U.S. Bank Trust, N.A. v. Gross

• Decision Date: 14 June 2017
• Docket Number: 6:16-cv-06640-EAW.
• Parties: U.S. BANK TRUST, N.A., as Trustee FOR LSF9 MASTER PARTICIPATION TRUST, Plaintiff, v. Richard R. GROSS, Sr., and Debbie D. Gross, Defendants.
• Court: U.S. District Court — Western District of New York

255 F.Supp.3d 427

U.S. BANK TRUST, N.A., as Trustee FOR LSF9 MASTER PARTICIPATION TRUST, Plaintiff,

v.Richard R. GROSS, Sr., and Debbie D. Gross, Defendants.

6:16-cv-06640-EAW.

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

Signed June 14, 2017

Amy E. Polowy, Gross Polowy LLC, Williamsville, NY, Stephen John Vargas, Gross Polowy, LLC, Westbury, NY, for Plaintiff.

DECISION AND ORDER

ELIZABETH A. WOLFORD, United States District Judge

INTRODUCTION

Plaintiff U.S. Bank Trust, N.A. ("Plaintiff") commenced this action on September 20, 2016, pursuant to Article 13 of the New York Real Property Actions and Proceedings Law ("RPAPL"), to foreclose a mortgage encumbering 401 Washington Avenue, Rochester, New York 14617, together with the land, buildings, and other improvements located on the property ("the Property"). (Dkt. 1 at ¶ 1). Defendants Richard R. Gross, Sr. and Debbie D. Gross (collectively, "Defendants") were served on October 7, 2016 (Dkt. 10–3), but have failed to answer the complaint or otherwise appear in this action. On November 4, 2016, the Clerk of Court entered a default against Defendants. (Dkt. 7).

Plaintiff now moves for a default judgment and for foreclosure and sale of the Property. (Dkt. 9). A copy of the instant motion was served upon Defendants by mail on January 23, 2017. (Dkt. 11).

For the reasons set forth below, the action is dismissed without prejudice for lack of subject matter jurisdiction, and the motion is denied.

BACKGROUND

On or about May 10, 2005, Defendant Richard executed and delivered a note, promising to pay $103,455.00, plus interest, on the unpaid amount due ("the Note"). (Dkt. 1 at ¶ 9). Defendants then executed and delivered a mortgage on the Property in the amount of $103,455.00 ("the Mortgage"). (Id. at ¶ 10). The Mortgage and the Note were subsequently assigned to Plaintiff. (Id. at ¶ 11). Defendants failed to make the payment due on October 1, 2010, and all payments thereafter. (Id. at ¶ 12).

Plaintiff alleges that a principal balance of $95,650.20, with 5.785% interest accruing from September 1, 2010, is owed by Defendants. (Id. at ¶ 13). Plaintiff further contends that Defendants also owe "late charges, monies advanced for taxes, assessments, insurance maintenance, and preservation of the Property, and the costs, allowances, expenses of sale, and reasonable attorney's fees for the foreclosure." (Id. ). Plaintiff also claims that it has complied with the notice provisions of the Mortgage and RPAPL § 1304, and that it has satisfied the filing requirements of RPAPL § 1306. (Id. at ¶ 15).

According to Plaintiff's affidavits of service, the summons and complaint, together with a certificate of merit, a debt validation letter, an RPAPL § 1303 notice, and an RPAPL § 1320 were served upon Defendants on October 7, 2016. (Dkt. 10–3). Although Defendant's answers were due on October 28, 2016 (Dkt. 5), Defendants failed to answer the complaint or otherwise appear in this action. On November 3, 2016, Plaintiff requested that the Clerk of Court enter a default against Defendants pursuant to Federal Rule of Civil Procedure 55(a). (Dkt. 6). The Clerk entered a default on November 4, 2016. (Dkt. 7).

On January 23, 2017, Plaintiff filed the instant motion. (Dkt. 9). Plaintiff also requests that the Court appoint a referee to oversee the sale of the Property and the disbursement of proceeds. (Dkt. 10 at 4). Plaintiff has served the motion. (Dkt. 11).

On January 27, 2017, the Court issued a scheduling order requiring Defendants to file any responsive papers to Plaintiff's motion by February 16, 2017. (Dkt. 12). The Court also ordered Plaintiff to serve Defendants with a copy of the scheduling order and Plaintiff's motion papers by February 2, 2017. (Id. ). Although Plaintiffs served the scheduling order on January 31, 2017 (Dkt. 13), to date, Defendants have not responded or appeared.

LEGAL STANDARD

I. Subject Matter Jurisdiction

"Dismissal of a case for lack of subject matter jurisdiction ... is proper ‘when the district court lacks the statutory or constitutional power to adjudicate it.’ " Ford v. D.C. 37 Union Local 1549, 579 F.3d 187, 188 (2d Cir. 2009) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). "Federal courts have a duty to inquire into their subject matter jurisdiction sua sponte, even when the parties do not contest the issue." D'Amico Dry Ltd. v. Primera Mar. (Hellas) Ltd., 756 F.3d 151, 161 (2d Cir. 2014). "A plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists." Fountain v. Karim, 838 F.3d 129, 134 (2d Cir. 2016) (internal quotations and citation omitted). "If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fed. R. Civ. P. 12(h)(3).

