Grimes v. Fremont Gen. Corp..

• Citation: 785 F.Supp.2d 269
• Decision Date: 31 March 2011
• Docket Number: Case No. 08–CV–1024 KMK.
• Parties: Darrick GRIMES and Yolanda Grimes, on behalf of themselves and a class of others similarly situated, Plaintiffs,v.FREMONT GENERAL CORPORATION, Fremont Investment and Loan, WCS Lending LLC, Jonathan Tanenbaum, Nadene McBean, America's Servicing Company, U.S. Bancorp and U.S. Bank, National Association, as Trustee for Master Asset Backed Securities Trust 2006–FRE–1, 3 Day Appraisal Services, Phil Aarons, David Abrams, Gailen Properties, Inc., GFI Mortgage Bankers, Inc., “John Doe” and “Jane Doe,” the last two names being fictitious said parties being individuals, if any, having any involvement in the fraud perpetrated on Plaintiffs, and XYZ–1 Corporation and XYZ–2 Corporation, the last two names being fictitious, it being the intention of Plaintiffs to designate any corporation or entity having any involvement in the fraud perpetrated on Plaintiffs described herein, Defendants.
• Court: U.S. District Court — Southern District of New York

785 F.Supp.2d 269

Darrick GRIMES and Yolanda Grimes, on behalf of themselves and a class of others similarly situated, Plaintiffs,

v.FREMONT GENERAL CORPORATION, Fremont Investment and Loan, WCS Lending LLC, Jonathan Tanenbaum, Nadene McBean, America's Servicing Company, U.S. Bancorp and U.S. Bank, National Association, as Trustee for Master Asset Backed Securities Trust 2006–FRE–1, 3 Day Appraisal Services, Phil Aarons, David Abrams, Gailen Properties, Inc., GFI Mortgage Bankers, Inc., “John Doe” and “Jane Doe,” the last two names being fictitious said parties being individuals, if any, having any involvement in the fraud perpetrated on Plaintiffs, and XYZ–1 Corporation and XYZ–2 Corporation, the last two names being fictitious, it being the intention of Plaintiffs to designate any corporation or entity having any involvement in the fraud perpetrated on Plaintiffs described herein, Defendants.

Case No. 08–CV–1024 KMK.

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

March 31, 2011.

Darrick Grimes and Yolanda Grimes, Newburgh, Pro Se Plaintiffs.Kenneth J. Flickinger, Esq., Knuckles, Komosinski & Elliot, LLP, Elmsford, Counsel for Defendants Fremont General Corporation and Fremont Investment and Loan.Matthew J. Bizzaro, Esq., Noah Numberg, Esq., L'Abbate, Balkan, Colavita & Conti, Garden City, Counsel for Defendant WCS Lending, LLC.Steven M. Hecht, Esq., Lowenstein Sandler PC, New York, Counsel for Defendant U.S. Bank, National Association, as Trustee for Master Asset Backed Securities Trust 2006–FRE–1.

OPINION AND ORDER

KENNETH M. KARAS, District Judge.

Darrick and Yolanda Grimes (“Plaintiffs”), proceeding pro se, bring this action against Fremont General Corporation (“FGC”) and Fremont Investment and Loan (“FIL”) (collectively, “Fremont”), WCS Lending LLC (“WCS”), Jonathan Tanenbaum (“Tanenbaum”), Nadene McBean (“McBean”), U.S. Bank, National Association, as Trustee for Master Asset Backed Securities Trust 2006–FRE–1 (“U.S. Bank”), and 3 Day Appraisal Services (collectively, “Defendants”), ¹ for violations of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq.; the Home Ownership and Equity Protection Act (“HOEPA”), 15 U.S.C. § 1639; the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et seq.; the Fair Housing Act (“FHA”), 42 U.S.C. § 3601 et seq.; the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691, et seq.; the Civil Rights Act, specifically 42 U.S.C. §§ 1981, 1982, & 1985(3); and the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962; as well as fifteen state law claims.² Fremont, WCS, and U.S. Bank (collectively, the “Moving Defendants”) have each moved to dismiss all of Plaintiffs' claims pursuant to Fed.R.Civ.P. 12(b)(6).³ For the reasons stated herein, the motions to dismiss are granted in part.

I. Background

The Amended Complaint is 161 pages long and contains 722 paragraphs. It sometimes contains conflicting dates and descriptions of events, and Plaintiffs are not always clear about which Defendants purportedly took which actions. However, for purposes of deciding the instant motions to dismiss, the Court accepts as true the allegations contained in Plaintiffs' Amended Complaint, described below, and construes them in the light most favorable to Plaintiffs.

A. Factual Background

Plaintiffs Darrick and Yolanda Grimes (“Plaintiffs”) are African–American owners of a house located at 23 Stacy Lee Drive, in Newburgh, New York (the “Newburgh home”). (Am. Compl. ¶¶ 17–18.) At the time of the transaction at issue, Plaintiffs were employed as legal assistants, earning a combined $103,000 per year. ( Id. ¶ 61.) ⁴ According to Plaintiffs, Defendant FGC is a financial services holding company that engages in real estate lending operations through its wholly owned subsidiary, Defendant FIL, “a wholesale lender [that] obtains] all of its loans through a network of independent mortgage brokers.” ( Id. ¶¶ 19, 23.) Defendant WCS is a licensed mortgage broker based in Florida. ( Id. ¶ 28.) Defendant Tanenbaum was a mortgage broker at WCS. ( Id. ¶ 31.) ⁵ Defendant U.S. Bank is a banking association acting as trustee for Master Asset Backed Securities Trust 2006 FRE–1, and “is the trustee for the securitization pool that contains [ ] Plaintiffs [sic] loan pursuant to a Pooling and Service Agreement dated August 1, 2006.” ( Id. ¶¶ 35, 38.) ⁶

