US Bank Natl. Assn. v McPherson

[*1] US Bank Natl. Assn. v McPherson 2012 NY Slip Op 50742(U) Decided on April 24, 2012 Supreme Court, Queens County McDonald, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 24, 2012
Supreme Court, Queens County

US Bank National Association AS TRUSTEE SUCCESSOR IN INTEREST TO WACHOVIA BANK, NA AS TRUSTEE FOR MST ALT TRST 2004-10, Plaintiff,

against

Garfield McPherson A/K/A GARFEILD A. MCPHERSON; NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE; NEW YORK CITY ENVIRONMENTAL BOARD; NEW YORK CITY DEPARTMENT OF FINANCE PARKING VIOLATIONS BUREAU PAYMENT AND ADJUDICATION CENTER OF QUEENS; "JOHN DOE" and "JANE DOE" said names being fictitious, it being the intention of plaintiff to designate any and all occupants fo premises being foreclosed herein, Defendants.



30564/10

Robert J. McDonald, J.

The following papers numbered 1 to 9read on this motion by defendant Garfield McPherson to dismiss the complaint, or in the alternative, for leave to amend the answer as proposed.

Papers

Numbered

Notice of Motion - Affidavits - Exhibits1-5

Answering Affidavits - Exhibits6-8

Reply Affidavits9

Upon the foregoing papers it is ordered that the motion is determined as follows: [*2]

Plaintiff U.S. Bank National Association (U.S. Bank), as trustee successor in interest to Wachovia Bank, NA, as trustee for MST ALT Trst 2004-10, commenced this action on December 8, 2010. It seeks to foreclose on a mortgage on the real property commonly known as 221-26 Hempstead Avenue, Queens Village, New York (the subject premises) given by defendant McPherson, to secure repayment of a promissory note, evidencing a loan from BNY Mortgage Company, LLC (BNY Mortgage) in the original principal amount of $353,00.00, plus interest, and to reform the property description in the subject mortgage nunc pro tunc.

Defendant McPherson, appearing pro se, served an answer, with certain affirmative defenses, including ones based upon improper service of process and lack of standing, and interposed counterclaims based upon unjust enrichment, civil conspiracy, violation of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) (18 USC § 1961 et seq.), usury and fraud. Plaintiff U.S. Bank served a reply. Defendant McPherson, now appearing by counsel, moves to dismiss the complaint, or in the alternative, for leave to amend the answer as proposed. Plaintiff U.S. Bank opposes the motion.

In support of its motion to dismiss, defendant McPherson makes no claim that the court lacks personal jurisdiction over him based upon improper service of process. In addition, defendant McPherson, having failed to move to dismiss on that ground within 60 days after serving his answer, has waived such defense (see CPLR 3211(e); Dimond v Verdon, 5 AD3d 718 [2004] ).

To the extent defendant McPherson moves to dismiss the complaint asserted against him for failure to state a cause of action (see CLR 3211[a][7]), a court must accept the facts as alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (see Leon v Martinez, 84 NY2d 83, 87—88 [1994]). In the complaint, plaintiff U.S. Bank alleges that the property description contained within the mortgage does not match the one found in the deed for the subject property, due to a scrivener's errors. Plaintiff U.S. Bank also alleges that it is the holder of the mortgage and underlying note, defendant McPherson defaulted under the terms of the mortgage and note by failing to pay the monthly installment payment due and owing on April 1, 2010, and it elected to accelerate the entire mortgage debt. Contrary to the argument of defendant McPherson, the complaint sets forth cognizable claims for reformation of the metes and bounds description contained within the subject mortgage (see RPAPL article 15), and to foreclose the mortgage as reformed (see e.g. McPherson v Goldstein, 256 App Div 1006 [1939]).

To the extent defendant McPherson moves to dismiss complaint asserted against him based upon lack of standing, the motion should have been labeled as one for summary judgment made pursuant to CPLR 3212, since it was made after joinder of issue (see Hertz Corp. v Luken, 126 AD2d 446 [1987]). Plaintiff U.S. Bank asserts that the note is endorsed in blank and was in its possession at the time of the commencement of the action. Although plaintiff U.S. Bank has failed to submit a copy of the note, or an affidavit by someone with personal knowledge of the facts, it was not obligated to supply evidentiary support for its assertions in view of the defective [*3]notice of motion. Plaintiff U.S. Bank has alleged facts, which if proven, would demonstrate standing (see U.S. Bank, N.A. v Collymore, 68 AD3d 752 [2009]).

