U.S. Bank N.A. v Duthie

[*1] U.S. Bank N.A. v Duthie 2014 NY Slip Op 51626(U) Decided on November 17, 2014 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 17, 2014
Supreme Court, Kings County

U.S. Bank National Association, as Trustee, successor in interest to Bank of America, National Association as successor by merger to Lasalle Bank, National Association as Trustee for WaMu Mortgage Pass-Through Certificates Series 2006-AR 12 Trust, Plaintiff,

against

Hugh Duthie, et al., Defendants.



350/12



Attorney for Plaintiffs:

Andrew J. Wells, Esq.

Phillips Lytle, LLP

620 Eighth Avenue, 23rd Floor

New York, NY 10018

Attorney for Defendants:

Rajesh Barua, Esq.

R. David Marquez, PC

50 Clinton Street, Suite 214

Hempstead, NY 11550
Carolyn E. Demarest, J.

Defendant moves to strike the Note of Issue. Plaintiff moves for summary judgment pursuant to CPLR 3212 and to amend the caption.

BACKGROUND

On August 1, 2006, defendant Hugh Duthie entered a note ("Note") and mortgage ("Mortgage") with Washington Mutual Bank, FA ("WaMu"). WaMu lent defendant $940,000 to [*2]purchase residential condominium unit 8B located at 70 Washington Street, Brooklyn, New York ("Property") and the Mortgage on the Property secured WaMu's interest. The purchase price of the condominium unit was $1,175,000. On August 1, 2010, defendant defaulted on his mortgage payments. Plaintiff commenced the present foreclosure action by filing the complaint on January 6, 2012. In the complaint, plaintiff alleged that it received the Note and Mortgage by assignment. According to the complaint, "[t]he Note and Mortgage were transferred to U.S. Bank National Association, as Trustee, successor in interest to Bank of America, National Association as Trustee as successor by merger to Lasalle Bank, National Association as Trustee for WaMu Mortgage Pass-Through Certificates Series 2006-AR12 Trust, and said transfer was memorialized by an Assignment of Mortgage executed on December 23, 2011" ("Assignment"). On March 12, 2012, defendant served an answer with counterclaims and, on March 20, 2012, plaintiff served a reply. Between November 2012 and November 2013, the attorneys for the parties attended foreclosure settlement conferences. Upon the request of defendant's counsel, the matter was referred out of the settlement conference part, and to this court, by referee's order dated November 15, 2013.

On January 23, 2014, a preliminary conference was held in this court. At that conference, the plaintiff produced the original Note. Extensive discovery discussions were held with my law clerk at the preliminary conference regarding the prior and remaining discovery in this action. Defendant had previously issued a notice to produce ("First Notice to Produce") dated June 29, 2012. The First Notice to Produce demanded 30 sets of documents including, but not limited to, all documents that support plaintiff's claim of ownership of the Note and Mortgage, the pooling and servicing agreement for "WAMU MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2006-AR12 TRUST" ("Trust"), the "entire mortgage file", proof of payments from WaMu to plaintiff, and "[a]ll documents showing or exhibiting any monetary consideration paid to each assignor by each assignee for all of the assignments of the Note and Mortgage . . .." Plaintiff responded to the First Notice to Produce, on July 30, 2012, with numerous documents. However, plaintiff objected to a number of the demands as, "vague, overbroad, and overly burdensome." Defendant then issued a notice for inspection ("Notice for Inspection"), dated February 15, 2013, and a second notice for discovery and inspection ("Second Notice to Produce"), dated April 1, 2013. The Notice for Inspection, sought, among other items, the following original documents: Note, Mortgage, mortgage file, Uniform Underwriting Transmittal Summary, pooling and servicing agreement for the Trust, assignment to plaintiff, proof of recording the mortgage and assignment, certified mailing receipt for notice to defendant pursuant to RPAPL 1304, and "the [o]riginal receipts for the consideration paid to acquire the mortgage and note with proof of delivery of the physical collateral file to the Plaintiff." The Second Notice to Produce included eleven requests that were largely duplicative of the prior requests including proof of delivery of the mortgage file, proof of consideration for the sale of the Note and Mortgage, and proof of a certified mailing of notice to defendant pursuant to RPAPL 1304. The plaintiff did not respond to the Second Notice to Produce or the Notice for Inspection.

