Vanderbilt Mtge. & Fin. Inc. v Davis

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Vanderbilt Mtge. & Fin. Inc. v Davis 2013 NY Slip Op 32117(U) September 3, 2013 Sup Ct, Suffolk County Docket Number: 11-37840 Judge: Jerry Garguilo Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] INDEX No. 11-37840 SUPREME COURT - STATE OF NEW E ORK I.A.S. PART 47 - SUFFOLK COUNTY PRESENT: ¬-I0 11. MOTION DATE 7-3 1- 12 ADJ. DATE 3-27-13 Mot. Seq. # 001 - MG JERRY GARGUILO Justice of the Supreme Court X VANDERBILT MORTGAGE AND FINANCE, INC., : Plaintiff, - against - FREDERICK E. DAVIS and KIM MITCHELL, co-executors of the Last Will and Testament of Gerald P. Burnett, THE INTERNAL REVENUE SERVICE, and JOI3d DOE # l through JANE DOE # 10, the last I 0 names being fictitious and unknown to the Plaintiff, the persons or parties intended being the occupants, tenants, persons or entities, if any, having or claiming an interest in or lien upon the mortgaged premises described in the Llerified complaint. Defendants. : : : : : : : : HELFAND & HELFAND Attorney for Plaintiff 350 Fifth Avenue, Suite 2826 New York, New York 10 I 18 CENCERIA EDWARDS, ESQ. Attorney for Defendants Davis & Mitchell 1047A Fulton Street Brooklyn, New York 11238 INTERNAL REVENUE SERVICE 333 Pershing Road Kansas, Missouri 64 108 : X Upon tiic foIloM.ing papers numbered 1 to A_ on this motion for sumtnaty iudgiiient and the amointment of read referee, Notice of Motionl Order to Show Cause and supporting papers I - 6 ; Notice of Cross Motion and supporting papers -; Answering Affidavits and supportin;; papers 7 - 8 ; R.eplying Affidavits and supporting papers 9 - 1 1 ; Other -; w) it is, ( e ORDERED that the motion by plaintiff for summary judgment on its complaint, to amend the caption deleting the John Doe and Jane Doe defendants, and for the appointment of a referee to c o 171p u t e is granted . _I_ his is an action to foreclose a mortgage on the premises located at 50 Beach Avenue, in Sag 1 ]arbor, NCMYork, designated on the Suffolk County Tax Map as District 0302, Section 004.000, Block [* 2] Vanderbilt Mortgage & Finance v Davis Index No. 11-37840 Page No. 2 04 00, Lot 001.000 (the premises ). On July 26, 2007, Gerald P. Burnett ( Burnett ) executed a note for the principal loan amount of $560,000, and as security for payment thereof, contemporaneously executed a mortgage on the premises in favor of First Franklin Financial Corp., an Op. Sub of MLB&T Co.. FSB (the original lender ). The mortgage reflects that Mortgage Electronic Registration Systems, Inc. ( MERS ) is the original lender s nominee, and for purposes of recording, the mortgagee of record. On October 3 1 , 20 1 1, MERS assigned the mortgage to plaintiff. Burnett defaulted in making the monthly payments due as of April 1 , 20 1 1 and thereafter. He died on June 17, 20 1 1, leaving a will naming defendants Frederick E. Davis and Kim Mitchell as COexecutors. On December 9 , 2 0 1 1 the instant action was commenced against the co-executors seeking to foreclose on the mortgage and sell the premises. The co-executors have interposed an answer with twelve affirmative defenses, including that the plaintiff lacks the capacity to sue (first affirmative), fraud (third affirmative defense), predatory lending in violation of the Banking Laws (fourth affirmative defense), unclean hands (fifth affirmative defense), violations of federal and state anti-discrimination and banking laws (sixth affirmative defense), redlining (seventh affirmative defense), failure to comply with RPAPL 1304 and 1306 (eleventh affirmative defense), and that the plaintiffs actions were unconscionable (twelfth affirmative defense), and a counterclaim for fraud, fraud in the inducement and conspiracy to conimit fraud. The plaintiff now moves for summary judgment on its complaint, to strike the co-executors answer and for an order of reference pursuant to RPAPL 132 1 fixing the default of the non-answering defendant the Internal Revenue Service, to amend the caption to delete the John Doe and Jane Doe defendants, and for the appointment of a referee to compute. The co-executors oppose and