16‐1765‐cv Green Tree Servicing, LLC v. Nicholas Christodoulakis, et al.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 28th day of April, two thousand seventeen.

PRESENT: GUIDO CALABRESI, DENNY CHIN, RAYMOND J. LOHIER, JR., Circuit Judges. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

GREEN TREE SERVICING, LLC, Plaintiff‐Appellee,

v. 16‐1765‐cv

NICHOLAS CHRISTODOULAKIS, ALEXANDRA CHRISTODOULAKIS, Defendants‐Appellants,

OLGA CHRISTODOULAKIS,

Defendant.

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

FOR PLAINTIFF‐APPELLEE: MICHAEL J. SIRIS, Solomon & Siris, P.C., Garden City, New York. FOR DEFENDANTS‐APPELLANTS: JAMES F. MISIANO, James F. Misiano, P.C., Hauppauge, New York.

Appeal from the United States District Court for the Eastern District of

New York (Feuerstein, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is VACATED IN

PART, and the case is REMANDED with instructions.

Defendants‐appellants Nicholas Christodoulakis (ʺNicholasʺ) and

Alexandra Christodoulakis (ʺAlexandra,ʺ and together with Nicholas, the ʺParentsʺ)

appeal a May 4, 2016 judgment awarding $336,154.26 to plaintiff‐appellee Green Tree

Servicing, LLC (ʺGreen Treeʺ). The judgment was entered pursuant to opinions and

orders dated September 29, 2015 and April 18, 2016. We assume the partiesʹ familiarity

with the underlying facts, procedural history, and issues on appeal.

This case arises from a series of transactions involving a parcel of real

property in Brooklyn, New York. Husband and wife Nicholas and Alexandra acquired

the property in 1981 and mortgaged it in 2003 to obtain a $300,000 loan (the ʺ2003

Mortgageʺ). Countrywide serviced the 2003 Mortgage. On April 10, 2008, the Parents

deeded the property to themselves and their daughter, Olga Christodoulakis (ʺOlgaʺ),

as tenants in common. That deed was recorded on May 9, 2008.

2 Soon thereafter, the Parents and Olga engaged in a transaction that left

Olga as the sole owner of the property (the ʺ2008 Transactionʺ). At the closing, the

Parents conveyed their interest in the property to Olga by deed dated May 22, 2008. In

exchange, Olga mortgaged the property (the ʺ2008 Mortgageʺ) for a $385,000 loan from

BankUnited FSB (the ʺNoteʺ) and transferred $295,298.38 of the loan proceeds to

Countrywide in satisfaction of the 2003 Mortgage. The satisfaction of the 2003

Mortgage was recorded on July 2, 2008, but neither the May 22, 2008 deed nor the 2008

Mortgage was recorded at that time.

Although the exact chain of ownership is not clear from the record, the

parties agree that the Federal National Mortgage Association (ʺFannie Maeʺ) came to

own the Note and 2008 Mortgage. On April 1, 2009, Fannie Mae designated Green Tree

as ʺservicerʺ of the loan and, pursuant to a ʺLimited Power of Attorney,ʺ granted Green

Tree the ʺfull power and authority . . . to do and perform all and every act and thing

requisite, necessary, and proper toʺ secure ʺthe full satisfaction . . . of a mortgage.ʺ App.

312.

The failure to record the 2008 Mortgage proved significant because, in

2013, Olga decided to sell the property for $354,000 (the ʺ2013 Transactionʺ) and her

buyersʹ title search revealed only the April 10, 2008 deed indicating that Olga owned the

property with her Parents as tenants in common. Therefore, Nicholas, Alexandra, and

Olga all signed a deed dated March 8, 2013, conveying the property to the buyers. On

3 March 8, 2013, the buyers issued a $260,182.41 check payable to Nicholas and Olga,

which they deposited with an escrow agent. On March 13, 2013, the escrow agent

issued a $106,511.03 check to Nicholas and Alexandra, which they deposited in their

bank account. Olga retained the remaining proceeds from the 2013 Transaction.

The March 8, 2013 deed and the buyersʹ $283,200 mortgage were recorded

on March 28, 2013. The 2008 Mortgage was not recorded until May 28, 2013, more than

five years after it was originated. Olga subsequently defaulted on the Note.

Green Tree commenced this action against Olga, Nicholas, and Alexandra

on March 31, 2014, asserting, inter alia, claims of breach of contract, fraud, and unjust

enrichment. On May 23, 2014, Olga, Nicholas, and Alexandra filed an answer,

asserting, inter alia, certain affirmative defenses challenging Green Treeʹs ʺstandingʺ to

sue under the Note and 2008 Mortgage. App. 21. At an initial pretrial conference on

July 23, 2014, Green Tree provided an affidavit from a foreclosure supervisor affirming

that the Note ʺwas physically delivered, surrendered, and conveyed to [Green Tree],

along with all right, title and interest in and thereto.ʺ App. 32. Accordingly, the district

court struck defendantsʹ aforementioned affirmative defenses. On November 10, 2014,

defendants moved to dismiss the complaint for failure to state a claim and Green Tree

filed a motion for summary judgment. Defendants also moved to vacate the order

striking their affirmative defenses on January 23, 2015.

