Stephens v. BonaparteStephens v. Bonaparte
Appearances:
Karamvir Dahiya, Esq.
Dahiya Law Office LLC
75 Maiden Lane, Suite 606
New York, NY 10038
Counsel for Plaintiff Evis Neverlane Stephens
Jason D. St. John, Esq.
Chadwick Devlin, Esq.
Ashley M. Slater, Esq.
Akerman LLP
1251 Avenue of the Americas, 37th Floor
New York, NY 10020
Counsel for Defendants Wilmington Savings Fund Society, FSB and Verus Securitization Trust 2020-NPL1
Ryan P. Mulvaney, Esq.
Stevens & Lee, P.C.
669 River Drive, Suite 201
Elmwood Park, NJ 07407
Counsel for Defendants Planet Management Group, LLC and Planet Home Lending, LLC d/b/a Planet Home Servicing
Evis Neverlane Stephens (“Plaintiff“) alleges she is the victim of a scheme that caused her to transfer her home to Defendant 12076 Holdings Inc. (“Holdings“). Defendant Lezantonio Woodburn (“Woodburn“) owns Holdings. Defendant Maxine Bonaparte (“Bonaparte“) was Plaintiff‘s real estate agent and introduced Plaintiff to Woodburn and Charles L. Mester, Esq. (“Mester“). Mester is the attorney that represented Plaintiff in connection with the sale of Plaintiff‘s home to Holdings.
Plaintiff alleges that Bonaparte, Woodburn, and Mester told her they would help her save her home from foreclosure. Plaintiff alleges they told her if she transferred her home to Woodburn or Holdings, they would pay off her mortgage, she could continue to live in the home, and, at some point, they would transfer the home back to her. Hоwever, Holdings did not transfer the property back to Plaintiff and Plaintiff alleges that Woodburn and Bonaparte harassed and intimidated Plaintiff and her family to get them to vacate the home.
Plaintiff alleges that Defendant Planet Management Group (“Planet Management“), financed Holdings’ acquisition of the property, Planet Home Lending, LLC d/b/a Planet Home Servicing (“Planet Servicing” and together with Planet Management, the “Planet Defendants“) serviced Planet Management‘s mortgage, and the Planet Defendants participated in the scheme to trick Plaintiff into selling her home to Holdings. Planet Management assigned its mortgage on the Plaintiff‘s home to Defendant Wilmington Savings Fund Society, FSB (“Wilmington“). Wilmington serves as the owner trustee of Defendant Verus Securitization Trust 2020-NPL1 (“Verus” and together with Wilmington, the “Wilmington Defendants“).
Plaintiff has moved for summary judgment to void the deed conveying her home to Holdings on the grounds the deed was procured by fraud in factum. Alternatively, she seeks to rescind the sale of her home and avoid the Wilmington Defendants’ mortgage pursuant to New
The Planet Defendants and Wilmington Defendants have moved for summary judgment to dismiss Plaintiff‘s claims. Additionally, the Wilmington Defendants seek an equitable mortgage on the Residence. For the reasons set forth below, Plaintiff‘s motion for summary judgement is denied and the Planet Defendants and the Wilmington Defendants’ motions for summary judgment are granted.
JURISDICTION
This Court has jurisdiction over this adversary proceeding under
PROCEDURAL BACKGROUND
Plaintiff filed a petition for relief under chapter 13 of the Bankruptcy Code on November 15, 2021 (the “Petition Date“). Chapter 13 Voluntary Pet., ECF No.1.2
The Wilmington Defendants, the Planet Defendants, and Mester each filed motions to dismiss. Mot. Dismiss, Adv. Pro. ECF No. 48 (the “Wilmington MTD“); Mot. Dismiss, Adv. Pro. ECF No. 51 (the “Planet MTD“); Mot. Dismiss, Adv. Pro. ECF No. 13 (the “Mester MTD“).
On March 23, 2023, the Court issued a Memorandum Decision that granted the Mester MTD in part. Mem. Decision, Adv. Pro. ECF No. 54.
On April 24, 2023, the Court entered an order directing all parties to mediation. Order, Adv. Pro. ECF No. 65. On October 6, 2023, the mediators reported that the parties had reached an impasse. Mediator‘s Report, Adv. Pro. ECF No. 73.
On January 5, 2024, the Court granted in part the Planet MTD and the Wilmington MTD but granted Plaintiff leave to amend the complaint to allege facts establishing Plaintiff‘s standing to bring causes of action to avoid and recover fraudulent conveyances. Mem. Decision Mot. Dismiss, Adv. Pro. ECF No. 81. On February 22, 2024, Plaintiff filed a second amended complaint (“Second Amended Complaint“). Am. Compl. Revised, Adv. Pro. ECF No. 93.
