People v Empire Prop. Solutions, LLC

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People v Empire Prop. Solutions, LLC 2012 NY Slip Op 30346(U) January 27, 2012 Sup Ct, Nassau County Docket Number: 09-017767 Judge: Steven M. Jaeger Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. ----------------------------------------------------------------------- [* 1] C.. SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK Present: HON. STEVEN M. JAEGER Acting Supreme Court Justice PEOPLE OF THE STATE OF NEW YORK by ANDREW M. CUOMO , Attorney General of the State of New York Plaintiff TRIAL/lAS, PART 43 NASSAU COUNTY INDEX NO. : 09- 017767 MOTION SUBMISSION DATE: 12- 16- -againstEMPIRE PROPERTY SOLUTIONS , LLC , JOHN RUTIGLIANO , KENNETH KIEFER , Individually and as Members of EMPIRE PROPERTY SOLUTIONS LLC , ZORNBERG & HIRSCH , BARRY ZORNBERG and NANCY HIRSCH , Individually and as Partners of ZORNBERG & HIRSCH , CORY COVERT , BILL TSOUMPELlS , H & Z ABSTRACT , INC. , BARRY ZORNBERG and NANCI HIRSCH , Individually and as Offcers of H & Z ABSTRACT , INC. , LEONIE NEUFVILLE d/b/a NEUFVILLE MORTGAGE , PAUL HARRIS , FRANK LUSCAVAGE , AMERICAN HOME MORTGAGE SERVICING INC. , AMERICA' SERVICING CO. , AVELO MORTGAGE LLC , BANK OF AMERICA , N. , DEUTSCHE BANK NATIONAL TRUST COMPANY , GMAC MORTGAGE LLC , GOLDMAN SACHS GROUP , INC. , SELECT PORTFOLIO SERVICING INC. , U. S. BANK NATIONAL ASSOCIATION , WELLS FARGO BANK , N. , AMERICAN EXPRESS CENTURION BANK , CAPITAL ONE BANK , DEL NORTE REFI , LLC. , KAREN L KIEFER , MDC CREDIT CORP. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. , ROBERT L. PRYOR , CHAPTER 7 TRUSTEE OF THE BANKRUPTCY ESTATE OF FRANK LUSCAVAGE UNITED STATES OF AMERICA, ACTING BY AND THROUGH FARMERS HOME ADMINISTRATION UNITED STATES DEPARTMENT OF AGRICULTURE AND JOHN DOES Defendants. MOTION SEQUENCE NO. [* 2] The following papers read on this motion: Order to Show Cause with Temporary Restraining Order Affirmation , and Exhibits Plaintiffs ' Reply Memorandum of Law in Support of Motion Memorandum of Law of Defendants , Avelo Mortgage LLC and GMAC Mortgage LLC in Opposition Affirmation in Opposition Order to show cause by the plaintiff, the People of the Sate of New York for inter alia an order: (1) enjoining the defendants Empire Property Solutions , LLC, John Rutigliano , and Kenneth Kiefer et. , at. from transferring, selling, or otherwise disposing of any assets owned , possessed or controlled by them in the State of New York; and (2) staying certain mortgage foreclosures actions. In August of2011 , the People of the State of New York (" the plaintiff" commenced the within action as against inter alia Empire Property Solutions , LLC Empire ) and its principals. The verified complaint alleges that Empire engaged in a fraudulent , mortgage " foreclosure rescue scheme " in violation of Executive Law 9 63(12) and General Business Law 99349 People v. Empire Property Solutions , LLC (Supreme Court , 350 (Cmplt. Misc. 39- 72; 76- 108 see also, , 2011 WL 5901372 Nassau County, 2011J(Order of Jaeger , J. ); Cmplt. 40- , 52- 53). In sum , the plaintiff alleges that victimized homeowners were instructed to convey their homes to - and then lease them back from - so-called " straw buyers supplied by Empire. The Empire straw buyers would then submit fraudulent ," [* 3] applications for mortgage loans on which they later defaulted , thereby exposing the homeowners ' properties to loss through subsequently commenced foreclosure proceedings (Cmplt. , ~~ 39- , 43- 73). Based upon these allegations and others , the complaint: (1) interposes several causes of action grounded on Executive Law 9 63 (12) and General Business Law 99 349, 350; and (2) demands inter alia pennanent injunctive relief and a declaration rescinding and/or " voiding any transfer of title to real property " or any other agreement " that arose out of * * * the fraudulent , deceptive and ilegal" mortgage scheme (Wherefore Clause , ~~ 1- 8). Notably, among the defendants named as necessary parties to the action are various lenders , including codefendants A velo Mortgage LLC (" A velo") and GMAC Mortgage LLC (" GMAC" ). Both Avelo and GMAC obtained title to their mortgages and notes (which were already in default at the time) through assignments are now attempting to foreclose upon those mortgages and both mortgages originally made by other lenders to Empire s fraudulent straw buyers " (Cmplt. , ~~ 39- 72). Contemporaneously with the service of its summons and verified complaint the plaintiff brought on the instant application for preliminary injunctive relief coupled with a temporary restraining order. Among other things , the temporary restraining order - which the Court signed - requested relief staying certain [* 4] foreclosure proceedings commenced by the defendant- lenders , including those (see OSC 4 decretal paragraph). instituted by Avelo and GMAC In support of its motion for injunctive relief, the plaintiff contends that a stay of the A velo and GMAC foreclosure proceedings is required to avoid