Wells Fargo Bank v Zelaya

[*1] Wells Fargo Bank v Zelaya 2015 NY Slip Op 50870(U) Decided on June 4, 2015 Supreme Court, Suffolk County Whelan, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 4, 2015
Supreme Court, Suffolk County

Wells Fargo Bank, AS TRUSTEE FOR CARRINGTON MORTGAGE LOAN TRUST SERIES FRE2 ASSET-BACKED PASS- THROUGH CERTIFICATES, Plaintiff, 5

against

Maria Zelaya, MARIA M. RIVAS, MORTGAGE REGISTRATION SYSTEMS, INC., FREEMONT INVESTMENT LOAN, CLERK OF THE SUFFOLK COUNTY DISTRICT COURT, TOYOTA MOTOR CREDIT CORPORATION, COMMISSIONER OF TAXATION AND FINANCE, CAPITAL ONE BANK, USA, N.A. and "JOHN DOE No.1" to "JOHN DOE #10" the last 10 names being fictitious and unknown to plaintiff, intended as being persons, entities or corporations, if any, having or claiming an interest in or lien upon the mortgaged premises described in the verified complaint, Defendants.



19050/2012



KNUCKLES, KOMOSINSKI et al

Attys. For Plaintiff

565 Taxter Rd. - Ste. 590

Elmsford, NY 10523

RAYMOND W. VERDI, JR., PC Attys. For Defendant Zelaya

50 Clinton St. - Ste. 99

Hempstead, NY 11550
Thomas F. Whelan, J.

Upon the following papers numbered 1 toread on this motion by plaintiff for accelerated judgments, party identification and an order of reference and cross motion by defendant for summary judgment dismissing the complaint; Notice of Motion/Order to Show Cause and supporting papers 1 - 3;8-9; Notice of Cross Motion and supporting papers4-7; Answering papers10-12; Reply papers 13-14; Other 15 (memorandum); (and after hearing counsel in support and opposed to the motion) it is,

ORDEREDthat this motion (#001) by the plaintiff for accelerated judgments against the defendants, substitution and deletion of parties, the appointment of a referee to compute and other incidental relief is considered under CPLR 3212, 3215, 1024 and Article 13 of the Real Property Actions and Proceedings Law and is granted; and it is further

ORDERED that the cross motion (#002) by defendant, Maria Zelaya, for dismissal of the complaint due to a purported lack of standing on the part of the plaintiff and/or its purported failure to comply with notice and pleading requirements is considered under CPLR 3212 and Article 13 of the Real Property Actions and Proceedings Law and is denied.

Plaintiff commenced this action to foreclose the lien of an August 4, 2006 mortgage given by defendants Maria Zelaya and Maria M. Rivas to secure a note of the same date given to Fremont Investment and Loan, which advanced the sum of $328,00.00 to enable these obligor/mortgagor defendants to purchase a residence in Wyandanch, New York. In its complaint, the plaintiff alleges that the mortgage was assigned to it by the original lender "as evidenced by the indorsement/allonge attached affixed to the note and later evidenced by written instrument dated December 2, 2009, and recorded with the County Clerk/City Registrar of Suffolk County on January 19, 2010" (see ¶ Eleventh (b) of the complaint). The obligor/mortgagors are alleged to have defaulted in their payment obligations on November 1, 2010 which default continues and is uncured.

In response to service of the summons, complaint and other initiatory papers served upon her, defendant Zelaya appeared herein by service of an answer. Therein, defendant Zelaya asserts some nine separately pleaded affirmative defenses, including a lack of standing on the part of the plaintiff and its failure to comply with recently enacted statutory provisions such as RPAPL §§ 1303, 1304 [*2]and 1306.

By the instant motion (#001), the plaintiff seeks summary judgment on its complaint against the answering defendants, default judgments against the remaining defendants served with process, none of whom appeared herein by answer and the identification of two persons served as unknown defendant. In support thereof, the plaintiff submits copies of the note and mortgage and a copy of a modification agreement allegedly executed on June 1, 2010 by the obligor/mortgagors and the servicer. In addition, the plaintiff submits an affidavit of its servicer, Carrington Mortgage Services, LLC, in which the affiant avers that the plaintiff is the assignee of the mortgage under the terms of a written assignment thereof dated December 2, 2009 executed by a nominee of the original lender [MERS] and that the plaintiff had possession of the subject note and mortgage prior to the commencement of the action (see October 23, 2013 affidavit of Chris Lechtanski, AVP of Default for Carrington Mortgage Servicer, LLC, attorney-in-fact). The affiant further alleges that the obligor/mortgagor defendants executed a loan modification with the servicer, Carrington Mortgage Services, LLC on or about June 1, 2010 in which said defendants were afforded a modification of the mortgage debt that was acknowledged therein. The affiant further alleges that defendant Zelaya was duly served with the RPAPL § 1304 notice which was sent by certified and first class mail on February 22, 2012, in full compliance with provisions of RPAPL § 1304. In the affirmation of the plaintiff's counsel, compliance with the pleading requirements of RPAPL § 1306 is alleged as evidenced by the complaint served and filed herein.