maintain that the motion should be denied and the complaint dismissed, relying on their counsel s affirmation wherein arguments are made in support of the aforementioned affirmative defenses and counterclaim. The opposition also includes an argument that the pleadings are facially defective, as well as a challenge to the authenticity of Burnett s signature. Entitlement to a judgment of foreclosure may be established, as a niatter of law, where a mortgagee produces both the mortgage and unpaid note, together with evidence of the mortgagor s default, thereby shifting the burden to the mortgagor to demonstrate, through both competent and admissible evidence, any defense which could raise a question of fact (Znnjki v Clzandler, 79 AD3d 103 1 . 103 I - 1032, 9 12 NYS2d 9 I 1 [2d Dept 20 lo], quoting HSBC Bank [[SA v Merrill, 37AD3d 899, 900, 830 NYS2d 598 [2d Dept 20101; see U S . Bank Natl. Assn. v Denaro, 98 AD3d 964,950 NYS2d 581 [2d Dept 20121; Citibnnk, A!A. v. Van Brunt Prop., LLC, 95 AD3d 1158, 945 NYS2d 330 [2d I k p t 20 121) Where as here, an answer includes lack of capacity to sue as an affirmative defense, the plaintiff must further establish its standing to succeed on a motion for summary judgment and to prevail on the relief requested in the complaint (Jee U S . Bank Nut. Assn. v Dellarmo, 94 AD3d 746, 942 NYS2d 122 [2d Dept 20121; Bauk ofNew York v Silverberg, 86 AD3d 280, 926 NYS2d 532 [2d Dept 201 11. U.S. Bank, N.A. v Col/yntore. 68 AD3d 752, 890 NYS2d 578 [2d Dept 20091; Wells Fnrgo Bank Minnesota v Mnstropaolo. 42 AD3d 239. 837 NYS2d 247 [2d Dept 20071). ITere, the plaintiff has established its entitlement to summary judgment by submitting copies of the mortgage and the unpaid note, together with evidence that the monthly payments were not paid [* 3] Vanderbilt Mortgage & Finance v Davis Index No. I 1-37840 Page No. 3 pursuant to the terms thereof (see CPLR 32 12; RPAPL $ 132 1 ; Neighborhood Hocrs. Serv. of New York LLC v Garcia Group CiQ v Hawkins. 97 AD3d 554,947 NYS2d 321 [2d Dept 20121; Baron ASSOC., Enter.. 96 AD3d 793, 946 NY S2d 6 1 1 [2d Dept 20 121; Citibank, N.A. v. Van Brunt Prop., LLC, supra). The plaintit t further established, prima facie, it has standing to prosecute its pleaded claims for foreclosure and sale by demonstrating that prj.or to the commencement of this action, it took possession of. and was the holder of the note indorsed by the original lender to First Franklin Financial Corporation (* First Franklin ) and, in turn, indorsed by First Franklin in blank, a copy of which is attached to the complaint (see Bank of N. Y. v Silverberg, supra; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674, 838 NE S2d 622 [2d Dept.20071; Kondacir Capital Coup. v Argyros, 38 Misc 3d 1230[A], 201 3 Slip Op 869945 [Sup Ct Queens County 20131; Deutsche Bank Natl. Trust Co. v Pietranko, 33 M i x . 3d 528, 928 NYS2d 818 [Sup Ct Suffolk County 201 11, @ d, 102 AD3d 724 [2d Dept 20131; see u1.w UCC $ 3-202; 8 3-204; 5 9-203[g]). The mere possession of a promissory note endorsed in blank (just like a check) provides presumptive ownership of that note by the current holder (DeutsclzeBank National Trust Co. v Pietranico, supra at 545, ). The holder of the note is deemed the owner thereof with standing to foreclose (id., (siting see, e.g., Mortgage Elec. Registration S x , j . Inc. v Coakfey,supra). Since the mortgage follows as an incident of the note, when the note changed hands, the mortgage interest automatically followed (see Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909, 961 NYS2d 200 [2d Dept 20131; U.S. Bank Natl. .Assn. v Cange, 96 AD3d 825,826,947 NYS2d 522 [2d Dept 201 21): U.S. Bank, NA v Slzarif, 89 AD3d 723, 933 NYS2d 293 [2d Dept 201 11; Bank of New York v Silverberg, supra; U S . Bank, N.A. v Collymore, supra). Therefore, based on the evidence before the court, the plaintiff was in possession of the note on the date the instant action was commenced, and therefore is deemed the presumptive owner of the note and mortgage with standing to prosecute its claim for foreclosure and sale (see U.S. Bank Natl. Assn. v Cangr, sz.rpra; U.S. Bank, NA