Deutsche Bank Natl. Trust Co. v Kopelman
Annotate this CaseDecided on January 29, 2018
Supreme Court, Suffolk County
Deutsche Bank National Trust Company, AS INDENTURE TRUSTEE FOR NEW CENTURY HOME EQUITY LOAN TRUST 2005-3, Plaintiff,
against
Elesiv Kopelman; CAPITAL ONE AUTO FINANCE INC.; CITIBANK (SOUTH DAKOTA) NA; NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE; UNITED STATES OF AMERICA-INTERNAL REVENUE SERVICE; E*TRADE BANK; MARK TEICHMAN; LAURA PFITER, Defendants.
35100-2011
ROSICKI, ROSICKI & ASSOCIATES
Attorneys for Plaintiff
26 Harvester Avenue
Batavia, NY 14020
Jeff H. Morgenstern, Esq.
Attorney for Defendant Kopelman
One Old Country Road
Carle Place, NY 11514
Robert F. Quinlan, J.
Upon the papers submitted on this order to show cause to reargue the court's decision of September 26, 2016, and upon the granting of reargument, for an order granting defendant's cross-motion to dismiss, or alternatively, to allow defendant to amend her answer, and upon amendment to revive defendant's cross-motion to dismiss for plaintiff's lack of standing; it is
ORDERED that the portion of defendant Elesiv Kopelman's motion seeking leave to reargue the court's decision of September 26, 2016 which denied her cross-motion to dismiss the action, is considered under CPLR 2221 and leave is granted, and upon granting leave to reargue, the court adheres to its prior determination; and it is further
ORDERED that the portion of defendant's motion seeking to amend her answer to include as her third affirmative defense a claim that plaintiff lacks standing to prosecute the action is granted; and it is further
ORDERED that upon granting the amendment of defendant's third affirmative defense, and upon reviving and reconsidering defendant's cross-motion in light thereof, the cross-motion is denied as plaintiff's standing is established; and it is further
ORDERED that as plaintiff's submissions have established its standing, the court's decision of September 26, 2016 remains in full force and effect, other than as modified as to scheduling issues relating to the filing of a judgment of foreclosure and sale set forth below; and it is
ORDERED that the caption of this action, as amended by the order of September 26, 2016, appears as follows:
X
DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS INDENTURE TRUSTEE
FOR NEW CENTURY HOME EQUITY
LOAN TRUST 2005-3,
Plaintiff,
against-
ELESIV KOPELMAN; CAPITAL ONE
AUTO FINANCE INC.; CITIBANK (SOUTH
DAKOTA) NA; NEW YORK STATE
DEPARTMENT OF TAXATION AND
FINANCE; UNITED STATES OF AMERICA
INTERNAL REVENUE SERVICE;
E*TRADE BANK; MARK TEICHMAN;
LAURA PFITER,
Defendant(s).
X;
all further proceedings are to appear under this caption; and it is further
ORDERED that within 30 days of the date of this order, plaintiff is to serve a copy of the order of reference granted by the order of September 26, 2016 upon all parties who have appeared in this action, as well as upon the referee, along with a copy of this order, and thereafter file the affidavits of service with the Clerk of the Court; and it is further
ORDERED that within 60 days of the date of this order, plaintiff is to provide the referee all papers and documents necessary for him/her to perform the determinations required by this order, and prepare his/her report; which referee's report is to be submitted to plaintiff within 30 days of receipt the papers and documents aforementioned; and it is further
ORDERED that plaintiff is to file an application for a judgment of foreclosure and sale within 120 days of the date of this order; and it is further
ORDERED that this action shall be calendared for a status conference on Tuesday, May 22, 2018 at 9:30 AM in Part 27 for the court to monitor the progress of this action. If a judgment of foreclosure and sale is filed with the court before that date, no appearance will be necessary; and it is further
ORDERED that failure to comply with any term of the order of September 26, 2016 and of this order will not form the basis for a motion to dismiss the action, but will be the subject of the status conference at which future compliance will be determined.
