Option One Mtge. Corp. v Duke

[*1] Option One Mtge. Corp. v Duke 2009 NY Slip Op 51773(U) [24 Misc 3d 1237(A)] Decided on August 18, 2009 Supreme Court, Kings County Schack, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 18, 2009
Supreme Court, Kings County

Option One Mortgage Corporation, Plaintiff,

against

Patrick E. Duke, et al., Defendants.



41590/07



Plaintiff

Charles D.J. Case, Esq.

Steven J. Baum, PC

Buffalo NY

Arthur M. Schack, J.

In this mortgage foreclosure action, for the premises located at 287 East 37th Street, Brooklyn, New York (Block 4891, Lot 49, County of Kings), plaintiff OPTION ONE MORTGAGE CORPORATION (OPTION ONE) moves, inter alia, for: the appointment of a referee to compute the amount due to plaintiff under the note and mortgage; and, to amend the caption to reflect that due to OPTION ONE's assignment of the instant mortgage and note subsequent to the commencement of this action, the new plaintiff is DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF SOUNDVIEW HOME LOAN TRUST 2006-OPT4 ASSET BACKED CERTIFICATES SERIES 2006-OPT4 (DEUTSCHE BANK).

The putative plaintiff, OPTION ONE, never owned the instant $357,000.00 March 18, 2006-mortgage and note, given by CONTOUR MORTGAGE CORPORATION (CONTOUR) to defendant PATRICK E. DUKE (DUKE). CONTOUR, in the instant action, assigned the DUKE mortgage and note OPTION ONE prior to the existence of the instant mortgage and note. [*2]Nonexistent mortgages and notes are incapable of assignment. Thus, without a valid assignment from CONTOUR to OPTION ONE, there could not have been a valid assignment of the DUKE mortgage and note from OPTION ONE to DEUTSCHE BANK. Therefore, the order of reference is denied, the instant action is dismissed with prejudice and the Kings County Clerk is directed to cancel OPTION ONE's notice of pendency, filed on November 9, 2007, against the subject property located at Block 4891, Lot 49, County of Kings.

Background

Defendant PATRICK E. DUKE borrowed $357,000.00 from CONTOUR on March 18, 2006 and executed a thirty-year note and a mortgage to secure the loan. The note was for "40/30 years" at 6.85% [exhibit F of motion]. While the loan was amortized for a 40-year term, the loan required a balloon payment for the outstanding balance after 30 years. The instant March 28, 2006-mortgage was recorded in the Office of the City Register, New York City Department of Finance, on April 21, 2006, at City Register File Number (CRFN) 2006000223830 [exhibit G of motion].

CONTOUR assigned the instant mortgage and note to OPTION ONE. However, Lisa Simeone, Treasurer of CONTOUR executed the assignment on March 17, 2006, one day prior to the execution of the mortgage and note. The March 17, 2006 assignment states that the instant mortgage was executed on March 18, 2006, one day later. Further, the Notary Public who took Ms. Simeone's signature, Kenneth S. Pelsinger, acknowledged that "[o]n the 17th day of March in the year 2006, before me, the undersigned, personally appeared Lisa Simeone, personally known to me . . . and acknowledged to me that he/she/they executed the same." The notary public, Mr. Pelsinger, is also the same notary public who took defendant DUKE's signature on March 18, 2006 for the execution of the instant mortgage. The March 18, 2006-mortgage contains, on page 9, the acknowledgment of Mr. Pelsinger as notary public, stating that "[o]n the 18th day of March in the year 2006, before me, the undersigned, personally appeared Patrick E. Duke, personally known to me . . . and acknowledged to me that he/she/they executed the same." The purported March 17, 2006 CONTOUR to OPTION ONE assignment was not recorded until more than thirteen months had passed, on April 23, 2007, in the Office of the City Register, New York City Department of Finance, at CRFN 2007000208111 [exhibit H of motion]. Interestingly, Mr. Pelsinger is a member of the Bar of the State of New York, whose listed business address registered with the Office of Court Administration is identical to CONTOUR's address, 1900 Hempstead Turnpike, East Meadow, New York 11554.

The July 3, 2008-affidavit of merit [exhibit B of motion] by Raymond Elmes, Vice President of OPTION ONE, admits, in ¶ 3, that the CONTOUR to OPTION ONE assignment took place on March 17, 2006 and that defendant DUKE executed the instant mortgage on March 18, 2006. Plaintiff's counsel, in ¶ 1 of his affirmation of regularity, states the same information with respect to the assignment being prior to the mortgage execution.

