Opinion
No. 500367/14.
10-31-2016
U.S. BANK NATIONAL ASSOCIATION, as Trustee for Mastr Asset Backed Securities Trust 2006–FRE2, Mortgage Pass–Through Certificates, Series 2006–FRE2, Plaintiff, v. Alberto MARTINEZ, Mortgage Electronic Registration Systems, Inc., Criminal Court of the City of New York, New York State Department of Taxation and Finance, United States of America by the Internal Revenue Service, City of New York Environmental Control Board, New York City Transit Adjudication Bureau, City of New York Department of Transportation Parking Violations Bureau, and John Doe, Defendant(s).
Wood Oviatt Gilman LLP, Rochester, for Plaintiff's. Alice A. Nicholson, Esq., Brooklyn, for Defendant's.
Wood Oviatt Gilman LLP, Rochester, for Plaintiff's.
Alice A. Nicholson, Esq., Brooklyn, for Defendant's.
DAWN M. JIMENEZ–SALTA, J.
The following papers numbered 1 to 15 read herein:
| Papers | Numbered |
|---|---|
| Notice of Motion/Order to Show Cause/Petition/Cross Motion and Affidavits (Affirmations) Annexed | 1–2, 4–6, 7, 9–11 |
| Opposing Affidavits (Affirmations) | 3, 7, 12–13 |
| Reply Affidavits (Affirmations) | 8, 14–15 |
Upon the foregoing papers in this foreclosure action regarding the real property at 809 Friel Place in Brooklyn (Property), plaintiff, U.S. Bank National Association, as Trustee for Mastr Asset Backed Securities Trust 2006–FRE2, Mortgage Pass–Through Certificates, Series 2006–FRE2 (U.S. Bank Trustee) moves in Motion Sequence (Seq.) No.1, pursuant to CPLR 3025(b), for an order granting it leave to serve a supplemental summons and an amended complaint: (1) adding New Dawn Home Improvement, Inc. (New Dawn) as a party defendant to this action; (2) adding a third cause of action against New Dawn seeking a declaration, pursuant to RPAPL Article 15, that New Dawn's prior lien on the Property was satisfied, is invalid, extinguished and discharged; (3) adding a fourth cause of action against New Dawn seeking a declaration, pursuant to RPAPL Article 15, that New Dawn's prior lien on the Property is equitably subordinated to U.S. Bank Trustee's mortgage on the Property; and (4) adding a fifth cause of action against New Dawn, pursuant to RPAPL 1921, alleging that "[u]pon payment of the indebtedness secured by the Mortgage, the defendant New Dawn ... was required to discharge the Prior Mortgage ..."
See U.S. Bank's proposed Amended Foreclosure Complaint, a copy of which is annexed as part of Exhibit A to the December 1, 2014 Affirmation of Victoria E. Munian, Esq. submitted in support of U.S. Bank Trustee's motion to amend the 2014 Complaint (2014 Munian Affirmation).
Defendant Alberto Martinez (Martinez) moves in Motion Seq. No.2, pursuant to CPLR 213(4), 3211(a)(5) and 3212, for an order: (1) granting him summary judgment dismissing U.S. Bank Trustee's complaint based on the six-year statute of limitations applicable to foreclosure actions, and (2) cancelling the notice of pendency filed against his Property.
US Bank Trustee moves in Motion Seq. # 3 for an order: (1) granting it summary judgment, pursuant to CPLR 3212, on the grounds that there are no triable issues of fact and that it is entitled to a judgment of foreclosure; (2) dismissing Martinez's answer and the affirmative defenses asserted therein, pursuant to CPLR 3211(b) ; and (3) appointing a referee to compute the amounts due, pursuant to RPAPL 1321.
* * *
US Bank Trustee admits that it failed to commence this 2014 Foreclosure Action within six years of Martinez's September 1, 2007 payment default under his home mortgage. As discussed herein (infra ), U.S. Bank Trustee has failed to satisfy its burden of establishing the existence of an exception to the statute of limitations to salvage its time-barred action.
Martinez's summary judgment motion seeking an order dismissing the 2014 Foreclosure Action and cancelling the Notice of Pendency filed against his Property is thus granted. Consequently, U.S. Bank Trustee's motions (Motion Seq. # 1 and # 3) were rendered moot.
Background
The Fremont Note And Mortgage
Martinez financed his residential Property on December 19, 2005 by executing a promissory note in favor of Fremont Investment & Loan (Fremont) in the principal amount of $639,000.00 (Fremont Note). The Fremont Note was secured by a mortgage on Martinez's Property, which provides that Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Fremont, is the mortgagee solely for purposes of recording the mortgage (Fremont Mortgage). The Fremont Mortgage was recorded in the New York City Register's Office on February 7, 2006, under City Register File Number (CRFN) 2006000072793.
Copies of the Fremont Note and Mortgage are annexed as Exhibits i and ii to Susana Leal–Salgado's December 17, 2014 "Affidavit In Support Of Motion For Summary Judgment And Amounts Due And Owing" (Leal–Salgado Affidavit).
The 2007 MERS Mortgage Assignment
About two years later, MERS, as nominee for Fremont, assigned the Fremont Mortgage to "US Bank National Association as trustee for the master asset backed securities trust 2006–FRE2" by a December 7, 2007 "ASSIGNMENT OF MORTGAGE" executed by Ronald W. Zackem, Esq. "On behalf of MERS, by Corporate Resolution dated 7/19/07" (2007 MERS Mortgage Assignment).
The 2007 MERS Mortgage Assignment is collectively annexed with the Fremont Mortgage as Exhibit ii to the Leal–Salgado Affidavit (emphasis added).
Notably, the 2007 MERS Mortgage Assignment reflects on its face that it was prepared by Steven J. Baum, P.C. (the Baum Law Firm), and it was executed by Mr. Zackem, an attorney previously employed by the Baum Law Firm. The 2007 MERS Mortgage Assignment was recorded with the City Register on January 3, 2008 under CRFN 2008000002354.
The Baum Law Firm was investigated for questionable mortgage foreclosure practices, misleading pleadings, affidavits and mortgage assignments and paid a $2 million fine, pursuant to an October 6, 2011 settlement with the United States Attorney for the Southern District of New York (https: //www.justice.gov/archive/usao/nys/pressreleases/October11/ stevenbaumpcagreementpr.pdf).
the 2008 Mers Mortgage Re–Assignment
According to New York's Automated City Register Information System (ACRIS), four months later, on April 3, 2008, MERS, as nominee for Fremont, re-assigned the Fremont Mortgage to "US Bank National Association as Trustee for the Master Asset Backed Securities Trust 2006–FRE2" by an "ASSIGNMENT OF MORTGAGE" executed by another Baum Law Firm attorney, Elpiniki Bechakas, as "Assistant Secretary and Vice President" of MERS (2008 MERS Mortgage Re–Assignment). The Baum Law Firm recorded the 2008 MERS Mortgage Re–Assignment with the City Register on April 18, 2008 at CRFN 2008000156043.
This court takes judicial notice of the mortgage recording documents on ACRIS (see Des Fosses v. Rastelli, 283 A.D. 1069, 1070 [1954] ["(t)his court has taken judicial notice of the deed in the foreclosure action from the Referee, to the respondents, dated April 6, 1953, and recorded April 15, 1953"] ).
Elpiniki M. Bechakas was an attorney employed by the Baum Law Firm who is mentioned in several other foreclosure cases (see, e.g ., U.S. Bank Natl. Assoc. v. Bresler, 39 Misc.3d 1205(A) [Sup Ct Kings County 2013] ; Bank of New York Mellon v. Martinez, 33 Misc.3d 1215(A) [Sup Ct Queens County 2011] ).
The Corrected Mers Mortgage Re–Assignments
1. The 2011 Corrected MERS Mortgage Re–Assignment
Sometime in 2011, during the pendency of a prior foreclosure action commenced by the Baum Law Firm on behalf of U.S. Bank Trustee in 2007 (see infra ), the Baum Law Firm recorded an undated "Correcting Assignment of Mortgage" executed by Yax Vrischika as "Secretary" of MERS (2011 Corrected MERS Mortgage Re–Assignment).
