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holding that the plaintiff's conversion claim, while it denied a legal conclusion reached by the state court, was premised on the plaintiff's allegations that the defendant procured the foreclosure judgment illegally through fraudulent tactics and thus was not barred by Rooker-Feldman
Summary of this case from Davis v. JP Morgan Chase Bank, Na & Pennymac Corp.Opinion
11-CV-06149 (NGG) (RER)
12-06-2012
Lenford Hinds, Plaintiff, v. Option One Mortgage Corp. and Wells Fargo Bank, Defendants.
REPORT & RECOMMENDATION RAMON E. REYES, JR., U.S.M.J. : TO THE HONORABLE NICHOLAS G. GARAUFIS, UNITED STATES DISTRICT JUDGE
Pro se plaintiff Lenford Hinds ("Plaintiff") commenced this action against defendants Option One Mortgage Corp. ("Option One") and Wells Fargo Bank, N.A. ("Wells Fargo") as Trustee for Option One Mortgage Trust 2006-1, Asset-Backed Certificates, Series 2006-1 (collectively, "Defendants") pursuant to 42 U.S.C. §§ 1983 and 1985. Before the Court are Defendants' motions to dismiss the Complaint for lack of subject-matter jurisdiction and for failure to state a claim upon which relief can be granted. See FED. R. CIV. P. 12(b)(1), 12(b)(6). For the reasons that follow, I respectfully recommended that Defendants' motions to dismiss be granted in their entirety.
The Court notes that Option One is now known as Sand Canyon Corporation. (See Certification of Anthony J. Laura, dated Mar. 30, 2012 (Dkt. No. 22-1) ("Laura Certification") ¶ 1). Nonetheless, for clarity and for consistency of the record, the Court will continue to refer to defendant as Option One.
At the onset, the Court notes two errors in the Complaint: (1) Wells Fargo Bank, N.A. is identified as "Wells Fargo Bank" and (2) the Statement of Jurisdiction incorrectly references 28 U.S.C. §§ 1983 and 1985. Given Plaintiff's pro se status, the Court overlooks these errors.
BACKGROUND
This action arises out of the state court proceeding commenced on July 30, 2007 by Option One seeking to foreclose on a mortgage secured by Plaintiff's property at 108-24 221st Street, Queens Village, New York 11429. (Laura Certification, Exh. 4 ("State Court Complaint").) Plaintiff failed to timely answer the complaint in that action, and as a result the Queens County Supreme Court entered a judgment of foreclosure and sale on March 5, 2008. (Laura Certification, Exh. 6.) The property was subsequently sold. (See Decl. of Marka Belinfanti, dated Feb. 29, 2012 (Dkt. No. 19) ("Belinfanti Decl."), Exh. F.)
Over three years later, on or around December 5, 2011, plaintiff filed an answer in the state court proceeding. (Laura Certification, Exh. 7.) On December 19, 2011, Plaintiff commenced this action against Defendants. The complaint appears to allege constitutional due process violations and common law fraud, unjust enrichment, and conversion claims. Plaintiff seeks, among other relief, an order "cancel[ing] the lien and vacating the sale, reversing the judgment," an injunction "preventing defendants from taking the real property from plaintiff" and "staying the transfer of title," and $1,750,000 in damages. (Compl. at 26-29.)
Citations to the Complaint refer to page numbers as assigned by the Electronic Case Filing system.
Defendants filed their respective motions for a pretrial conference regarding their anticipated motions to dismiss. (Dkt. Nos. 14-15.) Your Honor denied Defendants' request for a conference as unnecessary and allowed Defendants to proceed with their motions to dismiss, referring such motions to me, once fully briefed, for a report and recommendation. (Dkt. Nos. 16-17.)
STANDARD
"Where, as here, the defendant moves for dismissal under Rule 12(b)(1) as well as on other grounds, the court should consider the Rule 12(b)(1) challenge first since if it must dismiss the complaint for lack of subject matter jurisdiction, the accompanying defenses and objections become moot and do not need to be determined." Rhulen Agency, Inc. v. Ala. Ins. Guar. Ass'n, 896 F.2d 674, 678 (2d Cir. 1990) (citation and quotation marks omitted).
