30 F. Supp. 3d 183
E.D.N.Y2014Background
- Plaintiff Samuel Friedman purchased 734 E. 3rd St., Brooklyn with a $437,500 mortgage in 2008 to provide housing for his daughter and her family; he selected "investment" on the loan form because he would not occupy the house.
- The daughter and son‑in‑law (and sometimes plaintiff) made mortgage payments from 2009–2013; plaintiff contributed ~43% and the children ~55% of payments.
- Maspeth Federal Savings assessed seven late fees for certain monthly payments; plaintiff later produced mail receipts suggesting some payments were mailed and received within the loan booklet's stated grace‑period deadline.
- Plaintiff sent a qualified written request (QWR) under RESPA; Maspeth investigated, provided payment history, and refused to reverse charges without the mail receipts.
- Plaintiff sued (as a putative class) alleging: RESPA violations (failure to properly investigate/respond to QWR and to correct errors), N.Y. GBL § 349, breach of implied covenant of good faith and fair dealing, breach of contract, and unjust enrichment.
- Defendant moved to dismiss; the court denied the motion and ordered expedited discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of RESPA — whether loan is consumer (family) or business purpose | Friedman purchased the home to house his adult daughter and family without intent to derive rental income; loan is for personal/family use so RESPA protects him | Maspeth points to the loan application marking "investment" and to payments by occupants as indicia of a business/rental purpose | Court held plaintiff plausibly alleged a family/personal purpose and denied dismissal on RESPA applicability grounds |
| Business/commercial‑purpose exemption factors | Plaintiff met the regulatory factors (occupation unrelated, no intent to profit, loan size consistent with residential mortgage, limited personal management) | Maspeth relied on form selection and pattern of payments by occupants to argue business purpose | Court applied the five factor test and found plaintiff’s allegations sufficient to show consumer purpose for pleading stage |
| Whether occupants' payments constituted rent (thus making loan business use) | Payments by daughter/son‑in‑law were family support/contributions, not rent; no landlord‑tenant intent | Defendant argued mortgage contributions equate to rent and point to prior case law treating payments toward mortgage as rent | Court found no clear tenancy and accepted plaintiff's allegation that payments were family contributions, not rent, for pleading purposes |
| Adequacy of servicer response to QWR under RESPA (investigation & correction) | Maspeth’s responses were insufficient and failed to correct alleged errors despite plaintiff later producing receipts showing timely mailing | Maspeth contends it complied by investigating and producing payment history and that plaintiff failed to supply contemporaneous receipts during the investigation | Court held plaintiff plausibly alleged that servicer response was inadequate and that, with the receipts, the claim survives dismissal |
| N.Y. GBL § 349 claim (consumer‑oriented deceptive practice) | The standard payment booklet language about receipt/deadline is consumer‑oriented and materially misleading; plaintiff suffered economic and emotional injury | Maspeth disputed material misleadingness and causation | Court found § 349 pleaded plausibly and exercised supplemental jurisdiction to allow the claim to proceed |
| Breach of implied covenant / breach of contract / unjust enrichment | Alleged misrepresentation of records/policy (implied covenant); wrongful assessment of late fees (contract); retention of fees despite timely payment (unjust enrichment) | Maspeth argued contract remedies control and some claims redundant or precluded | Court allowed implied‑covenant claim (distinct factual basis), breach of contract (supplemental jurisdiction exercised), and unjust enrichment (disputed what writings form the contract) to survive pleading challenge |
| Class allegations | Mass handling of late fees is a uniform practice suitable for class treatment | Maspeth argued lack of factual detail to support class claim | Court found class allegations sufficiently pleaded at this stage |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard for plausibility)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must be plausible)
- Scheuer v. Rhodes, 416 U.S. 232 (1974) (on inquiry at motion to dismiss: accept allegations as true)
- Mauro v. Countrywide Home Loans, Inc., 727 F. Supp. 2d 145 (E.D.N.Y. 2010) (rental/non‑owner occupied loans treated as business purpose under RESPA)
- Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20 (1995) (N.Y. GBL § 349 material‑misleading standard)
- Dalton v. Educational Testing Service, 87 N.Y.2d 384 (1995) (implied covenant of good faith and fair dealing)
- Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004) (elements for unjust enrichment)