Loancare, a Div. of FNF Servicing Inc. v Coleman
Annotate this CaseDecided on March 9, 2015
Supreme Court, Kings County
Loancare, a Division of FNF Servicing Inc., Plaintiff,
against
Aaron Coleman, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY PARKING VIOLATIONS BUREAU, "JOHN DOE No.1" through "JOHN DOE #12", the last twelve names being fictitious and unknown to the plaintiff, the persons or parties intended being the tenants, occupants, persona or corporation, of any, having or claiming an interested in or lien upon lien upon the premises, described in the complaint, Defendants.
22233/12
Atty for Plaintiff
Berkman Henoch, Peterson, Peddy & Tenchel, P.C.
100 Garden City, new York 11530
516-222-6200
Atty for defendants
Law Office of Yvette V. Dudley, p.C.
217-01 Merrick Boulevard, Suite 202
Springfield gardens, New York 11413
Francois A. Rivera, J.
Recitation in accordance with CPLR 2219 (a) of the papers considered on the motion of Loancare, a Division of FNF Servicing Inc., (hereinafter Loancare or the plaintiff), filed on August 9, 2013, under motion sequence number one, for an order (1) striking the answer and dismissing the counterclaims of defendant Aaron Coleman (hereinafter Coleman or the mortgagor; (2) granting summary judgment pursuant to CPLR 3212 against Coleman; (3) discontinuing the action against defendants John Doe
#1 through John Doe #12; (4) deeming all non-appearing defendants in default pursuant to CPLR 3215 (a); (5) appointing a referee to compute pursuant to the RPAPL 1321; and (6) awarding plaintiff the costs of the motion. Notice of motionAffirmation of regularityAffidavit of plaintiff's vice presidentExhibit A-UProposed order of referenceAffirmation in further support and in opposition to the cross motionExhibit A-E
Recitation in accordance with CPLR 2219 (a) of the papers considered on defendant Coleman's cross motion filed on December 13, 2014, under motion sequence number one, for an order (1) granting summary judgment in favor of Coleman pursuant to CPLR 3212 and dismissing the complaint, (2) denying plaintiff's motion for summary judgment or in the alternative; (3) permitting Coleman to engage in discovery.
Notice of cross motionAffirmation in supportAffidavit of defendant ColemanExhibit A-KMemorandum of LawBACKGROUND
On November 19, 2012, plaintiff commenced the instant residential mortgage foreclosure action by filing a summons, complaint and a notice of pendency with the Kings County Clerk's office.
The complaint alleges in pertinent part that on June 2, 2009, defendant Coleman executed and delivered to Lend America (hereinafter Lend) a note in its favor in the principal sum of $701,499.00 (hereinafter the note). On that same date, Coleman executed and delivered to Mortgage Electronic Registration System (hereinafter MERS), as nominee for Lend, a mortgage (the subject mortgage) on certain real property known as 202 Quincy Street, Brooklyn, New York, Block 1807 Lot 24 (hereinafter the subject property).
Coleman defaulted on making payments due and owing on the subject note from February [*2]1, 2011 and thereafter. The lender sent the mortgagors a notice dated April 4, 2011, advising Coleman of his default and of the lenders intent to accelerate the entire amount due. Coleman did not cure the default.
Coleman interposed a verified answer dated February 22, 2013, which asserted seventeen affirmative defenses and five counterclaims. The second affirmative defense claims that Loancare lacks standing to maintain the action. The eleventh affirmative defense alleges that plaintiff failed to plead performance or occurrence of condition precedent, including a default letter and notice required pursuant to RPAPL 1304 [FN1] .Plaintiff joined issue by its verified reply dated March 14, 2013.
Coleman is the only defendant who has answered the complaint and who has submitted opposition to Loancare's motion.
By decision and order dated March 14, 2014, the Court ordered an expedited trial pursuant to CPLR 3212 (c)[FN2] level="1"> on Coleman's second affirmative defense that Loancare lacks standing to maintain the action. All other branches of Loancare and Coleman's motion were stayed pending resolution of the expedited trial. The bench trial was conducted on July 15, 2014. Plaintiff admitted six exhibits and called two witnesses. The six admitted exhibits are the subject note, the subject mortgage and proof of its filing with the New York City Register, the Master Custodial Agreement between Lend America as the issuer and U. S Bank, N.A. as the custodian (hereinafter USBNA), a custody agreement between Lend America/Ideal Mortgage/ Lending Key C/O Loancare, a Division of FNF Servicing Inc and USBNA, and a packet of computer screen shots. The parties were directed to submit proposed findings of fact to the court on or before September 30, 2014 pursuant to CPLR 4123. Both parties complied.
FINDINGS OF FACT
After considering all the documentary and testimonial evidence submitted at trial the Court makes the following findings of fact.
