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Bank of New York Mellon v. Lezdey

United States District Court, D. Massachusetts

September 10, 2014

THE BANK OF NEW YORK MELLON Plaintiff,
v.
NOREEN
v.
LEZDEY, JAMIE HOLDING CO., LLC, WORLD-PHARM TRUST, and the UNITED STATES OF AMERICA, Defendants.

MEMORANDUM AND ORDER

MARK L. WOLF, District Judge.

I. BACKGROUND

This case was originally brought by plaintiff Bank of New York Mellon ("BNY Mellon") in Barnstable County Land Court against Noreen Lezdey ("Lezdey"), Jamie Holding Company LLC ("Jamie Holding Company"), World-Pharm Trust ("World-Pharm"), and the Internal Revenue Service ("IRS").

The Complaint alleges the following. In October 1991, defendant Noreen Lezdey and her late husband, John Lezdey, acquired title to property in Eastham, Massachusetts. In January 2001, they transferred title to their limited liability company, defendant Jamie Holding Company, for nominal consideration. In early 2004, the Lezdeys sought to take out a mortgage on the property. Because the mortgage application specified that title would be held by Noreen alone, title was transferred back from Jamie Holding Company to Noreen for nominal consideration, and the quitclaim deed was recorded on June 10, 2004. On July 13, 2004, Noreen granted a mortgage on the property to Mortgage Electronic Registration Systems, Inc., as nominee for Full Spectrum Lending, Inc. However, the Complaint alleges that before the mortgage was recorded on July 26, 2004, Noreen improperly transferred the property back to Jamie Holding Company for nominal consideration, and that Jamie Holding Company recorded this transfer on July 21, 2004. The plaintiff alleges that this transfer created an imperfection in the title. See Compl. ¶¶ 6-14. The current owner of the property is defendant World-Pharm, of which defendant Lezdey's family members are trustees. See Compl. ¶ 4. BNY Mellon is the current assignee of the mortgage. See Compl. ¶ 20.

The plaintiff wishes to foreclose on defendant Lezdey's property, but it claims that due to the imperfection created by Lezdey's transfer of the property between the mortgage's execution and recording, it is necessary to reform the mortgage under Massachusetts law to reflect the parties' intent that BNY Mellon's mortgage be the primary lien on the property, superior to any interest in the property claimed by the defendants. Furthermore, after the mortgage was recorded, the IRS, which is also a defendant named as the United States of America, recorded federal income tax liens due to Noreen Lezdey's failure to pay income taxes. In the Complaint, BNY Mellon seeks a declaratory judgment that its mortgage interest is superior to any interest held by the defendants, see Compl. ¶ 24, and also seeks to quiet title to the property, pursuant to Mass. Gen. Laws ch. 240, § 6, see Compl. ¶ 27.

All of the defendants, including the IRS, removed the case to the United States District Court for the District of Massachusetts in May 2013 on the basis of diversity jurisdiction. See Notice of Removal. The case was originally assigned to Judge Joseph L. Tauro, who recused himself on August 1, 2013 because of a potential conflict of interest. See Aug. 1, 2013 Order. The IRS also filed a cross-claim against the other defendants, claiming that federal tax liens should attach to the property. See United States' Answer & Cross-Claim at 8.

On March 24, 2014, the court denied defendants Lezdey, Jamie Holding Company, and World-Pharm's motion for a preliminary injunction against Bank of America, the current servicer of the mortgage. See Mar. 24, 2014 Memo. & Order at 7. Crediting the representations of Bank of America's counsel that the company would make no attempts to interfere with the mortgaged property pending the resolution of this case, the court concluded that these defendants had not demonstrated that any irreparable harm would occur absent a preliminary injunction. See id. at 6.

Defendants Lezdey, Jamie Holding Company, and World-Pharm have also filed motions to dismiss against both BNY Mellon and defendant/cross-claimant IRS. These motions fail to certify that these defendants have conferred with the other parties as required by Rule 7.1(a)(2) of the Local Rules of the United States District Court for the District of Massachusetts (the "Local Rules"). Moreover, both motions were signed and submitted by Jarett Lezdey, who purports to represent World-Pharm and Jamie Holding Company in his capacity as a trustee and manager for those entities, respectively. See Mot. to Dismiss at 18; Mot. to Dismiss Cross Claim at 11. Because Jarett Lezdey is not an attorney, he is not permitted to represent these defendants, who must retain counsel. See Local Rule 83.5.3(c).

Despite these deficiencies, however, the court is denying these motions to dismiss on the merits.

II. STANDARD OF REVIEW

Although neither motion to dismiss identifies the Federal Rule of Civil Procedure under which dismissal would be merited, the court infers that the applicable rule is Rule 12(b)(6), which permits dismissal of a claim for "failure to state a claim upon which relief can be granted."

In considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, the court must "take all factual allegations as true and... draw all reasonable inferences in favor of the plaintiff." Rodriguez-Ortiz v. Margo Caribe, Inc. , 490 F.3d 92, 96 (1st Cir. 2007); see also Maldonado v. Fontanes , 568 F.3d 263, 266 (1st Cir. 2009). The court must "neither weigh[] the evidence nor rule[] on the merits because the issue is not whether the plaintiffs will ultimately prevail, but whether they are entitled to offer evidence to support their claims." Day v. Fallon Cmty. Health Plan, Inc. , 917 F.Supp. 72, 75 (D. Mass. 1996). A motion to dismiss should be denied if a plaintiff has shown "a plausible entitlement to relief." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 559 (2007); see also Rodriguez-Ortiz , 490 F.3d at 95-96 (applying the Bell Atlantic standard to a claim under the Private Securities Litigation Reform Act); Morales-Tanon v. Puerto Rico Elec. Power Auth. , 524 F.3d 15, 18 (1st Cir. 2008) (applying the Bell Atlantic standard to a claim under 42 U.S.C. § 1983).

Federal Rule of Civil Procedure 8(a)(2) requires that a complaint include a "short and plain statement of the claim showing that the pleader is entitled to relief." This pleading standard does not require "detailed factual allegations, " but does require "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. , 550 U.S. at 555. A court may disregard "bald assertions, unsupportable conclusions, and opprobrious epithets." In re Citigroup, Inc. , 535 F.3d 45, 52 (1st Cir. 2008). "To survive a 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 , 129 S.Ct. 1937, 1949 (2009) (emphasis added). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id . (quoting Bell Atl. , 550 U.S. at 557).

Ordinarily, a court will not consider documents outside of the pleadings in a motion to dismiss. See Rivera v. Centro Medico de Turabo, Inc. , 575 F.3d 10, 15 (1st Cir. 2009); Watterson v. Page , 987 F.2d 1, 3 (1st Cir. 1993). From this rule, the First Circuit makes a "narrow exception for documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiff's claim; or for documents sufficiently referred to in the complaint." Watterson , 987 F.2d at 3-4; see also Beddal v. State St. Bank & Trust, Co. , 137 F.3d 12, 16-17 (1st Cir. 1998) (when "a complaint's factual allegations are expressly linked to - and admittedly dependent upon - a document (the authenticity of which is not challenged) that document effectively merges into the pleadings and the trial court can review it in deciding a motion to dismiss under Rule 12(b)(6)").

III. MOTION TO DISMISS

Defendants Lezdey, Jamie Holding Company, and World-Pharm advance six arguments in support of their motion to dismiss the Complaint filed by BNY Mellon. First, these defendants argue that because the Complaint was signed and verified by Patricia Wirick, a representative of nonparty Bank of America, it is facially deficient. Second, they argue that an earlier foreclosure attempt by BNY Mellon bars the instant suit. Third, the defendants argue that because BNY Mellon "did not file this reformation on a timely basis, " the defendants have been prejudiced and the doctrine of laches should bar the complaint. Mot. to Dismiss at 3. Fourth, the defendants argue that the fault for any deficiency in the mortgage lies with BNY Mellon's predecessors, not with the defendants. Fifth, they argue that the mortgage is facially deficient because it does not contain payment information and, therefore, is a nullity. Sixth, they argue that BNY Mellon has "unclean hands" because it "planned a Joint Statement meeting and failed to notify Lezdey of the date and time until the last minute." Id. at 11. For the reasons explained below, none of these arguments is meritorious. Therefore, the motion to dismiss is being denied.

A. Verification by Patricia Wirick

The defendants first note that the complaint has been verified by Patricia Wirick, an assistant vice president at Bank of America, the current servicer of the mortgage on the property at issue. The defendants state that Wirick "does not claim any first-hand knowledge of any transaction concerning the subject mortgage" and that Bank of America has "no authority to verify the complaint." Mot. to Dismiss at 1. Accordingly, they argue that Wirick's verification "makes the Complaint deficient upon its face and makes the complaint incompetent, irrelevant and immaterial." Id. at 3.

The defendants offer no authority for this argument. In any event, the First Circuit has recognized that mortgage servicers are often involved in bringing claims on behalf of lenders. See In re Nosek , 609 F.3d 6, 7 n.2 (1st Cir. 2010) ("Suits by servicers acting on behalf of holders are commonplace."). Furthermore, the defendants have not identified any provision of Massachusetts or federal law that requires verification of this complaint.[1] ...


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