Deutsche Bank Natl. Trust Co. v Gillio

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[*1] Deutsche Bank Natl. Trust Co. v Gillio 2009 NY Slip Op 50383(U) [22 Misc 3d 1131(A)] Decided on February 26, 2009 Supreme Court, Suffolk County Whelan, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 26, 2009
Supreme Court, Suffolk County

Deutsche Bank National Trust Company, as Trustee, Plaintiff,

against

Kenneth Gillio, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. as Nominee for WMC MORTGAGE CORP., SARYA GILLIO, Defendants.



31670-07



Steven J. Baum, P.C.

Attys. For Plaintiff

PO Box 1291

Buffalo, NY 14240

Marc P. Gershman, Esq.

Atty. For Defendants

263 Mineola Blvd.

Mineola, NY 11501

Thomas F. Whelan, J.



ORDERED that this motion (#

003) by defendant, Kenneth Gillio, for an order vacating his default in appearing in this action, vacating any judgment which may have been entered herein and enjoining any proceedings authorized by said judgment and for an order extending said defendant's time to answer and/or dismissing the plaintiff's complaint is considered under CPLR 317, 3012 and 5015 and is denied.

The plaintiff commenced this mortgage foreclosure action on October 11, 2007. By its complaint, the plaintiff alleges that on August 12, 2005, defendant Gillio mortgaged his residential real property to WMC Mortgage Corp., in exchange for a loan in the amount of $239,200.00. Its is further alleged that Gillio's mortgage went into default on July 1, 2007. The mortgage note bears an indorsement in blank by the original lender. The plaintiff claims that on October 8, 2007, the mortgage note was transferred to the plaintiff by delivery and that the mortgage passed as incident thereof. The plaintiff further claims that this transfer is evidenced by a written assignment of the note and mortgage that was executed by a nominee of original lender (WMC Mortgage Corp.) on October 15, 2007. By its terms, the written assignment was effective as of October 8, 2007, the date of the note's transfer and the transfer of the mortgage as an incident thereto. The assignment was recorded in the Office of the Suffolk County Clerk on October 25, 2007.

The plaintiff served defendant Gillio with the summons and complaint by personal delivery pursuant to CPLR 308(1) on October 18, 2007. The plaintiff mailed an additional copy thereof to the plaintiff on October 22, 2008. Defendant Gillio does not contest such service.

The record reflects that in January of 2008, the plaintiff submitted an ex-parte motion (#

001) for an order fixing the known defendants' defaults in answering and the appointment of a referee to compute the amount due under the subject mortgage. This application, along with hundreds like it, was stored in the office of Special Term until it was reviewed by a clerk. In May of 2008, the plaintiff's ex-parte motion was assigned to this court and forwarded to chambers. On June 3, 2008, this court granted the plaintiff's motion by execution of the plaintiff's proposed order of reference.

In an apparent effort to avoid the back log of ex-parte applications sitting in this court's Special Term office, the plaintiff moved, in December of 2008 on notice to Gillio, for an order confirming the report of the referee to compute and for a judgment of foreclosure and sale. The record reflects that Gillio was served on December 2, 2008 with a copy of the plaintiff's motion which had noticed a return date of December 5, 2008. By order dated January 2, 2009, this court denied the plaintiff's motion due to its "short service" upon defendant Gillio.

By order to show cause dated January 8, 2009, defendant Gillio interposed this motion (#

003) for an order vacating his default in answering and for the incidental relief outlined above. Gillio's motion is predicated upon the following: 1) a claim asserted pursuant to CPLR 317 concerning the short service of the plaintiff's prior motion(#

002) for a judgment of foreclosure and sale; 2) an order vacating Gillio's default in answering or appearing in this action and extending his time to answer; and 3) upon the opening of Gillio's [*2]default, an order dismissing the plaintiff's complaint.

Gillio's complaints about the short service of the plaintiff's prior motion for an order confirming the report of the referee of sale and entry of a judgment of foreclosure and sale were rendered academic by the order of this Court dated January 2, 2009. Therein, the court denied the plaintiff's motion due to its improper service. Consequently, no judgment of foreclosure and sale has been entered in this action. Those portions of this motion wherein defendant Gillio claims an entitlement under CPLR 317 to the vacatur of any judgment and a stay of all proceedings such judgment may have authorized are denied as moot.

