Green Point Mortgage Corporation et al v. Jacobs et al

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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In re:
HERMAN JACOBS, VICTOR JACOBS, and
JACOB JACOBS, 	Case No. 03-84455-ess
Chapter 7
Debtors. 	(Jointly Administered)
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GREEN POINT FUNDING, INC.,
Plaintiff, 	Adv. Pro. No. 05-8555-ess
-against-
VICTOR JACOBS and
JACOB JACOBS,
Defendants.
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MEMORANDUM DECISION DENYING THE DEFENDANTS’
MOTION TO DISMISS THE FOURTH AMENDED COMPLAINT
APPEARANCES
Jeffrey Herzberg, Esq. 	Jeremy Rosenberg, Esq.
Zinker & Herzberg, LLP 	Law Offices of Sheldon Eisenberger
278 East Main Street (P.O. Box 866) 	30 Broad Street (27th Floor)
Smithtown, NY 11787 	New York, NY 10004
Attorneys for Plaintiff 	Attorneys for Defendants

HONORABLE ELIZABETH S. STONG
UNITED STATES BANKRUPTCY JUDGE
By motion dated July 13, 2007 (the “Motion to Dismiss”), Victor Jacobs and Jacob
Jacobs, the Debtors in these Chapter 7 cases and the Defendants in this adversary proceeding (the
“Adversary Proceeding”), seek an order dismissing this Adversary Proceeding brought by Green
Point Funding, Inc. (the “Plaintiff”), pursuant to Rule 12 of the Federal Rules of Civil Procedure,
made applicable to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 7012, and
for attorneys’ fees and costs, pursuant to Section 523(d) of Title 11 of the United States Code
(the “Bankruptcy Code”). The Plaintiff opposes the Motion to Dismiss. A hearing on the
Motion to Dismiss was held on August 15, 2007, at which counsel for the Plaintiff and counsel
for the Defendants appeared and were heard. Based on the entire record and consideration of the
relevant factors, and for the reasons stated below, the Motion to Dismiss is denied.
Jurisdiction
This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334(b) and
157(b)(2)(I), as a proceeding seeking a determination as to the dischargeability of particular
debts.
Procedural History
On April 15, 2005, Green Point Mortgage Corporation commenced this Adversary
Proceeding by filing a complaint (the “Original Complaint”) objecting to the dischargeability of
debts arising from mortgages loans made by GFI Mortgage Bankers, Inc. (“GFI”). Docket No.
1. Attached to the Original Complaint was an adversary proceeding cover sheet similarly stating
that “Green Point Mortgage Corporation” was the Plaintiff. On December 19, 2005, the
Defendants moved to dismiss the Original Complaint, on grounds that it failed to state a cause of
action upon which relief could be granted. Docket No. 12.

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On April 5, 2006, before that motion was heard, the Plaintiff filed a first amended
complaint (the “First Amended Complaint”), and on July 25, 2006, the Defendants’ motion to
dismiss the Original Complaint was marked off the Court’s calendar. Docket No. 17; see Docket
Entry dated July 25, 2006. In the caption of the First Amended Complaint, the plaintiff is
identified as “Green Point Funding, Inc.,” and in the text of the First Amended Complaint, the
plaintiff is identified as “Green Point Mortgage Corporation,” “GreenPoint,” and “Green Point.”
See, e.g., First Amended Complaint p. 1 and ¶ 11.
On May 16, 2006, the Plaintiff filed a second amended complaint (the “Second Amended
Complaint”). Docket No. 22. In the caption of the Second Amended Complaint, the Plaintiff is
identified as “Green Point Funding, Inc.,” and in the text of the Second Amended Complaint, the
Plaintiff states, “Green Point Funding, Inc. (‘GreenPoint’ or the ‘Plaintiff’), as the assignee of
GFI Mortgage Bankers, Inc. files this amended complaint . . . .” Second Amended Complaint p.
1. The Second Amended Complaint was filed in connection with an agreement between the
parties to settle this Adversary Proceeding, and on May 16, 2006, the parties filed a stipulation of
settlement and proposed order resolving the matter. Docket No. 21.
On August 1, 2006, a hearing was held on the parties’ application to approve the
stipulation of settlement, at which counsel for the Plaintiff and counsel for the Defendants
appeared and were heard. See Docket No. 28. The Court, by former Judge Melanie
Cyganowski, disapproved the stipulation of settlement. Docket No. 28. On August 28, 2006, the
Plaintiff sought reconsideration of the Court’s disapproval of the settlement. Docket No. 29.
On September 28, 2006, a hearing was held on the motion to reconsider the order
disapproving the settlement. Docket Entry dated September 28, 2006. The Court determined
that reconsideration should be denied and that the operative pleading was the First Amended

