Bank of N.Y. Mellon v Bak
Annotate this CaseDecided on June 2, 2016
Supreme Court, New York County
The Bank of New York Mellon, FKA THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF CWALT, INC., ALTERNATIVE LOAN TRUST 2007-OA11, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-OA11, Plaintiff,
against
Mihwa Bak, BOARD OF MANAGERS OF THE ATELIER CONDOMINIUM, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, "JOHN DOE 1" to "JOHN DOE 25," said names being fictitious, the persons or parties intended being the persons, parties, corporation or entities, if any, having or claiming an interest in or lien upon the mortgaged premises described in the complaint, Defendants.
810310/2011
Eckert Seamans Cherin & Mellott, LLC, New York (Candace E. Chun of counsel), for plaintiff.
Kim, Choi & Kim, P.C., New York (Dong Sung Kim of counsel) for defendant Bak.
Gerald Lebovits, J.
Recitation, as required by CPLR 2219 (a), of the papers considered in reviewing plaintiff The Bank of New York Mellon's motion for summary judgment, for default judgment and to appoint a referee; and defendant Mihwa Bak's cross-motion for the court to approve a stipulation of discontinuance, and summary judgment and dismiss the complaint.
PapersNumbered
Plaintiff's Notice of Motion 1
Plaintiff's Memorandum of Law in Support 2
Plaintiff's Affidavit in Support 3
Defendant's Notice of Cross-Motion 4
Plaintiff's Memorandum of Law in Opposition to Cross-Motion 5
Plaintiff's Affirmation in Opposition to Cross-Motion 6
______________________________________________________________________________
DECISION/ORDER
Gerald Lebovits, J.
Plaintiff, Bank of New York Mellon (BNY), moves for summary judgment and to strike defendant, Mihwa Bak's (Bak), answer and its affirmative defenses and counterclaims, for a default judgment against the non-answering defendants, the Board of Managers of the Atelier Condominium and the New York City Environmental Control Board, and for the court to appoint a referee to ascertain damages and issue a report for the court. Defendant Bak cross-moves to have the court enforce a stipulation of discontinuance, grant summary judgment and dismiss the complaint.
BNY argues that it is entitled to summary judgment because Bak defaulted under the terms of her note and mortgage and it has provided the court both documents along with evidence of default. Plaintiff also argues that it is entitled to default judgment against the non-answering defendants and seeks a referee to determine damages and to issue a report. Bak cross-moves for summary judgment on the grounds that plaintiff lacks standing to sue. The defendant also argues that the court should discontinue the case and dismiss the complaint because the parties had agreed to discontinue the case.
I.BNY's Summary-Judgment Motion and Baks' Cross-Motion
BNY's motion for summary judgment is granted and Bak's cross-motion for summary judgment is denied. For a court to grant a summary-judgment motion, the proponent must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issue of fact about the claim or claims at issue. (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986].) In a mortgage foreclosure action, a plaintiff moving for summary judgment must provide proof of both the unpaid note and the underlying mortgage along with sufficient evidence to establish defendant's default. (See JP Morgan Chase Bank, Nat. Ass'n v Shapiro, 104 AD3d 411, 412 [1st Dept 2013]; Deutsche Bank Natl. Trust Co. v Gordon, 84 AD3d 443, 443 [1st Dept 2011]; Bank Leumi Trust Co. of NY v Lightning Park, 626 N.Y.S.2d 202 [1st Dept 1995].) When a plaintiff has made this prima facie showing, the burden then shifts to the defendant to raise a triable issue of fact. (JP Morgan Chase Bank, Nat. Ass'n, 104 AD3d at 412.)
The following facts are not in dispute. On or about July 13, 2007, Bak executed an Adjustable Rate Note (the Note) in the principal amount of $900,000 as evidence of a loan from Countrywide Bank, FSB (Countrywide) to Bak. (Plaintiff's Affidavit In Support, Exhibit 2.) Countrywide indorsed the Note without recourse to Countrywide Home Loans, Inc., who then indorsed the Note in blank without recourse. (Plaintiff's Affidavit In Support, Exhibit 2.). At the same time that Bak executed the Note, Bak, in order to secure her promise under the Note, executed and delivered a mortgage (the Mortgage) to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Countrywide, which encumbered the premises located at 635 West 42nd Street, Unit No.23D, in New York County. (Plaintiff's Affidavit In Support, Exhibit 3.) The mortgage was recorded on July 31, 2007. (Plaintiff's Affidavit In Support, Exhibit 3.)
