John v. Soundview Home Loan Trust
1:16-cv-00256
N.D.N.Y.May 6, 2016Background
- Plaintiff Farooq John, proceeding pro se, sued the trustee of Soundview Home Loan Trust 2006-OPT3 (represented by Deutsche Bank) and mortgage servicer Ocwen concerning a 2006 note and mortgage on property in Rensselaer, NY.
- Plaintiff alleges securitization separated the mortgage from the note, breached the note, and rendered the mortgage void; he also alleges failures to notify and PSA (Pooling and Servicing Agreement) breaches.
- Deutsche Bank is trustee of a REMIC trust that holds the note; Ocwen is the servicer.
- Defendants moved to dismiss under Rule 12(b)(6). The court reviewed the complaint, the note and mortgage attached to defendants’ submission, and applicable law.
- The court found the complaint failed to (a) identify specific contract provisions allegedly breached, (b) state facts showing standing to enforce the PSA or challenge assignments, and (c) allege any contractual privity with the servicer.
- The motion to dismiss was granted without prejudice and plaintiff was given 30 days leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract by trustee (Deutsche Bank) | Trustee/Trust breached the Note and PSA during securitization, harming John | Complaint fails to identify specific contract terms breached; borrower lacks standing to enforce PSA or assignment chain | Dismissed: plaintiff failed to allege specific breached terms and lacks standing to enforce PSA/assignments (dismissal) |
| Breach of contract by servicer (Ocwen) | Ocwen failed to timely notify John of loan characteristic changes | Ocwen is merely servicer, not party to mortgage or note; no contractual privity with borrower | Dismissed: servicer not party to loan obligations; no viable breach claim against Ocwen |
| Declaratory judgment voiding mortgage due to separation from note | Mortgage is void because it was separated from the note and assignments to trustee are invalid under PSA | Separation theory does not void mortgage; lack of standing to challenge assignments; state precedent rejects nullifying mortgage on that basis | Dismissed: declaratory relief denied; separation/assignment challenge not available to borrower |
| Leave to amend | John requests leave to replead and says he can plead viable claims | Defendants argued dismissal; court balances liberal amendment rule against futility | Granted: pro se plaintiff given 30 days to amend; dismissal without prejudice but warned amendment must cure deficiencies |
Key Cases Cited
- Rajamin v. Deutsche Bank Nat. Trust Co., 757 F.3d 79 (2d Cir.) (borrowers lack standing to enforce PSAs or assignment chains)
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions and conclusory allegations not accepted on a motion to dismiss)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (complaint must state plausible claim to survive Rule 12(b)(6))
- Erickson v. Pardus, 551 U.S. 89 (pro se complaints are construed with leniency)
- Holmes v. Grubman, 568 F.3d 329 (pleading standards and inference-drawing on Rule 12(b)(6))