Scott v. Am. Sec. Ins. Co. (In re Scott), Case No. 16-12045 (JLG)

• Decision Date: 13 June 2017
• Docket Number: Case No. 16-12045 (JLG),Adv. P. No. 16-01195 (JLG)
• Parties: In re: PHILLIP MICHAEL SCOTT, Debtor. PHILLIP MICHAEL SCOTT, Plaintiff, v. AMERICAN SECURITY INSURANCE COMPANY, OCWEN LOAN SERVICING, BANK OF NEW YORK MELLON, ERWIN VENCER, ESQ., McCABE, WEISBERG & CONWAY, P.C., BARBARA CAMPBELL, and MARLEN GAETHERS-LANGLEY, Defendants.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

In re: PHILLIP MICHAEL SCOTT, Debtor.

PHILLIP MICHAEL SCOTT, Plaintiff,
v.
AMERICAN SECURITY INSURANCE COMPANY,
OCWEN LOAN SERVICING, BANK OF NEW YORK MELLON,
ERWIN VENCER, ESQ., McCABE, WEISBERG & CONWAY,
P.C., BARBARA CAMPBELL, and MARLEN GAETHERS-LANGLEY, Defendants.

Case No. 16-12045 (JLG)
Adv. P. No. 16-01195 (JLG)

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

Filed: June 14, 2017
June 13, 2017

Chapter 13

MEMORANDUM DECISION AND ORDER RESOLVING MOTIONS TO DISMISS COMPLAINT AND CROSS-COMPLAINTS

APEARANCES:

CARLTON FIELDS JORDEN BURT, P.A.
Attorneys for Defendant American Security Insurance Company
Robert W. DiUbaldo, Esq.
405 Lexington Avenue, 36th Floor
New York, New York 10174-0002

HOUSER & ALLISON, APC
Counsel to Defendants Ocwen Loan Servicing LLC and
The Bank of New York Mellon Trust Company, National
Association FKA The Bank of New York Trust Company,
N.A., as Successor to JP Morgan Chase Bank, N.A., as Trustee
For Residential Asset Mortgage Products, Inc., Mortgage
Asset-backed Pass-Through Certificates Series 2005-RZ3
Jacqueline M. Aiello, Esq.
60 E. 42n d Street, Suite 1148
New York, New York 10165

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McCABE, WEISBERG & CONWAY, P.C.
Attorneys for Defendants McCabe Weisberg &
Conway, P.C. and Erwin Vencer
Charles A. Higgs, Esq.
145 Huguenot Street, Suite 210
New Rochelle, New York 10801

KIM DSOUZA, ESQ.
Attorney for Plaintiff Phillip Michael Scott
32 Washington Place
Newburgh, New York 12550

BARBARA CAMPBELL, PRO SE
4319A Wickham Avenue
Bronx, New York 10466

MARLENE GAETHERS-LANGLEY, PRO SE
1473 Hicks Avenue
Bronx, New York 10469

HON. JAMES L. GARRITY, JR. U.S. BANKRUPTCY JUDGE

INTRODUCTION

Philip Michael Scott, the plaintiff and chapter 13 debtor herein (the "Debtor"), is party to a Mortgage (defined below) on certain real property located in Scarsdale, New York. In 2014, Ocwen Loan Servicing LLC ("Ocwen"), as servicer for Bank of New York Mellon ("BNY"), as mortgagee, purchased an insurance policy covering the property from American Security Insurance Company ("ASIC"). On December 31, 2014, a fire destroyed the property. The Debtor contends that thereafter, ASIC paid the insurance proceeds (the "Insurance Proceeds") to Ocwen, as BNY's servicer, in full satisfaction of the underlying Note (defined below) and Mortgage, but that BNY and/or Ocwen have wrongfully failed to credit those instruments for the amounts paid and to issue a satisfaction of the Mortgage.

In this adversary proceeding, the Debtor seeks: (i) money damages against most of the named defendants based upon their alleged pre-petition breaches of common law and

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miscellaneous state and federal laws in connection with their efforts to foreclose the Mortgage, and (ii) a determination that the Note, which he did not sign, and the Mortgage, which he did, are fully and finally satisfied and, as such, the Mortgage and a related judgment of foreclosure and sale entered in 2009 against the property are null and void. He seeks relief against five of the seven defendants named in the Debtor's four-count complaint (the "Complaint"),¹ as follows: ASIC, BNY, Ocwen, Edwin Vencer, Esq. ("Vencer"), and McCabe, Weisberg & Conway, P.C. ("McCabe," and collectively with ASIC, BNY, Ocwen and Vencer, the "Defendants"). The Complaint also names Barbara Campbell ("Campbell") and Marlene Gaethers-Langley ("Gaethers-Langley," and collectively with Campbell, the "Cross-Claimants"), as defendants, although the Debtor does not seek any form of relief from either of them. Only Campbell signed the Note; both Campbell and Gaethers-Langley executed the Mortgage. Both of them filed answers to the Complaint, which contain counterclaims against the Debtor and cross-claims against the Defendants.² The Cross-Complaints mostly incorporate the allegations and claims in the Complaint.