Defendant Elesiv Kopelman ("defendant") moves by order to show cause pursuant to CPLR 2221 (d) to reargue the court's decision of September 26, 2016 which denied her cross-motion to dismiss the action based upon plaintiff's lack of standing and granted plaintiff Deutsche Bank National Trust Company as Indenture Trustee for New Century Home Equity Loan Trust 2005-3's ("plaintiff") motion for summary judgment, and upon granting reargument, for an order granting defendant's cross-motion and denying plaintiff's motion. Defendant also moves alternatively, that if her cross-motion is not granted upon reargument, then she be allowed to amend her answer pursuant to CPLR 3025 (b) to amend her third affirmative defense to allege plaintiff's lack of standing, nunc pro tunc, and upon granting such amendment, for the court to revive and reconsider her cross-motion to dismiss, vacate the order of September 26, 2016 and dismiss the complaint. Plaintiff opposes these applications.
In deciding the order to show cause the court has considered the following submissions by the parties: the affirmation of defendant's counsel and attached exhibits which include the submissions by the parties on the original motion; plaintiff's counsel's affirmation in opposition and attached exhibits; the arguments raised by both counsel at oral argument on December 15, 2016; the supplemental briefings requested by the court after oral argument consisting of defendant's supplemental brief dated February 28, 2017, plaintiff's memorandum of law with attached exhibits dated March 2, 2017; and, defendant's counsel's "reply" by letter dated March 16, 2017.
This is an action to foreclose a mortgage on residential real property located at 559 Dewitt Avenue, North Babylon, Suffolk County, New York given by Glenn and Elesiv Kopelman, as husband and wife, to New Century Mortgage Corporation ("New Century") on [*2]April 8, 2005 to secure a note given at the same time to New Century by Glenn Kopelman. The history of the action is set forth in the decision placed on the record on September 26, 2016. (Glenn Kopelman passed away while the action was pending, plaintiff continued the action only against defendant.) That decision granted plaintiff's motion for summary judgment, dismissed defendant's three affirmative defenses and her answer, granted plaintiff's application to amend and reform the complaint and mortgage, to amend the caption to substitute in place of the "John Doe" and "Jane Doe" defendants Mark Teichman, Sr. and Laura Pfiter, fixed and set the defaults of the non-appearing and non-answering defendants and appointed a referee pursuant to RPAPL § 1321. Plaintiff's proposed order, as modified by the court, was signed simultaneously.
Defendant's cross-motion to dismiss the action based upon plaintiff's lack of standing was denied as defendant had waived that claim by not pleading it as an affirmative defense, and had not moved to amend her answer to raise such defense.
Defendant timely filed her motion to reargue by this order to show cause, seeking the relief referred to above.
Oral argument on defendant's order to show cause was held on December 15, 2016, at which time, on the record, the court granted defendant's alternative request for relief to allow the amendment of her third affirmative defense to include a claim of plaintiff's lack of standing to prosecute the action. This was done based upon the submissions and oral argument from which it appeared that defendant had raised substantive questions concerning the ability of the original lender to transfer the note and mortgage during the pendency of the bankruptcy proceeding of its parent corporation, New Century Financial Corporation ("New Century Financial"). The court also stayed the implementation of the order of September 26, 2016 and held in abeyance a decision on granting reargument, vacating the order of September 26, 2016, granting defendant's cross-motion to dismiss, as well as that portion of her alternative request which would revive consideration of her cross-motion upon the amendment, pending the submission by the parties of supplemental briefs or memorandums of law on the issue of the sufficiency of plaintiff's proof of its standing and defendant's claim that any possession of the mortgage and note was ultra vires as a result of the bankruptcy filing by New Century Financial in the United States Bankruptcy Court, Wilmington, Delaware ("Delaware bankruptcy") on April 2, 2007. Defendant argued that the bankruptcy filing prevented any transfer of the note without permission of the trustee of the Liquidating Trust, contrary to plaintiff's proof on its motion that it obtained possession of the note as a result of an assignment of the mortgage, which included the note, on April 8, 2011 by Carrington Mortgage Services ("Carrington") on behalf of New Century, which was filed with the Suffolk County Clerk June 2, 2011. Although a copy of the note indorsed in blank and undated by New Century ("the note") was included in the original submissions, there was no proof of when it came into plaintiff's possession.
