Wells Fargo Bank N.A. v. Lawson Ho–Shing

• Decision Date: 08 January 2019
• Docket Number: Index 380685,6956
• Citation: 168 A.D.3d 126,92 N.Y.S.3d 194
• Parties: WELLS FARGO BANK N.A., Plaintiff–Respondent, v. LAWSON HO–SHING Also Known as Lawson H. Ho–Shing, Defendant–Appellant, Audrey Ho–Shing, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

168 A.D.3d 126

92 N.Y.S.3d 194

WELLS FARGO BANK N.A., Plaintiff–Respondent,

v. LAWSON HO–SHING Also Known as Lawson H. Ho–Shing, Defendant–Appellant,Audrey Ho–Shing, et al., Defendants.

6956

Index 380685

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

ENTERED: JANUARY 8, 2019

Lawson Ho–Shing, appellant pro se.

Hogan Lovell, U.S. LLP, New York (Leah Edmunds, David Dunn and Cava Brandriss of counsel), for respondent.

Rosalyn H. Richter, J.P., Peter Tom, Angela M. Mazzarelli, Ellen Gesmer, Peter H. Moulton, JJ.

TOM, J.

In this mortgage foreclosure action, Supreme Court granted plaintiff Wells Fargo Bank, N.A.'s unopposed motion for summary judgment and referred the matter to a referee to determine the amount owed under the consolidated mortgage and note. We find that Supreme Court properly denied the motion of pro se defendant Lawson Ho–Shing to vacate the summary judgment order, as both his claim of fraud and his standing defense lack merit (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] ). We also find that the court properly denied defendant's motion to strike an affidavit pursuant to CPLR 3024(b).

The pertinent facts are undisputed. On November 12, 2005, defendant Lawson Ho–Shing and codefendant Audrey Ho–Shing (defendants) obtained a mortgage loan from nonparty Fremont Investment & Loan in the principal amount of $432,000. Defendant and Audrey executed a promissory note and mortgage (both also dated November 12, 2005) on their property located at 1312 Needham Avenue in the Bronx; Mortgage Electronic Registration Systems, Inc. (MERS), was the mortgage nominee.

On February 20, 2008, defendants obtained a second loan secured by the property in the amount of $43,338, from plaintiff Wells Fargo. Defendants executed a promissory note and mortgage in connection with the second secured loan, also dated February 20, 2008.

Then, defendants executed a Consolidation, Extension and Modification Agreement (CEMA) on February 20, 2008, under which the 2005 and 2008 mortgage loans were consolidated into a single loan in the principal amount of $471,415, which was secured by the property and payable to Wells Fargo. Under the CEMA, they agreed to keep all promises in the notes and mortgage as consolidated and modified. The CEMA explained that the two notes, identified in Exhibit A to the agreement, were combined and that the parties' rights and obligations were combined into one mortgage and one "loan obligation."

Defendants also executed a consolidated note and a consolidated mortgage that identified Wells Fargo as the payee and mortgagee, respectively. The consolidated note was attached to the CEMA, which provided that it "[would] supersede all terms, covenants, and provisions of the [original] Notes." Similarly, the consolidated mortgage constituted a "single lien" on the property and "[would] supersede all terms, covenants, and provisions of the [original] Mortgages." On October 18, 2010, MERS executed a written assignment of the first mortgage to Wells Fargo.

After May 1, 2010, defendants defaulted on their payment obligations under the consolidated mortgage. Wells Fargo states that it mailed defendants a notice of default and a 90–day pre-foreclosure notice, as required by Real Property Actions and Proceedings Law § 1304, and defendants failed to cure. Although the 90–day notice is not included in the appellate record, the record contains an affidavit of merit and amounts due and owing, signed by Sarah Lee Stonehocker, Wells Fargo's Vice President, Loan Documentation, who averred that she had reviewed the 90–day pre-foreclosure notice sent to defendant by certified and first class mail, confirmed that the notice was filed with the New York State Banking Department, as required, and that a confirmation number was issued.

On or about June 20, 2013, Wells Fargo commenced this foreclosure action by filing a summons, complaint, and notice of pendency. At that time, it was unrefuted that Wells Fargo had physical possession of the consolidated note. Defendants answered, asserting Wells Fargo's lack of standing as an affirmative defense.

In August 2015, Wells Fargo filed a motion for summary judgment, asking that the proceeding be referred to a referee to determine the amount owed under the consolidated mortgage and loan. Wells Fargo states that its motion was supported by copies of the RPAPL 1304 90–day notice mailed to defendant and proof of its filing with the New York State Banking Department pursuant to RPAPL 1306, and an affidavit by Amanda J. Weatherly, setting forth Wells Fargo's standard business practice concerning the mailing of 90–day notices, and stating that it complied with those practices here. Defendant did not oppose the motion.