Also denied are Gillio's demands for a vacatur of his default in answering or otherwise appearing in this action and an order extending his time to serve and file an answer. Gillio claims an entitlement to this relief due to his possession of a reasonable excuse for failing to appear or answer the summons and complaint and his possession of one or more meritorious defenses. Since this motion was interposed prior to Gillio's receipt of the denial of the plaintiff's prior motion for entry of judgment, Gillio's demands for relief appear to be governed by the provisions of CPLR 5015(a)(1) which requires a showing of a reasonable excuse for the movant's default in answering and a meritorious defense to the plaintiff's pleaded demands for relief (see Eugene Di Lorenzo, Inc. v A.C. Dutton Lumber Co. Inc., 67 NY2d 138, 501 NYS2d 8 [1986]; Mora v Scarpitta, 52 AD3d 663, 861 NYS2d 110 [2d Dept 2008]; Montague v Rivera, 50 AD3d 656, 854 NYS2d 749 [2d Dept 2008]). Since no default judgment has been entered,[FN1] the instant motion may also be considered as one governed by CPLR 3012(d) which allows the court in its discretion to extend a party's time to appear or plead or compel the acceptance of pleading untimely served. The distinction may be one without a difference, however, since it is clear that in the Second Judicial Department, a party seeking to avoid the entry of a default judgment by motion to extend his or her time to answer under CPLR 3102(d) must likewise "demonstrate a reasonable excuse for the default and a meritorious defense to the action" (Grinage v City of New York, 45 AD3d 729, 846 NYS2d 300 [2d Dept 2007]; see also Giovanelli v Rivera, 23 AD3d 616, 804 NYS2d 817 [2d Dept 2005]; Ennis v Lema ,305 AD2d 633, 760 NYS2d 197 [2d Dept 2003]; cf. Guzzetti v City of New York, 32 AD3d 234, 820 NYS2d 29 [1st Dept 2006]; Ayers Mem. Animal Shelter v Montgomery County Socy. for the Prevention of Cruelty to Animals, 17 AD3d 904, 793 NYS2d 608 [3d Dept 2005]).

The determination of that which constitutes a reasonable excuse for a default lies within the sound discretion of the trial court (see Hodges v Sidial, 48 AD3d 663, 852 NYS2d 340 [2d Dept 2008]; Savino v ABC Corp., 44 AD3d 1026, 845NYS2d 789 [2d Dept 2007]; Juesinoski v Board of Educ. of the City of NY, 15 AD3d 353, 790 NYS2d 162 [2d Dept 2005]; Gambardella v Ortov Lighting, Inc., 278 AD2d 494, 717 NYS2d 923 [2d Dept 2000]). Since a successful [*3]motion pursuant to CPLR 5015(a)(1) and CPLR 3012(d) results in a vacatur of the default and an opportunity to answer and defend on the merits see David v Barnes,130 AD2d 703, 515 NYS2d 817 [2d Dept 1987]), the moving papers should include a demand for leave to serve and file a proposed, verified answer and a copy of such answer (see Bekker v Fleischman, 35 AD3d 334, 825 NYS2d 270 (2d Dept 2006)).

The excuse Gillio proffers rests upon the purportedly deceptive, misleading and/or fraudulent conduct of Litton Loan Servicing, LP., the servicer of the mortgagor loan from its inception, with whom, Gillio had been negotiating a loan modification agreement since July of 2007. The meritorious defenses Gillio claims include a lack of standing on the part of the plaintiff because it lacked ownership of the note and mortgage on the October 11, 2007 commencement date of this action. A further lack of standing and/or capacity is alleged by reason of the plaintiff's foreign corporate status and its purported lack of qualification to sue in New York. Gillio also claims that the plaintiff's failure to comply with the notice requirements imposed upon it by the Fair Debt Collection Practices Act set forth at 15 USC § 1692 et. seq., provides him with an equally valid defense. For the reasons set forth below, the court rejects these claims as unmeritorious.

Claims of ongoing settlement negotiations between the defendant and the plaintiff have been held sufficient to justify a default in answering on the part of the defendant engaged in such negotiations (see Scarlett v McCarthy, 2 AD3d 623, 768 NYS2d 342 [2d Dept 2003]; see also Option One Mtg. Corp. v Massanet, 2009 WL 380734 [Sup. Ct. Richmond County, Maltese, J; 2/5/2009]; Travelers Cas. & Surety Co. v Dynamic Painting Corp., 9 Misc 3d 1121[A], 862 NYS2d 811 [Sup. Ct. Nassau County, Bucaria, J; 9/20/2005]). An exception to the foregoing rule applies where a judgment on the default was entered prior to the engagement in settlement negotiations and the movant was aware of such judgment (see American Shoring Inc., v DCA Constr., Ltd., 15 AD3d 431, 789 NYS2d 722 [2d Dept 2005]).

