Onewest Bank, FSB v Bernstein

[*1] Onewest Bank, FSB v Bernstein 2013 NY Slip Op 51274(U) Decided on August 5, 2013 Supreme Court, Queens County Siegal, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 5, 2013
Supreme Court, Queens County

Onewest Bank, FSB, Plaintiff,

against

Philip B. Bernstein a/k/a Philip B. Berstein a/k/a Philip Bruce Berstein a/k/a Philip B. Bernstin, Anita F. Berstein; New York State Department of Taxation and Finance "John Doe" and "Jane Doe" said names ficitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, Defendants.



30903/10

Bernice D. Siegal, J.

The following papers numbered 1 to 12 read on this motion for an order modifying the caption in this action by deleting"John Doe" and "Jane Doe" as Defendant and ordering a referee to compute pursuant to the Real Property Actions and Proceedings Law.

PAPERS

NUMBERED

Notice of Motion - Affidavits-Exhibits..................................1 - 4

Notice of Cross-Motion.........................................................5 - 9

Reply......................................................................................10 - 12

Upon the foregoing papers, it is hereby ordered that the motion is resolved as follows:

Plaintiff, Onewest Bank, FSB, moves for an Order of Reference in the underlying mortgage foreclosure action. Defendants, Philip B. Bernstein and Anita F. Bernstein ("defendants Bernsteins") cross-move for an order denying plaintiff's motion for an Order of Reference, dismissing the action pursuant to CPLR § 3211(a)(2), (a)(3), and (a)(10), and cancelling the Notice of Pendency pursuant to CPLR § 6514(a).

[*2]Facts

On October 30, 2003, defendant Philip B. Bernstein ("defendant") executed a mortgage. The mortgage was recorded on January 13, 2004. The mortgage secured a sum of $289,800.00 was then assigned to M.L. Moskowitz & Co., Inc., d/b/a Equity Now, a New York corporation to Option One Mortgage Corporation , a California Corporation by virtue of an Assignment of Mortgage, recorded in the Office of the City Register on August 27, 2004. The Assignment was re-recorded on October 4, 2004, and the mortgage was further assigned to M.L. Moskowitz & Co., Inc., d/b/a Equity Now by virtue of an Assignment of Mortgage, recorded in the Office of the City register on October 4, 2004.

On August 6, 2004, defendant executed a mortgage to M.L. Moskowitz & Co., Inc., d/b/a Equity Now to secure the sum of $49,130.95. The second mortgage was recorded on October 4, 2004. On August 6, 2004, these two mortgages were consolidated into one mortgage pursuant to a Consolidation, Extension, and Modification Agreement ("CEMA"), such consolidated mortgage being recorded on October 4, 2004. Thereby, a single lien was created in the amount of $337,500.00. The mortgage was later assigned to DLJ Mortgage Capital, Inc., by virtue of an Assignment of Mortgage, recorded in the Office of the City Register on February 23, 2006. The mortgage was further assigned to Wells Fargo Home Mortgage, Inc., as Attorney-in-fact for DLJ Mortgage Capital, Inc., to Mortgage Electronic Registration Systems, Inc., as a nominee for Equity Now, Inc., by virtue of an Assignment of Mortgage, recorded in the Office of the City Register on February 23, 2006.

On January 31, 2006, defendant executed a mortgage to Mortgage Electronics Registration Systems, Inc., as nominee for Equity Now, Inc., to secure the sum of $44,404.88. The third mortgage was recorded on February 23, 2006. On January 31, 2006, defendant executed a CEMA to Mortgage Electronics Registration Systems, Inc., as nominee for Equity Now, Inc. to consolidate the mortgages and to create a single lien in the amount of $378,000.00. The lien was recorded on February 23, 2006, and the mortgage was then assigned to Mortgage Electronics Registration Systems, Inc., as nominee for Equity Now, Inc., and recorded in the Office of the City Register on April 21, 2010.

