Bank of N.Y. Mellon v. Deane

• Decision Date: 11 July 2013
• Citation: 2013 N.Y. Slip Op. 23224,41 Misc.3d 494,970 N.Y.S.2d 427
• Parties: The BANK OF NEW YORK MELLON f/k/a The Bank of New York 3476 Stateview Boulevard Ft. Mill, SC 29715, Plaintiff, v. Carl DEANE, Jesse Deane, Mortgage Electronic Registration Systems, Inc. as Nominee for RBC Mortgage Company, New York City Environmental Control Board, New York City Transit Adjudication Bureau, New York Merchants Protective Co., Inc., John Doe (Said name being fictitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, and any parties, corporations or entities, if any, having or claiming an interest or lien upon the mortgaged premises.), Defendants.
• Court: New York Supreme Court

41 Misc.3d 494

970 N.Y.S.2d 427

2013 N.Y. Slip Op. 23224

The BANK OF NEW YORK MELLON f/k/a The Bank of New York 3476 Stateview Boulevard Ft. Mill, SC 29715, Plaintiff,

v.Carl DEANE, Jesse Deane, Mortgage Electronic Registration Systems, Inc. as Nominee for RBC Mortgage Company, New York City Environmental Control Board, New York City Transit Adjudication Bureau, New York Merchants Protective Co., Inc., John Doe (Said name being fictitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, and any parties, corporations or entities, if any, having or claiming an interest or lien upon the mortgaged premises.), Defendants.

Supreme Court, Kings County, New York.

July 11, 2013.

David Dunn, Esq. and Leah Rabinowitz, Esq. of Hogan Lovells U.S. LLP, for Plaintiff.

JACK M. BATTAGLIA, J.

In this mortgage foreclosure action commenced on July 2, 2009, plaintiff The Bank of New York Mellon f/k/a The Bank of New York moves for an order, among other things, granting summary judgment on its Complaint as against defendants Carl Deane and Jesse Deane, the mortgagors of the subject property; judgment by default against non-appearing defendants Mortgage Electronic Registration Systems, Inc. as Nominee for RBS Mortgage Company, New York City Environmental Control Board, New York City Transit Adjudication Bureau, New York Merchants Protective Co., Inc., and John Doe; and issuing an order of reference.

“In order to establish prima facie entitlement to summary judgment in a foreclosure action, a plaintiff must submit the mortgage and unpaid note, along with evidence of default.” ( Capstone Bus. Credit, LLC v. Imperia Family Realty, LLC, 70 A.D.3d 882, 883, 895 N.Y.S.2d 199 [2d Dept. 2010];see also GRP Loan, LLC v. Taylor, 95 A.D.3d 1172, 1173–74, 945 N.Y.S.2d 336 [2d Dept. 2012];U.S. Bank Natl. Assn. TR U/S 6/01/98 [Home Equity Loan Trust 1998–2] v. Alvarez, 49 A.D.3d 711, 711, 854 N.Y.S.2d 171 [2d Dept. 2008].) Plaintiff “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.” ( See Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572 [1986].) Plaintiff must tender “evidentiary proof in admissible form.” ( See Zuckerman v. New York, 49 N.Y.2d 557, 562, 427 N.Y.S.2d 595, 404 N.E.2d 718 [1980].)

“When the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief.” ( GRP Loan, LLC v. Taylor, 95 A.D.3d at 1173, 945 N.Y.S.2d 336.) Here, in their Verified Answer, defendants Carl Deane and Jesse Deane (the “Deane Defendants”) allege as a Second Affirmative Defense that “Plaintiffs [ sic ] ... lack standing and capacity to sue and are unknown creditors to Defendants” ( see Verified Answer ¶ 5.)

“On any application for judgment by default, the applicant shall file proof of service of the summons and complaint, ... and proof of the facts constituting the claim, the default and the amount due.” (CPLR 3215[f].) The proof must establish a prima facie case. ( See Walley v. Leatherstocking Healthcare, LLC, 79 A.D.3d 1236, 1238, 913 N.Y.S.2d 380 [3d Dept. 2010];Green v. Dolphy Construction Co., Inc., 187 A.D.2d 635, 637, 590 N.Y.S.2d 238 [2d Dept. 1992];Silberstein v. Presbyterian Hosp. in the City of N.Y., 96 A.D.2d 1096, 1096, 463 N.Y.S.2d 254 [2d Dept. 1983];see also Woodson v. Mendon Leasing Corp., 100 N.Y.2d 62, 71, 760 N.Y.S.2d 727, 790 N.E.2d 1156 [2003] [“viable cause of action”].) “There is no mandatory ministerial duty to enter a default judgment against a defaulting party.” ( Superior Dental Care, P.C. v. Hoffman, 81 A.D.3d 632, 634, 915 N.Y.S.2d 640 [2d Dept. 2011] [internal quotation marks and citation omitted].)

Where a defendant fails to answer the complaint and does not make a pre-answer motion to dismiss the complaint, the defendant is deemed to have “waived the defense of lack of standing.” ( See HSBC Bank USA, N.A. v. Taher, 104 A.D.3d 815, 817, 962 N.Y.S.2d 301 [2d Dept. 2013].)

