N.J. Title Ins. Co. v. Cecere

• Decision Date: 07 December 2020
• Docket Number: Civ. No. 20-1286 (KM) (JBC)
• Parties: NEW JERSEY TITLE INSURANCE COMPANY, Plaintiff, v. RICHARD CECERE, ROSEMARIE CECERE, FRANK J. COZZARELLI, WELLS FARGO BANK N.A., and CHAMPION MORTGAGE Defendants v. SECRETARY OF U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, MARGARET HARKNESS, Third Party Defendants
• Court: U.S. District Court — District of New Jersey

NEW JERSEY TITLE INSURANCE COMPANY, Plaintiff, v. RICHARD CECERE, ROSEMARIE

CECERE, FRANK J. COZZARELLI, WELLS FARGO BANK N.A.,and CHAMPION MORTGAGE Defendants v. SECRETARY OF U.S. DEPARTMENT OF HOUSINGAND URBAN DEVELOPMENT, MARGARET HARKNESS, Third Party Defendants

Civ. No. 20-1286 (KM) (JBC)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

December 7, 2020

OPINION

KEVIN MCNULTY, U.S.D.J.

:

One of the two Third Party Defendants, Secretary of the United States Department of Housing and Urban Development ("HUD"), removed this matter from the Superior Court of New Jersey, Chancery Division - Essex County, to the United States District Court for the District of New Jersey. HUD now seeks to dismiss the Third Party Complaint of pro se litigants Richard Cecere and Rosemarie Cecere under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, or in the alternative, under Rule 12(b)(6) for failure to state a claim.

For the reasons explained herein, I will grant, without prejudice, HUD's motion to dismiss the Third Party Complaint.

I. Summary¹

This action arose from New Jersey Title Insurance Company's ("NJTIC") action to quiet title ("the NJTIC Complaint") filed on September 20, 2017 in the Superior Court of New Jersey, Chancery Division - Essex County. (NJTIC Compl. at 1) NJTIC alleged that in August 1999, Rosemarie Cecere purchased the property located at 155 Highland Avenue, Montclair, New Jersey ("the Property"). (NJTIC Compl. ¶8; Cecere Am. Answer¶8) In April 2009, Rosemarie Cecere transferred title in the Property to Richard Cecere. (NJTIC Compl. ¶9; Cecere Am. Answer¶9) Then, on April 24, 2009, Wells Fargo Bank, N.A. provided a reverse mortgage loan ("Wells Fargo Mortgage") on the Property to Richard Cecere. (NJTIC Compl. ¶ 11; Cecere Am. Answer¶11)

On May 4, 2009, NJTIC issued title insurance to Wells Fargo in connection with the Wells Fargo Mortgage on the Property. (NJTIC Compl. ¶15; Cecere Am. Answer¶15) On July 7, 2009, Richard Cecere transferred title in the property "to Richard and Rosemarie Cecere, husband and wife." (NJTIC Compl. ¶18; Cecere Am. Answer¶18) NJTIC alleges that the July 2009 transfer did not address the Wells Fargo Mortgage. (NJTIC Compl. ¶22)

Those transfer documents were prepared by Frank Cozzarelli, Esq. (NJTIC Compl. ¶¶10, 19; Cecere Am. Answer¶10, 19) On November 23, 2013, Cozzarelli Law LLP, "a partnership controlled by Frank Cozzarelli, Esq.,"provided a mortgage loan ("Cozzarelli Mortgage") on the Property to Rosemarie Cecere. (NJTIC Compl. ¶23; Cecere Am. Answer¶23)

On July 7, 2016, Wells Fargo filed a Foreclosure Complaint and "named Cozzarelli Law LLP as a defendant, based upon its interests in the Property and its recording of the 2013 Cozzarelli Mortgage." (NJTIC Compl. ¶¶27-28; Cecere Am. Answer¶¶27-28) In his Answer to the Foreclosure Complaint, Cozzarelli acknowledged that his lien was recorded after the Wells Fargo Mortgage lien, but maintained that "because his lien is only against Rosemarie Cecere's interest in the property, and Rosemarie Cecere was not a party to the 2009 Wells Fargo Mortgage, the Cozzarelli lien should have priority over the Wells Fargo lien with respect to Rosemarie Cecere's interest in the Property." (NJTIC Compl. ¶29; Cecere Am. Answer¶29)

In May 2017, Wells Fargo provided a notice of a claim to NJTIC under NJTIC's title policy and "demanded that NJTIC establish title to the Property or pay the claim in full." (NJTIC Compl. ¶¶30-31) Then, in July 2017, Wells Fargo voluntarily dismissed and withdrew the Foreclosure Complaint. (NJTIC Compl. ¶32; Cecere Am. Answer¶32) NJTIC alleges that in September 2017, Wells Fargo transferred service of its mortgage on the Property to Champion Mortgage. (NJTIC Compl. ¶33)

NJTIC then brought its action to quiet the Property's title. NJTIC alleged that the April 2009 and July 2009 transfers of the Property "were fraudulent transfers designed to circumvent Richard's and Rosemarie's obligations to lenders." (NJTIC Compl. ¶35) The complaint alleges that "Cozzarelli was aware that Richard and Rosemarie were husband and wife," "that each had a marital interest in the Property at the time of the closing of the 2009 Wells Fargo Mortgage," and that "Cozzarelli, acting as the closing agent for the 2009 Wells Fargo Mortgage and the issuance of the NJTIC policy, had a duty to encumber the entire fee simple with a first position lien in favor of Wells Fargo." (NJTIC Compl. ¶¶36-37) In sum, NJIT alleged that

Cozzarelli, Richard Cecere and Rosemarie Cecere acted knowingly, in bad faith and with malice in participating in a scheme designedto: i) avoid Richard and Rosemarie Cecere's obligations under the 2009 Wells Fargo Mortgage; ii) create an interest in the Property for Frank Cozzarelli; and, as a result therefore, iii) require NJTIC to establish title.