Plaintiff, Onewest Bank, FSB ("plaintiff"), is a duly licensed foreign state banking corporation, doing business in the state of New York, with its principal state of business in Austin, Texas. Plaintiff purportedly received a purported assignment of the original, extinguished, superseded mortgage on March 31, 2010, from Mortgage Electronics Registration Systems, Inc. as nominee for the mortgage originator. The assignment purports to assign and transfer the mortgage executed by defendant on October 30, 2003, and recorded on January 13, 2004. On July 28, 2011, after the commencement of the instant action, said mortgage was assigned by plaintiff to Bank of America N.A. as successor by merger to Lasalle Bank National Association as trustee for the LXS 2006-11 trust fund as plaintiff in place and stead of plaintiff. Furthermore, the Note is indorsed in blank making it a bearer instrument.

The within action for foreclosure was commenced by the filing of a Notice of Pendency, Summons & Complaint on December 13, 2010, based upon the default of the CEMA in the amount of $378,000.00 given by defendant on January 31, 2006, whereas said CEMA was in default for the November 2009 payment with an unpaid principal balance of $378,000.00. Defendant was served [*3]pursuant to CPLR § 308(1) on December 17, 2010, and pursuant to CPLR § 3215(g) via mail. Pursuant to CPLR § 320(a) defendant had twenty (20) days to answer or otherwise respond. The time expired on January 6, 2011. Defendant did not answer or otherwise respond, nor was this time extended by stipulation or by an Order of the Court.

On January 15, 2011, plaintiff and defendants Bernsteins entered into a stipulation and agreed that: (1) defendants Bernsteins would not submit an answer to the Summons and Complaint; (2) they would not make a pre-answer motion pursuant to CPLR § 3211; (3) they submitted to the jurisdiction of the Court; and (4) waived their right to settlement conference. In return, plaintiff guaranteed that a foreclosure sale would take place no sooner than twelve (12) months from the date of the stipulation. Plaintiff then filed a Request for Judicial Intervention, along with filing the affirmation required by the Administrative Order of the Chief Administrative Judge.

A settlement conference was held pursuant to CPLR § 3408 on January 1, 2012, even though defendants Bernsteins allegedly were no longer entitled to it. At that time the matter was released back to the IAS Part and plaintiff was authorized to proceed with its foreclosure. Plaintiff then moved for an Order of Reference in Mortgage Foreclosure in November 2012. The motion was originally scheduled for January 14, 2013. It was adjourned a few times and finally scheduled for March 18, 2013. However, defendants Bernsteins thereafter filed opposition to plaintiff's motion and a cross-moved seeking dismissal of the action.

Contentions

Defendants Bernsteins contend that plaintiff never had standing to commence the action because it was never the holder of the note of mortgage on subject property. In addition, defendants Bernsteins contend that plaintiff cannot show a proper chain of title, failed to submit an affidavit of service to establish proper service of the RPAPL 1304 Notice on defendants, and engaged in robo-signing whereas the purported assignor was also an employee of the assignee.

In opposition, plaintiff contends that the cross-motion is fatally defective, because defendants Bernsteins failed to move under § 3211(a) before their time to serve a response pleading expired. Plaintiff also contends that the cross-motion is improper because it is made in contravention of stipulation entered into by the parties on January 15, 2011.

Defendants Bernsteins contend that plaintiff failed to prove that it complied with all conditions precedent to acceleration of the mortgage debt and the bringing of an action for foreclosure. In addition, defendants Bernsteins contend that plaintiff's affidavit of merit was not from "the party."

In response plaintiff contends that it established its prima facie case, while defendants Bernsteins failed to timely appear and do not provide a reasonable excuse for their default and fail to demonstrate a meritorious defense.

For the reasons set forth below, plaintiff's motion for an Order of Reference is denied. Defendants Bernsteins' cross-motion for an order denying plaintiff's motion for an Order of Reference, dismissing the action pursuant to CPLR § 3211(a)(2), (a)(3), and (a)(10), and cancelling [*4]the Notice of Pendency pursuant to CPLR § 6514(a) is similarly denied.

