Opinion
No. 61097/2013.
11-03-2014
WELLS FARGO BANK, N.A., Plaintiff(s), v. Ronald VANDERKAMP, Nancy Vanderkamp, et al, Defendant(s).
Alex Kriegsman Esq, Sag Harbor, for Defendant Vanderkamp. Hogan Lovells U.S. LLP By: David Dunn Esq, New York, for Plaintiff Wells Fargo.
Alex Kriegsman Esq, Sag Harbor, for Defendant Vanderkamp.
Hogan Lovells U.S. LLP By: David Dunn Esq, New York, for Plaintiff Wells Fargo.
Opinion
Andrew G. Tarantino Jr., J.
Upon consideration of the Notice of Motion on behalf of the defendants Ronald Vanderkamp and Nancy Vanderkamp [collectively “the defendants”] for summary judgment on the four Counterclaims in the defendants' Verified Answer (001), the supporting affirmation and affidavit, the defendants' memorandum of law, and supporting exhibits A through NN, and upon consideration of the Notice of Motion on behalf of the defendants for default judgment on the four Counterclaims in the defendants' Verified Answer (002), the supporting affirmation, the affirmation in opposition and exhibits A through E, and the defendants' reply affirmation, and upon consideration of the Notice of Cross Motion on behalf of the plaintiff, Wells Fargo Bank, NA [“the plaintiff” or “Wells Fargo”], for an order 1) granting Wells Fargo's motion for summary judgment, 2) dismissing the defendants counterclaims with prejudice, 3) dismissing the foreclosure action, 4) awarding Wells Fargo costs and attorneys fees in connection with the cross motion, and 5) directing the Suffolk County Clerk to cancel and discharge of record the Notice of Pendency (003), the supporting affirmation and affidavit, exhibits A through D and 1 through 5, the plaintiff's memorandum of law in opposition to the defendants' summary judgment motion and in support of the cross motion, it is now
ORDERED that motion sequences 001, 002, and 003 are considered together for purposes of this determination; and it is further
ORDERED that the defendants' motion for summary judgment on the four Counterclaims in the defendants' Verified Answer is denied; and it is further
ORDERED that the defendants' motion for a default judgment on the four Counterclaims in the defendants' Verified Answer is denied; and it is further
ORDERED that so much of the plaintiff's motion that seeks an order granting Wells Fargo's motion for summary judgment and dismissing the defendants' four counterclaims with prejudice is granted; and it is further
ORDERED that so much of the plaintiff's motion that seeks an order dismissing the foreclosure action and directing the Suffolk County Clerk to cancel and discharge of record the Notice of Pendency is granted; and it is further
ORDERED that so much of the plaintiff's motion that seeks an order awarding Wells Fargo costs and attorneys fees in connection with the cross motion is denied.
On March 11, 2008, the defendant Ronald Vanderkamp [“the defendant”], signed a note and mortgage in the amount of $1,719,000 .00 with respect to premises designated as 61 Widow Gavits Road, Sag Harbor, New York [“the subject premises”]. The defendants defaulted on the mortgage payment due on March 15, 2010, and the payments due thereafter. Wells Fargo sent the defendants a notice of intent to foreclose dated April 20, 2010.
The foreclosure action was not commenced until May 24, 2013. On or about July 15, 2013, the defendants answered the complaint asserting four counterclaims. In November 2013, apparently before participating in the residential foreclosure settlement conference program (see CPLR 3408 ; see also 22 NYCRR § 202.12–a ), the defendants sold the subject premises for $3,537,500.00. The amount of $2,156,806.40 was used to pay off the mortgage on the property. Wells Fargo sought to discontinue the action and cancel the notice of pendency by stipulation of all appearing parties. The defendants have refused to sign the discontinuance and now seek summary judgment or, alternatively, a default judgment with respect to their four counterclaims.
Ronald Vanderkamp submitted an affidavit in support of summary judgment [“the Vanderkamp affidavit”]. Unless otherwise stated, the facts are taken from the Vanderkamp affidavit.
The defendant initially applied for a loan modification in June of 2009. The plaintiff Wells Fargo Bank, N.A. [“Wells Fargo”], requested and received, at least in part, certain documents from the defendant.