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Complaint. Docket No. 38.
On February 28, 2007, this Adversary Proceeding, and the Chapter 7 bankruptcy cases of
Victor Jacobs and Jacob Jacobs, were transferred to Judge Elizabeth S. Stong. Docket No. 45.
On May 30, 2007, a pre-trial conference and hearings on the Defendants’ Motion to
Dismiss the First Amended Complaint and the Plaintiff’s Motion for Leave to Amend the First
Amended Complaint were held, at which counsel for the Plaintiff and counsel for the Defendants
appeared and were heard. Docket Entries dated May 30, 2007. Based on the entire record, the
Court granted the Defendants’ Motion to Dismiss the First Amended Complaint and also granted
the Plaintiff’s Motion for Leave to Amend the First Amended Complaint. Docket No. 47. The
Plaintiff was directed to file a Fourth Amended Complaint by June 8, 2007. Id.
On June 7 and 12, 2007, the Plaintiff filed the Fourth Amended Complaint (the “Fourth
Amended Complaint”). Docket Nos. 46, 48. In the caption of the Fourth Amended Complaint,
the Plaintiff is identified as “Green Point Funding, Inc.,” and in the text of the Fourth Amended
Complaint, the plaintiff is identified as “The Green Point Funding Corporation (‘GreenPoint’ or
the ‘Plaintiff’).” Fourth Amended Complaint p. 1. The Plaintiff is also described as “a creditor
of the Debtors, as the assignee of four (4) specific mortgage loans made by GFI Mortgage
Bankers, Inc. (‘GFI’).” Fourth Amended Complaint ¶ 5.
On July 13, 2007, the Defendants filed the Motion to Dismiss the Fourth Amended
Complaint and supporting Memorandum of Law (the “Defendants’ Memorandum in Support”).
Docket No. 49. On July 18, 2007, the Plaintiff filed an Opposition to the Motion to Dismiss
Fourth Amended Complaint (the “Plaintiff’s Opposition”). Docket No. 51. On July 23, 2007,
the Defendants filed a Reply Declaration of Sheldon Eisenberger in further support of the Motion
to Dismiss (the “Reply Declaration”). Docket No. 52.

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Background
In the Fourth Amended Complaint, and indeed, throughout the series of pleadings that
have been filed in this matter, the Plaintiff alleges that over a period of some three weeks, from
May 9, 2003, to May 30, 2003, Jacob Jacobs and Victor Jacobs obtained four loans in an
aggregate amount of $1,564,500, from GFI by false pretenses and false representations,
including the use of false and deceptive written statements. Fourth Amended Complaint ¶¶ 8-10,
22, 30. See Original Complaint ¶¶ 8-10, 22, 30; First Amended Complaint ¶¶ 8-10; Second
Amended Complaint ¶¶ 8-10. The Plaintiff alleges that, as assignee of these loans, it is entitled
to an order declaring that they are nondischargeable in accordance with the provisions of Section
523(a)(2)(A) and Section 523(a)(2)(B) of the Bankruptcy Code. Fourth Amended Complaint ¶¶
24, 31.
The Defendants seek dismissal of the Fourth Amended Complaint in its entirety on
several grounds. First, the Defendants argue that the Plaintiff does not have standing to seek a
finding of nondischargeability because it is an assignee of the loans at issue, and not the entity to
which the false pretenses and false representations, including false and deceptive written
statements, were directed. Defendants’ Memorandum in Support at 3-5. Second, the Defendants
argue that the Plaintiff’s nondischargeability claims are time-barred, because the Fourth
Amended Complaint was filed more than sixty days after the first date set for the meeting of
creditors in the Defendants’ Chapter 7 bankruptcy cases, and because the claims do not relate
back to the claims asserted in the Original Complaint. Defendants’ Memorandum in Support at
5-7. Finally, the Defendants argue that they did not waive the defense of statute of limitations by
entering into a stipulation of settlement that was later disapproved by the Court. Defendants’
Memorandum in Support at 7-9.

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Discussion
The Standard on a Motion to Dismiss
In reviewing a complaint for sufficiency under Rule 12(b)(6), the court’s task is “to
assess the legal feasibility of the complaint, not to assay the weight of the evidence which might
be offered in support thereof.” Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities, Inc.,
748 F.2d 774, 779 (2d Cir. 1984). The court accepts as true the well-pleaded factual allegations
made by the plaintiff, and “must draw all reasonable inferences in favor of the plaintiff.”
Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996). See also Levy v. Southbrook Int’l Invs., Ltd.,
263 F.3d 10, 14 (2d Cir. 2001), cert. denied, 535 U.S. 1054 (2002); Villager Pond, Inc. v. Town
of Darien, 56 F.3d 375, 378 (2d Cir. 1995).
The Second Circuit has observed that in addition to the factual allegations contained in
the complaint, the court may also consider the contents of any “documents attached to the
complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may
be taken, or to documents either in the plaintiffs’ possession or of which plaintiffs had
knowledge and relied on in bringing suit.” Brass v. American Film Techs., Inc., 987 F.2d 142,
150 (2d Cir. 1993).
This standard requires a plaintiff to do more than simply speculate about circumstances
that might conceivably give rise to a claim for relief. As the Supreme Court recently explained:
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide the “grounds” of his
“entitle[ment] to relief” requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do. Factual
allegations must be enough to raise a right to relief above the speculative level, on
the assumption that all the allegations in the complaint are true (even if doubtful
in fact).

