Opinion
22138/2010.
Decided May 2, 2011.
Lowenstein Sandler PC, by Maureen E. Montague, Esq., New York, New York, for the Plaintiff.
7128 Fresh Meadows, LLC, Zhi Cheng Huang, and Zorion, Inc.: Trop Spindler, by Gail E. Spindler, Esq., Whitestone, New York, For Defendants.
The following papers numbered 1 to 13 read on this motion by plaintiff pursuant to CPLR 3212 for summary judgment against defendants 7128 Fresh Meadows, LLC (7128 Fresh Meadows), Zhi Cheng Huang and Zorion, Inc. (Zorion), and to strike their answer; and this cross motion by defendants 7128 Fresh Meadows, Zhi Cheng Huang and Zorion pursuant to CPLR 3212 for summary judgment dismissing the complaint asserted against them, or in the alternative, pursuant to CPLR 3101, to compel plaintiff to comply with outstanding discovery demands.
Papers Numbered
Notice of Motion — Affidavits — Exhibits .............................. 1-5 Notice of Cross Motion — Affidavits — Exhibits ........................ 6-7 Answering Affidavits — Exhibits ....................................... 8-11 Reply Affidavits ...................................................... 12-13Upon the foregoing papers it is ordered that the motion and cross motion are determined as follows:
Plaintiff commenced this action by filing a copy of the summons and complaint on August 30, 2010, seeking to foreclose the consolidated mortgage given by defendant 7128 Fresh Meadows, LLC ("7128 Fresh Meadows"), on the real property known as 71-28 163rd Street, Fresh Meadows, in Queens County, New York.
Plaintiff alleges that defendant 7128 Fresh Meadows entered into an agreement, modifying and consolidating a building loan mortgage dated March 10, 2005, which secured an underlying note in the original principal amount of $2,000,000.00, payable with interest, a building loan mortgage dated April 26, 2006, on the same property which secured an underlying note in the principal amount of $200,000.00, payable with interest, and a mortgage and security agreement dated June 28, 2007, which secured an underlying note in the principal amount of $905,310.00, payable with interest. The indebtedness under the three mortgages was allegedly consolidated into a single mortgage lien in favor of United Commercial Bank, in the principal sum of $3,000,000.00, plus interest, by virtue of the consolidation, extension, and modification agreement dated June 28, 2007, and as evidenced by an amended and restated note of the same date, in favor of United Commercial Bank.
In its complaint, plaintiff alleges that the amended and restated note was modified, pursuant to a document, dated July 29, 2009, and denominated as "MODIFICATION OF AMENDED AND RESTATED MORTGAGE NOTE," to extend the maturity date of the amended and restated note to October 5, 2009. Plaintiff also alleges that as additional security for the loan, defendants Zhi Cheng Huang and Zorion, Inc. ("Zorion") each executed and delivered a continuing guaranty, pursuant to which they unconditionally guaranteed the payment of the obligations of 7128 Fresh Meadows. Plaintiff further alleges that the consolidated mortgage was assigned to it, pursuant to an assignment denominated "ASSIGNMENT OF CONSOLIDATION, EXTENSION AND MODIFICATION OF MORTGAGE AND SECURITY AGREEMENT," dated March 29, 2010, and that it is the holder of the consolidated mortgage and amended note, and guaranties.
Plaintiff additionally alleges that defendant 7128 Fresh Meadows defaulted under the terms of the amended and restated note and consolidated mortgage by failing to pay all the sums due and owing upon the extended maturity date, notwithstanding due demand. Plaintiff also seeks to adjudicate defendants 7128 Fresh Meadows, Zhi Cheng Huang and Zorion to be liable in the event a deficiency remains after any foreclosure sale.
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion served a combined answer to the complaint, asserting various affirmative defenses, including one based upon lack of standing. Defendant City of New York Department of Finance served a notice of appearance and waiver. Defendant New York State Department of Taxation and Finance has not appeared or answered the complaint. Defendants Board of Managers of Habitat Condominium and the John Doe defendants have not appeared or answered the complaint, although their time to do so has not yet expired.
Plaintiff moves, pursuant to CPLR 3212, for summary judgment against defendants 7128 Fresh Meadows, Zhi Cheng Huang and Zorion, and to strike their answer. Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion oppose the motion and cross-move pursuant to CPLR 3212, for summary judgment dismissing the complaint asserted against them, or, in the alternative, pursuant to CPLR 3101, to compel plaintiff to comply with outstanding discovery demands. Plaintiff opposes the cross motion.
