HSBC Bank USA, N.A. v Vasquez

[*1] HSBC Bank USA, N.A. v Vasquez 2009 NY Slip Op 51814(U) [24 Misc 3d 1239(A)] Decided on August 21, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 21, 2009
Supreme Court, Kings County

HSBC Bank USA, N.A., Plaintiff,

against

Chaquanna Vasquez, et. al., Defendants.



37410/07



Plaintiff

Kyle C. Didone, Esq.

Steven J. Baum, PC

Buffalo NY

Arthur M. Schack, J.

The motion of plaintiff, HSBC BANK USA, INC. (HSBC), in this mortgage foreclosure action, for premises located at 500 Thatford Avenue, Brooklyn, New York (Block 3626, Lot 42, County of Kings), for: summary judgment; dismissal of defendant CHAQUANNA VASQUEZ's (VASQUEZ) affirmative defenses; and, an order of reference, and related relief, is granted to the extent that all the affirmative defenses of defendant VASQUEZ are dismissed and that the granting of summary judgment and an order of reference and related relief is denied without prejudice, with leave to renew within sixty (60) days of this decision and order, with submission of:

(1) a copy of a valid assignment of the instant mortgage to plaintiff HSBC;

(2) a satisfactory explanation of the conflict of interest by plaintiff's counsel, Steven J. Baum, P.C., with respect to the October 9, 2007 assignment of the instant mortgage and note from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), as nominee for HSBC MORTGAGE CORPORATION USA (HSBC MORTGAGE), by Darleen Karaszewski, Esq., the assignor, an attorney employed by Steven J. Baum, P.C., plaintiff's counsel, and [*2]the simultaneous representation by Steven J. Baum, P.C., of assignee plaintiff HSBC; and,

(3) an affidavit by an officer of plainitff HSBC explaining why plaintiff HSBC purchased the instant nonperforming VASQUEZ loan, then 161 days in arrears.

Background

Defendant VASQUEZ executed the subject mortgage and note on September 1,

2006 and borrowed $381,500.00 from HSBC MORTGAGE. MERS, as nominee for HSBC MORTGAGE, recorded the instant mortgage and note on March 27, 2007, in the Office of the City Register of the City of New York, City Register File Number (CRFN) 2007000158561. MERS, as nominee for HSBC MORTGAGE for the purpose of recording the mortgage, assigned the mortgage and note to plaintiff HSBC, on October 9, 2007, effective October 3, 2007, with the assignment recorded on October 19, 2007, at CRFN 2007000531596. However, the assignment was executed by "Darleen Karaszewski, Esq. On [sic] behalf of MERS, by Corporate Resolution dated 8/28/07." Neither a corporate resolution nor a power of attorney to Ms. Karaszewski were recorded with the assignment. Thus, the assignment is invalid and plaintiff HSBC lacks standing to bring the instant foreclosure action.

Further, the assignor, Ms. Karaszewski, according to the Office of Court Administration's Attorney Registration, has as her business address, "Steven Baum, P.C., 220 Northpointe Parkway, Suite G, Amherst, NY 14228-1894." On the same day that Ms. Karaszweski executed the invalid MERS assignment, October 9, 2007, plaintiff's counsel, Steven J. Baum, P.C., commenced the instant action on behalf of assignee HSBC, by filing a notice of pendency, the summons and the complaint in the Kings County Clerk's Office. The Court is concerned that the simultaneous representation by Steven J. Baum, P.C. of both assignor MERS and assignee HSBC is a conflict of interest in violation of 22 NYCRR §1200.24, the Disciplinary Rule of the Code of Professional Responsibility, entitled "Conflict of Interest; Simultaneous Representation," in effect prior to April 1, 2009. The instant motion states that defendant VASQUEZ defaulted by failing to make her May 1, 2007 and subsequent monthly loan payments. Yet, on Octboer 9, 2007, 161 days subsequent to defendant VASQUEZ's alleged default, plaintiff HSBC was willing to take an assignment of the instant nonperforming loan from MERS, as nominee for HSBC MORTGAGE. Thus, the Court requires, upon renewal of the instant motion, a

satisfactory explanation from an officer of HSBC of why HSBC purchased a nonperforming mortgage loan from MERS, as nominee for HSBC MORTGAGE, 161 days subsequent to VASQUEZ's default.