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Bell Atl. Corp. v. Twombly, ___ U.S. ____, 127 S. Ct. 1955, 1964-65 (2007) (citations and
quotations omitted). That is, a plaintiff must allege “enough facts to state a claim to relief that is
plausible on its face” in order to state a claim that survives scrutiny under Rule 12(b)(6). Bell
Atlantic, 127 S. Ct. at 1974. See also Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007) (the
Bell Atlantic standard “obliges a pleader to amplify a claim with some factual allegations in
those contexts where such amplification is needed to render the claim plausible”). Thus, a claim
may be sustained only if the plaintiff has “nudged [its] claims across the line from conceivable to
plausible. . . .” Bell Atlantic, 127 S. Ct. at 1974.
The Plaintiff’s Allegations
The starting point for determining whether the Plaintiff has alleged facts sufficient to
state a claim upon which relief can be granted is the allegations of the present complaint – that is,
the Fourth Amended Complaint.
The Loans at Issue
The Plaintiff alleges that on or about May 9, 2003, GFI made a $735,000, loan to Victor
Jacobs, and that the repayment of this loan was secured by a mortgage on real property located at
176 Penn Street, Brooklyn, New York. Fourth Amended Complaint ¶ 8. The Plaintiff alleges
that this “mortgage loan” was assigned by GFI to the Plaintiff by an assignment dated May 9,
2003, and recorded with the City Registrar of the City of New York on April 14, 2004. Id.
The Plaintiff also alleges that less than a week later, on or about May 15, 2003, GFI made
a “credit line loan” of $84,000, to Jacob Jacobs, and that about two weeks thereafter, on or about
May 30, 2003, GFI made a further loan of $546,000, to Jacob Jacobs. Fourth Amended
Complaint ¶ 9. The Plaintiff alleges that the repayment of these loans was secured by a
mortgage on a condominium unit located at 171 Hooper Street, Unit 3A, Brooklyn, New York.

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Id. The Plaintiff alleges that these “mortgage loans” were assigned by GFI to the Plaintiff by an
assignment dated May 15, 2003, and recorded with the City Registrar of the City of New York
on January 15, 2004. Id.
And the Plaintiff alleges that on or about May 30, 2003, GFI made a loan of $199,500, to
Jacob Jacobs, and that repayment of this loan was secured by a mortgage on real property located
at 562 Bedford Avenue, Apartment 2B, Brooklyn, New York. Fourth Amended Complaint ¶ 10.
The Plaintiff alleges that this “mortgage loan” was assigned by GFI to the Plaintiff by an
assignment dated May 30, 2003, and recorded with the City Registrar of the City of New York
on January 28, 2004. Id.
The Alleged False Pretenses and False Representations
The Plaintiff alleges that Victor Jacobs and Jacob Jacobs obtained the loans at issue by
false pretenses and false representations, including the use of false and deceptive written
statements. In particular, the Plaintiff alleges that on their mortgage applications, Victor Jacobs
and Jacob Jacobs used the last name “Jakobowitz” rather than “Jacobs,” and stated in affidavits
that they had never been known by any other name. Fourth Amended Complaint ¶ 11. The
Amended Complaint also states that Victor Jacobs and Jacob Jacobs used false social security
numbers on the applications. Fourth Amended Complaint ¶ 14.
The Plaintiff alleges that Victor Jacobs and Jacob Jacobs executed affidavits at the
closings which state in part, “[t]here are no Judgments, Federal Tax Liens, Parking Violation
Bureau Judgments, Environmental Control Board Judgments, Transit Adjudication Bureau
Judgments or Warrants against me (us) nor have proceedings in Bankruptcy been instituted by or
against me (we) in any of the above names or in any other name.” Fourth Amended Complaint ¶
15.

