Commercial Lender, LLC v. DeVivo

UNITED STATES DISTRICT COURT CFLILEERDK

EASTERN DISTRICT OF NEW YORK

4:26 pm, Dec 18, 2023

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U.S. DISTRICT COURT

COMMERCIAL LENDER, LLC, EASTERN DISTRICT OF NEW YORK

LONG ISLAND OFFICE

Plaintiff, MEMORANDUM &

ORDER

CV 22-6443 (GRB)(AYS)

-against-

DANIELLE M. DeVIVO, GEORGE GOURNELOS,

MORTGAGE ELECTRONIC REGISTRATION

SYSTEMS, INC., solely as nominee for EMBRACE

HOME LOANS, INC., JOSEPH MARASCIA,

Individually and as Executor of the Estate of Jeanette

Marascia, JOHN MARASCIA, A GOOD DEED, LLC,

and THOMAS LAROUNIS as escrow agent,

Defendants.

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GARY R. BROWN, United States District Judge:

Presently before the Court is a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) by

defendants Danielle DeVivo, George Gournelos, and Federal Home Loan Mortgage Corporation

as the proper party in interest and the holder of the mortgage previously held by Mortgage

Electronic Registration Systems, Inc., solely as nominee for Embrace Home Loans, Inc.

(“defendants”).1 Docket Entry (“DE”) 60. For the reasons stated herein, that motion is

GRANTED.

Background

The following allegations are drawn from the amended complaint and taken as true solely

for the purposes of deciding this motion.

In May 2020, John and Joseph Marascia inherited their mother’s house, located at 40

LaRue Drive in Huntington, NY 11743 (the “premises”). Amended Complaint, DE 34 ¶ 2, 16-

1 The claims against all other defendants in this case are unaffected by this order.

19. At that time, OneWest Bank was pursuing a foreclosure action against the premises based on

unpaid mortgage obligations. Id. ¶ 14-15. John and Joseph Marascia entered an agreement with

plaintiff Commercial Lender, LLC to secure a new loan that was intended to pay off the

OneWest mortgage, prevent the foreclosure, and permit the Marascias to sell the premises. Id. ¶

23-25. The brothers represented that title to the premises had been transferred to A Good Deed,

LLC, of which John Marascia was the sole member; plaintiff agreed to provide the loan in

exchange for A Good Deed granting a mortgage on the property. Id. ¶ 22-24. Although plaintiff

released $534,750 of the loan proceeds on October 14, 2021, which were used to satisfy the

OneWest mortgage, plaintiff discovered that the deed to A Good Deed “was never signed or

recorded.” Id. ¶ 22, 25. After the disbursement, “Joseph [Marascia], acting individually and as

Executor of the Estate, fraudulently refused to sign the October 14, 2021, deed to A Good Deed,

LLC in order to unjustly enrich the Estate, himself and John [Marascia] and thereby rendered

fraudulent John’s October 14, 2021, representation of title in A Good Deed.” Id. ¶ 26.

In March 2022, Joseph, who still held title to the premises, sold the property to

defendants Danielle DeVivo and George Gournelos, who received their own mortgage from

defendant MERS acting as nominee for Embrace Home Loans in the amount of $628,000. Id.

¶ 4, 29-30. None of the proceeds from this sale were paid to plaintiff. Id. ¶ 32. Defendants

“DeVivo and Gournelos had actual and/or constructive notice of the October 14, 2021, unsigned

deed, and the intended conveyance of title [to A Good Deed] that it memorialized” because the

initial land sale contract listed A Good Deed as the owner of the premises; despite this,

defendants DeVivo and Gournelos proceeded with the purchase directly from the Marascias,

without the involvement of A Good Deed. Id. ¶ 36. Defendants’ mortgage was recorded on May

17, 2022. Id. ¶ 33. Plaintiff’s mortgage was recorded on June 30, 2022. Id. ¶ 40.

Plaintiff filed suit in this Court on October 24, 2022, asserting numerous claims against

various defendants, including fraud and unjust enrichment against John and Joseph Marascia.