By order entered January 28, 2016, Supreme Court granted the motion and struck defendants' answer with prejudice, finding that it was "nothing more than a general denial which is insufficient to create an issue of fact" as to default under the consolidated loan. By separate order entered January 28, 2016, the court referred the matter to a referee.

On or about September 1, 2016, Wells Fargo served—but did not file—a motion for judgment of foreclosure and sale supported by the Stonehocker affidavit.

In September 2016 and January 2017, defendant filed a motion to strike the Stonehocker affidavit under CPLR 3024(b), arguing that it was "impertinent, immaterial, scandalous, and a deliberate fraud," and separately moved to vacate the summary judgment order and order of reference under CPLR 5015(a)(3), arguing that Wells Fargo lacked standing to foreclose because the first mortgage assignment was invalid. Defendant contended that Wells Fargo "inten[ded] to deceive the Court" by "manufactur[ing] [documents] for the purposes of litigation, in order to get standing." He also argued that MERS had no authority to assign the first mortgage and note to Wells Fargo and that the entity that issued the original loan, Fremont Investment & Loan, had gone into bankruptcy before the assignment.

Supreme Court denied both motions. The court found that defendant failed to establish that Wells Fargo engaged in fraud that would warrant vacatur under CPLR 5015(a)(3), and declined to strike the Stonehocker affidavit under CPLR 3024, since it was never filed and was not a pleading, and, in any event, was neither scandalous nor prejudicial.

First, with regard to vacatur, even accepting, as the dissent lays out, that defendant established an excusable default because his attorney, who had been served with the summary judgment motion, filed for bankruptcy and failed to respond, he did not demonstrate a meritorious defense.

Initially, defendant's vacatur motion was primarily predicated on his claim that Wells Fargo had engaged in fraud and misrepresented facts, a point that the dissent overlooks. In any event, defendant argues on appeal that Wells Fargo failed to prove that it gave 90 days' notice of foreclosure, as required by RPAPL 1304 and 1306.

Defendant's belated notice argument is improperly raised for the first time on appeal (see Lutin v. SAP V/A Atlas 845 WEA Assoc. NF LLC, 157 A.D.3d 466, 467 [1st Dept. 2018] ). Moreover, the argument is unavailing. Indeed, Stonehocker averred that she had reviewed the RPAPL 1304 90–day pre-foreclosure notice sent to defendant by certified and first class mail and could confirm that the RPAPL 1306 notice was filed with the New York State Banking Department, as required, and that a confirmation number was issued.

Wells Fargo also argues that before the motion court, as further proof, it submitted the Weatherly affidavit, in which Weatherly averred that 90–day pre-foreclosure notice was sent to defendant at the subject property, and documentation of the mailing was filed with the New York State Banking Department. However, that assertion cannot be confirmed or rejected, because the Weatherly affidavit is omitted from the record, and cannot be accessed otherwise.

Further, there is no record evidence to support defendant's claim that Wells Fargo manufactured documents to "get standing." This is a bare accusation with no evidentiary proof. Nor is defendant aided by reference to an unrelated bankruptcy case in which he claims that Wells Fargo had relied upon a blank endorsement that the court found had been forged.

Turning to standing, it is not disputed that Wells Fargo had possession of the consolidated note and the consolidated mortgage at the time this action was commenced. A plaintiff in these cases establishes standing by showing that it is the holder or assignee of the subject note at the time the action is commenced (see Aurora Loan Servs., 25 N.Y.3d at 361, 12 N.Y.S.3d 612, 34 N.E.3d 363 ). As the dissent recognizes, in Aurora , 25 N.Y.3d at 361, 12 N.Y.S.3d 612, 34 N.E.3d 363 the Court of Appeals made clear that "[i]t is the note, and not the mortgage, that is the dispositive instrument that conveys standing to foreclose." Accordingly, Wells Fargo established standing by showing that it held the consolidated note at the time it commenced this action, as Stonehocker, who had personal knowledge of the facts, averred (see OneWest Bank FSB v. Carey, 104 A.D.3d 444, 445, 960 N.Y.S.2d 306 [1st Dept. 2013] ).¹

To the extent defendant could challenge standing based on any claims related to the consolidated note, his failure to include the complaint or the underlying summary judgment motion together with the supporting papers is fatal to this potential line of attack.

Moreover, defendant does not contest that Wells Fargo brought suit to enforce the consolidated note and mortgage, not the originals given by Fremont, and it is not contested that Wells Fargo was holder of the consolidated note and mortgage before commencing suit.

Critically, the CEMA makes clear that the consolidated note superseded the original notes and is the operative document in this case. As did the plaintiff in Weiss v. Phillips , 157 A.D.3d 1, 65 N.Y.S.3d 147 (1st...