German Am. Capital Corp. v Top Choice Estates, LLC
Annotate this CaseDecided on December 17, 2012
Supreme Court, Kings County
German American Capital Corporation, Plaintiff,
against
Top Choice Estates, LLC, et al., Defendants. And a Consolidated Action.
3241/10
Plaintiff Attorney: Kilpatrick Townsend, 31 West 52nd Street, 14th Fl., New York, NY 10019
Defendant Attorney: Alan J. Firestone, 32 Court Street, Brooklyn, NY 11201
David Schmidt, J.
The following papers numbered 1 to 9 read herein:
Papers Numbered
Notice of Motion/Order to Show Cause/
Petition/Cross Motion and
Affidavits (Affirmations) Annexed1 - 3
Opposing Affidavits (Affirmations)4, 5
Reply Affidavits (Affirmations)7
Affidavit (Affirmation) in further support6, 8
Other Papers Affidavit of Yvette Torres9
Upon the foregoing papers, German American Capital Corporation (GACC), the assignee of the subject consolidated mortgage from plaintiff JP Morgan Chase Bank (Chase) moves for an order, (1) pursuant to CPLR 1018, amending the caption to substitute GACC as plaintiff in place and stead of Chase, (2), pursuant to CPLR 3212, granting summary judgment and dismissing the verified answer of defendant Top Choice Estates, LLC (Top Choice), 3) dismissing the complaint as against unnecessary defendants WCP Wireless Lease Subsidiary, LLC, Nextel of New York, Inc., T-Mobile Northeast, LLC s/h/a as Omnipoint Financial Network 2, LLC and "John Doe No. 1 to "John Doe No. XXX," 4) granting a default judgment as against the remaining defendants, and 5) appointing a referee to compute. [*2]
Chase commenced this action on February 8, 2010 to foreclose a consolidated mortgage encumbering the subject commercial property at 192-198 East 56th Street in Brooklyn. By deed dated February 28, 2000, title to the subject property was conveyed to Top of the Line LLC (TOL). On July 15, 2003, TOL executed a mortgage in favor of Presidential Bank, FSB to secure a note in the amount of $700,000. On May 18, 2004, TOL executed a second mortgage in favor of Presidential Bank, FSB to secure an additional loan in the amount of $120,000. By assignment instruments dated June 14, 2005 and recorded June 23, 2005, the two mortgages were assigned to Carver Federal Savings Bank (Carver). Contemporaneously, Carver issued a loan to TOL in the amount of $578,310.74. The new loan was secured by an additional mortgage in favor of Carver which was consolidated with the two prior mortgages assigned by Presidential Bank, FSB to form a single lien in the amount of $1,375,000 (hereinafter the "Carver consolidated mortgage").
By deed dated January 29, 2007, TOL conveyed the property to Top Choice. Thereafter, Carver purportedly assigned the Carver consolidated mortgage to Washington Mutual Bank (WaMu) by assignment dated July 24, 2007 and recorded September 4, 2007. The assignment instrument recites that the transfer was made in consideration of $1,328.039,12. On August 13, 2007, Top Choice executed a mortgage in favor of WaMu to secure a loan in the amount of $321,960.88. This mortgage was consolidated by WaMu with the Carver consolidated mortgage with the intent to create a single consolidated mortgage lien in the amount of $1,650,000.00. This new consolidated mortgage, dated August 13, 2007 and recorded on September 4, 2007, is the lien sought to be foreclosed upon in the instant foreclosure action. On September 5, 2007, Carver recorded a "satisfaction/discharge of mortgage" stating that the Carver consolidated mortgage "is, with the note accompanying it, fully paid, satisfied, and discharged." The purported satisfaction instrument, dated August 21, 2007, also stated that the Carver consolidated mortgage "HAS NOT BEEN FURTHER ASSIGNED OF RECORD."
On September 25, 2008, WaMu was closed by the Office of Thrift Supervision and Chase purchased, from the Federal Deposit Insurance Corporation (FDIC) as receiver of WaMu, certain of WaMu's assets including all mortgage loans. On February 8, 2010, Chase commenced this action to foreclose the subject mortgage based upon the default of Top Choice in making the payment due on October 1, 2009. In its verified answer, dated March 18, 2010, Top Choice sets forth twelve affirmative defenses: failure of plaintiff to state a cause of action; laches; lack of personal jurisdiction; frivolous conduct by plaintiff; unclean hands; failure of plaintiff to set forth in the complaint how much is owed; equitable estoppel/waiver; lack of subject matter jurisdiction; statute of frauds; lack of privity of contract; failure to perform a condition precedent and usury.