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The Plaintiff also alleges that Victor Jacobs and Jacob Jacobs did not disclose certain
information in connection with their loan applications. For example, the Amended Complaint
states that Victor Jacobs and Jacob Jacobs did not state on their loan applications that they were
formerly officers, directors, and/or majority shareholders of Allou Distributors, Inc. (“Allou”)
Fourth Amended Complaint ¶ 12.
The Plaintiff alleges that Victor Jacobs and Jacob Jacobs did not disclose that they were
“under investigation for committing an alleged arson at one or more real properties owned or
controlled by Allou and/or that one or more fire insurance carriers was refusing to pay the
monies due to the fire loss based on the suspicion of arson.” Fourth Amended Complaint ¶ 13.
And the Plaintiff alleges that “both Victor [Jacobs] and Jacob [Jacobs] disclosed on their loan
applications for all four (4) mortgage loans that neither of them were subjects of a pending
lawsuit, and they never disclosed that Allou was already adjudicated a Chapter 7 bankrupt debtor
. . . .” Id.
Finally, the Plaintiff alleges that at the closings of the mortgage loans, in May 2003,
Victor Jacobs and Jacob Jacobs were shown a copy of a recorded confession of judgment in the
amount of $3.2 million executed by Jacob Jakobowitz, Herman Jakobowitz, and Victor
Jakobowitz, and they “claimed that they had never delivered and granted the $3.2 million
confession of judgment . . . [and] executed affidavits stating that they were not one of the three
(3) individuals who granted the $3.2 million confession of judgment . . . .” Fourth Amended
Complaint ¶ 16.
The Alleged Reliance
As for its reliance on the alleged false pretenses and false representations, the Plaintiff
alleges that neither GFI nor the Plaintiff was aware of:

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(a) the true identity of Jacob [Jacobs] and Victor [Jacobs]; (b) the existence of the
$3.2 million confession of judgment; (c) the adjudication of Allou as a bankrupt
debtor; and/or (d) the allegations and/or suspicions that Victor[Jacobs] and/or
Jacob [Jacobs] were involved in an arson of real property associated with Allou.
Fourth Amended Complaint ¶ 17.
The Plaintiff further alleges that if it or GFI had known that Victor Jacobs’ or Jacob
Jacobs’ “real last name was ‘Jacobs’ and not ‘Jakobowitz’ and/or their real social security
numbers” (Fourth Amended Complaint ¶ 20); or that “the $3.2 million confession of judgment
granted to Eurofactors International was actually executed by the Jacobs” (Fourth Amended
Complaint ¶ 19); or that “the Jacobs were alleged to have caused and/or perpetrated an arson of
real property” (Fourth Amended Complaint ¶ 18), neither it nor GFI would have made any of the
four loans at issue to Victor Jacobs or Jacob Jacobs (Fourth Amended Complaint ¶¶ 18-20).
The Alleged Losses
As for its losses, the Plaintiff alleges:
As reflected in Green Point’s proofs of claim . . . dated April 15, 2004, the
Plaintiff suffered the following losses on the mortgage loans: $774,541.00 on the
loans to Victor [Jacobs], $368,123.45 and $209,876.35 on the loans to Jacob
[Jacobs], with the default rate of interest continuing to accrue.
Fourth Amended Complaint ¶ 23.
Whether the Plaintiff States Claims for Relief Under Section 523
The Plaintiff seeks a determination that the debts arising from the loans at issue are
nondischargeable pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, as debts obtained by
“false pretenses, a false representation, or actual fraud.” 11 U.S.C. § 523(a)(2)(A). See Fourth
Amended Complaint ¶¶ 21-24. The Plaintiff also seeks a determination that these debts are
nondischargeable pursuant to Section 523(a)(2)(B), as debts obtained by use of a “statement in
writing . . . that is materially false . . . respecting the debtor’s or an insider’s financial condition.”

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11 U.S.C. § 523(a)(2)(B). See Fourth Amended Complaint ¶¶ 25-31.
The Section 523(a)(2)(A) Claim
The elements of a nondischargeability claim under Section 523(a)(2)(A) have been
described by this Court and others as follows:
[A] plaintiff must establish five elements to show that a debt is nondischargeable
under Section 523(a)(2)(A). These are: [F]irst, that the debtor made a false
representation; second, that the debtor knew the representation was false at the
time it was made; third, that the debtor made the false representation with the
intent to deceive the creditor; fourth, that the creditor justifiably relied on the
representation; and finally, that the creditor sustained a loss that was proximately
caused by the false representation.
People of the State of New York v. Suarez (In re Suarez), 367 B.R. 332, 338 (Bankr.
E.D.N.Y. 2007) (citing Fleet Credit Card Servs., L.P. v. Macias (In re Macias), 324 B.R.
181, 187 (Bankr. E.D.N.Y. 2004); Chase Manhattan Bank, USA, N.A. v. Giuffrida (In re
Giuffrida), 302 B.R. 119, 123 (Bankr. E.D.N.Y. 2003)). See also Charell v. Gonzalez (In
re Gonzalez), 241 B.R. 67, 71-72 (Bankr. S.D.N.Y. 1999).
Here, a review of the Fourth Amended Complaint shows that the Plaintiff adequately
alleges each of the elements of its claim under Section 523(a)(2)(A). First, with respect to the
allegations concerning the Defendants, the Plaintiff has adequately alleged that Victor Jacobs
and Jacob Jacobs knowingly made false representations with the intent to deceive the creditor, in
connection with the loans at issue. As described above, the Plaintiff alleges, among other things,
that Victor Jacobs and Jacob Jacobs applied for the loans using false names and false social
security numbers, and that they falsely stated in sworn affidavits that they had never been known
by any other names. Fourth Amended Complaint ¶¶ 11, 14. The Plaintiff also alleges that
Victor Jacobs and Jacob Jacobs falsely stated that there were no judgments or bankruptcy
proceedings pending against them, and that they falsely denied that they had granted a $3.2