The 2011 Corrected MERS Mortgage Re–Assignment purported to re-assign the Fremont Mortgage to U.S. Bank Trustee, the plaintiff herein, and explicitly states that: (1) the Fremont Mortgage was previously assigned by MERS to "US Bank National Association as trustee for the master asset backed securities trust 2006–FRE2 in 2007" and (2) " *[t]his assignment is being recorded to correct the scriveners's error on the assignment recorded the 3rd day of January, 2008 at CRFN: 2008000002354 as it inadvertently omitted ‘its successors and assigns' in the assignor. " The Baum Law Firm recorded the 2011 Corrected MERS Mortgage Re–Assignment with the City Register on April 19, 2011 under CRFN 2011000141836.
See Leal–Salgado Affidavit, Exhibit ii (emphasis in original).
However, the 2011 Corrected MERS Mortgage Re–Assignment was defective on its face, since it was executed by Yax Vrischika as "Assistant Secretary" of MERS on January 21, 2011, yet the document reflects that it was notarized by Sandra Mae Parrish, a Notary Public in Dakota County, Minnesota, three months later on March 21, 2011.
See Leal–Salgado Affidavit, Exhibit ii.
2. The 2013 Corrected MERS Mortgage Re–Assignment
More than two years later, on December 19, 2013, another "CORRECTIVE ASSIGNMENT OF MORTGAGE" was executed by MERS, as nominee for Fremont, purporting to re-assign the Fremont Mortgage to U.S. Bank Trustee (2013 Corrected MERS Mortgage Re–Assignment). The 2013 Corrected MERS Mortgage Re–Assignment was executed by Michelle Erin Wihren as "Assistant Secretary" of MERS and states that " * *THIS CORRECTIVE ASSIGNMENT IS BEING RECORDED TO AMEND [the 2011Corrected MERS Mortgage Re–Assignment] AS THE EXECUTED DATE AND NOTARY DATE ON THIS ASSIGNMENT DO NOT MATCH." The 2013 Corrected MERS Mortgage Re–Assignment reflects that the 2013 Corrected MERS Mortgage Re–Assignment was recorded with the City Register on January 13, 2014 at CRFN 2014000015412 at the request of Wells Fargo Bank, N.A. (Wells Fargo).
The 2007 Foreclosure Action
1. The 2007 Notice Of Default
Meanwhile, according to court records, the Default Management Department of Wells Fargo, d/b/a America's Servicing Company, Martinez's long-time mortgage servicer (Servicer Wells Fargo/ASC), sent Martinez an October 22, 2007 notice of default explicitly advising Martinez that:
"This court may take judicial notice of undisputed court records and files" (Khatibi v. Weill, 8 A.D.3d 485, 485 [2004] ).
"Our records indicate that your loan is in default. Unless the payments on your loan can be brought current by November 21, 2007, it will become necessary to accelerate your Mortgage Note and pursue the remedies provided for in your Mortgage or Deed of Trust.
....
"Your failure to pay this delinquency, plus additional payments and fees that may become due, will result in the acceleration of your Mortgage Note. Once acceleration has occurred, a foreclosure action, or any other remedy permitted under the terms of your Mortgage or Deed of Trust, may be initiated.
"You have the right o reinstate your Mortgage Note and Mortgage or Deed of Trust after acceleration. However, any future negotiations attempting to reinstate your loan or any payment of less than the full amount due shall not constitute [Servicer ASC's] waiver of the acceleration unless agreed to, in writing, by [Servicer ASC] and may be returned.
...
"If funds are not received by the above stated date, we will proceed to automatically accelerate your loan."
See Servicer ASC's October 22, 2007 default letter (emphasis added), a copy of which is annexed as part of Exhibit H to U.S. Bank Trustee's November 24, 2009 Motion For Execution of Judgment of Foreclosure and Sale in the 2007 Foreclosure Action.
2. The 2007 Foreclosure Complaint
On December 7, 2007, U.S. Bank Trustee commenced an action against Martinez seeking to foreclose on the Property under the Fremont Mortgage (see U.S. Bank Nat'l Assoc., As Trustee For Mastr Asset Backed Securities Trust, 2006–FRE2 v. Martinez, et al., index No. 44879/07) (the 2007 Foreclosure Action).
The 2007 Complaint, which was executed and filed by the Baum Law Firm, alleged that Martinez "failed to comply with the conditions of the [Fremont] mortgage and note by failing to pay principal and interest ... that came due and payable on the 1st day of September, 2007 ... Accordingly, Plaintiff elects to call due the entire amount secured by the mortgage."
See ¶ 5 of the 2007 complaint in the 2007 Foreclosure Action (emphasis added), a copy of which is annexed as Exhibit 3 to Alice A. Nicholson's February 11, 2015 affirmation submitted in support of Martinez's summary judgment motion (Nicholson Moving Affirmation).
Martinez filed a January 4, 2008 notice of appearance in the 2007 Foreclosure Action.
3. The 2009 Order Of Reference
Six months later, U.S. Bank Trustee filed a June 25, 2008 application seeking an order: (1) appointing a referee to determine the amount due and ascertain whether the Property could be sold in parcels; (2) substituting the Property tenants, Anna Martinez, Auhustainouch Ulyana and Tatsiana Yafremava as defendants in place of the "John Doe" defendants; and (3) deeming all non-appearing and non-answering defendants in default. US Bank Trustee's application for an order of reference was supported by the June 25, 2008 affirmation of Megan B. Szeliga, Esq. of the Baum Law Firm and the February 6, 2008 "Affidavit of Merit" of Dawn Ward, "Vice President" of Servicer Wells Fargo/ASC, the alleged "Attorney in fact" for U.S. Bank Trustee.
By a February 19, 2009 order, the court (Cutrona, J.) granted U.S. Bank Trustee's application for an Order of Reference, amended the caption to include the new defendants and appointed Charles Esposito as Referee (2009 Order of Reference). The 2009 Order of Reference was entered in the Kings County Clerk's office on February 24, 2009 and Notice of Entry was filed on July 30, 2009.
4. The 2009 Forbearance Plan
Four days after the 2009 Order of Reference was issued, Servicer Wells Fargo/ASC sent Martinez a February 23, 2009 letter thanking Martinez for "contacting [it] regarding [his] financial hardship ..." and expressing its "goal" to "ensure that [he has] every opportunity to retain [his] home." Servicer Wells Fargo/ASC's February 23, 2009 letter stated that "[b]ased on our telephone conversation and the financial information you provided, we would like to offer you a Special Forbearance Plan" (the 2009 Forbearance Plan). The 2009 Forbearance Plan offered by Servicer Wells Fargo/ASC advised that:
Apparently, during the pendency of the 2007 Foreclosure Action, Martinez had contacted Servicer Wells Fargo/ASC and submitted applications seeking an affordable modification of the Fremont loan in an effort to avoid foreclosure.
See Servicer Wells Fargo/ASC's February 23, 2009 letter, a copy of which is annexed as Exhibit M to Victoria E. Munian's April 9, 2015 "Affirmation of Regularity in Support of Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment" (2015 Munian Affirmation).
2015 Munian Affirmation, Exhibit M (2009 Forbearance Plan at page 1).
"[c]urrently, your loan is due for 18 installments, from September 01, 2007 through February 01, 2009. As agreed, you have promised to pay the amounts shown below by the dates indicated. Also enclosed are the terms and conditions of this forbearance. Please sign the enclosed agreement and return it with the first installment. This is not a waiver of the accrued or future payments that become due, but a period for you to determine how you will be able to resolve your financial hardship. Any payments received will be applied to the delinquent payments on the loan. During this Special Forbearance Agreement, payments are to be mailed to:
America's Servicing Company
3476 Stateview Blvd
Fort MillSC29715
"FWe will instruct our foreclosure counsel to suspend foreclosure proceedings once the initial payment has been received, and to continue to suspend the action as long as you keep to the terms of the Agreement...."