On August 9, 2009, the defendant suffered a heart attack and was hospitalized. The defendants' Memorandum of Law in support of their motion for summary judgment on their counterclaims asserts (at 12) that the defendant's heart attack on August 9, 2009, was a direct and foreseeable consequence of the stress and frustration brought about by Wells Fargo's ineptitude-by-design, and its scheme to frustrate the loan modification process it invited.
On July 6, 2010, Wells Fargo again requested the same or similar documents from the defendant. The defendant claims that during this time he was undergoing both health problems and financial hardship and at any time could have sold the subject premises had he known he was ineligible for a loan modification. On July 30, 2010, the defendant was notified that his file had been closed because of non-receipt of documentation notwithstanding that the defendant had provided the requested documents. On August 10, 2010, Wells Fargo requested further documents that the defendant had already provided. On September 7, 2010, Wells Fargo notified the defendant that his request had been received and that an escrow account had been established. On September 20, 2010, the defendant's request for a loan modification was denied.
On April 27, 2011, the defendant received a notification from Wells Fargo that he was 408 days in default and invited the defendant to explore the possibility of modifying his loan. For the second time the defendant began the process of submitting documentation to achieve a modification of his loan and was assigned a “home preservation specialist” or “single point of contact” person by Wells Fargo. Wells Fargo repeatedly contacted the defendant by letter advising that it had either not received documents or required additional documents. The defendant continued to supply documents and was assigned a new home preservation specialist in October of 2011. On November 5, 2011, Wells Fargo notified the defendant that it had been trying to contact him without success and that the foreclosure process was going to resume. Ten days later the newly assigned home preservation specialist wrote to the defendant and advised that she was not able to help the defendant find a mortgage assistance solution and that the normal collection efforts would resume.
The day after the home preservation specialist advised that she could not assist the defendant, she sent another letter requesting the same documentation that had previously been provided. Once again, the defendant was asked to and did forward the already provided documentation. On January 6, 2012, Wells Fargo contacted the defendant and told him that due to its inability to contact him, it would again resume foreclosure proceedings. Nevertheless, on January 12, 2012, the same home preservation specialist wrote to the defendant and made another request for documentation. On January 17, 2012, the defendant received another rejection letter; on January 20, 2012 the defendant was advised by letter that the foreclosure process would resume. During the second failed attempt to negotiate a loan modification, the defendant claims interest continued to accrue on his loan when he could have sold the premises.
In February of 2012, the defendant initiated a third attempt to modify the loan. On May 28, 2012, Jose Reyes advised the defendant that he was the newly assigned home preservation specialist. On September 28, 2012, and again on October 25, 2012, the defendant was told that Wells Fargo had assigned a new home preservation specialist. On February 7, 2013, the newly assigned home preservation specialist wrote to the defendant and requested more documentation. The defendant continued to submit and resubmit documents. On February 13, 2013, the home preservation specialist advised the defendant by letter that she had received the requested documents and that Wells Fargo would now proceed with the defendant's request for mortgage assistance. On May 13, 2013, the home preservation specialist called the defendant and advised for the first time that the defendant would not be able to get a loan modification because the mortgage was in excess of $1.5 million dollars. This foreclosure action was commenced less than two weeks later.
The defendant maintains that had he known that he was ineligible for a loan modification, he would have attempted to sell his home, pay off the principal of his mortgage and avoid accruing additional interest on the unpaid balance. The defendants' Answer contains four Counterclaims upon which the defendant seeks summary judgment. The Counterclaims allege that 1) Wells Fargo violated General Business Law § 349 by perpetrating an intentionally futile and fictitious loan modification policy and process on the defendant and other customers by utilizing deceptive acts or practices; 2) Wells Fargo violated 3 NYCRR § 419 imposing a duty of good faith and fair dealing with each borrower in connection with the servicing of the borrower's loan; 3) Wells Fargo violated the implied duty of good faith and fair dealing inherent in all contracts; and 4) intentional infliction of emotional distress. Wells Fargo filed and served a Verified Reply to the defendants' counterclaims dated July 26, 2013.
Regarding the first counterclaim, the defendant alleges that Wells Fargo violated Gen. Bus. Law § 349 by perpetrating an intentionally futile and fictitious loan modification policy and process on the defendant and other customers. The defendant contends that Wells Fargo invites customers to apply for a loan modification, then subjects them to purposeful and unconscionable delays, countless requests for the same documents, and multiple points of contact by assigning then reassigning “home preservation specialists”. Further, the defendant contends that Wells Fargo strung him along for three-and-a-half years before informing the defendants that Wells Fargo does not consider loan modifications for loans in excess of $1.5 million dollars. In essence, the Counterclaim alleges that the loan modification process was designed to defeat the application. The defendants claim that the failure to disclose the loan modification policy was patently deceptive and misleading within the meaning of G.B.L. § 349.
