U.S. Bank Nat'l Ass'n v. Nelson

• Decision Date: 23 January 2019
• Docket Number: Index No. 23423/09,2016–01722
• Citation: 93 N.Y.S.3d 138,169 A.D.3d 110
• Parties: US BANK NATIONAL ASSOCIATION, etc., Respondent, v. Kenyatta NELSON, et al., Appellants, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

169 A.D.3d 110

93 N.Y.S.3d 138

US BANK NATIONAL ASSOCIATION, etc., Respondent,

v.Kenyatta NELSON, et al., Appellants, et al., Defendants.

2016–01722

Index No. 23423/09

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

Submitted - June 23, 2017

January 23, 2019

OPINION & ORDER

MASTRO, J.P.

It is by now a firmly established principle that the issue of whether a plaintiff lacks standing to commence an action is waived unless it is raised in the answer or in a pre-answer motion to dismiss (see CPLR 3211[a][3] ; [e]; Matter of Prudco Realty Corp. v. Palermo, 60 N.Y.2d 656, 657, 467 N.Y.S.2d 830, 455 N.E.2d 483 ; U.S. Bank N.A. v. Konstantinovic, 147 A.D.3d 1002, 1004, 48 N.Y.S.3d 182 ; HSBC Bank USA, N.A. v. Taher, 104 A.D.3d 815, 817, 962 N.Y.S.2d 301 ). The instant appeal presents the question of whether, in a mortgage foreclosure action in which the complaint alleges that the plaintiff is the owner and holder of the note and mortgage, the mere denial of that allegation in the answer, without more, is sufficient to assert that the plaintiff lacks standing, thereby preserving that issue for adjudication. Upon our review of relevant statutory and decisional law, and in clarification of our own concededly inconsistent decisions in this area, we conclude that this question must be answered in the negative.

The Facts

Insofar as relevant here, it is undisputed that in June 2007, the defendants Kenyatta Nelson and Safiya Nelson (hereinafter together the Nelson defendants) obtained a loan in the principal sum of $660,000 from the plaintiff's alleged predecessor-in-interest and executed a promissory note for that sum, secured by a mortgage on their three-family dwelling in Brooklyn. The Nelson defendants subsequently defaulted on their monthly loan payments in May 2009 and thereafter. The plaintiff, to which the mortgage had been assigned, commenced this foreclosure action against the Nelson defendants and several other entities and individuals by the filing of a summons and complaint on September 15, 2009. In its complaint, the plaintiff alleged that it was "the owner and holder of [the] note and mortgage being foreclosed,"¹ and that the mortgage had been assigned to it on August 10, 2009. In their separate, identical answers, the Nelson defendants each admitted certain allegations of the complaint, but denied knowledge or information sufficient to form a belief as to the truth of most of the allegations, including those set forth above. Additionally, the Nelson defendants each pleaded affirmative defenses, including lack of proper service of process and improper inflation of the property's value during the loan process. The defense of lack of standing was not pleaded in the answers. Ultimately, the plaintiff moved for a judgment of foreclosure and sale. The Nelson defendants cross-moved to dismiss the complaint insofar as asserted against them on the grounds that the plaintiff lacked standing to commence the action and failed to comply with the notice requirements of RPAPL 1303. In an order dated December 15, 2015, the Supreme Court granted the plaintiff's motion and denied the Nelson defendants' cross motion. This appeal by the Nelson defendants ensued. For the reasons that follow, we affirm.

Standing

The Nelson defendants contend that the denials in their answers of knowledge or information sufficient to form a belief as to the truth of the plaintiff's allegation in the complaint that it was the owner and holder of the note and mortgage were sufficient, standing alone, to place in issue the plaintiff's standing to commence the foreclosure action. We disagree.

CPLR 3018, which governs responsive pleadings, draws a distinction between denials and affirmative defenses. Denials generally relate to allegations setting forth the essential elements that must be proven in order to sustain the particular cause of action. Thus, a mere denial of one or more elements of the cause of action will suffice to place them in issue, and "there is no reason to [additionally] assert as an affirmative defense the opposite of what the pleading party is [already] required to prove" (5–3018 Weinstein–Korn–Miller, N.Y. Civ Prac CPLR ¶ 3018.00). Conversely, where the answering party wishes to interpose new matter in defense to the cause of action that goes beyond the essential elements of the cause of action, the statute indicates that the party must plead, as an affirmative defense, "all matters which if not pleaded would be likely to take the adverse party by surprise or would raise issues of fact not appearing on the face of a prior pleading" ( CPLR 3018[b] ). Accordingly, where a defendant seeks to inject into the litigation "matters [that] are not the plaintiff's burden to prove as part of the cause of action," those matters must be affirmatively pleaded as defenses ( Siegel, N.Y. Prac § 223 [6th ed Dec. 2018 Update] ; see CPLR 3014 ; 5–3018 Weinstein–Korn–Miller, N.Y. Civ Prac CPLR ¶ 3018.02).