Defendant McPherson seeks leave to amend his answer as proposed. It is well settled that leave to amend pleadings shall be freely given in the absence of prejudice to the opponent, unless the proposed amendment is palpably insufficient as a matter of law, or is totally devoid of merit (see CPLR 3025[b]; Edenwald Contr. Co. v City of New York, 60 NY2d 957 [1983]); Norman v Ferrara, 107 AD2d 739-740 [1985]; see also Nissenbaum v Ferazzoli, 171 AD2d 654 [1991]; DeGuire v DeGuire, 125 AD2d 360 [1986]).

Defendant McPherson seeks to include in his proposed amended answer certain affirmative defenses and counterclaims based upon his claim that plaintiff U.S. Bank violated the Federal Fair Debt Collection Practices Act (FDCPA) (see 15 USC § 1692 et seq.). The FDCPA, however, does not generally apply to a creditor seeking to enforce a contract, such as a mortgage or note (see United Cos. Lending v Candela, 292 AD2d 800, 801—802 [2002], citing 15 USC § 1692a [6][F][iii]; see also Maguire v Citicorp Retail Servs., 147 F3d 232, 235 [1998]; Wadlington v Credit Acceptance, 76 F3d 103, 106 [1996]). Defendant McPherson makes no allegation that plaintiff U.S. Bank "in the process of collecting [its] own debts, used any name other than [its] own which would indicate that a third person [wa]s collecting or attempting to collect such debts" (15 USC § 1692a [6]). The FDCPA, likewise, is inapplicable to the claim for reformation of the mortgage. Thus, the second, fourteenth, and fifteenth affirmative defenses and counterclaims in the proposed amended answer, therefore, are palpably insufficient as a matter of law.

With respect to defendant McPherson's claim that plaintiff U.S. Bank violated article 29-H of the General Business Law, which regulates debt collection practices, his claim fails because such alleged violation does not constitute a defense to foreclosure or to a claim for reformation. Nor does a violation of article 29-H create a private cause of action (see General Business Law § 602[2]; Varela v Investors Ins. Holding Corp., 81 NY2d 958 [1993]). The third affirmative defense and counterclaim in the proposed amended answer, based upon alleged violation of General Business Law article 12-H, are palpably insufficient as a matter of law.

The fourth and sixteenth affirmative defenses and counterclaims, based upon the doctrine of unclean hands and claimed unjust enrichment, respectively, in the proposed amended answer, also are palpably insufficient as a matter of law. They are unsupported by any proposed factual allegations (see Petracca v Petracca, 305 AD2d 566 [2003], abrogated on other grounds by Butler v Catinella, 58 AD3d 145 [2008]).

Defendant McPherson, in his proposed answer, disputes the amount of the debt allegedly owed under the mortgage. A dispute as to the exact amount owed by the mortgagor to the mortgagee may be resolved after a reference pursuant to RPAPL 1321 (see Crest/Good Mfg. Co. v Baumann, 160 AD2d 831[1990]). It does not constitute an affirmative defense to this action or basis for a counterclaim. The sixth affirmative defense and counterclaim in the proposed amended answer, therefore, are palpably insufficient as a matter of law. [*4]

The seventh affirmative defense and counterclaim in the proposed amended answer, are premised upon defendant McPherson's allegation that he was not represented by "independent" counsel at the mortgage refinancing closing. Such allegation is insufficient to constitute an affirmative defense to the causes of action asserted herein, or a basis for a counterclaim. A borrower need not be represented by legal counsel in relation to a mortgage loan transaction, and defendant McPherson makes no allegation that BNY Mortgage, as the originator of the loan, in any way interfered with his right to select counsel of his own choosing. Likewise, the allegation that "plaintiff" failed to advise him of his right to counsel at the loan closing, contained in the twelfth affirmative defense and counterclaim of the proposed amended answer, is insufficient to constitute a defense or claim. It is undisputed that BNY Mortgage was the original lender, and defendant McPherson has failed to allege any facts indicating any contractual or fiduciary duty owed by BNY Mortgage or plaintiff to him to advise him regarding his right to counsel in connection with the transaction.

