Friedman v. Maspeth Fed. Loan & Sav. Ass'n
| Decision Date | 10 July 2014 |
| Docket Number | No. 13–CV–6295.,13–CV–6295. |
| Citation | 30 F.Supp.3d 183 |
| Parties | Samuel FRIEDMAN, Individually and on behalf of All Others Similarly Situated, Plaintiff, v. MASPETH FEDERAL LOAN AND SAVINGS ASSOCIATION, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Joseph D. Cohen, Scott + Scott, Attorneys at Law, LLP, New York, NY, Stephen J. Teti, Scott + Scott, Attorneys at Law, LLP, Colchester, CT, Jack I. Zwick, New York, NY, for Plaintiff.
Mark L. Cortegiano, Mark Cortegiano, Middle Village, NY, for Defendant.
| Table of Contents |
| I. | Introduction | 187 |
| II. | Facts | 187 |
| A. | Background | 187 |
| B. | Late Fees | 187 |
| C. | Correspondence Regarding Late Fees | 188 |
| D. | Loan Payments | 188 |
| III. | Law | 188 |
| A. | Motion to Dismiss | 188 |
| B. | Real Estate Settlement Procedures Act (RESPA) | 189 |
| 1. | Statutory Framework | 189 |
| 2. | Business and Commercial Purpose Exemption | 190 |
| a) | In General | 190 |
| b) | Rental Property | 190 |
| c) | Non–Owner Occupied Property Used for Family Purpose | 191 |
| 3. | Penalties | 191 |
| C. | New York State Law | 191 |
| 1. | New York General Business Law § 349 | 191 |
| 2. | Breach of Implied Duty of Good Faith and Fair Dealing | 192 |
| 3. | Breach of Contract | 192 |
| 4. | Unjust Enrichment | 192 |
| IV. | Application of Law to Facts | 192 |
| A. | RESPA | 192 |
| 1. | Family Purpose | 192 |
| a) | Relevant Factors | 192 |
| b) | Non-rental Property | 193 |
| 2. | Qualified Written Requests | 194 |
| B. | State Law | 194 |
| 1. | Supplemental Jurisdiction | 194 |
| 2. | New York General Business Law § 349 | 194 |
| 3. | Breach of Implied Duty of Good Faith and Fair Dealing | 195 |
| 4. | Breach of Contract | 195 |
| 5. | Unjust Enrichment | 195 |
| C. | Class Allegations | 196 |
| V. | Conclusion | 196 |
This case raises issues of first impression on the reach of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et seq. The Act was designed to throw the federal judiciary's protective cloak over residential-occupant owners of real property and their kin to protect against abuse by banks during loan closings and subsequent related events. The Act should be broadly applied to accomplish its prophylactic purposes by exercising federal subject matter jurisdiction.
Plaintiff Samuel Friedman alleges that Maspeth Federal Savings and Loan Association (“Maspeth”) improperly assessed late fees on seven mortgage payments. He sues for (1) violation of RESPA; (2) violation of New York General Business Law § 349 ; (3) breach of implied duty of good faith and fair dealing; (4) breach of contract; and (5) unjust enrichment. Am. Compl., ECF No. 17. A class action is proposed. Id. at ¶¶ 26–35.
Defendant's motion to dismiss is denied.
Plaintiff resides at 730 East 3rd Street, Brooklyn, NY 11218. Am. Compl. ¶ 2. In 2008, he bought an adjacent single-family home, 734 East 3rd Street (“734”). Id.
The price was $625,000. Def.'s Mot. to Dismiss, Loan Application, Ex. D, ECF No. 21. To finance this purchase, he obtained a $437,500 mortgage loan.Id.; Am. Compl., Bond, Ex. A ¶ 4. His daughter and son-in-law (“children”) live there with their offspring. They have been the only occupants since the purchase.
Applicants for the mortgage were asked to check whether the property would be a “primary residence”, “secondary residence”, or “investment”. See Def.'s Mot. to Dismiss, Ex. D. Selected by plaintiff was “investment”. Id.
The children as well as plaintiff made payments toward the mortgage. From 2009 to 2013, plaintiff's payments totaled $80,229.62. Def.'s Reply Mem. of Law in Further Supp. of Def.'s Mot. to Dismiss 4, ECF No. 27. Payments from the children totaled $103,756.71. Id. In addition, plaintiff gave his children money “to cover the family's living expenses, including housing.” Pl.'s Sur–Reply, Attach. 1, Decl. of Samuel Friedman ¶ 6, ECF No. 29.
Payments on the loan were due on the first of each month. Am. Compl. ¶ 8. A grace period of fifteen days was allowed before a late fee could be assessed. Id., at ¶¶ 8–9. The mortgage loan payment book provided by the bank emphasizes: “To avoid a late charge, payment must be RECEIVED by 8:00 P.M [sic] on the 16th of each month.” See Am. Compl., Payment Book, Ex. B (emphasis in the original).