At the PC conference, defendant's counsel indicated that he still sought the original pooling and servicing agreement "trustee file", proof of payment for the sale of the Note and Mortgage, and sought a deposition of the document custodian of the trust. Plaintiff indicated that no further discovery was necessary. As a result of the parties' contentions during the PC [*3]conference, the PC order, dated January 23, 2014 ("PC Order"), specifically provided that, "All Supplemental Demands for Discovery and Inspection (CPLR 3120) shall be served not later than 10 days from the date of this Order."[FN1] The PC Order also directed that the plaintiff be deposed on or before March 21, 2014 and listed a Note of Issue date of April 25, 2014. Defendant did not issue any supplemental demands for discovery and inspection or notice a deposition after the PC Order was signed. Defendant did not contact the court regarding a discovery dispute or seek any other court intervention. During discovery, plaintiff produced over 800 pages of documents to defendant and presented the original Note, Mortgage and Assignment in open court. On April 25, 2014, plaintiff filed a Note of Issue. By notice of motion dated May 14, 2014, defendant moved to strike the Note of Issue and sought further discovery. By notice of motion dated, June 16, 2014, plaintiff moved for summary judgment and an order of reference.

DISCUSSION

In support of its summary judgment motion, plaintiff has submitted the complaint, the original Note, Mortgage, and Assignment, as proof that it is the successor to the original mortgagee, and an affidavit by the plaintiff's servicer establishing that the defendant has defaulted on the Note and that the plaintiff had possession of the Note and Mortgage when the action was commenced. Accordingly, plaintiff established its prima facie entitlement to judgment as a matter of law (see Baron Assoc., LLC v Garcia Group Enters., Inc., 96 AD3d 793 [2d Dept 2012]; Washington Mut. Bank, F.A. v O'Connor, 63 AD3d 832, 833 [2d Dept 2009]). Thus the burden shifts to defendant to produce evidentiary proof, in admissible form, sufficient to raise a triable issue of fact as to its defenses (U.S. Bank Trust N.A. Trustee v. Butti, 16 AD3d 408 [2d Dept 2005]). While all "facts must be viewed in the light most favorable to the non-moving party'" (Vega v Restani Constr. Corp., 18 NY3d 499, 503 [2012], quoting Ortiz v Varsity Holdings, LLC, 18 NY3d 335, 339 [2011]), mere conclusory allegations or defenses are insufficient to preclude summary judgment (see Zuckerman v. New York, 49 NY2d 557, 562 [1980]; Baron Assoc., LLC v Garcia Group Enters., Inc., 96 AD3d 793, 794 [2d Dept 2012]).

Defendant argues, as both the basis for the striking of the Note of Issue and the opposition to the motion for summary judgment, that further discovery is necessary to prove the defendant's defenses. Other than reciting the conclusory affirmative defenses and counterclaims raised in the answer,[FN2] the defendant essentially raises two issues in the motions that, he alleges, require further discovery. First, the defendant argues that there is an issue of fact as to whether the plaintiff complied with the RPAPL 1304 notice requirement. Second, defendant argues that there are issues of fact as to plaintiff's ownership of the Note and Mortgage, including whether the terms of the pooling and servicing agreement were followed, whether the plaintiff had physical possession of the Note and Mortgage at the time the action was commenced, and whether the [*4]plaintiff gave any consideration for the Note and Mortgage.

The PC Order specifically gave the defendant leave to demand the documents he sought from the plaintiff by February 2, 2014. However, defendant did not issue any demands or notices for deposition. Defendant's argument that he did not need to issue any demands after the entry of the PC Order, as plaintiff had not responded to the Second Notice to Produce or Notice for Inspection, is unavailing as leave to supplement the prior demands in the PC Order was given to defendant specifically because he still sought documents from plaintiff. Further, defendant never contacted chambers regarding the purported ongoing dispute or made a motion to compel discovery until more than two weeks after the plaintiff filed the Note of Issue. It is clear that defendant's tactics are dilatory and, accordingly, defendant waived any further discovery in this action. Accordingly, defendant's motion to strike the Note of Issue is denied.