In a deciding a motion to dismiss for lack of subject matter jurisdiction, the court "must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of plaintiff, but jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it." Morisson v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008), aff'd, 130 S. Ct. 2869 (2010) (citations and quotations marks omitted). The court "may consider affidavits and other materials beyond the pleadings to resolve the jurisdictional issue, but [ ] may not rely on conclusory or hearsay statements contained in the affidavits." Id. (citation omitted). "A plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citation omitted).
As for a motion to dismiss for failure to state a claim for which relief can be granted, a court "accept[s] as true the facts alleged in the complaint, and may consider documents incorporated by reference in the complaint and documents upon which the complaint relies heavily." In re Citigroup ERISA Litig., 662 F.3d 128, 136 (2d Cir. 2011) (citation and quotation marks omitted). All reasonable inferences are drawn in favor of the plaintiff. Id. at 152.
In deciding a Rule 12(b)(6) motion, a court must conduct a two-step inquiry. First, a court "begin[s] by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). This is because "[w]hile legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Rather, "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Second, where well-pleaded facts are present, a court "consider[s] the factual allegations in [Plaintiff's] complaint to determine if they plausibly suggest an entitlement to relief." Id. at 681.
Finally, as Plaintiff is proceeding pro se, his submissions are "to be liberally construed[,] and a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citation and quotation marks omitted). The court must read pro se submissions "to raise the strongest arguments they suggest." Bertin v. United States, 478 F.3d 489, 491 (2d Cir. 2007) (citation and quotation marks omitted). "If a liberal reading of the complaint 'gives any indication that a valid claim might be stated,' this court must grant leave to amend the complaint." Goddard v. Citibank, NA, No. 04-CV-5317 (NGG) (LB), 2006 WL 842925, at *3 (E.D.N.Y. Mar. 26, 2006) (quoting Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000).
DISCUSSION
The Complaint alleges two causes of action. The first cause of action appears to allege violations of Plaintiff's due process rights under 42 U.S.C. §§ 1983 and 1985. The second cause of action may be read to raise three separate claims: (1) common law fraud in the origination of the underlying loan; (2) unjust enrichment to recover the entire balance of Plaintiff's interest in the property; and (3) conversion relating to Option One's alleged fraud in the procurement of the state court judgment of foreclosure and sale. I. The Rooker-Feldman Doctrine Divests the Court of Subject Matter Jurisdiction Over Plaintiff's §§ 1983 and 1985 Constitutional Due Process Claims
As a second cause of action, the Complaint alleges that "defendant participated in fraud, unjust enrichment and other scheme to commit the theft of equity and to use the legal system for the purpose to commit such fraudulent actions." (Id. at 27.) Option One interprets the cause of action to imply a claim for abuse of process, recognizing that such conduct has been described as a "form of extortion . . . to coerce the plaintiff into doing something other than what the process contemplates." (Mem. of Law of Def. Sand Canyon Corp., f/k/a/ Option One Mortg. Corp., in Supp. of Its Mot. to Dismiss Compl., dated Mar. 30, 2012 (Dkt. No. 22-8) ("Option One Mem.") at 14.) But an abuse of process claim does not find support in the Complaint as a whole, as Plaintiff does not appear to allege that Defendants commenced the state court action for any reason other than to foreclose on his property. Rather, the second cause of action is best understood as a conversion claim. See Goddard v. Citibank, 2006 WL 842925, at *4 (finding that the complaint plead conversion where plaintiff alleged that defendants "wrongfully invoked the legal process by means of deceit and fraud to obtain a judgment of foreclosure) (citing Smith v. Weinberger, 994 F. Supp. 418, 421 (E.D.N.Y. 1998).
The Rooker-Feldman doctrine holds "that federal district courts lack jurisdiction over suits that are, in substance, appeals from state-court judgments . . . . " Hoblock v. Albany Cnty Bd. of Elections, 422 F.3d 77, 84 (2d Cir. 2005). The doctrine applies only to "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review of those judgments." Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). "Thus, to properly invoke the Rooker-Feldman doctrine, the defendant must show that the plaintiff: (1) lost in state court; (2) complains of injuries caused by that state court judgment; (3) invites the district court to review and reject the state court judgment; and (4) commenced the federal suit after entry of the state court judgment." Goddard, 2006 WL 842925, at *3 (quoting Hoblock, 422 F.3d at 85).
