Ameriquest Mtge. Co. v Basevich

[*1] Ameriquest Mtge. Co. v Basevich 2007 NY Slip Op 51262(U) [16 Misc 3d 1104(A)] Decided on June 26, 2007 Supreme Court, Kings County Schack, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 26, 2007
Supreme Court, Kings County

Ameriquest Mortgage Company c/o GMAC Mortgage, LLC, Plaintiff,

against

Irina Basevich, Boris Basevich, et. al., Defendants



147/07



Plaintiff

Tracy Fourtner, Esq.

Steven J. Baum, PC

Amherst, NY

Defendants

No Defendant(s) to report because Judge Schack wrote on this issue sua sponte when an order was presented before him for signature.

Arthur M. Schack, J.

Plaintiff's motion, among other things, for an order of reference and granting

summary judgment to the plaintiff to foreclose a mortgage for real property located at 2940 Brighton 3rd Street, Brooklyn, New York (Block 8662, Lot 127, County of Kings), is denied. The instant action is dismissed with prejudice. Plaintiff Ameriquest Mortgage Company (Ameriquest), and its alleged attorney-in-fact, GMAC Mortgage LLC (GMAC), has no standing to bring this action. Further, GMAC Mortgage Corporation (GMACM), not GMAC is named as attorney- in-fact, in a defective limited power of attorney [exhibit G of motion] for Citigroup Global Markets Realty Corp. (Citigroup Global). Since January 18, 2007, the actual holder of this mortgage, and the proper party if it so desires to commence a new action, is US Bank NA (US Bank), as Trustee for Citigroup Loan Trust, Inc.(Citigroup Loan Trust) [exhibit F of motion - mortgage assignment from Ameriquest to US Bank].

Tracy M. Fourtner, Esq., of Steven J. Baum, P.C., plaintiff's counsel, is the

attorney of record in this action. He filed a statement attached to his March 9, 2007 affirmation of regularity [exhibit A of motion] that he "certifies after an inquiry reasonable under the circumstances, the presentation of this pleadings, affidavit (or motion if applicable), or the contentions contained herein are not frivolous as defined in 22 N.Y.C.R.R. 130 1.1(c) [sic]." Plaintiff's counsel filed a Request for Judicial Intervention (RJI) and the instant motion on March 16, 2007. Part 72, the Kings County Supreme Court, Civil Term part that deals with foreclosure, forwarded the case to me on June 1, 2007. Since the plaintiff lacked standing to foreclose since January 18, 2007, and plaintiff's counsel has presented to the Court a defective limited power of attorney, claiming that it allows GMAC to act for the plaintiff, Mr. Fourtner, Esq. and Steven J. Baum, P.C. will be given a reasonable opportunity to be heard as to why this Court should not sanction them for making a "frivolous motion," pursuant to 22 NYCRR §130-1.1.

Background[*2]

The Basevich defendants borrowed $515,250.00 from Ameriquest on May 18,

2005. They executed a thirty-year adjustable rate note for this amount and a mortgage for the premises at 2940 Brighton 3rd Street to secure the loan. The Mortgage and Note were recorded on June 9, 2005, with City Register File Number (CRFN) 2005000335355 [exhibit E of motion].

The instant mortgage loan is an exotic one. According to the May 18, 2005 Note [exhibit C of motion], the Basevich defendants were to initially pay interest only of $2,571.96 per month for an initial five years, at 5.99 %. Then on June 1, 2010, and every six months thereafter, the interest rate could change on the "change date," based upon an "index" that is the average of interbank offered rates for the six-month U.S. dollar- denominated deposits in the London market (LIBOR) as published in the Wall Street Journal. The specific terms of the Basevich note provided that the new interest rate would be the LIBOR rate, 45-days prior to the "change date," plus 2.75%, rounded to the nearest .125%. The interest-rate could increase 1.00% on each "change date" until the LIBOR index plus 2.75% would be reached. The LIBOR rate, according to today's Wall Street Journal, is 5.36%. Therefore, the LIBOR plus 2.75% is now 8.74%. The Note capped the adjusted interest at 11.99%. If interest rates stay constant, the defendants, if they hadn't become delinquent in their payments, would be paying their mortgage loan at the rate of 8.74% on December 1, 2011, and thereafter.