Discussion

Defendants Bernsteins move pursuant to CPLR § 3211(a)(3) to dismiss plaintiff's action as against them asserting that plaintiff has no legal capacity to sue. (See CPLR § 3211[a][3].) As a general rule, "where a defendant raises the issue of standing, the plaintiff must prove its standing to be entitled to relief." (U.S. Bank, N.A. v. Dellarmo, 94 AD3d 746 [2d Dep't 2012]; U.S. Bank, N.A. v. Sharif, 89 AD3d 723, 724 [2d Dep't 2011]; Bank of New York v. Silverberg, 86 AD3d 274, 279 [2d Dep't 2011]; U.S. Bank, N.A. v. Collymore, 68 AD3d 752, 753 [2d Dep't 2009].) "[T]o commence a foreclosure action, the plaintiff must have a legal or equitable interest in the mortgage." (Aurora Loan Servs. v. Weisblum, 85 AD3d 95, 96 [2d Dep't 2011].) A plaintiff has standing if it is "both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying note, either by physical delivery or execution of a written assignment prior to the commencement of the action with the filing of the complaint." (Id. at 97.)

However, defendants Bernsteins failed to timely answer the Summons and Complaint. Defendants waive the right to allege lack of standing as a viable defense where they fail to allege that defense in their answer or in a timely pre-answer motion to dismiss the complaint. (CPLR 3211[e]; Gabel v. Gabel, 104 AD3d 910, 912 [2d Dep't 2013], [holding that "the defendants waived any defense based on [plaintiff's] alleged lack of standing because they failed to interpose that defense in their answer or in a timely pre-answer motion to dismiss the complaint"]; HSBC Bank, USA v. Dammond, 59 AD3d 679, 680 [2d Dep't 2009], ["[h]aving failed to interpose an answer or file a timely pre-answer motion which asserted the defense of standing, the respondent waived such defense pursuant to CPLR 3211 [e]"]; Deutsche Bank Natl. Trust Co. v. Young, 66 AD3d 819 [2d Dep't 2009], [holding that "the Supreme Court did not err in determining that [defendants] waived the issue of standing by failing to timely appear or answer.")

In addition, defendants Bernsteins waived their right to assert plaintiff's alleged lack of standing as a defense in pre-answer motion because defendants Bernsteins and plaintiff entered into a stipulation on January 15, 2011, and agreed that defendants Bernsteins would not submit an answer or make a pre-answer motion to dismiss pursuant to CPLR § 3211. Without asking the court to set aside the stipulation, defendants Bernsteins cross-moved to dismiss the case pursuant to CPLR § 3211. It is well established that "[s]tipulations are favored by the courts and are not lightly cast aside," especially if the parties were represented by attorneys. (Morrison v. Rent A Car Systems, Inc., 230 AD2d 253, 256 [2d Dep't 1997]; see Racanelli Const. Co., Inc. v. Tadco Const. Corp., 50 AD3d 875 [2d Dep't 2008].)

In essence, "a stipulation is a contract." (Utica Mut. Ins. Co. v. Swim Tech Pool Services, Inc., 37 AD3d 706 [2d Dep't 2007].) Therefore, absent "fraud, overreaching, duress, or mistake" the court will not invalidate it. (Id. at 707; see Esposito v. Podolsky, 104 AD3d 903 [2d Dep't 2013], [holding that "[a] party seeking to set aside a stipulation will be granted such relief only upon a showing of good cause sufficient to invalidate a contract, such as fraud, overreaching, duress, or mistake."]) Plaintiff duly complied with their obligation under the stipulation. Defendants Bernsteins failed to demonstrate "fraud, overreaching, duress, or mistake" in relation to the stipulation and thus [*5]are obligated to follow the course of action they agreed to follow under the stipulation.

Accordingly, defendants Bernsteins' cross-motion to dismiss the case pursuant to CPLR § 3211 is denied in its entirety as defendants Bernsteins stipulated to waive their right to bring such a motion.

Along with their cross-motion to dismiss the action, defendants Bernsteins are moving to cancel the Notice of Pendency pursuant to CPLR § 6514(a). CPLR § 6514(a) provides:

"the court, upon motion of any person aggrieved and upon such notice as it may require shall direct any county clerk to cancel a notice of pendency if service of summons has not been completed within the time limited by section 6512; or if the action has been settled, discontinued or abated; or if the time to appeal from a final judgment against plaintiff has expired; or if enforcement of a final judgment against the plaintiff has not been stayed pursuant to section 5519."

Neither at the time defendants Bernsteins filed their cross-motion, nor at the present moment, were the grounds upon which motion to cancel the Notice of Pendency shall be granted present in the case. Therefore, defendants Bernsteins' motion to cancel the Notice of Pendency pursuant to CPLR § 6514(a) is similarly denied.