With respect to the eighth affirmative defense and counterclaim in the proposed amended answer, defendant McPherson alleges that plaintiff U.S. Bank "failed to provide for a settlement conference" as required pursuant to CPLR 3408. The court's records indicate that settlement conferences were held on July 5, 2011 and September 13, 2011, and defendant McPherson appeared at the conference held on July 5, 2011, and his counsel appeared at the conference held on September 13, 2011. Furthermore, an additional conference was held prior to the submission of the instant motion at which time counsel for defendant McPherson did not appear (see order dated January 20, 2012, Evans, Court Attorney Referee). Under such circumstances, the eighth affirmative defense and counterclaim in the proposed amend answer are devoid of merit.

Defendant McPherson seeks to assert, in his proposed amended answer, an affirmative defense and counterclaim based upon violation of "Banking Law § 349." That statute concerns books and record-keeping requirements of licensed lenders. Defendant McPherson makes no allegation regarding such books and record-keeping requirements, but rather alleges that "plaintiff" committed unfair, deceptive and fraudulent conduct in connection with the making of the mortgage loan. To the extent defendant McPherson intended to allege a violation of General Business Law § 349, insofar as he refers to the "Deceptive Practice Act" in the twelfth affirmative defense and counterclaim, a claimed violation of that section does not constitute an affirmative defense to a claim for foreclosure (see La Salle Bank Nat. Assn. v Kosarovich, 31 AD3d 904 [2006]), or for reformation of a mortgage. Such proposed counterclaim is barred by the expiration of the three-year statute of limitations (see CPLR 214[2]; Corsello v Verizon New York, Inc., ___ NY3d ___, 2012 NY Slip Op 02343).

Defendant McPherson also alleges as part of his twelfth affirmative defense and counterclaim in the proposed amended answer that "plaintiff" misrepresented the cost of the mortgage loan and the fair market value of the property. Such allegations are palpably insufficient to state an affirmative defense or a cause of action based upon fraudulent inducement since they do no include any allegation that defendant McPherson justifiably relied upon such alleged misrepresentations to his detriment (see Lama Holding Co. v Smith Barney, [*5]88 NY2d 413, 421 [1996]; Cash v Titan Financial Services, Inc., 58 AD3d 785, 788 [2009]). In addition, although it is well settled that an assignee of a mortgage takes it subject to the equities attending the original transaction (see Lapis Enterprises. Inc. v Intl. Blimpie Corp., 84 AD2d 286 [1981]), plaintiff U.S. Bank cannot be required to answer in damages for alleged misrepresentations committed by BNY Mortgage in connection with the making of the mortgage loan. To the degree the proposed twelfth counterclaim is based upon fraud, it is untimely (see CPLR 213[8]; Ricca v Valenti, 24 AD3d 647 [2005]).

To the extent defendant McPherson also alleges, as part of his twelfth affirmative defense and counterclaim in the proposed amended answer that "plaintiff" failed to provide disclosures prior to closing of the mortgage as required by "federal law," he has failed to identify which federal statute or statutes are claimed to have been violated. Such allegation therefore is palpably insufficient to constitute an affirmative defense or counterclaim.

The thirteenth affirmative defense and counterclaim asserted in the proposed amended answer also are palpably insufficient as a matter of law. Although defendant McPherson alleges that there was a disparity in bargaining power and financial sophistication between him and "plaintiff," and he did not have "independent counsel," he does not allege that BNY Mortgage, as plaintiff U.S. Bank's purported predecessor in interest, engaged in overreaching or oppressive conduct. Defendant McPherson also does not allege that he had an absence of meaningful choice and the mortgage terms are unreasonably favorable to the lender (see generally FGH Contracting Co., Inc. v Weiss, 185 AD2d 969 [1992]).

The ninth affirmative defense and counterclaim asserted in the proposed amended answer are based upon defendant McPherson's claim that the complaint fails to comply with RPAPL 1302. RPAPL 1302 requires a plaintiff to allege in a complaint for foreclosure of high-cost home and subprime home mortgages that it is "the owner and holder of the subject mortgage and note, or has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the subject mortgage and note." The complaint herein alleges that plaintiff U.S. Bank is the holder of the note and mortgage or has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the note and mortgage (see paragraph 11). The ninth affirmative defense and counterclaim, as proposed, are totally devoid of merit.

