U.S. Bank v. Wei Feng Zhu

• Docket Number: Index No. 850201/2022,Motion Seq. No. 001
• Decision Date: 16 August 2023
• Citation: 2023 NY Slip Op 32902 (U)
• Parties: U.S. BANK NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS OWNER TRUSTEE OF THE NEW RESIDENTIAL MORTGAGE LOAN TRUST 2021-NQM1R, Plaintiff, v. WEI FENG ZHU, BOARD OF MANAGERS OF 385 FIRST AVENUE CONDOMINIUM, JOHN DOE AND JANE DOE Defendant.
• Court: New York Supreme Court

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2023 NY Slip Op 32902(U)

U.S. BANK NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY AS OWNER TRUSTEE OF THE NEW RESIDENTIAL MORTGAGE LOAN TRUST 2021-NQM1R, Plaintiff, v. WEI FENG ZHU, BOARD OF MANAGERS OF 385 FIRST AVENUE CONDOMINIUM, JOHN DOE AND JANE DOE Defendant.

Index No. 850201/2022, Motion Seq. No. 001

Supreme Court, New York County

August 16, 2023

Unpublished Opinion

PRESENT: HON. FRANCIS A. KAHN, III Justice

DECISION + ORDER ON MOTION

Francis A. Kahn III, Judge

The following e-filed documents, listed by NYSCEF document number (Motion 001) 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33 34, 35, 36, 37, 38, 39. 40, 41,42, 43, 44, 45, 46 were read on this motion to/for JUDGMENT - SUMMARY.

Upon the foregoing documents, the motion and cross-motion are determined as follows:

The within action is to foreclose on a mortgage encumbering a parcel of residential real property located 385 1^st Avenue, Apt 17D, New York, New York. The mortgage, dated May 18, 2018, was given by Defendant Wei Feng Zhu ("Zhu") to New Penn Financial, LLC and secures a loan with an original principal amount of $1,500,000.00 which is memorialized by a note of the same date. Plaintiff commenced this action and alleged that Zhu defaulted in repayment of the indebtedness on or about February 1, 2019. Zhu answered and pled five [5] affirmative defenses including lack of standing, failure to comply with RPAPL §§1304 and 1306 as well as lack of personal jurisdiction.

Now, Plaintiff moves for summary judgment against Defendant Zhu, striking the answer and affirmative defenses, a default judgment against all non-appearing parties, to appoint a Referee to compute and to amend the caption. Defendant Zhu opposes the motion.

In moving for summary judgment, Plaintiff was required to establish prima facie entitlement to judgment as a matter of law though proof of the mortgage, the note, and evidence of Defendants' default in repayment (see U.S. Bank, N.A. v James, 180 A.D.3d 594 [1^st Dept 2020]; Bank of NY v Knowles, 151 A.D.3d 596 [1^st Dept 2017]; Fortress Credit Corp, v Hudson Yards, LLC, 78 A.D.3d 577 [1^st Dept 2010]). Proof supporting a prima facie case on a motion for summary judgment must be in admissible form (see CPLR §3212[b]; Tri-State Loan Acquisitions III, LLC v Litkowski, 172 A.D.3d 780 [1^st Dept 2019]). Since Defendant pled in the answer lack of standing, failure to serve an RPAPL §1304 notice and lack of a contractual pre-foreclosure notice, Plaintiff was required to demonstrate, prima facie, its standing (see eg Wells Fargo Bank, N.A. v Tricario, 180 A.D.3d 848 [2^nd Dept 2020]) and its strict compliance with RPAPL §§1304 and 1306 (see U.S. Bank, NA v Nathan, 173 A.D.3d 1112 [2d Dept 2019]; HSBC Bank USA, N.A. v Bermudez, 175 A.D.3d 667, 669 [2d Dept 2019]).

In support of a motion for summary judgment on a cause of action for foreclosure, a plaintiff may rely on evidence from persons with personal knowledge of the facts, documents in admissible form and/or persons with knowledge derived from produced admissible records (see eg U.S. Bank N.A. v Moulton, 179 A.D.3d 734, 738 [2d Dept 2020]). No particular set of business records must be proffered, as long as the admissibility requirements of CPLR 4518[a] are fulfilled and the records evince the facts for which they are relied upon (see eg Citigroup v Kopelowitz, 147 A.D.3d 1014, 1015 [2d Dept 2017]).

Plaintiff s motion was supported with an affidavit from Beatrix Phalen ("Phalen"), a Document Verification Specialist of New Rez LLC, F/K/A New Penn Financial, LLC D/B/A Shellpoint Mortgage Servicing ("Shellpoint"), Plaintiffs alleged attorney-in-fact. Phalen's affidavit laid a proper foundation for the admission of the records of Shellpoint into evidence under CPLR §4518 (see Bank of N.Y.Mellon v Gordon, 171 A.D.3d 197 [2d Dept 2019]). The records of other entities were also admissible since Phalen sufficiently established that those records were received from their makers and incorporated into the records Shellpoint kept which and it routinely relied upon such documents in its business (see U.S. Bank N.A. v Kropp-Somoza, 191 A.D.3d 918 [2d Dept 2021]). Further, annexed to the motion were records referenced by Phalen (cf Deutsche Bank Natl. Trust Co. v Kirschenbaum, 187 A.D.3d 569 [1^st Dept 2020]) as well as a limited power of attorney, dated April 1, 2021, demonstrating the authority of Shellpoint to act on behalf of Plaintiff (see Deutsche Bank Natl. Trust Co. v Silverman, 178 A.D.3d 898, 901 [2d Dept 2019]).

