Flagstar Bank, FSB v Davis

[*1] Flagstar Bank, FSB v Davis 2015 NY Slip Op 51924(U) Decided on December 21, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 21, 2015
Supreme Court, Suffolk County

Flagstar Bank, FSB, Plaintiff,

against

Camille Davis, PEOPLE OF THE STATE OF NEW YORK, JOHN T. MATHER MEMORIAL HOSPITAL OF PORT JEFFERSON, INC. and "JOHN DOE #1" to "JOHN DOE #10", the last ten names being fictitious and unknown to plaintiff the persons or parties intended being the persons or parties, if any, having or claiming an interest in or lien upon the mortgaged premises described in the verified complaint, Defendants.



16906-13



McCABE WEISBERG CONWAY
Attys. For Plaintiff
145 Huguenot St. - Ste. 210
New Rochelle, NY 10701

STEPHEN C. SILVERBERG, ESQ.
Atty. For Defendant Davis
626 RXR Plaza
Uniondale, NY 11556
Thomas F. Whelan, J.

Upon the following papers numbered 1 to 15read on this motion by the plaintiff for accelerated judgments on its complaint and the appointment of a referee to compute, and cross motion by defendant Davis for leave to serve an amended answer; Notice of Motion/Order to Show Cause and supporting papers 1 - 7 ; Notice of Cross Motion and supporting papers8-9; 10-11; Answering papers; Reply papers 12-13; 14-15 ; Other; (and after hearing counsel in support and opposed to the motion) it is,

ORDERED that this motion (#002) by the plaintiff for accelerated judgments on its complaint, an order identifying the true name of a defendant served as an unknown defendant and an order appointing a referee to compute is considered under CPLR 3212, 3215, 1024 and RPAPL § 1321 and is denied; and it is further

ORDERED that the cross motion (#003) by defendant, Camille Davis, for an order granting her leave to serve an amended answer in the form of the one attached to the cross moving papers is denied except with respect to the First Counterclaim set forth therein for relief under RPL § 282, and the original answer served is hereby deemed to include such counterclaim, without the necessity of service of a separate amended answer; and its is further

ORDERED that the plaintiff's reply to the counterclaim shall be served not later than 35 days following the defendant's service of a copy of this order, with notice of its entry, upon the plaintiffs' counsel; and it is further

ORDERED that counsel for the parties are directed to appear at a compliance conference now scheduled for March 8, 2016, at 9:30 a.m., in Part 33, at the courthouse located at 1 Court Street - Annex, Riverhead, New York.

The plaintiff commenced this mortgage foreclosure action to foreclose the lien of an August 18, 2006 mortgage given by defendant, Camille Davis, to Nationwide Equities Corp. [hereinafter Nationwide], to secure a mortgage note of the same date likewise given by defendant to Nationwide, a predecessor-in-interest to the plaintiff. According to the complaint filed herein on June 28, 2013, defendant Davis defaulted in her payment obligations under the note and mortgage on September 12, 2012 and such default remained without cure at the time of such filing.

In response to the plaintiff's service of its summons and complaint, defendant Davis appeared herein by way of an answer she prepared in a self-represented capacity. Therein, she asserted as affirmative defenses that she was offered a loan modification and that she never received notice that the plaintiff Flagstar was assigned the mortgage. The other defendants served with process failed to appear herein by answer.

The plaintiff now moves for summary judgment on its complaint against defendant Davis and [*2]for default judgments against the other defendants served with process, including one who was served as unknown defendant John Doe. The plaintiff also seeks an order identifying the person so served as Ronald Cook pursuant to CPLR 1024 and the deletion of the remaining unknown defendants together with an amendment of the caption to reflect these changes. The plaintiff further requests an order appointing a referee to compute amounts due under the terms of the note and mortgage that are the subject of this action.