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million confession of judgment. Fourth Amended Complaint ¶¶ 15, 16. The Fourth Amended
Complaint further states that Victor Jacobs and Jacob Jacobs did not disclose that they were
formerly officers, directors, or majority shareholders of Allou, and similarly did not disclose that
they were under investigation for alleged arson at property owned by Allou. Fourth Amended
Complaint ¶¶ 12, 13. See pp. 7-8, supra. For all of these reasons, and based on the entire record,
the Plaintiff has adequately alleged the first three elements of a Section 523(a)(2)(A)
nondischargeability claim.
Next, with respect to the allegations concerning the Plaintiff and GFI, the Plaintiff has
adequately alleged that the creditor justifiably relied on the Jacobs’ allegedly false
representations and sustained a loss that was proximately caused by them. As described above,
the Plaintiff alleges, among other things, that neither it nor GFI was aware of Victor Jacobs’ and
Jacob Jacobs’ true name or correct social security numbers, their execution of the $3.2 million
confession of judgment; their roles as officers, directors, or shareholders of Allou; the
adjudication of Allou as a debtor in bankruptcy; or the investigation of Victor Jacobs and Jacob
Jacobs for Arson at a property owned by Allou. Fourth Amended Complaint ¶¶ 17-20. And the
Fourth Amended Complaint states that if the Plaintiff or GFI had known these matters, then
neither it nor GFI would have made any of the four loans at issue. Fourth Amended Complaint
¶¶ 18-20. Finally, the Plaintiff alleges that it has suffered losses in the amounts indicated in its
proofs of claims. Fourth Amended Complaint ¶ 23.
For all of these reasons, and based on the entire record, the Plaintiff has adequately
alleged the final two elements of a Section 523(a)(2)(A) nondischargeability claim.
The Section 523(a)(2)(B) Claim
In order to state a claim under Section 523(a)(2)(B) of the Bankruptcy Code, a

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creditor must allege that the debtor obtained “money, property, services, or an extension,
renewal, or refinancing of credit” by using:
[A] statement in writing –
(i) 	that is materially false;
(ii) 	respecting the debtor's or an insider's financial condition;
(iii) 	on which the creditor to whom the debtor is liable for such money,
property, services, or credit reasonably relied; and
(iv) 	that the debtor caused to be made or published with intent to
deceive; . . .
11 U.S.C. § 523(a)(2)(B).
Here, a review of the Fourth Amended Complaint shows that the Plaintiff adequately
alleges each of the elements of its claim under Section 523(a)(2)(B). As described above, the
Plaintiff alleges that Victor Jacobs and Jacob Jacobs made materially false written statements
respecting their financial condition in connection with seeking the loans at issue. See pp. 7-8,
supra. For example, the Fourth Amended Complaint states that Victor Jacobs and Jacob Jacobs
misrepresented their names, social security numbers, bankruptcy debtor status, and employment
status on their loan applications. See Fourth Amended Complaint ¶¶ 11-16.
The Fourth Amended Complaint also states that Victor Jacobs and Jacob Jacobs did not
disclose that “Allou, their primary source of income, had been closed down in accordance with
the adjudication of being a Chapter 7 bankrupt debtor” (Fourth Amended Complaint ¶ 26) and
also did not disclose that “they had personally guaranteed the loans made by one or more
financial institutions . . . to Allou” (Fourth Amended Complaint ¶ 27).
As for reliance, the Plaintiff alleges:
Without their salary income from Allou, it was doubtful that the Jacobs,
individually or jointly, had the financial ability to repay the mortgage loans made
by the Plaintiff to the Jacobs, which loans were assigned to the Plaintiff as
indicated above.
. . .
If GFI and/or the Plaintiff knew or had reason to know that it was reasonably