Plaintiff's motion for an Order of Reference is based upon an assignment of mortgage from Mortgage Electronic Registration Systems, Inc., dated March 31, 2010. Plaintiff submitted a copy of the Assignment at issue. The Assignment seems to assign and transfer the mortgage in the sum of $289.800.00 executed by defendant Bernstein on October 30, 2003, and recorded on January 13, 2004. However, the assignment took place after defendant executed the CEMA and consolidated all the previous mortgages into one on August 6, 2004, such consolidated mortgage being recorded on October 4, 2004. Thereby, a single lien was created in the amount of $337,500.00.

Furthermore, section II of the CEMA recorded on February 23, 2006, combined all of Lender's rights and created one mortgage superseding all the mortgages created earlier. Section IV of the CEMA provided that the terms set forth in the Consolidated Mortgage would "supersede all terms, covenants, and provisions of the Mortgages." In addition, the Consolidated Note was to "supersede all terms, covenants, and provisions of the Notes." The Consolidated Note dated January 31, 2006, "amends and restates in their entirety, and is given in substitution for, the Notes described in Exhibits A of the New York Consolidation, Extension, and Modification Agreement dated the same date as this Note." Thus, on March 31, 2010, Mortgage Electronic Registration Systems, Inc. could not transfer the mortgage executed by defendant Bernstein on October 30, 2003, as that mortgage was explicitly superseded by the CEMA recorded on October 4, 2004, and by the CEMA recorded on February 23, 2006.

Although plaintiff alleged that it established its prima facie case, in a foreclosure action, a plaintiff establishes its prima facie case as a matter of law by showing the existence of the mortgage, the unpaid mortgage note, ownership of the mortgage, and evidence of default. (Argent Mortg. Co., LLC v. Mentesana, 79 AD3d 1079, 1080 [2d Dep't 2010], ["[i]n an action to foreclose a mortgage, a plaintiff establishes its case as a matter of law through the production of the mortgage, the unpaid [*6]note, and evidence of default,"] [citing to Republic Natl. Bank of NY v. O'Kane, 308 AD2d 482 [2d Dep't 2003]; Campaign v. Barba, 23 AD3d 327 [2d Dep't 2005], ["[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and mortgage note, ownership of the mortgage, and the defendant's default in payment."])

According to the recording of assignment, attached as Exhibit A in plaintiff's motion for an Order of Reference, on March 31, 2010, plaintiff was assigned the mortgage executed by defendant on October 30, 2003, and recorded on January 13, 2004, in the amount of $289,800.00. However, that mortgage was substituted by the CEMA recorded on October 4, 2004, and the CEMA recorded on February 23, 2006. The terms of the CEMA recorded on February 23, 2006, created a single lien on the property. The action in foreclosure commenced on December 13, 2010, was based upon defendant's default of the CEMA recorded on February 23, 2006, in the amount of $378,000.00. Plaintiff failed to provide documentary evidence showing that it was assigned the Consolidated Note and the CEMA prior to commencement of the action. Therefore, plaintiff failed to establish its prima facie case as a matter of law by showing ownership of the mortgage. (Campaign v. Barba, 23 AD3d 327 [2d Dep't 2005].)

Substituting Bank of America N.A. as successor by merger to Lasalle Bank National Association as trustee for the LXS 2006-11 trust fund, for the current plaintiff, will not alter the outcome of the motion. Plaintiff assigned to Bank of America N.A. the mortgage executed by defendant on October 30, 2003, and recorded on January 13, 2004, and subsequently extinguished by the CEMA recorded on October 4, 2004 and the CEMA recorded on February 23, 2006. Thus, Bank of America N.A. will not be able to prove ownership of the Consolidated Note and the CEMA.

Accordingly, plaintiff's motion for an Order of Reference is denied.

Conclusion

For the reasons set forth above, plaintiff's motion for an Order of Reference in the underlying mortgage foreclosure action is denied. Defendants' cross-motion for an order denying plaintiff's motion for an Order of Reference, dismissing the action pursuant to CPLR § 3211(a)(2), (a)(3), and (a)(10), and cancelling the Notice of Pendency pursuant to CPLR § 6514(a) is similarly denied.

This constitutes the decision and order of this court.

Dated:August 5, 2013___________________________

Bernice D. Siegal, J. S. C.