Emigrant Mtge. Co., Inc. v Markland

[*1] Emigrant Mtge. Co., Inc. v Markland 2012 NY Slip Op 52245(U) Decided on December 11, 2012 Supreme Court, Kings County Rivera, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 11, 2012
Supreme Court, Kings County

Emigrant Mortgage Company, Inc., Plaintiff,

against

Melicia Markland n/k/a MELICIA MARLAND JONES, et al., Defendants.



11927/10



Attorney for Plaintiff

Robert T. Yosko, Esq.

Knuckles, Komosinski, & Elliott, LLP

565 Taxter Road

Suite 590

Elmsford, NY 10523

(914) 345-3020

Attorney for Defendant

Arthur A. Edwards, Esq.

572A Flatbush Avenue

Brooklyn, New York 11225

(718) 469-8555

Francois A. Rivera, J.

By notice of motion filed on April 9, 2012, under motion sequence number one plaintiff Emigrant Mortgage Company, Inc. has moved for an order: (1) granting summary judgment in its favor as against defendant Melicia Markland (Markland) pursuant to CPLR 3212; (2) striking Markland's affirmative defenses; (3) substituting Emigrant Savings Bank — Manhattan (hereinafter ESB) as named plaintiff; (4) substituting Tanya Waters, George Smith and David Thompson in place of "John Doe No.1" through "John Doe #3"; (5) striking the remaining "John Doe" defendants and amending the caption to reflect the substitutions; (6) granting a default judgment against the non-appearing defendants pursuant to CPLR 3215 and (7) appointing a referee to compute pursuant to RPAPL 1321. [*2]

Markland has opposed the motion.

BACKGROUND

On May 13, 2010 plaintiff Emigrant Mortgage Company, Inc., commenced this action to foreclose a mortgage encumbering the property at 653 East 79th Street in Brooklyn (hereinafter the subject property) by filing a summons and complaint and a notice of pendency with the Kings County Clerk's office. By answer dated July 6, 2010, defendant Markland joined issue. No note of issue has been filed.

The complaint alleges the following salient facts. On December 11, 2007, Markland executed a mortgage in favor of plaintiff Emigrant Mortgage Company, Inc. to secure a loan in the amount of $360,000.00 towards her purchase of the subject property. In conjunction with the mortgage, Markland signed an adjustable rate note in favor of plaintiff, requiring initial monthly payments in the amount of $3807.25 commencing on February 1, 2008. Markland defaulted under the terms of the mortgage and note by failing to make the payment which became due on May 1, 2009 or on any month thereafter.

Markland interposed an answer containing general denials and ten affirmative defenses. The first affirmative defense is that the complaint fails to state a cause of action. The second is that the court lacks personal jurisdiction over Markland due to improper service. The third is that plaintiff's complaint fails to allege facts sufficient to state a cause of action upon which relief may be granted. The fourth is that plaintiff has acted in bad faith by unreasonably rejecting tender of monthly mortgage payments. The fifth is that the action is barred by the applicable statute of limitations. The sixth is that the default interest rate is usurious and unconscionable. The seventh is that Markland does not owe the amounts claimed. The eighth is that plaintiff has failed to comply with United States and New York law governing the commencement and prosecution of foreclosure actions. The ninth is that plaintiff violated United States and New York banking and housing laws governing mortgage loans, including but not limited to the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The tenth is that Markland is about to enter into a forbearance, modification or repayment plan/agreement.

MOTION PAPERS

Plaintiff's motion papers consists of a memorandum of law, an affirmation of its counsel, an affidavit of its assistant treasurer, Maryann Monteserrato, a proposed order of reference and seven annexed exhibits labeled A through G. Exhibit A is a copy of the summons, complaint, notice of pendency, the note, an allonge, a mortgage, and an assignment of the mortgage. Exhibit B is a notice of default and a notice pursuant to RPAPL 1304. Exhibit C are affidavits of service of the commencement papers. Exhibit D is Markland's answer. Exhibit E is an attorney's affirmation. Exhibit F are affidavits of service. Exhibit G are described as copies of Truth in Lending documents pertaining to this case.

