Green Tree Servicing, LLC v. Molini

• Decision Date: 10 April 2019
• Docket Number: Index No. 135873/14,2016–04865
• Citation: 98 N.Y.S.3d 136,171 A.D.3d 880
• Court: New York Supreme Court — Appellate Division
• Parties: GREEN TREE SERVICING, LLC, Respondent, v. Lawrence MOLINI, et al., Appellants, et al., Defendants.

171 A.D.3d 880

98 N.Y.S.3d 136

GREEN TREE SERVICING, LLC, Respondent,

v.Lawrence MOLINI, et al., Appellants, et al., Defendants.

2016–04865

Index No. 135873/14

Supreme Court, Appellate Division, Second Department, New York.

Submitted—September 11, 2018

April 10, 2019

DECISION & ORDER

In an action to foreclose a mortgage, the defendants Lawrence Molini and Eugene V. Moller appeal from a judgment of foreclosure and sale of the Supreme Court, Richmond County (Thomas P. Aliotta, J.), dated July 10, 2017. The judgment of foreclosure and sale, inter alia, confirmed a referee's report and directed the sale of the subject property. The appeal brings up for review (1) so much of an order of the same court dated February 10, 2016, as granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendants Lawrence Molini and Eugene V. Moller, and for an order of reference, and denied those branches of the cross motion of those defendants which were for summary judgment dismissing the complaint insofar as asserted against them on the ground that the plaintiff lacked standing and for summary judgment dismissing the complaint insofar as asserted against the defendant Eugene V. Moller only, and (2) so much of an order of the same court dated March 14, 2016, as granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendants Lawrence Molini and Eugene V. Moller and for an order of reference, and referred the matter to a referee to ascertain and compute the amount due on the mortgage loan.

ORDERED that the judgment of foreclosure and sale is affirmed, with costs.

In June 2005, the defendant Lawrence Molini executed a note in the sum of $ 416,000 in favor of Countrywide Home Loans, Inc. (hereinafter Countrywide). The note was secured by a mortgage on residential property located in Staten Island, and was executed by Molini and the defendant Eugene V. Moller (hereinafter together the defendants). In November 2014, the plaintiff commenced this action against, among others, the defendants, inter alia, to foreclose the mortgage and reform it nunc pro tunc so that the property description therein reflected the correct property address. The defendants interposed an answer in which they asserted, inter alia, the affirmative defense that the plaintiff lacked standing. Thereafter, the plaintiff moved, inter alia, for summary judgment and for an order of reference. The defendants cross-moved, inter alia, for summary judgment dismissing the complaint insofar as asserted against them on the ground that the plaintiff lacked standing and for summary judgment dismissing the complaint insofar as asserted against Moller on the ground that he did not execute the note and, therefore, was not a necessary party.

In an order dated February 10, 2016, the Supreme Court granted the plaintiff's motion and denied the defendants' cross motion. In an order dated March 14, 2016, the court, among other things, referred the matter to a referee to ascertain and compute the amount due on the mortgage loan. On July 10, 2017, the court issued a judgment of foreclosure and sale. The defendants appeal.

Where, as here, a plaintiff's standing to commence a foreclosure action is placed in issue by a defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief (see Deutsche Bank Trust Co. Ams. v. Garrison, 147 A.D.3d 725, 726, 46 N.Y.S.3d 185 ; Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973–974, 995 N.Y.S.2d 118 ). A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note (see Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d 355, 361–362, 12 N.Y.S.3d 612, 34 N.E.3d 363 ; U.S. Bank, N.A. v. Noble, 144 A.D.3d 786, 787, 41 N.Y.S.3d 76 ; U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 753–754, 890 N.Y.S.2d 578 ). 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 (see Deutsche Bank Trust Co. Ams. v. Garrison, 147 A.D.3d at 726, 46 N.Y.S.3d 185 ; U.S. Bank N.A. v. Saravanan, 146 A.D.3d 1010, 1011, 45 N.Y.S.3d 547 ; Deutsche Bank Natl. Trust Co. v. Logan, 146 A.D.3d 861, 862, 45 N.Y.S.3d 189 ).