CPLR 3212(a) provides that "[a]ny party may move for summary judgment in any action, after issue has been joined." It is well established that the proponent of a summary judgment motion "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" ( Alvarez v Prospect Hosp., 68 NY2d 320, 324). On a motion for summary judgment in an action to foreclose a mortgage, a plaintiff establishes its case as a matter of law through the production of the mortgage, the unpaid note, and evidence of default ( see, Wells Fargo Bank, N.A. v Webster , 61 AD3d 856 [2nd Dept. 2009]; Republic Natl. Bank of NY v O'Kane, 308 AD2d 482, 482 [2nd Dept. 2003]; see, Aames Funding Corp. v Houston , 44 AD3d 692 , 693 [2nd Dept. 2007], lv. to appeal denied, 10 NY3d 704).
In support of that branch of its motion for summary judgment against defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion, plaintiff offers, among other things, a copy of the pleadings, affidavits of service, the consolidated mortgage, the amended and restated note, the guaranties, an affirmation of its counsel, and the affidavit of Linda Lam, a loan servicing manager of plaintiff, attesting to the default of defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion by failing to pay the balance due under the loan documents by the extended maturity date. These submissions establish plaintiff's prima facie case to summary judgment as against defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion ( see, EMC Mtge. Corp. v Riverdale Assoc., 291 AD2d 370 [2nd Dept. 2002]; Republic Natl. Bank of New York v Zito, 280 AD2d 657, 658 [2nd Dept. 2001]; see also, IMC Mtge. Co. v Griggs, 289 AD2d 294 [2nd Dept. 2001]; Paterson v Rodney, 285 AD2d 453 [2nd Dept. 2001]). The burden shifts to defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion to raise a triable issue of fact regarding their defenses ( see, Cochran Inv. Co., Inc. v Jackson , 38 AD3d 704 [2nd Dept. 2007]; First Nationwide Bank, FSB v Goodman, 272 AD2d 433 [2nd Dept. 2000]).
With respect to the first affirmative defense asserted by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion, plaintiff has stated a cause of action for foreclosure against defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion.
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion assert, as a second affirmative defense, that plaintiff lacks standing to bring this action. They argue that the June 28, 2007 note was replaced and superseded, and plaintiff has made no showing it holds the replacement note. In addition, they argue that, even assuming the June 28, 2007 note was not replaced and superseded, plaintiff has failed to show the proper assignment of the June 28, 2007 note to it. They contend the allonge attached to the June 28, 2007 note is endorsed by Dennis Lee, as attorney-in-fact for the Federal Deposit Insurance Corporation ("FDIC"), but that the endorsement is not in accordance with the limited power of attorney dated December 9, 2009, appointing Lee, among others, with the authority to execute the note on behalf of the FDIC.
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion also contend that plaintiff's presentation of a press release is insufficient to show it is the holder of the subject consolidated mortgage.
As the Appellate Division, Second Judicial Department, in U.S. Bank, N.A. v Collymore ( 68 AD3d 752 ), has stated:
In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced ( see Mortgage Elec. Registration Sys., Inc. v Coakley , 41 AD3d 674 [2007]; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547 [2003]; First Trust Natl. Assn. v Meisels, 234 AD2d 414 [1996]).
A plaintiff may demonstrate it was the assignee of the mortgage and the underlying note by the lending documents themselves or by proof of the owner's indorsement of the note or the allonge, along with a written assignment of the mortgage, by the time the foreclosure action was commenced ( see, Mortgage Elec. Registration Sys., Inc. v Coakley , 41 AD3d 674 [2nd Dept. 2007]; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546 [2nd Dept. 2003]; Slutsky v Blooming Grove Inn, Inc., 147 AD2d 208, 211-212 [2nd Dept. 1989]).
Plaintiff asserts that it purchased certain assets and assumed certain deposit and other liabilities of United Commercial Bank from the FDIC, as receiver of United Commercial Bank, pursuant to an agreement dated November 6, 2009, between it and the FDIC. Although the press release is inadmissible evidence ( see, P N Tiffany Properties, Inc. v Maron, 16 AD3d 395 [2nd Dept.], lv. to appeal dismissed in part and denied in part, 5 NY3d 757; Young v Fleary, 226 AD2d 454, 455 [2nd Dept. 1996]), the copy of the purchase and assumption agreement between plaintiff and the FDIC, as receiver of United Commercial Bank, indicates that plaintiff purchased from the FDIC, as receiver, all of the assets of United Commercial Bank, except for those assets listed in sections 3.5 of the agreement, and those assets determined by the FDIC, as receiver, to be essential to the FDIC ( see section 3.6). The subject consolidated mortgage is not included on the list of excluded assets. Nothing in the purchase and assumption agreement indicates that the FDIC retained the subject consolidated mortgage as an asset. More importantly, plaintiff has submitted a copy of an assignment entitled "ASSIGNMENT OF CONSOLIDATION, EXTENSION AND MODIFICATION OF MORTGAGE AND SECURITY AGREEMENT," dated March 29, 2010, whereby the FDIC, as receiver for United Commercial Bank, assigned the subject consolidated mortgage to plaintiff.