Pursuant to CPLR 1304(2), plaintiff was required to provide defendant with notice of default, at least 90 days prior to commencing an action, by certified and first class mail (see CPLR 1304[2]). In support of the motion for summary judgment, plaintiff provided an affidavit signed by Amber Alegria ("Alegria"), Assistant Secretary of JPMorgan Chase Bank, N.A. ("Chase"), the servicer and attorney in fact for plaintiff, in support of the motion.[FN3] Alegria indicated that the 90 day notice was mailed on or about January 15, 2011 by certified and first class mail. The notices dated January 14, 2011, which are in compliance with RPAPL 1304, were attached in support of the motion. Defendant argues that the barcode on one of the notices "does not register as a tracking number with the U.S. Postal Service website" and that the plaintiff's proof of service, is therefore, insufficient. It is noted that, although the defendant submitted an affidavit in which he references the 90 day notice requirement, he does not deny receiving the notices. The plaintiff sufficiently demonstrated prima facie evidence of their compliance with CPLR 1304 and, if the defendant did not receive this correspondence, he would have full knowledge of that fact. The defendant has not denied receiving either notice pursuant to CPLR 1304. Accordingly, as defendant has not affirmatively demonstrated the merit of this defense, affirmative defenses 22, 23 and 24 are dismissed (see Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909, 911 [2d Dept 2013]).

Defendant argues that further discovery is necessary to determine whether the plaintiff complied with the terms of the Trust's Pooling and Servicing Agreement and, therefore, has standing to maintain this action. Defendant argues that the plaintiff has not "provided evidence of delivery of the mortgage file to the Trust prior to the Trust closing date of September 24, 2006, despite the fact that according to the Pooling and Servicing Agreement, receipt of the mortgage file had to have been acknowledged through a signed receipt executed by the Trustee." However, [*5]as the defendant was not a party to, or intended beneficiary of, the Pooling and Servicing Agreement, he does not have standing to assert its noncompliance (see Bank of NY Mellon v Gales, 116 AD3d 723, 725 [2d Dept 2014], citing Rajamin v Deutsche Bank Natl. Trust Co., — F Supp 2d &mdash, 2013 US Dist LEXIS 45031 [SD NY 2013]; Rajamin v Deutsche Bank Nat'l Trust Co., 757 F3d 79, 87-88 [2d Cir 2014]; US Bank Natl. Assoc. v Mosquera, 2013 NY Slip Op 31720(U), *6 [Sup Ct, Queens County 2013]; Vaughan v HSBC Mtge. Corp., 2013 NY Slip Op 33600(U), *6 [Sup Ct, Putnam County 2013]). Defendant cites to Auroa Loan Servs. LLC v Scheller (43 Misc 3d 1226[A]) and argues that the alleged noncompliance with the Pooling and Service Agreement, "evidences ultra vires action on the part of the trustee" which would "defeat plaintiff's holder in due course status" and make the Assignment void pursuant to Estates, Powers and Trusts Law § 7-2.4. However, like the United States Court of Appeals, Second Circuit, this court declines to follow the holding in Auroa as acts may be ratified by the trust's beneficiaries and "are voidable only at the instance of a trust beneficiary or a person acting in his behalf" (Rajamin, 757 F3d at 90; see Mooney v Madden, 193 AD2d 933, 933-934 [3d Dept 1993]; Berezovskaya v Deutsche Bank Nat'l Trust Co., 2014 US Dist LEXIS 127532 [ED NY 2014]). As defendant was not an intended third party beneficiary of the Pooling and Servicing Agreement, he may not assert noncompliance (see Bank of NY Mellon, 116 AD3d at 725; Rajamin, 757 F3d at 87-88).

The plaintiff presented the original notarized Assignment, dated December 23, 2011, which states:

FOR GOOD AND VALUABLE CONSIDERATION, the sufficiency of which is hereby acknowledged, the undersigned, JPMORGAN CHASE BANK, NATIONAL ASSOCIATION SUCCESSOR IN INTEREST BY PURCHASE FROM THE FDIC AS RECEIVER OF WASHINGTON MUTUAL BANK F/K/A WASHINGTON MUTUAL BANK, FA . . . by these presents does convey, grant, sell, assign, transfer and set over the described MORTGAGE with all interest secured thereby, all liens, and any rights due or to become due thereon to [plaintiff] . . ..

