Mosdos Chofetz Chaim, Inc. v. RBS Citizens, N.A.
14 F. Supp. 3d 191
S.D.N.Y.2014Background
- Mosdos borrowed $12.8M from Citizens for a construction project on a Ramapo, NY parcel later subject to a mortgage; project reportedly did not finish as planned.
- Citizens funded portions of the loan, held funds in trust/escrow, and later allegedly misused those escrow funds to pay liens and swap-related expenses.
- In 2011 Avon Defendants acquired Mosdos/Citizens note and mortgage and filed a foreclosure action in 2012; Village Defendants were named but Mosdos alleges they had no legally cognizable interest.
- Mosdos alleges two related disputes under Religious Corporations Law § 12 and seeks declaratory relief that the mortgage is invalid or unenforceable under § 12(1) and possibly nunc pro tunc under § 12(9).
- Mosdos asserted numerous causes of action (fiduciary duties, conversion, unjust enrichment, LIBOR-related claims) against Citizens, and abuse of process and defamation-type claims against Avon, plus civil-rights claims against Village Defendants, many of which the CourtScreen later dismissed.
- The Court granted in part and denied in part the motions to dismiss and for summary judgment, allowing amendments and dismissing several claims without prejudice except where statutorily barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Village Defendants' liability for alleged abuse of process and related claims | Village Defendants substantially controlled foreclosure proceedings to injure Mosdos due to discriminatory motives. | Participation in litigation by itself is protected; no post-issuance improper use of process is alleged. | Dismissed; mere participation insufficient; no post-issuance improper use proved. |
| Citizens' fiduciary duty regarding escrow funds | Citizens breached a fiduciary duty by using Mosdos escrow funds for its own benefit and to pay swap-related items. | No fiduciary duty created; contract governs escrow and use of funds. | Plausible fiduciary relationship pleaded; breach and damages may be viable; third cause of action survives. |
| Conversion and unjust enrichment claims against Citizens | Citizens improperly converted Mosdos funds via the swap and misused funds held in escrow. | Contract governs use of funds; conversion and unjust enrichment barred by enforceable written contract. | Conversion and unjust-enrichment claims dismissed (precluded by contract); statute-of-limitations not clearly satisfied at this stage. |
| Libor manipulation claim and related theories | Citizens manipulated LIBOR to Mosdos’s detriment and concealed risks of the swap. | No standalone LIBOR manipulation cause of action exists under New York law; related theories are subsumed by contract claims. | Dismissed; no independent LIBOR manipulation claim. |
| Declaratory relief re Religious Corporations Law § 12(1) and § 12(9) | Mortgage invalid at inception for lack of court approval; assignment to Avon violated § 12(1); nunc pro tunc § 12(9) relief requested. | Mortgage validity disputed; § 12(1) does not bar Mosdos; § 12(9) requires careful weighing; summary judgment inappropriate at this stage. | Mortgage validity not declared invalid at this stage; § 12(9) issues unresolved; summary judgment denied on § 12(9) grounds; other § 12(1) relief denied without prejudice. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for pleading; not mere speculation)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility required after Twombly)
- Church of God of Prospect Plaza v. Fourth Church of Christ, Scientist, 431 N.Y.S.2d 834 (N.Y. App. Div. 1982) (§ 12(9) and balancing standards for nunc pro tunc approvals)
- Church of God of Prospect Plaza v. Fourth Church of Christ, Scientist, 431 N.Y.S.2d 834 (N.Y. App. Div. 1982) (consideration of provisions to approve mortgage nunc pro tunc under Not-for-Profit Corp. Law)
- Parkin v. Cornell Univ., Inc., Not readily specified in text (N.Y. 1991) (noerr-petition immunity discussed in context of litigation activity)
- Meisel v. Grunberg, 651 F. Supp. 2d 98 (S.D.N.Y. 2009) (agency relationship pleading standard in defamation contexts)