The following causes of action against the Planet Defendants and the Wilmington Defendants survived the motions to dismiss:
- First Cause of Action – in which Plaintiff seeks a declaration that the deed conveying Plaintiff‘s property is void due to Forgery or Fraud in Factum
- Second Cause of Action – in which Plaintiff seеks rescission of the sale of her home and avoidance of the mortgages on her home based on New York‘s Home Equity Theft Prevention Act
Third Cause of Action – in which Plaintiff seeks to quiet title to her home based on common law - Tenth Cause of Action – in which Plaintiff seeks to quiet title to her home based on New York Real Property Actions and Proceedings Law, Article 15
- Fifteenth Cause of Action–A, B, C, Sixteenth Cause of Action and Seventeenth Cause of action – in which Plaintiff seeks to avoid and recover her home based on New York‘s former Fraudulent Conveyance Act and Bankruptcy Code sections 544 and 550, and to claim the home as exempt property
On March 6, 2024, the Wilmington Defendants answered and asserted a counterclaim against the Plaintiff seeking equitable subrogation of their mortgage on the Plaintiff‘s home and a cross-claim against Planet Management for damages arising from the assignment of a mortgage loan from Wilmington to Planet Management. Answer Am. Compl. with Cross-Cl. and Countercl., Adv. Pro. ECF No. 97. Plaintiff answered the Counterclaim. Answer Countercl., Adv. Pro. ECF No. 100. Planet Management answered the Wilmington Defendants’ cross-claim. Answer Cross-Cl., Adv. Pro. ECF No.101.
On June 10, 2024, the Planet Defendants answered the Secоnd Amended Complaint, counterclaimed against Plaintiff for an equitable lien, equitable subrogation of their mortgage, and money damages for unjust enrichment. Answer Am. Compl. Countercl., Adv. Pro. ECF No. 102. The Planet Defendants asserted crossclaims against Holdings for indemnification, breach of contract, and attorney‘s fees, costs and expenses. Id. at ¶¶ 56-60;66-76. The Planet Defendants also asserted crossclaims against Woodburn to recover on a guaranty and for attorney‘s fees, costs and expenses. Id. at ¶¶ 61-72.
On July 31, 2024, Plaintiff‘s counsel informed the Court he had been suspended from practice. Letter, Adv. Pro. ECF No.106. On November 5, 2024, Narissa Joseph appeared as counsel for the Plaintiff. Notice of Appearance, Adv. Pro. ECF No. 111. On August 4, 2025, after entry of an order lifting his suspension, Plaintiff‘s original counsel appeared as counsel for
On October 17, 2025, the Wilmington Defendants moved for summary judgment seeking dismissal of Plaintiff‘s remaining causes of action and judgment in favor of the Wilmington Defendants on its counterclaim for equitable subrogation of its mortgage on Plaintiff‘s home. Mot. Summ. J., Adv. Pro. ECF No. 150. Plaintiff filed her objection on December 19, 2025. Mem. Law Opp‘n, Adv. Pro. ECF No. 168. The Wilmington Defendants filed their reply on January 9, 2026. Reply Mem. Law Further Supp., Adv. Pro. ECF No. 170.
On October 24, 2025, Plaintiff moved for summary judgment seeking judgment against all defendants on all remaining causes of action and dismissing Wilmington‘s counterclaim for equitable subrogation. Pl.‘s Mot. Summ. J., Adv. Pro. ECF Nos. 152, 154, 155. The Wilmington Defendants objected to Plaintiff‘s motion for summary judgment. Mem. Law Opp‘n, Adv. Pro. ECF Nos. 158, 159, 160. The Planet Defendants also objected to Plaintiff‘s motion for summary judgment. Mem. Law Opp‘n, Adv. Pro. ECF No. 169. Plaintiff replied to both Wilmington Defendants’ and Planet Defendants’ motions for summary judgment on January 26, 2026. Reply, Adv. Pro. ECF Nos. 174, 175.
On December 10, 2025, the Planet Defendants moved for summary judgment. Mot. Summ. J., Adv. Pro. ECF Nos. 163, 164. Plaintiff objected on January 24, 2026. Mem. Law Opp‘n, Adv. Pro. ECF No. 173. The Planet Defendants did not reply to Plaintiff‘s opposition.
Woodburn, Bonaparte, and Holdings have not answered or otherwise responded to the Plaintiff‘s Second Amended Complaint or the cross-claims. To date, Plaintiff has not moved for default judgment against Woodburn, Bonaparte, or Holdings. Mester filed opposition to Plaintiff‘s motion for summary judgment. Opp‘n Mot. Summ. J., Adv. Pro. ECF No. 166.
FACTS
Plaintiff purchased a house commonly known as 127-06 177th Street, Jamaica, New York (the “Residence“) in 2006. Pl. Statement Undisputed Material Facts ¶ 3, Adv. Pro. ECF No. 152-3 (“Pl. Facts“); Planet Defendants’ Statement of Undisputed Facts ¶ 1, Adv. Pro. ECF No. 164-1 (“Planet Facts“); Wilmington Defendants’ Statement of Undisputed Facts ¶ 1, Adv. Pro. ECF No.150-49 (“Wilmington Facts“).
Plaintiff financed the purchase of the Residence with a loan from Novastar Mortgage, Inc., in the original principal amount of $630,000.00 (the “2006 Mortgage“). Pl. Facts ¶ 3; Wilmington Facts ¶ 2; Planet Facts ¶ 2.
Ocwen Loan Servicing LLC (“Ocwen“) was the servicer for the 2006 Mortgage. Wilmington Facts ¶ 4; Planet Facts ¶ 4. In 2010, Ocwen agreed to modify the 2006 Mortgage, after Plaintiff fell behind on her mortgage payments. Wilmington Facts ¶¶ 3, 5, 15; Planet Facts ¶¶ 3, 5.