Id (emphasis added).
The second page of the 2009 Forbearance Plan contained a list of "SPECIAL FORBEARANCE AGREEMENT—TERMS AND CONDITIONS," including:
"1. Currently, your loan is due for 18 installments, from September 01, 2007 through February 01, 2009. The indebtedness of the referenced loan is in default and in consideration of extending forbearance for a period of time, it is necessary that you indicate your understanding and acceptance of the terms of the forbearance agreement by immediately signing and returning this agreement.
"2.... This plan is an agreement to temporarily accept reduced payments or maintain regular monthly payments during the plan ... Upon successful completion of the payments outlined in this plan, your loan will be reviewed for a Loan Modification....
"3. The lender is under no obligation to enter into any further agreement, and this forbearance shall not constitute a waiver of the lender's right to insist upon strict performance in the future.
"4. All of the provisions of the note and security instrument, except as herein provided, shall remain in full force and effect. Any breach of any provision of this agreement or non-compliance with this agreement, shall render the forbearance null and void, and at the option of the lender without further notice to you may terminate this agreement. The lender, at its option, may institute foreclosure proceedings according to the terms of the note and security instrument without regard to this agreement...."
Id. at page 2, 778 N.Y.S.2d 511 (emphasis added).
The 2009 Forbearance Plan provided for four payments: (1) $4,668.31 to be paid on 03/15/09; (2) $4668.31 to be paid on 04/15/09; (3) $4668.31 to be paid on 05/15/09; and (4) a balloon payment of $111,805.24 to be paid on 06/15/09. A copy of the 2009 Forbearance Plan submitted to the court by U.S. Bank Trustee reflects that it was executed by Martinez on March 5, 2009.
Id. (emphasis added).
See 2015 Munian Affirmation, Exhibit M at page 2.
According to Servicer Wells Fargo/ASC's "payment history," Martinez allegedly made three payments of $4,668.31 under the 2009 Forbearance Plan that Servicer Wells Fargo/ASC "posted on March 12, 2009, April 9, 2009, and May 15, 2009 ..." According to Servicer Wells Fargo/ASC, those payments were applied to the contractual due dates of September 1, 2007, October 1, 2007 and November 1, 2007. Thus, the only payment that Martinez failed to make under the 2009 Forbearance Plan was the large payment of $111,805.24, which was due on June 15, 2009.Despite Martinez's three forbearance payments totaling $14,004.93, Servicer Wells Fargo/ASC failed to comply with the terms of the 2009 Forbearance Plan because court records reflect that the 2007 Foreclosure Action was not suspended once Martinez made his initial payment under the 2009 Forbearance Plan.
See 2015 Munian Affirmation at ¶ 24 and Exhibit Q
2015 Munian Affirmation at ¶ 24.
5. The 2009 HAMP Trial
In August 2009, Servicer Wells Fargo/ASC offered Martinez a three-month loan trial period during which he was reviewed for a loan modification under the federal Home Affordable Modification Program (HAMP) (2009 HAMP Trial).
"HAMP is a federal program that is intended to help homeowners avoid foreclosure ‘by modifying loans to a level that is affordable for borrowers now and sustainable over the long term" ’ (U.S. Bank Nat. Ass'n v. Sarmiento, 121 A.D.3d 187, 190 [2014] [quoting https://www.hmpadmin. com/portal/programs/hamp.jsp, last accessed July 16, 2014] ).
The 2009 HAMP Trial references the Fremont Mortgage and Note and identifies the "Loan Trial Period Effective Date" as October 1, 2009. Curiously, the 2009 HAMP Trial identifies "America's Servicing Company" as the "Lender" and Martinez as the "Borrower ." According to the terms of the 2009 HAMP Trial, Martinez agreed that "[he] will pay the Lender" three "Trial Period Payments" of $2,415.48 on or before 10/01/09, 11/01/09 and 12/01/09, which is "an estimate of the payment that will be required under the modified loan terms ..." Importantly, the 2009 HAMP Trial provided that:
See 2015 Munian Affirmation, Exhibit L at page 1.
Id. at page 1, 991 N.Y.S.2d 68.
Id. at page 2, 991 N.Y.S.2d 68.
"B. Except as set froth in Section 2.C. below, the Lender will suspend any scheduled foreclosure sale, provided I continue to meet the obligations under this Plan, but any pending foreclosure action will not be dismissed and may be immediately resumed from the point at which it was suspended if this Plan terminates, and no new notice of default, notice of intent to accelerate, notice of acceleration, or similar notice will be necessary to continue the foreclosure action ...
....
"E. When the Lender accepts and posts a payment during the Trial Period it will be without prejudice to, and will not be deemed a waiver of, the acceleration of the loan or foreclosure action and related activities and shall not constitute a cure of my default under the Loan Documents unless such payments are sufficient to completely cure my entire default under the Loan Documents ..."
Id. at page 2, 991 N.Y.S.2d 68 (emphasis added).
The 2009 HAMP Trial in the record reflects that it was executed by Martinez on August 27, 2009 and by the "VP of Loan Documentation" of Servicer Wells Fargo/ASC on September 30, 2009.
Id. at page 3, 991 N.Y.S.2d 68.
6. US Bank Trustee's November 2009 Summary Judgment Motion
Meanwhile, the court-appointed referee, Referee Charles Esposito, Esq., issued his Oath and Report of Amount Due on October 14, 2009, reporting that from September 1, 2007 through July 2, 2009 principal and interest (at a rate of 7.5%) totaled $738,232.57.
The following month—during the 2009 HAMP Trial—US Bank Trustee proceeded to prosecute the 2007 Foreclosure Action by filing a summary judgment motion on November 24, 2009 seeking an order: (1) granting it summary judgment; (2) granting it an extension of time, nunc pro tunc, within which to serve notice of entry of the 2009 Order of Reference; (3) granting defendant, National City Bank, relief pursuant to RPAPL 1351(3) ; and (4) declaring that defendants' prior adverse liens are invalid and extinguished, pursuant to RPAPL Article 15 (2009 Summary Judgment Motion).
Two months later, U.S. Bank Trustee inexplicably withdrew its 2009 Summary Judgment Motion by filing a December 7, 2009 notice of withdrawal with the Kings County Clerk on January 14, 2010.
7. US Bank Trustee's 2010 Summary Judgment Motion
US Bank Trustee filed another summary judgment motion on October 4, 2010 (2010 Summary Judgment Motion). Martinez cross-moved to dismiss U.S. Bank Trust's 2007 Complaint.
On January 7, 2011, U.S. Bank Trustee submitted its December 11, 2010 notice of withdrawal requesting that its 2010 Summary Judgment Motion be withdrawn. Notably, U.S. Bank Trustee's 2010 notice of withdrawal explicitly advised the court that "Plaintiff will not be discontinuing the above referenced action."
See U.S. Bank Trustee's December 21, 2010 Notice of Withdrawal (emphasis added).
On February 28, 2011, the return date of U.S. Bank Trustee's 2010 Summary Judgment Motion and Martinez's cross motion to dismiss the 2007 Complaint, the court granted the parties leave to withdraw their respective motion and cross motion.
8. Plaintiff's 2011 Consent To Change Attorney
By a December 16, 2011 consent to change attorney executed by Meryl Ponyman "Assistant Vice President" and "Client Services Manager" of U.S. Bank Trustee and Darleen V. Karaszewski, Esq. of the Baum Law Firm, Frenkel Lambert Weiss Weisman & Gordon, LLP (the Frenkel Law Firm) was substituted in as attorneys of record for the U.S. Bank Trustee in the 2007 Foreclosure Action.
The Baum Law Firm announced that it was closing its business in November 2011 after it received negative publicity and was being investigated regarding its foreclosure practices. http://dealbook.nytimes.com/ 2011/11/21/foreclosure-firm-steven-j-baum -to-close-down/?_r=0.