In Counts One and Two of the Complaint, the Debtor has aggregated damage claims against ASIC, BNY and/or Ocwen predicated on alleged: (i) conversion; (ii) embezzlement; (iii) breach of contract; (iv) constructively fraudulent conveyances (under the New York Debtor and Creditor Law (the "NY DCL")); (v) violations of the New York General Business Law (New

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York's Unfair and Deceptive Trade Practices law) (the "NY GBL"); and (vi) violations of the Fair Debt Collection Practices Act (15 U.S.C. § 1692a, et seq.) (the "FDCPA"). In Count Three, he seeks money damages against Ocwen based upon Ocwen's alleged failure to credit the loan balance with the insurance proceeds, and against BNY based upon, among other things, its failure to record a satisfaction of mortgage and satisfaction of judgment as allegedly mandated by section 1921 of the New York Real Property Actions and Proceedings Law (the "NY RPAPL") and section 5020 of the New York Civil Practice Law and Rules (the "NY CPLR"). Finally, in Count Four he asserts damage claims against Vencer and McCabe under the FDCPA.

Only ASIC answered the Complaint. None of the Defendants answered the Cross-Complaints. BNY and Ocwen (collectively, the "Mortgagee Defendants") jointly moved to dismiss the Complaint and Cross-Complaints pursuant to Rule 12(b)(6)³ of the Federal Rules of Civil Procedure (the "Rules").⁴ ASIC moved for judgment on the pleadings dismissing the Complaint, pursuant to Rule 12(c), and to dismiss the Cross-Complaints pursuant to Rule 12(b)(6).⁵ By amended motion, McCabe and Vencer (collectively, the "McCabe Defendants")

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jointly moved to dismiss the Complaint for lack of subject matter jurisdiction, insufficient process, improper service, and failure to state a claim for relief pursuant to Rules 12(b)(1), (2), (4), (5) and (6), respectively. In the alternative, they ask for summary judgment dismissing the Complaint pursuant to Rule 56, as incorporated by Bankruptcy Rule 7056.⁶ The McCabe Defendants filed separate motions seeking to dismiss the Cross-Complaints on similar grounds.⁷

The Debtor, Campbell and Gaethers-Langley oppose all of the motions. The Debtor filed one objection covering the Mortgagee Defendants Motion to Dismiss Complaint, and the ASIC Rule 12(c) Motion⁸ and a separate objection to the McCabe Motion to Dismiss Complaint.⁹ Campbell and Gaethers-Langley did the same with respect to the various motions to dismiss the

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Cross-Complaints.¹⁰ In their opposition to the Mortgagee Defendants' and ASIC's motions to dismiss their Cross-Complaints, Campbell and Gaethers-Langley essentially adopted verbatim the Debtor's arguments in opposition to those Defendants' motions to dismiss the Complaint.¹¹ The Court conducted hearings on all of the motions filed in response to the Complaint and Cross-Complaints.¹² What follows is the Court's resolution of those motions.

As set forth below, the Court finds that the Debtor, Campbell and Gaethers-Langley lack standing to assert claims against the Defendants under the NY DCL. Accordingly, the Court dismisses those claims for relief in Count One of the Complaint and in Count One of each of the Campbell Cross-Complaint and Gaethers-Langley Cross-Complaint, without leave to amend, for lack of subject matter jurisdiction. The Court dismisses the balance of the claims asserted against the Defendants by Campbell and Gaethers-Langley in their Cross-Complaints, without leave to amend, for lack of subject matter jurisdiction since those claims do not fall within the

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Court's "core," "non-core related to" or supplemental jurisdiction. See 28 U.S.C. §§ 1334(b), 1367(a). Although the Court finds that it has "non-core related to" jurisdiction over the balance of the claims asserted by the Debtor against the Defendants in the Complaint (Counts One through Four), the Debtor has failed to state any claim for relief in support of those counts, and, as a matter of law, is not able to do so. Accordingly, pursuant to 28 U.S.C. § 157(c)(1), the Court recommends that each of those claims be dismissed, without leave to amend.

LEGAL STANDARD AND SCOPE OF RECORD

Rule 12(b)(6) provides in relevant part:

(b) Every defense to a claim for relief in any pleading must be asserted in the responsive pleading if one is required. But a party may assert the following defense[] by motion . . . (6) failure to state a claim upon which relief can be granted . . . .

Fed. R. Civ. P. 12(b)(6). As noted, ASIC joins the Mortgagee Defendants and the McCabe Defendants in urging the Court to dismiss the Cross-Complaints pursuant to Rule 12(b)(6). However, since it answered the Complaint, it is seeking a judgment on the pleadings dismissing the Complaint pursuant to Rule 12(c). Under that rule, "[a]fter the pleadings are closed--but early enough not to delay trial--a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). In resolving ASIC's motion under Rule 12(c), the Court will apply the same standard applicable to a motion under Rule 12(b)(6). See Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir. 2010); Johnson v. Rowley, 569 F.3d 40, 43 (2d Cir. 2009); see also Fed. R. Civ. P. 12(h)(2)(B) ("Failure to state a claim upon which relief can be granted . . . may be raised . . . by a motion under Rule 12(c).").

To survive a Rule 12(b)(6) motion to dismiss, "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, 678, 129 S. Ct. 1937, 173 L. Ed.2d 868 (2009) (quoting Bell Atlantic

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Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed.2d 929 (2007)). Courts use a two-prong approach in assessing the merits of Rule 12(b)(6) motions. See Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 717 (2d Cir. 2013) (noting that Iqbal "creates a 'two-pronged approach' . . . based on '[t]wo working principles.'" (quoting Iqbal, 556 U.S. at 678-79, 129 S. Ct. 1937)). First, the court must "accept as true all of the factual allegations set out in the plaintiff's complaint, draw inferences from those allegations in the light most favorable to plaintiff, and construe the complaint liberally."...