Plaintiff stopped making mortgage payments after receiving the modification. Stephen‘s Dep. Tr. 118:19-24 (“Stephen‘s Dep. Tr.“), Mulvaney Dec., Ex. D, Adv. Pro. ECF No. 164-8. Plaintiff stopped making payments based on her conversation with John Clark. Id. at 118:2-120:25. Plaintiff said she met John Clark prior to 2006 when he helped her with real estate matters unrelated to the Residence. Id. at 45:7-20. Plaintiff said that John Clark told her something “about robo signing,” and based on John Clark‘s advice, Plaintiff believed she could keep the Residence without paying the 2006 mortgage. Id. at 120:19-25.
At some point, John Clark‘s nephew, Otis, introduced Plaintiff to Bonaparte. Stephen‘s Dep. Tr. 129:16-25, 130:3-21. Bonaparte advised she could save the Residence from foreclosure by putting the Residence in Woodburn‘s name temporarily and then putting the Residence back in Plaintiff‘s name. Id. at 131:17-22. Bonaparte introduced Plaintiff to Mester, an attorney. Id. at 133:8-25,134:1-3. Plaintiff met with Bonaparte, Otis, and Mester around September 21, 2018. Stephen‘s Dep. Tr. at 135:15-23; Wilmington Facts ¶ 11; Planet Facts ¶ 11.
Plaintiff signed a contract, dated July 2018 (the “Sale Contract“), to sell the Residence to Holdings. Stephen‘s Dep. Tr. 188-190:2-20; Stephen‘s Dep. Tr., Ex. J, Adv. Pro. ECF No. 150-15. Plaintiff and Holdings closed the sale on March 27, 2019 (the “Transfer Date“). Pl. Facts ¶ 26-28; Wilmington Facts ¶ 16; Planet Facts ¶ 16.
Plaintiff claims Wоodburn, Holdings, and Bonaparte failed to reconvey the Residence back to her. Am. Compl. Revised, ¶¶ 28, 33, 55, 56, Adv. Pro. ECF No. 93. Plaintiff also alleges that Woodburn and Bonaparte harassed Plaintiff and her family to compel them to vacate the Residence. Id. at ¶31-35. Further, Plaintiff alleges Woodburn and Bonaparte bullied Plaintiff and her husband into signing an occupancy agreement that restricted Plaintiff to using
Holdings financed its purchase of the Residence with a $535,000 loan from Planet Management (the “2019 Loan“), secured by a mortgage on the Residence (the “2019 Mortgage“). Pl. Facts ¶ 29; Wilmington Facts ¶ 24; Planet Facts ¶ 25. Loan proceeds of $337,500 were wired to Ocwen, and Ocwen accepted the $337,500 in full satisfaction of the 2006 Mortgage. Wilmington Facts ¶23-26; Planet Facts ¶ 23. Deutsche Bank then discontinued the 2015 Foreclosure Action and released the 2006 Mortgage on the Residence. Wilmington Facts ¶ 27-29; Planet Facts ¶ 27-29.
IRP Fund II Trust 1A (“IRP“) purchased the 2019 Loan and the 2019 Mortgage from Planet Management on April 30, 2019. Wilmington Facts ¶ 33; Planet Facts ¶ 30. Verus was formed in 2020 to issue a securitization of non-performing mortgage assets. Dellovo Dec. ¶ 8, Adv. Pro. ECF No. 150-36. IRP transferred the 2019 Loan to Verus. Id. Wilmington serves as the owner trustee of the Verus trust. Id. at ¶ 9. On May 2, 2022, Planet Management assigned the 2019 Mortgage to Wilmington, as owner trustee for Verus. Id. at ¶10.
DISCUSSION
I. Standards for Summary Judgment
Summary judgment is appropriate when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.”
“In ruling upon a summary judgment motion, the court‘s job is not to resolve disputed issues of fact, but to determine whether a genuine issue of fact exists.” Bethpage Fed. Credit Union v. Freidman (In re Kabbalah Taxi Inc.), No. 17-45743-cec, Adv. Pro. No. 18-1016-cec, 2018 WL 3569314, at *2 (Bankr. E.D.N.Y. July 20, 2018) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986)). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
“When viewing the evidence, the court must ‘assess the record in the light most favorable to the non-movant and . . . draw all reasonable inferences in [the non-movant‘s] favor.’” Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir. 2000) (quoting Delaware & Hudson Ry. Co. v. Consol. Rail Corp., 902 F.2d 174, 177 (2d Cir. 1990)).
A movant has the initial burden of establishing the absence of any genuine issue of material fact, which burden may be discharged by pointing out the absence of evidence supporting the non-moving party‘s case. Celotex, 477 U.S. at 323–25. Rule 56 “requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’” Id. at 324. “The nonmoving party must show that there is more than a metaphysical doubt regarding a material fact and may not rely solely on self-serving conclusory statements.” Rosenman & Colin LLP v. Jarrell (In re Jarrell), 251 B.R. 448, 450–51 (Bankr. S.D.N.Y. 2000) (internal citations omitted).