On June 2, 2009, Coleman executed and delivered to Lend America the subject note wherein he promised to repay to it the principal sum of $701,499.00 with interest.
On that same date, Coleman executed and delivered to MERS, as nominee for Lend America, the subject mortgage on the subject property.
On June 9, 2009, the subject mortgage was recorded.
On May 7, 2012, the subject mortgage was assigned by MERS, as nominee for Lend America to Government National Mortgage Association (hereinafter GNMA). That assignment [*3]was recorded with the New York City Register on December 27, 2012.
On May 7, 2012, the subject mortgage was further assigned by GNMA to the plaintiff. That assignment was recorded with the New York City Register on December 27, 2012.
Lend America did not deliver the subject note to MERS.
The subject mortgage did not give MERS the authority to assign the subject note.
Since 1981 Allison Bielby (hereinafter Bielby) has been employed by the plaintiff as a Foreclosure Specialist.
Bielby's duties include handling a portfolio of loans that are in foreclosure, accepting and processing payments and handling the administration of the loans.
Ginnie Mae is a master servicer of mortgage loans and Loancare LLC is a sub-servicer on behalf of Ginnie Mae.
US Bank is the custodian for Loancare LLC.
US Bank has held possession of the subject note and subject mortgage which it had obtained from Cenlar Cenlar was the prior custodian to Loancare LLC's custodian, US Bank. Bielby had no knowledge of how and when the subject note was transferred from Lend America.
Beilby testified that exhibit 5 is a print out of a computer screen shot from the
plaintiff's computer system. She further testified that the exhibit purportedly shows that on December 23, 2009, Cenlar, the prior servicer of the subject note, electronically transferred to plaintiff's computer system the principle balance and acquisition identification number of the subject note.
Beilby testified that exhibit 6 is a custodial agreement between the plaintiff and USBNA. She further testified that the subject note was subject to this custodial agreement. She also testified that the plaintiff has no relationship with Lend America and became the sub-servicer of Lend America's portfolio through Ginnie Mae.
Beilby testified that exhibit 7 is a custodial agreement between the plaintiff and USBNA.
The custodial agreement admitted as exhibit 6 and exhibit 7 does not contain any mention of the subject note.
Sorell Elbert (hereinafter Elbert) has been employed by USBNA since 2001 and has been its senior operations manager since 2010.
Elbert's current responsibilities include overseeing the operations teams consisting of file certifications, trailing documents, releases and vault functions.
Elbert identified exhibit 8 as six pages taken from USBNA'S computers EMB Trust system of records.
Elbert stated that the EMB Trust records show that USBNA acquired the subject note as of May 18, 2010.
Neither Beilby nor Elbert had knowledge of any facts regarding the delivery of the subject note by Lend America to any other entity.
Neither Beilby nor Elbert had ever seen the subject note before July 15, 2014.
Neither Beilby nor Elbert had any knowledge as to when the undated allonge was affixed to the subject note.
Neither Loancare LLC's computer system nor USBNA's computer system contain a scan of the subject note.
Neither Loancare LLC's computer system nor USBNA's computer system contains any [*4]mention of the allonge to the subject note.
LAW AND APPLICATION
In order to commence a foreclosure action, a plaintiff must have a legal or equitable interest in the mortgage (US Bank N.A. v Faruque, 120 AD3d 575 [2nd Dept 2014] citing HSBC Bank USA v Hernandez, 92 AD3d 843, 843 [2nd Dept 2012]). Where standing is put into issue by a defendant's answer, a plaintiff must prove its standing if it is to be entitled to relief (Bank of America N.A. v Paulsen, —- N.Y.S.2d —&mdash, 2015 WL 775197 [2d Dept 2015], US Bank N.A. v Faruque, 120 AD3d 575 [2nd Dept 2014] citing Bank of NY Mellon v Gales, 116 AD3d 723 [2nd Dept 2014]).
Coleman put the plaintiff's standing into issue by his second affirmative defense. Thus, in order for the plaintiff to be entitled to relief, it had to prove its standing (Id.).
A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that it is 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 (US Bank N.A. v Faruque, 120 AD3d 575 [2nd Dept 2014] citing Kondaur Capital Corp. v McCary, 115 AD3d 649, 650 [2nd Dept 2014]). 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 (see Aurora Loan Servs., LLC v Taylor, 114 AD3d 627 [2nd Dept 2014]). As a general matter, once a promissory note is tendered to and accepted by an assignee, the mortgage passes as an incident to the note (US Bank N.A. v Faruque, 120 AD3d 575 [2nd Dept 2014] citing Bank of NY v Silverberg, 86 AD3d 274 at 280 [2nd Dept 2011]). However, the transfer of the mortgage without the debt is a nullity, and no interest is acquired by it (see Bank of NY Mellon v Gales, 116 AD3d 723 [2nd Dept 2014]), because a mortgage is merely security for a debt or other obligation and cannot exist independently of the debt or obligation (US Bank N.A. v Faruque, 120 AD3d 575 [2nd Dept 2014] citing Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909, 911 [2nd Dept 2013]).
