Aurora Loan Servs. LLC v. Sadek, 09 Civ. 9651 (HB).

• Decision Date: 22 August 2011
• Docket Number: No. 09 Civ. 9651 (HB).,09 Civ. 9651 (HB).
• Citation: Aurora Loan Servs. LLC v. Sadek, 809 F.Supp.2d 235 (S.D. N.Y. 2011)
• Parties: AURORA LOAN SERVICES LLC, Plaintiff, v. David SADEK; Winthrop Abstract, LLC; First Financial Equities, Inc.; the Closing Network, Ltd.; 100 W. 58th St. 7C LLC; Mortgage Electronic Registration Systems, Inc.; JPMorgan Chase Bank, N.A.; Board of Managers Windsor Park Condominium; Windsor Tov LLC; Fremont Investment & Loan; John Does 1–10, Defendants.
• Court: U.S. District Court — Southern District of New York

809 F.Supp.2d 235

AURORA LOAN SERVICES LLC, Plaintiff,

v.David SADEK; Winthrop Abstract, LLC; First Financial Equities, Inc.; the Closing Network, Ltd.; 100 W. 58th St. 7C LLC; Mortgage Electronic Registration Systems, Inc.; JPMorgan Chase Bank, N.A.; Board of Managers Windsor Park Condominium; Windsor Tov LLC; Fremont Investment & Loan; John Does 1–10, Defendants.

No. 09 Civ. 9651 (HB).

United States District Court, S.D. New York.

Aug. 22, 2011.

Jennifer Lindsay Rubin, Akerman Senterfitt, LLP, William Craig Sandelands, Margaret J. Cascino, Tompkins, McGuire, Wachenfeld & Barry, Newark, NY, for Plaintiff.

Stuart S. Zisholtz, Zisholtz & Zisholtz, L.L.P., Mineola, NY, Cynthia Ann Augello, James Gerard Ryan, Justin Francis Capuano, Cullen & Dykman LLP, Garden City, NY, Gregg P. Tabakin, Fein, Such Fein, Such, Kahn & Shepard, P.C., Parsippany, NJ, Laurence David Pittinsky, Rosenberg & Pittinsky, LLP, New York, NY, for Defendants.

OPINION & ORDER

HAROLD BAER, JR., District Judge.

Before the Court are three motions for summary judgment. They are brought on by plaintiff Aurora Loan Services, LLC (“Aurora” or “Plaintiff”), defendant JPMorgan Chase Bank, N.A. (“Chase”), and defendant The Closing Network, Ltd. (“TCN”). Chase has also filed a motion to dismiss. For the reasons that follow, the motion to dismiss is DENIED; the motions for summary judgment filed by Aurora and Chase are DENIED, and TCN's motion is DENIED as moot.¹

This is a foreclosure action with a number of related claims and counterclaims that arise out of mortgages on two condominiums, units 7C and 5F located at 100 West 58th street, New York, New York (“Unit 7C” and “Unit 5F,” respectively). The instant motions focus on two major issues. First, Aurora and Chase dispute the priority of their purported interests in Unit 7C (Unit 5F is not at issue here). Second, Aurora and TCN dispute whether TCN is liable for, among other things, its alleged failure to properly record the mortgage on Unit 7C that Aurora claims to hold.

Background ²

The “Aurora” Mortgage

On February 21, 2006 defendant David Sadek purchased Unit 7C and Unit 5F from defendant Windsor Tov LLC (“Windsor”). Windsor executed two deeds transferring Unit 5F and Unit 7C to Sadek. See Aurora's 06/13/2011 Statement of Material Facts (“Pl. 06/13/2011 Statement”) ¶ 1. Although the parties dispute how Sadek originally financed the purchases, the documentary evidence shows that on February 27, 2006, Sadek refinanced his purchase of Unit 7C with a loan for $1,350,000 from defendant First Financial Equity (“FFE”), executed a note in that amount (the “Aurora Note”), and secured the note with a mortgage on Unit 7C (the “Aurora Mortgage”). See Aurora's 06/23/2011 Counterstatement of Material Facts in Opp'n to Mot. for Summ. J. (“Pl. 06/23/2011 Statement”) ¶¶ 12–15 and accompanying exhibits; TCN's 06/27/2011 Resp. to Pl.'s Counterstatement of Material Facts (“TCN 06/27/2011 Statement”) ¶¶ 12–16. It is undisputed that the Aurora Mortgage was never recorded. Chase's 06/14/2011 Statement of Material Facts (“Chase 06/14/2011 Statement”) ¶ 39; Pl. 06/23/2011 Resp. to Chase ¶¶ 32–42.