Cancellation of Deed Based upon Forgery or Fraud in Factum
(Against All Defendants)
Plaintiff seeks summary judgment that her conveyance of the Residence to Holdings is void because the deed was procured by fraud in factum.3 Pl. Mem. of Law 48, Adv. Pro. ECF No. 152-1 (“Pl. MOL“). Plaintiff claims she did not knowingly convey title and believed the documents she signed at closing were for a loan modification. Id. Further, Plaintiff argues the 2019 Mortgage is void because the deed is void. Id. at 49. The Planet Defendants and the Wilmington Defendants seek summary judgment dismissing Plaintiff‘s First Cause of Action, alleging that Plaintiff knew she was signing a deed that conveyed the Residence to Holdings. Planet Defendants’ Mem. of Law 5-8, Adv. Pro. ECF No.163-3; Wilmington Defendants’ Mem. of Law 3-5, Adv. Pro. ECF No. 150-49.
Fraud in the factum, also known as fraud in the execution, is a claim that a party was induced to sign something entirely diffеrent than what the party thought they were signing. Ackerman v. Ackerman, 120 A.D.3d 1279, 1280 (App. Div. 2d Dep‘t 2014); Whitehead v. Town House Equities, Ltd., 8 A.D.3d 367, 368 (App. Div. 2d Dep‘t 2004). If the grantor is tricked into signing a deed believing it to be some other instrument, the signature is a forgery, and the deed is invalid “to the same extent that it would have been if the grantor‘s signature had been actually forged by a third person.” Grimes v. Green Point Sav. Bank (In re Grimes), 147 B.R. 307, 313 (Bankr. E.D.N.Y. 1992); see also First Natl. Bank of Odessa v. Fazzari, 10 N.Y.2d 394, 397 (1961) (finding fraud in the factum where party signed promissory note believing it to be statement of wages earned); JPMorgan Chase Bank, Nat‘l Ass‘n v. Kalpakis, 30 Misc.3d
To prevail on a claim for fraud in the factum, the claimant must prove “there [was] a ‘misrepresentation as to the character or essential terms of a proposed contract,’ and the party signed without knowing or having a ‘reasonable opportunity to know of its character or essential terms.’” Hetchkop v. Woodlawn at Grassmere, Inc., 116 F.3d 28, 31–32 (2d Cir. 1997) (quoting Restatement (Second) of Contracts § 163 cmt. a (Am. L. Inst. 1981)).
Plaintiff failed to introduce evidence supporting her claim of fraud in the factum. Plaintiff testified she understood that by signing the deed, she was transferring the Residence to someone else. Stephen‘s Dep. Tr. 132:17-133:7; 167:17-24; 333:13-15; 343:20-23. Plaintiff also testified she agreed to pay Bonaparte $10,000 for trаnsaction costs and to negotiate with Ocwen for the Residence to be sold to Woodburn in a short sale. Id. at 300:6-7; 342:14-17. Further, Plaintiff signed the Sale Contract, which is some evidence that Plaintiff knew she was transferring the Residence. Moreover, Plaintiff testified she regretted not selling the Residence to someone else for $10,000. Id. at 161:9-19.
Plaintiff testified she transferred the Residence to avoid foreclosure and to get the Residence back one day. Id. at 132:7-9 (“[Bonaparte] told me, I know a friend. If I put the property in their name, I will get back my house.“); Id. at 331:20-332:6 (Plaintiff testified the Residence would be put into Woodburn‘s name, she would get nothing but, after a while, she would get the Residence back.). Plaintiff testified that she believed after the Residence was transferred, Plaintiff could stay in the Residence for two years and pay $2,500 monthly (toward
Although Plaintiff‘s testimony that she transferred the Residence with the belief the Rеsidence would be conveyed back to her is not refuted, her testimony does not support a claim of fraud in factum. To the contrary, her testimony evidences she knew she was conveying the Residence to Holdings, but Holdings breached its agreement to convey the Residence back to her.
Plaintiff points to deposition testimony that she claims evidences that she signed the documents under duress believing the documents were to refinance the 2006 mortgage, not to transfer title. Pl. Mem Opp‘n Planet Def. Mot. Summ. J. 3, Adv. Pro. ECF No. 173. The portions of the deposition cited by Plaintiff, however, relate to Plaintiff‘s other real estate transactions, not Plaintiff‘s transfer of the Residence to Holdings. Stephen‘s Dep. Tr. 50-60 (Plaintiff describing transfer of 1487 East 53rd Street to Mr. Clarke); Id. at 80-90 (Plaintiff describing her purchase of Residence, not her sale of Residence to Holdings and documents related to 1487 East 53rd Street.).5
Second Cause of Action6
Recission of Equity Purchase Contract and Grant Deed, Declaratory Relief and Damages
(Against all Defendants)
Plaintiff seeks summary judgment that she may rescind7 the deed transferring the Residence to Holdings and avoid the 2019 Mortgage under New York‘s Home Equity Theft Prevention Act (“HETPA“). HETPA is:
intended to prevent abusive and fraudulent practices by purchasers of distressed properties who falsely promise to “save” properties and to reconvey them to the homeowners at a future date. The Act regulates certain sales of distressed properties, and imposes stringent procedural and substantive requirements for sales contracts (“covered contracts“) between homeowners (“equity sellers“) and purchasers (“equity purchasers“). [HETPA] imposes potential civil and criminal penalties for violations on both equity purchasers as well as lending institutions, and creates a right of rescission extending for two years after a sale.
Damaris E. Torrent, Prac Commentaries, McKinney‘s Cons Laws of NY,
Homeowners seeking rescission under HETPA must show: (1) the seller is an equity seller; (2) the purchaser is an equity purchaser; (3) the agreement between the equity seller and the equity purchaser is a covered contract; (4) the covered contract does not comply with
Plaintiff is an Equity Seller
HETPA defines “equity seller” as “a natural person who is a property owner or homeowner at the time of the equity sale.”