vShariJ supra). The burden, thus, shifts to the co-executors to submit proof sufficient to raise a genuine question of fact rebutting the plaintiffs prima facie showing or in support of the affirmative defenses asserted in their answer. They have failed to do so. The argument that the pleadings are defective on their face is insufficient to overcome the plaintiffs prima facie showing. Although the summons and complaint identify the address of the premises subject to foreclosure as 50 S. Beach Avenue instead of 50 Beach Avenue . this error is negligible i n view of the accurate description of the premises in the documents attached to the complaint (i.e . the executed mortgage to which is attached Schedule A with the metes and bounds description of the premises, and the accurately designated section, block and lot of the premises set forth in the complaint) ( S P P American Mtge. Bank vMatovitz, 208 AD2d 788, 618 NYS2d 391 [2d Dept 19941; cf: Bagnoli v Albert, 263 AD2d 594, 692 NYS2d 790 [3d Dept 19991). Acidit~onally, argument in opposition that the assignment of mortgage is alarmingly the questionable I S of no consequence as the plaintiff demonstrated its standing by establishing that the note. Indorsed in blaiiI<, was phy(jica1ly delivered to it and in its possession (.ree Deutsclte Bank Natl. Trust Co. v W tnlen, 107 AD3d 931 , 20 13 WL 3 198 184 [2d Dept 20 131). Therefore. also defeated is the argument in support of their lirst affirmative defense that the plaintiff lacks the capacity to sue (see id;U S . Bank Natl. Assn. v Cmge, stipi*a;M& T Bank v Romero, 40 Misc 3d 12 1 O[A], 201 3 WL 3583999. Slip Op 51 147[U] [Sup Ct Suffolk County 20131). [* 4] Vanderbilt Mortgage & Finance v Davis Index No. I 1-37840 Page No. 4 Also inadequate to rais: an issue offact necessitating a trial is the coiiclusory assertion that Burnett s signature on the note appears to be ,a forgery. Something more than a bald assertion of forgerj is required to create an issue of fact contesting the authenticity o f a signature (Banco Popular N. Am. v Victory TcrxiMgt., 1 NY3d 381, 385, 774 NYS2d 480 [2004]; see JPMorgan Chase Bank, NA v Bairer. 92 ADSd 64 1. 938 NYS2d 190 [2d Dept 20 121 [defendant s affidavit alone insufficient]; cf TD Bank, NA v Piccolo Mondo 21st Century, Inc., 98 AD3d 499,949 NYS2d 444 [2d Dept 20121 [expert opinion not required to raise an issue of fact regarding a forgery allegation, however, copies of driver s license and passport submitted as exemplars were sufficient]). Here, no such additional evidence has been proffered to support the co-executors allegations of forgery. The allegations that the original lender targeted Burnett and was a predatory lender, engaged in reverse redlining and discrimination by charging an interest rate greater than nine percent, and acted with unclean hands from the inception of the transaction are also unavailing. It is well-settled that the doctrine of unclean hands is not a defense to a mortgage foreclosure action (see Jo-Ann Homes v Dwortetz, 25 NY2d 1 12, 302 NYS 599 [ 19691). In any event, the co-executors have failed to come forward with any evidence that the plaintiffs conduct was immoral or unconscionable (see CFSC Capital Corp. XXVII v W.J. Brrchman MecliirnicalSlieet Metal Co., 247 AD2d 502, 669 NYS2d 329 [2d Dept 19981). Relying on Equicredit Corp. v Turcios (300 AD2d 344, 752 NYS2d 684 [2d Dept 20021) and M& T Mortgage Corp. v Foy (20 Misc 3d 274., 858 NYS2d 567 [Sup Ct, Kings County 2008]), counsel for the co-executors attempts to persuade this court that Burnett was the victim of a form of predatory or discriminatory lending practices lcnown as reverse redlining. Reverse redlining is a scheme that targets low-income minorities, offering them exorbitantly high interest rate loans in large amounts, even though they do not have the ability to repay, thereby approving a loan designed to fail, and resulting in loss of the home through foreclosure (EquicredifCorp. v Turcios, supra at 346). It has been held that a mortgage granted to a minority buyer for the purchase of property in a minority area which carries an interest