Markland has opposed the motion with an affirmation of her attorney and four annexed exhibits labeled A through D. Exhibit A is a copy of the same notice of default annexed as part of exhibit B in the plaintiff's motion. Exhibit B is a copy of a letter that Markland addressed to the plaintiff. Exhibit C is described as a form letter used by the plaintiff. Exhibit D are letters from Markland and her counsel to the plaintiff.

Plaintiff's reply papers consists of an affirmation of its counsel and copies of disclosure demands to defendant Markland.

[*3]LAW AND APPLICATION

Plaintiff's Unopposed Request for Relief

There is no dispute that subsequent to the commencement of this action, ESB received from plaintiff an assignment of the subject mortgage and delivery of the note.

Furthermore, Markland is not opposed to that part of plaintiff's motion which seeks to amend the caption. Therefore, the court grants plaintiff's motion to substitute ESB as plaintiff, to substitute Tanya Waters, George Smith and David Thompson in place of John Doe number 1 through 3 and to strike the remaining "John Doe" defendants.

Where, as here, a foreclosure complaint is not verified, CPLR 3215(f) states, among other things, that upon any application for a judgment by default, proof of the facts constituting the claim, the default, and the amount due are to be set forth in an affidavit "made by the party." The affidavits of service annexed to plaintiff's motion papers demonstrate that the New York City Environmental Control Board, Keystone National Association, Tanya Waters, George Smith and David Thompson were all properly served with process. None of these defendants appeared. The affidavit of Ms. Monteserrato, plaintiff's Assistant Treasurer, constitutes proof of the facts constituting the claim. Therefore, plaintiff's motion for a default judgment against New York City Environmental Control Board, Keystone National Association, Tanya Waters, George Smith and David Thompson is granted.

Plaintiff's Motion to Strike Markland's Affirmative Defenses

Plaintiff has moved to strike all the affirmative defenses asserted in Markland's answer pursuant to CPLR 3211. When moving to dismiss or strike an affirmative defense as meritless, the plaintiff bears the burden of demonstrating that the affirmative defense is without merit as a matter of law (Mazzei v Kyriacou, 98 AD3d 1088 [2nd Dept 2012]). In reviewing a motion to dismiss an affirmative defense as meritless, the court must liberally construe the pleadings in favor of the party asserting the defense and give that party the benefit of every reasonable inference (id.). An affirmative defense should not be dismissed if there is any doubt as to its availability (Federici v. Metropolis Night Club, Inc., 48 AD3d 741, 743 [2nd Dept 2008]. Legal conclusions and facts contradicted by the record, however, are not entitled to the presumption of truth.

The first and third affirmative defense state that the plaintiff has failed to state a cause of action for which relief can be granted. Since the issuance of Butler v Catinella, 58 AD3d 145 [2nd Dept 2008], the Appellate Division Second Department has made clear that no motion lies to strike the defense of failure to state cause of action. Such a motion amounts to an endeavor by the plaintiff to test the sufficiency of his or her own claim (see Mazzei v Kyriacou, 98 AD3d 1088 [2nd Dept 2012]). Butler overruled prior Second Department case law which held that failure to state a cause of action was not a proper affirmative defense. "Overruling those earlier cases, the Second Department now joins the First and Third Departments in holding that the worst that can be said about the defendant's including failure to state a cause of action as a defense in the answer, is that it's harmlessmere surplusagebecause a motion to dismiss on that ground lies at any time (see CPLR 3211(e)whether or not the defendant has included it as a defense. (Butler v Catinella, 58 AD3d 145, [2nd Dept 2008])." (see CPLR 3211(b); Siegel, 7B McKinney's Practice Commentaries, C3211:38).

The second affirmative defense is that the court lacks personal jurisdiction over Markland [*4]due to improper service. Markland, however, has waived the defense of lack of personal jurisdiction by failing to move to dismiss the complaint on that ground within 60 days after serving her answer (see CPLR 3211 [a] [8]; [e]; Wiebusch v Bethany Mem. Reform Church, 9 AD3d 315 [1st Dept 2004]). Therefore, the second affirmative defense is stricken.