9. The 2011 Settlement Conference
Four days later, on December 20, 2011, the parties appeared for a settlement conference before a court-attorney referee, pursuant to CPLR 3408, after which the case was referred back to the court (Cutrona, J.) because Martinez did not qualify for a loan modification.
See the December 20, 2011 Referee's Directive issued in the 2007 Foreclosure Action.
10. US Bank Trustee's 2013 Motion To Discontinue The 2007 Foreclosure Action
Prior to U.S. Bank Trustee's 2013 Motion to Voluntarily Discontinue the 2007 Foreclosure Action, the 2007 Foreclosure Action was transferred from Part 75 (Garson, J.) to the Judicial Referral Foreclosure Part 2 (Knipel, J.), and a July 9, 2013 Order of Dismissal was issued.
By notice of motion dated October 21, 2013, U.S. Bank Trustee moved for an order: (1) canceling its notice of pendency; (2) discharging Referee Charles Esposito, Esq.; and (3) discontinuing the 2007 Foreclosure Action (2013 Motion to Discontinue). US Bank Trustee's 2013 Motion to Discontinue was supported by the October 21, 2013 affirmation of Michael Herberger, Esq. of the Frenkel Law Firm (Herberger Affirmation), which affirmed that:
"[p]laintiff now seeks to discontinue this [2007 Foreclosure Action] because of our continuing obligations pursuant to the OCA administrative orders applicable to foreclosure actions, as our office is unable to verify the accuracy of all prior filings and proceedings in this action."
Herberger Affirmation at ¶ 6 (emphasis added).
Apparently, Herberger was referring to Administrative Order 431/11, which set forth certain requirements in residential foreclosure actions to confirm the factual accuracy of the allegations in the complaint.
Administrative Order (AO) 431/11 (which superceded AO 548/10) mandates that plaintiffs' counsel in residential foreclosure actions file a form affirmation stating that they communicated with a plaintiff representative to confirm the factual accuracy of the allegations in the complaint because "[d]uring and after August 2010, numerous and widespread insufficiencies in foreclosure filings in various courts around the nation were reported by major mortgage lenders and other authorities, including failure to review documents and files to establish standing and other foreclosure requisites; filing of notarized affidavits which falsely attest to such review and to other critical facts in the foreclosure process; and ‘robosignature’ of documents."
By a December 18, 2013 Order, the court (Garson, J.) granted U.S. Bank Trustee's 2013 Motion to Discontinue the 2007 Foreclosure Action based on its inability to comply with AO 431/11, cancelled the notice of pendency and discharged the court-appointed foreclosure referee (2013 Discontinuance Order). The 2013 Discontinuance Order was subsequently filed with the Kings County Clerk on February 25, 2014.
The 2014 Foreclosure Action
1. US Bank Trustee's 2014 Complaint
On January 16, 2014, one month after the 2007 Foreclosure Action was discontinued (and 3 days after the 2013 Corrected MERS Mortgage Re–Assignment was recorded), U.S. Bank Trustee commenced the 2014 Foreclosure Action by filing a notice of pendency, a summons and an unverified complaint alleging that: (1) "[a]s of December 20, 2013, there is due and owing on the Note a principal balance of $634,032.53, together with: accrued interest from November 1, 2007 at a rate of 7.500% ... incurred prior to acceleration ..."; (2) "the Note is in default due to the principal defendant's failure to repay the Indebtedness in accordance with the terms of the Note"; (3)[t]he principal defendant failed to pay the December 1, 2007 payment and subsequent installments due on the Note"; and thus, the first cause of action against Martinez alleges that: (4) "[a]s a result of the principal defendant's default by failing to make his payments as promised in the Note and Mortgage, the plaintiff has previously elected and hereby elects to call due the entire amount presently secured by the Mortgage, plus accrued interest ..." and seeks a foreclosure judgment declaring that the mortgaged Property be sold and adjudging Martinez to be liable for any "deficiency of the indebtedness that may remain ..."
Notably, the 2013 Corrected MERS Mortgage Re–Assignment reflects on its face that the "Recording [was] Requested By" Servicer Wells Fargo/ASC.
The 2014 notice of pendency was filed by U.S. Bank Trustee's new foreclosing counsel from the law firm of Woods Oviatt Gilman LLP.
See Munian Affirmation, Exhibit A (2014 Complaint at ¶ 6 [emphasis added] ).
Id. at ¶ 15, 991 N.Y.S.2d 68 (emphasis added).
While the first cause of action alleges that: "[t]here are no other actions or pending proceedings at law to collect or enforce the note and mortgage," the 2014 Complaint does not contain any allegations regarding the parties' extensive litigation history during the 2007 Foreclosure Action—which was pending before the court for six years —from December 7, 2007 until December 18, 2013.
Id. at ¶ 17, 991 N.Y.S.2d 68.
The second cause of action alleges that: (1) "the full and proper name of the plaintiff is "U.S. Bank National Association, as Trustee for MASTR Asset Backed Securities Trust 2006–FRE2, Mortgage Pass–Through Certificates, Series 2006–FRE2" and (2) "the Mortgage was assigned to the full and proper name of the plaintiff by [the 2011 Corrected MERS Mortgage Re–Assignment]." Consequently, U.S. Bank Trustee seeks a declaration that the 2008 MERS Mortgage Re–Assignment is a nullity and "respectfully requests that it be expunged of record by the Office of the City Register of the City of New York." Essentially, U.S. Bank Trustee admits that the 2011 Corrected MERS Mortgage Re–Assignment was executed to correct the "name of the plaintiff" and the 2011 Corrected MERS Mortgage Re–Assignment explicitly states that "[t]his assignment is being recorded to correct the scriveners's error on the [2007 MERS Mortgage Assignment] ..."
Id. at ¶ 24, 991 N.Y.S.2d 68.
Id. at ¶ 25, 991 N.Y.S.2d 68.
Id. at ¶ 25, 991 N.Y.S.2d 68 and Leal–Salgado Affidavit, Exhibit ii (emphasis in original).
2. Martinez's 2014 Verified Answer
Martinez's answer, verified on February 12, 2014, denies the material allegations in the 2014 Complaint and asserts affirmative defenses, including: (1) lack of personal jurisdiction; (2) lack of standing; (3) failure to comply with RPAPL 1302 ; (4) failure to comply with RPAPL 1304 ; (5) failure to state a cause of action; (6) statute of limitations; (7) failure to join necessary parties; (8) failure to credit collateral sources; (9) the debt includes illegal charges; (10) failure to send a notice of default; (11) violations of RPAPL 1301, 1302, 1303 and 1304 ; (12) violation of New York's Banking Law; (13) unclean hands; (14) violation of the Federal Trust in Lending Act, 15 U.S.C. § 1601, et seq. ; (15) violation of the Real Estate Settlement Procedure Act, 12 U.S.C. § 2601, et seq., and Banking Law § 598 ; (16) violation of the Fair Housing Act, 42 U.S.C. §§ 3604 and 3605 ; and (17) lack of capacity.
US Bank Trustee's Motion To Amend The 2014 Complaint (Motion Seq. 1)
On December 1, 2014, U.S. Bank Trustee moved for an order granting it leave to serve an amended notice of pendency, a supplemental summons and an amended foreclosure complaint adding New Dawn, an alleged necessary party, as a party defendant because it holds "a prior mortgage which was recorded prior to the filing of its Lis Pendens."
2014 Munian Affirmation at ¶ 3.
While not mentioned anywhere in U.S. Bank Trustee's motion papers, the proposed amended foreclosure complaint reflects that U.S. Bank Trustee also seeks to amend its 2014 Complaint to add three additional causes of action against New Dawn: (1) a third cause of action seeking a declaration that New Dawn's lien on the Property was satisfied, is invalid, extinguished and discharged; (2) a fourth cause of action seeking a declaration that New Dawn's lien on the Property is equitably subordinated to the Fremont Mortgage; and (3) a fifth cause of action asserting a cause of action, pursuant to RPAPL 1921, alleging that "[u]pon payment of the indebtedness secured by the Mortgage, the defendant New Dawn ... was required to discharge the Prior Mortgage ..."
