Shui Fong Loo v HSBC Mtge. Corp. (USA)
Annotate this CaseDecided on July 30, 2012
Supreme Court, Suffolk County
Shui Fong Loo and YOUNG LUNG LOO, Plaintiffs
against
HSBC Mortgage Corporation (USA), Defendant.
11-20981
ZINKER & HERZBERG, LLP
Attorney for Plaintiffs
278 East Main Street, Suite C, P.O. Box 866
Smithtown, New York 11787
PHILLIPS LYTLE LLP
Attorney for Defendant
3400 HSBC Center
Buffalo, New York 14203-2887
Joseph C. Pastoressa, J.
ORDERED that the motion by plaintiffs for summary judgment on their first cause of action for a judgment declaring a certain mortgage unenforceable, and to expunge it from the record is denied as premature; and it is further
ORDERED that the plaintiffs' request for summary judgment dismissing the seventh affirmative defense in the defendant's answer is denied; and it is further
ORDERED that, upon a search of the record, summary judgment is granted in favor of defendant on its seventh affirmative defense on the grounds that the plaintiffs' claims lack ripeness, [*2]and the complaint is dismissed.
On December 7, 2007, plaintiff Shui Fong Loo ("Shui") executed a note in the amount of $200,000 in favor of defendant HSBC Mortgage Corporation (USA) (hereinafter referred to as "HSBC" or the "Lender"). The note was secured by a second mortgage on the property known as 17 Valient Drive in Brookhaven, New York. The mortgage agreement also dated December 7, 2007, was executed by Shui and by plaintiff Young Lung Loo ("Young"), by Shui as his attorney in fact. The mortgage agreement indicates that the Mortgage Electronic Registration Systems, Inc. ("MERS"), acting solely as a nominee for the Lender and the Lender's successors and assigns for purposes of recording the mortgage, is the mortgagee of record. On December 19, 2006, the MERS caused the mortgage to be recorded with the Suffolk County Clerk.
On June 29, 2011, plaintiffs commenced the instant declaratory judgment action. The first cause of action, at paragraph 5 of the complaint sets forth that "[t]he Plaintiffs are hereby requesting proof that HSBC has possession of the original $200,000 mortgage note to insure that HSBC has standing to commence and prosecute a mortgage foreclosure action against the Property based on a default in the repayment of the $200,000 mortgage note, if any." The first cause of action continues, at paragraph 6, and reads, "[a]nd even if the HSBC has possession of the original mortgage note for standing purposes, whether HSBC can legally foreclose the mortgage given that the mortgage was given to MERS, as nominee, and MERS never advanced any moneys to Shui or had physical possession of the original mortgage note."
In the second cause of action, it is stated that Young never executed the mortgage note or the mortgage, therefore, "even if HSBC has possession of the original mortgage note and can foreclose the mortgage granted to MERS for standing purposes, there is no indication that HSBC has the legal right to foreclose Young's interest in the Property in satisfaction of the moneys borrowed as evidenced by the mortgage note." The third cause of action contains two paragraphs: paragraph 10 incorporates the previous paragraphs; paragraph 11 reads "[t]he Plaintiffs also believe that HSBC has not properly accounted for several of the payments that Shui has made on the mortgage loan."
Based on the aforementioned statements, the complaint sets forth, verbatim, that plaintiffs are seeking the following relief:
a.that HSBC demonstrate that it has a properly perfected security interest on the $200,000 mortgage by possession of the original mortgage note and that it can foreclose a mortgage granted and delivered to MERS, as nominee, and, if not, to enter a judgment vacating and expunging the mortgage lien;
b.assuming arguendo that HSBC has a properly perfected mortgage lien, a declaration that HSBC does not have the right to foreclose Young's interest in the Property in the event of a default; [*3]
c.a determination of the amount of moneys due and owing on the $200,000 original mortgage loan by Shui, if any, and the parties that may be liable for the repayment of said borrowing; and
d.for such other and further relief as is just and proper.
