Dolan v. Fairbanks Capital Corp.

• Decision Date: 13 March 2013
• Docket Number: No. 03 CV 3285 (DRH) (AKT).,03 CV 3285 (DRH) (AKT).
• Citation: 930 F.Supp.2d 396
• Parties: Michael T. DOLAN, Plaintiff, v. FAIRBANKS CAPITAL CORPORATION, a Utah corporation, and PMI Mortgage Insurance Company, Walnut Creek, CA, Defendants.
• Court: U.S. District Court — Eastern District of New York

930 F.Supp.2d 396

Michael T. DOLAN, Plaintiff,

v.FAIRBANKS CAPITAL CORPORATION, a Utah corporation, and PMI Mortgage Insurance Company, Walnut Creek, CA, Defendants.

No. 03 CV 3285 (DRH) (AKT).

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

March 13, 2013.

Michael T. Dolan, Smithtown, NY, pro se.

Eckert Seamans Cherin & Mellott, LLC, by: Riyaz Gulam Bhimani, Esq., White Plains, NY, for Defendant Fairbanks Capital Corporation.

Boutin & Altieri, PLLC, by: John L. Altieri, Jr., Esq., Fairfield, CT, for Defendant PMI Mortgage Insurance Company.

MEMORANDUM AND ORDER

HURLEY, Senior District Judge.

Pro se plaintiff Michael T. Dolan (“plaintiff” or “Dolan”) commenced this action alleging that defendants Fairbanks Capital Corp. (“FCC”) ¹ and PMI Mortgage Insurance Company (“PMI”) violated various federal and state laws in connection with the servicing of his mortgage and related foreclosure proceedings. Presently before the Court are separate motions made by FCC and PMI pursuant to Federal Rule of Civil Procedure (“Rule”) 56 seeking dismissal of the Second and Third Amended Complaints. For the reasons set forth below, FCC's motion is granted in part and denied in part and PMI's motion is granted in its entirety.

BACKGROUND

The following facts, which are drawn from the parties' Local Civil Rule 56.1Statements, the pleadings and the voluminous exhibits attached thereto, and the parties' submissions, are undisputed unless otherwise noted.

Relevant Facts

On February 11, 1998, plaintiff executed, acknowledged and delivered to non-party Premier Mortgage Corp. (d/b/a PMC Mortgage Co.) (“Premier”) a note in the principal amount of $224,000 (the “Note”), which was secured by a mortgage (the “Mortgage”) encumbering the property located at 21 Kent Place, Smithtown, New York (the “Property”). (Decl. of Riyaz G. Bhimani, dated May 20, 2011 (“Bhimani Decl.”), Exs. A & B.) In June 1998, the Note and Mortgage were assigned from Premier to TMS Mortgage Inc. (d/b/a The Money Store) (“TMS”), and this assignment was recorded in the Office of the Clerk of Suffolk County on August 2, 1999.

On August 11, 2000, plaintiff and his wife, Donna Dolan, entered into a forbearance agreement with TMS (the “August 2000 Forbearance Agreement”). According to that agreement, plaintiff had “failed to make regular monthly payments” as required by the Note and Mortgage, the loan was in default, and TMS had “instituted foreclosure.” ² (Bhimani Decl., Ex. D at unnumbered page 3.) At plaintiff's request, TMS had agreed to enter into the August 2000 Forbearance Agreement and hold foreclosure proceedings in abeyance. Pursuant to the August 2000 Forbearance Agreement, plaintiff was required to pay a total of $51,136.10 “to bring the loan current through and including the 08/17/00 payment.” ( Id.) The agreement set forth a payment schedule that required plaintiff to make monthly forbearance payments in addition to his regularly scheduled monthly mortgage payments. ( Id.)

On November 7, 2000, TMS notified plaintiff that FCC would begin servicing plaintiff's mortgage as of November 22, 2000.³ (Bhimani Decl., Ex. E.) Plaintiff asserts that the August 2000 Forbearance Agreement, which had been executed several months prior to FCC's involvement with his loan, “was in-force at the time of the transfer to FCC” and that plaintiff made monthly payments to FCC pursuant to the August 2000 Forbearance Agreement beginning in November 2000. (3d Am. Compl. ¶ 7.)

On October 22, 2001, TMS commenced foreclosure proceedings against plaintiff in New York State Supreme Court, Suffolk County. (Bhimani Decl., Ex. F.) In the complaint filed in those proceedings, TMS alleged that plaintiff had “failed to make and pay the installment of principal and interest due and owing on October 17, 2000 and thereafter, despite due demand therefor.” ⁴ ( Id. at ¶ 7.) Thus, TMS sought “the unpaid principal sum of the NOTE and MORTGAGE in the amount of $220,852.53 with accrued interest at 14.125% per annum, from September 17, 2000.” ( Id. ¶ 8.)

On September 23, 2002, FCC (as the servicing agent for TMS) and Dolan entered into a second forbearance agreement (the “September 2002 Forbearance Agreement”), which was filed in the foreclosure action.⁵ (Bhimani Decl., Ex. G.) That agreement provided that plaintiff had failed to make monthly payments as of October 17, 2000 and, as such, TMS had “elected to declare the unpaid principal sum of the NOTE and MORTGAGE in the amount of $220,852.53 with accrued interest at 14.125% per annum, from September 17, 2000, to be immediately due and payable.” ( Id. ¶ 7.) In the agreement, Dolan “acknowledged that [he] is indebted to [TMS] in ... the sum of $87,567.71,” and agreed to the payment plan set forth in the September 2002 Forbearance Agreement. ( Id. ¶ 8.) In exchange, TMS agreed “to take no further action to foreclose the Mortgage.” ( Id.)