There is no question that the first and fourth requirement of the Rooker-Feldman doctrine are satisfied for all of Plaintiff's claims. Plaintiff lost in state court and commenced this action after entry of the state court judgment. The second and third requirements, however, are satisfied only with respect to Plaintiffs claims under §§ 1983 and 1985.
Through his §§ 1983 and 1985 claims, Plaintiff seeks to invalidate the state court judgment of foreclosure and sale, claiming that he was not properly served with process and that Option One lacked standing to commence that action. (See, e.g., Compl. at ¶¶ 21-22, 24-26.) Thus, Plaintiff complains of an injury caused by that judgment, and although styled as constitutional due process claims, Plaintiff essentially asks the Court to engage in an impermissible review of the state court's default judgment. See, e.g., Granger v. Harris, No. CV-05-3607 (SJF) (ARL), 2007 WL 1213416, at *5 (E.D.N.Y. Apr. 17, 2007) (finding that the Rooker-Feldman doctrine barred plaintiff's claims that defendant wrongfully obtained a default judgment without serving process, "since, in essence, they seek to overturn the default judgment entered against Granger in the state court action.") (citation omitted); see also Garvin v. Bank of New York, 227 Fed. Appx. 7, 8 (2d Cir. 2007) (concluding that the Rooker-Feldman doctrine applies to challenges to state court proceedings based on alleged constitutional violations) (citing Feldman, 460 U.S. 462, 486 (1983)); Ashby v. Polinsky, No. 06-CV-6778 (DLI), 2007 WL 608268 (E.D.N.Y. Feb. 22, 2007), aff'd, 2009 WL 1262962 (2d Cir. 2009) (finding lack of subject-matter jurisdiction where "plaintiff has retooled her complaint as one brought pursuant to 42 U.S.C. § 1983 alleging Due Process violations"). Indeed, Plaintiff asks the Court to "cancel the lien and vacat[e] the sale, reversing the judgment" and to grant various forms of injunctive relief, including "preventing defendants from taking the real property from plaintiff" and "[d]irecting defendants to provide evidence of legal standing." (Compl. at 26.) The Rooker-Feldman doctrine precludes such review and reversal of the state court judgment.
Plaintiff's constitutional due process claim fails for the additional reason that it does not state a claim upon which relief can be granted. Plaintiff cannot assert §§ 1983 and 1985 claims against a private entity unless it engages in state action. See Desiderio v. Nat'l Ass'n of Sec. Dealers, Inc., 191 F.3d 198, 206 (2d Cir. 1999). The Complaint makes no allegations that Defendants are state actors, or acting under the color of law or with any state actor to plead a constitutional violation claim. See Flagg v. Yonkers Sav. and Loan Ass'n, 396 F.3d 178, 187 (2d Cir. 2005) (citation omitted).
The same cannot be said, however, with respect to Plaintiff's fraud, unjust enrichment, and conversion claims. As for Plaintiff's common law fraud claim, the Complaint alleges that Defendants engaged in fraud and predatory lending tactics in the formation of the underlying mortgage agreement. (See, e.g., Compl. at 14-16.) The Rooker-Feldman doctrine does not divest the Court of jurisdiction over such a claim because Plaintiff's injuries, if any, arising from that fraud were caused by Defendants' prior conduct, and not the state court judgment. McKithen v. Brown, 481 F.3d 89, 97-98 (2d Cir. 2007) ("[A] party is not complaining of an injury 'caused by' a state-court judgment when the exact injury of which the party complains in federal court existed prior in time to the state-court proceedings, and so could not have been 'caused by' those proceedings.")
To the extent that Plaintiff seeks to bring a cause of action for fraud on the court, he must do so in the state court that issued the judgment of foreclosure and sale. Goddard, 2006 WL 842925, at *4 n.4.
Additionally, while Plaintiff's unjust enrichment and conversion claims may deny a legal conclusion reached by the state court, these claims are premised on Plaintiff's allegations that Option One procured the foreclosure judgment illegally though fraudulent tactics, "independent from the barred claim that the state court issued an incorrect decision regarding the law or the evidence presented to it." Goddard, 2006 WL 849225, at *6; accord Marshall v. Grant, 521 F. Supp. 2d 240, 244-45 (E.D.N.Y.2007); Mac Pherson v. State St. Bank & Trust Co., 452 F. Supp. 2d 133, 140 (E.D.N.Y. 2006). That Plaintiff seeks money damages, rather than vacatur of the judgment of foreclosure and sale, provides further support that such claims are independent from the state court judgment. Goddard, 2006 WL 849225, at *6 (finding that plaintiff's allegations of conversion and intentional infliction of emotional distress are not precluded by the Rooker-Feldman doctrine).