Gretchen Morgenson, in the April 6, 2007 New York Times, reported in "Fair Game; Home Loans: A Nightmare Grows Darker," that "with home foreclosures and mortgage delinquencies soaring, it is becoming clear that the innovative loans that lenders championed in what the industry called the democratization of credit' are turning the American dream into a nightmare for many borrowers." Ms. Morgenson quotes Thomas A. Lawler, founder of Lawler Economic and Housing Consulting Daily, a newsletter, that

subprime loans, similar to the one in this action, "are designed to make borrowers refinance and keep the loan production mill churning." Further, Mr. Morgenson writes that "[w]hile subprime borrowers try to climb out of the holes they fell into, those who sold and packaged the loans are laughing all the way to the bank. Folks who ran these companies are going to walk away not just unscathed but extraordinarily well rewarded,' Mr. Calhoun [Michael D. Calhoun, President of the Center for Responsible Lending] said."

With respect to the instant mortgage loan, according to the February 20, 2007- affidavit of merit by Bernard J. Smith, a Vice-President of GMAC [exhibit B of motion], GMAC is US Bank's attorney-in-fact and that "a true copy of the Power of Attorney from US BANK NA AS TRUSTEE FOR CITIGROUP LOAN TRUST, INC. to GMAC MORTGAGE COMPANY LLC is attached hereto." Mr. Smith states that Ameriquest assignment to US Bank has "been sent for recording." I checked the Automated City Register Information System (ACRIS) website of the Office of the City Register, New York City Department of Finance and verified that the Ameriquest assignment to US

Bank was recorded on February 5, 2007 CRFN 2007000067791, 15 days before Mr. Smith executed his affidavit. However, as will be explained, the power of attorney is defective. Further, as Ameriquest lacked standing to sue as plaintiff since January 18, 2007, this action appears to be a waste of judicial resources, and thus is "frivolous."

Discussion

The alleged Citigroup Loan Trust "Limited Power of Attorney" to GMAC,

presented to the Court in exhibit G of the motion, has no date. Matthew Bollo, Vice-President of [*3]Citigroup Global executed the "Limited Power of Attorney," on "this 6th day of November, before me," without stating a year, according to the notary public, Scott P. Schundler, whose commission expires on April 4, 2009 in New York County. The document states that GMACM is appointed as attorney-in-fact for Citigroup Global, "in connection with mortgage loans serviced by GMACM on behalf of Citigroup pursuant to that certain Servicing Agreement, dated as of May 20, 2005, between GMACM and Citigroup" for the purpose of servicing such loans and foreclosure of delinquent loans.

Even if a correctly dated power of attorney from US Bank, as Trustee for Citigroup Loan Trust to GMAC had been presented to the Court, as opposed to Citigroup Global to GMACM, this Court without a properly offered copy of the Servicing Agreement referred to in the power of attorney, is unable to determine if GMAC may properly act as servicing agent for US Bank in the instant action. Deutsche Bank Nat. Trust Co. v Lewis, 14 Misc 3d 1201 (A) (Sup Ct, Suffolk County 2006). The Court is perplexed as to why plaintiff's counsel has not presented a proper power of attorney. Mr. Fourtner, Esq. and his firm, without a proper power of attorney from the present holder of the mortgage, are wasting court resources.

The Court of Appeals, in Saratoga County Chamber of Commerce, Inc. v Pataki,

100 NY2d 801, 812 (2003), cert denied 540 US 1017 (2003), declared that "[s]tanding to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress." Professor David Siegel, in NY Prac, § 136, at 232 [4th ed] instructs that:

[i]t is the law's policy to allow only an aggrieved person to bring a

lawsuit . . . A want of "standing to sue," in other words, is just another

way of saying that this particular plaintiff is not involved in a genuine

controversy, and a simple syllogism takes us from there to a "jurisdictional"

dismissal: (1) the courts have jurisdiction only over controversies; (2) a

plaintiff found to lack "standing" is not involved in a controversy; and

(3) the courts therefore have no jurisdiction of the case when such a

plaintiff purports to bring it.

In Caprer v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that "[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request." If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. Stark v Goldberg, 297 AD2d 203 (1st Dept 2002).