On May 24, 2006, Lehman Brothers Bank, FSB purchased the Aurora Note from FFE through its subsidiary Aurora. Pl. 06/23/2011 Statement ¶ 23; TCN 06/27/2011 Statement ¶ 23. The parties dispute whether Aurora—then a wholly-owned a subsidiary of Lehman—is the current “holder,” but agree that at a minimum Aurora holds the Aurora Note and Aurora Mortgage. Pl. 06/13/2011 Statement ¶ 15; Chase 06/14/2011 Statement ¶ 51. See also 06/13/2011 Decl. of Angela Martinez, Vice President of Aurora (“Martinez Decl”) ¶¶ 4, 7; Deposition of Shirley Flaig (“Flaig Dep.”) at 20, Ex. A to 06/13/2011 Aff. of Cynthia Augello, Attorney for Chase (“Augello 06/13/2011 Aff.”); 06/23/2011 Supp. Decl. of Terry Martin, Aurora Foreclosure Specialist III (“Martin Supp. Decl.”) ¶ 2 and Ex. A. Aurora alleges that it is the servicer for the Aurora Mortgage. See Pl. 06/13/2011 Statement ¶ 15. Sadek defaulted on his monthly obligations under the Aurora Mortgage and it remains unpaid as of October 1, 2007. Pl. 06/13/2011 Statement ¶¶ 23–25.

The “Chase” Mortgage

On September 11, 2006, Sadek obtained an additional loan from FFE in the amount of $650,000 through a warehouse line of credit provided by Washington Mutual Bank (“WaMu”). To secure the loan, Sadek, on behalf of defendant 100 W. 58th St. 7C LLC (“7C LLC”), executed a second mortgage on Unit 7C (the “Chase Mortgage”), and that mortgage was recorded on December 15, 2006. Chase 06/14/2011 Statement ¶¶ 63–65; Pl. 06/23/2011 Resp. to Chase ¶¶ 63–65. 7C LLC is an entity owned by Sadek that never held title to Unit 7C. Chase 06/23/2011 Resp. to Aurora ¶ 17. Although Aurora disputes the validity of the transfer, on February 2, 2007, FFE transferred the Chase Mortgage to WaMu. Chase 06/14/2011 Statement ¶ 66; Pl. 06/23/2011 Resp. to Chase ¶ 66.

On February 15, 2008 WaMu commenced an action against Sadek, FFE and 7C LLC and others in the New Jersey Superior Court, Bergen County, Chancery Division, alleging breaches related to a number of loans and mortgages, including the Chase Mortgage. See WaMu Compl. ¶¶ 36–42, Ex. F to 06/13/2011 Sandelands Decl. That lawsuit was resolved through a settlement agreement dated September 12, 2008 (the “Settlement Agreement”). See Ex. E ¶ 4D to 06/13/2011 Sandelands Decl.; Pl. 06/23/2011 Resp. to Chase ¶¶ 81–82. While Chase disputes the relevance of the Settlement Agreement, it included an agreement that the Chase Mortgage was “paid in full.” Chase 06/23/2011 Resp. to Pl's Statement of Material Facts ¶ 22.

WaMu was subsequently closed on September 25, 2008 by order of the Office of Thrift Supervision, and the FDIC was appointed its receiver. Chase 06/14/2011 Statement ¶¶ 85–86. While Chase acquired WaMu's assets from the FDIC that same day, Aurora disputes that Chase acquired the Chase Mortgage from WaMu as part of its purchase. Pl. 06/23/2011 Resp. to Chase ¶ 84.