Accordingly, Plaintiff's §§ 1983 and 1985 claims should be dismissed with prejudice, given that such claims are "inextricably intertwined" with the state court foreclosure judgment, and therefore amendment would be futile. See Webster v. Penzetta, 458 Fed. 23, 25 (2d Cir. 2012); see also Hoblock, 422 F.3d at 86-87 ("Rooker-Feldman bars a federal claim, whether or not raised in state court, that asserts injury based on a state judgment and seeks review and reversal of that judgment; such a claim is 'inextricably intertwined' with the state judgment.) Nonetheless, consistent with Your Honor's decision in Goddard, the Court should find that the Rooker-Feldman doctrine does not bar federal jurisdiction over Plaintiff's remaining common law fraud, unjust enrichment, and conversion claims. II. Res Judicata Bars Plaintiff's Common Law Fraud Claim
In the Complaint, Plaintiff appears to invoke federal question jurisdiction premised on §§ 1983 and 1985. Having found that these federal claims should be dismissed with prejudice, there remains the question of whether the Court should exercise supplemental jurisdiction over Plaintiff's remaining state law claims pursuant to 28 U.S.C. § 1367(c)(3). Defendants have not addressed the Court's jurisdiction in their motions to dismiss. Additionally, the Complaint suggests a basis for diversity jurisdiction. (Compl. at 2.) Under these circumstances, the Court should decline to dismiss the claims.
Under the doctrine of res judicata, or claim preclusion, "'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.'" Monahan v. New York City Dept. of Corr., 214 F.3d 275, 284 (2d Cir. 2000) (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)). Res Judicata applies where: "(1) the previous action involved an adjudication on the merits; (2) the previous action involved the plaintiffs or those in privity with them; [and] (3) the claims asserted in the subsequent action were, or could have been, raised in the prior action." Id. at 285 (citation omitted).
Wells Fargo argues for dismissal of the Complaint on res judicata grounds. (Mem. of Law in Supp. of Mot. to Dismiss Compl., dated Feb. 29, 2012 (Dkt. No. 20) ("Wells Fargo Mem.") at 5-7.) Although Wells Fargo does not appear to have been a party in the state court proceeding, the Court takes judicial notice of the Referee's Deed that reflects that Wells Fargo, as Trustee of Option One, bought the subject property at the foreclosure sale, rendering it a successor to Option One's property interest. (See Belinfanti Decl., Exh. F). The Court therefore finds that the privity requirement is satisfied here and that res judicata applies to Wells Fargo. See Watts v. Swiss Bank Corp., 27 N.Y.2d 270, 277 (1970) (Under New York law, privity extends to "those who are successors to a property interest, those who control an action although not formal parties to it, those whose interests are represented by a party to the action, and possibly coparties to a prior action.") (citation omitted).
The preclusive effect of the New York state court proceeding is examined under New York law. Council v. Better Homes Depot, Inc., No. 04-CV-5620 (NGG) (KAM), 2006 WL 2376381, at *3 (E.D.N.Y. Aug. 16, 2006) ("A federal court must apply the rules of preclusion of the state in which the prior judgment was rendered.") (citing Sullivan v. Gagnier, 225 F.3d 161, 166 (2d Cir. 2000)). New York "has adopted a transactional approach to res judicata, barring a later claim arising out of the same factual grouping as an earlier litigated claim even if the later claim is based on different legal theories or seeks dissimilar or additional relief." Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir. 1994) (citing Smith v. Russell Sage Coll., 54 N.Y.2d 185 (1981)). "This transactional doctrine also applies to defenses that could have been litigated in a foreclosure action." See Beckford v. Citibank N.A., No. 00-CV-205, 2000 WL 1585684, at *3-4 (S.D.N.Y. Oct. 24, 2000).