Mr. Elmes' affidavit states that defendant DUKE defaulted with his August 1, 2007 loan payment and that at the time of his default there was due and owing the principal balance of $354,654.83 plus 6.85% interest from July 1, 2007. OPTION ONE, despite alleging to have been assigned the mortgage and note that did not exist on March 17, 2006, filed the instant notice of pendency, summons and complaint on November 9, 2007 with the Kings County Clerk. Eleven days subsequent to this, on November 20, 2007, OPTION ONE assigned the instant [*3]mortgage and note to DEUTSCHE BANK. While this assignment recites that the instant mortgage and note were dated March 18, 2006 and recorded on April 21, 2006, it is silent as to the date of the CONTOUR to OPTION ONE assignment, but states that this assignment was recorded on April 23, 2007. If this Court allows the defective chain of title to vest the instant mortgage and note with DEUTSCHE BANK, the Court would have had to explore why DEUTSCHE BANK purchased the nonperforming DUKE loan, then 112 days in default? While the assignment of the DUKE nonperforming loan to DEUTSCHE BANK appears to be a small ripple in what former Federal Reserve Board Chairman Alan Greenspan called, in his October 23, 2008 testimony before the House Oversight Committee, "a once in a century credit tsunami," the Court wonders why DEUTSCHE BANK purchased the DUKE mortgage loan and did DEUTSCHE BANK violate its fiduciary duty to its stockholders with the purchase of a loan that defaulted almost four months prior to its assignment to DEUTSCHE BANK?

Discussion

Plaintiff OPTION ONE must have "standing" to bring this action. "Standing to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress." (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d 801 812 [2003], cert denied 540 US 1017 [2003]). Professor David Siegel, in NY Prac, § 136, at 232 [4th ed] instructs that: [i]t is the law's policy to allow only an aggrieved person to bring a lawsuit . . . A want of "standing to sue," in other words, is just another way of saying that this particular plaintiff is not involved in a genuine controversy, and a simple syllogism takes us from there to a "jurisdictional" dismissal: (1) the courts have jurisdiction only over controversies; (2) a plaintiff found to lack "standing" is not involved in a controversy; and (3) the courts therefore have no jurisdiction of the case when such a plaintiff purports to bring it.

"Standing to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request." (Caprer v Nussbaum (36 AD3d 176, 181 [2d Dept 2006]). If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. (Stark v Goldberg, 297 AD2d 203 [1st Dept 2002]). "Since standing is jurisdictional and goes to a court's authority to resolve litigation [the court] can raise this matter sua sponte." (Axelrod v New York State Teachers' Retirement System, 154 AD2d 827, 828 [3d Dept 1989]).

To foreclose on a mortgage, a party must have title to the mortgage. The instant assignment, before the actual mortgage and note were executed, is a nullity. The Appellate Division, Second Department (Kluge v Fugazy, 145 AD2d 537, 538 [2d Dept 1988]), held that a "foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity." The Appellate Division, First Department, citing Kluge v Fugazy (Katz v East-Ville Realty Co., 249 AD2d 243 [1st Dept 1998]) instructed that "[p]laintiff's attempt to foreclose upon a mortgage in which he had no legal or equitable interest was without foundation in law or fact."

Plaintiff OPTION ONE lacked standing to foreclose on the instant mortgage and note [*4]when it commenced the instant action on November 9, 2007, because it never owned the DUKE mortgage and note. The Court, in Campaign v Barba (23 AD3d 327 [2d Dept 2005]), instructed that "[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and the mortgage note, ownership of the mortgage, and the defendant's default in payment [ Emphasis added]." (See Witelson v Jamaica Estates Holding Corp. I, 40 AD3d 284 [1st Dept 2007]; Household Finance Realty Corp. of New York v Winn, 19 AD3d 545 [2d Dept 2005]; Sears Mortgage Corp. v Yaghhobi, 19 AD3d 402 [2d Dept 2005]; Ocwen Federal Bank FSB v Miller, 18 AD3d 527 [2d Dept 2005]; U.S. Bank Trust Nat. Ass'n Trustee v Butti, 16 AD3d 408 [2d Dept 2005]; First Union Mortg. Corp. v Fern, 298 AD2d 490 [2d Dept 2002]; Village Bank v Wild Oaks Holding, Inc., 196 AD2d 812 [2d Dept 1993]).

"It is axiomatic that to be effective, an assignment of a note and mortgage given as security therefor must be made by the owner of such note and mortgage and that an assignment made by entities having no ownership interest in the note and mortgage pass no title therein to the assignee." (LaSalle Bank Nat. Ass'n v Lamy, 12 Misc 3d 1191 [A] [Sup Ct, Suffolk County 2006]). OPTION ONE, in the instant action, claims that CONTOUR assigned the DUKE mortgage and note to it, prior to its execution. Documents not yet executed, and thus not in existence, cannot be assigned, because no present right exists in the thing assigned. "To effect an assignment . . . there [must] be a perfected transaction between the assignor and assignee, intended by those parties to vest in the assignee a present right in the things assigned" (Leon v Martinez, 84 NY2d 83, 88 [1994])." (Zeman v Falconer Electronics, Inc., 55 AD3d 1240 [4d Dept 2008]).