On or about October 1, 2007, BNY entered into a Pooling and Servicing Agreement (the PSA) with CWALT, Inc., as Depositor, Countrywide Home Loans, Inc., as Seller, Park Granada LLC, as Seller, Park Monaco Inc., as Seller, Park Sienna LLC, as Seller, Countrywide Home Loans Servicing LP, as Master Servicer. (Plaintiff's Affidavit In Support, Exhibit 4.) BNY served as Trustee under the PSA. (Plaintiff's Affidavit In Support, Exhibit 4.) Article II, Section 2.01(c) of the PSA, "Conveyance of Mortgage Loans" provides:
"In connection with the transfer and assignment set forth in clause (b) above, the Depositor has delivered or caused to be delivered to Trustee (or, in the case of the Delay Delivery Mortgage Loans that are Initial Mortgage Loans, will deliver or cause to be delivered to the Trustee within thirty (30) days following the Closing Date and in the case of the Delay Delivery Mortgage Loans that are Supplemental Mortgage Loans, will deliver or cause to be delivered to the Trustee within twenty (20) days following the applicable Supplemental Transfer Date) for the benefit of the Certificateholders the following documents or instruments with respect to each Mortgage Loan so assigned: (i) (A) the original Mortgage Note endorsed by manual or facsimile signature in blank in the following form: Pay to the order of _________ without recourse,' with all intervening endorsements showing a complete chain of endorsement from the originator to the Person endorsing the Mortgage Note . . . ." (Plaintiff's Affidavit In Support, Exhibit 4.)
MERS, as Countrywide's nominee, executed an assignment of the Mortgage on May 12, 2011 in order to memorialize the purported transfer and assignment of both the Note and the Mortgage. (Plaintiff's Affidavit In Support, Exhibit 5.) Bak defaulted on the terms of both her note and underlying mortgage by not tendering payment due on August 1, 2010, and any and all payments subsequently due. Because of the default, BAC Home Loans Servicing, LP (BAC) sent Bak a demand letter on or around September 16, 2010 on BNY's behalf. (Plaintiff's Affidavit In Support, Exhibit 6.) On or about January 5, 2011, BAC sent Bak a 90-day notice under RPAPL § 1304. (Plaintiff's Affidavit In Support, Exhibit 7.)
BNY has proven its prima facie case to entitle it to summary judgment, but because Bak has raised standing as an affirmative defense, BNY has the burden to prove standing to entitle it to summary judgment relief. (JP Morgan Chase Bank, Nat. Ass'n v. Hill, 133 AD3d 1057, 1057 [3d Dept 2015] [internal citations and quotations omitted].) A plaintiff in a mortgage foreclosure action "has standing where 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." (Bank of New York v Silverberg, 86 AD3d 274, 279 [2d Dept 2011].) In New York, it is the note and not the mortgage that is the "dispositive instrument," which confers standing in a foreclosure action. (Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361 [2d Dept 2015].) In order to demonstrate that it is the holder or assignee of a note, a plaintiff must provide proof of either a written assignment or physical delivery of the note. (U.S. Bank, N.A. v Adrian Collymore, 68 AD3d 752, 754 [2d Dept 2009].) Where plaintiff is someone "other than the original mortgage lender, a valid transfer of the note to the plaintiff prior to the commencement of the action . . . will resolve the standing issue in favor of the plaintiff." (Deutsche Bank Nat. Trust Co. v Torres, 2014 NY Slip Op 51544[U], *2 [Sup Ct 2014].)