Inasmuch as Plaintiff's fraud claim is premised on his allegations that Defendants obtained the underlying mortgage through predatory lending tactics and fraud, res judicata operates to preclude federal review of such a claim. See Karamath v. U.S. Bank, N.A, No. 11-CV-1557 (NGG) (RML), 2012 WL 4327613, at *3 (E.D.N.Y. Aug. 29), adopted by, 2012 WL 4327502 (E.D.N.Y. Sept. 20, 2012) (holding that res judicata barred the plaintiff's fraud claim because it arose from the same "factual grouping" that formed the basis of the state court foreclosure action); Gray, 2009 WL 1787710, at *6 n.2 ("Plaintiff's allegations of fraud regarding the underlying loan transaction do not appear to be of the type recognized by certain courts as immune from res judicata."). First, the state court default judgment is an adjudication on the merits. Done v. Wells Fargo Bank, No. 08-CV-3040, 2009 WL 2959619, at *4 (E.D.N.Y. Sept. 14, 2009). Second, Plaintiff was party to the state court proceeding as a defendant and now brings this federal action as a pro se Plaintiff. Third, Plaintiff's present claims arise from the same factual grouping - namely, the validity of Plaintiff's mortgage, and the right of Defendants to enforce that agreement in a state court foreclosure proceeding. Plaintiff claims that Defendants engaged in "high-pressure abusive fraudulent behavior," such as grossly inflating the value of the property and increasing "fees, costs and expenses" of the mortgage, in furtherance of their "predatory lending scheme." (Compl. at 15-16.) Such claims regarding alleged improprieties during the formation of the mortgage agreement should have been raised in the prior state court proceeding. Thus, Plaintiff's common law fraud claim should be dismissed with prejudice on res judicata grounds.
Plaintiff's fraud claims fails for the additional reason that it fails to state a claim upon which relief can be granted. To state a claim for common law fraud, plaintiff must plead with particularity the circumstances constituting the fraud. FED. R. CIV. P. 9(b); see also Eternity Global Master Fund v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 187 (2d Cir. 2004) (stating that the complaint must "(1) detail the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or omissions) were made, and (4) explain why the statements (or omissions) are fraudulent" to satisfy the particularity requirement). Plaintiff's factually deficient allegations of fraud and predatory lending are insufficient to satisfy this heightened pleading standard.
Plaintiff's remaining claims for unjust enrichment and conversion are not barred by res judicata. Although there is disagreement in this circuit, some courts, including Your Honor, have found that a plaintiff may collaterally attack a judgment based on a lack of jurisdiction or demonstration that the prior judgment was procured by fraud. See Goddard, 2006 WL 842925, at *7 (quoting Bell v. Town of Pawling, 537 N.Y.S.2d 214, 215 (2d Dep't 1989)); Smith v. Weinberger, P.C., 994 F. Supp. 418, 421 (E.D.N.Y.) (citation omitted); see also Morris v. Jones, 329 U.S. 545, 550-551 (1947) ("A judgment of a court having jurisdiction of the parties and of the subject matter operates as res judicata, in the absence of fraud or collusion, even if obtained upon a default.") (citation and quotation marks omitted). Inasmuch as Plaintiff alleges that Defendants procured the state court judgment by fraud, the Court should find that res judicata does not bar Plaintiff's unjust enrichment and conversion claims.
Res judicata is inapplicable to Plaintiff's unjust enrichment and conversion claims for the additional reason that these causes of action accrued after the foreclosure proceeding. Plaintiff's claims for unjust enrichment and conversion apparently seek to recover either the balance of his interest in the property or the fair market value of the property pursuant to the wrongfully obtained judgment. See Goddard, 2006 WL 842925, at *6 n.5 ("A cause of action for conversion pursuant to a wrongfully obtained judgment is generally not to vacate the underlying judgment, but rather seeks to recover the fair market value of the converted property at the time and place of conversion, to which interest may be added.") (citation and quotation marks omitted."). These claims therefore accrued when the property was sold, and well after the March 5, 2008, judgment of foreclosure and sale. Goddard, 2006 WL 842925, at *7. Accordingly, res judicata does not bar Plaintiff's claims of unjust enrichment and conversion.
In addition to injunctive relief, which is clearly foreclosed by the Rooker-Feldman doctrine, Plaintiff seeks a judgment of $1,750,000, alleging that Defendants "participated in fraud, unjust enrichment and other scheme to commit the theft of equity . . . . " (Compl. at 27.) In another section of the Complaint, Plaintiff demands that Defendants be directed to pay the "entire balance of [his] interest in the property," and alleges that $490,000 would suffice. (Id. at 17.) Plaintiff further claims that Defendants are liable for damages for "an extensive amount of equity into the property since the judgment of foreclosure and sale." (Id. (emphasis added).)