Holdings and Planet are Equity Purchasers
HETPA defines “equity purchaser” as “any person who or entity which acquires title to any residence in foreclosure . . . except a person who acquires such title as a bona fide purchaser or encumbrancer for value.
Holdings is an equity purchaser because it is an entity that acquired title to the Residence while it was in foreclosure. Planet Management contends it is not an equity purchaser because it is a good faith encumbrancer for value.
Respecting good faith purchasers or encumbrancers for value, HETPA provides:
The provision of [
New York Real Property Law Section 265-a(8) which grants equity sellers the right of rescission] shall not affect the interest of a bona fide purchaser or encumbrancer for value if such purchase or enсumbrance occurred prior to the recording of the notice of rescission . . . . Knowledge that the property was residential real property in foreclosure or, where applicable, default shall not impair the status of such persons or entities as bona fide purchasers or encumbrancers for value. This subdivision shall not be deemed to abrogate any duty of inquiry which exists as to rights or interests of person in possession of the residential real property in foreclosure, or where applicable, default.
In connection with the origination of, and due diligence related to, the 2019 Mortgage, Planet Management received, among other things:
the Title Report; the Title Policy; the Loan Agreement; the Commercial Mortgage; the Note; the Guaranty; the appraisal of the Subject Property; the Deed and Transfer Documents; . . . Declaration of Non-Owner Occupancy executed by 12706 Holdings; . . . Certificate of Business Purpose of Loan signed by 12706 Holdings . . . .
Dec. in Support of Mot. Summ. J. (“Woods Aff.“) ¶ 54, Adv. Pro. ECF No. 164-40.
The deed that Planet Management received indicated that Plaintiff resided at the Residence. Woods Aff. Ex. M-13. From the Title Report, Planet Management knew the Residence was in foreclosure and the foreclosure sale was scheduled to occur nine days prior to the 2019 Mortgage Loan closing. Woods Aff. ¶ 41; Woods Aff. Ex. F, Part 1, Ex. F, Part 2; Ex. G.
Schedule B to the Title Insurance Policy that Planet Management received prior to the closing lists exceptions from title insurance coverage, and states in relevant part:
21. Please advise the [title insurance] Company prior to closing if any mortgage on the property is in arrears two or more months, or if the mortgage pay off letter discloses any late payment charges. In either situation, a copy of the contract of sale must be delivered to the company prior to closing so that the company can review the contract for compliance with the Home Equity Theft Prevention Act. Failure to notify the Company of either of these facts and to deliver a copy of the contract prior to closing will result in a delay in the closing while the Company reviews the contract for compliance with the Home Equity Theft Prevention Act.
42. At closing, the seller(s) must provide an affidavit that they are vacating the subject premises and the purchaser(s) must provide an affidavit that they are planning to occupy the premises or, they are a relative of the seller, a referee for the foreclosing lender or a not-for profit/public housing authority or, the sale is authorized by state statute or pursuant to a court order. An affidavit stating that the рurchaser is a bona-fide purchaser for value is not sufficient. Otherwise an exception must be taken in both the owner and loan policy to the effect that “Policy will except and not cover any harm, loss or damage including but not limited to legal fees and expenses and/or loss of title arising from any violation of the Home Equity Theft Prevention Act.” The exception does not have to be raised when the seller does not occupy the property as his/her/their principal residence. If this is the case, please take an affidavit to that effect.
Woods Aff. Ex. F, Part 1, Schedule B ¶¶ 21, 42.
Planet Management admits it obtained a title report and title insurance policy “[a]s is standard in the mortgage lending industry.” Woods Aff. ¶ 38. The title insurance policy, title report, and deed put Planet on notice that: Plaintiff was an individual; she resided in the Residence; and the 2006 Mortgage was in foreclosure. Those documents also put Planet Management on notice that the Residence was “residential real property” as that term is used in HETPA. Planet Management does not allege it received, prior to closing on the 2019 Mortgage, a copy of the Sale Contract or Plaintiff‘s affidavit that the Residence was not her principal residence.8 Further, Planet Management does not allege it received Holding‘s affidavit that it
Schedule B of Planet Management‘s title insurance policy instructed Planet Management to obtain the Sale Contract and affidavits from the Plaintiff and Holdings to enable the insurance company to determine whether the transaction was HETPA compliant. Planet Management does not contend it received those documents prior to closing the 2019 Mortgage. Had it obtained the Sale Contract, it would have known that the Sale Contract did not comply with HETPA. See infra at 19-21.
Under HETPA, Planet Management‘s knowledge of the foreclosure sale would not deprive Planet Management of its good faith encumbrancer status.
The Sale Contract Qualifies as a Covered Contract
HETPA defines a covered contract as:
any contract, agreement, or arrangement, or any term thereof, between an equity purchaser and equity seller which:
(i) is incident to the sale of a residence in foreclosure; or
(ii) is incident to the sale of a residence in foreclosure or default where such contract, agreement or arrangement includes a reconveyance arrangement; or
(iii) is incident to the sale of a residence that is the collateral for a “distressed home loan” as defined in paragraph (d) of subdivision one of section two hundred sixty-five-b of this article.