a.Physical Delivery of Note
Plaintiff provides sufficient evidence to show physical delivery of the Note before commencing this foreclosure action against defendant. Where, in the regular course of business, an entity merely files and maintains papers that it has received on behalf of another entity, those documents do not qualify as business records and are therefore not admissible as evidence. (Deutsche Bank Nat. Trust Co. v Monica, 131 AD3d 737, 739 [3d Dept 2015] quoting People v Cratsley, 86 NY2d 81, 90 [1995] [internal quotation marks and citation omitted].) The documents, however, are admissible where "the recipient can establish personal knowledge of the maker's business practices and procedures, or that the records provided by the maker were incorporated into the recipient's own records or routinely relied upon by the recipient in its business." (State of New York v 158th St. & Riverside Dr. Hous. Co., Inc., 100 AD3d 1293, 1296 [2012], lv denied 20 NY3d 858 [2013]). Michelle Simon, VP Consumer Ombudsman of Select Portfolio Servicing Inc. (SPS), the servicing agent and attorney-in-fact for BNY, reviewed the "records that SPS maintains for [p]laintiff with respect to the mortgaged property." (Plaintiff's Affidavit In Support, ¶ 2.) Those records showed that the Note was transferred to the plaintiff on or about October 30, 2007, pursuant to the PSA dated October 1, 2007, and that the Note is currently in the possession of the plaintiff's counsel in their offices based in Pittsburg, Pennsylvania. (Plaintiff's Affidavit In Support, ¶¶ 11-13.) As the servicer of both the Note and Mortgage for plaintiff, the records maintained by SPS qualify as business records and are therefore admissible to show delivery of the Note. (Deutsche Bank Nat. Trust Co., 131 AD3d at 739; see also CPLR 4518 [a]; Cratsley, 86 NY2d at 90.)
Bak relies on Bank of New York Mellon v Deane, 41 Misc 3d 494 (2013) for the proposition that a plaintiff in a mortgage foreclosure action must provide factual details relating to the physical delivery of the note in order to prove standing. Therefore, Bak argues that neither Michelle Simon's affidavit nor any supporting documents are proof that the Note was physically delivered to the plaintiff prior to the commencement of the foreclosure action. (Defendant's Notice of Cross-Motion.) Defendant also argues that the PSA is not evidence of the delivery of the Note, but shows only the "intent to indorse and physically deliver the notes and mortgages referred to." (Defendant's Notice of Cross-Motion.)
But Bank of New York Mellon v Deane is distinguishable from this case. In Bank of New York Mellon, as proof of assignment of the note, plaintiff offered into evidence only excerpts from the pooling and servicing agreement and did not include the signature pages. (41 Misc 3d at 498.) Also, the note was made payable to the original lender and indorsed to a trustee other than the plaintiff. (41 Misc 3d at 497.) No evidence existed that the trustee indorsed the note "either to the order of another special indorsee, or in blank, with no particular indorsee, in the latter case transforming the [n]ote to an instrument payable to bearer that could be further negotiated by delivery alone.'" (Id. at 500, quoting UCC 3-204 [2].) Here, plaintiff attached the PSA in its entirety as an exhibit to Michelle Simon's affidavit, and to authenticate the document, included the signature pages. (Plaintiff's Affidavit In Support, Exhibit 4.) The PSA specifically acknowledges that the notes have to be delivered along with the underlying mortgages under the agreement. (Plaintiff's Affidavit In Support, Exhibit 4, Article II, Section 2.01 [c].) Furthermore, Countrywide indorsed the Note without recourse to Countrywide Home Loans, Inc., who then [*2]indorsed the Note in blank without recourse. (Plaintiff's Affidavit In Support, Exhibit 2.) Countrywide's delivery of the Note in blank to BNY without any additional language on the Note was sufficient to make BNY the Note's holder. Therefore, BNY has proven that the Note was physically delivered to BNY.
b.Written Assignment of Mortgage
The assignment of the Mortgage from Countrywide to BNY is valid. In a secured transaction, the security is incident to the debt. (Bank of New York, 86 AD3d at 282.) Once a promissory note passes to and is accepted by an assignee, "the mortgage passes as an incident to the note." (Id.) Mortgage lenders and other entities use the MERS system to track the ownership and transfer of mortgages between various MERS-system members. (Id.) The Court of Appeals summarized MERS's function as follows:
"The initial MERS mortgage is recorded in the County Clerk's office with Mortgage Electronic Registration Systems, Inc.' named as the lender's nominee or mortgagee of record on the instrument. During the lifetime of the mortgage, the beneficial ownership interest or servicing rights may be transferred among MERS members (MERS assignments), but these assignments are not publicly recorded; instead they are tracked electronically in MERS's private system. In the MERS system, the mortgagor is notified of transfers of servicing rights pursuant to the Truth in Lending Act, but not necessarily of assignments of the beneficial interest in the mortgage." (Matter of MERSCORP, Inc. v Romaine, 8 NY3d 90, 96 [2006].)
