Tanasi v. CitiMortgage, Inc.
| Decision Date | 30 June 2017 |
| Docket Number | No. 3:16-CV-00727 (VAB).,3:16-CV-00727 (VAB). |
| Citation | 257 F.Supp.3d 232 |
| Parties | Richard TANASI and Athansula Tanasi, Plaintiffs, v. CITIMORTGAGE, INC. et al., Defendants. |
| Court | U.S. District Court — District of Connecticut |
Jeffrey S Gentes, Suzann L. Beckett, Beckett Law, LLC, David Faber Lavery, Hartford, CT, for Plaintiffs.
Donald E. Frechette, Tara Lynn Trifon, Locke Lord LLP, Hartford, CT, for Defendants.
RULING ON DEFENDANTS' MOTION TO DISMISS THE FIRST AMENDED COMPLAINT
III. Standard of Review...249
IV. Discussion...250
I. Introduction
Richard and Athansula Tanasi ("the Tanasis") bring this action against CitiMortgage, Inc. ("CitiMortgage"), which serviced a mortgage on their home, and M & T Bank Corporation ("M & T"), the successor by merger to Hudson City Savings Bank ("Hudson"), which owned the mortgage. The Tanasis allege that both Defendants violated the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. 2601 et seq. , and its implementing regulations, specifically Regulation X Mortgage Servicing Final Rule, 78 F.R. 10695 (February 14, 2013), 12 CFR § 1024 ("Regulation X"). They also allege that Defendants breached a duty of care owed to them under those regulations and a related consent decree. Finally, they allege that Defendants violated the Connecticut Unfair Trade Practices Act ("CUTPA").
Defendants move to dismiss all three causes of action. Defendants first argue that this Court lacks jurisdiction over the Tanasis' claims because of the Rooker – Feldman doctrine and res judicata. Defendants further argue that the Tanasis fail to state claims upon which relief can be granted.
The Court concludes that jurisdiction is permissible under Rooker – Feldman , but agrees with Defendants that most of the Tanasis' claims are barred by res judicata and cannot be asserted here. For the remaining claims, it reviews Defendants' motion to dismiss under Rule 12(b)(6), and concludes that the Tanasis' remaining RESPA, CUTPA, and negligence claims cannot be dismissed. Accordingly, Defendants' motion to dismiss is GRANTED in part and DENIED in part.
Specifically, regarding Claim One, the Court must dismiss under res judicata the claims that Defendants violated RESPA and Regulation X by failing to acknowledge or properly review loss mitigation applications (Compl., ¶¶ 71–81). This includes claims that arise under Regulation X's 12 C.F.R. § 1024.41. It also must dismiss under Rule 12(b)(6) the Tanasis' claims under Section 2605(e) of RESPA relating to qualified written requests that did not pertain to "servicing" and therefore were not actionable under the statute. While Count One is not dismissed, because the Tanasis' claims under Regulation X's 12 C.F.R. § 1024.36 and 1024.35 remain, the Court notes the limitations on their damages relating to these claims. The Court dismisses any of the Tanasis' claims for RESPA damages relating to "costs related to stripping the Property of equity," "unnecessary costs of maintaining the Property due to delayed foreclosure," and the creation of a "public record of foreclosure." See Compl. ¶¶ 61–65. It also dismisses the Tanasis claims for compensatory damages for costs relating to the preparation of requests for information, because these costs would have been incurred regardless of CitiMortgage's alleged violations.
In Claim Two, the Court dismisses under res judicata the Tanasis' claims concerning Defendants' negligent processing of their loss mitigation and mortgage modification applications. Because some of the negligence claim arises out of other acts, the Court does not dismiss Claim Two in its entirety.
There are many components to Claim Three, in which the Tanasis allege violations of CUTPA. Of these, the claim that CitiMortgage violated CUTPA by unfairly applying its existing loss mitigation policies, see Compl. at ¶ 149(d), is dismissed under res judicata.