HETPA defines “residence” as residential real property consisting of one to four-family dwelling units, one of which the equity seller occupies or occupied at a time immediately prior to the equity sale as his or her primary residence.
As set forth above, Plaintiff is an equity seller, and Holdings, Planet Management, and Wilmington are equity purchasers. The Residence is a two-family house in which Plaintiff resided immediately prior to Plaintiff‘s sale of the Residence to Holdings. Pl. Facts ¶ 2; Resp. and Counterstatement of Undisputed Facts (“Planet Response“) ¶ 2, Adv. Pro. ECF No. 169-1; Stephen‘s Dep. Tr. 216:18-25. Therefore, the Residence is a “residence” or “residential real property” as defined by HETPA. Deutsche Bank commenced a foreclosure action and filed a notice of pendency prior to the date of the Sale Contract. Pl. Facts ¶ 4; Planet Response, ¶ 4. Plaintiff was in default under her mortgage prior to the date of the Sale Contract. Stephen‘s Dep. Tr. 234:25-236:7. Accordingly, the Sale Contract is a сovered contract under HETPA section 265-a (2)(i). Under HETPA section 265-a (2) (iii), Plaintiff may rescind the conveyance of the Residence and void the 2019 Mortgage, if the Sale Contract does not comply with HETPA, and Plaintiff complies with HETPA‘s requirements to effectuate rescission.
The Sale Contract Does Not Comply With HETPA
HETPA requires covered contracts to include a notice to the equity seller that the equity seller may cancel the contract and to provide the date and time of the deadline for cancellation.
The Sale Contract does not comply with HETPA because the Sale Contract lacks the cancellation notice. Sale Contract, Stephen’s Dep. Tr. Ex. J, Mulvaney Dec. Ex. D, Adv. Pro. ECF No. 169-20. Further, there is no evidence that Plaintiff was provided with the instructions to cancel the Sale Contract.
Plaintiff Failed to Comply with HETPA’s Requirements Regarding Rescission
A HETPA violation may entitle an equity seller to rescind a conveyance of real property; provided the equity seller seеks rescission within “two years from the date of the recording of the conveyance of the residential real property in foreclosure or, where applicable, default.”
- give written notice to the equity purchaser and his or her successor in interest, if the successor is not a bona fide purchaser or encumbrancer. The notice of rescission shall contain the name of the equity seller and the name of the equity purchaser in addition to any successor in interest holding record title to the residential real property and shall particularly describe such residential real property;
- record such notice with the county clerk of the county in which the property is located, within two years of the date of the recording of the conveyance to the equity purchaser; and
- return to the equity purchaser any consideration received from the equity purchaser as part of the original transaction.
Plaintiff provided the Court with a document titled “Recission Notice Pursuant To Real Property Law 265-a.” Recission Notice, Adv. Pro. ECF No. 154-21. The notice states, among other things, that the equity purchaser is Holdings. The notice is signed by Plaintiff’s counsel of record in this adversary proceeding and is dated November 18, 2021.
TO THE CLERK OF THE COUNTY OF QUEENS, NEW YORK
You are hereby directed to Index the foregoing Rescission Notice pursuant to Real Property Law §265-a98) [sic] to the names of each of the following individuals’ entities and attorneys.
Neither Plaintiff’s conveyance of the Residence to Holdings nor Holding’s conveyance of the 2019 Mortgage to Planet Management are subject to rescission because Plaintiff has not satisfied her burden of proof that she complied with HETPA section 265-a (8)(b). First, the notice of rescission is not authenticated. Notwithstanding that the notice is signed by Plaintiff’s attorney and was filed on the Adversary Proceeding docket by Plaintiff’s attorney, Plaintiff has not provided an affidavit, from someone with firsthand knowledge that the notice is a true and correct copy of the notice purportedly
Importantly, the notice does not name Planet Management or Wilmington as equity purchasers and does not allege service of the rescission notice on the Planet Defendants or the Wilmington Defendants. Even if the notice of recission was timely served and recorded, the notice would not affect a rescission of the 2019 Mortgage due to Plaintiff’s failure to include Planet Management or Wilmington on the notice.
Finally, Plaintiff does not provide evidence that she intends to return to Planet Management the consideration she received for the Residence, which is a condition to rescission under HETPA.
For the reasons set forth above, Plaintiff’s motion for summary judgment to rescind the deеd and avoid the 2019 Mortgage under HETPA is denied and the Planet Defendants’ and the Wilmington Defendants’ motions to dismiss the Second Cause of Action are granted.
Quiet Title
(Against all Defendants and Does 1 through 200, inclusive)
Tenth Cause of Action
New York Real Property Actions and Proceedings Law, Article 159
In an action to quiet title, the plaintiff must prove actual or constructive possession of the property and the existence of a removable cloud on the property, which can be a deed or other instrument, that is invalid or inoperative. Nurse v. Rios, 160 A.D.3d 888, 888 (App. Div. 2d Dep’t 2018) (collecting cases); see Acocella v. Wells Fargo Bank, NA, 139 A.D.3d 647, 649 (App. Div. 2d Dep’t 2016).
Under Article 15 of the New York Real Property Actions and Proceedings law, “a person [that] claims an estate or interest in real property . . . may maintain an action against any other person . . . to compel the determination of any claim adverse to that of the plaintiff which the defendant makes.”