A "nominee" is one who is designated to act on an individual or entity's behalf as a representative, but with limited authority. (Black's Law Dictionary 1076 [8th Ed 2004].) Here, the initial mortgage was between Bak, as borrower and Countrywide as lender. (Plaintiff's Affidavit In Support, Exhibit 3.) The Mortgage provides that MERS is "a separate corporation that is acting solely as nominee for Lender and Lender's successors and assigns . . . FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD." (Plaintiff's Affidavit In Support, Exhibit 3.) Further, under the terms of the Mortgage, "[t]he Note, or an interest in the Note, together with the Security Instrument, may be sold one or more times . . . ." (Plaintiff's Affidavit In Support, Exhibit 3, Covenants.) Under the PSA, in which Countrywide was a party, the Mortgage was assigned to the plaintiff, as the Trustee. In 2011, plaintiff memorialized the Mortgage's assignment in a separate document that was recorded with the State of New York. (Plaintiff's Affidavit In Support, Exhibit 5.)
Citing Bank of New York v Silverberg, 86 AD3d 274 (2011) and IndyMac Fed. Bank, FSB v Meisels, 2012 NY Slip Op 51902(U) (2012), Bak argues that, as the lender's nominee, MERS did not have the authority to assign the mortgage; therefore the assignment is void. Defendant's reliance on these cases is misguided. In both cases, MERS purportedly assigned both the note and the underlying mortgage; therefore, according to the court, this was beyond the limited scope of its authority as nominee. (See Bank of New York, 86 AD3d at 281; IndyMac Fed. Bank, FSB, 2012 NY Slip Op at *8.) Here, under the PSA, in which Countrywide as the original lender was a party, the Mortgage was assigned to plaintiff as the trustee and the Note was physically delivered to the plaintiff within the time frame specified in the PSA. (Plaintiff's [*3]Affidavit In Support, Exhibit 4.) Therefore, the assignment of the Mortgage was valid.
II.BNY's Motion For Default Judgment Against Non-Answering Defendants
BNY's motion for a default judgment against the non-answering defendants is granted. A default judgment is appropriate when "a defendant has failed to appear, plead or proceed to trial of an action reached and called for trial, or when the court orders a dismissal for any other neglect to proceed." (CPLR 3215 [a].) On a motion for default judgment, plaintiff must "file proof of service of the summons and the complaint, or a summons and notice served pursuant to subdivision (b) of rule 305 or subdivision (a) of rule 316 of this chapter, and proof of the facts constituting the claim, the default and the amount due by affidavit made by the party . . . ." (CPLR 3215 [f].) If a corporate defendant fails to appear and plaintiff has properly served a summons and complaint on the corporate defendant, "an affidavit shall be submitted that an additional service of the summons by first class mail has been made upon the defendant corporation at its last known address at least twenty days before the entry of judgment." (CPLR 3215 [g] [4] [i].) Here, BNY submitted proof of service of the summons and complaint as well the affidavit of Michelle Simon. The evidence demonstrates the present foreclosure action as well as the defendant's default on the terms of the Note and Mortgage and the outstanding amount that Bak owes. (Plaintiff's Affidavit in Support.) Plaintiff has also provided evidence that it served the non-moving defendants, Board of Managers of the Atelier Condominium and the New York City Environmental Control Board, with an additional summons at least 20 days before the entry of judgment. (Plaintiff's Notice of Motion, Exhibit K.) Therefore, plaintiff is entitled to default judgment against the non-answering defendants.
III.Bak's Remaining Cross-Claims and Affirmative Defenses
a.Bak's Cross-Claims
Bak's cross-motion to dismiss the complaint under CPLR 3211 (3) is denied. CPLR 3211 (3) states that a party may have a cause of action dismissed if "the party asserting the cause of action has not legal capacity to sue." Here, BNY has proven standing by showing that the Note was physically delivered to BNY and that the assignment of the underlying mortgage was valid. Therefore Bak's cross-motion to dismiss the complaint under CPLR 3211 (3) is denied.