A facially adequate cause of action to foreclose a mortgage requires allegations regarding the existence of the mortgage, the unpaid note, and the defendant's default thereunder, which, if subsequently proven, will establish a prima facie case for relief (see IndyMac Venture, LLC v. Amus, 164 A.D.3d 883, 884, 83 N.Y.S.3d 571 ; JPMorgan Chase Bank N.A. v. Wenegieme, 162 A.D.3d 876, 877, 81 N.Y.S.3d 54 ; A/SL DFV, LLC v. C.A.R.S. Constr., LLC, 161 A.D.3d 921, 922, 77 N.Y.S.3d 683 ). In order to place in issue any of these essential elements of the cause of action, a defendant need only deny them in the answer. However, as a general matter, a plaintiff need not establish its standing (i.e., that it held and/or owned the note at the time the action was commenced) as an essential element of the cause of action (see JP Morgan Chase Bank, N.A. v. Butler, 129 A.D.3d 777, 780, 12 N.Y.S.3d 145 ; Deutsche Bank Natl. Trust Co. v. Islar, 122 A.D.3d 566, 567, 996 N.Y.S.2d 130 ). Rather, it is only where the plaintiff's standing is placed in issue by the defendant that the plaintiff must shoulder the additional burden of establishing its standing to commence the action, a burden satisfied by evidence that it was the holder or assignee of the underlying note at the time the action was commenced (see Nationstar Mtge., LLC v. Balducci, 165 A.D.3d 959, 86 N.Y.S.3d 172 ; U.S. Bank N.A. v. Clement, 163 A.D.3d 742, 743, 81 N.Y.S.3d 116 ; JP Morgan Chase Bank, N.A. v. Atedgi, 162 A.D.3d 756, 757, 79 N.Y.S.3d 81 ; Bank of N.Y. Mellon v. Theobalds, 161 A.D.3d 1137, 1138, 79 N.Y.S.3d 50 ; CitiMortgage, Inc. v. McKenzie, 161 A.D.3d 1040, 1041, 78 N.Y.S.3d 200 ).

Based on the foregoing, it logically follows that where, as here, standing is not an essential element of the cause of action, under CPLR 3018(b) a defendant must affirmatively plead lack of standing as an affirmative defense in the answer in order to properly raise the issue in its responsive pleading. Indeed, the Court of Appeals reached this very conclusion in Matter of Fossella v. Dinkins , 66 N.Y.2d 162, 495 N.Y.S.2d 352, 485 N.E.2d 1017. That case involved a proceeding to have the Board of Elections of the City of New York remove a proposed referendum from the ballot, and the intervenors in the action argued that the petitioners lacked standing to seek that relief. In rejecting the contention, the Court relied upon, inter alia, CPLR 3018(b) and CPLR 3211(e) to hold that the challenge to the petitioners' standing had been waived "because it was not raised as an affirmative defense, or by way of a motion to dismiss, at Special Term" ( Matter of Fossella v. Dinkins, 66 N.Y.2d at 167, 495 N.Y.S.2d 352, 485 N.E.2d 1017 ). The decision also cited to two earlier cases in which the Court had resolved standing objections in the same manner. In Dougherty v. City of Rye , 63 N.Y.2d 989, 991–992, 483 N.Y.S.2d 999, 473 N.E.2d 249, which involved an action challenging a zoning ordinance amendment, the Court rejected an argument by the defendant City of Rye that the plaintiffs lacked standing, reasoning that the argument "[was] not asserted in the City's answer or in a pre-answer motion to dismiss and [has] thus been waived." Likewise, in Matter of Prudco Realty Corp. v. Palermo , 60 N.Y.2d at 657, 467 N.Y.S.2d 830, 455 N.E.2d 483, a proceeding to annul the determination of a zoning board of appeals in which the intervenor interposed an answer that did not assert that the petitioner lacked standing, the Court held that "[i]nasmuch as CPLR 3211 (subd. [e] ) provides that such a defense is waived if not raised either by motion or in the responsive pleading, [the intervenor] must be deemed to have waived its objection to [the] petitioner's standing."

The clear principle readily discerned from CPLR 3018(b) and the foregoing decisions is that a defendant waives the issue of standing unless she or he affirmatively raises an objection premised upon it, either by making a pre-answer motion to dismiss on that basis or by specifically asserting that defense in the answer. None of these decisions supports the proposition that standing will be placed in issue by the mere denial in the answer of factual allegations set forth in the complaint, nor has the Court of Appeals suggested that these holdings are in any manner limited to a particular type or class of actions or proceedings. Our own Court implicitly acknowledged as much by relying upon the foregoing decisions in Wells Fargo Bank Minn., N.A. v. Mastropaolo , 42 A.D.3d 239, 837 N.Y.S.2d 247, a mortgage foreclosure action similar to the one currently before us. There, the complaint of the foreclosing plaintiff expressly alleged that the plaintiff was the "sole, true and lawful owner" of the note, and a copy of the note was appended to the pleading. As in the case at bar, the defendant served an answer specifically denying the material allegations of the complaint, including the foregoing allegation, and also asserted five affirmative defenses, but lack of standing was not...