On June 2, 2009, Coleman executed and delivered to Lend America the subject note wherein he promised to repay to Lend America the principal sum of $701,499.00 with interest. He also executed and delivered to MERS, as nominee for Lend America, the subject mortgage on the subject property. Plaintiff, however, neither claimed nor proved that Lend America ever delivered the subject note to MERS. As a result, MERS was never a holder of the subject note and was not capable of delivering the subject note to anyone. Although MERS had assigned the subject mortgage to GNMA no interest in the subject note was created by the assignment. Similarly, GNMA's assignment of the subject mortgage to the plaintiff also failed to give plaintiff the rights of a holder of a note (see Bank of NY Mellon v Gales, 116 AD3d 723 [2nd Dept 2014]). Even assuming the parties to the aforementioned assignments intended to assign the underlying debt, as well as the mortgage, the subject mortgage and note did not give MERS the right to assign the underlying note in its own right (see Bank of New York v Silverberg, 86 AD3d 274 [2nd Dept 2011]).
Therefore, the plaintiff did not become a holder of the subject note through a written assignment prior to the commencement of the action. Under these circumstances to demonstrate standing, plaintiff had to demonstrate that prior to the commencement of the action, the subject note was delivered to it by a holder of the note under circumstances evincing an intent to transfer [*5]the obligation.
Physical delivery of a note is sufficient as a transfer without a written instrument of assignment (Bank of New York Mellon v Deane, 41 Misc 3d 494,503 [NY Sup 2003] citing Flyer v Sullivan, 284 AD 697, 699 [1st Dept 1954]). But delivery requires voluntary transfer of possession (Bank of America N.A. v Paulsen, —- NYS2d —&mdash, 2015 WL 775197 [2nd Dept 2015]; Bank of New York Mellon v Deane, 41 Misc 3d 494,503 [NY Sup 2003] citing NYUCC § 1—201[14]).
Elbert has been employed by USBNA since 2001 and has been its senior operations manager since 2010. She testified regarding the meaning of certain pages taken from USBNA'S computers EMB Trust system of records. She testified that EMB Trust records showed that the subject note was acquired by USBNA as of May 18, 2010. She further testified that the subject note was acquired pursuant to its custodial agreement with the plaintiff. The meaning of USBNA's acquisition of the note is at best ambiguous. It may mean acquiring the right to service the loan, or something else. In the absence of factual detail, it does not mean delivery of the note by a holder with an intent to transfer the obligation.
Neither Elbert nor Beilby offered any evidence regarding the delivery of the subject note by Lend America to any other entity. Neither Elbert nor Beilby had ever seen the subject note before July 15, 2014 nor did they have any knowledge as to when the allonge was affixed to the subject note. Furthermore, neither Loancare LLC's computer system nor USBNA's computer system contained a scan of the subject note. In sum, plaintiff offered no factual details as to by whom or by which entity physical delivery of the note was made to it (see Homecomings Fin., LLC v Guldi, 108 AD3d 506 [2nd Dept 2013]; HSBC Bank USA v Hernandez, 92 AD3d 843; cf. Aurora Loan Servs., LLC v Taylor, 114 AD3d 627 [2nd Dept 2014]), and whether the blank endorsement of the note was effectuated prior to the commencement of the action (see HSBC Bank USA v Hernandez, 92 AD3d 843 [2nd Dept 2012]; US Bank N.A. v Collymore, 68 AD3d 752, 753 [2nd Dept 2009]). Consequently, plaintiff did not make a prima facie showing that it was a holder of the subject note by either delivery or written assignment prior to the commencement of the action.
CONCLUSION
The burden is on the plaintiff to demonstrate that it had standing to foreclose on the note and mortgage. After the trial on the discrete issue of plaintiff's standing, the court finds that plaintiff did not make a prima facie showing that it was the both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note prior to the commencement of the instant action.
Accordingly, the instant action is dismissed based on plaintiff's lack of standing.
The foregoing constitutes the decision and order and judgment of this Court.
Enter: J.S.C. Footnotes
Footnote 1:Although Coleman wrote CPLR 1304 instead of RPAL 1304, it is disregarded as a mere irregularity pursuant to CPLR 2001, because the plaintiff understood and addressed the claim under RPAPL 1304.
Footnote 2:Pursuant to CPLR 3212 (c), the court may order an immediate trial of a motion based on any of the grounds enumerated in subdivision (a) or (b) of rule 3211. Coleman raised plaintiff's lack of standing as an affirmative defense and moved pursuant to CPLR 3212 and 3211(a)(3) for dismissal on the basis.
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