A prior motion (#001) for this relief was interposed by the plaintiff in March of 2015. It was denied on March 24, 2015 without prejudice by order of this court as the same had been rendered academic by the plaintiff's withdrawal thereof. In or about the same time, defendant Davis retained her current counsel who served various discovery demands upon the plaintiff's counsel. In response to this second motion by the plaintiff for the relief outlined above, defense counsel opposes all of the plaintiff's demands for relief in cross moving papers in which he seeks an order granting defendant Davis leave to serve and file an amended answer in the form of the one attached to the moving papers. Therein, defendant Davis amplifies and/or modifies the admissions and denials that were set forth in her original answer; advances 34 separate paragraphs asserting factual allegations regarding the loan transaction and other matters, including allegations as to burdens of proof and legal conclusions; ten affirmative defenses; two counterclaims; and one "Defense and Affirmative Defense Real Defense Recision, Setoff and Recoupment". The plaintiff opposes the defendant's cross motion on various grounds in opposing papers that further serve as reply papers to the defendant's opposition to the plaintiff's motion-in-chief, to which the defendant has replied.

The court shall first consider the defendant's cross motion since determination thereof may render the plaintiff's motion, academic. The standard for granting applications for leave to amend pleadings is statutorily prescribed as one which should be "freely granted" (see CPLR 3025[b]). Case authorities provide that in the absence of prejudice or surprise to a non-moving party, leave should be granted without an examination of the merits of the proposed amendments nor any obligation to support them with evidentiary materials (see Katz v Castlepoint Ins. Co., 121 AD3d 948, 995 NYS2d 131 [2d Dept 2014]; Rosicki & Rosicki Assocs. PC v Cochems,59 AD3d 512, 873 NYS2d 184 [2d Dept 2009]; Mackenzie v Croce,54 AD3d 825, 864 NYS2d 474 [2d Dept 2008]; Lucido v Mancuso, 49 AD3d 220, 851 NYS2d 238 [2d Dept 2008]). Defenses that were waived by the defendant's failure to raise them in its original answer or on a pre-answer motion to dismiss may nonetheless be asserted in an amended answer (see CPLR 3211[e]; Onewest, F.S.B. v Goddard, 131 AD3d 1028, 17 NYS2d 142 [2d Dept 2015]; Deutsche Bank Trust Co. Americas v Cox, 110 AD3d 760, 973 NYS2d 662 [2d Dept 2013]; Aurora Loan Serv. v Dimura, 104 AD3d 796, 962 NYS2d 304 [2d Dept 2013]; U.S. Bank, N.A. v Sharif, 89 AD3d 723, 723, 933 NYS2d 293 [2d Dept 2011]; Ingrami v Rovner, 45 AD3d 806, 847 NYS2d 132 [2d Dept 2007]). However, proposed amendments that are palpably insufficient or patently devoid of merit will be rejected without any showing of surprise or prejudice to non-moving parties (see Vista Prop, LLC v Rockland Eye, Ear, Nose and Throat Assocs. PC, 60 AD3d 846, 875 NYS2d 248 [2d Dept 2009]; Lucido v Mancuso, 49 AD3d 220, 222, supra).

Contrary to the contentions of the plaintiff's counsel, defendant Davis did not waive the defense of standing as it was loosely asserted in the answer she served in response to service of the summons and complaint (see Bank of America, N.A., v Paulsen, 125 AD3d 909, 6 NYS3d 68 [2d Dept 2015]; Aurora Loan Servs., LLC v Thomas, 70 AD3d 986, 987, 897 NYS2d 140 [2d Dept 2010]). Even if it were otherwise, defendant Davis is not precluded from asserting waived defenses in an amended answer except for the defense of lack of personal jurisdiction (see Addesso v Shemtob, 70 NY2d 689, 518 NYS2d 793 [1987]). However, the court finds all of the factual allegations set forth in paragraphs numbered 15-45 of the proposed amended complaint are palpably insufficient as they are not factual in nature, but instead, consist of statements as to the defendant's view of law, burdens of proof and legal conclusions which are not the proper subjects of an answer. Also found to be palpably insufficient and/or patently devoid of merit are the FIRST, SECOND, THIRD, FOURTH, FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH and TENTH affirmative defenses set forth in the complaint. Likewise found insufficient is the Second Counterclaim and the last claim that is denominated as "Defense and Affirmative Defense Real Defense Recision, Setoff and Recoupment" also set forth in the proposed amended complaint.

