Opinion
Index No. 63629/2019 Motion Seq. No. 2
01-11-2024
U.S. BANK TRUST NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE FOR RCF 2 ACQUISITION TRUST, Plaintiff, v. BAITAI LI, Defendant, and BB 23 Hollow Ridge, LLC, Intervenor.
Unpublished Opinion
To commence the statutory time for appeals as of right (CPLR 5513 [a]), you are advised to serve a copy of this order, with notice of entry, upon all parties.
DECISION/ORDER
David F. Everett Judge
Upon consideration of the papers filed in the New York State Courts Filing System (NYSCEF) Doc Nos. 55-75, 111 (referencing 87-104), 118, relative to the motion by plaintiff to confirm the Referee's report, for a judgment of foreclosure and sale, and to direct the distribution of the sale proceeds, the Court determines as follows:
The affirmation in support (NYSCEF Doc No. 56) states that this foreclosure action was brought to foreclose on a residential mortgage dated September 11, 2015, executed by defendant. Plaintiff identifies the assignments of the mortgage. On August 30, 2019, when the action was commenced, plaintiff was the holder of the note (NYSCEF Doc Nos. 58 and 64), which was attached to the complaint (NYSCEF Doc No. 60). The original loan was for $2,345,000. The Referee computed the sum due to plaintiff to be $2,922,390.68 (NYSCEF Doc No. 68). Affidavits of service are provided to show defendant was served with notices, pursuant to Real Property Actions and Proceeding Law (RPAPL) 1303, 1304, and 1306 (NYSCEF Doc Nos. 62,64), as well as the CPLR 3215 (g) (3) notice (NYSCEF Doc No. 63). On August 18, 2023, this Court granted BB 23 Hollow Ridge LLC's (the intervenor) motion to intervene and serve an answer (NYSCEF Doc No. 108).
In the intervenor's memorandum of law in support of the motion to intervene (NYSCEF Doc No. 88), the intervenor explained that defendant transferred his interest in 23 Hollowridge Road Bedford Corners, a/k/a 23 Hollow Ridge Road, Mt. Kisco, a/k/a 23 Hollow Ridge Road, New Castle, in Westchester County (property) by deed to BB 23 Hollow Ridge, LLC, the intervenor, which seeks to be heard on a number of issues in opposition to plaintiffs motion. Intervenor's arguments include that plaintiff lacks standing because plaintiff failed to establish that it was the owner and holder of the note when the action was commenced; that defendant did not provide the RPAPL 1304 notice and did not file an affidavit of service that the notice was served; that the mortgage was issued to Mortgage Electronic Registration Systems, Inc. (MERS), so the holder of the note and the holder of the mortgage were different, in that they were split at the inception of the loan transaction; that the assignment of the note did not carry with it an assignment of the mortgage; and that there is no certificate of conformity (CPLR 2309).
In reply (NYSCEF Doc No. 118), plaintiff argues that an attorney's affirmation is without evidentiary value because there is only the affidavit by the intervenor's attorney in opposition (NYSCEF Doc No. 111) and the memorandum of law, signed by defendant's attorney (NYSCEF Doc No. 115 [marked as related to motion sequence # 4]), and neither the intervenor nor defendant provided an affidavit based on their personal knowledge and further fail to provide documentary evidence to support the allegations; that, usually by operation of law, the assignments of a note fail to carry with them an assignment of the mortgage; that it has standing because MERS does not make a mortgage unenforceable, particularly since upon execution of the subject mortgage, defendant, "mortgage[d], grant[ed] and conveyed the Property to MERS (solely as nominee for Lender and Lender's successors in interest) and its successors in interest...."; that the intervenor -has no standing to challenge the assignment of the mortgage; that the absence of a certificate of conformity is ah irregularity, which can be disregarded in the absence of a showing of actual prejudice; and that notwithstanding that the intervenor cannot challenge a plaintiffs compliance with RPAPL 1304, plaintiff has demonstrated compliance with the statute (NYSCEF Doc Nos. 35, 64 and 97) and defendant has neither sufficiently challenged compliance nor rebutted the presumption of mailing set forth in plaintiffs documentary proof (NYSCEF Doc No. 64).
