintiff is not entitled to either a declaratory judgment or a permanent injunction.
Therefore, the fifth cause of action fails to state a cause of action and must be dismissed.
Accordingly, it is,
ORDERED, that Defendant's motion for an order dismissing the complaint is granted and the complaint is hereby dismissed.
This constitutes the decision and order of this Court.