HSBC has interposed an answer with seven affirmative defenses, including, inter alia, the seventh affirmative defense that the "[p]laintiffs' claims lack ripeness." Plaintiffs now move for summary judgment on their first cause of action. Plaintiffs argue that the mortgage delivered to MERS as nominee is invalid and unenforceable because the note was delivered to HSBC. Thus, plaintiffs argue, neither MERS nor HSBC has standing to commence and prosecute a mortgage foreclosure action. Therefore, the plaintiffs maintain, they are entitled to summary judgment and a "declar[ation] that HSBC does not have a valid security interest in the property; and further, that the mortgage granted and delivered to MERS, which was recorded with the Suffolk County Clerk on December 19, 2006....be expunged and vacated as of record." In this regard, plaintiffs rely upon Bank of New York v Silverberg (86 AD3d 274, 926 NYS2d 532 [2d Dept 2011]), and quote the following language from the case: The issue presented on this appeal is whether a party has standing to commence a foreclosure action when the party's assignor—in this case, Mortgage Electronic Registration Systems, Inc. (hereinafter MERS)—was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but was never the actual holder or assignee of the underlying notes. We answer this question in the negative.
There is nothing in the quoted language, indeed, no language in the entire Silverberg case which supports plaintiffs' argument that where the holder of the note is different from the mortgagee of record, the mortgage lien is invalid and rendered unenforceable. Rather, in its analysis, the Second Department in Silverberg clearly stated that the issue left unaddressed by the majority in Matter of MERSCORP, Inc. v Romaine (8 NY3d 90, 828 NYS2d 266 [2006]) was ripe for determination, i.e., "whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS's right to, or possession of, the actual underlying note" (Bank of NY v Silverberg, supra at 279). In Silverberg, the subject consolidation agreement gave MERS the right to assign the mortgages, but did not specifically give MERS title to the underlying notes or the authority to assign them, and the record did not demonstrate that the notes had been physically delivered to MERS. Thus, the Second Department explained that the broad language reciting that MERS is a lender's nominee, and the mortgagee for recording purposes, "cannot overcome the requirement that the foreclosing party be both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying note, at the time the action is commenced" (Bank of NY v Silverberg, s upra at 539). Therefore, the plaintiff therein, Bank of New York, did not acquire the power to foreclose by way of the assignment of the notes to it by MERS, and thus, lacked standing to commence the action. [*4]
In the instant case, an action to foreclose the subject second mortgage on the property, has not been commenced against the plaintiffs. Therefore, the Silverberg case is not dispositive. Moreover, this court agrees with HSBC that plaintiffs' claims are premature, as the claims in essence challenge HSBC's standing in a foreclosure action that does not exist. "The declaratory judgment procedure is intended to deal with actual problems and not with remote possibilities which may never eventuate" (Fairhaven Props. v Garden City Plaza, 119 AD2d 796, 501 NYS2d 422 [2d Dept 1986]; see CPLR 3001). Thus, "[u]ntil there is a declared default and the commencement of foreclosure proceedings, there is no justiciable controversy" (Fairhaven Props. v Garden City Plaza, supra). Consequently, the plaintiffs' action for declaratory relief is premature (id.; see also, Waterways Development Corp. v Lavalle, 28 AD3d 539, 540, 813 NYS2d 485 [2d Dept 2006] ["the dispute must be real, definite, substantial, and sufficiently matured so as to be ripe for judicial review", and if it is not, the request for a declaratory judgment is premature]).
Although the relief requested in plaintiffs' notice of motion does not seek to strike the affirmative defenses, such relief is requested in their supporting papers, and opposed by HSBC in its response. Therefore, plaintiffs' request for summary judgment striking the seventh affirmative defense is denied, and upon a search of the record pursuant to CPLR 3212(b), summary judgment is granted in favor of HSBC on its seventh affirmative defense.
Accordingly, plaintiffs' motion is denied, summary judgment is granted in favor of the defendant, and this declaratory judgment action is hereby dismissed.
Dated: July 30, 2012__________________________________
HON. JOSEPH C. PASTORESSA, J.S.C.
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