With respect to the Judgment of Foreclosure and Sale, plaintiff contends that defendant lacks standing to challenge plaintiffs motion for Judgment of Foreclosure and Sale since he conveyed his interest in the property; that there is no directive by the Court that the Referee must conduct a hearing, but to compute the sum due plaintiff and to examine and report whether the mortgaged premises could be sold in parcels; that the evidence needed by the Referee was submitted by plaintiff, which defendant did not challenge; that the intervenor is a stranger to the underlying loan without personal knowledge sufficient to challenge the sums set forth in the Referee's report (NYSCEF Doc Nos 68. 76-78, and 97); and that Schedule A of the Referee's report reflects that the Referee reviewed plaintiffs affidavit, the note and mortgage, and the payment history (NYSCEF Doc No. 68).
Plaintiff contends that since the intervenor did not address plaintiff s arguments when raised in opposition to the intervenor's Order to Show Cause, they are deemed waived or abandoned. Plaintiff requests that in the interest of judicial economy the intervenor's answer be stricken, as it raises the same arguments in its answer as in the opposition to plaintiffs motion, that the caption be amended: and that the action be discontinued against defendant, as an unnecessary party.
Summary Judgment
Summary judgment is appropriate when there are no genuine triable issues of material fact k between the parties and the movant is entitled to judgment as a matter of law (CPLR 3212; Alvarez v Prospect Hosp., 68 N.Y.2d 320, 326-327 [1986]). The movant 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 N.Y.2d at 324; Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]). A defendant's prima facie showing is governed by the allegations of liability made in the plaintiffs pleadings (see Wald v City of New York, 115 A.D.3d 939, 940 [2d Dept 2014]). To defeat a motion for summary judgment, the opposing party must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which the opposing claim rests (Zuckerman v City of New York, 49 N.Y.2d at 562; Moore v 3 Phase Equestrian Ctr., Inc., 83 A.D.3d 677, 679 [2d Dept 2011 ]). While an attorney affirmation not based on personal knowledge of the facts may serve as the vehicle for the submission of acceptable attachments that provide "evidentiary proof in admissible form", such as documents and transcripts, an attorney's affirmation is insufficient if the attorney has no personal knowledge (see Zuckerman v City of New York, 49 N.Y.2d at 563; United Specialty Ins. v Columbia Cas. Co., 186 A.D.3d 650, 651-652 [2d Dept 2020]).
Here, the intervenor's opposition (NYSCEF Doc No. 111) references NYSCEF documents 87 to 104, related to motion # 4. Among those documents is an affidavit from the intervenor's managing member, Brad Zackson (NYSCEF Doc No. 90), who notes the intervenor has a right of redemption and summarily states there are meritorious defenses stated in the memorandum of law; and an unsigned affidavit from defendant focusing on his quest to find a buyer (NYSCEF Doc. 96). Notwithstanding that the documents submitted regarding motion #2 are attorney affirmations, the Court will address the arguments raised.
Standing of Plaintiff
In Matter of MERSCORP, Inc. v Romaine (8 N.Y.3d 90 [2006]), the Court reviewed the MERS system, which was created to track ownership interests in residential mortgages. In Bank of N.Y. v Silverberg (86 A.D.3d 274, 283 [2d Dept 2011]), the Court dealt with the question of whether an assignee has standing to foreclose if MERS did not also have the right to, or possession of, the actual underlying promissory note. The Court's answer was that the assignee does not have that right, and that the action brought by the assignee must be dismissed under CPLR 3211 (a) (3) due to the plaintiffs lack of standing.
However, in Bank of N. Y. v Willis (150 A.D.3d 652 [2d Dept 2017]), the Court explained:
Where, as here, a plaintiffs standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief (see Citimortgage, Inc. v Klein, 140 A.D.3d 913, 914 [(2d Dept) 2016]; Bank of N.Y. Mellon v Visconti, 136 A.D.3d 950, 950 [(2d Dept) 2016]). A plaintiff has standing in a mortgage foreclosure action where it is the holder or assignee of the underlying note at the time the action was commenced (see Aurora Loan Servs., LLC v Taylor, 25 N.Y.3d 355, 361 [2015]; Wells Fargo Bank, N.A. v Marchione, 69 A.D.3d 204, 207-209 [(2d Dept) 2009]; U.S. Bank, N.A. v Collymore, 68 A.D.3d 752, 754 [(2d Dept) 2009]). 'Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes-with the debt as an inseparable incident' (U.S. Bank, N.A. v Collymore, 68 A.D.3d at 754; see Aurora Loan Servs., LLC v Taylor, 25 N.Y.3d at 361-362).(See U.S. Bank N.A. v Nelson, 169 A.D.3d 110, 113-114 [2d Dept 2019]; GRP Loan, LLC v Taylor, 95 A.D.3d 1172 [2d Dept 2012]; Deutsche Bank Natl. Trust Co. v Rivas, 95 A.D.3d 1061 [2d Dept 2012]; Campaign v Barba, 23 A.D.3d 327 [2d Dept 2005].)