On or about October 18, 2010, Top Choice brought a motion seeking summary judgment dismissing the complaint of Chase based upon the satisfaction of mortgage document recorded by Carver on September 5, 2007. Top Choice's motion was denied by order of this court dated December 6, 2010. In the interim, Chase commenced a proceeding against the City Register to discharge the satisfaction of mortgage from the records, claiming that the satisfaction was erroneously issued by Carver (hereinafter, the City Register proceeding). By order dated February 23, 2011, the court (Hon. Larry D. Martin, J.) directed that the satisfaction be discharged. The order was made on the default of Top Choice and the other named respondents in appearing and opposing Chase's order to show cause at a hearing thereon.
By assignment and allonge dated March 7, 2011, the subject consolidated mortgage and note were purportedly assigned from Chase to GACC. On August 5, 2011, GACC brought the instant motion seeking an order directing substitution of GACC as plaintiff and amending the caption to so reflect, granting summary judgment in favor of GACC and dismissing the verified answer of Top Choice, dismissing the action against certain named defendants deemed unnecessary to this action, granting a default judgment against the non-answering defendants and appointing a referee to compute.
On October 5, 2011, Top Choice brought a cross motion for an order, a) pursuant to CPLR 602, consolidating this action with an action with the City Register proceeding, b) vacating the default of Top Choice in the City Register proceeding and vacating the order granted on default on [*3]February 23, 2011 which discharged the satisfaction of mortgage, c) pursuant to Part 130 of the Rules of the Chief Administrator, imposing sanctions against Chase and its counsel, Jaspan Schlesinger, for frivolous conduct and d) pursuant to CPLR 3216, dismissing the instant foreclosure action for lack of prosecution.
By order dated February 2, 2012, this court ordered the consolidation of the actions, vacated the default of Top Choice in the City Register proceeding and vacated the February 23, 2011 order discharging the satisfaction of mortgage. The order noted that portions of the cross motion seeking sanctions and dismissal were withdrawn with prejudice.To establish prima facie entitlement to summary judgment in a foreclosure action, a plaintiff must produce the mortgage, the unpaid note, and undisputed evidence of default by the mortgagor "in [its] repayment of the obligation memorialized by the note and mortgage" (Horizon Bancorp v Pompee, 82 AD3d 935, 935 [2011]; see Washington Mut. Bank, F.A. v O'Connor, 63 AD3d 832, 833 [2009]; Daniel Perla Assoc., LP v 101 Kent Assoc., Inc., 40 AD3d 677, 677 [2007]; LPP Mtge., Ltd. v Card Corp., 17 AD3d 103, 104 [2005]; US Bank Trust N.A. Trustee v Butti, 16 AD3d 408, 408 [2005]; Republic Natl. Bank of NY v O'Kane, 308 AD2d 482, 482 [2003]; Hypo Holdings v Chalasani, 280 AD2d 386, 387 [2001]).
In support of its motion for summary judgment, GACC submits copies of the consolidated mortgage, consolidated note and the affidavit of Ravi Alimchandani, identified therein as an asset manager of Helios AMC, LLC, the servicer for GACC, who attests to Top Choice's default under the consolidated mortgage. However, according to the extant satisfaction filed with the City Register, the bulk of the indebtedness memorialized by the instant consolidated mortgage has been satisfied and the attendant mortgage lien discharged without ever having been assigned to WaMu. Mr. Alimchandani does not explain or mention the satisfaction in his affidavit. Thus, taking into consideration the submissions of GACC in it its motion papers, there is an unresolved issue as to whether Top Choice may be considered in default. While GACC offers an additional affidavit from Carver assistant vice president Yvette Torres, who states that the satisfaction was issued and recorded in error, Ms. Torres does not state the basis of her knowledge of this alleged fact. Likewise, the reply affidavit of Mr. Alimchandani, who does not aver to having ever been employed by Carver or WaMu, merely concludes that the satisfaction was issued by mistake.