rate that exceeds nine percent creates a rebuttable presumption of discriminatory practice (M& T Murtgcrge Corp. v Foy, supra at 275). Here, no evidence has been submitted by a person with knowledge to establish that Burnett was knoun to be a member o f a minority. or that the premises, located in Sag Harbor. was in a minority area. Additionally, the documents attached to the opposition papers at Exhibit H reflect that the loan was a Cash-Out Refinance , not a purchase, and that Burnett was not in a low-income category with an inability to repay the loan inasmuch as his monthly base income was $17,785.00. Therefore. the rebuttable presumption has not been created, thus, the related fourth and seventh affirmative defenses of predatory lending and redlining are not viable. Similarly, the sixth affirmative defense which alleges that federal and state anti-discrimination and banking laws were violated is not viable. The co-executors are attempting to invoke violations of Ranking 1,aw 8s 6-1 and 6-111, failure to investigate Burnett s creditworthiness or ability to repay the note and mortgage Neither section ofthe Ranking Law applies, as both sections require the mortgaged premises be occupied by the borrower as the borrower s principal dwelling (see Banking Law [* 5] Vanderbilt Mortgage & Finance v Davis Index No. 1 1-37840 Page No. 5 $6 6-I[ l][e][iv] and 6-m[ l][d][iv]). The loan documents reveal that Burnett s principal dwelling was in Henipstead. New York. Additionally, unpersuasive is the clairii by the co-executors that Burnett was fraudulently induced to enter an agreement with unconscionable terms. The determination of unconscionability is a matter of law for the court to decide (Emrigrcint Mortg. Co., Inc. v Fitzpcrtrick, 95 AD3d 1 169, 945 NYS2d 697 [2d Dept 20 121). The co-executors have not presented any evidence to indicate that Burnett had an absence of meaningfd choice as to whether to accept the original lender s terms (see id ; Frevnuist Investment & Loan v Laroc, 21 Misc 3d 1124[A], 873 NYS2d 51 1 [Sup Ct, Queens County 2008]), citing King v Fox, 7 NY3d 18 1, 8 18 NYS2d 833 [2006] and Gillman v Clzase Mnnhattan Bank, N.A., 73 NY2d 1, 537 NYS2d 787 [ 1 988]). There is nothing unconscionable about enforcing the terms of an agreement Burnett willingly entered into (see .Arias Indus., 1nc. v 1411 Trizeclzalzn Swig, LLC, 294 AD2d 107. 744 NYS2d 362 [ 1st Dept 20021). Even assuming, without deciding, that unconscionability is an affirmative defense to the underlying default, the co-executors failed to demonstrate that no reasonable and competent person would accept [the] terms, which are so inequitable as to shock the conscience (internal citations omitted) (LaSalle Bank Nut. Assn v Kusaroviclz, 3 1 AD3d 904, 906, 820 NYS2d 144 [3d Dept 20061; see ulso Emigrant Murtg. Co., Inc. v Fitzpntrick, stlpra). The co-executors have further failed to demonstrate that the value of the subject property was inflated, that the appraisal was fraudulent at the time it was issued, or that it was intended for E3urnett-s benefit, and Burnett justifiably relied upon the representations therein when deciding to enter into the original transaction (see Fremont Investmeizt & Lotin v Laroc, supm). Furthermore, although it is well settled that an assignee of a mortgage takes it subject to the equities attending the original transaction (see Lapis Enterprises, Inc. v Intl. Blimpie Curp., 84 AD2d 286 [ 1981]), the plaintiff cannot be required to answer in damages for alleged misrepresentations committed by the original lender in connection with the making of the original mortgage loan (US Bank NationalAssn vMcPIzearsun, 33 Misc 3d 1219[A], 2012 NY Slip Op 50742[U], 2012 WL 1521862 [Sup Ct, Queens County]). In any event, the facts establish that Burnett made payments on the mortgage note from 2007 until March 201 1, which conduct constitutes acquiescence and asscnt to the terms thereof (Feinstein v Leyv, 12 1 AD2d 499, 500. 