Phalen's affidavit and the referenced documents sufficiently evidenced the note and mortgage. As to the Mortgagor's default, it "is established by (1) an admission made in response to a notice to admit, (2) an affidavit from a person having personal knowledge of the facts, or (3) other evidence in admissible form" (Deutsche Bank Natl. Trust Co. v McGann, 183 A.D.3d 700, 702 [2d Dept 2020]). Here, Phalen's review of the attached account records demonstrated that the Mortgagor defaulted in repayment under the note (see eg ING Real Estate Fin. (USA) LLC v Park Ave. Hotel Acquisition, LLC, 89 A.D.3d 506 [1^st Dept 2011]).

As to standing in a foreclosure action, the note is the dispositive instrument (Aurora Loan Servs., LLC v Taylor, 25 N.Y.3d 355, 361-362 [2015]). "'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 Carnivale, 138 A.D.3d 1220, 1221 [2d Dept 2016], quoting Onewest Bank, F.S.B. v Mazzone, 130 A.D.3d 1399, 1400 [2d Dept 2015]). However, "mere physical possession of a note at the commencement of a foreclosure action is insufficient to confer standing or to make a plaintiff the lawful holder of a negotiable instrument for the purposes of enforcing the note" (U.S. Bank N.A. v Moulton, 179 A.D.3d 734, 737 [2d Dept 2020]). "Holder status is established where the plaintiff possesses a note that, on its face or by allonge, contains an indorsement in blank or bears a special indorsement payable to the order of the plaintiff' (Wells Fargo Bank, NA v Ostiguy, 127 A.D.3d 1375, 1376 [2d Dept 2015] [citations omitted]). The indorsement must be made either on the face of the note or on an allonge "so firmly affixed thereto as to become a part thereof' (UCC §3-202[2]). "The attachment of a properly endorsed note to the complaint may be sufficient to establish, prima facie, that the plaintiff is the holder of the note at the time of commencement" (Deutsche Bank Nat'l. Trust Co. v Webster, 142 A.D.3d 636, 638 [2d Dept 2016]; cf. JPMorgan Chase Bank, N.A. v Grennan, supra).

In this case, Plaintiff annexed a copy of the note to the complaint to which an allonge was attached. That document contained an endorsement, in blank, executed by "NewRez LLC fka New Penn Financial, LLC". That New Penn may have ceased to exist, indicated by the "fka" designation which commonly stands for "formerly known as", does not negate Plaintiffs standing or the authority to assign the note. Defunct and merged business entities are authorized to continue business in the name of the former entity (see LLCL §703 [a]; PNC Bank NA v Klein, 125 A.D.3d 953 [2d Dept 2015]). Moreover, Phalen averred in her affidavit that the allonge was firmly affixed to the note when the action was filed. Contrary to Defendant's assertions, the proffered evidence was sufficient to demonstrate Plaintiff was in possession of a properly endorsed in blank note when the action was commenced (see PNC Bank, NA v Salcedo, 161 A.D.3d 571 [1^st Dept 2018]; Bank of New York Mellon v Knowles, 151 A.D.3d 596 [1^st Dept 2017]).

Accordingly, Plaintiff demonstrated prima facie the note, mortgage and Defendant's default in repayment thereunder.

Plaintiff was also required to proffer "sufficient evidence demonstrating the absence of material issues as to its strict compliance with RPAPL 1304" (Aurora Loan Servs., LLC v Weisblum, 85 A.D.3d 95, 106 [2d Dept 2011]). The Court of Appeals has "has long recognized a party can establish that a notice or other document was sent through evidence of actual mailing or-as relevant here-by proof of a sender's routine business practice with respect to the creation, addressing, and mailing of documents of that nature" (Cit Bank N.A. v Schiffman, 36 N.Y.3d 550, 556 [2020][internal citations omitted]). A satisfactory office practice giving rise to the presumption "must be geared so as to ensure the likelihood that [the] notice ... is always properly addressed and mailed" (Nassau Ins. Co. v Murray, 46 N.Y.2d 828, 830 [1978]) and can be demonstrated via an affiant who explains "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" (Cit Bank N.A. v Schiffman, supra). An affidavit from the person who performed the actual mailing is not necessary (see Bossuk v Steinberg, 58 N.Y.2d 916, 919 [1983]). Proof from a person with "personal knowledge of the practices utilized by the [sender] at the time of the alleged mailing" is sufficient (Preferred Mut. Ins. Co. v Donnelly, 22 N.Y.3d 1169, 1170 [2014]; see also Citibank, N.A. v Conti-Scheurer, 172 A.D.3d 17, 21 [2d Dept 2019] [internal quotation marks omitted]). Fulfillment of this requirement can raise a presumption that the required notice was sent and received by the projected addressee (Cit Bank N.A. v Schiffman, supra).

The affidavit of Phalen demonstrated strict compliance with the notice requirements under RPAPL §1304 (see HSBC Bank USA, N.A. v Bermudez, 175 A.D.3d 667 [2d Dept 2019]). Phalen's affidavit laid a proper foundation for the admission of Shellpoint's...