II. Factual Allegations
In 2007, Richard Tanasi and Athansula Tanasi ("the Tanasis") bought a piece of property at 27 Briarwood Drive in Old Saybrook, Connecticut (the "Property"). First Amended Complaint ("Compl."), ECF No. 18, ¶ 4. The Property was encumbered by a first-position mortgage loan in the principal amount of $656,250, dated August 2, 2007, which was given as security for a promissory note of the same date and recorded on August 6, 2007. Id. at ¶ 12. The original underwriter sold or otherwise transferred the mortgage to Wachovia Savings Bank and CitiMortgage purchased the mortgage shortly afterwards.
Id. CitiMortgage then sold the mortgage to Hudson on or about November 27, 2007, but continued to service the mortgage. Id. at ¶ 12. Hudson later merged with Defendant M & T Bank. Id. at ¶¶ 5. Both CitiMortgage and M & T Bank are corporations organized under the laws of New York. Id. at ¶¶ 2–3.
In 2010, the Tanasis fell behind on their mortgage payments. CitiMortgage initiated a foreclosure action in 2011 and foreclosed on the Property on March 7, 2016. See CitiMortgage's Mot., Exhibit C, ECF No. 26–4, Docket ("Foreclosure Docket"). Before and during the foreclosure process, the Tanasis communicated with CitiMortgage about their mortgage. These communications—as well as the reach of consumer-protection statutes, the relative duties of state and federal courts, and the tension between the finality of judgments and the promise of full relief—are at the heart of this case.
The Tanasis missed their first mortgage payment on or about July 1, 2010, and did not make any payments after that date. CitiMortgage's Mot., Exhibit D, ECF No. 26–5, CitiMortgage's Motion to Terminate Mediation Stay, MMX–cv–11–6005630–S (Middlesex Superior Court), 2.1 They allege, however, that CitiMortgage solicited them for loss mitigation on their mortgage as early as June 2009. Compl. ¶ 14. The Tanasis applied for a mortgage modification in response to one of these solicitations, a letter they received from CitiMortgage on June 17, 2009. Id. CitiMortgage denied their application on November 27, 2009. Id. at ¶ 15. On December 1, 2009, CitiMortgage followed up with another letter, which stated that the Tanasis' income exceeded the allowable amount under the Home Affordable Modification Program ("HAMP") and that the Tanasis had insufficient credit for modification. Id. The Tanasis applied for loss mitigation two more times before CitiMortgage commenced a foreclosure action, allegedly at "CitiMortgage's request." Id. CitiMortgage denied these applications on October 6, 2010 and November 14, 2010. Id.
CitiMortgage filed a foreclosure action in Connecticut Superior Court (the "Foreclosure Action") on July 18, 2011. See Compl. ¶ 18; Foreclosure Docket, p. 1. Shortly thereafter, the Tanasis filed a request to participate in the court's foreclosure mediation program, which was granted on August 28, 2011. See Foreclosure Docket, 102.00. The parties met in "numerous mediation sessions" between October 26, 2011 and December 4, 2012. CitiMortgage's Motion to Terminate Mediation Stay, 4.
On December 27, 2012, CitiMortgage moved to terminate the mediation efforts. Id. The Tanasis did not object to this motion and the Superior Court granted it on January 4, 2013. Id. On November 11, 2013, the Tanasis filed an answer and special defense to the Foreclosure Action, admitting that they had signed the Note and Mortgage, but denying the "authenticity of, and authority to make, each signature on the Note." CitiMortgage's Mot., Ex. E, ECF No. 26–6, Mem. of Decision on Mot. for Summ. J., MMX–cv–11–6005630–S (Middlesex Superior Court).
On July 10, 2014, CitiMortgage moved for summary judgment in the foreclosure case. See Foreclosure Docket, 138.00. The Superior Court granted this motion on October 10, 2014. See CitiMortgage's Mot., Ex. E, Mem. of Decision on Mot. for Summ. J. On July 23, 2015, the Tanasis moved to dismiss the foreclosure action, contesting CitiMortgage's standing to commence the foreclosure action and arguing that it "fraudulently invoked the rebuttable presumption of ownership." Foreclosure Docket, 149.00. This motion was denied. Id. at 149.10. On March 7, 2016, the Superior Court granted CitiMortgage a judgment of strict foreclosure and found that the outstanding debt under the Note and Mortgage was $960,871.75. See CitiMortgage's Mot., Ex. H, ECF No. 26–9, Notice of Judgment of Strict Foreclosure. In March of 2016, before the extinguishment of their right of...
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