Proposed Amended Complaint at ¶¶ 26–37.
id. at ¶¶ 38–39, 991 N.Y.S.2d 68.
id. at ¶¶ 40–41, 991 N.Y.S.2d 68.
Martinez's counsel, in opposition, advises that "Martinez, in a separate motion requests an order granting summary judgment dismissing this case pursuant to CPLR 3211(a)(5) and 3212 because [the 2014 Foreclosure Action] may not be maintained because of expiration of the statute of limitations."
See ¶ 1 of Alice A. Nicholson's February 11, 2015 affirmation submitted in opposition to U.S. Bank Trustee's motion to amend the complaint (Nicholson Opposition Affirmation).
Martinez's Summary Judgment Motion (Motion Seq. 2)
On February 11, 2015, Martinez moved for summary judgment seeking an order dismissing the 2014 Complaint because it is barred by the six-year statute of limitations. Martinez submitted an affidavit attesting that "I have not extended or renewed the statute of limitations."
See ¶ 3 of Martinez's February 11, 2015 affidavit in support of his summary judgment motion (Martinez Affidavit).
US Bank Trustee's Opposition To Martinez's Summary Judgment Motion
US Bank Trustee, in opposition, contends that the 2014 Foreclosure Action is not time-barred because it "falls within a statute of limitations exception" based on Martinez's "partial payments" and alleged "acknowledgment" of the time-barred debt when Martinez made payments under the 2009 Forbearance Plan and pursuant to the 2009 HAMP Trial. Importantly, U.S. Bank Trustee explicitly admits that the 2014 Foreclosure Action was not commenced within six years of Martinez's September 1, 2007 payment default. In addition, U.S. Bank Trustee acknowledges that "[w]here a party relies on an exception to the Statute of Limitations, it has the burden of establishing applicability to that exception."
See 2015 Munian Affirmation at ¶¶ 15, 20 and 24 (emphasis added).
See U.S. Bank Trustee's April 9, 2015 Memorandum of Law in Opposition to Defendant's Motion for Summary Judgment and in Support of Plaintiff's Motion (U.S. Bank Trustee's Mem.) at page 4 (citing Park Assoc. v. Crescent Park Assoc., Inc., 159 A.D.2d 460 [1990] ).
1. Plaintiff Argues That The Statute Of Limitations Was Tolled And/Or Renewed When Martinez Paid Under The 2009 Forbearance Plan And The 2009 HAMP Trial
US Bank Trustee contends that Martinez acknowledged the debt and made partial payments under both the 2009 Forbearance Plan and the 2009 HAMP Trial that were "sufficient to toll and renew the statute":
"Firstly, while the six year statute of limitation starts from the December 1, 2007 installment and Plaintiff commenced its instant action [on] January 16, 2014 outside of six years, Plaintiff asserts that the instant foreclosure action falls within a statute of limitations exception as partial payments were made and accepted sufficiently to toll and renew the statute and there was a prior acknowledgment sufficient to toll and renew the statute...."
See 2015 Munian Affirmation at ¶ 15 and U.S. Bank Trustee's Mem. at page 5.
Regarding the 2009 HAMP Trial Plan, U.S. Bank Trustee's Memorandum of Law and the 2015 Munian Affirmation both state, verbatim:
"[H]ere the HAMP trial period agreement was an acknowledgment sufficient to toll and renew the statute as the agreement stated that the loan modification was to cover the [Fremont Mortgage] and Note dated December 23, 2005, the agreement stated that the Defendant believed he was either in default or that default was imminent ... and the Defendant further acknowledged and ratified the [HAMP] agreement by making the first three payments on September 23, 2009, October 28, 2009, and November 24, 2009, each in the amount of $2,415.48.
"Furthermore, the Defendant acknowledged in the [HAMP] trial plan that the completion of the plan would allow for a permanent loan modification for the [Fremont Mortgage] for the remaining life of the loan, thereby agreeing to pay the remainder of the debt. As [ ] there was a writing acknowledging that there was a default under the terms of the December 23, 2005 [Fremont Mortgage] and Note and consistent evidence that the Defendant wished to continue to pay the debt for the remaining life of the loan, the statute of limitations was tolled upon this writing and started anew on the date of execut[ion], August 27, 2009 ..."
2015 Munian Affirmation at ¶¶ 20–21 and U.S. Bank Trustee's Mem. at page 8.
US Bank Trustee further contends that Martinez's "partial payments" made pursuant to the 2009 Forbearance Plan are "sufficient to toll and renew the statute":
"Here, the partial payments made on the special forbearance agreement [are] sufficient to toll and renew the statute. First, the agreement was executed on March 5, 2009 within 6 years of the December 1, 2007 default date. The agreement included language acknowledging that the remainder of the debt still needed to be paid. The payments posted on March 12, 2009, April 9, 2009, and May 15, 2009, were paid and applied to the contractual due dates of September 1, 2007, October 1, 2007 and November 1, 2007, as demonstrated by the payment history ...
"Moreover, the execution of the agreement shows the consistent intent of the Defendant to pay the debt and bring the loan current."
See 2015 Munian Affirmation at ¶¶ 24–25 and U.S. Bank Trustee's Mem. at page 9.
2. Plaintiff Argues That The 2007 Foreclosure Action Was Not Based On The Same Cause Of Action
US Bank Trustee also argues that the commencement of the 2007 Foreclosure Action on December 6, 2007 did not cause the six-year Statute of Limitations to accrue because the 2007 Foreclosure Action was "not based upon the same cause of action."
2015 Munian Affirmation at ¶ 27 and U.S. Bank Trustee's Mem. at page 10.
US Bank Trustee contends that "separate causes of action[ ] accrue for each installment that is not paid, and the statute of limitations begins to run on th[e] date on which each installment becomes due and payable." Although Paragraph 5 of the 2007 Complaint explicitly and unambiguously alleges that "Plaintiff elects to call due the entire amount secured by the mortgage [,]" U.S. Bank Trustee now contends that the first cause of action in the 2007 Foreclosure Action merely alleged that "the Defendant failed to pay the [ ] installment for September 1, 2007." US Bank Trustee argues that the 2014 Foreclosure Action, in contrast to the 2007 Foreclosure Action, "is based on the Defendant's failure to make the December 1, 2007 installment and not the September 1, 2007 payment ..."
2015 Munian Affirmation at ¶ 28 and U.S. Bank Mem. at page 10.
2015 Munian Affirmation, Exhibit N (2007 Complaint at ¶ 5 [emphasis added] ).
2015 Munian Affirmation at ¶ 32 and U.S. Bank Trustee's Mem. at page 11.
3. Plaintiff Argues That The 2007 Acceleration Was Rescinded By The 2009 HAMP Trial
Finally, U.S. Bank Trustee argues that "any acceleration of the loa[n] has been deaccelerated with the execution of an additional loan modification trial plan ..." Without citing any legal authority for its position, U.S. Bank Trustee contends that "the loan was deaccelerated with the execution of [the 2009 HAMP Trial] agreement entered into by the Defendant as Defendant made the three trial payments in the amounts of $2,415.48 [a total of $7,246.44] on September 23, 2009, October 28, 2009, and November 24, 2009."
2015 Munian Affirmation at ¶ 15 and U.S. Bank Trustee's Mem. at page 5.
US Bank Trustee Mem. at page 12.
Notably, although U.S. Bank Trustee admits that Martinez complied with the 2009 HAMP Trial by making the three trial payments, Servicer Wells Fargo/ASC did not grant Martinez a final HAMP modification at the conclusion of 3–month trial in December 2009.