It is clear that plaintiff Ameriquest lacks standing to foreclose on the instant mortgage since January 18, 2007, the date Ameriquest assigned its ownership of the Basevich mortgage to US Bank as Trustee for Citigroup Loan Trust. The Court, in Campaign v Barba, 23 AD3d 327 (2d Dept 2005), instructed that "[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and the mortgage note, ownership of the mortgage, and the defendant's default in payment [Emphasis added]." See Household Finance Realty Corp. of New York v Wynn, 19 AD3d 545 (2d Dept 2005); Sears Mortgage Corp. v Yahhobi, 19 AD3d 402 (2d Dept 2005); Ocwen Federal Bank FSB v Miller, 18 AD3d 527 (2d Dept 2005); U.S. Bank Trust Nat. Ass'n Trustee v Butti, 16 AD3d 408 (2d Dept 2005); First Union Mortgage Corp. v Fern, 298 AD2d 490 (2d Dept 2002); Village Bank v Wild Oaks, [*4]Holding, Inc., 196 AD2d 812 (2d Dept 1993).

Therefore, since Ameriquest has not owned the Basevich mortgage since January 18, 2007, and plaintiff's counsel failed to present a proper power of attorney from US Bank to Citigroup Loan Trust, the Court must dismiss this foreclosure action. US Bank NA as Trustee for Citigroup Loan Trust, Inc. may commence a new foreclosure action for the premises at 2940 Brighton 3rd Street, Brooklyn, New York, if they continue to own the Basevich mortgage, and the Basevich's are delinquent in their payments on the Note.

The failures of Tracy M. Fourtner, Esq., and Steven J. Baum, P.C., to either discontinue this action after January 18, 2007, or move to amend the caption and provide a proper power of attorney and copy of the appropriate loan servicing agreement, since January 18, 2007, appears to be "frivolous." 22 NYCRR § 130-1.1 (a) states in pertinent part that "the Court, in its discretion may impose financial sanctions upon any party or attorney in a civil action or proceeding who engages in frivolous conduct as defined in this Part, which shall be payable as provided in section 130-1.3 of this Subpart." Further, it states in 22 NYCRR § 130-1.1 (2), that "sanctions may be imposed upon any attorney appearing in the action or upon a partnership, firm or corporation with which the attorney is associated."

22 NYCRR § 130-1.1(c) states that:

For purposes of this part, conduct is frivolous if:

(1) it is completely without merit in law and cannot be supported

by a reasonable argument for an extension, modification or

reversal of existing law;

(2) it is undertaken primarily to delay or prolong the resolution of

the litigation, or to harass or maliciously injure another; or

(3) it asserts material factual statements that are false.

It is clear that since January 18, 2007 the instant motion for a judgment of foreclosure and sale "is completely without merit in law" and "asserts material factual statements that are false."

Several years before the drafting and implementation of the Part 130 Rules for

costs and sanctions, the Court of Appeals in A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 6 (1986) observed that "frivolous litigation is so serious a problem affecting the

proper administration of justice, the courts may proscribe such conduct and impose sanctions in this exercise of their rule-making powers, in the absence of legislation to the contrary (see NY Const, art VI, § 30, Judiciary Law § 211 [1] [b] )."

Part 130 Rules were subsequently created, effective January 1, 1989, to give the

courts an additional remedy to deal with frivolous conduct. These stand beside Appellate Division disciplinary case law against attorneys for abuse of process or malicious prosecution. The Court, in Gordon v Marrone, 202 AD2d 104, 110 (2d Dept 1994), lv denied 84 NY2d 813 (1995), instructed that:

Conduct is frivolous and can be sanctioned under the court rule if

"it is completely without merit . . . and cannot be supported by a

reasonable argument for an extension, modification or reversal of

existing law; or . . . it is undertaken primarily to delay or prolong

the resolution of the litigation, or to harass or maliciously injure

another" (22 NYCRR 130-1.1[c] [1], [2] . . . ).

In Levy v Carol Management Corporation, 260 AD2d 27, 33 (1st Dept 1999), [*5]

the Court stated that in determining if sanctions are appropriate the Court must look at the broad pattern of conduct by the offending attorneys or parties. Further, "22 NYCRR

130-1.1 allows us to exercise our discretion to impose costs and sanctions on an errant party . . ." The Levy Court held, at 34, that "[s]anctions are retributive, in that they punish past conduct. They also are goal oriented, in that they are useful in deterring future frivolous conduct not only by the particular parties, but also by the Bar at large."