The fourth affirmative defense alleges that plaintiff has acted in bad faith by unreasonably rejecting tender of monthly mortgage payments. The seventh affirmative defense states that Markland does not owe the amounts plaintiff claims. Presuming that the facts alleged are true and giving Markland the benefit of a favorable inference, these defenses may only be struck pursuant to CPLR 3211(b) if the plaintiff demonstrates that they are meritless as a matter of law (Mazzei v Kyriacou, 98 AD3d 1088 [2nd Dept 2012]). Plaintiff has not shown these defenses to be meritless as a matter of law. Instead plaintiff has shown that they are factually disputed. The affidavits submitted by the plaintiff do not conclusively established Markland's claims to be untrue. Therefore, the fourth and seventh affirmative defenses may not be stricken pursuant to CPLR 3211(b).

The fifth affirmative defense is that the action is barred by the applicable statute of limitations. "As a general matter, an action to foreclose a mortgage may be brought to recover unpaid sums which were due within the six-year period immediately preceding the commencement of the action (see CPLR 213[4] ). With respect to a mortgage payable in installments, separate causes of action accrued for each installment that is not paid, and the statute of limitations begins to run, on the date each installment becomes due (see Wells Fargo Bank, N.A. v Cohen, 80 AD3d 753 [2nd Dept 2011]). However, "even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt" (Wells Fargo Bank, N.A. v Burke, 94 AD3d 980 [2nd Dept 2012]). Plaintiff has demonstrated through the affidavit of Maryann Monteserrato, its Assistant Treasurer, that Markland's earliest default on the note occurred in May of 2009. The instant action was commenced in 2010 and is therefore timely brought. Therefore, the fifth affirmative defense is stricken.

The sixth affirmative defense is that the default interest rate is usurious and unconscionable. The note calls for a default rate of 18%. "The defense of usury does not apply where . . . the terms of the mortgage and note impose a rate of interest in excess of the statutory maximum only after default or maturity" (Kraus v Mendelsohn, 97 AD3d 641 [2nd Dept 2012]). In light of that, the sixth affirmative defense is stricken.

The tenth affirmative defense is that Markland is about to enter into a forbearance, modification or repayment plan/agreement. The tenth defense does not state a defense cognizable in law or equity and is therefore stricken.

The eighth affirmative defense is that plaintiff has failed to comply with United States and New York law governing the commencement and prosecution of foreclosure actions. The ninth affirmative defense asserts that the plaintiff violated United States and New York banking and housing laws governing mortgage loans, including but not limited to the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). Neither the eighth or ninth defense contain allegations of fact explaining the transactions or occurrences of the plaintiff contemplated by the defenses.

Due to the ambiguity of the fourth, seventh, eight and ninth affirmative defense the [*5]plaintiff served Markland with a demand for a bill of particulars pursuant to CPLR 3041 seeking clarification. Markland did not comply with the demand. Plaintiff now moves to strike these defenses on the basis that they are both vague, conclusory and therefore meritless. Plaintiff may properly demand a bill of particulars on affirmative defenses pursuant to CPLR 3041, and thereafter move to strike them based on the defendant's failure to comply with such a demand. However, plaintiff must also comply with the Uniform Rules for the New York State Trial Courts (22 N.Y.C.R.R) at 202.7(a) to obtain a striking of the defenses on that basis.

Part 202 of the Uniform Rules for the New York State Trial Courts (22 N.Y.C.R.R) at 202.7(a) provides in pertinent part as follows:

a) There shall be compliance with the procedures prescribed in the CPLR for the bringing of motions. In addition, except as provided in subdivision (d) of this section, no motion shall be filed with the court unless they have been served and filed with the motion papers (1) a notice of motion, and (2) with respect to a motion relating to disclosure or to a bill of particulars, an affirmation that counsel has conferred with counsel for the opposing party in a good faith effort to resolve the issues raised by the motion ...

Part 202 of the Uniform Court Rules, requires that a party seeking sanctions based on a disclosure violation submit an affirmation of counsel detailing the efforts made to resolve the disclosure disputes raised in the instant motion. Plaintiff did not submit an affirmation of its good faith effort to resolve the bill of particulars dispute with Markland. Therefore, the branch of its motion seeking to strike Markland's fourth, seventh, eighth and ninth affirmative defense for failure to provide a bill of particulars must be denied without prejudice.