Discussion

The proponent of a summary judgment motion must make a prima facie showing

of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. (See Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers. (Winegrad v New York [*3]University Medical Center, 64 NY2d 851 [1985] Qlisanr, LLC v Hollis Park Manor Nursing Home, Inc., 51 AD3d 651, 652 [2d Dept 2008]; Greenberg v Manlon Realty, 43 AD2d 968, 969 [2nd Dept 1974]).

CPLR 3212 (b) requires that for a court to grant summary judgment the court must

determine if the movant's papers justify holding as a matter of law "that there is no defense to the cause of action or that the cause of action or defense has no merit." The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant. (Marine Midland Bank, N.A. v Dino & Artie's Automatic Transmission Co., 168 AD2d 610 [2d Dept 1990]). Summary judgment shall be granted only when there are no issues of material fact and the evidence requires the court to direct judgment in favor of the movant as a matter of law. (Friends of Animals, Inc., v Associated Fur Mfrs., 46 NY2d 1065 [1979]).

Plaintiff HSBC commenced the instant action with the filing of a notice of pendency, the summons and the complaint on October 9, 2007. Defendant VASQUEZ appeared by counsel, who filed and served an answer on October 24, 2007. The instant action was stayed for a period of months by defendant VASQUEZ's filing for bankruptcy. The bankruptcy case was dismissed on June 3, 2008. Then, plaintiff, on September 26, 2008 filed the instant motion. Defendant VASQUEZ failed to file any opposition papers to the instant motion and defaulted in appearing on November 5, 2008 in the Foreclosure Motion Part. The instant motion was then assigned to me for this decision and order.

With respect to defendant VASQUEZ's answer, her sixteen affirmative defenses all lack merit. They are all bald conclusory statements and unsubstantiated allegations. With defendant VASQUEZ's November 5, 2008 default, plaintiff's motion is granted to the extent that all of the affirmative defenses of defendant VASQUEZ are dismissed.

However, the Court is required to review, as noted above, the motion papers to determine if plaintiff made a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. (Alvarez v Prospect Hospital, supra; Zuckerman v City of New York, supra; Sillman v Twentieth Century-Fox Film Corp., supra). The Court's review of plaintiff's moving papers demonstrates that plaintiff HSBC fails to make such a showing. Therefore, the Court denies the instant motion, with leave granted to plaintiff to renew within sixty (60) days of this decision and order, by submitting: a valid assignment of the subject mortgage and note to plaintiff HSBC: an affidavit by Steven J. Baum, Esq. with respect to whether or not there is a violation of 22 NYCRR § 1200.24; and, an affidavit by an officer of HSBC explaining why HSBC took an assignment of a nonperforming mortgage loan that was then more than five months in default.Plaintiff HSBC must have "standing" to bring this action. The Court of Appeals (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d 901, 812 [2003], cert denied 540 US 1017 [2003]) held that "[s]tanding 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." In Caprer v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that "[s]tanding 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." If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. [*4](Stark v Goldberg, 297 AD2d 203 [1d 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]).