Defendant's cross-motion for the court approve a stipulation of discontinuance under CPLR 3217 and dismissing the complaint under CPLR 3211 (5) is denied. CPLR 3217 (a) provides that "[a]ny party asserting a claim may discontinue it without an order . . . by filing with the clerk of the court before the case has been submitted to the court or jury a stipulation in writing signed by the attorneys of record for all parties . . . ." CPLR 3217 (b) provides that "[e]xcept as provided in subdivision (a), an action shall not be discontinued by a party asserting a claim except upon order of the court and upon terms and conditions, as the court deems proper. After the cause has been submitted to the court or jury to determine the facts the court may not order an action discontinued except upon the stipulation of all parties appearing in the action."
Bak relies on a compliance-conference order from Supreme Court, Hon. Paul Wooten, [*4]dated August 14, 2013, and an attorney affirmation from BNY's former counsel. Bak argues that BNY agreed to discontinue this foreclosure action. (Notice of Cross-Motion, Exhibits C & D.) The attorney affirmation provides the following: "attached is a copy of the stipulation od discontinuance." (Cite.) But neither the order nor the attorney affirmation demonstrate that BNY intended to discontinue this case. The order provides that plaintiff did not appear for the scheduled compliance conference and that the only issue remaining between the parties was whether or not the case would be discontinued with or without prejudice; BNY's former counsel did not sign the order. (Notice of Cross-Motion, Exhibits C.) BNY argues that "no stipulation of discontinuance was ever signed or filed in this case." (Memorandum of Law in Opposition to defendant Mihwa Bak's Cross-Motion.) Further, the signed affirmation from plaintiff's former counsel does not attach an executed stipulation of discontinuance, even though the document makes this reference. (Notice of Cross-Motion, Exhibit D.) According to BNY's current counsel, "[i]t appears as though this affirmation was prepared during the course of settlement negotiations between the parties in 2013, though the parties never reached an agreement." (Memorandum of Law in Opposition to defendant Mihwa Bak's Cross-Motion.) Therefore, Bak's motions under CPLR 3217 and CPLR 3211 (5) are denied.
b.Bak's Affirmative Defenses
Bak's first through fourth affirmative defenses, lack of legal capacity to sue, lack of standing, that plaintiff has no beneficial interest in this action and that plaintiff has no proof of authority to foreclose, are all variations of the same defense, namely, that BNY lacks standing to bring the foreclosure action. For the reasons stated above, these four affirmative defenses are without merit and are dismissed.
Bak's fifth affirmative defense alleging that BNY improperly served the default notice is without merit. BAC, the prior servicer of the Note and Mortgage, served Bak with a demand letter, pursuant to the terms of the Mortgage, which explained in detail the reasons for Bak's default and gave Bak an opportunity to cure the default. (Plaintiff's Affidavit In Support, Exhibit 7). Therefore, defendant's firth affirmative defense is dismissed.
Bak's sixth affirmative defense alleging that the BNY is not the holder in due course of the note is without merit. Under the Uniform Commercial Code, a holder in due course is one who takes an instrument "(a) for value; and (b) in good faith; and (c) without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person." (UCC 3-302 [1].) As stated above, BNY proved that it is the holder in due course of both the Note and the Mortgage. Therefore, defendant's sixth affirmative defense is dismissed.
Defendant has provided insufficient evidence, beyond conclusory statements, to support the seventh through tenth affirmative defenses: unclean hands, estoppel, statute of frauds, and failure to join a necessary party. Therefore, those defenses are dismissed.
ORDERED that plaintiff's motion for summary judgment and striking Bak's affirmative defenses is granted; and it is further
ORDERED that defendant's cross-motion is denied in its entirety; and it is further
ORDERED that plaintiff's motion for default judgment against the Board of Managers of the Atelier Condominium and the New York City Environmental Control Board, is granted; and it is further
ORDERED that a referee be appointed to compute the damages due from Bak and report to the court its conclusions.
This constitutes the court's decision and order.
Dated: June 2, 2016
J.S.C.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