Nevertheless, vague, nonspecific and uncorroborated factual assertions, upon which a claim of a reasonable excuse for a default is predicated, are generally insufficient to satisfy the reasonable excuse requirements (see Wells Fargo Bank v. Linzenberg, 50 AD3d 674, 853 NYS2d 912 [2d Dept 2008]; Canty v Gregory, 37 AD3d 508, 829 NYS2d 694 [2d Dept 2007]; Aames Capital Corp. v Davidsohn, 24 AD3d 474, 808 NYS2d 229 [2d Dept 2005]; Desiderio v. Devani, 24 AD3d 495, 806 NYS2d 240 [2d Dept 2005]). Here, Gillio offers nothing but unsubstantiated claims that the plaintiff's servicing agent, Litton, induced him into not answering the summons and complaint or otherwise indicated that the foreclosure action would be forestalled. Moreover, all such claims are belied by the record adduced on this motion. Attached to the plaintiff's opposing papers are documents indicating that Gillio was repeatedly advised that any foreclosure proceeding would continue until Gillio met all of the conditions precedent to the consummation of any loan modification agreement. Although five of such agreements and correspondence containing this advisory were prepared by Litton and mailed to Gillio, none were returned duly completed by Gillio with the supporting documentation required by Litton. Since the facts underlying Gillio's claims of a reasonable excuse for his default (as bereft and unsubstantiated as [*4]they are) are flatly contradicted by the record, Gillio has no viable claim of a reasonable excuse for his failure to answer or otherwise appear in this action (see Bank of New York v Stradford, 55 AD3d 765, 869 NYS2d 554 [2d Dept 2008]; Mortgage Elec. Sys., Inc. v Schotter, 50 AD3d 983, 857 NYS2d 592 [2d Dept 2008]; Aames Capital Corp. v Davidsohn, 24 AD3d 474, supra ; Miller v. Lanzisera, 273 AD2d 866, 709 NYS2d 286 [4th Dept 2000]).

Even if this court assumed, without finding, that Gillio's claims were sufficiently alleged and supported so as to permit a finding that he possessed a reasonable excuse for his default, Gillio failed to establish a meritorious defense to the plaintiff's claims for foreclosure and sale. Gillio's claim that the plaintiff lacked standing to commence this action by reason of its lack of ownership in the note and mortgage at the time of the commencement of this action is without merit. It is now clear beyond peradventure that an indorsement of a mortgage note in blank together with its delivery by the owner or its agent to a transferee is sufficient to transfer ownership of said note and of a mortgage given to secure it (see Mortgage Elec. Sys., Inc. v Coakley, 41 AD3d 674, 838 NYS2d 622 [2d Dept 2007]). Gillio's argument that the assignment of October 15, 2007 was ineffective to confer standing because it post-dated the commencement of this action is without merit. Said assignment accurately reflected that the plaintiff acquired ownership of the note and mortgage on October 8, 2007, by its receipt of delivery of the note indorsed in blank. The mortgage followed as an incident to the transfer of the note. The plaintiff was thus the owner of the note and mortgage at the time of the commencement of this action.

Gillio's alternative claim that the plaintiff lacks standing and/or the requisite capacity to sue under BCL § 1312(a) is also without merit as the plaintiff's capacity is governed by Banking Law § 200 (see First Wisconsin Trust Company v Hakimian, 237 AD2d 249, 654 NYS2d 808 [2d Dept 1997]; Commonwealth Bank & Trust Co. v Tioga Mills, Inc., 78 AD2d, 433 NYS2d 519 [3d Dept 1980]). Equally unavailing is Gillio's claim that the plaintiff's purported failure to issue a timely "validation notice" allegedly required under the Fair Debt Collection Practices Act at 15 USC § 1692 et. seq., constitutes a valid defense to the plaintiff's claims for foreclosure and sale. Gillio's remedies for the plaintiff's violation, if any, of the provisions of this federal statute are limited to those set forth therein, none of which, include the forestalling of state claims to collect on the debt or to foreclose on secured property (see Green Tree Fin. Serv. Corp. v Lewis, 280 AD2d 642, 720 NYS2d 843 [2d Dept 2001]).

To the extent that Gillio's motion may be considered as one interposed pursuant to CPLR 5015(a)(3) (cf., Aames Capital Corp. v Davidsohn, 24 AD3d 474, supra ), no showing of a reasonable excuse for his default nor any showing that Gillio has a meritorious defense would be required since Gillio's claims of wrongdoing on the part of the plaintiff's agent, Litton, the loan servicer, sound in "extrinsic fraud" rather than "intrinsic fraud" (see Bank of New York v Lagakos, 27 AD3d 678, 810 NYS2d 923 [2d Dept 2006]; Fischman v Gilmore, 246 AD2d 508, 666 NYS2d 942 [2d Dept 1998]); Shaw v Shaw, 97 AD2d 403, 467 NYS2d 231 [2d Dept 1983]). Nevertheless, the inadequacies of the factual assertions underlying Gillio's claims of extrinsic fraud outlined above are equally fatal to any claim for vacatur of Gillio's default under CPLR 5015(a)(3) (see Mortgage Elec. Sys., Inc. v Schotter, 50 AD3d 983, supra ; Bank of New York v Stradford, [*5]55 AD3d 765, supra ; Aames Capital Corp. v Davidsohn, 24 AD3d 474, supra ; Miller v. Lanzisera, 273 AD2d 866, supra ).

In view of the foregoing, this motion by defendant Gillio is in all respects denied.

DATED: ____________________________________________

THOMAS F. WHELAN, J.S.C.

Footnotes

Footnote 1:While not a judgment within the contemplation of CPLR 5015, the order of reference entered herein on June 3, 2008, did in fact adjudicate Gillio's default in answering which allowed the court to appoint a referee to compute amounts due under the subject note and mortgage (see RPAPL 1321).



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