Here, we agree with the Supreme Court's determination that the plaintiff established its standing as a holder of the mortgage and of the note endorsed to it in blank, which it physically possessed prior to the commencement of the action (see UCC 3–201[1] ; 3–204[2]; U.S. Bank N.A. v. Clement, 163 A.D.3d 742, 81 N.Y.S.3d 116 ). Additionally, the plaintiff established, prima facie, the defendants' default in their payment obligations under the note and mortgage (see Bank of N.Y. Mellon v. Aiello, 164 A.D.3d 632, 83 N.Y.S.3d 135 ). In opposition to the plaintiff's prima facie showing, the defendants failed to raise a triable issue of fact. Therefore, we need not address their contention that the plaintiff's proof of assignments was insufficient (see Wells Fargo Bank, N.A. v. Inigo, 164 A.D.3d 545, 83 N.Y.S.3d 95 ).

We disagree with our dissenting colleague on the issue of whether the plaintiff established that the note was properly endorsed pursuant to the Uniform Commercial Code and, thus, validly transferred to it. The defendants' brief, at most, mentions in passing UCC 3–202(1)along with other boilerplate legal discussion, but then relates the UCC provision to an argument that the plaintiff failed to prove the authority of the assignor to negotiate the note. Further, in challenging the endorsement itself, the defendants focus in their brief on the plaintiff's failure to establish the signature and authority of David A. Spector, whose name is on the endorsement, and the plaintiff's failure to prove the chain of assignments, but the defendants do not actually raise the issue of the affixation of the endorsement to the note. The defendants' brief focuses almost entirely upon the enforceability of the assignment, not the issue of physical possession of the note or endorsement. To the extent physical possession is argued by the defendants, their argument is that the plaintiff failed to prove when the note was received and the circumstances of its delivery, without raising any issue about this particular endorsement being firmly affixed to the note. As a result, the dispositive basis of the dissent, having not been argued on appeal, is simply not before us to consider. It is not appropriate for us to decide an appeal "on a distinct ground that we winkled out wholly on our own" ( Misicki v. Caradonna, 12 N.Y.3d 511, 519, 882 N.Y.S.2d 375, 909 N.E.2d 1213 ), where no party has had notice and an opportunity to be heard on this ground.

We agree with the Supreme Court's determination that the cause of action to reform the mortgage on the ground of mutual mistake was timely, as it was interposed within the two-year discovery window measured from the plaintiff's receipt of the mortgage (see CPLR 213[6], 203[g][1] ; Davis v. Davis, 95 A.D.2d 674, 675, 463 N.Y.S.2d 462 ).

The defendants' remaining contentions are without merit.

DILLON, J.P., ROMAN and MILLER, JJ., concur.

DUFFY, J., concurs in part and dissents in part, and votes to reverse the judgment of foreclosure and sale appealed from, on the law, deny those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendants Lawrence Molini and Eugene V. Moller, and for an order of reference, and modify the orders dated February 10, 2016, and March 14, 2016, accordingly, with the following memorandum:

For the reasons set forth herein, I would reverse the judgment of foreclosure and sale, on the law, deny those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendants Lawrence Molini and Eugene V. Moller (hereinafter together the defendants) and for an order of reference, and modify the orders dated February 10, 2016, and March 14, 2016, accordingly.

Where, as here, a plaintiff's standing to commence a foreclosure action is placed in issue by a defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief (see Deutsche Bank Trust Co. Ams. v. Garrison, 147 A.D.3d 725, 726, 46 N.Y.S.3d 185 ; Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973–974, 995 N.Y.S.2d 118 ). Here, the defendants opposed the plaintiff's motion contending, inter alia, that the plaintiff failed to show it possessed the note as a holder in due course and did not show that it had obtained the note by assignment.

A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, at the time the action was commenced, it was either the holder or assignee of the underlying note (see U.S. Bank, N.A. v. Noble, 144 A.D.3d 786, 787, 41 N.Y.S.3d 76 ; U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 753, 890 N.Y.S.2d 578 ). Contrary to the conclusion of the majority, and, as the record itself amply demonstrates, the plaintiff failed to show, prima facie, its status as a holder of the note at the time of commencement of the action.

A "holder" is the person "in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession" ( UCC 1–201[b][21] ; see U.S. Bank N.A. v. Clement, 163 A.D.3d 742, 743, 81 N.Y.S.3d 116 ). Pursuant to article 3 of the Uniform Commercial Code, a note can be endorsed, or signed over, to a new owner. A note can also be endorsed in blank, naming no specific payee, which makes it a bearer instrument under article 3 of the Uniform Commercial Code, so that any party that possesses the note has the legal authority to enforce it (see U.S. Bank N.A....