US Bank N.A. v Major Holdings, LLC

[*1] US Bank N.A. v Major Holdings, LLC 2012 NY Slip Op 50852(U) Decided on May 8, 2012 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 8, 2012
Supreme Court, Suffolk County

US Bank National Association, Plaintiff,

against

Major Holdings, LLC, GLEN FELDMAN, ET ALS, Defendants.



35268/11



VENABLE, LLP

Attys. For Plaintiff

1270 Avenue of the Americas

New York, NY 10020

CERTILMAN, BALIN, ADLER

Attys. For Defendant

90 Merrick Ave.

East Meadow, NY 11554

MARK CUTHBERTSON, ESQ.

Receiver 434 New York Ave.

Huntington, NY 11743

Thomas F. Whelan, J.

It is, ORDERED that this motion (No.002) by the plaintiff for an order: (1) awarding it summary judgment against the answering defendants including dismissal of their asserted affirmative defenses; (2) deleting as party defendants the unknown defendants listed in the caption; (3) fixing the defaults in answering of the remaining defendants; and (4) appointing a referee to compute amounts due under the subject note and mortgage is considered under CPLR 3212, 1024, 3215 and RPAPL § 1321 and is granted; and it is further

ORDERED that the plaintiff's pleaded demand for a deficiency judgment against the obligor defendant by assumption is dismissed as the same has been withdrawn.

This action arises out of a July 30, 2004 commercial mortgage loan in the amount of $7,000,000.00 made by predecessors of the plaintiffs to predecessors of defendant, Major Holdings, LLC (hereinafter "Major Holdings"). Major Holdings acquired title to the mortgaged premises on February 4, 2005 and it assumed the obligations of the original borrower under the mortgage note by an assumption agreement dated February 4, 2005. Also executed on that day, was a written guaranty of the obligations of Major Holdings by defendant, Glen Feldman.

Under terms of the July 30, 2004 note and mortgage, the loan matured on August 1, 2009. The full outstanding principal balance of the loan, together with all accrued and unpaid interest thereon and all other sums required by the loan documents, became fully due and owing on the maturity date of August 1, 2009. Following the failure of Major Holdings and its guarantor to make the maturity payment, a notice of default issued from counsel for plaintiff, CW Capital Asset Management, LLC in its capacity as loan servicer for plaintiff, US Bank National Association, as Trustee, successor-in-interest to Bank of America, NA, as trustees, successor by merger to LaSalle Bank National Association, in its capacity as Trustee for the Registered Holders of Greenwich Capital Commercial Funding Corp., Commercial Mortgage Trust 2005-GG3, Commercial Mortgage Pass-Through Certificates Series 2005-GG3, as holder (hereinafter "Trust plaintiff").

In September of 2009, the plaintiff's counsel and defendant Feldman, on behalf of defendant Major Holdings, entered into a pre-negotiation agreement aimed at attaining some mutually agreeable resolution of the default. This pre-negotiation agreement required that the resolution of issues, if any be reached, had to be reduced to a writing; that the loan documents remained in full force; and that neither the existing defaults nor any rights or remedies possessed by the plaintiffs were waived by the servicer plaintiff's engagement in the discussions and/or settlement negotiations contemplated by the post-default agreement.

The complaint served and filed herein in November of 2011 contains two causes of action. By the First, the plaintiff seeks a judgment of foreclosing the subject mortgage, all subordinate liens and encumbrances, the sale of the mortgaged premises and a deficiency judgment against defendant, Major Holdings. The demand for a deficiency judgment was, however, withdrawn by the plaintiff in its moving papers due to the existence of a non-recourse clause in the original loan documents (see [*2]p. 21 of plaintiff's Memorandum of Law in support of its motion). By the Second cause of action, the plaintiff seeks recovery from defendant Feldman of any counsel fees remaining unpaid after application of the net proceeds of the foreclosure sale.

Issue was joined by the service of a joint answer of defendants Major Holdings and Feldman. Set forth therein, are some nine affirmative defenses but no counterclaims. In January of 2012, the plaintiff moved, ex-parte, for the appointment of a receiver which was granted on January30, 2012.

By the instant motion (#001), the plaintiff seeks summary judgment against the answering defendants, Major Holdings and Feldman, including the dismissal of their affirmative defenses. The plaintiff also seeks an order deleting as party defendants, the unknown defendants. The plaintiff further demands an order fixing the defaults in answering of the remaining defendants and an order appointing a referee to compute amounts due under the subject note and mortgage.