MORTGAGE dated 08/01/2006, made by HUGH DUTHIE to WASHINGTON MUTUAL BANK, FA in the principal sum of $940,000.00 and recorded on 08/14/2006 . . . .

Property commonly known as: 70 WASHINGTON ST No.8B

BROOKLYN, NY 11201

In her affidavit, Alegria states that, "[t]he holder of the Note and Mortgage is, and was at the time this action was commenced, Chase, as servicer and attorney-in-fact for plaintiff." Further, Alegria states, "Chase's counsel was sent the original Note, Mortgage, and Assignment for the purpose of this litigation." Defendant argues that the plaintiff has the burden of proving that physical delivery of the note occurred prior to the commencement of the action and the affidavit does not prove when the transfer of the Note occurred.

Defendant further argues that plaintiff has not provided any assignments from WaMu to Chase that demonstrate the chain of title. Although the court takes judicial notice that the FDIC was appointed as receiver upon the closing of WaMu during the 2008 financial crisis and that [*6]WaMu's assets, including WaMu's loans, were transferred to Chase,[FN4] plaintiff has not provided any documentary proof of the transfer of this particular Note and Mortgage to Chase. Although the defendant has never asserted that any other entity has claimed to be the holder of the subject Note and Mortgage despite the defendant being in default for more than four years, nor has defendant claimed to have made payments on the Note to any other entity, it is possible that WaMu could have transferred the Note and Mortgage to another entity, perhaps in the secondary market, prior to Chase's acquisition of WaMu's assets. Such speculation is dispelled, however, by the production of the original documents in open court.

"Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation" (Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909, 912 [2d Dept 2013]; quoting HSBC Bank USA v Hernandez, 92 AD3d 843, 844 [2d Dept 2012] and U.S. Bank, N.A. v Collymore, 68 AD3d 754 [2d Dept 2009], citing Bank of NY v Silverberg, 86 AD3d at 281). "However, the transfer of the mortgage without the debt is a nullity, and no interest is acquired by it, because a mortgage is merely security for a debt or other obligation and cannot exist independently of the debt or obligation" (US Bank Natl. Assn. v Faruque, 120 AD3d 575, 577 [2d Dept 2014], internal citations omitted). As the Assignment only references the assignment of the Mortgage, and not the Note, plaintiff is required to demonstrate that it physically received delivery of the Note prior to the commencement of the action. An affidavit from a plaintiff's servicing agent, that contains conclusory statements regarding the plaintiff's possession of the Note and does not give any factual details of the physical delivery, is insufficient to establish that the plaintiff had physical possession of the Note prior to the commencement of the action (see US Bank v Faruque, 120 AD3d at 577; U.S. Bank v Collymore, 68 AD3d at 754; Homecomings Fin. v Guldi, 108 AD3d 506, 508 [2d Dept 2013]; HSBC v Hernandez, 92 AD3d at 844; compare Aurora Loan Servs., LLC v Taylor, 114 AD3d 627, 628-629 [2d Dept 2014] (holding that plaintiff established standing where the plaintiff's affidavit specifically stated the date of physical possession of the note which was four days prior to the commencement of the action)). Upon review of the Assignment, Alegria recites conclusory statements regarding the Assignment and does not state the specific date upon which the plaintiff obtained physical possession of the Note. Accordingly, as plaintiff must rely on the physical possession of the Note to demonstrate its ownership at the time of the commencement of this action, defendant has raised an issue of fact as to whether plaintiff obtained physical possession of the Note on or before January 6, 2012 (see US Bank v Faruque, 120 AD3d at 577; U.S. Bank v Collymore, 68 AD3d at 754; Homecomings, 108 AD3d at 508; HSBC v Hernandez, 92 AD3d at 844).