II. Default Judgment

Rule 55 of the Federal Rules of Civil Procedure provides a two-step process for obtaining a default judgment. The first step is to obtain an entry of default. ... The next step requires the plaintiff to seek a judgment by default under Rule 55(b). Rule 55(b)(1) allows the clerk to enter a default judgment if the plaintiff's claim is for a sum certain and the defendant has failed to appear. In all other cases Rule 55(b)(2) governs. It requires a party seeking a judgment by default to apply to the court for entry of a default judgment.

Priestley v. Headminder, Inc., 647 F.3d 497, 504–05 (2d Cir. 2011). "The Rule ‘tracks the ancient common law axiom that a default is an admission of all well-pleaded allegations against the defaulting party.’ " Pillar v. Takhar Grp. Collection Servs., Ltd., No. 12 Civ 355A (SR), 2012 WL 6209755, at *1 (W.D.N.Y. Nov. 21, 2012) (quoting Vt. Teddy Bear Co. v. 1–800 Beargram Co., 373 F.3d 241, 246 (2d Cir. 2004) ), report and recommendation adopted, No. 12 Civ 355A, 2012 WL 6209114 (W.D.N.Y. Dec. 13, 2012). However, "[t]he entry of a default, while establishing liability, ‘is not an admission of damages.’ " N.Y.C. v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 128 (2d Cir. 2011) (quoting 15 Finkel v. Romanowicz, 577 F.3d 79, 83 n.6 (2d Cir. 2009) ).

DISCUSSION

It bears mentioning that Plaintiff's attorney, Gross Polowy, LLC, has been frequently cited for failing to follow the requirements attendant to securing default judgments in other foreclosure cases in the Northern District of New York. See, e.g., U.S. Bank Trust, N.A. v. Monroe, No. 15 CV 1480 (LEK)(DJS), 2017 WL 923326, at *3 (N.D.N.Y. Mar. 8, 2017) ; U.S. Bank Trust, N.A. v. Dupre, No. 15 Civ 0558 (LEK)(TWD), 2016 WL 5107123, at *2 (N.D.N.Y. Sept. 20, 2016) ; Nationstar Mortg. LLC v. Pignataro, No. 15 Civ 1041 (LEK)(DJS), 2016 WL 3647876, at *2 (N.D.N.Y. July 1, 2016). Gross Polowy's routine errors appear to demonstrate a pattern of indifference toward the substance of their filings.

In the past year, U.S. Bank's attorneys—Gross Polowy—have repeatedly failed to secure default judgments in similar foreclosure cases before this Court. In each case, Gross Polowy's motion was denied for one of two reasons: either the complaint failed to sufficiently allege subject matter jurisdiction, or the motion for default judgment failed to meet the requirements of the [Northern District of New York's] Local Rules.

Monroe, No. 15 CV 1480 (LEK)(DJS), 2017 WL 923326, at *3 (citations omitted). This Court has also recently ruled against Plaintiff's attorney for the failure to adhere to the procedural requirements of pursuing a judgment of foreclosure and sale. See Decision and Order, Nationstar Mortg. LLC v. Atanas, et al., 6:16–CV–06832–EAW (W.D.N.Y. May 23, 2017), ECF No. 13 (denying the motion for default judgment because Plaintiff failed to file the complaint along with the notice of pendency that was filed with the county clerk's office). Here, Plaintiff has failed to sufficiently allege facts establishing subject matter jurisdiction, and has failed to follow the proper procedures for seeking a judgment of foreclosure and sale in New York State.

I. Absence of Subject Matter Jurisdiction

Plaintiff alleges that subject matter jurisdiction exists under a theory of diversity jurisdiction (Dkt. 1 at 2), which requires complete diversity of citizenship between the opposing parties. See Xerox Corp. v. W. Coast Litho, Inc., No. 16 Civ 06032 (EAW), 251 F.Supp.3d 534, 538–39, 2017 WL 1831682, at *4 (W.D.N.Y. Apr. 25, 2017). Pursuant to 28 U.S.C. § 1348, "[a]ll national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively located." The United States Supreme Court has held that "a national bank, for § 1348 purposes, is a citizen of the State in which its main office, as set forth in its articles of association, is located." Wachovia Bank v. Schmidt, 546 U.S. 303, 307, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). The Second Circuit has since limited a national bank's citizenship to that criterion, explicitly declining to permit the establishment of citizenship through a national bank association's "principal place of business." OneWest Bank, N.A. v. Melina, 827 F.3d 214, 219 (2d Cir. 2016). Thus, it is the law of this Circuit that " ‘[a] national bank is a citizen only of the state in which its main office is located, and not the state in which its principal place of business is located, if that state differs from the location of its main office.’ " Zink v. First Niagara Bank, N.A., 155 F.Supp.3d 297, 306 n.3 (W.D.N.Y. 2016) (quoting Excelsior Funds, Inc. v. JP Morgan Chase Bank, N.A., 470 F.Supp.2d 312, 312 (S.D.N.Y. 2006) ).

Here, Plaintiff has neither submitted its articles of incorporation, nor has it made any reference to them or the location of its main office presumably delineated therein. Plaintiff has only alleged diversity jurisdiction insofar as its principal place of business is located in Coppell, Texas. (Dkt. 1 at ¶ 2). Such an assertion is insufficient to properly allege subject matter jurisdiction. Accordingly, the complaint...