The Motion to Dismiss for Lack of Subject Matter Jurisdiction

Chase moves to dismiss this diversity action pursuant to Fed.R.Civ.P. 12(b)(1) on the grounds that Aurora has not shown that the parties are diverse. After Chase filed its motion, Aurora submitted a Second Amended Complaint (“SAC”), as well as a memorandum in opposition. Chase rejoined that Aurora had still not shown that jurisdiction exists.

I. LEGAL STANDARD

On a motion to dismiss for lack of subject matter jurisdiction, a district court “must accept as true all material factual allegations in the complaint, but [it is] not to draw inferences from the complaint favorable to plaintiffs.” J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir.2004). Where jurisdiction is based on 28 U.S.C. § 1332, there must be complete diversity of citizenship between the parties. Put simply, this means that no plaintiff can be a citizen of the same state as a defendant. See Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996); Strawbridge v. Curtiss, 2 L.Ed. 435, 435, 3 Cranch 267, 267 (1806) (overruled on other grounds). A complaint properly invoking diversity jurisdiction includes not just a statement of diversity, but “an averment of the particular states of which the parties are citizens.” Laufer Wind Grp. LLC v. DMT Holdings LLC, No. 10 Civ. 8716(RJH), 2010 WL 5174953, at *1 (S.D.N.Y. Dec.20, 2010) (quoting Ganoe v. Lummis, 662 F.Supp. 718, 723 (S.D.N.Y.1987)). Where diversity exists but defective pleadings do not make that clear, a plaintiff may cure its defect “simply by amending the complaint.” Leveraged Leasing Admin. Corp. v. PacifiCorp Capital, Inc., 87 F.3d 44, 47 (2d Cir.1996).

II. THE MOTION MUST BE DENIED

Plaintiff initially failed to indicate the citizenship of the defendant LLCs' members. Chase correctly points out that this is generally insufficient. See Strother v. Harte, 171 F.Supp.2d 203, 205 (S.D.N.Y.2001) (Chin, J.) (granting motion to dismiss for failure to sufficiently allege diversity jurisdiction where plaintiff did not indicate citizenship of defendant LLC members). Chase's remaining concern is with Winthrop Abstract, LLC (“Winthrop”) and Windsor Tov LLC (“Windsor”). An LLC is a citizen of each state of which its members are citizens. Handelsman v. Bedford Vill. Assoc. Ltd. P'ship, 213 F.3d 48, 52 (2d Cir.2000); UBS Secs. LLC v. Voegeli, 684 F.Supp.2d 351, 354 n. 5 (S.D.N.Y.2010). While Chase no longer disputes the citizenship of each individual alleged to be a member of the two LLCs, it argues that Aurora has not provided a comprehensive list of all members.

This is not the first time I have had to resolve a motion in which “Plaintiff's claims of complete diversity are not exactly air tight.” Discovery Ortho Partners, LLC v. Osseous Techs. of Am., Inc., No. 10 Civ. 1729(HB), 2010 WL 3239428, at *4 (S.D.N.Y. Aug. 17, 2010). Although the supporting documents are hardly a model of precision, Plaintiff need only show diversity by a preponderance of the evidence. See Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d 635, 638 (2d Cir.2005). Following Chase's motion Plaintiff rectified its pleadings with the SAC, in which it alleges both the membership and citizenship of each defendant. See SAC ¶¶ 1–12.³ These allegations are certified and signed by an officer of the Court subject to Rule 11, and I am constrained to accept them as true. See Attica Cent. Sch., 386 F.3d at 110; Fed.R.Civ.P. 11. Between that and the Sandelands' Declaration—asserting diversity on pain of perjury—I conclude that the plaintiff has sufficiently shown that the parties are completely diverse. The motion is denied.

The Motions for Summary Judgment

I. LEGAL STANDARD

A district court may not grant summary judgment if there exists a genuine issue of material fact. See Cotarelo v. Vill. of Sleepy Hollow Police Dep't, 460 F.3d 247, 251 (2d Cir.2006) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (...