US Bank, N.A. v. Flynn

• Decision Date: 12 March 2010
• Parties: US BANK, N.A. as Trustee for Deutsche ALT-A Securities Mortgage Loan Trust Series 2007-2, Plaintiff, v. Francis FLYNN, Andrew Mancini, Emigrant Mortgage Company, Inc. State of New York on behalf of University Hospital IP, Wells Fargo Foothill, Inc., et als, Defendants.
• Court: New York Supreme Court

897 N.Y.S.2d 855

27 Misc.3d 802

US BANK, N.A. as Trustee for Deutsche ALT-A Securities Mortgage Loan Trust Series 2007-2, Plaintiff,

v.Francis FLYNN, Andrew Mancini, Emigrant Mortgage Company, Inc. State of New York on behalf of University Hospital IP, Wells Fargo Foothill, Inc., et als, Defendants.

Supreme Court, Suffolk County, New York.

March 12, 2010.

Hogan & Hartson, LLP, New York, for Plaintiff.

O'Shea, Marcincuk & Bruyn, LLP, Southampton, for Defendant.

THOMAS F. WHELAN, J.

It is ORDERED that this motion by the plaintiff for partial summary judgment on its first cause of action against defendant Flynn and for dismissal of the affirmative defenses and counterclaims asserted in his answer is considered under CPLR 3212 and RPAPL Article 13 and is granted.

On November 21, 2008, the plaintiff commenced this hybrid action to foreclose a February 26, 2007 mortgage given by defendant Flynn to secure a note of the same date in the amount of $2,000,000.00 in connection with his purchase of residential real property located in the Town of Southampton. In the separate, second cause of action set forth in its complaint, the plaintiff demands declaratory relief pursuant to RPAPL § 1501 to effect an extinguishment or subordination of the liens and encumbrances owned by the remaining known defendants listed in the caption. For the reasons set forth below, the instant motion, which is limited to a demand for partial summary judgment on the plaintiff's first cause of action against the mortgagor defendant Flynn, is granted.

It is well established that a plaintiff who seeks summary judgment on its claims for foreclosure and sale establishes a prima facie case for such relief by production of copies of the mortgage, the unpaid note and evidence of a default under the terms thereof ( see CPLR 3212; RPAPL § 1321; North Bright Capital, LLC v. 705 Flatbush Realty, LLC, 66 A.D.3d 977, 889 N.Y.S.2d 596 [2d Dept. 2009] Wells Fargo Bank Minnesota v. Perez, 41 A.D.3d 590, 837 N.Y.S.2d 877 [2d Dept. 2007];Household Fin. Realty Corp. of New York v. Winn, 19 A.D.3d 545, 796 N.Y.S.2d 533 [2d Dept. 2005]; Ocwen Fed. Bank FSB v. Miller, 18 A.D.3d 527, 794 N.Y.S.2d 650 [2d Dept. 2005] ). Here, the moving papers established the plaintiff's entitlement to summary judgment on its complaint to the extent it asserts claims against answering defendant Flynn as they included copies of the mortgage, the unpaid note and due proof of a default in payment.

It was thus incumbent upon Flynn to submit proof that factually rebuts the plaintiff's prima facie showing or demonstrates that one or more of the affirmative defenses asserted in his answer requires a trial ( see Neighborhood Hous. Serv. of New City Inc. v. Meltzer, 67 A.D.3d 872, 889 N.Y.S.2d 627 [2d Dept. 2009]; Washington Mut. Bank v. O'Connor, 63 A.D.3d 832, 880 N.Y.S.2d 696 [2d Dept. 2009]; J.P. Morgan Chase Bank, N.A. v. Agnello, 62 A.D.3d 662, 878 N.Y.S.2d 397 [2d Dept. 2009];Household Fin. Realty Corp. of New York v. Winn, 19 A.D.3d 545, 796 N.Y.S.2d 533, supra ). A review of the opposing papers submitted by the defendant reveals, however, that they were insufficient in this regard.

Flynn's first asserted defense, namely, that the plaintiff lacks standing or the capacity to sue by reason of its non-ownership of the subject note and mortgage is refuted by the record. It is well settled law that in cases wherein "the plaintiff is the assignee of the mortgage and underlying note at the time the foreclosure action was commenced, the plaintiff has standing to maintain the action" ( Countrywide Home Loans v. Gress, 68 A.D.3d 709, 888 N.Y.S.2d 914 [2d Dept. 2009]; quoting Federal Natl. Mtg. Assn. v. Youkelsone, 303 A.D.2d 546 546-547, 755 N.Y.S.2d 730 [2d Dept. 2003]; see also Wells Fargo Bank v. Marchione, 69 A.D.3d 204, 887 N.Y.S.2d 615 [2d Dept. 2009]; First Trust National Assn. v. Meisels, 234 A.D.2d 414, 651 N.Y.S.2d 121 [2d Dept. 1996] ). Here, the plaintiff claims ownership of the note and mortgage under a written assignment executed by a nominee of the original lender in favor of the plaintiff which pre-dates the commencement of this action by two days.