Defendant filed a supplemental brief, plaintiff filed a memorandum of law and defendant responded to "new evidence" raised by plaintiff in a letter dated March 16, 2017. Both plaintiff's "new evidence" and the response by defendant are appropriate, as having granted defendant's application to amend her answer to raise the affirmative defense, plaintiff's memorandum of law was the first opportunity for plaintiff to respond to that affirmative defense and present evidence to support its standing, and defendant was entitled to respond to this new information.
REARGUMENT GRANTED, CROSS-MOTION DENIED
The court, in its discretion, grants defendant reargument of her cross-motion (see Deutsche Bank Natl. Trust Co. v Ramirez, 117 AD3d, 674 [2d Dept 2014]) and upon reargument, adheres to its original decision. Defendant's cross-motion to dismiss was based upon a claim that plaintiff lacked standing to prosecute the action and, as defendant's unamended answer still did not contain that affirmative defense, standing was waived and could not form the basis for summary judgment dismissing the complaint (see Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239 [2d Dept 2007]; Deutsche Bank Natl. Trust Co. v Hunter, 100 AD3d 810 [2d Dept 2012]; HSBC Bank USA, N. A. v Dalessio, 137 AD3d 860 [2d Dept 2016]; Castle Peak 2012-1 Loan Trust v Sottile, 147 AD3d 720 [2d Dept 2017]; Citigroup v Kopelowitz, 147 AD3d 1014 [2d Dept 2017]).
AMENDMENT TO ADD AFFIRMATIVE DEFENSE OF STANDING GRANTED
The court affirms its oral decision on the record on December 15, 2016 which granted defendant's application to amend her answer. Even if waived under CPLR 3211(e), a defense can be asserted in an amended answer by leave of court pursuant to CPLR 3025(b). The decision whether to allow an amendment is committed almost entirely to the court's discretion (see HSBC Bank v Picarelli, 110 AD3d 1031 [2d Dept 2013]; US Bank N.A. v Lomuto, 140 AD3d 852 [2d Dept 2016]). Such leave is generally freely given, as long as the amendment does not cause prejudice or surprise to the opposing party as a result of the delay in raising it, and such defense is not "palpably insufficient or patently devoid of merit" (see Deutsche Bank Trust Co. America v Cox, 110 AD3d 760 [2d Dept 2013]; Aurora Loan Services, LLC v Dimura, 104 AD3d 796 [2d Dept 2013]; Citimortgage , Inc. v. Pugliese, 143 AD3d 659 [2d Dept 2016]; Castle Peak 2012 v Sottile, 147 AD3d 720 [2d Dept 2017]). Here, plaintiff is not surprised, as in its original motion it put forward some proof of its standing, although not in the detail presented in its submissions on the order to show cause and supplemental memorandum of law. Its prejudice is minimal as no action has been taken upon the order of reference, nor has a final judgment of foreclosure been issued. It has been found to be an abuse of discretion by a trial court to refuse to allow a defendant to amend her answer to add a defense of lack of standing where plaintiff addressed its standing in its submission (see US Bank N.A. v Primiano, 140 AD3d 857 [2d Dept 2016]). Although at the time originally made defendant's arguments were not so insufficient or devoid of merit as to warrant denial of her application to amend, they are insufficient to grant summary judgment upon revival and reconsideration of her cross-motion when considered thereafter along with the supplemental submissions made by both parties.
DISMISSAL FOR LACK OF STANDING DENIED
In defendant's submissions supporting her alternative request for relief she argues that her cross-motion should be revived upon the granting of the amendment of her answer, and that upon revival, she should be granted summary judgment dismissing the complaint as plaintiff lacks standing. Defendant's submissions, including those from plaintiff's original motion and her [*3]cross-motion annexed as an exhibit to her order to show cause, as well as her other exhibits therein and her supplemental brief and reply to plaintiff' submissions do not establish as a matter of law plaintiff's lack of standing to bring the action. The revived cross-motion is denied.