The first affirmative defense set forth in the amended answer is denominated as "Failure to State a Cause of Action". This defense is premised upon an alleged legal insufficiency in the plaintiff's claim due to the absence an necessary element of such claim as is contemplated by CPLR 321l(a)(7). However, the defense asserted here by defendant Davis is both palpably insufficient and improper.

It is well established that a prima facie case for foreclosure and sale is made out where a foreclosing plaintiff submits proof of the execution of the note and mortgage by the defendant and a default in payment or other obligations of the defendant borrower/mortgagor under the terms of the mortgage (see Wells Fargo Bank, N.A. v Rooney,132 AD3d 980, 2015 WL 6483852 [2d Dept 2015]; Nationstar Mtge. LLC v Wong,132 AD3d 825, 18 NYS2d 669 [2d Dept 2015]; Loancare v Firshing, 130 AD3d 787, 14 NYS2d 410 [2d Dept 2015]; Wells Fargo Bank, N.A. v Erobobo, 127 AD3d 1176, 9 NYS3d 312 [2d Dept 2015]; Wells Fargo Bank, N.A. v DeSouza, 126 AD3d 965, 3 NYS3d 619 [2d Dept 2015]; One W. Bank, FSB v DiPilato, 124 AD3d 735, 998 NYS2d 668 [2d Dept 2015]; Wells Fargo Bank, N.A. v Ali, 122 AD3d 726, 995 NYS2d 735 [2d Dept 2014]). There is no obligation to plead the amount owed to the plaintiff as a result of the default. A review of the plaintiff's complaint, here, reveals that it contains sufficient factual averments for the assertion of a viable claim for foreclosure and sale, as it contains allegations that defendant Davis executed the subject note and mortgage, received the monies advanced thereunder by the plaintiff's predecessor-in-interest, made payments of principal and interest under the terms of said mortgage for a period of six years until September of 2012, when she defaulted in her payment obligations.

Defense counsel nevertheless claims that the complaint served herein is legally insufficient because it does not include allegations of fact regarding the plaintiff's standing to prosecute its claim by virtue of its ownership or possession of the note prior to the commencement of the action. This contention is contrary to law as it is well settled that a foreclosing plaintiff's standing is not an element of its claim for foreclosure and sale, but instead, is an affirmative defense within the ambit of CPLR 3211(a)(3). As such it is a defense which much be timely asserted by a defendant duly [*3]possessed of it in order to impose a burden upon the plaintiff of establishing its standing to obtain a judgment of foreclosure and sale (see Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 243, 837 NYS2d 247 [2d Dept 2007]; see also Wells Fargo Bank, N.A., v Rooney,132 AD3d 980, supra; Nationstar Mtge. LLC v Wong,132 AD3d 825, supra; Loancare v Firshing, 130 AD3d 787, supra; Wells Fargo Bank, N.A. v Ali, 122 AD3d 726, supra; Midfirst Bank v Agho, 121 AD3d 343, 347, 991 NYS2d 623 [2d Dept 2014]). Indeed, note ownership or possession is not the only measure of the standing of a foreclosing plaintiff, since loan servicers of note owners or holders are statutorily authorized to prosecute claims for foreclosure and sale (see RPAPL § 1302; Citimortgage, Inc., v Espinal, ___ AD3d ___ , 2015WL 8828613 [2d Dept 2015]). There is thus no obligation to plead facts asserting the plaintiff's ownership, holder status or other in the complaint, since it is not element of a claim for foreclosure and sale until a defendant possessed of a standing defense timely asserts it.

The court thus finds that the complaint is legally sufficient which renders the First Affirmative defense in the proposed amended answer insufficient and devoid of merit. Leave to amend so as to add the First affirmative defense set forth in the proposed amended complaint is thus denied.