US Bank Trustee's Summary Judgment Motion (Motion Seq. 3)
On April 9, 2015, U.S. Bank Trustee separately moved for an order: (1) granting it summary judgment; (2) dismissing Martinez's answer and his affirmative defenses asserted therein; and (3) appointing a referee to compute the amounts due.
US Bank Trustee's motion for an order of reference and summary judgment is supported entirely by an affidavit submitted by Servicer Wells Fargo/ASC. Attorney Munian erroneously affirms that "[s]ubmitted herewith is the Plaintiff's Affidavit, setting forth the Plaintiff's ownership of the Note and Mortgage, the sums due to the Plaintiff, and the defendants' default under the Mortgage obligations." What Attorney Munian refers to as "Plaintiff's Affidavit" is actually the December 17, 2014 "Affidavit in Support of Motion for Summary Judgment and Amounts Due and Owing" of Susana Leal–Salgado, "a Vice President Loan Documentation of Wells Fargo dba America's Servicing Company ... as Servicer" for U.S. Bank Trustee (Servicer Leal–Salgado), in which she attests, without any documentary proof (such as a power of attorney), that "[i]n my position with Wells Fargo I am authorized to execute this Affidavit and to make the representations contained herein."
2015 Munian Affirmation at ¶ 37 (emphasis added).
Leal–Salgado Affidavit at ¶ 1 (emphasis added).
Servicer Leal–Salgado further attests that "I have access to the business records relating to the loan at issue herein ... I have reviewed the books and records maintained by Wells Fargo in the ordinary course of business in servicing this loan and make this affidavit based on my review of those records." Thus, the facts in the Leal–Salgado Affidavit are admittedly not based on personal knowledge, but are based on Servicer Leal–Salgado's review of Servicer Wells Fargo/ASC's business records, none of which were included with U.S. Bank Trustee's Summary Judgment Motion.
Id. at ¶ 2, 552 N.Y.S.2d 314 (emphasis added).
Importantly, Servicer Leal–Salgado attests that U.S. Bank Trustee "is in possession of the Promissory Note." However, Latice Simone Aiken, "Vice President Loan Documentation" of Servicer Wells Fargo/ASC submits a February 19, 2015 "Affidavit of Possession of Original Note" (Aiken Affidavit), which "confirm[s] that Wells Fargo had possession of the Promissory Note as of January 21, 2008[and] that Wells Fargo had possession of the Promissory Note on or before January 16, 2014, the date that this action was commenced." Like Servicer Leal–Salgado, Servicer Aiken admits that "[i]n connection with making this affidavit, I have acquired personal knowledge of the matters stated herein by examining the business records relating to the subject mortgage loan," without identifying or annexing those business records. Neither Servicer Leal–Salgado nor Servicer Aiken address the whereabouts of the Fremont Note on or before the commencement of the 2007 Foreclosure Action on December 7, 2007.
Id. at ¶ 6, 552 N.Y.S.2d 314.
Aiken Affidavit at ¶ 4 (emphasis in original).
Id. at ¶ 2, 552 N.Y.S.2d 314 (emphasis added).
Servicer Leal–Salgado's Affidavit regarding Servicer Wells Fargo/ASC's business records was executed in North Carolina and Servicer Aiken's Affidavit regarding possession of the Fremont Note was executed in South Carolina. This raises factual issues regarding the location where Servicer Wells Fargo/ASC maintains its servicing records for the Fremont Mortgage and/or where Leal–Salgado and Aiken reviewed those particular records, since Servicer Wells Fargo/ASC's address is listed as "4101 Wiseman Blvd MAC T & 408–01G in San Antonio, Texas 78251" on the pre-foreclosure notices that Servicer Wells Fargo/ASC allegedly mailed to Martinez, i.e., (1) the August 22, 2013 default notice, and (2) the August 22, 2013 RPAPL 1304 90–day pre-foreclosure notice.
Id. at Exhibits I (Leal–Salgado Affidavit) and K (Aiken Affidavit).
Id. at Exhibits G and H.
Martinez's Opposition To U.S. Bank Trustee's Summary Judgment Motion
Martinez, in opposition, attests that "this action is barred by the six-year statute of limitations ..." and that "[he] did not receive a 90–day notice pursuant to RPAPL § 1304 by certified or registered and by regular mail [and] the notice of default that the lender must send [him] under the mortgage loan documents."
See ¶¶ 3 and 4 of the June 10, 2015 Affidavit of Alberto Martinez submitted in opposition to U.S. Bank Trustee's Summary Judgment Motion (Martinez Opposition Affidavit).
Defense counsel contends that U.S. Bank Trustee's Summary Judgment Motion based on Servicer Leal–Salgado's Affidavit from Servicer Wells Fargo/ASC is insufficient to prove that a condition precedent to foreclosure has been satisfied because Servicer Leal–Salgado does not have "personal knowledge of whether the pre-foreclosure notices were properly mailed to the borrower. Nor does [she] offer any details as to the transfer of the [Fremont] note from Fremont to the plaintiff." Defendant counsel contends that Servicer Leal–Salgado's affidavit testimony regarding the pre-foreclosure notices are "unsubstantiated and conclusory statements."
See ¶ 6 of Alice A. Nicholson, Esq.'s June 10, 2015 affirmation in opposition to U.S. Bank Trustee's Summary Judgment Motion (Nicholson Opposition Affirmation).
See Nicholson Opposition Affirmation at ¶ 14.
Additionally, defense counsel argues that the substance of Servicer Wells Fargo/ASC's August 22, 2013 default notice failed to comply with the conditions set forth under Article 22(b)(5) and (b)(6) of the Fremont Mortgage.
Id. at ¶ 11, 552 N.Y.S.2d 314.
Defense counsel contends that "plaintiff failed to submit an affidavit of service evincing that it properly served [Martinez] pursuant to RPAPL § 1304 [,]" another condition precedent to the commencement of a foreclosure action, that "plaintiff's assertions, based on unspecified business records, constitute inadmissible hearsay [and that] the certified article number that the plaintiff submits is untraceable at the U.S. Postal Service website ... and the plaintiff has provided no proof of service."
Id. at ¶ 20, 552 N.Y.S.2d 314.
Id. at ¶ 23, 552 N.Y.S.2d 314.
Discussion
Martinez's Summary Judgment Motion Based On The Six–Year Statute Of Limitations
(1)
"[A]n action to foreclose a mortgage may be brought to recover unpaid sums which were due within the six-year period immediately preceding the commencement of the action" (Wells Fargo Bank N.A. v. Burke, 94 A.D.3d 980, 982 [2012] [citing CPLR 213(4) ] ).
"The statute of limitations in a mortgage foreclosure action begins to run from the due date for each unpaid installment, or from the time the mortgagee is entitled to demand full payment, or from the date the mortgage debt has been accelerated (Plaia v. Safonte, 45 A.D.3d 747, 748 [2007] [emphasis added] ). It is "well settled that, even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt" (EMC Mortgage Corporation v. Patella, 279 A.D.2d 604, 605 [2001] [emphasis added] [internal citations omitted]; Federal National Mortgage Ass'n v. Mebane, 208 A.D.2d 892, 894 [1994] ["[o]nce the mortgage debt was accelerated, the borrowers' right and obligation to make monthly installments ceased and all sums became immediately due and payable"] [internal citation omitted] ).
The Appellate Division, Second Department has held that the option to accelerate the maturity of a mortgage loan is subject to the contractual terms of the note and mortgage and that the holder of the note must unequivocally notify the borrower that the contractual option has been exercised:
"As with other contractual options, the holder of an option may be required to exercise an option to accelerate the maturity of a loan in accordance with the terms of the note and mortgage. Furthermore, the borrower must be provided with notice of the holder's decision to exercise the option to accelerate the maturity of a loan, and such notice must be clear and unequivocal" (Burke, 94 A.D.3d at 983, 943 N.Y.S.2d 540 [internal citations and quotation marks omitted] ).
