Yeiser v. Gmac Mortg. Corp.

• Decision Date: 18 February 2008
• Docket Number: No. 06 Civ. 13466(WCC).,06 Civ. 13466(WCC).
• Citation: 535 F.Supp.2d 413
• Parties: Avis P. YEISER and Jerome Yeiser, Plaintiffs, v. GMAC MORTGAGE CORPORATION, GRP Financial Services Corp., Mortgage Electronic Registration Systems, Inc. and Option One Mortgage Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

535 F.Supp.2d 413

Avis P. YEISER and Jerome Yeiser, Plaintiffs, v. GMAC MORTGAGE CORPORATION, GRP Financial Services Corp., Mortgage Electronic Registration Systems, Inc. and Option One Mortgage Corporation, Defendants.

No. 06 Civ. 13466(WCC).

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

February 18, 2008.

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Stephen A. Katz, P.C., New York, NY (Stephen A. Katz, of Counsel), for Plaintiffs.

Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, LLP, New York, NY (Stan L. Goldberg, Son K. Le, of Counsel), for Defendants GMAC Mortgage LLC and Mortgage Electronic Registration Systems, Inc.

Eschen, Frenkel & Weisman, LLP, Bay Shore, NY (Joseph F. Battista, of Counsel), for Defendant GRP Financial Services Corp.

Fein, Such, Kahn & Shepard, P.C., Chestnut Ridge, NY (Gregg P. Tabakin, of Counsel), for Defendant Option One Mortgage Corporation.

OPINION AND ORDER

CONNER, Senior District Judge.

Plaintiffs, Avis P. Yeiser and Jerome Yeiser, ("plaintiffs") filed this action claiming violations of the Real Estate Settlement Procedures Act ("RESPA") 12 U.S.C. §§ 2605(e), 2605(g); N.Y. GEN. Bus. LAW § 349; N.Y. BANKING LAW § 595-a; fraud; intentional infliction of emotional distress; conversion; conspiracy to commit conversion; breach of contract; breach of implied covenant of good faith and fair dealing and breach of fiduciary duty. Defendants GMAC Mortgage, LLC ("GMAC"), Mortgage Electronic Registration Systems, Inc. ("MERS") and GRP Financial Services Corp. ("GRP") move to dismiss the Complaint on the grounds that it is precluded by res judicata and collateral estoppel based on a prior judgment of foreclosure in New York State court. Defendant Option One Mortgage Corporation ("Option One") joins this motion and separately moves for summary judgment, on the same grounds. For all the reasons that follow, defendants' motions are granted.

BACKGROUND

Plaintiffs purchased property at 10 Manhattan Avenue, New Rochelle, N.Y. with a $427,500 mortgage loan. (Complt.¶ 9.) Plaintiffs executed a mortgage in favor of ME RS as nominee for MortgageIt, Inc. ("MortgageIt"). (Tabakin Aff. ¶ 3, Ex. A.) In November 2003, the mortgage loan was transferred to Option One who serviced it until May 2004 when it was transferred to GMAC. (Complt.¶¶ 10, 23.) GMAC transferred the mortgage loan to GRP in May 2005. (Id. ¶¶ 11, 23.) The note provides that the loan accrues interest at a fixed rate of 5.75%, repayable over thirty years by means of a $2,494.77 monthly principal-and-interest payment. (Id. ¶ 21.) Initially, plaintiffs' monthly payment including escrow amounts for taxes, insurance premiums and other expenses was $3,343.17.¹ (Id. ¶ 22.)

When GMAC purchased the loan from Option One, plaintiffs' monthly payment increased to $4,560.04. (Id. ¶ 26.) A Housing and Urban Development ("HUD") employee told plaintiffs that Option One had miscalculated the payment causing GMAC to bill them at the increased amount. (Id. ¶ 28.) According to plaintiff, because the note provides for a fixed interest rate and a fixed monthly payment of principal-and-interest, the increase in the monthly payment charged by GMAC was a result of an increase in the escrow amount. (Id. ¶¶ 29-31.) The original escrow payment was $848.40 (the $3,343.17 total monthly payment less the principal-and-interest of $2,494.77). The escrow payment charged by GMAC was $2,065.27 (the new $4,560.04 total monthly payment less the principal-and-interest of $2,494.77). (Id. ¶¶ 34-35.) Plaintiffs contend that "it is impossible" that taxes, insurance premiums or other expenses covered by the escrow payment increased to that extent in one year. (Id. ¶ 37.)

Plaintiff Avis Yeiser requested that GMAC explain the increase in the monthly payment but states that GMAC did not return her phone calls or respond to her certified letter dated July 17, 2004. (Id. ¶ 39.) Plaintiffs had not missed a monthly payment until May 2004, when they did not pay the May, June and July payments for the stated reason that GMAC refused to explain the increase. (Id. ¶¶ 40-42.) On July 23, 2004, MERS, the holder of the note and mortgage, commenced foreclosure proceedings in the Supreme Court of the State of New York, Westchester County. (Complt. 1143; Tabakin Aff. ¶ 5, Ex. B.) Plaintiffs were served, and filed an answer on September 1, 2004 denying they were in default. (Tabakin Aff. ¶ 6, Ex. C.) Plaintiffs stated they had not defaulted on their mortgage because: they "wrote (certified return receipt) letters to GMAC upon transfer of [the] loan from Option One Bank requesting in writing why or [sic] mortgage payment increased drastically" they "were never informed why payment went up when taxes had been decreased by $2,500, insurance was paid in full for the calendar year and PMI was to stop in August 2004"; GMAC did not return their phone calls or respond to their letter; and GMAC "rejected [their] check of almost $14,000." (Id., Ex. C.)