Against Danielle DeVivo, George Gournelos, and Mortgage Electronic Registration Systems,

Inc., solely as nominee for Embrace Home Loans, Inc.,2 plaintiff brings claims for quiet title

under Article 15 of the New York Real Property Actions and Proceedings Law (“RPAPL”),

equitable subrogation, equitable lien, and constructive trust. On May 23, 2023, defendants filed

the instant motion to dismiss, DE 60, and supporting memorandum, DE 60-2. Plaintiff filed a

memorandum in opposition, DE 61-14, and defendants filed a reply in further support, DE 62-1.

Discussion

Standard of Review

Motions to dismiss are decided under the well-established standard of review for such

matters, as discussed in Burris v. Nassau County District Attorney, No. 14-5540 (JFB) (GRB),

2017 WL 9485714, at *3-4 (E.D.N.Y. Jan. 12, 2017), adopted by 2017 WL 1187709 (E.D.N.Y.

Mar. 29, 2017), and incorporated by reference herein. The gravamen of that standard, of course,

is the question of whether, assuming the allegations of the complaint to be true solely for the

purposes of the motion, the complaint sets forth factual material to render the claims plausible.

See id.

Quiet Title

Plaintiff’s first claim is for quiet title to the premises under RPAPL Article 15. In such

an action, “the plaintiff need only plead its claim to an estate or interest in land and defendant's

adverse claim.” W. 14th St. Comm. Corp. v. 5 W. 14th Owners Corp., 815 F.2d 188, 196 (2d Cir.

1987). A party without any interest in the subject property is unable to bring a quiet title action.

2 Embrace Home Loans, Inc.’s mortgage was subsequently acquired by Federal Home Loan Mortgage Corporation,

which is recognized as the proper party in interest. See DE 61 ¶ 1.

See, e.g., Soscia v. Soscia, 35 A.D.3d 841, 843 (2d Dep’t 2006). This holds true even if the party

received an instrument purporting to transfer a property interest that is acknowledged to be

legally ineffective. See Riley v. Rivers, No. 15-CV-5022 (RLM), 2016 WL 11263672, at *6

(E.D.N.Y. Sept. 19, 2016), report and recommendation adopted, No. 15-CV-5022 (DLI)(RLM),

2017 WL 1093193 (E.D.N.Y. Mar. 23, 2017), aff’d, 710 F. App’x 503 (2d Cir. 2018) (dismissing

quiet title action because “plaintiff fails to allege any facts, apart from the pleading’s reference to

the legally ineffective quitclaim deed, that she is the legal owner of said property”). Most

importantly, a piece of property cannot be mortgaged by a party that does not own it. See Lucas

v. J & W Realty & Const. Mgmt., Inc., 97 A.D.3d 642, 643 (2d Dep’t 2012) (“[S]ince Bedard did

not acquire valid title to the subject property on October 16, 2008, he could not give Golden a

valid mortgage interest in the property on that date.”).

Here, plaintiff’s alleged property interest stems from an agreement with A Good Deed

that purported to grant plaintiff a mortgage in the premises. However, plaintiff acknowledges

there was no legally effective conveyance because Joseph Marascia never signed the deed

transferring the property to A Good Deed, DE 34 ¶ 26, so as in Lucas, it was not possible for

plaintiff to acquire a mortgage interest in the premises, see 97 A.D.3d at 643. Therefore,

plaintiff fails to allege a property interest that could serve as a basis for a quiet title claim, and

that cause of action is dismissed.3

3 In its memorandum in opposition to defendants’ motion, plaintiff focuses on the similar but distinct issue of

whether defendants were “bona fide purchasers” entitled to protection under the New York recording statute as

described in RPAPL § 266. See DE 61-14 at 7-8. However, the Second Circuit has clearly stated that “plaintiff

need not plead the ‘invalidity’ of defendant’s claim” in a quiet title action, so whether defendants were bona fide

purchasers is ultimately irrelevant at this stage. W. 14th St. Comm. Corp., 815 F.2d at 196.

Equitable Subrogation

Plaintiff’s second cause of action is for equitable subrogation, a remedy available when

the “property of one person is used in discharging an obligation owed by another or a lien upon

the property of another, under such circumstances that the other would be unjustly enriched by

the retention of the benefit thus conferred.” King v. Pelkofski, 20 N.Y.2d 326, 333 (1967).

Here, plaintiff fails to allege that its property was used to discharge an obligation owed

by defendants and therefore also cannot establish that defendants were unjustly enriched.