Further, acceleration only takes place when the holder of the note and mortgage takes "affirmative action ... evidencing the holder's election" to do so:
"[w]here the acceleration of the maturity of a mortgage debt on default is made optional with the holder of the note and mortgage, some affirmative action must be taken evidencing the holder's election to take advantage of the accelerating provision, and until such action has been taken the provision has no operation" (Burke, 94 A.D.3d at 982–983, 943 N.Y.S.2d 540 [emphasis added] ).
Commencement of a foreclosure action may be sufficient affirmative action to put the borrower on notice that the note holder's option to accelerate the debt has been exercised, depending on the allegations in the complaint (Burke, 94 A.D.3d at 983, 943 N.Y.S.2d 540 ; see also EMC Mortg. Corp. v. Smith, 18 A.D.3d 602, 603 [2005] [holding that "by commencing the first foreclosure action, [the foreclosing plaintiff] placed the appellant on notice that it was holding her in default under the note and mortgage and that the debt was being accelerated"]; Clayton Nat'l v. Guldi, 307 A.D.2d 982 [2003] [holding that "[t]he filing of the summons and complaint and lis pendens in an action commenced in 1992 accelerated the note and mortgage. The statute of limitations began to run upon acceleration of the mortgage debt and expired prior to the commencement of this action in January 2000"] [citations omitted]; 21st Mortgage Corp. v. Osorio, 51 Misc.3d 1219(A), *3 [Sup.Ct. Queens County 2016] [holding that "[a] debt may be accelerated by a demand, or commencement of an action in which the election is within the body of the complaint"] [emphasis added] ).
"Although a lender may revoke its election to accelerate the mortgage ..." it can only be done through "an affirmative act by the lender revoking its election to accelerate ..." made within the statute of limitations period (EMC Mortgage Corp. v. Patella, 279 A.D.2d 604, 606 [2001] [holding that court's dismissal of prior foreclosure action without prejudice to renewal did not constitute an affirmative act by the lender revoking its election to accelerate]; Lavin v. Elmakiss, 302 A.D.2d 638, 639 [2003] [holding that "once the debt was accelerated on April 25, 1991, defendants' election in this regard could be revoked only through an affirmative act occurring within the statute of limitations period"] [internal citation omitted] lv dismissed, 100 N.Y.2d 577 [2003] ; lv denied, 2 N.Y.3d 703 [2004] ; see also HSBC Bank USA NA v. Gold, 2016 WL 1545610, * 1 [Sup.Ct. Kings County April 15, 2016] [Dear, J.] [holding that "dismissal [of prior foreclosure action] by the court [for failure to prosecute, pursuant to CPLR 3215(c),] does not qualify" as "an ‘affirmative act of revocation’ by the lender' " that revoked acceleration).
(2)
Martinez contends that the 2014 Foreclosure Action is time-barred by the six-year statute of limitations because U.S. Bank Trustee previously accelerated the debt on December 7, 2007 when the 2007 Foreclosure Action was commenced. Martinez claims that U.S. Bank Trustee's election to accelerate the Fremont Mortgage debt was clear and unequivocally expressed in Paragraph 5 of the 2007 Complaint, which alleged that "MARTINEZ ... failed to comply with the conditions of the mortgage and note by failing to pay principal and interest ... that came due and payable on the 1st day of September, 2007 ... Accordingly, Plaintiff elects to call due the entire amount secured by the mortgage." According to Martinez, the statute of limitations expired 6 years after commencement of the 2007 Foreclosure Action—or on December 7, 2013—approximately 5 weeks before the 2014 Foreclosure Action was commenced on January 16, 2014.
2007 Complaint at ¶ 5.
In response, U.S. Bank Trustee admits that it commenced the 2014 Foreclosure Action "outside of six years" (even if the default date is deemed to be December 1, 2007), but that "the instant foreclosure action falls within a statute of limitations exception as partial payments were made and accepted sufficiently to toll and renew the statute and there was a prior acknowledgment sufficient to toll and renew the statute."
Essentially, U.S. Bank Trustee contends that the payment default date automatically changed from September 1, 2007 to December 1, 2007 because Servicer Wells Fargo/ASC posted Martinez's payments under the 2009 Forbearance Plan to the payments that were past due for September 1, 2007, October 1, 2007 and November 1, 2007.
2015 Munian Affirmation at ¶ 15 (emphasis added).
First, U.S. Bank Trustee contends that "the [2009] HAMP trial period agreement was an acknowledgment sufficient to toll and renew the statute ..." as required under General Obligations Law (GOL) § 17–101 because:
"the [2009 HAMP] agreement stated that the loan modification was to cover the [Fremont] first lien Security Instrument and Note dated December 23, 2005, the agreement stated that the Defendant believed he was either in default or that default was imminent ... and the Defendant further acknowledged and ratified the agreement by making the first three payments ...
"Furthermore, the Defendant acknowledged in the [2009 HAMP] trial plan that the completion of the plan would allow for a permanent loan modification for the original security agreements for the remaining life of the loan, thereby agreeing to pay the remainder of the debt...."
Id. at ¶¶ 20–21, 552 N.Y.S.2d 314.
Alternatively, U.S. Bank Trustee argues that "the partial payments made on the [2009] special forbearance agreement is sufficient to toll and renew the statute" since: (1) "the agreement was executed on March 5, 2009 within 6 years of the December 1, 2007 default date"; (2) "[t]he agreement included language acknowledging that the remainder of the debt still needed to be paid"; (3) "payments posted on March 12, 2009, April 9, 2009, and May 15, 2009, were paid and applied to the contractual due dates ..."; (4) "the execution of the agreement shows the consistent intent of the Defendant to pay the debt and bring the loan current." According to counsel for U.S. Bank Trustee, "the statute was tolled when the first payment was made and beg[a]n to run anew on March 12, 2009."
Id. at ¶¶ 24–25, 552 N.Y.S.2d 314.
Id. at ¶ 25, 552 N.Y.S.2d 314.
(3)
As a preliminary matter, U.S. Bank Trustee's theory that the 2014 Foreclosure Action is premised on a different cause of action (failure to make the December 1, 2007 payment) than the 2007 Foreclosure Action (failure to make the September 1, 2007 payment) lacks merit. Essentially, U.S. Bank Trustee reasons that Servicer Wells Fargo/ASC unilaterally altered the default date and the acceleration date based on Martinez's payments under the 2009 Forbearance Plan. The mere fact that Servicer Wells Fargo/ASC "applied [Martinez's three payments under the 2009 Forbearance Plan] respectively to the September 1, 2007, October 1, 2007, and November 1, 2007 past due installments ..." did not automatically change the default date to December 1, 2007 and the acceleration date to June 16, 2009, the date on which those payments were posted by Servicer Wells Fargo/ASC.
2015 Munian Affirmation at ¶ 33.
According to the plain language of the 2009 Forbearance Plan, Martinez was offered "a period for you to determine how you will be able to resolve your financial hardship. Any payments received will be applied to the delinquent payments on the loan ..."; it promised Martinez that upon payment, Servicer Wells Fargo/ASC "will instruct our foreclosure counsel to suspend foreclosure proceedings"; and it specifically advised Martinez that "[t]he indebtedness of the referenced loan is in default and in consideration of extending forbearance for a period of time" Martinez was required to make payments under the 2009 Forbearance Plan. Importantly, the 2009 Forbearance Plan does not specifically address or state that it changes the existing "default date" and/or the "acceleration date" in the document. Furthermore, U.S. Bank Trustee cites no legal authority to support their argument that payments made by the borrower during a foreclosure action under the terms of such a forbearance plan with a mortgage servicer automatically change the default and acceleration dates specifically alleged by the plaintiff in the foreclosure complaint.
Id. at Exhibit M (emphasis added).
In any event, U.S. Bank Trustee's contentions regarding the application of the statute of limitations "exceptions" to avoid dismissal based on Martinez's payments under the 2009 HAMP Trial and the 2009 Forbearance Plan are hereby rejected, as a matter of law.
