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Mark P. Galayda and v. Wachovia Mortgage

December 22, 2010


The opinion of the court was delivered by: Wolfson, United States District Judge:



Presently before the Court are motions by Defendants Wachovia Mortgage, FSB ("Wachovia"), Market Yard Mortgage ("Market Yard"), Craig Frankel ("Frankel"), and Giant Title Agency ("Giant Title") (collectively referred to as "Defendants") for judgment on the pleadings pursuant to Fed .R. Civ. P. 12(c).*fn1 Defendants seek to dismiss Plaintiffs Mark P. Galayda and Jacqueline A. Santone-Galayda's (collectively referred to as "Plaintiffs") fifteen-count Complaint stemming from a home mortgage transaction between Plaintiffs and Defendants. Each Defendant asserts the same basis for seeking judgment on all counts; specifically, Defendants argue that Plaintiffs have failed to state any claims for which relief may be granted. For reasons that follow, the Court will dismiss Plaintiffs' claims against all Defendants.

I. Factual Background

Plaintiffs were the owners of the residential property located at 212 Stuart Street, Howell, New Jersey 07731, Block 144, Lot 23.02. Compl. ¶ 1. At some point in 2007, Plaintiffs determined to subdivide their property into two parcels, build a new house on the new parcel and sell their old house. Certification of Jacqueline A Galayda ("Galayda Cert.") ¶ 3. In April 2007, Plaintiffs were approved for and executed a construction loan for the 212 Stuart Street property. Id. ¶ 5. Thereafter, in early 2008, Plaintiffs met with Craig Frankel, a broker for Market Yard, about "getting out of the construction loan" and refinancing their existing home mortgage loan. Galayda Cert. Id. ¶ 7. In addition, Plaintiffs allege that they advised Frankel that they needed funds to complete construction on the 212 Stuart Street property as well as additional funds to help with the monthly mortgage payments. Id. ¶ 8. Based on preliminary information provided by Plaintiffs, and prior to the performance of any appraisals, Market Yard issued preliminary disclosures to Plaintiffs. Frankel Aff. ¶ 3. According to the Galaydas, Frankel advised Plaintiffs that they could expect to receive $30,000 to $40,000 from the refinancing. Galayda Cert., ¶ 9.

Subsequently, Frankel obtained a lender for Plaintiffs, Wachovia, and in March 2008, Plaintiffs applied to Wachovia to refinance their mortgage. Id. ¶ 14; Frankel Aff. ¶ 4. Plaintiffs certified that all of the information provided in connection with the loan application was true and correct. Certification of Kellie A. Lavery in Support of Wachovia's Motion for Judgment on the Pleadings ("Lavery Cert."), Ex. A. Moreover, Plaintiffs acknowledged that they were provided with all of the requisite disclosures in connection with the loan application. Lavery Cert., Ex. B. Specifically, Plaintiff Mark Galayda acknowledged that he received information pertaining to the 3 Year Fixed Rate Pick-A-Payment Loan and Deferred Interest Acknowledgment which describe the features of the Loan that Plaintiffs were considering. Lavery Cert., Exs. C, J.

On March 20, 2008, Wachovia issued a Commitment Letter to Plaintiffs which provided that Plaintiff was approved for a "3 Year Fixed Rate Pick-a-Payment Loan" in the amount of $455,000 with an initial interest rate of 7.550%. Lavery Cert., Ex. D; Compl. ¶ 17. Moreover, the Letter provided that the loan was a "modified interest rate" loan and that the interest would be adjusted on a monthly basis beginning on the due date of the 36th regularly scheduled payment. Lavery Cert., Ex. D.

Plaintiffs decided to pursue the refinance with Wachovia. Lavery Cert., Ex. H. Sometime prior to closing, Plaintiffs allege that they discovered that they were only to receive about $8,000 from the refinancing with Wachovia. Galayda Cert. ¶ 11. Because this was less than they expected, Plaintiffs allege that Frankel promised that he would secure an additional loan from Sun Bank to enable Plaintiffs to complete construction on their property. Galayda Cert. ¶ 12.