The second counterclaim alleges that Wells Fargo violated the duty of good faith and fair dealing in connection with the servicing of their loan imposed by Part 419 of the Superintendent of the Department of Financial Services' Emergency Regulations (see 3 NYCRR § 419).
The current version of Section 419.2 entitled “Servicer duty of fair dealing” provides:
A servicer has a duty of good faith and fair dealing in its communications, transactions, and course of dealings with each borrower in connection with the servicing of the borrower's mortgage loan. This includes, but is not limited to, the duty to:
(a) safeguard and account for any money handled for the borrower;
(b) follow reasonable and lawful instructions from the borrower consistent with the underlying note and mortgage;
(c) act with reasonable skill, care and diligence;
(d) promptly provide the borrower with an accurate statement of account in accordance with section 419.7(b) of this Part;
(e) make borrowers in default aware of loss mitigation options and services offered by the servicer in accordance with section 419.11 of this Part;
(f) provide trained personnel and telephone facilities sufficient to respond promptly to borrower inquiries regarding their mortgage loans; and
(g) pursue loss mitigation with the borrower whenever possible in accordance with section 419.11 of this Part.
The defendants contend that by repeatedly inviting the defendants to apply for a loan modification, and then subjecting them to a process that ultimately defeated the defendants' applications, Wells Fargo violated the duty of good faith and fair dealing imposed by Part 419. The end result was that Wells Fargo increased the chance of foreclosure while potentially diminishing the value of any eventual sale of the defendants' home.
The third counterclaim alleges that Wells Fargo breached the covenant of good faith and fair dealing inherent in all contracts. The fourth counterclaim alleges intentional infliction of emotional distress.
The plaintiff opposed the defendants' summary judgment motion with, inter alia, an affidavit from Michael Dolan, Research and Mediation Manager of Wells Fargo Bank, NA [“the Dolan affidavit”]. According to the Dolan affidavit, the defendants could not qualify for a modification under the Home Affordable Modification Program [“HAMP”], because the unpaid principal balance on their loan exceeded the HAMP limit for a one-unit property, that is $729,650.00. Further, the defendants did not qualify for a proprietary modification because the amount of arrears and principal balance that it would have been necessary for the mortgagee to forbear to create an affordable payment exceeded the permissible amount under Wells Fargo's policies for a proprietary modification.
The Dolan affidavit challenges the defendants' assertion that the unpaid balance of $1.5 million dollars automatically rendered them ineligible for all loss mitigation options, and claims that the defendant was advised of this fact in a telephone conversation on June 21, 2013.
Wells Fargo seeks summary judgment in its favor with respect to the four counterclaims and states that its attorneys have incurred $8,676.99 in legal fees, only $4,616.37 of which was paid off with the proceeds from the sale. Wells Fargo claims that the defendants are liable for the unpaid balance of $4,060.62, plus the fees and costs in connection with the cross motion. No affirmation of attorney services was provided with the plaintiff's application.
With respect to the defendants' first counterclaim, Gen. Bus. Law § 349, entitled “Deceptive acts and practices unlawful” provides in subsection (a) that “deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful.” Although the statute is “directed at wrongs against the consuming public” (Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 24, 623 N.Y.S.2d 529, 647 N.E.2d 741 ), it allows a private right of action by any person who has been injured by a violation of the section (see General Business Law § 349[h] ). “To assert a viable claim under G.B.L. § 349(a), a plaintiff must plead that (1) the challenged conduct was consumer-oriented, (2) the conduct or statement was materially misleading, and (3) [he or she sustained] damages” (Lum v. New Century Mtge. Corp., 19 AD3d 558, 559, 800 N.Y.S.2d 408 ; see Blue Cross & Blue Shield of N.J., Inc. v. Philip Morris USA Inc., 3 NY3d 200, 205–206, 785 N.Y.S.2d 399, 818 N.E.2d 1140 ; Stutman v. Chemical Bank, 95 N.Y.2d 24, 29, 709 N.Y.S.2d 892, 731 N.E.2d 608 ; Gaidon v. Guardian Life Ins. Co. of Am., 94 N.Y.2d 330, 344, 704 N.Y.S.2d 177, 725 N.E.2d 598 ).