503 NYS2d 82 1 [2d Dept 19861). Therefore, the fourth. fifth, and seventh aflirniative defenses, and the fraud counterclaim cannot he sustained. and are hereby severed and dismissed. The arguments in opposition and in support of the eleventh affirmative defense regarding the plaintiffs failure to comply with RPAPL 1304 and 1306 are unavailing. RPAPL 1304 provides, inter rilru. that at least ninety days before a lender, assignee or loan servicer commences an action against a borrower to foreclosc on a mortgage, notice must be provided to the borrower advising that the loan is in default and his or her home is at risk (see RPAPL 13041I]; Aurora Services, LLC v Weisblunz, 85 AD3d 95. 923 NYS2d 609 [2d Dept 201 11). The statutorily mandated content of the 90-day notice and the method by which service must be effected are set forth in RPAPL 1304 subdivisions (1) and (2). It has been held that proper service of the RPAPL 1304 notice containing the statutorily-mandated content is a condition precedent to the commencement of the foreclosure action (Aurora Services, LLC v [* 6] Vanderbilt Mortgage & Finance v Davis Index No. I 1-37840 Page No. 6 Weisbliim. ~ ~ / p u . n103). A plaintiffs failure to demonstrate strict compliance with the manner of at service and that the notice contains the mandatory language as set forth in the statute requires denial of a motion for summary judgment (.we Decitsche Bank Natl. Trust Cu. v Spanus, mpr-u). Herr. the borrower, Burnett, was deceased 90 days prior to commencement of this action. There is nothing in the record before the Court to indicate that the co-executors assumed the mortgage or obtained a new mortgage in their own names. Therefore, as the statute requires only that the borrower be given notice. the provisions of RPAPL 1304 are inapplicable herein (see Bank o New Yurk Mellon v f Roman as Es r ufEstate o Porblo Ronzan, 21312W L 2463828, 2012 Slip Op 3 1687[U]) [Sup Ct, f Queens County]; sre also RPAPL 1304[3]). Thus, also inapplicable is the condition precedent found in RPAPL 1306 which requires filing the pre-foreclosure notice with the superintendent of banks. Therefore, the eleventh affirmative defense also cannot be sustained. The co-executors have riot addressed their other affirmative defenses. Thus, the second affirmative defense for lack of personal jurisdiction, eighth affirmative defense for failure to state a cause of action, the ninth affirmative defense which simply reads Statute of Limitations , the tenth affirmative defense for laches, and the affirmative defense alleging plaintiff violated the Home Equity Act (inadvertently labeled the twelfth affirmative defense), are treated as abandoned (see US Bank, N.A. v Flynn, 27 Misc 3d 802, 897 NYS2d 855 [Sup Ct, Suffolk County 2010, Whelan, J.]). .On motion for leave to enter a defaullt judgment pursuant to CPLR 32 15, the movant is required to submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defaulting party s default in answering or appearing (Green Tree Servicing, LLC v Cmy, 106 AD3d 691, 692, 965 NYS2d 5 1 1 [2d Dept 20 131 [internal quotation marks omitted]). As the United States has submitted a notice of appearance on behalf of defendant Internal Revenue S e n ice, the plaintiff is not entitled to a default judgment against this defendant. However, as the United States has not interposed an answer, no question of fact has been raised to preclude the grant of summary judgment in 12Iaintiff~s favor as against the co-executors. Any arguments by the parties not explicitly addressed herein have been reviewed and deemed to be without merit. Hence, as the co-executors have failed to raise a genuine issue of fact to overcome the plaintiffs prima facie showing of entitlement to summary judgment. plaintiff is awarded summary judgment on its complaint against them. I heportion of the instant motion wherein the plaintiff seeks an order dropping the John Does and Jane Does as party defendants is also granted, as is an amendment of the caption to reflect same. Plaintiff, having been awarded s~ummary judgment is entitled to an order appointing a referee to compute the amounts due under the subject note and mortgage (see RPAPL 9 132 1). Accordingly. the motion is granted. S u b m 1t 0rd er . ,I

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