In re Laudani
| Decision Date | 16 January 2009 |
| Docket Number | Bankruptcy No. 07-15355-JNF.,Adversary No. 07-1433. |
| Parties | In re Nicholas LAUDANI, Debtor. Nicholas Laudani, Plaintiff v. Tribeca Lending Corporation, Franklin Credit Management Corporation, Manhattan Financial Services, Inc., Defendants. |
| Court | United States Bankruptcy Courts. First Circuit. U.S. Bankruptcy Court — District of Massachusetts |
David G. Baker, Boston, MA, for Plaintiff.
Kevin Scanlon, Barron & Stadfeld, Boston, MA, for Defendants.
Manhattan Financial Services, Inc., West Yarmouth, MA, pro se.
The matter before the Court is the Motion for Partial Summary Judgment (the "Motion") filed by Franklin Credit Management Corporation ("Franklin") and its wholly owned subsidiary, Tribeca Lending Corporation ("Tribeca")(collectively, the "Defendants").1 Through their Motion, the Defendants seek summary judgment with respect to seven of the twelve counts set forth in the Verified Complaint filed by Nicholas Laudani ("Laudani" or the "Debtor").
The Court conducted a hearing on both the Motion and the Debtor's Objection on November 5, 2008 and took the matter under advisement. The issues presented include whether the Defendants have sustained their burden of establishing the absence of genuine issues of material fact, and whether they are entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c), made applicable to this proceeding by Fed. R. Bankr.P. 7056.
The Debtor, acting pro se, filed a voluntary Chapter 13 petition on August 24, 2007. One month later, on September 24, 2007, he filed his Schedules. On Schedule A-Real Property, he disclosed an ownership interest in 29 Beechglen Street, Roxbury, Massachusetts, describing it as a four-family residence (the "Property").2 The Debtor listed its value at $450,000, the same value ascribed to the property by the City of Boston for tax purposes. He added: ". . . [b]ut property 2 doors from mine at Foreclosure did not sell and was in better shape not even $400,000 [sic] Perhaps in todays [sic] Market a quick sale could be anywhere from $200,000-$400,000." On Schedule D-Creditors Holding Secured Claims, the Debtor listed Franklin d/b/a Tribeca as the holder of a claim, but he stated on the schedule: "I rescinded August 15-07—My notion is that it is now unsecured debt."
Shortly after filing his petition, the Debtor obtained the services of an attorney, and, on October 13, 2007, counsel filed a notice of appearance on his behalf. One day later, the Debtor filed amended schedules, as well as an amended Statement of Financial Affairs, and an Amended Statement of Current Monthly Income and Means Test Calculation and Calculation of Commitment Period and Disposable Income, which revealed that the Debtor is a below median income debtor capable of proposing a plan with a three year commitment period. See 11 U.S.C. § 1325(b)(3). On Amended Schedule A, the Debtor listed the Property with a current value of $415,000, subject to a disputed secured claim listed on Schedule D in the sum of $360,000. On Amended Schedule B-Personal Property, the Debtor did not disclose any claims or counterclaims against any of the Defendants.
On Schedules I and J-Current Income and Expenditures of Individual Debtor(s), the Debtor listed income from employment as a "[l]oan officer-(strictl [sic] commission basis)" with Metrocities Mortgage LLC in the net monthly sum of $729, as well as income from real property in the sum of $3,400.3 On Schedule J, he disclosed expenditures of $1,108, excluding any mortgage payment, resulting in monthly net income of $3,021. On his Statement of Financial Affairs, he disclosed gross income of $40,000 in 2005; and adjusted gross income of $8,450 in 2006, referencing line 4 from his federal income tax return, namely 2006 Form 1040EZ.4
On October 22, 2007, the Defendants filed a Motion for Relief from the Automatic Stay Pursuant to 11 U.S.C. § 362 (the "Lift Stay Motion"). The Debtor objected to the Lift Stay Motion. On November 1, 2007, he also objected to Tribeca's proof of claim, which Franklin filed as its servicer, in the amount of $421,151.15,5 on the grounds that "pre-petition, Laudani validly exercised his right, pursuant to the Truth in Lending Act, to rescind the mortgage loan transaction," leaving Tribeca with an unsecured claim. The Debtor also objected to the amount of the claim on the ground that it contained fees and charges and "other amounts not provided for by the underlying contract."