The proponent of summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, providing sufficient evidence to establish the absence of any material issues of fact, failure to do so requires the motion to be denied regardless of the sufficiency of the opposition (see Jacobsen v New York City Health & Hospitals Corp., 22 NY3d 824 [2014]; William J Jenack Estate Appraiser and Auctioneers v Rabizadeh, 22 NY3d 470 [2013]; US Bank, NA v Sabloff, 153 AD3d 879 [2d Dept 2017]). For the court to grant summary judgment it must clearly appear that no material and triable issue of fact is presented (see Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957]). A party seeking summary judgment may not merely point to gaps in an opponent's proof to obtain relief, it must adduce affirmative evidence of entitlement to that relief, regardless of the sufficiency of the opposing papers (see Winegrad v. New York University Medical Center, 64 NY2d 851 [1985]; Gilbert Frank Corp. v. Federal Insurance, 70 NY2d 966 [1988]; Torres v. Industrial Container, 305 AD2d 136 [1st Dept 2003]; Fields v Village of Sag Harbor, 92 AD3d 718 [2d Dept 2012]; Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909 [2d Dept 2013]). Defendant has not met that burden here.
If defendant fails to establish plaintiff's lack of standing, its motion to dismiss is to be denied (see Flagstar Bank, FSB v Campbell, 137 AD3d 853 [2d Dept 2016]; US Bank N.A. v Weinman, 123 AD3d 1108 [2d Dept 2014]; Wells Fargo Bank, NA v Talley, 153 AD3d 583 [2d Dept 2017]).
Defendant's submissions do not establish that the assignment of the mortgage, which also assigned the note, by Carrington on behalf of New Century dated April 8, 2011 and filed with the Suffolk County Clerk on June 2, 2011 did not establish plaintiff's standing (see U. S. Bank N.A. v Akande, 136 AD3d 887 [2d Dept 2016]; Emigrant Bank v Larizza, 129 AD3d 904 [ 2d Dept 2015]). Nor do defendant's submissions disprove as a matter of law plaintiff's claim of possession of the note on July 1, 2007, as stated in the affidavit of Elizabeth Gonzales, an employee of Carrington, as part of plaintiff's supplemental submissions (see HSBC Bank USA, N.A. v Baptiste, 128 AD3d 773 [2d Dept 2015]; Bank of NY Mellon v Gales, 116 AD3d 723 [2d Dept 2014]). Defendant's proof, at best, can be said to only raise questions as to plaintiff's standing, but does not provide proof of her claims in evidentiary form. In the opinion of the court after reviewing the cases set forth below concerning the New Century Financial bankruptcy, defendant's claim is more mirage than substance, and in fact supports plaintiff's proof of standing.
Defendant's submission of the decision in Ross v Deutsche Bank National Trust Company as Indenture Trustee for New Century Home Equity Loan Trust 2005-4, 933 F. Supp. 2d 225 (D MA 2013) contradicts her claim that the filing of the bankruptcy by New Century Financial in April, 2007 prevented the transfer of the note in July 2007 or the assignment of the mortgage in April 2011. That decision establishes Carrington's ability to assign the note and mortgage to plaintiff on behalf of New Century, thus establishing plaintiff's standing.
The cornerstone of defendant's argument is that once the Delaware bankruptcy was filed on April 2, 2007 New Century had no authority to transfer a note or mortgage. This is [*4]contradicted by the holding in Ross v Deutsche Bank National Trust Company as Indenture Trustee for New Century Home Equity Loan Trust 2005-4, supra, (hereinafter "Ross"). In that decision the court notes that the bankruptcy records show that shortly after the bankruptcy was filed, New Century granted Carrington a limited power of attorney to execute, record, and assign "mortgages and other documents." It goes on to state that the application for the Liquidating Trust agreement, covering New Century Financial and its subsidiaries, including New Century, was filed with the bankruptcy court on April 6, 2008 and confirmed by the court on July 15, 2008. The court states that only on July 15, 2008 did all assets became vested in the Liquidating Trust and all debtors excluded from further interests in the assets, but that prior to July 15, 2008 New Century, as record holder of the mortgage and debtor in possession, had authority over the note and mortgage. This contradicts defendant's claim that New Century's authority over the note and mortgage terminated with the bankruptcy filing on April 2, 2007. Instead it establishes the ability of New Century to transfer the note to plaintiff on July 1, 2007, as Ms. Gonzales' affidavit claims, and would prove plaintiff's standing as long as Ms. Gonzales establishes her ability to testify pursuant to CPLR 4518.