irreparable injury; maintain the status quo; and avoid the dissipation of property which could render any judgment for the relief sought ineffectual (CPLR 6301). More particularly, the plaintiff contends that if the foreclosure proceedings are pennitted to conclude the victim s fonner homes are acquired by third party purchasers could be irrevocably lost (e. , Masjid Usman , Inc. v. Beech 140, and the residences LLC 68 AD3d 942). The plaintiff further contends , among other things , that the underlying loan transactions were already in default when the movants received their respective assignments , and were replete with " red flag " type anomalies , including, inter alia mortgage applications containing inaccuracies; incomplete and inaccurate HUstatements; purchasers who were not residing in the homes acquired when the assignments were made (cj, HSBC Mortg. Services , Inc. v. Alphonso 58 AD3d 598, 600); and numerous instances where lender-attorneys simultaneously acted as counsel for sellers and/or purchasers (Pltffs Brief at 5- , 17- , 19- 20). Upon the papers submitted , the plaintiff has demonstrated its entitlement to the . injunctive relief sought. [* 5] More specifically, the evidentiary record before the Court depicts in detail , the manner in which the alleged mortgage rescue scheme was perpetrated in violation of statutory proscriptions and establishes both a likelihood of success on the merits and a balancing of the equities in the Ass People 79 AD3d 1015; see also , Masjid Usman , Inc. v. v. (see plaintiffs favor Property Solutions , Beech 140, v. , Thomas Lasalle Bank Nat. LLC, supra 2011 WL 5901372 LLC, supra 68 AD3d 94). The evidence further supports the plaintiff s assertions that if the is not maintained status quo through the granting of provisional relief, the victims of the scheme could sustain irreparable harm through the foreclosure sale and irrevocable loss of the homes to third parties. Although the defendant- lenders Avelo and GMAC contend that they themselves have they not been accused of violating the statute , the two homes encumbered by their mortgages were titled in the names of the accused wrongdoers who acquired the deeds through false pretenses and/or an allegedly fraudulent scheme plainly violative of inter alia Executive Law 9 63(12J). It is settled that " (a) deed ab initio and a mortgage based on forgery or obtained by false pretenses is void based on such a deed is likewise invalid" Mayala 87 AD3d 691 Nat. Ass v. AD3d 740 , 742; GMAC Mtge. Corp. (Cruz 692; v. Cruz First Nat. Bank of Nevada Chan 56 AD3d 521 see , Us. Bank 37 AD3d 754 v. see generally, Marden Williams [* 6] 160 NY 39 Dorthy, Jean 77 AD3d 919 v. Wargo , 49 (1899); Home Loan Services , Inc. v. Arango 72 AD3d 915 v. People AD3d 519; Property Solutions , National City 921; v. Johnson 916; Melnikoff 65 LLC , supra 2011 WL 5901372). Further mortgagee is under a duty to make an inquiry where it is aware of facts that would lead a reasonable , prudent lender to make inquiries of the circumstances of the transaction at issue , and one who does not do so " is not a bona fide encumbrancer for value Assn. v. (JP Morgan Chase Bank Ally, see 39 AD3d 597 Munoz, 85 AD3d 1124 LaSalle Bank N. A. , Thomas Bresnick 76 AD3d 1009 1017; Stracham Williams , supra; HSBC Mortg. Services , 1010; , Inc. v. LaSalle Bank Natl. , 1126; supra 79 AD3d 1015 First Nat. Bank ofNevadav. Alphonso, supra 58 AD3d 598 600). Lastly, while the Court agrees that the plaintiff has made an adequate showing of irreparable injury, nevertheless " (t)raditional concepts of irreparable damage which (State of New York apply to private parties do not govern this public interest field" 1987J). This is Terry Buick 137 Misc. 2d 290 , 296 (Supreme Court , Dutchess County because " (t)he irreparable injury to be enjoined is an injury to the public not be focused upon an individual to be actionable supra see also Court , Spitzer , New York County 2003) NY 368 383 (1938); v. Lev Misc.3d. , which need Terry Buick (State of New York , 2003 WL 21649444 , at 2 (Supreme see generally, People ex Incorporated Vi!. of Plan dome Manor re!. Bennett Laman , 277 Ioannou 54 AD3d [* 7] Brookhaven Aggregates 364; State of New York Clark 90 AD2d 500 Supp. 2d 311 319 (S. 501 cJ, F.T.C v. 121 AD2d 440 442; Town of Islip Crescent Pub. Group, Inc. , supra, 129 Y. 2001J). The Court has considered the defendants ' remaining contentions and concludes that they are lacking in merit. Accordingly, it is ORDERED that the order to show cause by the People of the Sate of New York for a preliminary injunction is granted , and it is further ORDERED that the directives contained in the restraining order signed by the Court upon the initial submission of the plaintiff s motion on September 1 , 2011 shall be continued pending the conclusion of the action or until further order of this Court. The foregoing constitutes the Decision and Dated: January 27 2012 ENTERED JAN 3 1 2012 "ASSAU COUNTY S OFfICE COUNTY CLERK'

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