Plaintiff also has presented a copy of the June 28, 2007 note, which contains an allonge endorsed by Dennis Lee, as attorney-in-fact for FDIC, without recourse to plaintiff. To the extent defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion assert the June 28, 2007 note was replaced and superseded, such assertion is without merit. The modification agreement dated July 29, 2009, did not create a new superseding or replacement note, but, rather, modified and amended the June 28, 2007 note for the purpose of extending the maturity date of the loan to October 5, 2009, and allowing for continued payments until the extended maturity date, and did not create or secure any new or further indebtedness. The modification agreement, moreover, explicitly ratified and confirmed, in all respects, the terms of the June 28, 2007 note and consolidated mortgage. Contrary to the contention of defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion, the endorsement of Dennis Lee on the allonge to the June 28, 2007 note meets the requirements of the limited power of attorney.
Under such circumstances, plaintiff has established by competent evidence that it had standing to commence this action as the holder of the consolidated mortgage and the June 28, 2007 note, as modified ( see, Mortgage Elec. Registration Sys., Inc. v Coakley , 41 AD3d 674 , supra; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, supra).
The third affirmative defense asserted by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion based upon alleged violation of Judiciary Law section 469 is without merit. Section 469 of the Judiciary Law relates to a stay or continuance of a trial when a party's trial counsel is a member of the New York State Legislature. Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion make no claim that their counsel is a member of the Legislature.
The fourth affirmative defense asserted by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion, based upon mitigation of damages, is not an affirmative defense to an action to foreclose a mortgage.
The fifth affirmative defense raised by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion is based upon their claim that the subject premises is capable of being sold in separate parcels. This claim does not constitute a defense to a mortgage foreclosure action. In addition, a mortgagee generally is entitled to a sale of the premises, as described in the mortgage ( see, Gregory v Campbell, 16 How Pr 417 [Sup Ct New York County 1858]; 78 NY Jur 2d, "Mortgages" § 684). Moreover, the consolidation agreement, to which defendant 7128 Fresh Meadows was a party, expressly provides that "in case of any sale of the Premises by virtue of judicial proceedings, the Premises may be sold in one parcel and as an entity or in such parcels, manner or order as the Mortgagee in its sole discretion may elect" (section "V," paragraph "D") ( see, LBV Properties v Greenport Dev. Co., 188 AD2d 588 [2nd Dept. 1992]).
With respect to the sixth and seventh affirmative defenses asserted by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion, based upon bad faith and unconscionable conduct, they have failed to allege or establish that they lacked any meaningful choice when entering into the loan transaction, or that plaintiff or its predecessors in interest engaged in conduct which was harsh or oppressive, or impeded their ability to make payments on the consolidated mortgage ( see, Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d 175 ; Mahopac Natl. Bank v Baisley, 244 AD2d 466 [2nd Dept. 1997], lv. to appeal dismissed, 91 NY2d 1003 (1998); FGH Contracting Co., Inc. v Weiss, 185 AD2d 969, lv. to appeal dismissed, 81 NY2d 783 (1993).
To the extent they assert that plaintiff and its predecessors in interest communicated an offer to continue to "extend the due date on the said loan until such time as the [condominium] Units were sold," and present a copy of an e-mail dated December 21, 2009, to such effect, defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion make no claim that they accepted the terms of the offer therein. Rather, counsel for defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion assert the offer was disingenuous, because it was known by the bank they could not afford the proposed terms.
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion assert usury as an eighth affirmative defense. A limited liability company is not entitled to impose a defense based upon civil usury in any action, except for in those instances where the limited liability company has, as its principal asset, a one-or two-family dwelling and the limited liability company was organized, or the controlling interest acquired, within six months prior to execution by the limited liability company of the note evidencing the indebtedness ( see, General Obligations Law § 5-521; Limited Liability Company Law § 1104). Furthermore, because an individual guarantor may be viewed as standing in the shoes of the principal, such guarantor can avail only those defenses available to the principal ( see General Phoenix Corp. v Cabot, 300 NY 87, 95 [1949]; European American Bank Trust Co. v Boyd, 131 AD2d 629 [2nd Dept. 1987]). Hence, a guarantor cannot rely upon the defense of civil usury in the instance where the principal is a limited liability company prohibited from interposing the defense of civil usury ( see, General Phoenix Corp. v Cabot, 300 NY 87, 95 [1949]; European American Bank Trust Co. v Boyd, 131 AD2d 629, supra).
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion do not deny that defendant 7128 Fresh Meadows is a limited liability company and make no claim that it has as its principal asset a one-or two-family residence. Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion, therefore, may not raise the defense of civil usury.