The motion is opposed by defendant Zelaya in cross moving papers in which she seeks a dismissal of the complaint on the following pleaded affirmative defenses asserted in her answer: a lack of standing on the part of the plaintiff and its failure to comply with the notice provisions of RPAPL § 1304 and the pleading requirements imposed by §1306. Defense counsel also challenges the efficacy of the plaintiff's proof since it is predicated upon affidavits by a purported servicer/ attorney-in-fact of the plaintiff without sufficient proof as to those relationships with the plaintiff. Defense counsel challenges the undated indorsement in blank that appears on a separate page or allonge to the note and also challenges the plaintiff's reliance upon the MERS assignment of December 2, 2009, as it contains an assignment of the mortgage only without a concomitant assignment of the note. In a separate affidavit, defendant Zelaya denies receipt of any RPAPL § 1304 notice.

In the plaintiff's opposing papers, it relies upon a new affidavit of its servicer in which the date of April 4, 2008 is advanced as the date of the plaintiff's possession of the original note. The affiant goes on to allege that the plaintiff "is the current owner of the subject note and mortgage endorsed in blank and has not transferred same" (see affidavit of Elizabeth Ostermann, Vice President of Foreclosure for Carrington Mortgagor Services, LLC, attorney-in-fact dated February 27, 2014, attached to opposing papers of the plaintiff). Ms. Ostermann also attests to the mailing date of the RPAPL § 1304 notices, by certified and first class mail, as sent on February 22, 2012.

Rejected as unmeritorious are the challenges to the plaintiff's compliance with the pleading requirements of RPAPL § 1306 which require the plaintiff to allege in its complaint that it complied [*3]with the requirements for filing the RPAPL § 1304 notice with the superintendent of the state financial services department. A review of the complaint served and filed herein reveals that the plaintiff satisfied these pleading requirements.

Also rejected as unmeritorious are the defendant's claims that the plaintiff's reliance upon the affidavit of the loan servicer, Carrington Mortgage Services, LLC, is misplaced since there is no proof that the relationship between the Carrington and the plaintiff is one of servicer or of attorney-in fact and principal. That a loan servicer may testify on behalf of a foreclosing plaintiff is well established (see Wells Fargo Bank, N.A. v Arias, 121 AD3d 973, 995 NYS2d 118 [2d Dept 2014]; HSBC Bank USA, Natl. Ass'n v Sage, 112 AD3d 1126, 977 NYS2d 446 [3d Dept 2013]; Aames Capital Corp. v Ford, 294 AD2d 134, 740 NYS2d 880 [2d Dept 2002]). Indeed, a loan servicer has standing to prosecute an action for foreclosure in its own name even in the absence of ownership of holder status of the note and mortgage that follows as an incident to the note (see RPAPL §§ 1302; 1304).

In addition, the execution of the loan modification agreement by Carrington, as loan servicer and the obligor/mortgagor defendants, Zelaya and Rivas, in June of 2010, and their payment of monies due under the terms of such modification agreement for a period of some four months until the date of default on November 1, 2010 constitutes a ratification of the Carrington's status as loan servicer and a waiver of all any and all challenges thereto (see IRB-Brasil Resseguros S.A. v Portobello Intern. Ltd., 84 AD3d 637, 923 NYS2d 508 [1st Dept 2011]; see also Confidential Lending, LLC v Nurse, 120 AD3d 739, 992 NYS2d 77 [2d Dept 2014]; Moweta v Citywide Home Improvements of Queens, Inc., 267 AD2d 438, 700 NYS2d 845 [2d Dept 1999]; Verela v Citrus Lake Dev., Inc., 53 AD3d 574, 862 NYS2d 96 [2d Dept 2008]).

The court also rejects the defendant's challenges to the standing of the plaintiff. Recent cases emanating from the Appellate Division, Second Department have held that once the plaintiff establishes, by due proof, that the note was transferred to it or to a custodial agent on a day certain which is prior to the commencement of the action, the plaintiff's standing is established as a matter of law since "[i]t can reasonably be inferred from these averments that physical delivery of the note was made to the plaintiff ..." thus obviating the need for "further detail" (Aurora Loan Serv., LLC v Taylor, 114 AD3d 627, 980 NYS2d 475 [2d Dept 2014]; see also Wells Fargo Bank, N.A. v Arias, 121 AD3d 973, supra; Central Mtge. Co. v McClelland, 119 AD3d 885, 991 NYS2d 87 [2d Dept 2014]; Deutsche Bank Natl. Trust Co. v Whalen, 107 AD3d 931, 969 NYS2d 82 [2d Dept 2013; "The plaintiff also established its standing as the holder of the note and mortgage by physical delivery prior to commencement of the action with evidence that its custodian received the original note in October 2005 and received the original mortgage in February 2006 and safeguarded those original documents in a secure location"]).