The Second affirmative defense is equally devoid of merit. This defense is denominated as one sounding in a lack of subject matter jurisdiction, but it too rests upon a purported lack of standing on the part of the plaintiff to prosecute its claim for foreclosure sale. It is now well settled that a plaintiff's standing or the lack thereof is not a matter of subject matter jurisdiction (see Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 243, supra). Attempts by defendants in mortgage foreclosure actions to recast a standing defense into one sounding in a lack of subject matter jurisdiction by the simple expedient of denominating it as such have been easily dispatched as wholly unavailing (see Wells Fargo Bank, N.A. v Rooney, 132 AD3d 980, supra; U.S. Bank, N.A. v Peters, 127 AD3d 742, 743, 9 NYS3d 58 [2d Dept 2015]; Deutsche Bank Natl. Trust Co. v Hunter, 100 AD3d 810, 954 NYS2d 181 [2d Dept 2012]). The defendant's attempt here to do the same is thus rejected. Leave to amend the answer to assert the subject matter defense advanced as the Second affirmative defense in the proposed amended answer of the defendant is thus denied.

The Third Affirmative defense in which the defendant asserts a failure to comply with a contractual condition precedent to foreclosure, namely, a failure on the part of the plaintiff "to provide defendant with a Notice of Default and Intent to Cure as required by and/or that complies with Paragraph 22 of the subject mortgage" is both palpably insufficient and totally devoid of merit. The mortgage contains no such Paragraph 22 or any other requiring issuance of a notice of default and cure (see Emigrant Funding Corp. v Agard, 121 AD3d 935, 995 NYS2d 154 [2d Dept 2014]). Leave to amend the original answer to assert this defense is thus denied.

The Fourth affirmative defense which is denominated as "Fraud on the Court" is patently devoid of merit. It is premised upon the plaintiff's allegedly false alleging that it was the owner of the subject loan. The defendant contends "upon information and belief" that an "alleged assignment had not been recorded." This defense, like the First and Second proposed affirmative defenses is [*4]also premised upon a purported absence of standing which, as stated above, is not an element of the plaintiff's claim. Moreover, the absence of standing, even if established, is not a jurisdictional defect (see Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 243, supra). Moreover, the recording or lack of recording of an assignment of mortgage is not germane to the issue of standing (see Tuthill Fin. v Abundant Life Church U.P.C., Inc., 122 AD3d 918, 998 NYS2d 387 [2d Dept 2014]; Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 108, 923 NYS2d 609 [2d Dept 2011]).

More importantly, however, is the fact that the prosecution of a claim for foreclosure and sale by one without standing is not an actionable wrong, as a lack of standing is merely an affirmative defense that is waived if not asserted by a defendant duly possessed of such defense, thereby allowing a plaintiff, in cases wherein the defense is waived, to prevail even in the absence of standing (see JPMorgan Chase Natl. Assoc., v Butler, 129 AD3d 777, 12 NYS2d 145 [2d Dept 2015]; see also US Bank Natl. Assoc. v Dorestant, 131 AD3d 467, 15 NYS3d 142 [2d Dept 2015]; Deutsche Bank Natl. Trust Co. v Islar, 122 AD3d 566, supra; Bank of New York v Cepeda, 120 AD3d 451, 989 NYS2d 910 [2d Dept 2014]). Nor does the prosecution of a claim for foreclosure and sale by one without standing vitiate or otherwise affect, adversely, the validity of the mortgage (see Homar v American Home Mtge. Acceptance, Inc., 119 AD3d 900, 989 NYS2d 856 [2d Dept 2014]). Leave to amend the answer of defendant Davis to assert the Fourth affirmative defense advanced in the proposed amended answer is thus denied.