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foreseeable that the Jacobs lacked the financial ability to satisfy the monthly
monetary obligations related to the above-referenced mortgage loans due to the
failure of Allou, neither GFI nor the Plaintiff would have made the subject four
(4) mortgage loans.
Fourth Amended Complaint ¶¶ 28, 30.
For all of these reasons, and based on the entire record, the Plaintiff has adequately
alleged the final two elements of a Section 523(a)(2)(B) nondischargeability claim.
Whether the Plaintiff Has Standing To Bring the Section 523 Claims
The Defendants argue that the Plaintiff does not have standing to pursue a claim for
nondischargeability of the loans at issue because it is not the entity to which the alleged false
pretenses and false representations, including false and deceptive written statements, were
directed. Citing State of California Public Employees’ Retirement System v. Shearman &
Sterling, 95 N.Y.2d 427, 741 N.E.2d 101, 718 N.Y.S.2d 256 (2000) (“CalPERS”), and Banque
Arabe et Internationale D'Investissement v. Maryland National Bank, 57 F.3d 146 (2d Cir.
1995), the Defendants also argue that “[e]ven if the loans were assigned to Greenpoint . . . there
was no assignment of any purported claim that could serve as a basis for a claim of non-
dischargeability of this debt.” Defendants’ Memorandum in Support at 3. See Defendants’
Memorandum in Support at 3-5.
The Defendants further argue that the assignments as alleged lack “the requisite language
necessary to effectuate a proper assignment of a cause of action arising from a tort or otherwise
alleged misrepresentations” by Victor Jacobs or Jacob Jacobs. Defendants’ Memorandum in
Support at 4. See Reply Declaration ¶ 3. And the Defendants urge that the claims for
nondischargeability asserted in the Fourth Amended Complaint are “necessarily outside the loan
contract assigned to Greenpoint.” Defendants’ Memorandum in Support at 4. In addition, the
Defendants argue that the documents relied upon by the Plaintiff show that assignments were

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made by GFI to Greenpoint Mortgage Funding, Inc., not Greenpoint Funding, Inc., the Plaintiff
in this action. Reply Declaration ¶ 2.
The Plaintiff argues that there was no reservation of any right, title, or interest in GFI as
assignee when the loans at issue were assigned to it. Plaintiff’s Opposition at 9. The Plaintiff
observes that each of the assignments contains the identical language, that is, that the assignment
“hereby assigns unto the assignee” the mortgage loan, and further provides:
“TOGETHER with the bond or note or obligation described in said mortgage, and
the moneys due and to grow due thereon with the interest; TO HAVE AND TO
HOLD the same unto the assignee and to the successors, legal representatives and
assigns OF the assignee forever.”
Id. As noted above, the Fourth Amended Complaint states that the assignments were recorded
with the City Registrar of the City of New York. Fourth Amended Complaint ¶¶ 8-10. For these
reasons, the Plaintiff argues, it has standing to bring these claims under Section 523 because
“‘[w]hen a valid assignment is made, the assignee steps into the assignor’s shoes and acquires
whatever rights the latter had.’” Plaintiff’s Opposition at 9-10, quoting Careplus Med. Supply v.
Citiwide Auto Leasing, Inc., No. 86041/2003 slip op. (N.Y. Civ. Ct. Mar. 29, 2005).
In addition, the Plaintiff argues that “GreenPoint” and GFI are “associated or affiliated
entities under the same holding company umbrella,” and either the Plaintiff or GFI could pursue
this action, if necessary. Plaintiff’s Opposition at 11.
It is widely acknowledged that an assigned claim may be asserted by the assignee as a
creditor in a bankruptcy case. As one commentator has noted, “[a]s a general rule, claims are
freely transferable, and the assignee of an obligation is entitled to assert an assigned claim
against a debtor in bankruptcy.” COLLIER ON BANKRUPTCY ¶ 553.03[3][h] (15th ed. rev. 2007).
And as the Second Circuit has held, in connection with the assignment of a claim, “New
York law does not require specific boilerplate language to accomplish the transfer of causes of

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action sounding in tort. Rather, ‘any act or words are sufficient which “show an intention of
transferring the chose in action to the assignee.”’” Banque Arabe, 57 F.3d at 151-52 (citations
omitted). The court concluded that the assignment at issue validly transferred tort claims based
on fraud, and observed, “[t]his conclusion is also consistent with the general trend in New York
toward adopting principles of free assignability of claims, including those of fraud. See N.Y.
Gen. Oblig. Law §§ 13-105 & 13-107 (McKinney 1978).” Banque Arabe, 57 F.3d at 153.
The New York Court of Appeals’ decision in CalPERS is similarly unavailing to the
Defendants. The Defendants argue that CalPERS requires that before a party may recover in tort
for a loss caused by a fraudulent misrepresentation, there must be “a showing that there was
either actual privity of contract between the parties or a relationship so close as to approach that
of privity.” Defendants’ Memorandum in Support at 3. But in CalPERS, the plaintiff, a
purchaser of a commercial loan, sought to pursue a claim against the law firm that prepared the
loan documents, not the obligor or guarantor of the loan. Plaintiff’s Opposition at 5-6. As the
court found:
The claim alleged here – that Shearman & Sterling prepared a defective note by
materially altering the prepayment and acceleration provisions of the standard
form note and the terms of the commitment – does not arise from the note itself or
from the loan documents. Rather, CalPERS’ claim against Shearman & Sterling
is premised on the firm’s failure to prepare loan documents . . . that complied with
the terms of the Correspondent Agreement. Thus, while ‘all’ of [the assignor’s]
rights to and under the loan documents were assigned to CalPERS, ‘all’ in this
case does not include the right to assert [the assignor’s claims, whatever they may
be, against Shearman & Sterling arising from the firm’s failure to observe the
specifications of the Correspondent Agreement.
CalPERS, 95 N.Y.2d at 436, 741 N.E.2d at 105, 718 N.Y.S.2d at 260.
Here, by contrast, the Plaintiff’s nondischargeability claims are claims against the
borrowers, not a claim against a professional or other non-party to the loans at issue. For that
reason, they are more in the nature of claims “to and under the loan documents,” as the Court of