The fifth affirmative defense and counterclaim in the proposed amended answer are based upon defendant McPherson's claim that plaintiff U.S. Bank failed to "mitigate damages," by "not dealing" with him in good faith. Mitigation of damages is not an affirmative defense to an action to foreclose a mortgage or for reformation of a mortgage, and does not constitute a basis for a counterclaim.

To the extent defendant McPherson seeks to reassert lack of standing as a tenth affirmative defense in the proposed amended answer, such defense is not palpably insufficient as a matter of law, and plaintiff U.S. Bank has failed to show it is totally devoid of merit (see supra [*6]at ). However, to the extent the first and tenth affirmative defenses are repetitive, defendant McPherson shall not include the affirmative defense denominated "first" in the amended answer. To the extent defendant McPherson also seeks to add counterclaims in his proposed amended answer based upon lack of standing, such counterclaims are devoid of merit.

With respect to the eleventh affirmative defense and counterclaim in the proposed amended answer, counsel for plaintiff U.S. Bank makes no claim that RPAPL 1304 is inapplicable to this mortgage loan, but rather asserts that defendant McPherson was provided with the notice required pursuant to RPAPL 1304. The copy of the notice submitted by plaintiff U.S. Bank, however, does not include "a list of at least five housing counseling agencies" with their "last known addresses and telephone numbers" (RPAPL 1304[2]). Plaintiff U.S. Bank also has not submitted an affidavit of service establishing the contents of the RPAPL 1304 notice and the manner in which, and to whom, the RPAPL 1304 notice was mailed. It cannot be said, at this juncture, that the proposed eleventh affirmative defense is totally devoid of merit (see Aurora Loan Services, LLC v Weisblum, 85 AD3d 95 [2011]). Plaintiff U.S. Bank also has failed to show surprise or prejudice resulting from defendant McPherson's delay in asserting this affirmative defense (see Edenwald Contr. Co. v. City of New York, 60 NY2d 957, 959 [1983]; McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 NY2d 755, 757 [1983]).

Nevertheless, defendant McPherson has failed to establish that a private right of action exists which would entitle him to obtain monetary damages from plaintiff U.S. Bank for violation of RPAPL 1304. RPAPL 1304 does not expressly provide for a private right of action based upon a violation of the statute. Relief may be had under a state statute if a legislative intent to create such a right is "fairly implied" in the statutory provisions and their legislative history (see Brian Hoxie's Painting Co. v Cato—Meridian Cent. School Dist., 76 NY2d 207, 212 [1990]; Maraia v Orange Regional Medical Center, 63 AD3d 1113 [2009]). In making this determination, the court must examine " (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme' " (Ahmad v Nassau Health Care Corp., 8 AD3d 512, 513 [2004], quoting Sheehy v Big Flats Community Day, 73 NY2d 629 [1989]) (see also Maraia v Orange Regional Medical Center, 63 AD3d 1113 [2009]).

RPAPL 1304, which mandates the service of a notice on the borrower as a condition precedent to the commencement of a foreclosure action, is intended to afford greater protections to homeowners confronted with foreclosure (see Aurora Loan Services, LLC v Weisblum, 85 AD3d 95 [2011], supra). RPAPL 1304 notice must be sent at least 90 days prior to the commencement of an anticipated foreclosure action, and "its manifest purpose is to aid the homeowner in an attempt to avoid litigation" (see id. at 107). Although defendant McPherson is a person for whose benefit the law was enacted, it does not appear that recognition of an implied private right of action for alleged violation of the statute would promote the legislative purpose and be consistent with the overall legislative scheme. Rather, where a foreclosure plaintiff [*7]substantially fails to comply with RPAPL 1304, its foreclosure complaint is subject to dismissal (see id.)- reason enough to comply with the statute.

Accordingly, the motion by defendant McPherson is granted only to the extent of granting leave to amend his answer to include affirmative defenses based upon lack of standing and violation of RPAPL 1304.

Dated: Long Island City, NY

April 24, 2012

______________________________

ROBERT J. McDONALD

J.S.C.