Alleged is that Maspeth improperly assessed seven late fees for payments that were due on: (1) March 1, 2011; (2) December 1, 2011; (3) March 1, 2012; (4) May 1, 2012; (5) August 1, 2012; (6) October 1, 2012; and (7) July 1, 2013. Am. Compl. ¶¶ 15–17, 20, 23; Pl.'s Documentation of Late Fees, ECF No. 18. Based on mail receipts now submitted by plaintiff—but not furnished to the bank before this suit was brought—payments should have been received by defendant prior to 8:00 P.M. on the sixteenth day of some of those months. Id. By January 2014, when the loan had been paid in full, plaintiff had accumulated, according to the bank, $457.83 in late fees. See Pl.'s Documentation of Late Fees.
On March 28, 2012, plaintiff mailed defendant a letter inquiring about these late charges. See Am. Compl., Ex E. Under RESPA, this letter constituted a qualified written request (QWR), obligating defendant to respond. See 12 C.F.R. § 1024.35. In the QWR, plaintiff requested a statement showing the payments he had submitted and the dates on which they had been received. See Am. Compl., Ex E. Defendant responded by mail on April 3, 2012, informing plaintiff that Maspeth had conducted an investigation and was enclosing his payment history. In handwriting on the payment history sheet, defendant indicated when late charges were assessed and the amount. Id. at Ex. F.
By letter dated October 31, 2012, plaintiff then notified defendant that he had mail receipts proving that the payments were timely received. See Am. Compl., Ex. H. He requested: “(i) all late fees be reversed and (ii) the payment history be corrected to reflect that the payments were not received late by your office.” Id.
On November 20, 2012, the bank responded: “It clearly states in our client's mortgage coupon book that the mailing of payments before the 16th of the month is not determinative if the Bank does not receive it within the grace period.” Id. at Ex. I. It went on to list when, according to Maspeth's records, late payments had been received. Id. Plaintiff maintains that this letter does not contain an accurate statement of the instructions in the coupon book or of the dates his payments were received. See Am. Compl. ¶ 46.
Plaintiff began making payments on the loan in January 2009.See Def.'s Reply Mem. of Law in Further Supp. of Def.'s Mot. to Dismiss, Ex. A. For the first five months, plaintiff paid the loan himself. Id. Beginning in May of that year and for about two years, plaintiff's children began contributing to the mortgage payments. Id. From August 2012 to December 2013, the children paid without contribution by plaintiff. Id.
In the period from 2009 to 2013 plaintiff contributed $80,229.62, or 43% of the payments made. Id. The children contributed $103,756.71, or 55%. Id. The remaining 2% were made by Judy Friedman and Body Tech Inc. 12–13, a company whose address is the same as the property at issue. Id.
In January 2014, plaintiff paid § 415,561.40, the balance of the mortgage and fees in full, and transferred the deed to his daughter and son-in-law. See Declaration of Samuel Friedman at ¶ 7; see also Declaration of Mark L. Cortegiano, Ex. I.
On a motion to dismiss for failing to state a claim upon which relief can be granted, “a court must accept the plaintiffs factual allegations as true, drawing all reasonable inferences in plaintiff's favor.” Clark Street Wine & Spirits v. Emporos Sys. Corp., 754 F.Supp.2d 474, 479 (E.D.N.Y.2010). “[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 677–78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).
Considered may be any written instrument attached as an exhibit or incorporated by reference to the complaint and integral documents relied on by the complaint. Subaru Distrib. Corp. v. Subaru of Am., Inc., 425 F.3d 119, 122 (2d Cir.2005). “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.” Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). It is “legal feasibility of the complaint,” and not the weight of evidence, that must be assessed. Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir.1980).
RESPA was enacted to ensure that residential real estate owners were provided with adequate information on the costs of the loan, and to protect them from abusive business practices flowing from the loan agreement and settlement process. See 12 U.S.C. § 2601(a) -(b). Lenders are required to disclose pertinent information in writing. See 12 U.S.C. §§ 2603 –2610.
We are not left in doubt about Congressional design. The legislature made specific findings of its purpose:
The Congress finds that significant reforms in the real estate settlement process are needed to ensure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices that have developed in some areas of the country.
See 12 U.S.C. § 2601(a). See also, e.g., John P. Kromer, Sanford Shatz, and Jonathan W. Cannon, 2010 Survey on RESPA Developments, 66 Bus. Law. 435, 436 (Feb.2011) (); Curtis J. Berger, ULSIA and the Protected Party: Evolution or Revolution?, 24 Conn. L.Rev. 971 (1992).
RESPA is essentially directed to achieve fair settlement procedures in acquisitions of property. See 12 U.S.C. § 2601(b) (). It is...
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