4 On September 29, 2015, the district court, inter alia, denied the motion to

dismiss the unjust enrichment claim against the Parents and granted Green Treeʹs

motion for summary judgment. The district court held that Green Tree could enforce

the terms of the Note as a ʺholderʺ under N.Y. U.C.C. § 3‐301 and that Olga breached

her obligations by failing to make full payment of the Note within thirty days of the

2013 Transaction. As to the Parents, the district court held as a matter of law that they

were unjustly enriched in the amount of $295,298.38 by virtue of the 2013 Transaction

because they ʺtook advantage of the failure to record the [May 22, 2008 deed] and 2008

Mortgage by surreptitiously conveying the subject premises to the [buyers] free and

clear of the 2003 Mortgage and pocketing the proceeds therefrom.ʺ App. 343. In other

words, the district court held that because Green Treeʹs ʺpredecessor or assignor

satisfied Nicholasʹs and Alexandraʹs 2003 Mortgage under the reasonable, but mistaken,

assumption that the [May 22, 2008 deed] and 2008 Mortgage would be promptly

recorded, equity and good conscience require restitutionʺ in the amount noted. App.

344.

The parties filed motions to reconsider the ruling. Green Tree argued that

it was entitled to prejudgment interest on the $295,298.38 award and the Parents argued

that the district court overlooked facts showing that Green Tree lacked standing to sue

them and they were not unjustly enriched. By opinion and order dated April 18, 2016,

the district court awarded Green Tree prejudgment interest on the $295,298.38 award

5 running from March 8, 2013, and denied the Parentsʹ motion on the merits. Green Tree

dropped its remaining claims against Olga on April 29, 2016 and on May 4, 2014, the

district court entered a final judgment against the Parents in the amount noted. The

Parents appealed.

We review the district courtʹs denial of the Parentsʹ motion to dismiss the

complaint for failure to state a claim de novo. See Wurtz v. Rawlings Co.,

(2d Cir. 2014). We assume the complaintʹs factual allegations are true and taken

together they must state a plausible claim for relief to survive a motion to dismiss under

Federal Rule of Civil Procedure 12(b)(6). Bell Atl. Corp. v. Twombly,

, 569‐70

(2007).

Similarly, we review de novo a district courtʹs grant of summary judgment.

Garcia v. Hartford Police Depʹt,

(2d Cir. 2013) (per curiam). Summary

judgment must be granted if ʺthere is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.ʺ Fed. R. Civ. P. 56(a).

On appeal, the Parents argue that Green Treeʹs rights as a mere ʺholderʺ of

the Note are circumscribed by New York law and the Limited Power of Attorney such

that Green Tree lacks ʺstandingʺ to bring an unjust enrichment claim against them.

They also argue that the district court erred in granting summary judgment in favor of

Green Tree on that claim. We discuss each issue in turn.

6 1. Standing

The Parentsʹ argument that Green Tree lacks ʺstandingʺ to sue them for

unjust enrichment is unavailing. They cite no legal authority for their argument that

New York law ʺprovides a holder with no other rights against the Note obligor (beyond

enforcement of the Note), and surely confers upon the holder no other rights under any

theory to sue any third parties who are not obligors.ʺ Appellantsʹ Br. at 34 (emphasis

omitted). To the contrary, under New York law, ʺthere is precedent for allowing a

noteholder to maintain an unjust enrichment claim . . . where loan proceeds are

wrongfully transferred to a non‐contracting party, against whom a breach of contract

claim does not lie.ʺ Taberna Preferred Funding II, Ltd. v. Advance Realty Grp. LLC, No.

652884/2013,

, at *13 (Sup. Ct. N.Y. Cty. Oct. 3, 2014); see also N.Y.

U.C.C. § 3‐201 (providing that, subject to exceptions inapplicable here, the ʺ[t]ransfer of

an instrument vests in the transferee such rights as the transferor has thereinʺ); U.S.

Bank N.A. v. Denisco,

(4th Depʹt 2012) (ʺIt is well settled that an

assignee steps into the shoes of its assignor and may pursue the same remedies as

would have been available to the assignor.ʺ (internal quotation marks and citations

omitted)).1 The Parentsʹ arguments based on the Limited Power of Attorney fare no

better. That document granted Green Tree the ʺfull power and authority . . . to do and

1 The partiesʹ briefs assume that New York law governs this case ʺand such implied consent is, of course, sufficient to establish the applicable choice of law.ʺ Arch Ins. Co. v. Precision Stone, Inc.,

(2d Cir. 2009) (quoting Golden Pac. Bancorp v. FDIC,

, 514 n.4 (2d Cir. 2001)).