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Appeals stated. Id.
The Ninth Circuit Bankruptcy Appellate Panel recently considered a similar issue in New
Falls Corp. v. Pateel Boyajian (In re Boyajian), 367 B.R. 138 (9th Cir. B.A.P. 2007). There, the
court considered whether the “reasonable reliance” required by Section 523(a)(2)(B) requires
“reasonable reliance not only by the lender who extended the original credit to a debtor, but also
by an assignee.” In re Boyajian, 367 B.R. at 140-41.
The court began with the premise that “‘[s]tated as a basic principle, an assignee merely
steps into the shoes of his assignor.’” In re Boyajian, 367 B.R. at 145, quoting State Bar v.
Tooks (In re Tooks), 76 B.R. 162, 164 (Bankr. S.D. Cal. 1987). Reviewing cases decided by
courts in several Circuits, the court found that “[i]mposing a requirement that [the assignee]
prove its own reliance, independent of [the assignor’s], not only imposes a barrier to enforcement
of its assignment rights, it makes no sense when applying the remedy made available under §
523(a)(2)(B).” In re Boyajian, 367 B.R. at 146. The court further found:
The basic policy supporting discharges in bankruptcy is to give the honest but
unfortunate debtor a fresh start. Marrama v. Citizens Bank of Mass., ___ U.S.
___, 127 S. Ct. 1105, 1107, 166 L. Ed. 2d 956 (2007); Brown v. Felsen, 442 U.S.
127, 128, 99 S. Ct. 2205, 60 L. Ed. 2d 767 (1979).
The Tooks court discussed the policy considerations implicated by failure to make
the exception to discharge provisions of the Code available to assignees:
In the future, a dishonest debtor will know that he will be protected
from the financial consequences of his wrongdoing in situations
where a surety agrees to pay the victim. The debt will be paid by
the surety to the victim/creditor and, since the surety would not
have assignment rights, the debtor will be effectively discharged
from the consequences of his own willful and malicious conduct.
Tooks, 76 B.R. at 164. The bankruptcy court below expressed the same concerns
in the § 523(a)(2)(B) context: “Because really what you’re saying to me it’s okay
to lie . . . in order to get the credit because if you’re really lucky somebody else
will come along and purchase this debt . . . .” Transcript of December 8, 2005
Hearing, pp. 35-36.

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There is no policy expressed in the Bankruptcy Code to reward such dishonesty
by debtors, and no such policy should be implemented in the absence of clear
direction from Congress. The bare use of the term “creditor” in §
523(a)(2)(B)(iii) does not provide such clear guidance.
In re Boyajian, 367 B.R. at 147-48.
For all of these reasons, and based on the entire record, the Plaintiff has adequately
alleged that it has standing to assert the claims in the Fourth Amended Complaint.
Whether the Plaintiff’s Section 523 Claims Are Barred by the Statute of Limitations
The Defendants argue that the claims asserted in the Fourth Amended Complaint are
barred by the statute of limitations established by Federal Rule of Bankruptcy Procedure 4007(c)
for claims to determine the dischargeability of a debt, for two principal reasons. First, the
Defendants argue that the Fourth Amended Complaint is time-barred because the Original
Complaint, which was timely filed on April 18, 2005, names “Greenpoint Mortgage
Corporation” as the plaintiff, while the Fourth Amended Complaint names a different entity,
“Green Point Funding, Inc.” or “Green Point Funding Corporation,” as the plaintiff. Defendants’
Memorandum in Support at 5-6. And second, the Defendants argue that the statute of limitations
cannot be avoided by the “relation-back” doctrine as reflected in Federal Rule of Civil Procedure
15(c). Defendants’ Memorandum in Support at 6-7. The Defendants further note that they have
not waived their statute of limitations defense, whether through entry into a proposed settlement
or otherwise. Defendants’ Memorandum in Support at 7-9.
The Plaintiff argues that the Fourth Amended Complaint is not barred by the statute of
limitations because it relates back to the Original Complaint, which was timely filed. Plaintiff’s
Opposition at 12-15. The Plaintiff also argues that the Defendants waived the defense of statute