(NJTIC Compl. ¶40)

On April 10, 2018, in addition to filing an Amended Answer, Rosemarie and Richard Cecere filed a Counterclaim (Cecere Counterclaim ¶¶1-11), and a Third Party Complaint naming Wells Fargo, Margaret Harkness, and HUD (Third Party Compl. ¶¶1, 2, 5, 13). In the Third Party Complaint, the Ceceres allege that they were "solicited by Wells Fargo Bank to place a reverse mortgage on their home" and that

Margaret Harkness, as agent of Wells Fargo Bank, made it crystal clear that Richard Cecere, who [w]as 63 years of age at that time qualified for a Reverse Mortgage. Margaret Harkness also advised Richard Cecere that Rosemarie Cecere who was 55 years of age did not qualify for a reverse mortgage.

(Third Party Compl. ¶¶1-2) They allege that Harkness instructed Rosemarie to convey title solely to Richard in order to qualify for the mortgage. (Third Party Compl. ¶3) The Ceceres further allege that Harkness informed Richard and Cozzarelli that "title could be transferred back to Richard and Rosemarie Cecere as husband and wife" after the mortgage was secured. (Third Party Compl. ¶3) According to the Ceceres, that information was "intended and designed to promote" the Wells Fargo Mortgage "without any consideration of the implications to [the interest] of Rosemarie Cecere," and was "intended and designed to generate fees and income to Wells Fargo Bank when it was not entitled to such compensation." (Third Party Compl. ¶¶8-9) In other words, "Wells Fargo Bank and Margaret Harkness were involved in abusive lending practices." (Third Party Compl. ¶11)

With respect to HUD, the Ceceres allege that the agency "actually fund[ed]" the Wells Fargo Mortgage,² was aware of Wells Fargo's "pattern ofmisconduct," and "had a duty to [the Ceceres] to protect them from abusive and predatory lending practices." (Third Party Compl. ¶¶5, 12, 13) Further, the Third Party Complaint alleges that Wells Fargo was involved in a "conspiracy with Margaret Harkness and HUD to obtain customers from whom they could generate substantial fee income" and that "HUD shares in the fee income generated because of the reverse mortgage signed by third party plaintiff, Richard Cecere." (Third Party Compl. ¶¶21-22)

The Ceceres submit, inter alia, that the actions of the Third Party Defendants have deprived Rosemarie of her right to the Property. (Third Party Compl. ¶23) They contend that the Defendants "violated New Jersey common law and federal laws" such as the Real Estate Settlement Procedures Act ("RESPA") and the "truth in lending law," which I interpret to mean the federal Truth in Lending Act ("TILA"). (Third Party Compl. ¶28)

The New Jersey Superior Court entered default, but not default judgment, against HUD. (DE 4-1 at 20; DE 4-5 at 1) On February 6, 2020, the HUD Secretary removed the matter to the United States District Court for the District of New Jersey pursuant to 28 U.S.C. § 1442(a)(1). (DE 1 at 2) The Secretary contended that because the Ceceres "never served the United States Attorney's Office or the Attorney General in the manner set forth in [Federal Rule of Civil Procedure] 4, the HUD Secretary has not been properly served,"and, therefore, "removal pursuant to 28 U.S.C. § 1442(a)(1) is still timely under 28 U.S.C. § 1446(b)." (DE 1 at 5)

On March 20, 2020, HUD filed its motion (DE 4) to dismiss the Third Party Complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and under Rule 12(b)(6) for failure to state a claim. (DE 4 at 1-2)

II. Discussion

a. Entry of Default in State Court

At the outset, HUD submits, and the Ceceres concede, that the agency was not properly served with the Third Party Complaint. (DE 4-1 at 21; DE 6 at 1) Federal Rule of Civil Procedure 4 provides, inter alia, that "[t]o serve a United States agency . . . , a party must serve the United States." Fed. R. Civ. P. 4(i)(2).

In turn, to serve the United States, a party must:

(A)(i) deliver a copy of the summons and of the complaint to the United States attorney for the district where the action is brought--or to an assistant United States attorney or clerical employee whom the United States attorney designates in a writing filed with the court clerk—or (ii) send a copy of each by registered or certified mail to the civil-process clerk at the United States attorney's office;

(B) send a copy of each by registered or certified mail to the Attorney General of the United States at Washington, D.C.; and

(C) if the action challenges an order of a nonparty agency or officer of the United States, send a copy of each by registered or certified mail to the agency or officer.

Fed. R. Civ. P. 4(i)(1). Here, the Ceceres attempted to serve HUD by delivering the summons and Third Party Complaint "to Keith Johnson as Paralegal & Authorized Agent at 451 7th St., SW, Washington, DC 20410." (DE 4-4 at 2, 6) The Ceceres did not attempt to serve the United States Attorney for the District of New Jersey or the Attorney General of the United States. The service therefore did not comply with Rule 4. See Fed. R. Civ. P. 4(i)(1).

HUD submits that, because service was improper, this...