In Petito v. Piffath, (85 N.Y.2d 1 [1994], rearg. denied, 85N.Y.2d 858, cert. denied, 516 U.S. 864 [1995] ), a precedent-setting case, the New York Court of Appeals held that a settlement agreement in a foreclosure action cannot constitute the borrower's acknowledgment of the debt sufficient to renew the running of the Statute of Limitations for enforcement of the debt itself. In so holding, the Court of Appeals relied on the express language of GOL § 17–101, which provides that "[a]n acknowledgment or promise contained in a writing signed by the party to be charged thereby is the only competent evidence of a new or continuing contract whereby to take an action out of the operation of the provisions of limitations of time for commencing actions under the [CPLR]." The Court noted that the settlement agreement contained "neither an express acknowledgment of [the borrower's] indebtedness nor an express promise to pay the mortgage debt per se. Rather, the agreement contained only a promise to pay [plaintiff] a specific sum in exchange for [plaintiff's] agreement to forego prosecution of its foreclosure action ..." (85 N.Y.2d at 7, 623 N.Y.S.2d 520, 647 N.E.2d 732 ).
Applying the same logic, the Appellate Division, Third Department held that a HAMP trial agreement could not satisfy GOL § 17–101 because "while the letter arguably acknowledged the existence of the indebtedness, there was no unconditional promise to pay ... Rather, a condition precedent, i.e., preparation and execution of a modification agreement was imposed, thereby rendering any promise conditional, and the condition was never fulfilled" (Sichol v. Crocker, 177 A.D.2d 842, 843 [1991] ).
The Appellate Division, Second Department has held that a HAMP modification trial is "not an agreement for the binding obligations of the parties going forward" because it is "merely a trial arrangement" (Wells Fargo Bank, N.A. v. Meyers, 108 A.D.3d 9, 21 [2013] ; see also Gahfi v. Wells Fargo Bank, N.A., 41 Misc.3d 1228(A) [Sup Ct. Kings County 2013] [same]; JP Morgan Chase Bank, Nat. Ass'n v. Ilardo, 36 Misc.3d 359, 374–375, 940 N.Y.S.2d 829 [Sup Ct Suffolk County 2012] [holding that loan servicer did not breach its contract by failing to offer mortgagors a final HAMP modification after they made payments under a HAMP trial).
In Petitio, the Court of Appeals also held that the amount paid under a settlement agreement "cannot be deemed a partial payment ‘on account of the indebtedness secured by a mortgage’ under [GOL] § 17–107(2)(b)..." because the promise to pay and the partial payment only referenced the settlement agreement and "not to the mortgage debt that plaintiff [sought] to enforce" (Petitio, 85 N.Y.2d at 9, 623 N.Y.S.2d 520, 647 N.E.2d 732 ). Further, the payment did not satisfy the long-standing rule that "[i]n order to make a money payment a part payment within the statute, the burden is upon the creditor to show that it was * * * accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due" (id. [quoting Crow v. Gleason, 141 N.Y. 489, 493, 36 N.E. 497 (1894) ]; see also Stern v. Stern Metals, Inc., 22 A.D.3d 567, 568 [2005] ["[i]n order [for] a part payment [to] have the effect of tolling a time-limitation period, under the statute or pursuant to contract, it must be shown that there was a payment of a portion of an admitted debt, made and accepted as such, accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remainder"] [quoting Lew Morris Demolition Co. v. Bd. of Educ. of City of NY, 40 N.Y.2d 516, 521, 387 N.Y.S.2d 409, 355 N.E.2d 369 (1976) ] ).
Here, as in Petito, the 2009 HAMP Trial does not qualify as an acknowledgment of an existing debt, pursuant to GOL § 17–101, because the 2009 HAMP Trial does not contain Martinez's express acknowledgment of his indebtedness under the Fremont Mortgage and Note or Martinez's express promise to pay any of the outstanding debt. Instead, Martinez made a conditional promise to make three payments of $2,415.48 based on Servicer Wells Fargo/ASC's agreement to "suspend any scheduled foreclosure sale ..." during the three-month 2009 HAMP Trial period during which it promised to review Martinez's documented income to determine whether Martinez qualified for a final HAMP modification. Interestingly, the 2009 HAMP Trial specifically states that "[w]hen the Lender accepts and posts a payment during the Trial Period it will be without prejudice to, and will not be deemed a waiver of, the acceleration of the loan or foreclosure action ..." Accordingly, Martinez's execution of the 2009 HAMP Trial was not an acknowledgment of the debt sufficient to toll and renew the Statute of Limitations, pursuant to GOL § 17–101.
2015 Munian Affirmation, Exhibit L (2009 HAMP Trial at ¶ 2 [E] ).
Equally unavailing is U.S. Bank Trustee's theory that the Statute of Limitations was tolled and/or renewed by partial payments that were made under the 2009 Forbearance Plan.
US Bank Trustee has utterly failed to satisfy its burden of proving that Martinez made partial payments under the 2009 Forbearance Plan "accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due" (Petitio, 85 N.Y.2d at 9, 623 N.Y.S.2d 520, 647 N.E.2d 732 [emphasis added] ). US Bank Trustee utterly failed to submit an affidavit from anyone with personal knowledge of the circumstances surrounding the 2009 Forbearance Plan, its negotiation and its execution. Tellingly, the 2009 Forbearance Plan, which was drafted by Servicer Wells Fargo/ASC, explicitly advised Martinez that "[t]his is not a waiver of the accrued or future payments that become due, but a period for you to determine how you will be able to resolve your financial hardship." US Bank Trustee has not demonstrated with record evidence that Martinez made partial payments of an admitted debt under the 2009 Forbearance Plan, which were accepted as such, accompanied by circumstances amounting to an absolute and unqualified acknowledgment by Martinez of more being due.
Id. at Exhibit M at page 1.
US Bank Trustee's unsupported contention that "the loan was deaccelerated" when Martinez made three trial payments pursuant to the 2009 HAMP Trial with Servicer Wells Fargo/ASC is also not supported by any facts or documentation reflecting a revocation of the acceleration in the 2007 Complaint.
Finally, the record is clear and unambiguous the plaintiff, U.S. Bank Trustee, is the entity that accelerated the debt, and thereby started the accrual of the six-year statute of limitations, by specifically alleging that it was doing so in U.S. Bank Trustee's 2007 Complaint. Oddly, both the 2009 Forbearance Plan and the 2009 HAMP Trial were offered to Martinez and executed by Servicer Wells Fargo/ASC in its capacity as "Lender," rather than by the plaintiff, U.S. Bank Trustee. Certainly, an entity other than the foreclosing party who accelerated the loan cannot possible have the authority to rescind such acceleration. Accordingly, it is
ORDERED AND ADJUDGED that Martinez's summary judgment motion, pursuant to CPLR 3212, Mot. Seq. # 2, seeking an order dismissing U.S. Bank Trustee's 2014 Complaint is granted; and it is further
ORDERED AND ADJUDGED that the Clerk of the County of Kings is hereby directed to cancel and discharge of record the Notice of Pendency filed in this action on January 16, 2014 against the Property known as 809 Friel Place in Brooklyn, N.Y. 11218 identified on the tax map of Kings County as Block 5331, Lot 35, and said Clerk is hereby directed to enter upon the margin of record of same a notice of cancellation referring to this Order; and it is further
ORDERED that U.S. Bank Trustee's motion for leave to serve a supplemental summons and an amended complaint, pursuant to CPLR 3025(b), Mot. Seq. # 1, is denied as moot; and it is further
ORDERED that U.S. Bank Trustee's motion for an order: (1) granting it summary judgment, pursuant to CPLR 3212 ; (2) dismissing Martinez's answer and his affirmative defenses, pursuant to CPLR 3211(b) ; and (3) appointing a referee to compute the amounts due, pursuant to RPAPL 1321, Mot. Seq. # 3, are denied as moot.
This constitutes the decision, order and judgment of the court.