JP Morgan Chase Bank, Nat'l Ass'n v. Hill

• Decision Date: 19 November 2015
• Citation: 21 N.Y.S.3d 363,133 A.D.3d 1057
• Parties: JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, Respondent, v. Barbara A. HILL et al., Appellants, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

133 A.D.3d 1057

21 N.Y.S.3d 363

JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, Respondent,

v.Barbara A. HILL et al., Appellants, et al., Defendants.

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

Nov. 19, 2015.

Barbara A. Hill and Robert W. Hill, Coral Gables, Florida, appellants pro se.

Buckley Madole, PC, Rochester (Michael T. Ansaldi of counsel), for respondent.

Before: LAHTINEN, J.P., GARRY, LYNCH and DEVINE, JJ.; EGAN JR., J., vouched in.

LYNCH, J.

Appeal from an order of the Supreme Court (LaBuda, J.), entered April 14, 2014 in Sullivan County, which, among other things, granted plaintiff's motion for summary judgment.

In October 2004, defendants Barbara A. Hill and Robert W. Hill (hereinafter collectively referred to as defendants) executed a note in favor of BNY Mortgage Company, LLC to borrow the sum of $132,664 to purchase property located in the Village of Monticello, Sullivan County. The debt was secured by a mortgage on the property. When defendants stopped making monthly payments, plaintiff commenced this action in February 2013 to foreclose on the mortgage. Supreme Court scheduled a settlement conference (see CPLR 3408 ; 22 NYCRR 202.12–a ), but defendants did not appear. Thereafter, with the court's permission, plaintiff moved for summary judgment and defendants cross-moved for, among other things, an order directing plaintiff to produce the "wet-ink" note. The court granted plaintiff's motion, denied defendants' cross motion and defendants now appeal.

In a foreclosure action, a plaintiff seeking summary judgment "must produce evidence of the mortgage and unpaid note along with proof of the mortgagor's default" (Wells Fargo Bank, NA v. Ostiguy, 127 A.D.3d 1375, 1376, 8 N.Y.S.3d 669 [2015] ; see HSBC Bank USA, N.A. v. Sage, 112 A.D.3d 1126, 1127, 977 N.Y.S.2d 446 [2013], lvs. dismissed 22 N.Y.3d 1172, 985 N.Y.S.2d 472, 8 N.E.3d 849 [2014], 23 N.Y.3d 1015, 992 N.Y.S.2d 774, 16 N.E.3d 1253 [2014] ). Plaintiff supported its motion with the required documentation, but because the self-represented defendants raised the issue of standing in their answer, plaintiff was also obligated to demonstrate that it was a holder or assignee of the note and subject mortgage at the time the action was commenced (see Wells Fargo Bank, NA v. Ostiguy, 127 A.D.3d at 1376, 8 N.Y.S.3d 669 ; Chase Home Fin., LLC v. Miciotta, 101 A.D.3d 1307, 1307, 956 N.Y.S.2d 271 [2012] ). It is the note, not the mortgage, that is the dispositive instrument that conveys standing to foreclose under New York law (see Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d 355, 361, 12 N.Y.S.3d 612, 34 N.E.3d 363 [2015] ).

Here, plaintiff maintains that it has standing because it obtained physical possession of the note prior to commencement of the action. "Since the note has only an undated indorsement in blank from the original lender, it does not evidence plaintiff's possessory interest" (Deutsche Bank Natl. Trust Co. v. Monica, 131 A.D.3d 737, 738–739, 15 N.Y.S.3d 863 [2015] [citation omitted]; see Bank of Am., N.A. v. Kyle, 129 A.D.3d 1168, 1169, 13 N.Y.S.3d 253 [2015] ), nor, for that matter, does the June 2012 assignment of the mortgage from the Mortgage Electronic Registration Systems, Inc. confer standing (see id. ). To establish physical possession, plaintiff produced an affidavit by an assistant secretary, who stated that plaintiff's "custodial system of record" showed that plaintiff " received the original [n]ote on February 16, 2007" and that plaintiff maintained "possession of the [n]ote at its storage facility" in Monroe, Louisiana. Noticeably absent is any representation by the assistant secretary that she examined the original note and, contrary to the dissent, the affidavit is devoid of any detail as to how plaintiff actually acquired possession of the original note (compare Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d at 362, 12 N.Y.S.3d 612, 34 N.E.3d 363 ; Deutsche Bank Natl. Trust Co. v. Monica, 131 A.D.2d at 739, 15 N.Y.S.3d 863). Moreover, the dissent's reliance on HSBC Bank USA, N.A. v. Sage (supra ) is misplaced, for the question here is not, as it was in that case, whether plaintiff's representative had personal knowledge as to the creation of the original loan documents, but whether any direct evidence was presented detailing how plaintiff came into actual possession of the original note. The plaintiff in HSBC Bank USA had already established that the custodian of the trust had actual possession of the note for over two years prior to commencement of the action (id. at 1127–1128, 977 N.Y.S.2d 446 ). Even accepting that plaintiff met its burden of proving physical possession of the note through the assistant secretary's review of plaintiff's custodial records, in opposition, defendants cross-moved for an order directing plaintiff to produce the original or "wet-ink" note, as described by defendants. Defendants made the same demand in their answer.

In Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d at 361–362, 12 N.Y.S.3d 612, 34 N.E.3d 363, the Court of Appeals recently addressed the degree of proof necessary to show possession of a note for purposes of standing. In that case, the plaintiff's representative averred, upon review of its business records and after examining the original note, that it had custody of the note prior to the commencement of the action. The defendants countered that more detail was required as to how the plaintiff acquired the note. While observing that "the better practice would have been for [the plaintiff] to state how it came into possession of the note," the Court determined that the trial court did not err in granting summary judgment to the plaintiff without requiring production of the original note, emphasizing that no such demand had been made (id. at 362 ). Not to be overlooked is the fact that the allonge indorsing the note to the plaintiff in Aurora showed a specific chain of ownership to the plaintiff ( id. at 359 ). Here, by comparison, the original note includes only a blank indorsement, the affidavit of the assistant secretary is based on a review of system records without an examination of the original note and defendants demanded production of the original note from the outset. Defendants also represent that a prior foreclosure action was commenced by defendant Bank of New York in 2008—a year after plaintiff ostensibly obtained possession of the original note—and discontinued in 2010, without prejudice. Given this context, and without any verification as to how plaintiff came into possession of the note, we conclude that Supreme Court should have first compelled it to produce the original note prior to resolving plaintiff's motion for summary judgment. This is particularly so given the responding affidavit of plaintiff's representative that it was "ready, wiling (sic) and able to produce the original ‘wet-ink’ note for inspection"—a representation repeated in plaintiff's brief on appeal.

GARRY and EGAN JR., JJ., concur.

DEVINE, J. (dissenting).

Our colleagues find that questions of fact exist as to whether plaintiff actually possesses the note; we do not, and, therefore, respectfully dissent.

Plaintiff undoubtedly "produce[d] evidence of the mortgage and unpaid note along with proof of the mortgagor's default" (Wells Fargo Bank, NA v. Ostiguy, 127 A.D.3d 1375, 1376, 8 N.Y.S.3d 669 [2015] ; see HSBC Bank USA, N.A. v. Sage, 112 A.D.3d 1126, 1127, 977 N.Y.S.2d 446 [2013], lvs. dismissed 22 N.Y.3d 1172, 985 N.Y.S.2d 472, 8 N.E.3d 849 [2014], 23 N.Y.3d 1015, 992 N.Y.S.2d 774, 16 N.E.3d 1253 [2014] ). Because defendants Barbara A. Hill and Robert W. Hill (hereinafter collectively referred to as defendants) raised standing as an affirmative defense, plaintiff was further required to show that it was "both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action [was] commenced" (Chase Home Fin., LLC v. Miciotta, 101 A.D.3d 1307, 1307, 956 N.Y.S.2d 271 [2012] ; see Wells Fargo Bank, NA v. Ostiguy, 127 A.D.3d at 1376, 8 N.Y.S.3d 669 ). Plaintiff submitted a copy of the mortgage that was assigned to it and a copy of the promissory note indorsed in blank, but a blank indorsement "does not evidence plaintiff's possessory interest" in the note and requires proof of actual possession (Deutsche Bank Natl. Trust Co. v. Monica, 131 A.D.3d 737, 738–739, 15 N.Y.S.3d 863 [2015] ; see UCC 3–204[2] ; Bank of Am., N.A. v. Kyle, 129 A.D.3d 1168, 1169, 13 N.Y.S.3d 253 [2015] ).

In that regard, plaintiff provided an affidavit by an assistant secretary, who averred that she reviewed plaintiff's business records regarding the loan in question, that she was personally familiar with the maintenance of those records and that they had been created and kept in the regular course of business. Her affidavit "was adequately based on a review of the books and records of the company maintained in the ordinary course of business" under these circumstances and, contrary to the assertion of my colleagues, her "lack of personal knowledge as to the creation of the documents is not fatal" (HSBC Bank USA, N.A. v. Sage, 112 A.D.3d at 1127, 977 N.Y.S.2d 446 ; see CPLR 4518 ; compare Deutsche Bank Natl. Trust Co. v. Monica, 131 A.D.3d at 739, 15 N.Y.S.3d 863 [records made by another entity] ). The majority complains that this affidavit was deficient in failing to "detail ... how plaintiff actually acquired possession of the original note," but that issue is irrelevant, as "[a]n instrument payable to order and indorsed in blank becomes payable to bearer and may be negotiated by delivery alone until specially indorsed" (UCC 3–204[2] ). Possession, regardless of how that possession came about, is all that is required to make plaintiff a bearer and holder of a note indorsed in blank (see UCC 1–201 [b][5], [21] ; UCC 3–204[2] ; Getty Petroleum Corp. v. American Express Travel Related Servs. Co., 90...