1. Purchase and Financing of the Newburgh Home

Plaintiffs owned a home in St. Albans, New York (the “St. Albans home”), which they placed on the real estate market on or about July 17, 2005. ( Id. ¶¶ 135–36.) On August 1, 2005, Plaintiffs signed a contract to purchase the Newburgh home for $435,000, and submitted a $20,000 down payment to the sellers. ( Id. ¶¶ 135, 137.) According to Plaintiffs, Yolanda Grimes had a good credit score, but Darrick Grimes had a poor one. ( Id. ¶ 61.) To finance the purchase, Plaintiffs applied for a mortgage from Washington Mutual, but were denied on September 5, 2005. ( Id. ¶ 139.) Subsequently, Plaintiffs searched for other financing sources, and decided to use Tanenbaum, who told Plaintiffs he would help them “ ‘obtain reasonable financing,’ ” and that WCS “ ‘would provide everything’ for the closing and mortgage process.” ( Id. ¶¶ 140, 145, 151.) ⁷ Based on Tanenbaum's purported statements and assurances, “Plaintiffs did not seek assistance from another mortgage broker, bank or appraiser.” ( Id. ¶ 152.) Plaintiffs allege that Tanenbaum told them that they would qualify for traditional loan products with a fixed interest rate of, at the most, 7%. ( Id. ¶ 205.) However, Plaintiffs allege that, through Fremont, WCS actually arranged a 100% no-documentation-financing Adjustable Rate Mortgage (“ARM”) loan for Plaintiffs, which for the first two years of the loan, consisted of a lower fixed rate and lower monthly payments, followed by a higher, adjustable rate for the next twenty-eight years. ( Id. ¶¶ 8, 55.) ⁸ Plaintiffs claim that they “would not have entered into the transaction but for WCS Lending's misrepresentations, false promises, and other negligent advice.” ( Id. ¶ 83.) Plaintiffs never met with Tanenbaum in person. ( Id. ¶ 167.)

Plaintiffs allege that on or about September 9, 2005, Tanenbaum had them sign a loan application that purportedly misstated the income of Yolanda Grimes; Plaintiffs were not given a copy of the application, and were not asked to provide documentation of their income, employment, or assets. ( Id. ¶ 65.) Exhibits attached to the Amended Complaint indicate that WCS submitted several sets of documents to Fremont in September and October 2005.⁹ First, Plaintiffs assert that upon information and belief, WCS employees Tanenbaum and McBean “intentionally and knowingly” submitted a mortgage application and related pre-disclosure documents to Fremont on September 13, 2005, that “contained falsified data and forged signatures on the application in many material respects.” ( Id. ¶¶ 158, 212–13.) ¹⁰ These documents included an application for a $405,000 2/28 ARM loan at an 8% interest rate, indicating that Plaintiffs had $1,076 in monthly rental income (Compl. Ex. 2), and a HUD Settlement Statement containing the same information, ( id. Ex. 4). Fremont's records indicate that it received this loan application on September 16, 2005, and, on the same date, Fremont approved a counter-offer of: (1) a 2/28 ARM loan for $405,000, at an initial interest rate of 8.45%, and (2) a second loan for $22,500, at a fixed interest rate of 12.45%. ( Id. Ex. 5.) The approval form states that these documents were being sent to Majestic Settlement Services to be verified by Plaintiffs. ( Id.) Plaintiffs allege that Fremont approved their mortgage financing based on this fraudulently submitted mortgage loan application (Am. Compl. ¶ 70), though there is no assertion that Fremont knew that the application contained false information. Plaintiffs further allege that they were not told that this application had been approved, or of any of the material terms of the financing that they were being offered, until the closing on October 12, 2005. ( Id. ¶¶ 169, 222.) ¹¹

Next, Plaintiffs allege that on or about September 14, 2005, they received a mortgage application and disclosure documents from WCS for a potential Fremont loan, that Plaintiffs characterize as “confusing”; however, Plaintiffs admit that they signed these documents on September 20, 2005. ( Id. ¶¶ 69, 71.) Despite Plaintiffs' claims that this application offered a loan with a fixed interest rate of 7% ( id. ¶ 226), the actual documents, which Plaintiffs themselves have submitted as exhibits, clearly and repeatedly stated that the loan was not a fixed rate, but instead was a 2/28 ARM mortgage. (Compl. Ex. 3.) The completed loan application also stated—on pages that Plaintiffs concede they signed—that Plaintiffs earned $1,076 per month in net rental income. ( Id.) ¹² Plaintiffs also signed a document acknowledging that their “interest rate [was] currently floating and [was] subject to daily changes based upon market fluctuations,” and a “Good Faith Estimate” of their likely settlement charges, listing anticipated fees, charges, taxes, and insurance payments in the amount of $12,844.75. ( Id.)

Plaintiffs allege they became concerned that they had not received the final mortgage numbers or a confirmed written financing commitment. (Am. Compl. ¶¶ 229–32.) Plaintiffs allege that they “were confused and very reluctant about going forward with the property purchase”; but, after “numerous phone calls” with WCS, during which WCS used unspecified “high pressure tactics to convince Plaintiffs through deception and misrepresentation to go forward with the closing,” Plaintiffs decided to proceed “because they feared losing their $20,000 deposit.” ( Id. ¶¶ 182–84, 236.) Plaintiffs also state that on October 11, 2005, they called their lawyer, Keith Schultzman (who represented them at the closing), and WCS to get confirmation of...