The September 2002 Forbearance Agreement required plaintiff to “make a down payment of $15,000 on or before September 16, 2002,” and then make five monthly payments of $4,000 between October 2002 and February 2003.⁶ ( Id. ¶ 9a.) On or about September 30, 2002, Dolan made the required $15,000 down payment. (Bhimani Decl., Ex. K at ¶ 9 and Ex. M at 1; 3d Am. Compl. ¶ 10 & Ex. 6.) Plaintiff asserts that he “was forced to pay [this amount] or FCC would foreclose.” (3d Am. Compl. ¶ 10.)

In November 2002, FCC determined that plaintiff was in default of the September 2002 Forbearance Agreement and the foreclosure proceedings brought by TMS against Dolan were reinstated. ( See Bhimani Decl., Ex. C at ¶ 11.) On May 30, 2003, the Property was sold pursuant to a Judgement of Foreclosure and Sale to non-party Michael Haley, who then assigned his rights in the Property to non-party Anthony Rigole.⁷ ( See Bhimani Decl., Ex. I at 1; Pl.'s Opp'n, Ex. A at unnumbered page 7–8.) Subsequently, Dolan—who had not, up to that point, entered any appearance in the foreclosure action—moved to vacate the Judgement of Foreclosure and Sale as well as the subsequent sale of the Property. (Bhimani Decl., Ex. I at 1.) Rigole brought separate eviction proceedings against Dolan, and those proceedings were joined with the foreclosure action. ( Id.) Dolan was granted temporary injunctive relief and awarded possession of the Property pending the outcome of the foreclosure proceedings. ( Id.) Neither FCC nor PMI were named as parties in the foreclosure proceeding.

On July 1, 2003, while the foreclosure action remained pending, FCC transferred to Wilshire Credit Corporation (“Wilshire”) all of its servicing rights to plaintiff's loan. (Bhimani Decl., Ex. J.)

Subsequent State Court Proceedings

On March 22, 2004, New York State Supreme Court Justice Patrick Henry issued an interim order that, inter alia, denied without prejudice Dolan's motion to vacate the Judgement of Foreclosure and Sale. (2d Am. Compl. (Second document attached to the pleading).) Justice Henry reasoned that pending settlement negotiations between Dolan and Rigole, which could allow Dolan to repurchase the Property from Rigole, might resolve the entire matter and obviate the need to decide the pending motion. ( Id. at 3.) Justice Henry continued:

In the event that negotiations do not resolve the dispute, the record reflects that numerous issues of fact are raised with regard to the method, manner and the veracity of the lenders' representations to the [Dolans] which require further examination and disclosure. The proceeding appears procedurally in compliance with the foreclosure statute. However the propriety of the two forbearance agreements signed on or about September 24, 2002 and August 11, 2000, the lenders' operating procedures, the acceptance and appropriation of [the Dolans'] substantial payments pending foreclosure and judgment on default between 2001 and 2002, and the similarity of the abuse claimed by the Dolans and those publicized in federal investigation and recently settled between the lender, FTC and HUD in late 2003, raise a basis for inference and issues concerning intent, and the need for scrutiny.

( Id.) In a subsequent Order dated December 6, 2004, Justice Henry noted that the negotiations between Dolan and Rigole “never got off the ground,” and referred the matter to an appointed Judicial Hearing Officer for a hearing and determination on “all outstanding issues.” (2d Am. Compl., Ex. IV, Doc. 15.)

The foreclosure proceeding was thereafter referred to Judicial Hearing Officer (“JHO”) Morton I. Willen, who held an evidentiary hearing on February 1 and 14, 2005. (Bhimani Decl., Ex. I at 1.) In a written decision dated April 18, 2005, JHO Willen granted Dolan's motion to set aside the judgment of foreclosure and sale, set aside the sale of the Property to Rigole, excused Dolan's default in the foreclosure action, and permitted him to “interpose an answer and assert whatever defenses [he] deem[ed] appropriate.” ⁸ ( Id. at 5.) JHO Willen determined that TMS and its servicing agents had “failed to properly credit Dolan in excess of $10,000” in 2001 and 2002 and that “Dolan was injured because of [the] failure to timely apply these payments to principal and interest.” ( Id. at 3.) JHO Willen further concluded that “[t]he interest rate of 14.125% was [improperly] frozen [even though] the lending documents require adjustment every six months,” and that “[t]his inconsistency in assessing interest rates resulted in inaccurate crediting to the detriment of the borrower.” ( Id.)

JHO Willen further concluded that “[e]ach of the [forbearance] agreements contain either egregious mistakes and/or overreaching and unconscionable clauses.” ( Id.) JHO Willen found that the September 2002 Forbearance Agreement entered into by FCC and Dolan was “[t]he singular most flagrant of the forbearance agreements” in that it claimed that plaintiff owed $87,567.71 in arrears despite the fact that “there is nothing in the record to support this.” ⁹ ( Id. at 4.) Moreover, the agreement listed the...