7 perform all and every act and thing requisite, necessary, and proper toʺ secure ʺthe full

satisfactionʺ of the 2008 Mortgage, App. 312, and such language is sufficiently broad to

cover actions against third parties to recover amounts owed under the Note. See Perosi

v. LiGreci,

(2d Depʹt 2012) (a power of attorney is construed

according to ordinary principles of contract interpretation and ʺ[g]enerally, the scope of

a power of attorney is limited only by the boundaries of the principal‐agency

relationshipʺ); Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.A.R.L.,

(1st Depʹt 2016) (holding that an indenture providing that ʺthe Trustee may pursue

any available remedy to collect the payment of principal, premium, if any, and interest

on [a note] . . . confers standing on the Trustee to pursue, not only . . . breach of contract

claims, but alsoʺ ʺcauses of action for . . . unjust enrichmentʺ against third parties).

Therefore, the district court correctly concluded that Green Tree has standing to pursue

the unjust enrichment claim against the Parents and thus did not err in striking the

Parentsʹ affirmative defenses in that regard.

2. Unjust Enrichment

The Parents argue that the district court erred in granting summary

judgment on Green Treeʹs unjust enrichment claim because (1) they received no benefit

at Green Treeʹs expense, and (2) if they did, the amount is limited to $106,511.03, not the

$295,298.38 awarded by the district court.

8 ʺTo prevail on a claim for unjust enrichment in New York, a plaintiff must

establish 1) that the defendant benefitted; 2) at the plaintiffʹs expense; and 3) that ʹequity

and good conscienceʹ require restitution.ʺ Kaye v. Grossman,

(2d Cir.

2000) (quoting Dolmetta v. Uintah Natʹl Corp.,

, 20 (2d Cir. 1983)). ʺThe theory

of unjust enrichment lies as a quasi‐contract claim.ʺ Goldman v. Metro. Life Ins. Co.,

(2005). ʺIt is an obligation the law creates in the absence of any agreement.ʺ

(emphasis added). Accordingly, ʺ[t]he existence of a valid and enforceable . . .

contract governing a particular subject matter ordinarily precludes recovery in quasi

contract for events arising out of the same subject matter.ʺ Clark‐Fitzpatrick, Inc. v. Long

Island R.R. Co.,

, 388‐89 (1987) (ʺBriefly stated, a quasi‐contractual

obligation is one imposed by law where there has been no agreement or expression of

assent, by word or act, on the part of either party involved.ʺ (emphasis omitted)).

The district court held that the Parents ʺwere clearly unjustly enriched in

2008, insofar as they received a benefit, i.e., satisfaction of their 2003 mortgage, without

giving plaintiff, or its predecessor or assignor, anything in return, since only Olga

executed the 2008 Mortgage and Note.ʺ App. 342 (citations omitted). This was error.

The 2008 Transaction, in effect, constituted two contractual agreements, the existence of

which precludes Green Treeʹs recovery of the $295,298.38 in loan proceeds on a theory

of unjust enrichment. See Beth Israel Med. Ctr. v. Horizon Blue Cross & Blue Shield of N.J.,

Inc.,

, 587 (2d Cir. 2006) (ʺClark‐Fitzpatrick precludes unjust enrichment

9 claims whenever there is a valid and enforceable contract governing a particular subject

matter, whether that contract is written, oral, or implied‐in‐fact.ʺ). In the first contract,

the Parents conveyed their entire interest in the property to Olga in exchange for

$295,298.38, which was applied to satisfy the 2003 Mortgage. In a separate written

contract, BankUnited FSB lent $385,000 to Olga in exchange for her promise to repay

that amount (plus interest) under the terms of the Note and the 2008 Mortgage. Olga

directed $295,298.38 of the loan proceeds to Countrywide in satisfaction of her Parentsʹ

mortgage, and received the property clear of the 2003 Mortgage. The Parents were

relieved of their obligations under the 2003 Mortgage, but ‐‐ as far as any claims

between Olga and them ‐‐ they gave up their interest in the property to her. In other

words, both contracts were supported by adequate consideration and thus the Parents

were not unjustly enriched at that time. Accordingly, the district court erred in

concluding that the Parents were unjustly enriched by $295,298.38 and its award of that

amount must be vacated.

Nevertheless, we conclude that the Parents were unjustly enriched by the

2013 Transaction. There, with knowledge (1) that they had already given up their

interest in the property to Olga (in return for $295,298.38), and (2) that payments were

still due under the Note, the Parents ‐‐ taking advantage of the failure to record the 2008

Mortgage ‐‐ participated in Olgaʹs sale of the property by signing the March 8, 2013

deed. Shortly thereafter, on March 11, 2013, they received a $106,511.03 check from

10 Olgaʹs escrow agent. Therefore, because the Parents concede that they ʺhad no interest

in the sale proceeds,ʺ Appellantsʹ Br. at 47, we conclude that the Parents were unjustly

enriched by $106,511.03 and that equity and good conscience require restitution in that

amount, with prejudgment interest to accrue from March 8, 2013.

We have reviewed the Parentsʹ remaining arguments and conclude they

are without merit. Accordingly, the judgment of the district court is VACATED IN

PART, and the case is REMANDED with instructions to enter judgment against the

Parents in the amount of $106,511.03, with prejudgment interest to accrue from March 8,

2013.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

11