Here, the proof submitted in opposition to the defendant's cross motion provided a delivery date of April 4, 2008 as the date on which the plaintiff obtained physical possession of the note which also effected a transfer of the mortgage under the principal incident rule (see Wells Fargo Bank, N.A. v Parker, 125 AD3d 848, 5 NYS3d 130 [2d Dept 2015]; Wells Fargo Bank, N.A. v [*4]Arias, 121 AD3d 973, supra; PHH Mtge. Corp. v Israel, 120 AD3d 1329, 992 NYS2d 355 [2d Dept 2014]; Deutsche Bank Natl. Trust Co. v Whalen, 107 AD3d 931, supra; One West Bank FSB v Carey, 104 AD3d 444, 960 NYS2d 306 [1st Dept 2013]; Bank of New York Mellon Trust Co. NA v Sachar, 95 AD3d 695, 943 NYS2d 893 [1st Dept 2012]). Deutsche Bank Trust Co. Am. v Codio, 94 AD3d 1040, 943 NYS2d 545 [2d Dept 2012]; GRP Loan, LLC v Taylor, 95 AD3d 1172, 945 NYS2d 336 [2d Dept 2012]). Although defense counsel is correct in noting that the subsequent MERS assignment was ineffective to transfer the note since, among other things, it did not contain an assignment of the note (see Bank of America, N.A. v Paulsen, 125 AD3d 909, 6 NYS3d 68 [2d dept 2015]), the issuance of that subsequent, albeit ineffective written mortgage assignment had no effect upon the plaintiff's status as owner and/or holder of the note and mortgage through its possession of the note on April 4, 2008 (see Emigrant Mortg. Co., Inc. v Persad, 117 AD3d 676, 985 NYS2d 608 [2s Dept 2014]; HSBC Bank USA, Natl. Ass'n v Sage, 112 AD3d 1126, supra; Deutsche Bank Natl. Trust Co. v Whalen, 107 AD3d 931, supra; see also Tuthill Fin. v Abundant Life Church, U.P.C., 122 AD3d 918, 998 NYS2d 387 [2d Dept 2014]; see also Suntrust Mortg., Inc. v Andriopoulos, 39 Misc 3d 1208(A), 971 NYS2d 75 [Sup. Court, Suffolk County 2013]).

Contrary to the contentions of defense counsel, there is no special indorsement on the face of the note in favor of the original lender, Freemont Investment and Loan. There is only an indorsement in blank on what appears to be a separate page or allonge, the effectiveness of which is challenged by defense counsel. However, the court reject these challenges as unavailing for the reasons outlined below.

It is well established that mortgage notes may be transferred by mere delivery to a third party transferee as it has long been recognized that "a good assignment is made by delivery only" (see Fryer v Rockefeller, 63 NY 268, 276 [1875]; see PHH Mtge. Corp. v Israel, 120 AD3d 1329, 992 NYS2d 355 [2d Dept 2014]). In addition, it is clear that " [n]o special form or language is necessary to effect an assignment as long as the language shows the intention of the owner of a right to transfer it'" (Bank of New York v Silverberg, 86 AD3d 274, 926 NYS2d 532 [2d Dept 2011], quoting Suraleb, Inc. v International Trade Club, Inc., 13 AD3d 612, 612, 788 NYS2d 403 [2d Dept 2004]; see also OneWest Bank FSB v Carey, 104 AD3d 444, 960 NYS2d 306 [1st Dept 2013]; Chase Home Fin., LLC v Miciotta, 101 AD3d 1307, 956 NYS2d 271 [3d Dept 2012]). 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 (see HSBC Bank USA, Natl. Ass'n v Gilbert, 120 AD3d 756, 991 NYS2d 358 [2d Dept 2014]; U.S. Bank Natl. Ass'n v Faruque, 120 AD3d 575, 2014 WL 3928918 [2d Dept 2014]; Bank of New York v Silverberg, 86 AD3d 274, supra).