Plaintiffs closed on the adjustable rate mortgage loan with Wachovia on March 27, 2008. Lavery Cert., Ex. H. Giant Title provided the title insurance for the transaction. Compl. ¶ 5. At the closing, Plaintiffs were provided with all of the disclosures required by law. Lavery Cert., Exs. E, F, G. Indeed, each of the Plaintiffs signed the Truth-in-Lending Disclosure Statement and each of the Plaintiffs acknowledged their receipt of two copies of the Notice of Right to Cancel. Lavery Cert., Exs. F, G. Moreover, Plaintiff Mark Galayda chose an initial monthly payment of $1,980.19 and acknowledged that his initial monthly payment would be $3,154.58 with $1,980.10 applied to the mortgage, and $1,174.39 to be deposited in an escrow account for taxes and insurance. Lavery Cert., Exs. L & M. In addition, Plaintiff Mark Galayda executed a Note to secure the sum of $455,000 to Wachovia Mortgage; the loan was secured by a Mortgage on the Plaintiffs' property. Lavery Cert., Exs. H,I.

Shortly thereafter, Plaintiffs discovered that the additional loan from Sun Bank that Frankel promised had been denied. Galayda Cert. ¶ 15. As a result, Frankel himself offered Plaintiffs $15,000 out of his own funds which they could use for their construction costs. Galayda Cert. ¶¶ 17,18; Frankel Aff. ¶¶ 9, 12. In exchange for accepting the $15,000 from Frankel, on May 22, 2008, Plaintiffs executed a General Release Form releasing Market Yard and Frankel from any liability concerning the 212 Stuart Street property. Frankel Aff., Ex. A; Galayda Cert., ¶¶ 18-21.

Sometime thereafter, Plaintiffs defaulted on the loan with Wachovia by failing to make payments due under the terms of the mortgage. As a result, Wachovia filed a foreclosure action against Plaintiffs on December 28, 2009 in state court. Wachovia's Br. at 3. Subsequently, on January 6, 2010, Plaintiffs filed the instant Complaint against Wachovia, Market Yard, Frankel and others in the Superior Court of New Jersey, Monmouth County, Law Division. The Complaint sets forth 15 different causes of action including: violations of the federal Truth-in-Lending Act ("TILA); violations of the New Jersey Consumer Fraud Act ("NJCFA"); violations of the New Jersey Racketeer Influenced and Corrupt Organization (NJ RICO) statutes; common-law fraud; unconscionability; negligent supervision; unjust enrichment; violations of the federal Real Estate Settlement Practices Act ("RESPA"); respondeat superior liability; breach of fiduciary duty; breach of the duty of good faith and fair dealing; violations of the New Jersey Law Against Discrimination ("NJ LAD" or "LAD"); violations of the New Jersey Home Ownership Security Act ("NJ HOSA" or "HOSA"); and violations of the federal Home Ownership and Equity Protection Act ("HOEPA").

At the outset, the Court is compelled to note the blunderbuss nature of Plaintiffs' Complaint. Indeed, a thorough review of the Complaint suggests that Plaintiffs pieced together the instant Complaint from complaints filed in other matters. For example, the Court notes that not only did Plaintiffs include causes of action that have seemingly nothing to do with the substance of their dispute with Defendants including, for example, a claim under the NJ LAD, but a number of Plaintiffs' allegations have nothing to do with the facts as they relate to the transaction between the Plaintiffs and these Defendants. See, e.g., Compl. ¶ 35 ("The defendants, plaintiff, John Does and ABC Corporations knew or should have known that plaintiffs lacked the legal capacity to enter into this mortgage loan contract."). Moreover, a large number of the allegations refer to the unspecified actions of unspecified John Doe and ABC Corp. Defendants. See, e.g., Compl. ¶¶ 34, 36, 43. These types of allegations are entirely irrelevant and singularly unhelpful to the Court's review, let alone entirely non-compliant with the Supreme Court's pleading standards.

That said, the Court understands, in relevant part, that Plaintiffs allege that the mortgage Plaintiffs received had "higher interest rates and/or other terms that differed from what they were promised" and that Defendants failed to make proper disclosures under TILA and HOEPA. Compl. ¶¶ 9, 14-16, 20, 23-26. Moreover, Plaintiffs allege that Frankel incorporated "certain falsehoods" into the loan application "including inflation of income and intentionally failing to verify third-party plaintiff income; misstated and/or manipulated data to hide the actual cost of credit; and concealed the fact that it was a 'high cost' loan that required additional disclosures that were never made." Id. ¶ 13.*fn2 In addition, Plaintiffs allege that Defendants "made fraudulent representations about the terms of the loan to plaintiffs to induce them to refinance the mortgage on their house." Id. ¶ 31.