In the absence of a valid assignment on March 17, 2006, from CONTOUR to OPTION ONE, OPTION ONE never acquired the rights to the DUKE mortgage possessed by CONTOUR. Thus, OPTION ONE did not have the right to assign the instant mortgage and note to DEUTSCHE BANK. "When a valid assignment is made, he assignee steps into the assignor's shoes and acquires whatever rights the latter had (see Furlong v Shalala, 156 F3d 394, 392 [2d Cir 1998])." (In re Stralem, 303 AD2d 120, 123 [2d Dept 2003]).

Therefore, without a valid assignment from CONTOUR to OPTION ONE, OPTION ONE's motion for an order of reference is denied, the instant action is dismissed with prejudice, and the notice of pendency filed agaisnt the subject premises on November 9, 2007 is cancelled.

CPLR § 6501 provides that the filing of a notice of pendency against a property is to give constructive notice to any purchaser of real property or encumbrancer against real property of an action that "would affect the title to, or the possession, use or enjoyment of real property, except in a summary proceeding brought to recover the possession of real property." "The purpose of the doctrine was to assure that a court retained its ability to effect justice by preserving its power over the property, regardless of whether a purchaser had any notice of the pending suit . . . " and, that "the statutory scheme permits a party to effectively retard the alienability of real property without any prior judicial review." (5303 Realty Corp. v O & Y Equity Corp. 64 NY2d 313, 319-320 [1984]).

Article 65 of the CPLR outlines notice of pendency procedures. The Court, in Da Silva v Musso (76 NY2d 436, 442 [1990]), held that "the specific statutorily prescribed mechanisms for implementing this provisional remedy . . . were designed with a view toward balancing the interests of the claimant in the preservation of the status quo against the equally legitimate [*5]interests of the property owner in the marketability of his title."

CPLR § 6514 (a) provides for mandatory cancellation of a notice of pendency by: [t]he court, upon motion of any person aggrieved and upon such notice as it may require, shall direct any county clerk to cancel a notice of pendency, if service of a summons has not been completed within the time limited by section 6512; or if the action has been settled, discontinued or abated; or if the time to appeal from a final judgment against the plaintiff has expired; or if enforcement of a final judgment against the plaintiff has not been stayed pursuant to section 5519. [Emphasis added] The plain meaning of the word "abated," as used in CPLR § 6514 (a), is the ending of an action. Abatement is defined (Black's Law Dictionary 3 [7th ed 1999]) as "the act of eliminating or nullifying." " An action which has been abated is dead, and any further enforcement of the cause of action requires the bringing of a new action, provided that a cause of action remains' (2A Carmody-Wait 2d § 11.1)." (Nastasi v Nastasi, 26 AD3d 32, 40 [2d Dept 2005]). Further, the Nastasi Court, at 36, instructed that "[c]ancellation of a notice of pendency can be granted in the exercise of the inherent power of the court where its filing fails to comply with CPLR 6501 (see 5303 Realty Corp. v O & Y Equity Corp. at 320-321; Rose v Montt Assets, [1st Dept 1998]; Siegel, NY Prac § 336 [4th ed])." Thus, the dismissal of the instant complaint must result in the mandatory cancellation of plaintiff OPTION ONE's November 9, 2006 notice of pendency against the subject property "in the exercise of the inherent power of the Court."

Conclusion

Accordingly, it is ORDERED, that the application of plaintiff, OPTION ONE MORTGAGECORPORATION, for an order of reference for the premises located at 287 East 37th

Street, Brooklyn, New York (Block 4891, Lot 49, County of Kings) is denied; and it is further

ORDERED, that the instant complaint, Index Number 41590/078, is dismissed with prejudice because plaintiff, OPTION ONE MORTGAGE CORPORATION, never owned the instant mortgage and note, executed on March 18, 2006 by defendant PATRICK E. DUKE to CONTOUR MORTGAGE CORPORATION; and it is further

ORDERED, that the Notice of Pendency in the instant action, Index Number 41590/07, filed with the Kings County Clerk on November 9, 2007, by plaintiff, OPTION ONE MORTGAGE CORPORATION, to foreclose a mortgage for real property located at 287 East 37th Street, Brooklyn, New York (Block 4891, Lot 49, County of Kings) is cancelled.

This constitutes the Decision and Order of the Court.

ENTER [*6]

HON. ARTHUR M. SCHACK J. S. C.