Plaintiff’s arguments are not clear, but it appears Plaintiff seeks summary judgment on her Third and Tenth Causes of Action to restore her to title to the Residence, free of the 2019 Mortgage, because her transfer of the Residence to Holdings is subject to rescission under
As set forth above, Plaintiff is not entitled to rescission under HETPA or to avoid the transfer of the Residence to Holdings based on fraud in the factum. See supra at 14, 24. Also, as discussed above, under New York Real Property Law section 266, the rights of a bona fide encumbrancer for value will be protectеd, unless it appears that such purchaser or incumbrancer had previous notice, whether actual or constructive, of the fraudulent intent of his immediate grantor, or of the fraud rendering void the title of such grantor. See supra at 16; see In re Doresca, No. 8-16-75006-LAS, Adv. Pro. No. 8-17-8213-LAS, 2023 WL 2639573, at *6 (Bankr. E.D.N.Y. Mar. 24, 2023). “A mortgagee will be charged with constructive notice if it is aware of facts that would lead a reasonable, prudent lender to make inquiries of the circumstances of the transaction at issue. . . . If a ‘reasonable inquiry’ would reveal some evidence of fraud, then failure to ‘make some investigation’ will divest the mortgagee of bona fide encumbrancer status.” Miller-Francis, 113 A.D.3d at 34 (citations omitted); see Lucia, 68 A.D.3d at 1066 (finding an allegation that mortgagee’s agent was present at closing where
To obtain the protections of a good faith encumbrancer for value, Wilmington would bear the ultimate burden of proof to show that Planet Management, the assignor, had no knowledge of the alleged fraud or of facts that would have led a reasonable mortgagee to make inquiry of the possible fraud at the time the 2019 Mortgage was granted to Holdings, or, if Planet Management was on notice, it conducted reasonable diligence. JP Morgan Bank v. Munoz, 85 A.D.3d 1124, 1126 (App. Div. 2d Dep’t 2011); see Pennymac Corp. v. Dean-Phillips, 189 A.D.3d 1603, 1604 (App. Div. 2d Dep’t 2020) (Finding mortgagee was not bona fide encumbrancer for value based on failure to make inquiry. Mortgagee’s assignee was not encumbrancer for value because “[a]n assignee stands in the shoes of the assignor and takes the assignment subject to any preexisting liabilities“); Rambaran, 97 A.D.3d at 804 (“[a]n assignee stands in the shoes of the assignor and takes the assignment subject to any preexisting liabilities“).
Plaintiff argues she was defrauded in a foreclosure rescue scam as evidenced by the occupancy agreement that Woodburn imposed on Plaintiff as a condition to remining in possession of the Residence. Pl. Mem. Law Opp’n 12-13, Adv. Pro. ECF No. 168-2. However, Plaintiff does not allege the Planet Defendants had notice or knowledge of the occupancy agreement. In that regard, Plaintiff alleges she executed the occupancy agreement ten months after Planet Management closed on the 2019 Mortgage and loan. Pl. Facts ¶ 34 (“On January 1, 2020, a “Contract - Use and Occupancy Agreement” was executed between [Holdings] (as owner) and Calvin Stephens, [Plaintiff], John Doe(s), and Jane Doe(s) (as occupants) for the [Residence]“). Further, Plaintiff has not provided evidence that the Wilmington Defendants had notice of the occupancy agreement when the 2019 Mortgage was assigned from Planet
As set forth above, the Planet Defendants and the Wilmington Defendants had notice that Plaintiff’s sale of the Residence violated HETPA, and for that reason, the Court determined that the Planet Defendants and the Wilmington Defendants were not good faith encumbrancers under HETPA. However, HETPA permits equity sellers to rescind sales even if there is no fraud. Instead, rescission is permitted if the covered contract fails to include the HETPA disclosures. In contrast,
As Plaintiff has failed to introduce evidence that the Planet Defendants or the Wilmington Defendants had notice of any facts, whether actual or constructive, of Holdings’, Woodburn’s, or Bonaparte’s alleged scheme to defraud Plaintiff, the Planet Defendants and the Wilmington Defendants are good faith encumbrancers, as defined by
Therefore, the Wilmington Defendants’ motion for summary judgement is granted and Plaintiff’s Third and Tenth Causes of Action are dismissed solely to the extent those causes of action seek to avoid the 2019 Mortgage.
(Fraudulent Conveyance, Section 273 of NY Debtor Creditor Law)
(Against All Defendants)
Fifteenth [sic] Cause of Action B
(Fraudulent Conveyance, Section 275 of NY Debtor Creditor Law)
(Against All Defendants)
Fifteenth [sic] Cause of Action C
(Fraudulent Conveyance, Section 273 and 275 of NYCD law, 11 U.S.C. §544)
(Against All Defendants)
Sixteenth Cause of Action
(Recovery of Fraudulent Transfer under 11 U.S.C. § 550)
(Against All Defendants)
Seventeenth Cause of Action
Avoidance of and Recovery of Fraudulent Transfers from Planet Enterprise
Plaintiff seeks judgment under
(h) The debtor may avoid a transfer of property of the debtor or recover a setoff to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if--
(1) such transfer is avoidable by the trustee under section 544, 545, 547, 548, 549, or 724(a) of this title or recoverable by the trustee under section 553 of this title; and
(2) the trustee does not attempt to avoid such transfer.