On December 13, 2007, the Court consolidated both the Debtor's objection to Tribeca's proof of claim and the Debtor's objection to the Defendants' Lift Stay Motion with the adversary proceeding commenced by the filing of the Verified Complaint. In his Verified Complaint, the Debtor set forth twelve counts against the Defendants arising out of a refinancing transaction with Tribeca that occurred on May 3, 2006 as follows: Count I—Fraud; Count II—Violations of Truth in Lending Act and M.G.L. ch. 140D; Count III-Violation of M.G.L. ch. 184, §§ 17D and 17B and Chapter 93A; Count IV—Borrower's Interest; Count V—Negligent or Intentional Misrepresentation; Count VI—Economic Duress; Count VII—Breach of Contract and of Servicing Regulations; Count VIII—Unconscionability; Count IX—Violation of HOEPA and M.G.L. ch. 183C; Count X Violations of Servicer Act; Count XI—Chapter 93A; and Count XII—Emotional Distress. As noted above, Tribeca seeks summary judgment with respect to Counts II, IV, VI, VII, VIII, IX and XII.
The following facts are derived from the Debtor's Verified Complaint, the Debtor's Affirmation in Response to Defendants' "Undisputed Facts," and the Debtor's Supplemental Affirmation in Support of Objection to Defendants' Motion for Partial Summary Judgment, as well as Affidavits submitted by the Defendants, namely, the Affidavit of Kevin P. Scanlon ("Scanlon"), containing transcripts from the depositions of the Debtor and Robert J. Walsh ("Walsh"), the principal of Manhattan Financial Services, Inc. ("Manhattan"), the mortgage broker involved in the loan transaction with Tribeca, as well as other documents; the Affidavit of Karen A. Waite ("Waite"), a paralegal with the law firm of Aloisi & Aloisi; and the Affidavit of Bruce I. Miller ("Miller"), who was practicing with the law firm of Aloisi & Aloisi in May of 2006 and who was the Settlement Agent at the closing which precipitated the Debtor's adversary proceeding against the Defendants.
In his Verified Complaint, the Debtor stated that he acquired the Property in 1986. Excluding the transaction with Tribeca, the Debtor refinanced the Property twice after purchasing it. In July of 2000, he obtained a loan secured by a first mortgage on the Property from Homecomings Financial ("Homecomings"). The interest rate on the note secured by the Homecomings mortgage was 11.4%. In May of 2005, the Debtor obtained a second mortgage on the Property in the amount of $100,000 from the Carpenter Trust, which, in the Debtor's words, is a "hard money" lender, using Manhattan's services as a mortgage broker. At his deposition, Laudani testified that the interest rate payable to the Carpenter Trust was 18%. The Debtor described "hard money lending" as "strictly asset-based lending with no consideration to your ability to pay it back. . . ."
In his Verified Complaint, the Debtor represented that he expected to receive a $5,000 construction fund from the Carpenter Trust loan, but that the Carpenter Trust withheld cash, making it impossible for him to renovate the Property for rental purposes. As a result, according to Laudani, he was unable to make monthly mortgage payments, and Homecomings initiated foreclosure proceedings in December of 2005. It scheduled a foreclosure sale for May 5, 2006. At his deposition, the Debtor elaborated about the loan from the Carpenter Trust. He testified that, although the purpose of the loan was to rehabilitate his Property, he used the cash proceeds from the loan instead to pay bills and start an internet company which failed.
In early December of 2005, knowing that he was in financial trouble, and, at a time when he was employed as a Senior Loan Officer with Mortgage Pros USA, Laudani contacted Manhattan "for a refinancing and indicating that he was interested in a `cash out' transaction so that he could complete renovations of his home."
The Debtor contradicted that representation, which is contained in his Verified Complaint, in his Affirmation in Response to Defendants' "Undisputed Facts." In his Affirmation, the Debtor stated that Robert Zimmerman, the trustee of the Carpenter Trust contacted Walsh, Manhattan's principal, and asked Walsh to contact him about refinancing his Property. Walsh, in his deposition testimony, rejected that notion and testified that the Debtor contacted him. Additionally, Walsh testified that he was not and is not an agent of Tribeca and at all times acted as an independent contractor in the refinancing transaction at issue. Although the Debtor stated that, upon information and belief, Tribeca "only uses mortgage brokers that it has selected and approved in advance," he did not rebut Walsh's testimony that he was an independent contract vis à vis Tribeca.
On or around December 20, 2005, the Debtor sent Walsh a note by facsimile. On the facsimile cover sheet, which reflected the name of his employer, Mortgage Pros USA, the Debtor stated the following:
The Debtor testified at his deposition that, because he had "a couple of 90-day-lates [sic]," few lenders were going to consider refinancing the Property "below 70 percent" and...
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