In the instant action, the October 9, 2007 assignment from MERS, as nominee for HSBC MORTGAGE, to HSBC is defective. Therefore, HSBC has no standing to bring this action, unless it records a valid assignment. The recorded assignment by "Darleen Karaszewski, Esq. On [sic] behalf of MERS, by Corporate Resolution dated 7/19/07," has neither the corporate resolution nor a power of attorney attached to it and recorded. Real Property Law (RPL) § 254 (9) states:

Power of attorney to assignee. The word "assign" or other words of assignment, when contained in an assignment of a mortgage and bondor mortgage and note, must be construed as having included in their meaning that the assignor does thereby make, constitute and appoint the assignee the true and lawful attorney, irrevocable, of the assignor, in the name of the assignor, or otherwise, but at the proper costs andcharges of the assignee, to have, use and take all lawful ways and means for the recovery of the money and interest secured by the said mortgage and bond or mortgage and note, and in case of payment to discharge the same as fully as the assignor might or could do if the assignment were not made. [Emphasis added] To have a proper assignment of a mortgage by an authorized agent, a power of

attorney is necessary to demonstrate how the agent is vested with the authority to assign the mortgage. "No special form or language is necessary to effect an assignment as long as the language shows the intention of the owner of a right to transfer it. [Emphasis added]." (Tawil v Finkelstein Bruckman Wohl Most & Rothman, 223 AD2d 52, 53 [1d Dept 1996]; see Suraleb v International Trade Club., Inc., 13 AD3d 612 [2d Dept 2004]).To foreclose on a mortgage, a party must have title to the mortgage. The instant assignment, without a recorded corporate resolution or power of attorney 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 AS2d 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."

It is clear that plaintiff HSBC with an invalid assignment of the instant mortgage and note from MERS, lacks standing to foreclose on the instant mortgage. 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 Wynn, 19 AD3d 545 [2d Dept 2005]; Sears [*5]Mortgage Corp. v Yahhobi, 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 Mortgage Corp. v Fern, 298 AD2d 490 [2d Dept 2002]; Village Bank v Wild Oaks, Holding, Inc., 196 AD2d 812 [2d Dept 1993]).

Even if plaintiff HSBC is able to cure the assignment defect, plainitff's counsel then has to address the conflict of interest that exists with his representation of both the assignor of the instant mortgage, MERS as nominee for HSBC MORTGAGE, and the assignee of the instant mortgage, HSBC. 22 NYCRR § 1200.24, of the Disciplinary Rules of the Code of Professional Responsibility, entitled "Conflict of Interest; Simultaneous Representation," states in relevant part: (a) A lawyer shall decline proffered employment if the exercise ofindependent professional judgment in behalf of a client will be or is

likely to be adversely affected by the acceptance of the proffered

employment, or if it would be likely to involve the lawyer in representing

differing interests, except to the extent permitted under subdivision (c)

of this section. (b) A lawyer shall not continue multiple employment if the

exercise of independent professional judgment in behalf of a client

will be or is likely to be adversely affected by the lawyer's representation

of another client, or if it would be likely to involve the lawyer in

representing differing interests, except to the extent permitted under

subdivision (c) of this section. (c) in the situations covered by subdivisions (a) and (b) of this

section, a lawyer may represent multiple clients if a disinterested lawyer

would believe that the lawyer can competently represent the interest

of each and if each consents to the representation after full disclosure

of the implications of the simultaneous representation and the

advantages and risks involved. [Emphasis added] If plaintiff HSBC seeks to renew the instant motion for summary judgment

and granting of an order of reference, the Court needs to know if both MERS and HSBC were aware of the simultaneous representation by plaintiff's counsel, Steven J. Baum, P.C. and whether both MERS and HSBC consented to the simultaneous representation. Therefore, upon renewal of the instant motion, the Court requires an affirmation by Steven J. Baum, Esq., the principal of Steven J. Baum, P.C., explaining whether both MERS, as nominee for HSBC MORTGAGE, and HSBC consented to simultaneous representation in the instant action, with "full disclosure of the implications of the simultaneous [*6]representation and the advantages and risks involved [22 NYCRR § 1200.24 (c)]."