In the context of a mortgage foreclosure action, “standing” must mean entitlement to enforce the note and mortgage. One might question whether a plaintiff who is not entitled to enforce the note and mortgage should be able to obtain a judgment by default, whereas that plaintiff would be required to make a prima facie showing on its entitlement to enforce where it seeks summary judgment against a defendant who merely raises the issue. That is, however, the current law in the Second Department.

As recently summarized by the Second Department:

“In order to commence a foreclosure action, the plaintiff must have a legal or equitable interest in the subject mortgage ... 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 prior to commencement of the action with the filing of the complaint ... 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.” ( GRP Loan, LLC v. Taylor, 95 A.D.3d at 1173, 945 N.Y.S.2d 336 [internal quotation marks and citations omitted] [emphasis added].)

“As a general matter, once a promissory note is tendered to and accepted by an assignee, the mortgage passes as an incident to the note.” ( Bank of New York v. Silverberg, 86 A.D.3d 274, 280, 926 N.Y.S.2d 532 [2d Dept. 2011].) “By contrast, ‘a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it’.” ( Id. [quoting Merritt v. Bartholick, 36 N.Y. 44, 45 (1867) ].) “[A]n assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery.” ( Id.)

This action rests on an Adjustable Rate Note dated April 27, 2005 in the principal amount of $340,000, executed by the Deane Defendants in favor of RBC Mortgage Company (“Note”), and, as security for payment of the Note, a Mortgage of the same date on real property at 9315 Schenck Street, Brooklyn. The Note was specially indorsed, without a date, to the order of JPMorgan Chase Bank, N.A., as Trustee. The Mortgage identified Mortgage Electronic Registration Systems, Inc. (“MERS”) “acting solely as a nominee for Lender and Lender's successors and assigns,” and as “Mortgagee of Record.”

In its Complaint, plaintiff The Bank of New York Mellon alleges that it is “the owner and holder of the note and mortgage being foreclosed” ( see Complaint, FIRST), and that the mortgage was assignedto it “by assignment dated the 17th day of June, 2009” ( see id., THIRD.) Plaintiff submits with this motion a copy of an Assignment of Mortgage dated June 17, 2009 from MERS to Plaintiff, transferring the Mortgage given by the Deane Defendants to RBC Mortgage Company. The Assignment of Mortgage does not purport to assign the underlying Note, nor is there any showing that MERS would have had the power or authority to do so. ( See Bank of New York v. Silverberg, 86 A.D.3d at 281–82, 926 N.Y.S.2d 532.) There is no evidence of “MERS's right to, or possession of, the actual underlying promissory note” ( see id. at 279, 926 N.Y.S.2d 532), and, if based only upon the Assignment of Mortgage, Plaintiff would lack standing to maintain this foreclosure action ( see id. at 283, 926 N.Y.S.2d 532.)

Plaintiff also submits however (1) excerpts from a Pooling and Servicing Agreement dated as of July 1, 2005 among Structured Asset Mortgage Investments II Inc. as “Depositor,” JP Morgan Chase, National Association as “Trustee,” Wells Fargo Bank, National Association as “Master Servicer” and “Securities Administrator,” and EMC Mortgage Corporation as “Seller”; a copy of an Agreement of Resignation and Assumption dated as of October 1, 2006 by and among JPMorgan Chase, National Association as “Resigning Trustee” and The Bank of New York as “Successor Trustee”; and affidavit of Angela Frye, described as “a Vice President Loan Documentation for Wells Fargo Bank, N.A..... d/b/a Americas Servicing Company, as servicing agent for The Bank of New York Mellon, fka The Bank of New York as Successor in interest to JP Morgan Chase Bank NA as Trustee for Structured Asset Mortgage Investments II Inc. Bear Sterns ALT–A Trust 2005–7, Mortgage Pass–Through Certificates, Series 2005–7.”

Neither the affidavit of Angela Frye, nor the affirmation of counsel, nor counsel's memorandum of law, attempts to describe the transactions purportedly reflected in the submitted agreements, nor does any of them cite to specific language or provisions that purportedly have the legal effects ascribed to them in conclusory fashion. Indeed, the cursory treatment of the standing question in the memorandum of law evidences a misunderstanding of the general law of negotiable instruments in its equation of the status as “holder” to mere possession of the instrument ( see Plaintiff's Memorandum of Law in Support of its Motion for Summary Judgment and to Amend the Caption Nunc Pro Tunc [“Plaintiff's Memorandum”] at 7–8.)

The core of the law of negotiable instruments is found in Article 3 of the Uniform Commercial Code, adopted in New York in 1962 (“NYUCC”.) In 1990, The National Conference of Commissioners on Uniform State Laws proposed a revision of Article 3 that has been adopted in all of the states except New York. Amendments to Revised Article 3 were proposed in 2002, and have been adopted in 10 states. The provisions of these later versions of Article 3 (“Revised UCC”) can be helpful in interpreting and applying the former version, still effective in New York. ( See Lawyers' Fund for Client Protection v. Bank Leumi Trust Co., 94 N.Y.2d 398, 406, 706 N.Y.S.2d 66, 727 N.E.2d 563 [2000];Gabriel v. Kost, 2001 N.Y. Slip Op. 40288[U], 2001 WL 1491374 [Civ. Ct., Kings County 2001].)

New York's version of Article 3 does not...