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of limitations when they entered into the stipulation of settlement that was ultimately
disapproved by the Court. Plaintiff’s Opposition at 11.
The amendment of a pleading is governed by Rule 15(c), which provides that “[a]n
amendment of a pleading relates back to the date of the original pleading when . . . the claim or
defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set
forth or attempted to be set forth in the original pleading.” FED. R. CIV. P. 15(c)(2). “Although
the relation back of amendments switching plaintiffs – as opposed to defendants – is not
explicitly treated in Rule 15(c), ‘the attitude taken in [the rule] toward change of defendants
extends by analogy to amendments changing plaintiffs.’” Allied Int’l v. International
Longshoremen’s Ass’n, 814 F.2d 32, 35 (1st Cir. 1987), quoting F ED. R. CIV. P. 15(c) advisory
committee note. See Reyna v. Flashtax, Inc., 162 F.R.D. 530, 533 n.1 (S.D. Tex. 1995) (“[F]or
purposes of the ‘relation back’ doctrine, a correction of a misnomer is treated as a change of
parties.”)
Rule 15(c) does not set a high bar for relation back, so long as the claims attempted to be
asserted in the new complaint share a reasonable measure of common ground with the
allegations of the original pleading. As courts have found, “adequate notice” not of the
particulars but of the “general fact situation” is all that is required. Contemporary Mission, Inc.,
665 F. Supp. at 255-56. See Benfield, 26 F.3d at 23 (relation back should be denied where there
is no common ground between the allegations of the original complaint and those of the
amended pleading in order to avoid “unfair surprise”).
As the Second Circuit has observed:
The purpose of “Rule 15 ‘is to provide maximum opportunity for each claim to be
decided on its merits rather than on procedural technicalities.’” “For a newly
added action to relate back, ‘the basic claim must have arisen out of the conduct
set forth in the original pleading. . . .’” Under Rule 15, “the central inquiry is

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whether adequate notice of the matters raised in the amended pleading has been
given to the opposing party within the statute of limitations by the general fact
situation alleged in the original pleading.” Where the amended complaint does
not allege a new claim but renders prior allegations more definite and precise,
relation back occurs.
In contrast, even where an amended complaint tracks the legal theory of the first
complaint, claims that are based on an “entirely distinct set” of factual allegations
will not relate back.
Slayton v. American Express Co., 460 F.3d 215, 228 (2d Cir. 2006) (citations omitted). See
Contemporary Mission, Inc. v. N.Y. Times Co., 665 F. Supp. 248, 255-56 (S.D.N.Y. 1987)
(holding that a claim relates back under Rule 15(c) if the “general fact situation alleged in the
original pleading” provided adequate notice of the new allegations), aff’d, 842 F.2d 612 (2d Cir.
1988), cert. denied sub nom. O’Reilly v. N.Y. Times Co., 488 U.S. 856 (1988); In re Chaus Sec.
Litig., 801 F. Supp. 1257, 1263 (S.D.N.Y. 1992).
In addition, the Second Circuit has found that where fraud is alleged, a new claim will
relate back if there is “sufficient commonality” between the new claim and the matters alleged in
the original pleading to avoid “unfair surprise” to the defendant. Benfield v. Mocatta Metals
Corp., 26 F.3d 19, 23 (2d Cir. 1994).
At the outset, the Court declines to adopt the position that the Defendants have waived
their ability to assert a statute of limitations defense by entry into a stipulation of settlement. By
rejecting that settlement, the Court wiped away all of its provisions. There simply is no basis in
this record to conclude that the Defendants somehow remain bound by a single provision of the
stipulation of settlement where the settlement as a whole was rejected by the Court.
But while the Defendants may assert this defense, they will not prevail on it. Here, a
review of the Original Complaint and the Fourth Amended Complaint shows that the Plaintiff’s
claims in each complaint arise out of the same “conduct, transaction, or occurrence” – that is, the

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four loans obtained by Victor Jacobs and Jacob Jacobs over a period of some three weeks, from
May 9, 2003, to May 30, 2003, from GFI, and the alleged false pretenses and false
representations made by Victor Jacobs and Jacob Jacobs in connection with those loans. Fourth
Amended Complaint ¶¶ 8-10, 22, 30; Original Complaint ¶¶ 8-10, 22, 30. See pp. 6-7, supra.
For these same reasons, a review of these pleadings also shows that Victor Jacobs and Jacob
Jacobs received “adequate notice” of the “general fact situation” giving rise to the Plaintiff’s
Section 523 claims. Contemporary Mission, Inc., 665 F. Supp. at 255-56.
For all of these reasons, and based on the entire record, the Plaintiff has adequately
alleged that it has standing to assert the claims in the Fourth Amended Complaint.
Conclusion
For the reasons stated herein, the Motion to Dismiss is denied. An order in accordance
with this Memorandum Decision shall be entered simultaneously herewith.
Dated: Brooklyn, New York 	s/Elizabeth S. Stong____________
November 21, 2007 	ELIZABETH S. STONG
UNITED STATES BANKRUPTCY JUDGE