Plaintiffs sent GMAC a check for $13,859.89 dated August 5, 2004, which GMAC returned uncashed with a letter stating that the "funds do not represent the full amount due to reinstate your account at this time" because additional fees and costs were incurred, and directed plaintiffs to contact the named attorney for the reinstatement amounts. (Complt. ¶¶ 44-45; Pis. Mem. Opp. Defs. Mots. Dismiss & Summ. J., Exs. E & F.) Plaintiffs contend that the amount tendered was enough to pay all arrears and costs and therefore MERS should have discontinued the foreclosure proceedings in accord with paragraph 19 of the contract.² (Complt. ¶¶ 46-47.)

Plaintiffs could not find an attorney to represent them until 2006 and therefore proceeded with the foreclosure action pro se. (Id. ¶¶ 48-49.) MERS filed a motion for an order striking plaintiffs answer and entering summary judgment for MERS, and on December 29, 2004 the motion was granted. (Tabakin Aff. ¶ 7, Ex. D.) However, in January 2005 plaintiffs participated in settlement conferences with MERS authorized by Justice Louis A. Barone of Westchester County Supreme Court. (Complt.¶ 51.) Plaintiffs contend that MERS could not justify the increased payments at the conferences and upon prompting by Justice Barone the parties reached an oral agreement to settle. (Id. ¶¶ 53-57.) Plaintiffs understood that under the agreement they would resume payments at $3,243.33 per month and MERS would discharge the missed payments with a balloon payment at the end of the repayment period. (Id. ¶ 58-59.) According to plaintiffs, in December 2005 Justice Barone retired and MERS moved for judgment of foreclosure and sale. (Id. ¶ 61.) Defendants contend that the parties never agreed to settle. (Tabakin Aff. ¶ 8.)

Judgment of foreclosure and sale was entered on January 4, 2006, adopting and ratifying the court-appointed referee's report determining the amount due on the mortgage. (Complt. ¶ 64; Tabakin Aff, Ex. E.) Plaintiffs, through their attorney, filed a notice of appeal of the judgment on February 21, 2006. (Tabakin Aff. ¶ 11). MERS scheduled a foreclosure sale for February 22, 2006 which was cancelled pursuant to plaintiffs' Order to Show Cause, which temporarily stayed the sale. (Id. ¶ 12.) The motion to vacate the foreclosure judgment was denied by the state court on May 24, 2006 and the stay was lifted. (Id., Ex. F.)

Plaintiffs raised the same arguments in the motion to vacate that they now assert in their Complaint. In the opinion, the court stated that it brought the parties in for a conference and directed MERS to address the. RE SPA issue by explaining the mortgage increase and to advise plain tiffs of the total arrears and expenses due. (Id., Ex. F at 5.) The court could not settle the matter in conference and the parties submitted additional motion papers. (Id.) The court then denied plaintiffs' request to present their defenses because there was no reasonable excuse for their default. (Id., Ex. F at 7.) The court also noted that plaintiffs did not pay GMAC the old monthly mortgage amount, did not put the payment amounts in an escrow account or deliver them to the court, did not pay yearly taxes on the property in 2004 and 2005, and did not attempt to refinance their home. (Id., Ex. F at 9-10.) Additionally, the court did not find that Justice Barone determined that the foreclosure procedure was unjust (although plaintiffs claimed he did), because Justice Barone did not vacate his own order granting summary judgment or place a stipulation of Settlement on the record. (Id., Ex. F at 10.) Finally the court noted that plaintiffs' allegations of fraud were not supported by any case law nor established on the record at bar. (Id., Ex. F at 11.)

In July 2006, plaintiffs, through their attorney, filed a Notice of Appeal of the order denying the motion to vacate. (Tabakin Aff. ¶ 15, Ex. G.) Plaintiffs again asserted that their default was due to the unexplained increase in their monthly mortgage payments, that they sent payment of all arrears, which should have stopped the foreclosure, and that there was an oral agreement to settle among the parties. (Id., Ex. G.) Plaintiffs requested an extension to consolidate the appeals of the foreclosure judgment and the May 2006 order which was granted by the court in August 2006. (Id. ¶¶ 16-17, Ex. G.)

MERS scheduled a foreclosure sale for September 13, 2006 but plaintiffs filed another Order to Show Cause seeking stay of the sale on September 12, 2006, alleging they were about to refinance their loan. (Id. ¶ 18.) The Order to Show Cause was denied by the court on October 3, 2006. (Id., Ex. H.) In September 2006 the court granted plaintiffs another extension of time. (Id. ¶ 20, Ex. I.) The foreclosure sale was rescheduled for November 30, 2006, and this time the court denied plaintiffs Order to Show Cause to stay the sale because it was rendered moot when plaintiffs filed a bankruptcy petition. (Id. ¶ 21, Ex. J.) On November 4, 2006, plaintiffs filed a letter with...