Barnett v. Countrywide Bank, FSB
60 F. Supp. 3d 379
E.D.N.Y2014Background
- Plaintiffs obtained a $405,500 mortgage from Countrywide on December 26, 2007; mortgage named MERS as nominee and was assignable and transferable.
- Mortgage was later assigned to a securitized trust (Fannie Mae REMIC Trust 2008-14); servicing transferred to Green Tree on December 1, 2011; Countrywide later merged into Bank of America.
- Plaintiffs sued in New York State Supreme Court on April 1, 2014 alleging improper securitization/assignment, fraud (inducement and concealment), breach of fiduciary duty, intentional infliction of emotional distress, and violations of TILA, HOEPA, and RESPA; they sought damages, declaratory relief, and rescission.
- Defendants removed to federal court; moved to dismiss for lack of subject-matter jurisdiction and failure to state a claim; plaintiffs initially failed to oppose but later filed opposition; court considered motions on the merits.
- Court found many claims abandoned by failure to oppose, and dismissed the remainder for lack of standing, untimeliness, failure to plead fraud with particularity, and substantive insufficiency; leave to amend was denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge securitization/assignments and to quiet title | Securitization/assignment violated PSA and therefore defendants lack right to collect or foreclose | Plaintiffs lack constitutional and prudential standing; not parties or beneficiaries of PSA; assignment did not change borrower obligations | Dismissed for lack of standing (constitutional and prudential) — Rajamin controls |
| Validity of MERS assignment | MERS lacked authority as nominee to assign mortgage | Mortgage expressly authorized MERS as nominee with power to act/assign | Dismissed — contractual terms and New York precedent permit MERS assignments |
| Fraudulent inducement / fraudulent concealment | Defendants misled plaintiffs into the loan and concealed material facts | Claims are time-barred (at least as to Countrywide) and inadequately pleaded under Rule 9(b) | Dismissed — statute of limitations and failure to plead with particularity |
| TILA, HOEPA, RESPA, and rescission claims | Violations occurred at origination and through servicing/payments; seek damages and rescission | TILA/HOEPA/RESPA claims are time-barred; rescission under TILA expired; underlying claims fail | Dismissed as time-barred and for failure to state a claim; rescission also denied |
Key Cases Cited
- Rajamin v. Deutsche Bank Nat. Trust Co., 757 F.3d 79 (2d Cir. 2014) (mortgagors lack standing to enforce PSA or challenge securitization when not parties or intended beneficiaries)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (party invoking federal jurisdiction bears burden to establish constitutional standing)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead facts plausibly suggesting entitlement to relief)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (Iqbal/Twombly plausibility standard for Rule 12(b)(6) pleadings)
- Warth v. Seldin, 422 U.S. 490 (1975) (prudential standing principles prohibit asserting rights of others)
- DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242 (2d Cir. 1987) (pleading fraud against multiple defendants requires particularity to apprise each defendant of alleged role)