Plaintiff states that the funds it distributed to John and Joseph Marascia were used to pay off the

OneWest mortgage and prevent foreclosure. DE 34 ¶ 25. Notably, since the premises were

unencumbered by the OneWest mortgage at the time defendants acquired it, defendants were

never liable for that obligation. Instead, all the allegations in this case indicate that defendants

paid a fair price in an arms-length transaction with John and Joseph Marascia for a piece of

property with no prior encumbrances, as evidenced by the $628,000 loan defendants DeVivo and

Gournelos took out to purchase the premises. See DE 34 ¶ 30. Defendants have not been

unjustly enriched here,4 and indeed, applying equitable subrogation on these facts would subject

defendants to the type of “unfair result” the doctrine is meant to address. See Hytko v.

Hennessey, 62 A.D.3d 1081, 1085 (3d Dep’t 2009) (explaining that the purpose of equitable

subrogation is “to shift a debt or obligation to a party who more properly should be accountable

in order to prevent unjust enrichment or an unfair result”). Accordingly, plaintiff’s equitable

subrogation claim is dismissed.

4 Plaintiff appears to implicitly acknowledge this fact by asserting its unjust enrichment claim only against John and

Joseph Marascia and their mother’s estate.

Equitable Lien

Plaintiff’s third claim requests an equitable lien, specifically, an equitable mortgage.

This remedy is appropriate only when the parties intended to make a legally enforceable

mortgage that “fails for the want of some solemnity.” See Canandaigua Nat. Bank & Tr. Co. v.

Palmer, 119 A.D.3d 1422, 1423 (4th Dep’t 2014) (quoting Hamilton Tr. Co. v. Clemes, 163 N.Y.

423, 428 (1900)). Like equitable subrogation, the purpose of an equitable lien is to “prevent the

owner of the property from being unjustly enriched.” Reisner v. Stoller, 51 F. Supp. 2d 430, 453

(S.D.N.Y. 1999).

In this case, there is no plausible allegation that the parties intended to create a mortgage.

Although plaintiff contracted with A Good Deed to receive a mortgage on the premises,

defendants were not involved with that transaction. In fact, defendants do not appear to have had

any interaction with plaintiff before this suit was commenced. In the absence of any business

relationship, the parties obviously could not have intended to create a mortgage, precluding the

creation of an equitable mortgage. Also, as described above, defendants have not been unjustly

enriched, obviating the justification for any type of equitable lien. Accordingly, plaintiff’s

equitable lien claim is dismissed.

Constructive Trust

The final claim at issue is plaintiff’s seventh cause of action, asserted against defendants

DeVivo and Gournelos, requesting that the Court impose a constructive trust over the premises.

“[A] constructive trust may be imposed when property has been acquired in such circumstances

that the holder of the legal title may not in good conscience retain the beneficial interest.” Sharp

v. Kosmalski, 40 N.Y.2d 119, 121 (1976) (internal quotations omitted). Traditionally, four

elements were required: “(1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in

reliance thereon and (4) unjust enrichment.” Id. More recently, courts have applied the remedy

flexibly even when not every element is met, but the four factors still provide “important

guideposts.” In re Koreag, Controle et Revision S.A., 961 F.2d 341, 352 (2d Cir. 1992).

Imposing a constructive trust is entirely unwarranted here. This is not a case where one

of the four elements is missing; rather, plaintiff has failed to adequately allege that any element

has been satisfied. Plaintiff concedes that there was no relationship, much less a confidential or

fiduciary relationship, between it and defendants prior to the commencement of this lawsuit. See

DE 61-14 at 12. This also negates any possibility that defendants made a “promise” to plaintiff,

and even if such a promise existed, plaintiff clearly did not rely on it, as its only transfer of funds

occurred on October 14, 2021, more than four months before defendants purchased the premises.

See DE 34 ¶ 25, 29-30. Finally, as explained in detail above, defendants were not unjustly

enriched by their purchase of the premises in an arms-length transaction. Since none of the

elements that would support imposing a constructive trust are present here, that claim is

dismissed.

Conclusion

For the foregoing reasons, defendants’ motion to dismiss is GRANTED in its entirety.

SO ORDERED.

Dated: Central Islip, New York

December 18, 2023

/s/ Gary R. Brown

GARY R. BROWN

United States District Judge