Equally devoid of merit and/or palpably insufficient is the Fifth affirmative defense, which is premised upon a failure to negotiate in good faith a loan modification and to follow unidentified standards of loan servicing practices, and the Sixth affirmative defense, which is denominated as "unclean hands" and is similarly premised. The failure to negotiate in good faith a loan modification agreement or other resolution of a defaulted loan is not a defense to a mortgage foreclosure claim (see U.S. Bank N.A. v Sarmiento, 121 AD3d 187, 204, 991 NYS2d 68 [2d Dept 2014]; see also Citibank, N.A. v Barclay, 124 AD3d 174, 999 NYS2d 375 [1st Dept 2014]; U.S. Bank Natl. Ass'n v Smith, 123 AD3d 914, supra; Bank of New York v Castillo, 120 AD3d 598, 991 NYS2d 446 [2d Dept 2014]; Wells Fargo Bank, NA v Van Dyke, 101 AD3d 638, 958 NYS2d 331 [1st Dept 2012] Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 19, 966 NYS2d 108 [2d Dept 2013]). The remedy where a lack of good faith is established is the imposition of some sort of sanction, not a cancellation of the foreclosing plaintiff's contractual rights and remedies under the loan documents (see US Bank N.A. v Sarmiento, 121 AD3d 187, supra). The recasting of a failure to negotiate in good faith into an unclean hands or other defense to a mortgage foreclosure action is thus interdicted by the above cited authorities. Leave to amend the original answer to assert these defenses is thus denied.

Also denied is the defendant's request for leave to amend the original answer to assert the Seventh, Eighth and Tenth proposed affirmative defenses, all of which are premised upon a failure of the plaintiff, who was not the originator of the loan, to use due diligence to ascertain whether the defendant could afford the loan thereby negating a proper origination of said loan. The court finds that these defenses are totally devoid of merit and palpably insufficient. It is clear that a lender has no fiduciary or other heightened duties owing to a borrower in transactions arising from the advancement of credit (see Baumann v Hanover Community Bank, 100 AD3d 814, 957 NYS2d 111 [2d Dept 2012]; Rakylar v Washington Mut. Bank, 51 AD3d 995, 858 NYS2d 759 [2d Dept [*5]2008]; Standard Fed. Bank v Healy, 7 AD3d 610, 777 NYS2d 499 [2d Dept 2004]). "The fact that the plaintiff sought and received a loan [that] he [allegedly] could not afford does not mean that he can now proceed against the party that made his [purported] mistake possible" (Patterson v Somerset Inv. Corp., 96 AD3d 817, 946 NYS2d 217 [2d Dept 2012]; see also Aydin v Opteum Fin. Serv., LLC, 2014 WL 2612516 [EDNY 2014]). Moreover, evidence that the plaintiff's decision to lend money to a mortgagor was unwise for any reason provides no legally sufficient defense (see Argent Mtge. Co., LLC v Mentesana, 79 AD3d 1079, 915 NYS2d 591 [2d Dept 2010]). This is especially so where, as here, the defendant accepted the benefits of the contract for a significant length of time but after defaulting, urges a defense based upon the plaintiff's purportedly wrongful conduct (see Feinstein v Levy, 121 AD2d 499, 503 NYS2d 821 [1st Dept 1986]; Ricca v Ricca57 AD3d 868, 869, 870 NYS2d 419 [2d Dept 2008]).

The court further finds a total lack of merit in the defendant's Ninth affirmative defense which is denominated as a demand for a full accounting. This defense is premised upon the plaintiff's allegedly wrongful accounting practices and incorrect application of the payments made by the defendant which allegedly constitute unconscionable or deceptive conduct and practices. However, it is well established that claims of wrongful overcharges, insufficient crediting of amounts paid allegedly resulting in wrongful acceleration and improperly declared defaults have been held not to constitute a defense to foreclosure, but instead, are matters which the defendant may put before the court or its referee by application to offset any overpayments (see First Nationwide Bank, FSB v Goodman, 272 AD2d 433, 707 NYS2d 669 [2d Dept 2000]; Long Is. Sav. Bank of Centereach, FSB v Denkensohn, 222 AD2d 659, 635 NYS2d 683 [2d Dept 1995]; Crest/Good Mfg. Co. v Baumann, 160 AD2d 831, 554 NYS2d 264 [2d Dept 1990]; Johnson v Gaughan, 128 AD2d 756, 757, 513 NYS2d 244 [2d Dept 1987]; Federal Natl. Mtge. Assn. v Connelly, 84 AD2d 805, 444 NYS2d 147 [2d Dept 1981]; see also Shufelt v Bulfamante, 92 AD3d 936, 940 NYS2d 108 [2d Dept 2012]). The GBL § 349 claim that is couched within the Ninth affirmative defense is also totally devoid of merit (see Confidential Lending, LLC v Nurse, 120 AD3d 739, 992 NYS2d 77 [2d Dept 2014]). Leave to amend the original answer to assert these affirmative defenses is thus denied.