The defendants have failed to establish, prima facie, that Wells Fargo's actions and statements during the three failed loan modification attempts were anything but a private matter between the plaintiff and the defendants, as distinguished from allegedly deceptive “acts or practices [with] a broad impact on consumers at large” (U.S. Bank Nat. Ass'n v. Pia, 73 AD3d 752, 754, 901 N.Y.S.2d 104 [2d Dept.2010] [citations omitted]; see also Confidential Lending, LLC v. Nurse, 120 AD3d 739, 992 N.Y.S.2d 77 [2d Dept.2014] ). The complaint and the Vanderkamp affidavit clearly and with great factual detail describe a series of events and exchanges solely between the parties, as distinguished from the “consuming public”. There are no factual allegations, much less admissible evidence, establishing that Wells Fargo had a policy of misleading borrowers or sabotaging loan modifications. For that reason, the defendants' motion for summary judgment on the first counterclaim is denied. So much of the plaintiff's cross motion for summary judgment in its favor dismissing the first counterclaim is granted as the evidence established that the transactions between the parties were purely private in nature and the defendants failed to raise an issue of fact (Confidential Lending, LLC v. Nurse, 120 AD3d. at 741 ).
With respect to the second counterclaim alleging violation of Part 419, the defendants' summary judgment motion is denied and the plaintiff's cross motion for summary judgment is granted. “When, as here, a statute does not provide an express private right of action, the courts will imply a private right of action only upon examination of the following three factors: (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme” (Davis v. Citibank, N.A., 116 AD3d 819, 984 N.Y.S.2d 388 [2d Dept.2014] ; see also Goldman v. Simon Prop. Group, Inc., 58 AD3d 208, 214–215, 869 N.Y.S.2d 125.
Part 419 is a regulatory scheme applicable to certain mortgage loan servicers and other entities engaged in servicing mortgage loans. The defendant has not cited any authority that the regulatory scheme was adopted solely for the benefit of mortgagors like the defendants. The defendants have made no argument that allowing a private right of action would further the purposes for which the regulations were adopted or that creation of such a right would further the regulatory scheme. The defendants have not cited to a single case where such a private right has been recognized and this Court declines the invitation to do so under the circumstances here. Thus, the defendants' summary judgment motion as to the second counterclaim is denied; so much of the plaintiff's cross claim for summary judgment dismissing the second counterclaim is granted.
The third counterclaim alleges a breach of the covenant of good faith and fair dealing. Implicit in every contract is a covenant of good faith and fair dealing, which encompasses any promise that a reasonable promisee would understand to be included (see New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 318, 639 N.Y.S.2d 283, 662 N.E.2d 763 ; Staffenberg v. Fairfield Pagma Assoc., L.P., 95 AD3d 873, 875, 944 N.Y.S.2d 568 ). The covenant is breached “where one party to a contract seeks to prevent its performance by, or to withhold its benefits from, the other” (Collard v. Incorporated Vil. of Flower Hill, 75 A.D.2d 631, 632, 427 N.Y.S.2d 301, affd. 52 N.Y.2d 594, 439 N.Y.S.2d 326, 421 N.E.2d 818 ; see Aventine Inv. Mgt. v. Canadian Imperial Bank of Commerce, 265 A.D.2d 513, 514, 697 N.Y.S.2d 128 ; Dvoskin v. Prinz, 205 A.D.2d 661, 662, 613 N.Y.S.2d 654 ). The defendants offer the court the alternative of choosing the referenced contract as either the mortgage or the would-be loan modification.
The defendants failed to submit evidence in admissible form that the plaintiff sought to prevent the performance of a contract, or to withhold the benefits of a contract from the defendants (see Aventine Inv. Mgt. v. Canadian Imperial Bank of Commerce, 265 A.D.2d at 514, 697 N.Y.S.2d 128 ). There is no dispute that the defendants defaulted on their mortgage and that they failed to cure after notification of their default. With respect to the failed attempts at loan modification, it is now firmly established that the mortgagee was under no contractual duty to enter into a loan modification (Wells Fargo Bank, N.A. v. Meyers, 108 AD3d 9, 966 N.Y.S.2d 108 [2d Dept.2013] ; US Bank National Association v. Williams, ––– N.Y.S.2d ––––, 2014 WL 5461494 [2d Dept.] ; see also JP Morgan Chase Bank, Nat. Ass'n v. Ilardo, 36 Misc.3d 359, 373, 940 N.Y.S.2d 829 [N.Y.Sup.2012]. Therefore, the defendants' motion for summary judgment in their favor with respect to the third counterclaim is denied; so much of the plaintiff's cross motion for summary judgment dismissing the third counterclaim is granted.