(g) Notwithstanding sections 550 and 551 of this title, the debtor may exempt under subsection (b) of this section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this title, to the extent that the debtor could have exempted such property under subsection (b) of this section if such property had not been transferred, if--
(1)(A) such transfer was not a voluntary transfer of such property by the debtor; and
(B) the debtor did not conceal such property; or
(2) the debtor could have avoided such transfer under subsection (f)(1)(B) of this section.
There is no dispute: the Chapter 13 Trustee is not attempting to avoid the Plaintiff’s transfer of the Residence or the 2019 Mortgage; Plaintiff could exempt the Residence if the Chapter 13 Trustee had recovered it under
However, before considering whether Plaintiff’s transfer was involuntary and voidable as a fraudulent conveyance, the Court must determine whether Plaintiff has standing to bring state law fraudulent conveyance claims under
The Plaintiff would have standing to bring fraudulent conveyance claims under
As stated by Judge Louis Scarcella in In re APCO Merch. Servs., Inc.:
The power given to a trustee under § 544(b) to avoid a transfer or obligation is derivative, that is, there must be an actual existing creditor holding an allowable unsecured claim who would have had that right outside of bankruptcy. “In order for a trustee to maintain an action for аvoidance of a fraudulent conveyance, the trustee must show that at least one of the present unsecured creditors of the estate holds an allowable claim, against whom the transfer or obligation was invalid under applicable state or federal law.”
585 B.R. at 314 (quoting Young v. Paramount Commc‘ns Inc. (In re Wingspread Corp.), 178 B.R. 938, 945 (Bankr. S.D.N.Y. 1995)). The burden of proof is on Plaintiff to prove she has standing under 544(b) to bring the UFCA claims. Id.
Constructive fraudulent conveyances under former
Plaintiff has not identified a qualifying creditor in her Motion for Summary Judgment. At oral argument, Plaintiff requested the Court take judicial notice of the proofs of claim filed on the claims register of this case. A bankruptcy judge may take judicial notice of a bankruptcy court‘s records. See
As the Plaintiff has not established standing, the Court will not address the elements of the Plaintiff’s causes of action, except to note that as set forth above, the record would support a finding that the Plaintiff’s transfer of the Residence was voluntary because she knew she was
Therefore, Plaintiff’s motion for summary judgment on her Fifteenth Cause of Action (A, B, and C), Sixteenth Cause of Action, and Seventeenth Cause of Action is denied and those causes of action are dismissed as against the Planet Defendants and the Wilmington Defendants.
Wilmington Defendants’ Counterclaim for Equitable Subrogation
Wilmington seeks equitable subrogation to the 2006 Mortgage if the Court avoids the 2019 Mortgage. Although the Court is dismissing Plaintiff’s clаims to avoid the Mortgage, the Court will address Wilmington’s counterclaim.
“Under the doctrine of equitable subrogation, where the ‘property of one person is used in discharging an obligation owed by another or a lien upon the property of another, under such circumstances that the other would be unjustly enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the position of the obligee or lien-holder.‘” Lucia v. Goldman, 145 A.D.3d 767, 769 (App. Div. 2d Dep’t 2016); see Wells Fargo Bank, N.A. v. Dalfin, 169 A.D.3d 970, 972 (App. Div. 2d Dep’t 2019) (Mortgagee may be entitled to equitable subrogation even if mortgagor’s signature was forged provided mortgagee had not actively engaged in fraud and lacked actual notice of fraud or had unclean hands); Lombard v. Yacoob, 168 A.D.3d 919 (App. Div. 2d Dep’t 2019) (mortgage assignee entitled to equitable lien on real property for paying off mortgagor’s original mortgage, notwithstanding deed and original mortgage had been avoided because deed had been procured through a home rescue scam).
The doctrine of unclean hands applies when the offending party “is guilty of immoral, unconscionable conduct” directly related to the subject matter in litigation and which conduct injured the party seeking to invoke the doctrine. Here, although Chase was charged with knowledge of informatiоn which would have caused a prudent lender to inquire as to the circumstances of the transaction, the Supreme Court did not find that it had actual notice of the fraud or that it did anything to actively facilitate the fraud. There was no evidence that Chase “was a willing participant in a mortgage [rescue] scheme“. Accordingly, the plaintiff failed to show that Chase was guilty of immoral, unconscionable conduct, and the court properly imposed equitable liens against the premises for the portion of the Chase mortgage which was used to satisfy the plaintiff‘s prior mortgage and amounts advanced by Chase for the payment of real estate taxes and insurance.
Lucia, 145 A.D.3d at 769 (internal citations omitted).
Here, Plaintiff has failed to introduce evidence that the Planet Defendants or the Wilmington Defendants had actual notice of the alleged fraud or that they actively participated in the fraud. Further, Planet Management funded a $337,500 payment to Ocwen that satisfied the
CONCLUSION
For the reasons set forth above, Plaintiff’s motion for summary judgment is denied to the extent Plaintiff requested judgment against the Planet Defendants and the Wilmington Defendants on Plaintiff’s First, Second, Third, Tenth, Fifteenth (A, B, and C), Sixteenth, and Seventeenth Causes of action. The Planet Defendants’ and the Wilmington Defendants’ motions for summary judgment are granted and those causes of action are dismissed as to the Planet Defendants and the Wilmington Defendants.
SO ORDERED:
Jil Mazer-Marino
Chief United States Bankruptcy Judge
Dated: July 1, 2026
Brooklyn, New York