Flynn's challenges to the ineffectiveness of the assignment by Mortgage Electronic Registration Systems, Inc. [MERS], the nominee of the original lender, are unavailing. Flynn alleges that the MERS assignment did not effect a valid transfer of the note, notwithstanding its recitation of an assignment of the note, as well as the mortgage, because MERS never had an ownership interest in the note at the time of the assignment. The plaintiff counters by relying on the language of the mortgage indenture itself which names MERS as mortgagee of record and nominee of the lender, its successors and assigns, and confers upon it broad authority to act with respect to the mortgage in all ways that the original lender, its successors and assigns could act, including the right to foreclose, and to take any action required of the lender, including, but not limited, to releasing or discharging the mortgage.

Some support for the plaintiff's claim that the language of the mortgage itself confers standing upon a foreclosing plaintiff can be found in the case of Mortgage Elec. Registration Sys. v. Coakley, 41 A.D.3d 674, 838 N.Y.S.2d 622 [2d Dept. 2007]. Therein, the Appellate Division, Second Department sustained the standing of MERS to sue as a foreclosing plaintiff in the face of a challenge thereto. The court found that MERS had ownership of the note by virtue of an indorsement and that ownership of the mortgage followed as an incident of the transfer of the note. The court then focused on the powers conferred upon MERS under the mortgageindenture and noted as follows:

"Moreover, further support for MERS's standing may be found on the face of the mortgage instrument itself. Coakley expressly agreed without qualification that MERS had the right to foreclose in the event of a default ( see Fairbanks Capital Corp. v. Nagel, 289 A.D.2d 99, 100 735 N.Y.S.2d 13; Airlines Reporting Corp. v. S & N Travel, 238 A.D.2d 292, 293, 656 N.Y.S.2d 299; College Mgt. Co. v. Belcher Oil Co. of N.Y., 159 A.D.2d 339, 341, 552 N.Y.S.2d 616)."

This court is aware of only one other New York appellate case authority wherein the court addressed the propriety of the prosecution of a mortgage foreclosure action by a nominee or other agent of the owner of the note and mortgage at the time of the commencement of the action. In Fairbanks Capital Corp. v. Nagel, 289 A.D.2d 99, 735 N.Y.S.2d 13, supra, the Appellate Division, First Department noted in dicta that a servicing agent of the owner of the note and mortgage could prosecute the foreclosure action so long as its authority to do so was properly conferred ( see Fairbanks, id., at 100, 735 N.Y.S.2d 13). However, courts in various other jurisdictions have upheld the standing of MERS, as nominee, to prosecute a foreclosure action where the mortgage indenture at issue confers upon such nominee broad powers to act as the lender or its successors and assigns may act ( see Morgera v. Countrywide Home Loans, Inc., 2010 WL 160348 [U.S. E.D. Cal. 1/11/10]; Bucci v. Lehman Bros. Bank, FSB, 2009 WL 3328373 [Sup. Ct. Rhode Island 8/25/09]; Mortgage Elec. Registration Sys. v. Revoredo, 955 So.2d 33 [3d Dist. Ct. of Appls. Fla.2007]; Hilmon v. Mortgage Elec. Registration Sys., 2007 WL 1218718 [E.D. Dist. Mich.2007]; In re Huggins, 357 B.R. 180 [U.S. Bankruptcy Ct. D.Mass 2006] ).

In a more recent case entitled, Crum v. LaSalle Bank, NA, ---So.3d ---- [Ala. Ct. Civ. App.2009] the Alabama Court of Civil Appeals rejected a debtor's claim that an assignment by a nominee of the owner of the note and mortgage was ineffective because the assignor lacked ownership of the note evidencing debt at the time it made the assignment. This finding was premised in large part upon the language of the mortgage indenture which conferred upon the nominee named therein [MERS] broad authority to act on behalf of the lender, including being empowered "to take any action required of the lender".

The defendant's reliance upon Merscorp, Inc. v. Romaine, 24 A.D.3d 673, 808 N.Y.S.2d 307 [2d Dept. 2005], aff'd 8 N.Y.3d 90, 828 N.Y.S.2d 266, 861 N.E.2d 81 [2006] tosupport his first affirmative defense is misplaced. Therein, the Second Department held that mortgages, assignments and discharges thereof which name MERS as the lender's nominee or the mortgagee of record must be recorded and indexed by the County Clerk. The holding was affirmed by the Court of Appeals. Neither the Second Department nor the Court of Appeals decided the issue of the efficacy of a MERS assignment to confer standing upon the assignee. Indeed, both concurring Judge Ciparick and dissenting Chief Judge Kaye of the Court of Appeals stated that consideration of the standing of MERS to prosecute a foreclosure action under the ancient rule that a "transfer of the mortgage without the debt is a nullity" ( Merritt v. Bartholick, 36 N.Y. 44 [1867] ), was not undertaken by the Court, but instead, left for another day ( see Merscorp, Inc. v. Romaine, 8 N.Y.3d 90, at 100, 102, 828 N.Y.S.2d 266, ...