In Us. Bank Trust v McGlone (201 A.D.3d 999, 1001 [2d Dept 2022]), the Court determined that"a mere assignment of mortgage is irrelevant to the issue of the plaintiffs standing to foreclose, as the mortgage is not the dispositive document of title (see Aurora Loan Servs., LLC v Taylor, 25 N.Y.3d 355, 362 [2015]; Citimortgage, Inc. v Zagoory, 198 A.D.3d at 715 [2d Dept 2021]).'" In U.S. Bank N.A. v Combs (177 A.D.3d 1014, 1016 [2d Dept 2019]), the Court found that the plaintiff established it had standing by attaching a copy of the note to the complaint, which demonstrated that it had physical possession of the note when the action was commenced. (See Wells Fargo Bank, N.A. v Thomas, 150 A.D.3d 1312, 1313 [2d Dept. 2017].)
Here, plaintiff demonstrated its standing through its possession of the original note, which was attached to the complaint, at the time the action was commenced.
Certificate of Conformity - CPLR 2309 (c) and Real Property Law (RPL) 299-a
CPLR 2309 (c) provides: "An oath or affirmation taken without the state shall be treated as if taken within the state if it is accompanied by such certificate or certificates as would be required to entitle a deed acknowledged without the state to be recorded within the state if such deed had been acknowledged before the officer who administered the oath, or affirmation."
RPL 299-a (1) provides: "An acknowledgment or proof made pursuant to the provisions of section two hundred ninety-nine of this chapter may be taken in the manner prescribed either by the laws of the state of New York or by the laws of the state, District of Columbia, territory, possession, dependency, or other place where the acknowledgment or proof is taken. The acknowledgment or proof, if taken in the manner prescribed by such state, District of Columbia, territory, possession, dependency, or other place, must be accompanied by a certificate to the effect that it conforms with such laws."
In Capital One, N.A. v McCormack (183 A.D.3d 644, 645 [2d Dept 2020]), the Court explained that "even if the assignments of [a] mortgage and affidavit were not accompanied by a certificate of conformity, the absence of a certificate of conformity is a mere irregularity, not a fatal defect, which can be disregarded in the absence of a showing of actual prejudice (see CPLR 2001; Midfirst Bank v Agho, 121 A.D.3d [343] at 351 [2d Dept 2014])." (See U.S. Bank Trust V McGlone, 201 A.D.3d at 1001; Citimortgage, Inc. v Zagoory, 198 A.D.3d at 717.)
Here, the intervenor has not shown any prejudice because of a failure to have a certificate of conformity and the Court will disregard its absence.
Standing of Defendant
As stated in Valiotis v Bekas (191 A.D.3d 1037, 1038 [2d Dept 2021 ]), a "party who conveys his or her interest in property that is the subject of a foreclosure action 'effectively divest[s]' himself or herself of standing to challenge [a] plaintiffs request for a judgment of foreclosure and sale' (Deutsche Bank Nat'l. Trust Co. v Patrick, 173 A.D.3d 973, 974 [(2d Dept) 2019]; see NYCTL 1996-1 Trust v King, 304 A.D.2d 629, 630-631 [(2d Dept) 2003])." In DLJ Mtge. Capital, Inc. v 44 Brushy Neck, Ltd. (51 A.D.3d 857, 859 [2d Dept 2008]), the Court noted: "The rule is that a mortgagor who has made an absolute conveyance of all his interest in the mortgaged premises, including his equity of redemption, is not a necessary party to foreclosure, unless a deficiency judgment is sought (see Federal Natl. Mtge. Assn, v Connelly, 84 A.D.2d 805 [(2d Dept) 1981])." (See Bank of N.Y. Mellon Trust Co. v Ungar Family Realty Corp., 111 A.D.3d 657, 658 [2d Dept 2013]; HSBC Bank USA v Ungar Family Realty Corp., 111 A.D.3d 673, 673-674 [2d Dept 2013].)
Here, since plaintiff has elected to waive a deficiency judgment, defendant is no longer a necessary party to this action. Plaintiff and the intervenor may stipulate to discontinue the action against defendant (CPLR 3217) and to amend the caption to reflect this change.