The Court, in Kernisan, M.D. v Taylor, 171 AD2d 869 (2d Dept 1991), noted that the intent of the Part 130 Rules "is to prevent the waste of judicial resources and to deter vexatious litigation and dilatory or malicious litigation tactics (cf. Minister, Elders & Deacons of Refm. Prot. Church of City of New York v 198 Broadway, 76 NY2d 411; see Steiner v Bonhamer, 146 Misc 2d 10) [Emphasis added]." Since January 18, 2007, the instant action is "a waste of judicial resources." This conduct, as noted in Levy, must be deterred. In Weinstock v Weinstock, 253 AD2d 873 (2d Dept 1998), the Court ordered the maximum sanction of $10,000.00 for an attorney who pursued an appeal "completely without merit," and holding, at 87, that "[w]e therefore award the maximum authorized

amount as a sanction for this conduct (see, 22 NYCRR 13-1) calling to mind that frivolous litigation causes a substantial waste of judicial resources to the detriment of those litigants who come to the Court with real grievances [Emphasis added]." Citing Weinstock, the Appellate Division, Second Department, in Bernadette Panzella, P.C. v De Santis, 36 AD3d 734 (2d Dept 2007), affirmed a Supreme Court, Richmond County $2,500.00 sanction, at 736, as "appropriate in view of the plaintiff's waste of judicial resources [Emphasis added]."

In Navin v Mosquera, 30 AD3d 883 (3d Dept 2006), the Court instructed that when considering if specific conduct is sanctionable as frivolous, "courts are required to

examine whether or not the conduct was continued when its lack of legal or factual basis was apparent [or] should have been apparent' (22 NYCRR 130-1.1 [c])." In Sakow ex rel. Columbia Bagel, Inc. v Columbia Bagel, Inc., 6 Misc 3d 939, 943 (Sup Ct, New York County 2004), the Court held that "[i]n assessing whether to award sanctions, the Court must consider whether the attorney adhered to the standards of a reasonable attorney (Principe v Assay Partners, 154 Misc 2d 702 [Sup Ct, NY County 1992])." In the instant action, plaintiff's attorney is responsible for amending the name of the plaintiff to reflect the owner of a mortgage, if the mortgage is assigned. Further, if there is a power of attorney in effect for a mortgage servicer to foreclose on a delinquent loan, counsel must present the court with a proper power of attorney and a copy of the servicing agreement.

This Court will examine the conduct of plaintiff's counsel, in a hearing, pursuant to 22 NYCRR § 130-1.1, to determine if plaintiff's counsel engaged in frivolous conduct, and to allow plaintiff's counsel a reasonable opportunity to be heard. See Mascia v Maresco, 39 AD3d 504 (2d Dept 2007); Yan v Klein, 35 AD3d 729 (2d Dept 2006); Greene v Doral Conference Center Associates, 18 AD3d 429 (2d Dept 2005); Kucker v Kaminsky & Rich, 7 AD3d 39 (2d Dept 2004).

Conclusion

Accordingly, it is

ORDERED that the motion of plaintiff Ameriquest Mortgage Company c/o

GMAC Mortgage LLC, for an order of reference and granting summary judgment to the plaintiff, to foreclose a mortgage for real property located at 2940 Brighton 3rd Street, Brooklyn, [*6]New York (Block 8662, Lot 127, County of Kings) is denied; and it is further

ORDERED, that the instant foreclosure action is dismissed with prejudice, and it further

ORDERED, that it appearing that Tracy M. Fourtner, Esq. and Steven J. Baum, P.C. engaged in "frivolous conduct," as defined in the Rules of the Chief Administrator, 22 NYCRR § 130-1(c) and that pursuant to the Rules of the Chief Administrator, 22 NYCRR § 130.1.1 (d), "[a]n award of costs or the imposition of sanctions may be

made . . . upon the court's own initiative, after a reasonable opportunity to be heard," this

Court will conduct a hearing affording Mr. Fourtner and Steven J. Baum, P.C. "a reasonable opportunity to be heard," before me in Part 27, on Friday, August 3, 2007, at 3:00 P.M., in Room 479, 360 Adams Street, Brooklyn, NY 11201; and it is further

ORDERED, that Ronald D. Bratt, Esq., my Principal Law Clerk, is directed to serve this order by first-class mail upon Tracy M. Fourtner, Esq. and Steven J. Baum, P.C., at 220 Northpointe Parkway, Suite G, Amherst, New York 14228 and at P.O. Box 1291, Buffalo, New York 14240.

This constitutes the Decision and Order of the Court.

ENTER

_________________________

Hon. Arthur M. Schack

J. S. C.