III. Plaintiff's Unjust Enrichment and Conversion Claims Fail to State a Claim Upon Which Relief Can Be Granted
Option One argues that the Complaint must be dismissed pursuant to Rule 12(b)(6) because Plaintiff has failed to state a claim upon which relief can be granted. Having found that Plaintiff's claims of unjust enrichment and conversion are not foreclosed by the Rooker-Feldman and res judicata doctrines, the Court will now turn to the sufficiency of Plaintiff's allegations under 12(b)(6) standards.
A. Unjust Enrichment
Plaintiff brings an unjust enrichment claim apparently seeking to recover "the entire balance of [his] interest in the property including maintenance and restoration and repairs" and "damages caused by the frivolous actions" filed by Defendants. (Compl. at 17.) "The theory of unjust enrichment lies as a quasi-contract claim." Goldman v. Metropo. Life Ins. Co., 5 N.Y.3d 561, 587 (2005). "Where the parties executed a valid and enforceable written contract governing a particular subject matter, recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded." IDT Corp. v. Morgan Stanley Dean Witter &Co., 12 N.Y.3d 132, 142 (2009) (citation omitted).
Here, Plaintiff's claim for unjust enrichment arises out of the very subject matter governed by the note and mortgage. See also Scott v. Saxon Loan Servs., No. 09-CV-2119 (SJF) (ARL), 2010 WL 1529281, at *11-12 (E.D.N.Y. Apr. 9, 2010) (dismissing an unjust enrichment claim seeking to recover fees, insurance proceeds, and equity in the home because it arose out of the same subject matter as the mortgage and note). To the extent that Plaintiff seeks to recover damages on a theory of unjust enrichment for the "extensive amount of equity" put into the property since the judgment of foreclosure and sale, such a claim is also foreclosed by the existence of a valid contract, as the mortgage expressly provides Option One the right to bring a lawsuit of foreclosure and sale to collect all costs, disbursements, and allowances allowed under the law. Mortgage ¶ 21.
Even if the existence of a valid contract does not foreclose recovery under the theory of unjust enrichment, the claim nonetheless fails because Plaintiff has not shown that Defendants were unjustly enriched. "To prevail on a claim of unjust enrichment, a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) that 'it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered.'" Anesthesia Assocs. of Mount Kisco, LLP v. N. Westchester Hosp. Ctr., 873 N.Y.S.2d 679, 686 (2d Dep't 2009) (citation and quotation marks omitted). Plaintiff has made no allegations that Defendants have improperly retained any surplus from the sale beyond the loan funds and additional out-of-pocket expenses to which they are entitled. See Mazeh Const. Corp. v. VNB New York Corp., 35 Misc. 3d 1237(A) (N.Y. Sup. Ct. 2012). Thus, Plaintiff has failed to state a claim.
B. Conversion
Plaintiff appears to bring a conversion claim, alleging in substance that Defendants employed fraud to procure a judgment of foreclosure and sale that is tantamount to "theft of equity." "Under New York law, conversion is any unauthorized exercise of control by one who is not the owner or interferes with a superior possessory right of another in property." Goddard v. Citibank, 2006 WL 842925, at *8 (quoting Tese-Milner v. TPAC, LLC (In re Ticketplanet.com), 313 B.R. 46, 69 (Bankr. S.D.N.Y. 2004)). "A conversion claim must allege that the contested acts are unlawful or wrongful as distinguished from acts that are mere violation of contractual rights." Id. (citation and quotation marks omitted). Accordingly, "a claim of conversion will survive a motion to dismiss even where there is an underlying foreclosure judgment if the plaintiff alleges that the foreclosure judgment was wrongfully obtained." Weinberger, 994 F. Supp. at 421 (citing Hof v. Mager, 203 N.Y.S. 161, 162-63 (1st Dep't 1924); see also 23 N.Y. Jur. 2d Conversion, Etc. § 24 ("One who applies for or obtains a warrant of seizure and takes possession of the goods of another takes the risk of doing so; this person, if having no right to possess the property, is a trespasser and is liable in conversion to the owner of the goods.").