With this in mind the court must determine whether an affirmative defense should be dismissed pursuant to CPLR 3211(b) as vague and meritless before the movant has properly sought enforcement of a bill of particulars through motion practice. The court declines to do so. To the extent that plaintiff seeks to strike the fourth, seventh, eighth and ninth affirmative defense based on Markland's failure to provide a bill of particulars, it is denied for failing to comply with the aforementioned uniform court rules

In his affirmation, Markland's attorney focuses on the claim that Markland was likely the victim of "reverse redlining" in the issuance of the mortgage. Where "redlining" is the practice of denying the extension of credit to specific geographic areas due to the income, race or ethnicity of its residents, "reverse redlining is the practice of extending credit on unfair terms to those same communities" (United Cos. Lending Corp. v Sargeant, 20 F Supp 2d 192, 203, n 5, [D Mass 1998]).

Federal courts have held that reverse redlining claims are cognizable under the Federal Housing Act (FHA) (see e.g. Hargraves v Capital City Mortgage Corp., 140 F Supp 2d 7, 20 [D DC 2000]; Honorable v Easy Life Real Estate System, 100 F Supp 2d 885, 892 [ND Ill 2000]). Where plaintiffs have raised reverse redlining claims, courts have identified a four-part test to determine whether the claim is sufficiently pleaded. The plaintiff must allege: (1) that she is a member of a protected class; (2) that she applied and was qualified for a loan; (3) that the loan was given on grossly unfavorable terms; and (4) that the lender either intentionally targeted her for unfair loans or currently makes loans on more favorable terms to others (Hafiz v Greenpoint Mtge. Funding, Inc., 652 F Supp 2d 1039, 1045-1046 [ND Cal 2009]; Matthews v New Century [*6]Mtge. Corp., 185 F Supp 2d 874, 886 [SD Ohio 2002]). Markland's attorney asserts that Markland is an African American, and was a thirty-year old home health aide at the time of the transaction. Based on the affirmation of Markland's counsel, the court finds that Markland's eighth and ninth affirmative defenses allege that plaintiff engaged in reverse redlining.

Markland's counsel has proposed that this court follow the reasoning of M & T Mtge. Corp. v Foy (20 Misc 3d 274 [2008]), wherein the Supreme Court, Kings County (Kramer, J.) held that "a mortgage granted to a minority buyer for the purchase of property in a minority area which carries an interest rate that exceeds nine percent creates a rebuttable presumption of discriminatory practice" and that "the lender who has brought [a] proceeding to foreclose the mortgage must demonstrate by a fair preponderance of the evidence that the mortgage was not the product of unlawful discrimination" (id. at 275).

Thus, under M & T Mtge. Corp. v Foy, an additional burden would be imposed on plaintiff to show that the loan was not discriminatory as part of establishing a prima facie case of foreclosure, and Markland effectively would be relieved of her burden to submit evidence to raise an issue of fact as to an affirmative defense of reverse redlining unless and until plaintiff meets its burden of demonstrating that the loan was not discriminatory.

Of course, "though entitled to respectful consideration", a decision of a court of equal or inferior jurisdiction "is not necessarily controlling" (Pasqua v Bon Secours New York Health Sys., Inc., 13 Misc 3d 1036, 1041 [2006]). Since M & T Mtge.Corp. v Foy has not been addressed by any appellate court of this state, this court is not bound to follow its holding.

However, Markland's counsel has also averred that no discovery has been completed and that if a hearing is not ordered pursuant to the reasoning articulated in M & T Mtge. Corp. v Foy, then substantial discovery is needed to demonstrate the equitable affirmative defense of reverse redlining. CPLR 3211(d) provides in pertinent part as follows:

"Should it appear from affidavits submitted in opposition to a motion made ... that facts essential to justify opposition may exist but cannot then be stated, the court may deny the motion ..or may order a continuance to permit further affidavits to be obtained or disclosure to be had and may make such other order as may be just." (CPLR 3211(d)).