To the extent defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion assert criminal usury, the criminal usury statutes do not apply to loans in excess of $2.5 million that are issued in one or more installments pursuant to a written agreement ( see, General Obligations Law § 5-501[b]; AJW Partners LLC v Itronics Inc. , 68 AD3d 567 [1st Dept. 2009]). The stated principal amount of the consolidated mortgage exceeds $2.5 million and was issued in one or more installments pursuant to a written agreement. Hence, defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion may not assert criminal usury as a defense with respect to such mortgage ( see, General Obligations Law § 5-501[b]).
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion raise lack of personal jurisdiction as a ninth affirmative defense in their answer. They failed to move to dismiss the complaint upon such ground within 60 days of service of a copy of the amended answer, and have made no showing of undue hardship. As a consequence, the defense is deemed waived (CPLR 3211[e]; DeSena v HIP Hosp., Inc., 258 AD2d 555 [2nd Dept. 1999]; Wade v Byung Yang Kim, 250 AD2d 323 [2nd Dept. 1998]; Fleet Bank, N.A. v Riese, 247 AD2d 276 [1st Dept. 1998]).
With respect to the tenth affirmative defense based upon payment, the loan has matured, and defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion have failed to present evidence of full payment of the total amount due and owing plaintiff. Any dispute as to the exact amount owed plaintiff, pursuant to the mortgage and note, may be resolved after a reference pursuant to RPAPL 1321 ( see, Crest/Good Mfg. Co., Inc. v Baumann, 160 AD2d 831 [2nd Dept. 1990]). The existence of such a dispute does not preclude the granting of summary judgment as to liability ( see, Layden v Boccio, 253 AD2d 540 [2nd Dept. 1998]).
The eleventh affirmative defense asserted by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion based upon their claim that plaintiff has an adequate remedy at law is without merit. The consolidated mortgage allows for the mortgagee to proceed in equity to enforce its terms (section "V," paragraph "D"). In addition, the right of a mortgagee to invoke the aid of equity to enforce the mortgage lien, cannot be defeated upon the ground that the mortgagee has an adequate remedy at law for damages ( see, Occidental Realty Co. v Palmer, 117 App Div 505 [1st Dept. 1907]), aff'd, 192 NY 588).
The twelfth affirmative defense asserted by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion is based upon their claim that United Commercial Bank misrepresented to them it would continue to hold, renew, and extend the subject mortgage loan, and that it "defrauded" them into paying fees and other monies to United Commercial Bank, and executing personal guaranties. They have failed to allege or demonstrate United Commercial Bank made any misrepresentation to them which was false and known to be false, for the purpose of inducing them to rely upon it, and that they justifiably relied upon it, causing them injury ( see, Lama Holding Co. v Smith Barney, 88 NY2d 413, 421; Cash v Titan Financial Servs., Inc. , 58 AD3d 785 , 788 [2nd Dept. 2009]). To the extent defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion allude to the takeover of United Commercial Bank by the FDIC, such takeover did not occur until after the extension of the maturity date of the loan.
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion assert as a thirteenth affirmative defense that the complaint is not verified. A complaint for foreclosure is not required by statute to be verified, and, therefore, any lack of verification does not constitute an defense to a foreclosure action. The Court notes, however, that the copy of the complaint presented by plaintiff herein is verified. To the extent defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion assert the complaint herein is defectively verified, the objection based upon improper verification was not preserved (CPLR 3022; see, Scott v Statem, 46 AD3d 664 [2nd Dept. 2007]; see also, Ligotti v Wilson, 287 AD2d 550 [2nd Dept. 2001]). The thirteenth affirmative defense based upon lack of verification asserted by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion in their answer is dismissed.
The fourteenth affirmative defense raised by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion is based upon lack or failure of consideration. They have failed to allege or demonstrate the subject mortgage loan was without consideration.
Defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion have failed to come forward with any evidence showing the existence of a triable issue of fact with respect to any defense. They also has failed to demonstrate the manner in which discovery might reveal the existence of a triable issue of fact in relation to their defenses, warranting the denial of summary judgment of the foreclosure claim ( see, JP Morgan Chase Bank, N.A. v Agnello , 62 AD3d 662 [2nd Dept. 2009]).
Plaintiff, therefore, is entitled to summary judgment in its favor against defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion ( see, Fed. Home Loan Mtge. Corp. v Karastathis, 237 AD2d 558 [2nd Dept. 1997]; DiNardo v Patcam Serv. Station, 228 AD2d 543 [2nd Dept. 1996]).
The motion by plaintiff is granted, and the cross motion by defendants 7128 Fresh Meadows, Zhi Cheng Huang, and Zorion is denied.
The foregoing constitutes the decision, order, and opinion of the Court.