Although confusing and contradictory, the Complaint appears to challenge Option One's standing to bring the state court foreclosure proceeding in light of a purportedly improper assignment on October 10, 2008. Plaintiff's allegations regarding the mortgage assignment, however, are inconsistent, vague, and refer to individuals and documents not previously introduced or provided to this Court. The Complaint nonetheless asserts that the 2008 assignment "was done for the sole purpose of providing some excuse upon which to commence [that state court foreclosure] litigation." (Compl. at 5.) Defendants, in moving to dismiss, attach the state court complaint, which clearly establish that the state court action was filed in July 2007.
Insofar as Plaintiff's conversion claim is premised on fraud, it is subject to the heightened pleading standards of Rule (9)(b). See Silverman Partners, L.P. v. First Bank, 687 F.Supp.2d 269, 288 (E.D.N.Y. 2010). Plaintiff asserts no facts regarding Defendants' statements or omissions that resulted in the "untruthful" nature of the assignment to be "hidden" from the state court. (Compl. at 4.) Specifically, Plaintiff does not identify the speaker of the alleged fraudulent statements, the circumstances surrounding the statements, and whether the statements were material to the judge's decision. See Goddard, 2006 WL 842925, at *8. Thus, Plaintiff's bald conclusion of fraud are insufficient to satisfy Rule 9(b). --------
Thus, given contradictory evidence contained in documents explicitly referred to by the Complaint, Plaintiff's unsubstantiated fraud allegations are insufficient to defeat the motion to dismiss. See Matusovsky v. Merrill Lynch, 186 F. Supp. 2d 379, 400 (S.D.N.Y. 2000); Rapoport v. Asia Elecs. Holding Co., 88 F. Supp. 2d 179 (S.D.N.Y. 2000). The alleged fraudulent assignment post-dates the commencement of the state court action by over a year, and entry of judgment of foreclosure and sale by several months. Accordingly, Plaintiff's allegations that the allegedly improper assignment was for the purpose of commencing litigation against him and that Option One "hid" the untruthful assignment to procure a judgement of foreclosure and sale are without merit. Indeed, whereas the Complaint alleges inconsistent and seemingly irrelevant factual content regarding Option One's standing, the mortgage document itself makes clear the governing relationship between plaintiff as borrower and Option One as lender at the time of the 2007 state court proceeding. Therefore, Plaintiff's claim should be dismissed because he has failed to allege sufficient facts to raise a plausible claim for relief.
IV. Plaintiff Should Be Denied Leave to Replead
Although Plaintiff has not requested leave to amend or replead, the Second Circuit has advised that "the court should not dismiss without granting leave to amend at least once when a liberal reading of the complaint gives any indication that a valid claim might be stated." Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000) (quotations and citations omitted); see also FED. R. CIV. P. 15(a) (The court should freely give leave [to amend the pleadings] when justice so requires.")
Here, any attempt to amend Plaintiff's claims would be futile. As discussed above, the Court lacks jurisdiction to hear Plaintiff's §§ 1983 and 1985 claims under the Rooker-Feldman doctrine, and Plaintiff's common law fraud claim is barred by the doctrine of res judicata. Additionally, no amendments can cure the substantive defects underlying Plaintiff's unjust enrichment and conversion claims. See Cuoco, 222 F.3d at 112 ("The problem with [plaintiff's] cause[ ] of action is substantive; better pleading will not cure it. Repleading would thus be futile. Such a futile request to replead should be denied."); see also Hayden v. Cnty. of Nassau, 180 F.3d 42, 53 (2d Cir.1999) ("[W]here the plaintiff is unable to demonstrate that he would be able to amend his complaint in a manner which would survive dismissal, opportunity to replead is rightfully denied."). Therefore, Plaintiff's complaint should be dismissed with prejudice.
CONCLUSION
For the foregoing reasons, I respectfully recommend that Defendants' motions to dismiss be granted in their entirety. Any objection to this Report and Recommendation must be filed with the Clerk of the Court and the Honorable Nicholas G. Garaufis within fourteen days of receipt hereof. Failure to file timely objections may waive the right to appeal the District Court's Order. See 28 U.S.C. § 636(b)(1); FED. R. CIV. P. 72; Small v. Sec'y of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989). Dated: December 6, 2012
Brooklyn, New York
/s/ _________
Ramon E. Reyes, Jr.
United States Magistrate Judge