In support of its motion, the plaintiffs rely upon the language of the mortgage indenture, the assumption agreement and the written guaranty. In ¶ 1(d) of the consolidated mortgage of July 30, 2004, the original borrower expressly agreed that "the Note, this Mortgage and the other Loan documents are not subject to any right of recession, set-off, counterclaim or defense, including the defense of usury, nor would the operation of the terms of the Note, Mortgage or the other Loan documents, or the exercise of any right thereunder, render this Mortgage unenforceable, in whole or in part, or subject to any right of recession, set-off counterclaim or defense, including the defense of usury". Major Holdings assumed the obligations of the mortgagor in the assumption agreement executed by it in February of 2005, at the time of its acquisition of title to the mortgaged premises, which obligation, defendant Feldman guaranteed in his written guaranty of the same date. The written guaranty of the obligations of Major Holdings executed by defendant Feldman in consideration of the assumption agreement, described such guaranty as "an irrevocable, absolute continuing guaranty of payment and performance and not a guaranty of collection" which "shall not be reduced by reason of any existing or future offset, claim or defense of Borrower or any other persons" (see Guaranty attached as Exhibit 1-k to Complaint ¶¶ 1.3 & 1.4). The plaintiff contends that by virtue of these contractual waivers of defenses, the answering defendants are precluded from asserting the defenses set forth in their answer, including the lack of standing defense asserted in opposition to the instant motion. The plaintiff thus claims that all affirmative defenses asserted herein by the answering defendants are without merit and that the plaintiff is entitled to the award of summary judgment demanded by it on this motion.

The answering defendants oppose solely on the grounds asserted in their first affirmative defense, namely, that the servicer plaintiff lacks standing to prosecute this action. For the reasons stated, the court rejects this defense and grants the plaintiff's motion to the extent set forth below.

It is well established that in an action to foreclose a mortgage, a prima facie case is made by the plaintiff's production of the note and mortgage and proof on the part of the defendant/mortgagor and any guarantors of a default in payment or any other material term set forth in the mortgage (see Garrison Special Opportunities Fund, L.P. v Arthur, 82 AD3d 1042, 918 NYS2d 894 [2d Dept 2011]; Swedbank, AB v Hale Ave. Borrower, LLC., 89 AD3d 922, 932 NYS2d 540 [2d Dept 2011]; [*3]Rossrock Fund II, L.P. v Osborne, 82 AD3d 737, 918 NYS2d 514 [2d Dept 2011]). Here, the plaintiff established its entitlement to summary judgment on its complaint by its production of the consolidated note and mortgage, the assumption agreement executed by Major Holdings and the written guaranty of defendant Feldman, together with due proof of the defaults in payment of amounts due and owing thereunder.

It was thus incumbent upon the answering defendants to submit proof sufficient to raise a genuine question of fact casting doubt on the plaintiff's prima facie showing or implicating support for one or more of the affirmative defenses asserted in their answer (see Grogg Assocs. v South Rd. Assocs., 74 AD3d 1021, 907 NYS2d 22 [2d Dept 2010]; Washington Mut. Bank v O'Connor, 63 AD3d 832, 880 NYS2d 696 [2d Dept 2009]). The opposing papers submitted by the answering defendants were insufficient in this regard.

It is now well established that the issue of a plaintiff's standing is not an issue concerning subject matter jurisdiction, but instead, is an affirmative defense in bar which may be waived by a defendant possessed of such defense (see Wells Fargo Bank Minn, NA v Mastropaolo, 42 AD3d 239, 837 NYS2d 247 [2d Dept 2007]; see also HSBC Bank USA, NA v Schwartz, 88 AD3d 961, 931 NYS2d 528 [2 Dept 2011]; CitiMortgage, Inc. v Rosenthal, 88 AD3d 759, 931 NYS2d 638 [2d Dept 2011]; Wells Fargo Bank Minn., NA v Perez, 70 AD3d 817, 817—818, 894 NYS2d 509 [2010]; leave to appeal denied, 14 NY3d 710, 903 NYS2d 769 [2010]; cert. denied, 131 S. Ct. 648 [2010]). A plaintiff is thus under no obligation to plead and prove its standing in the first instance. It is only where standing is put in issue by a defendant's pre-answer motion or his or her answer that the plaintiff must prove its standing todefeat the asserted standing defense (see Wells Fargo Bank Minn, NA v Mastropaolo, 42 AD3d 239, supra, citing TPZ Corp. v Dabbs, 25 AD3d 787, 808 NYS2d 746 [2d Dept 2006]).