Wachovia filed a Notice of Removal on February 24, 2010 and removed this matter to the United States District Court for the District of New Jersey. Wachovia answered the Complaint on March 17, 2010 and filed a Motion for Judgment on the Pleadings on April 19, 2010. Giant Title answered the Complaint on March 24, 2010 and filed a Motion for Judgment on the Pleadings on April 22, 2010. Market Yard answered the Complaint on April 20, 2010 and filed a Motion for Judgment on the Pleadings on May 7, 2010.*fn3

By letter Order dated October 5, 2010, the Court advised Market Yard, Frankel, Giant Title and Plaintiffs, that, in light of the extraneous factual material filed in their motions as well as in Plaintiffs' response to these motions, the Court would consider Market Yard, Frankel and Giant Title's motions for judgment on the pleadings as those for summary judgment pursuant to Fed. R. Civ. P. 12(d). The Court provided the parties ten days to submit additional material pertinent to the summary judgment motions. No additional material was received.

II. Standards

i. Motion for Judgment on the Pleadings

The standard that a court applies on a motion for judgment on the pleadings pursuant to Rule 12(c) is the same standard that a court applies in deciding a motion to dismiss pursuant to Rule 12(b)(6). Turbe v. Government of Virgin Islands, 938 F.2d 427 (3d Cir.1991); see also Spruill v. Gillis, 372 F.3d 218, 223 n. 2 (3d Cir.2004). When reviewing a motion to dismiss, courts "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008) (citation and quotations omitted). In Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (2007), the Supreme Court clarified the 12(b)(6) standard. Specifically, the Court "retired" the language contained in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 561 (quoting Conley, 355 U.S. at 45-46). Instead, the factual allegations set forth in a complaint "must be enough to raise a right to relief above the speculative level." Id. at 555. As the Third Circuit has stated, "[t]he Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating . . . a claim requires a complaint with enough factual matter (taken as true) to suggest 'the required element. This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of 'the necessary element'." Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556).

In affirming that Twombly standards apply to all motions to dismiss, the Supreme Court recently explained the following principles. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949 (2009); Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir.2009). "Second, only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 1950. The plausibility standard requires that "the plaintiff plead[ ] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged" and demands "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 129 S.Ct. At 1949 (quoting Twombly, 550 U.S. at 556). Ultimately, "a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Fowler, 578 F.3d at 211. In evaluating a motion to dismiss, a court may consider only the complaint, exhibits attached to the complaint, matters of public record, and undisputedly authentic documents if the complainant's claims are based upon these documents. Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Importantly, "a court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document. Otherwise, a plaintiff with a legally deficient claim could survive a motion to dismiss simply by failing to attach a dispositive document on which it relied." Id. (emphasis added). Accordingly, the Court has considered the documents that form the basis of Plaintiffs' Complaint and that were attached to the Lavery Certification in support of Wachovia's Motion for Judgment on the Pleadings.

ii. Summary Judgment

"Summary judgment is proper if there is no genuine issue of material fact and if, viewing the facts in the light most favorable to the non-moving party, the moving party is entitled to judgment as a matter of law." Pearson v. Component Tech. Corp., 247 F.3d 471, 482 n. 1 (3d Cir. 2001) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)); accord Fed. R. Civ. P. 56(c). For an issue to be genuine, there must be "a sufficient evidentiary basis on which a reasonable jury could find for the non-moving party." Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether a genuine issue of material fact exists, the court must view the facts and all reasonable inferences drawn from those facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Curley v. Klem, 298 F.3d 271, 276-77 (3d Cir. 2002). For a fact to be material, it must have the ability to "affect the outcome of the suit under governing law." Kaucher, 455 F.3d at 423. Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment.

Initially, the moving party has the burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 323. Once the moving party has met this burden, the nonmoving party must identify, by affidavits or otherwise, specific facts showing that there is a genuine issue for trial. Id.; Monroe v. Beard, 536 F.3d 198, 206-07 (3d Cir. 2008). Thus, to withstand a properly supported motion for summary judgment, the nonmoving party must identify specific facts and affirmative evidence that contradict those offered by the moving party. Anderson, 477 U.S. at 256-57. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to material facts." Id. at 206 (quoting Matsushita, 475 U.S. at 586). Moreover, the non-moving party must present "more than a scintilla of evidence showing that there is a genuine issue for trial." Woloszyn v. County of Lawrence, 396 F.3d 314, 319 (3d Cir. 2005). Indeed, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp., 477 U.S. at 322.

Moreover, in deciding the merits of a party's motion for summary judgment, the court's role is not to evaluate the evidence and decide the truth of the matter, but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. A non-moving party cannot defeat summary judgment simply by asserting that certain evidence submitted by ...

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