Finally, the court finds that and the last stated Defense for Recision Setoff and Recoupment which is more in the nature of a third counterclaim and the Second Counterclaim for Disgorgement of Profits are both palpably insufficient and totally devoid of merit (see Restatement [Third] of Restitution and Unjust Enrichment, §§ 44; 44[2]; 44[3][b]; [2011]). Leave to amend the original answer to assert this Second Counterclaim and the last one labeled as a Defense of Recision, Setoff and Recoupment is denied.

The First Counterclaim asserted in the proposed amended answer is one premised upon the defendant's recovery of attorney's fees and costs under RPL § 282. This claim is neither palpably insufficient nor totally devoid of merit as the defendant may ultimately be the prevailing party in this action. Leave to amend the originally filed answer to assert this counterclaim for recovery under RPL § 282 is thus granted to the extent that the court deems said answer to include that First counterclaim asserted in the proposed amended complaint that is attached to the cross moving papers now before the court. The need for service of a separate amended answer is thus obviated. The [*6]plaintiff's reply to such counterclaim may be served at any time, but not later than 35 days, after the defendant's service of a copy of this order upon the plaintiff's counsel, with notice of entry.

The court next considers the plaintiff's motion-in-chief (#002) in which it seeks summary judgment against answering defendant Davis, default judgments against the remaining defendants party identification and deletion and an order appointing a referee to compute. The court finds that the plaintiff's submissions were insufficient to establish its prima facie entitlement to the summary judgment demanded.

The affidavit of merit attached to the moving papers is incomplete as the first page is missing. The identity of the affiant, his relation to the plaintiff and his familiarity with the records to which he is attesting to and their keeping as a business record within the contemplation of CPLR 4518 is not before the court. In addition, his allegations regarding the plaintiff's possession of the specially indorsed note in its favor does not include a date specific prior to the commencement of the action (see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 12 NYS3d 612 [2015]; Loancare v Firshing, 130 AD3d 787, 2015 WL 4256095 [2d Dept 2015]), or the particulars of delivery of such note to the plaintiff prior to the commencement of the action (see Deutsche Bank Natl. Trust v Weiss, 133 AD3d 704, 2015 WL 7270431 [2d Dept 2015]; Flagstar Bank, FSB v Anderson, 129 AD3d 665, 12 NYS3d 119 [2d Dept 2015]; Bank of America, N.A. v Paulsen, 125 AD3d 909, 6 NYS2d 68 [2d Dept 2015]; US Bank Natl. Ass'n v Faruque, 120 AD3d 575, 991 NYS2d 631[2d Dept 2014]; Trust Co. v Haller, 100 AD3d 680, 954 NYS2d 551 [2d Dept 2012]; HSBC Bank USA v Hernandez, 92 AD3d 843, 939 NYS2d 120 [2d Dept 2012]).

Accordingly, the court finds that the plaintiff's submissions were not sufficient to establish by due proof in admissible form the plaintiff's a prima facie entitlement to the summary judgment demanded by it (see U.S. Bank N.A., v Weinman, 123 AD3d 1108, 2 NYS3d 128 [2d Dept 2014]). The plaintiff's motion (#002) for accelerated judgments on its complaint and the other relief outlined above is thus denied, without prejudice.

DATED: 12/21/2015
___________________________
Thomas F. Whelan, J.S.C.