The fourth counterclaim is for the intentional infliction of emotional distress. To state a claim for intentional infliction of emotional distress, the plaintiff must prove the following four elements (i) extreme and outrageous conduct; (ii) intent to cause, or disregard of a substantial probability of causing, severe emotional distress; (iii) a causal connection between the conduct and injury; and (iv) severe emotional distress (Howell v. New York Post Co., Inc., 81 N.Y.2d 115, 121, 612 N.E.2d 699 [1993]. In practice, courts have tended to focus on the outrageousness element, the one most susceptible to determination as a matter of law (Id. [citations omitted] ).
The fourth counterclaim for intentional infliction of emotional distress fails to state acts and statements which are extreme or outrageous (Associates First Capital v. Crabill, 51 AD3d 1186, 857 N.Y.S.2d 799 [3d Dept.2008] ; Gkanios v. Home Sav. of America, 257 A.D.2d 602, 683 N.Y.S.2d 866 [2d Dept.1999]. Stated another way, the plaintiff's conduct does not approach the level which “so transcends the bounds of decency as to be regarded as atrocious and intolerable in a civilized society” (Marine Midland Bank, N.A. v. Cafferty, 174 A.D.2d 932, 571 N.Y.S.2d 628 [3d Dept.1991], citing Freihofer v. Hearst Corp., 65 N.Y.2d 135, 143, 490 N .Y.S.2d 735, 480 N.E.2d 349 ). The defendants' motion for summary judgment as to the fourth counterclaim is denied. So much of the plaintiff's motion seeking summary judgment on the fourth counterclaim is granted; this counterclaim should also be dismissed.
The Appellate Division Second Department has specifically held that the Supreme Court has “authority to impose a sanction or remedy in the event it determined ... that [a] plaintiff had failed to negotiate in good faith in the mandatory foreclosure settlement conferences”, including the suspension of interest accrual on the debt, if appropriate (U.S. Bank Nat. Ass'n v. Sarmiento, 121 AD3d 187, 991 N.Y.S.2d 68 [2d Dept.2014], citing Bank of Am. v. Lucido, 114 AD3d 714, 715, 981 N.Y.S.2d 433 ; Wells Fargo Bank, N.A. v. Meyers, 108 AD3d at 11, 966 N.Y.S.2d 108 ). To be sure, while the Vanderkamp affidavit, if credited, chronicles a frustrating, arduous and ultimately futile attempt to avoid foreclosure with a loan modification, all three applications were made before the action was commenced and before the good faith requirement of CPLR 3408(f) was triggered. By the time the parties appeared for their first mandatory residential foreclosure settlement conference, the defendants had already paid off the loan, including the accrued interest. There is simply no authority, and the defendants have offered none to support their attempt to clawback and recover any or all of the interest that accrued between the first attempt at modification in June of 2009, and the defendants allegedly being told that Wells Fargo does not modify loans in excess of $1.5 million dollars in May of 2013, before the commencement of the foreclosure action.
With respect to the defendants' alternate motion for a default judgment pursuant to CPLR 3215 for the plaintiff's failure to file opposing papers to defendants' summary judgment motion, the application is without merit, and is denied.
It is undisputed that the plaintiff did not submit opposition to the defendants' summary judgment motion because counsel was advised by a clerk in the Calendar Department that Judge LaSalle had referred the matter to the residential foreclosure settlement part and had declined to hear the defendants' summary judgment motion.
So much of the plaintiff's motion that seeks an order dismissing the foreclosure action and directing the Suffolk County Clerk to cancel and discharge of record the Notice of Pendency is granted.
So much of the plaintiff's motion that seeks an order awarding Wells Fargo costs and attorneys fees in connection with the cross motion is denied as the plaintiff has failed to support its application with an attorney's affirmation of services or establish its entitlement to judgment as a matter of law in this regard (Alvarez v. Prospect Hospital, 68 N.Y.2d 320, 501 N.E.2d 572, 508 N.Y.S.2d 923 [1986] ).
Settle Judgment on notice.