The Appellate Division, Fourth Department, the Department where both Ms. Karaszewski and Mr. Baum are registered, censured an attorney for, inter alia, violating 22 NYCRR § 1200.24, by representing both a buyer and sellers in the sale of a motel. (In re Rogoff, 31 AD3d 111 [2006]). The Rogoff Court, at 112, found that the attorney, "failed to make appropriate disclosures to either the sellers or the buyer concerning dual representation." Further, the Court, at 113, censured the attorney, after it considered the matters submitted by respondent in mitigation, including:

that respondent undertook the dual representation at the insistence of

the buyer, had no financial interest in the transaction and charged the

sellers and the buyer one half of his usual fee. Additionally, we note

that respondent cooperated with the Grievance Committee and has

expressed remorse for his misconduct.

Next, if a power of attorney is used for an agent to act as MERS' assignor of the instant mortgage and loan to HSBC, the power of attorney presented to the Court must be an original or a copy certified by an attorney, pursuant to CPLR § 2105. CPLR § 2105 states that "an attorney admitted to practice in the court of the state may certify that it has been compared by him with the original and found to be a true and complete copy." (See Secuirty Pacific Nat. Trust Co. v Cuevas, 176 Misc 3d 2d 846 [Civ Ct, Kings County 1998]).

Last, the Court requires a satisfactory explanation from an officer of HSBC as to why, in the middle of our national mortgage financial crisis, plaintiff HSBC purchased from MERS, as nominee of HSBC MORTGAGE, the instant nonperforming loan. The Court wonders if HSBC violated a corporate fiduciary duty to its stockholders by purchasing a mortgage loan that defaulted 161 days prior to its assignment from MERS, as nominee for HSBC MORTGAGE, rather than keep the mortgage loan on HSBC MORTGAGE's books. The Court is not sure that the stockholders of HSBC are aware that HSBC purchased the instant "toxic" nonperforming mortgage loan. It could well be that MERS, as nominee for HSBC MORTGAGE, with the acquiescence of HSBC, transferred the instant nonperforming loan, as well as others, to HSBC, as part of what former Federal Reserve Board Chairman Alan Greenspan referred to in his October 23, 2008 testimony, before the House Oversight Committee, as "a once in a century credit tsunami."

Conclusion

Accordingly, it is

ORDERED that those branches of the motion of plaintiff, HSBC BANK USA, N.A., for summary judgment and an order of reference and related relief for the premises located at 500 Thatford Avenue, Brooklyn, New York (Block 3626, Lot 42, County of Kings) are denied without prejudice; and it is further

ORDERED that leave is granted to plaintiff, HSBC BANK USA, N.A., to renew those [*7]branches of the instant motion for summary judgment and an order of reference and related relief for the premises located at 500 Thatford Avenue, Brooklyn, New York (Block 3626, Lot 42, County of Kings), within sixty (60) days of this decision and order, provided that plaintiff, HASBC BANK USA, N.A., submits to the Court:

(1) a copy of a valid assignment of the instant mortgage to plaintiff

HSBC BANK USA, N.A.;

(2) a satisfactory explanation of the conflict of interest by plaintiff's

counsel, Steven J. Baum, P.C., with respect to the October 9,

2007 assignment of the instant mortgage and note from MORTGAGE

ELECTRONIC REGISTRATION SYSTEMS, INC., as nominee for

HSBC MORTGAGE CORPORATION USA, by Darleen Karaszewski, Esq., the assignor, an attorney employed by Steven J. Baum, P.C.,

plaintiff's counsel, and the simultaneous representation by Steven J.

Baum, P.C., of assignee plaintiff HSBC BANK USA, N.A.; and,

(3) an affidavit by an officer of plaintiff, HSC BANK, USA, N.A.

explaining why plaintiff, HSBC BANK, USA, N.A., purchased the

instant nonperforming loan, then 161 days in arrears; and it is further

ORDERED that the branch of the motion by plainitff, HSBC BANK, USA, N.A., to dismiss all of the affirmative defenses of defendant CHAQUANNA VASQUEZ is granted.

This constitutes the Decision and Order of the Court.

ENTER

___________________________

HON. ARTHUR M. SCHACK

J. S. C.