Defendant further argues that he, "intends to seek evidence in admissible form showing that the Plaintiff does not have proof that it paid value as consideration for the note and mortgage being foreclosed upon" and "further expects to uncover evidence to support the contention that the originating lender engaged in deceptive trade practices in violation of General Business Law § 1349." Despite asserting an affirmative defense citing "General Business Law § 1349", as well [*7]as referencing it in opposition to the summary judgment motion, it is noted that there is no General Business Law § 1349. The court presumes the defendant intended to cite to General Business Law § 349 which addresses unlawful deceptive acts and practices. Other than citing to the incorrect statute, defendant does not provide any further basis for plaintiff's purported deceptive acts and practices. The only reference to a lack of consideration in the answer is in the second counterclaim which states, in its entirety, "[t]he Defendant alleges that the alleged note and/or the alleged mortgage lacked consideration as the Plaintiff did not provide any consideration to support the contract." The Assignment specifically states that the Mortgage was exchanged "FOR GOOD AND VALUABLE CONSIDERATION, the sufficiency of which is hereby acknowledged . . .." Further, Alegria's affidavit confirms that the Assignment was the means by which the Mortgage was assigned. As defendant was not a party to the transaction between plaintiff and Chase, the documentary evidence demonstrates that both the assignor and assignee acknowledge the consideration in exchange for the Mortgage, and the second counterclaim fails to state a cause of action, the defendant has not produced any evidence, or raised any defense claims, with respect to the consideration, that are sufficient to raise a triable issue of fact (see U.S. Bank Trust, 16 AD3d at 408).

Defendant's affirmative defenses, 2-28, are stricken, and counterclaims 1-4 are dismissed, as they are pro-forma defenses and claims that are conclusory in nature. The defendant has failed to provide any specific factual allegations in support of the alleged defenses and counterclaims.

The plaintiff's motion to amend the caption is granted.[FN5] The caption shall now read:

X

U.S. BANK NATIONAL ASSOCIATION, as

Trustee, successor in interest to Bank of America,

National Association, as Trustee, as successor by

merger to Lasalle Bank, National Association as

Trustee for WaMu Mortgage Pass-Through

Certificates Series 2006-AR 12 Trust,

Plaintiff,

against -

HUGH DUTHIE; BOARD OF MANAGERS OF

70 WASHINGTON STREET CONDOMINIUM

HOMEOWNERS ASSOCIATION; CITY OF NEW

YORK ENVIRONMENTAL CONTROL BOARD;

CITY OF NEW YORK PARKING VIOLATIONS

BUREAU; CITY OF NEW YORK TRANSIT

ADJUDICATION BUREAU; "JOHN DOE", said

name being fictitious, it being the intention of

Plaintiff to designate any and all occupants of

premises being foreclosed herein, and any parties,

corporations or entities, if any, having or claiming

an interest or lien upon the mortgaged premises,

Defendants.

X

CONCLUSION

The plaintiff's motion is granted as to the dismissal of affirmative defenses 2-28, and counterclaims 1-4, and held in abeyance pending a hearing as to the dismissal of the first affirmative defense and the granting of summary judgment. Defendant's motion is denied.

A hearing on the plaintiff's physical receipt of the Note, and its possession at the commencement of the suit, will be held on December 22, 2014. The parties are to exchange witness lists and meet and confer with respect to hearing exhibits no later than December 15, 2014.

This constitutes the decision and order of the court.

E N T E R :

J.S.C. Footnotes

Footnote 1:It is noted that the word "Supplemental" was specifically added by the court to the standard PC form used by this court.

Footnote 2:Defendant claims that he has a number of affirmative defenses and counterclaims and that further discovery is necessary to prove those defenses and counterclaims. It is noted that the answer contains 28 single sentence affirmative defenses, and four single sentence counterclaims, that are conclusory and devoid of factual allegations in support thereof.

Footnote 3:Defendant argues that Alegria's affidavit is hearsay as she "has no personal knowledge of the underlying transactions" and "she does not state that she made [the] business records" upon which she relied. However, this argument is unavailing as Alegria states that she relied upon Chase's business records and loan documents, a number of which were attached to the affidavit, the statements regarding the ownership of the Note and Mortgage are consistent with the Assignment, and, pursuant to CPLR 4518(a), Alegria's personal knowledge as to the creation of the business records does not affect their admissibility (see Gen. Bank v Mark II Imports Inc., 290 AD2d 240, 241 [1st Dept 2002]). Accordingly, Alegria's affidavit is admissible.

Footnote 4:See Beka Realty LLC v JP Morgan Chase Bank, N.A. (41 Misc 3d 1213(A) [Sup Ct, Kings County 2013]), in which my colleague, Justice David Schmidt, recited the history of Chase's acquisition of WaMu's assets.

Footnote 5:The phrase "as Trustee" after "Bank of America, National Association" was omitted in the original caption. This correction now matches the assignee in the Assignment.