Top Choice's opposition to GACC's motion focuses on the discharge of mortgage recorded by Carver, with Top Choice arguing that the circumstances surrounding the assignment of the Carver consolidated mortgage remain unclear and that GACC has not established its claim that the satisfaction was, in fact, issued and recorded in error.
Real Property Law § 275 provides, in pertinent part:
1. Whenever a mortgage upon real property is due and payable, and the full amount of principal and interest due on the mortgage is paid, a certificate of discharge of mortgage shall be given to the mortgagor or person designated by him or her, signed by the person or persons specified in section three hundred twenty-one of this chapter. The person signing the certificate shall, within thirty days thereafter, arrange to have the certificate presented for recording to the recording officer of the county where the mortgage is recorded.
2. For purposes of this section, the full amount of principal and interest due on a mortgage shall not be considered to be paid whenever such mortgage continues to secure a bona fide debt and an enforceable lien continues to exist, such as may occur in the following situations:
* * *
(c) the refinancing of an existing loan with a new lender, such as where the original lender assigns a note and the mortgage securing its payment to another lender in return for consideration and such mortgage is consolidated with another mortgage which secures any funds advanced by the new lender to the mortgagor. [*4]
Accordingly, in the event it is established that the Carver consolidated mortgage was assigned to WaMu, and any moneys received by Carver were intended as consideration for the assignment, the Carver consolidated mortgage would not be deemed to have been satisfied and discharged and any subsequent issuance and recording of a satisfaction instrument would be erroneous and subject to cancellation.
Following the issuance of this court's order vacating Top Choice's default in the City Register proceeding, the parties proceeded to conduct depositions on the issue of the satisfaction. Mary K. Przybyla, an employee of Carver's sub-servicer and the preparer of the satisfaction, was deposed on April 16, 2012. Carver senior vice president, James A. Raborn, was deposed on May 16, 2012. Copies of unsigned transcripts of the depositions were submitted by Top Choice in opposition, along with a copy of a check payable to Carver in the amount of $1,378,572.17 from the escrow account of attorney "Janice G. Han." The substance of the testimony of Ms. Przybyla is that the satisfaction was generated by the sub-servicer's computer system and presented to her for signature, that she did not know the type of transaction which resulted in funds being paid and had no knowledge of whether or not the funds received from Carver was the result of a payoff from the mortgagor. There is no testimony provided by Ms. Przybyla which establishes that the funds received by Carver were related to an assignment rather than a satisfaction.
Mr. Raborn reiterated that the satisfaction was issued because the sub-servicer received a check and processed it on their system as a full payoff of the loan. Mr. Raborn testified that the funds were the result of a refinance, and that if there was a payoff, there would have been no request or need to issue an assignment. Mr. Raborn testified that the satisfaction was thus issued in error. However, Mr. Raborn does not explain how he reached the conclusion that the satisfaction was issued an error, as opposed to the assignment being issued in error. Mr. Raborn reviewed the check drawn of the escrow account of Ms. Han and stated that it was issued in connection with the assignment and consolidation. However, Mr. Raborn testified that he was not at Carver at the time of the transaction and was therefore not involved with the assignment transaction. Mr. Raborn testified that he did not communicate with Timothy Williams, the individual who signed the assignment of the Carver consolidated mortgage, and further testified that he is not familiar with Ms. Han. Taken as a whole, Mr. Raborn's testimony sheds little light on either the source or the purpose of the funds received by Carver.
To date, there is no proof presented to establish the person or entity represented by Ms. Han or the purpose of the funds represented in the escrow check. Further, the court notes that there is no testimony or affidavit from Mr. Williams with respect to the circumstances surrounding the purported assignment of the Carver consolidated mortgage to WaMu.
Therefore, even after considering the documentary evidence, including the July 24, 2007 assignment of the Carver consolidated mortgage to WaMu and the check from the escrow account of Ms. Han, along with the testimony of Ms. Przybyla and Mr. Raborn, the court finds that factual issues remain as to whether or not the satisfaction was prepared and recorded by Carver in error. Insofar as there is a dispute as to the status of the Carver consolidated mortgage, the court declines to make an award of summary judgment in favor of GACC.
As a result, GACC's motion is granted only to the extent that the caption is amended to substitute GACC as plaintiff and the complaint dismissed against the unnecessary defendants. The remainder of GACC's motion is denied.
The foregoing constitutes the decision and order of the court.
E N T E R,
J. S. C.
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