RPAPL 1304-Notice
In HSBC Bank USA, N.A. v Ozcan (154 A.D.3d 822, 825-826 [2d Dept 2017]) the Court recognized that "although not jurisdictional, proper service of RPAPL 1304 notice on the borrower or borrowers is a condition precedent to the commencement of a residential foreclosure action, and the plaintiff has the burden of establishing satisfaction of this condition." The Court continued that a plaintiff is not required to rely on any particular set of business records to establish a prima facie case, "so long as the plaintiff satisfies the admissibility requirements of CPLR 4518 (a), and the records themselves actually evince the facts for which they are relied upon." The Court concluded that the "mailing may be proved by any number of documents meeting the requirements of the business records exception to the hearsay rule under CPLR 4518." (See U.S. Bank Trust, N.A. v Chiramannil, 205 A.D.3d 966, 966-967 [2d Dept 2022]; USA Residential Props., LLC v Jongebloed, 203 A.D.3d 990, 991 [2d Dept 2022]; Wells Fargo Bank, N.A. v Shields, 201 A.D.3d 1007, 1008-1009 [2d Dept 2022].)
In Citibank, N.A. v Conti-Scheurer (172 A.D.3d 17, 20-21 [2d Dept 2019]), the Court explained:
By requiring the lender or mortgage loan servicer to send the RPAPL 1304 notice by registered or certified mail and also by first-class mail,' 'the Legislature implicitly provided the means for the plaintiff to demonstrate its compliance with the statute, i.e., by proof of the requisite mailing,' which can be 'established with proof of the actual mailings, such as affidavits of mailing or domestic return receipts with attendant signatures, or proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by someone with personal knowledge of the procedure'' (Bank of Am., N.A. v Bittie, 168 A.D.3d 656, 658 [(2d Dept) 2019], quoting Wells Fargo Bank, NA v Mandrin, 160 A.D.3d 1014, 1016 [(2d Dept) 2018]; see Viviane Etienne Med. Care, P C. v Country-Wide Ins. Co., 25 N.Y.3d 498, 508-509 [2015]; Nassau Ins. Co. v Murray, 46 N.Y.2d 828, 829-830 [1978]).
Expanding on this explanation, the Court in CIT Bank N.A. v Schiffman (36 N.Y.3d 550, 556 [2021]), stated:
Evidence of 'an established and regularly followed office procedure' (Matter of Gonzalez [Ross], 47 N.Y.2d 922, 923 [1979]) may give rise to a rebuttable 'presumption that such a notification was mailed to and received by the [intended recipient]' (Preferred Mut. Ins. Co. v Donnelly, 22 N.Y.3d 1169, 1170 [2014]; see also Nassau Ins. Co. v Murray, 46 N.Y.2d 828, 829 [1978]). '[I]n order for the presumption to arise, [the] office practice must be geared so as to ensure the likelihood that [the] notice ... is always properly addressed and mailed' (Nassau Ins. Co., 46 N.Y.2d at 830). Such proof need not be supplied by the employee charged with mailing the document (see Bossuk v Steinberg, 58 N.Y.2d 916, 919 [1983]) but can be offered in the form of an affidavit of an employee with 'personal knowledge of the practices utilized by the [company] at the time of the alleged
mailing' (Preferred Mut. Ins. Co., 22 N.Y.3d at 1170; see also Nassau Ins. Co., 46 N.Y.2d 828). For example, in Preferred Mut. Ins. Co., we deemed an affidavit, describing the procedures used by an insurance company 'to ensure the accuracy of addresses, as well as office procedures relating to the delivery of mail to the post office' sufficient to support the presumption, where the affidavit explained, among other things, how the notices and envelopes were generated, posted and sealed, as well as how the mail was transmitted to the postal service (22 N.Y.3d at 1170, affg 111 A.D.3d 1242, 1244 [4th Dept 2013]).
The Court reviewed the "showing necessary to rebut the presumption created by proof of a standard office mailing procedure in the section 1304 context." (id. at 556.) The Court stated: "It is well-settled that '[d]enial of receipt. . ., standing alone, is insufficient.... In addition to a claim of no receipt, there must be a showing that [the] routine office practice was not followed or was so careless that it would be unreasonable to assume that the notice was mailed' (Nassau Ins. Co., 46 N.Y.2d at 829-830).... [T]the crux of the inquiry is whether the evidence of a defect casts doubt on the reliability of a key aspect of the process such that the inference that the notice was properly prepared and mailed is significantly undermined. Minor deviations of little consequence are insufficient." (id. at 557.)