In mortgage foreclosure actions, cases authorities have traditionally measured the standing of the plaintiff by its ownership, holdership and/or possession of the note and mortgage at the time of the commencement of the action (see Bank of NY v Silverberg, 86 AD3d 274, 279, 926 NYS2d 532 [ 2d Dept 2011]; Bank, NA v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]; Wells Fargo Bank, NA v Marchione, 69 AD3d 204, 207—210, 887 NYS2d 615 [2d Dept]; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 A.D3d 674, 838 NYS2d 622 [2d Dept 2007]). Since such ownership interest bears solely upon the issue of standing, and not upon the sufficiency of the claim, the pleading and proving of such ownership interest is not an element of the plaintiff's claim for foreclosure and sale. It is only in those cases wherein an appearing defendant timely raises a standing defense will the plaintiff be obliged to establish its standing under any of the above described legal theories (see Wells Fargo Bank Minn, NA v Mastropaolo, supra).[FN1] [*4]

It is well established that a waiver of defenses may be set forth in commercial mortgage loan documents and written guarantees or contained in agreements executed subsequent to the loan documents by the parties thereto or their successors in interest (see JPMCC CICB Bronx Apts., LLC, 84 AD3d 613, 922 NYS2d 779 [1st Dept 2011]; Inland Mtge. Capital Corp. v Realty Equities NM LLC, 71 AD3d 1089, 900 NYS2d 79 [2d Dept 2010]; North Fork Bank v Computerized Quality Separation Corp., 62 AD3d 973, 879 NYS2d 575 [2d Dept 2009]); Red Tullip, LLC v Neiva, 44 AD3d 204, 842 NYS2d 1 [2007]); Fleet Bank v Petri Mech. Co., 244 AD2d 523, 664 NYS2d 462 [2d Dept 1997]). Such waivers are enforceable as they do not contravene the public policy of this State (see Chemical Bank NY Trust Co. v Batter, 31 AD2d 801, 297 NYS2d 363 [1st Dept 1969]). They do, however, present defendants who have waived such defenses with "an insurmountable obstacle" to defeating a claim (see JPMCC CICB Bronx Apts., LLC, 84 AD3d 613, quoting Red Tullip, LLC v Neiva, 44 AD3d 204, supra).

The waivers of defenses set forth in the consolidated mortgage indenture sued upon here and agreed to by the defendants in the assumption agreement and guaranty preclude the effective assertion of the standing defense on which the defendants predicate their opposition to the plaintiffs' motion. Consideration of the merits of such defense would thus be a waste of the judicial resources of this court.

The court thus finds that the plaintiff is entitled to summary judgment on its complaint and to the dismissal of the affirmative defenses set forth in the joint answer of defendants Major Holdings and Feldman. Also granted are those portions of the instant motion wherein the plaintiff seeks an order dropping as party defendants the unknown defendants listed in the caption together with an amendment of the caption to reflect same (see CPLR 1024).

The plaintiff's moving papers further established the default in answering on the part of the newly substituted defendant, Amity Express Deli, Inc. and the remaining named defendants, none of whom served answers to the plaintiff's complaint. Accordingly, the defaults of all such defendants are hereby fixed and determined. Since the plaintiff has been awarded summary judgment against the sole answering defendants and has established a default in answering by the remaining defendants, the plaintiff is entitled to an order appointing a referee to compute amounts due under the subject note and mortgage (see RPAPL § 1321; Bank of East Asia, Ltd. v Smith, 201 AD2d 522, 607 NYS2d 431 [2d Dept 1994]; Vermont Fed. Bank v Chase, 226 AD2d 1034, 641 NYS2d 440 [3d Dept 1996]; Perla v Real Prop. Holdings, LLC, 23 Misc 3d 697, 874 NYS2d 873 [Sup Ct. Kings Cty. 2009]; HSBC Mtge. Serv., Inc. v Alphonso, 16 Misc 3d (A), 2007 WL 2429711 [Sup. Ct. Kings Cty. 2007]). Those portions of the instant motion wherein plaintiff demands such relief are thus granted, subject only to the submission of an order providing for the appointment of such referee as hereinafter directed. [*5]

The plaintiff is directed to forthwith submit, upon a copy of this order, an order providing in blank for the appointment of a referee to compute by this court and the matters necessarily attendant with respect to such appointment.

DATED: 5/8/12_________________________________

THOMAS F. WHELAN, JSC Footnotes

Footnote 1: Notwithstanding the recent plethora of appellate case authorities wherein the issue of standing was unequivocally fixed as an affirmative defense which must be asserted by a defendant or it is waived (see e.g., HSBC Bank USA, NA v Schwartz, 88 AD3d 961, supra, and the cases cited therein), most complaints in mortgage foreclosure actions contain allegations that the plaintiff is the owner of the note and mortgage. This result is likely attributable, at least in part, to the continued use of form books that have not been updated to reflect these recent appellate case authorities and the new statutory enactments governing mortgage foreclosure actions. Compare, however, RPAPL §1302 governing the foreclosure of home loans or subprime loans, which expressly confers standing to sue upon loan servicers duly authorized by note and mortgage owners and holders, but requires pleaded allegations of such authorization (see also RPAPL §1304(1); §1306).