Rather than ordering a hearing pursuant to the reasoning articulated in M & T Mtge. Corp. v Foy, the Court will apply the more common, established and broader statutory principle set forth in CPLR 3211(d). The facts necessary to determine whether or not the loan provided to Markland was given on grossly unfavorable terms are peculiarly within the possession of the plaintiff. Only the plaintiff knows or has access to the criteria it uses in setting the mortgage interest rates it offers to individual borrowers. Applying CPLR 3211(d) to plaintiff's motion to strike the affirmative defenses, the Court finds that facts essential to support a bona fide defense that the plaintiff's engaged in reverse redlining may exist but cannot be stated by Markland without additional discovery.

Therefore, to the extent that plaintiff seeks to strike the eighth and ninth affirmative as meritless, the Court finds that it is premature. Markland should be afforded a reasonable time to conduct discovery on this issue. After discovery is completed the plaintiff may make the motion again.

Plaintiff's Motion for Summary Judgment as against Markland [*7]

It is well established that summary judgment may be granted only when it is clear that no triable issue of fact exists (Alvarez v Prospect Hospital, 68 NY2d 320 [1986]). The burden is upon the moving party to make a prima facia showing that he or she is entitled to summary judgment as a matter of law by presenting evidence in admissible form demonstrating the absence of material facts (Guiffirda v Citibank, 100 NY2d 72 [2003]).

A failure to make that showing requires the denial of the summary judgment motion, regardless of the adequacy of the opposing papers (Ayotte v Gervasio, 81 NY2d 1062 [1993]). If a prima facie showing has been made, the burden shifts to the opposing party to produce evidentiary proof sufficient to establish the existence of material issues of fact (Alvarez v Prospect Hospital, supra, 68 NY2d at 324).

In action to foreclose a mortgage, plaintiff moving for summary judgment establishes its case as matter of law through production of the mortgage, unpaid note, and evidence of default (Baron Associates, LLC v Garcia Group Enterprises, Inc., 96 AD3d 793 [2nd Dept 2012]). In the case at bar, plaintiff has annexed the note and mortgage in admissible form. Through the affidavit of Maryann Monteserrato, plaintiff's assistant treasurer, who has attested to personal knowledge based on review of the loan documents and records kept in the ordinary course of business of the plaintiff and ESB, plaintiff has established that Markland defaulted under the terms of the mortgage and note by failing to make the payment which became due on May 1, 2009 or on any month thereafter.

Plaintiff has therefore established a prima facie showing of entitlement to judgment as a matter of law by submitting the mortgage, the underlying note, and the affidavit of Ms. Monteserrato attesting to the default (see Flagstar Bank v Bellafiore, 94 AD3d 1044, 1045 [2nd Dept 2012]; HSBC Bank USA, NA v Schwartz, 88 AD3d 961 [2nd Dept 2011]). The burden thus shifts to Markland "to demonstrate the existence of a triable issue of fact as to a bona fide defense to the action'" (Rose v Levine, 52 AD3d 800,801 [2nd Dept 2008]).

However, inasmuch as the Court has found that the striking of Markland's eighth and ninth affirmative defense of reverse redling is premature, the plaintiff's motion for summary judgment would also be premature pursuant to CPLR 3212(f) for the very same reason. Furthermore, plaintiff's application for a referee to compute pursuant to RPAPL 1321 must also be denied as premature.

CONCLUSION

Plaintiff's motion to substitute Emigrant Savings Bank — Manhattan as plaintiff is granted.

Plaintiff's motion to substitute Tanya Waters, George Smith and David Thompson in place of "John Doe #1" through "John Doe #3" and striking out the other "John Doe" defendants is granted.

Plaintiff's motion for a default judgment against the New York City Environmental Control Board, Keystone National Association, Tanya Waters, George Smith and David Thompson is granted.

Plaintiff's motion to strike Markland's second, fifth, and tenth affirmative defense is granted.

Plaintiff's motion to strike Markland first, third, fourth, seventh, eighth and ninth affirmative defenses is denied.

Plaintiff's motion for summary judgment summary judgment in its favor as against [*8]Markland is denied without prejudice as premature.

The foregoing constitutes the decision of this court.