In addition to mere delivery, mortgage notes may be transferred to third party "holders" by negotiation provided that such notes qualify as negotiable instruments under the Uniform Commercial Code (see UCC 3—104; Wells Fargo Bank, NA v Ostiguy, 127 AD3d 1375, 2015 WL 1565673 [3d Dept 2015]; Deutsche Bank Trust Co. Ams. v Codio, 94 AD3d 1040, supra; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674, 838 NYS2d 622 [2d Dept. 2007]). New York's Uniform Commercial Code (UCC) §1-201(20) defines "holder" as "a person who is in possession of a document of title, an instrument or an investment security drawn, issued or endorsed [*5]to him or to his order or to bearer or in blank" and a person becomes the holder of an instrument "through its negotiation" to him or her (see UCC §3-202[1]). Where the instrument is payable to order, it is negotiated by delivery and all necessary endorsements; but where it is payable to the bearer by virtue of an endorsement in blank or otherwise, delivery alone is sufficient to transfer it to a third party (see UCC 3-204[2]; Wells Fargo Bank, NA v Ostiguy, 127 AD3d 1375, supra; Nationstar Mtge., LLC v Davidson, 116 AD3d 1294, 1296 [2014], lv denied 24 NY3d 905 [2014]; Deutsche Bank Trust Co. Ams. v Codio, 94 AD3d 1040, supra; Mortgage Elec. Registration Sys., Inc. v. Coakley, 41 AD3d 674, 674 [2007]; Franzese v Fidelity New York FSB, 214 AD2d 646 625 NYS2d 275 [2d Dept 1995]). The sine qua non of negotiation is delivery of the note that is either indorsed in blank or if specially indorsed then indorsed by the special indorsee.

Here the court finds that no questions of fact were raised here defendant Zelaya's challenges to the indorsement in blank on the separate allonge. The plaintiff's possession of the note, which does not contain a specific indorsement, is sufficient to effect a transfer of the note and mortgage to the plaintiff, irrespective of the undated or unattached nature of the indorsement set forth in the purportedly separate allonge containing the indorsement in blank by the original lender, Freemont Investment and Loan.

Left for consideration are defendant, Zelaya's challenges to the plaintiff's compliance with the pre-commencement 90 day notice of default provisions set forth in RPAPL §1304. Defendant Zelaya denies receiving such notices as follows: "I have reviewed the notice that is annexed to the plaintiff's motion at Exhibit C which the plaintiff claims is the notice required by RPAPL Section 1304 and I have never received a copy of said notice other than the copy that was annexed to the plaintiff's motion papers".

There are, however, two notices of default attached to the plaintiff's moving papers at Exhibit C. The first is dated December 7, 2010, and is denominated as a notice of "Intent to Foreclose" , while the second notice dated 2/22/12 is denominated as one issued pursuant to RPAPL § 1304. Each of the affidavits by officers of the plaintiff's loan servicer submitted on these applications identify the first notice as the contractual notice of default and cure that is required to be issued to the borrowers under the terms of the mortgage and the second notice as the RPAPL § 1304 notice. Each of the servicer affiants attests that the statutory notice was mailed to the obligor/mortgagor defendants on February 22, 2012 by first class and certified mail and that their knowledge thereof is based upon their review of the records maintained by their employer as servicer of the loan and/or their personal knowledge of its record keeping procedures. Under these circumstances, the court finds that the equivocal denial of receipt of a copy of the RPAPL 1304 notice by defendant Zelaya, is insufficient to raise any genuine question of fact with respect to the issuance and service thereof which the plaintiff demonstrated.

The court has considered the remaining contentions of defendant Zelaya and find them to be without merit. The court thus denies the cross motion (#002) for summary judgment dismissing the complaint and grants the plaintiff's motion-in-chief for summary judgment in its favor dismissing the affirmative defenses asserted in the answer of defendant Zelaya and in favor of the plaintiff on [*6]its complaint against such defendant.

Those portions of the instant motion wherein the plaintiff seeks an order identifying Rubel Escobar and Katie Zelaya as the first two John Doe defendants and dropping as party defendants the remaining unknown defendants listed in the caption is granted pursuant to CPLR 1024 and 1003. Also granted is an amendment of the caption to reflect these changes.

The moving papers further established the default in answering on the part of the defendants served with process who failed to appear herein by answer, including the two served as John Doe unknown defendants (see HSBC Bank USA, N.A. v Alexander, 124 AD3d 838, 2015 WL 361008 [2d Dept 2015]; U.S. Bank, N.A. v Razon, 115 AD3d 739, 740, 981 NYS2d 571 [2d Dept 2014]). Accordingly, the defaults of all such defendants are hereby fixed and determined. Since the plaintiff has been awarded summary judgment against the sole answering defendant and has established a default in answering by the remaining defendants, the plaintiff is entitled to an order appointing a referee to compute amounts due under the subject note and mortgage (see RPAPL § 1321; Bank of East Asia, Ltd. v Smith, 201 AD2d 522, 607 NYS2d 431 [2d Dept 1994];Vermont Fed. Bank v Chase, 226 AD2d 1034, 641 NYS2d 440 [3d Dept 1996]; LaSalle Bank, NA v Pace, 31 Misc 3d 627, 919 NYS2d 794 [Sup. Ct. Suffolk County 2011], aff'd, 100 AD3d 970, 955 NYS2d 161 [2d Dept 2012])