The Court in Citimortgage, Inc. v Etienne (172 A.D.3d 808 [2d Dept 2019]) noted that a borrower/mortgagor, whose name appears on the note, is the only person who can raise the RTAPL 1304 defense, as the statutory defense created by RPAPL 1302 (2) for noncompliance with RPAPL 1304 is a personal defense, which cannot be raised by a stranger to the note and underlying mortgage. Although a current owner of the property is a proper party to this foreclosure action, the owner may not properly assert, either in its own right or on behalf of the borrower, any defense that was or could have been asserted by the borrower. The Court recognized that "the notice requirements of RPAPL 1304 were enacted for the benefit and protection of borrowers who are 'natural person[s]' (RPAPL 1304 [6] [a] [1] [i]; citation omitted)." (See Bank of N.Y. Mellon v Ramsamooj, 194 A.D.3d 997, 999 [2d Dept. 2021].)
Here, the intervenor lacks standing to raise the issue of compliance with RPAPL 1304 as a defense and defendant has not provided sufficient evidence to overcome the rebuttable presumption.
Referee's Report
The Court in Bank of N.Y. Mellon v Singh (205 A.D.3d 866, 868 [2d Dept 2022] [internal quotations marks omitted]) provided the following guidance:
[A]s long as a defendant is not prejudiced by the inability to submit evidence directly to the referee, a referee's failure to notify a defendant and hold a hearing is not, by itself, a basis to reverse a judgment of foreclosure and sale and remit the matter for a hearing and a new determination of amounts owed (U.S. Bank Trust, N.A. v Bank of Am., N.A., 201 A.D.3d 769, 771-772 [(2d Dept) 2022], quoting Bank of N.Y. Mellon v Viola, 181 A.D.3d 767, 770 [(2d Dept) 2020]). Here, contrary to his contention, the defendant was not prejudiced by the referee's failure to hold a hearing since, in opposing the plaintiffs motion to confirm the referee's report and for a judgment of foreclosure and sale, the defendant had the opportunity to raise questions and submit evidence directly to the Supreme Court (see U.S. Bank Trust, N.A. v Bank of Am., N.A. 201 A.D.3d at 772; Bank of N.Y. Mellon v Viola, 181 A.D.3d at 770).
As stated in Wells Fargo Bank, N.A. v Henry (64 Misc.3d 1235[A], *2 [Sup Ct, Queens County]): "The Court is the ultimate arbiter of the dispute and has the power to [consider] evidence submitted by a defendant in opposition and to reject the referee's report and make new findings (see CPLR 4403; Fed. Deposit Ins. Corp, v 65 Lenox Rd. Owners Corp., 270 A.D.2d 303, 304 [(2d Dept) 2000]). In addition, documentary evidence is not required to support the [plaintiffs] testimonial evidence by affidavit (see 2-20 Bergman on New York Mortgage Foreclosures § 20.06[l][d] citing Johnson v Frederick, 219 N.Y.S.2d 482 [Kings County Sup. Ct. 1961])."" 'The report of a referee should be confirmed whenever the findings are substantially supported by the record, and the referee has clearly defined the issues and resolved matters of credibility'" (U.S. Bank N.A. v Morton, 196 A.D.3d 715, 717 [2021], quoting 33-37 Farrington, LLC v Global Universal Group, Ltd., 165 A.D.3d 1018, 1019-1020 [2018])." (HSBC Bank USA, N.A. v Blair-Walker, 202 A.D.3d 1065, 1068 [2d Dept 2022]; see U.S. Bank N.A. v Sheth, 177 A.D.3d 1018, 1020 [2d Dept 2019]; Nationstar Mtge., LLC v Vordermeier, 165 A.D.3d 822, 823 [2d Dept 2018]; Flagstar Bank, F.S.B. v Konig, 153 A.D.3d 790, 790-791 [2d Dept 2017].)
Here, the Referee's findings are substantially supported by the business records produced by plaintiff (NYSCEF Doc No. 64). Despite an opportunity to do so, defendants have not provided evidence to challenge the calculations made by the Referee. Further, defendant has transferred his interest in the property and the intervenor would not be able to present evidence based on personal knowledge at a Referee's hearing or in opposition to plaintiff s motion.
Accordingly, it is, ORDERED that plaintiffs motion to confirm the Referee's report, for a judgment of foreclosure and sale, and to direct the distribution of the sale proceeds, is granted; and it is further
ORDERED that the judgment of foreclosure and sale is stayed for sixty days from the date of this Order to March 11, 2024, to allow the parties time to reach a settlement.
Contemporaneous with this Decision and Order, the Court has executed an "Order Confirming Referee Report and Judgment of Foreclosure and Sale."
The foregoing constitutes the Decision and Order of the Court.