Additional case law involving the Delaware bankruptcy leading from Ross, supra, further supports that decision and contradicts defendant's claims.
The ability of New Century, as a debtor in possession, to dispose of its property until the approval of a plan of reorganization is confirmed in an unreported federal decision, Phelps v U.S. Bank Nat. Ass'n , 2014 WL 991803 (US Dist Ct, SD TX 2014), which also involves the Delaware bankruptcy. There the court states that pursuant to U.S.C. §§ 1107 and 1108 a debtor in possession (which in that case was also New Century) has the power of a bankruptcy trustee to operate a debtor's business prior to approval of a plan of reorganization and the setting up of a liquidating trust. That court held that nothing in the Bankruptcy Code prohibited New Century from transferring the note and mortgage to U.S. Bank National Association as trustee and dismissed Phelps' claim, which is similar to the arguments here.
Further, the case of In Re: Richmond, 534 B.R. 479 (Bankr. E.D. NY 2015); affd 2016 WL 743397, 2016 U.S. Dist LEXIS 22396 (ED NY, 15 Civ. 04980 Donnelly, J.) is even more instructive on the issues raised by the parties herein. It shows that the establishment of the Liquidating Trust under the First New Century Confirmation Order of July 15, 2008 did not deprive New Century of the ability to transfer the note and mortgage. In Re: Richmond, supra, also dealt with a mortgage involving New Century and the Delaware bankruptcy and held that neither the First New Century Confirmation Order, nor the Second New Century Confirmation Order issued on November 20, 2009 prevented New Century or its servicers from transferring the note or assigning the mortgage, even after the Liquidating Trust was set up. In fact, provisions of both Confirmation Orders specifically authorized New Century's servicers retained prior to the Confirmation Orders to transfer, assign or otherwise make disposition of the mortgages (see In Re: Richmond at 488-490). The decision in Ross, supra, states Carrington was appointed servicer by New Century prior to the First Confirmation Order, and therefore able to assign the mortgage and note..
Defendant's claim that the filing of the bankruptcy petition by New Century in April, 2007 made all transfers as of that date "illegal" if they occurred without permission of the bankruptcy trustee, misrepresents the facts of that bankruptcy proceeding as indicated in the [*5]cases cited above. There appear to be a number of ways for New Century, or Carrington as its servicer, to legally transfer the note and/or assign the mortgage after the Delaware bankruptcy filing of April 2007, two of which are set forth in plaintiff's submissions.
Defendant's other submissions in support of her claim that New Century could not transfer the note and mortgage to plaintiff are not in admissible form, are not relevant to this case, do not support defendant's conclusions and are without merit.
Therefore, defendant's revived cross-motion for summary judgment dismissing the action based upon the amendment adding the affirmative defense of plaintiff's lack of standing is denied, as defendant has failed to prove as a matter of law that plaintiff lacked standing. In fact, based upon the above cited cases involving the Delaware bankruptcy and the proof submitted, plaintiff's submissions have established its standing.
PLAINTIFF'S STANDING ESTABLISHED
Although defendant's revived cross-motion is denied, as her amended answer raises standing plaintiff must establish its standing to succeed upon its motion for summary judgment. Where plaintiff's standing has been placed in issue by defendant's answer, plaintiff must establish its standing as part of its prima facie showing (see Aurora Loan Servs., LLC v. Taylor, 25 NY3d 355 [2015]; Loancare v. Firshing, 130 AD3d 787 [2d Dept 2015]; US Bank,, NA v Richard, 151 AD3d 1001 [2d Dept 2017]). A plaintiff has standing if it is either holder of the note or assignee thereof, at the time the action was commenced (see M & T Bank v Cliffside Prop. Mgt.,LLC, 137 AD3d 876 [2d Dept 2016]). Plaintiff may establish its standing by submitting evidence showing that the note, indorsed in blank by the lender, was physically delivered to it, prior to the commencement of the action (see HSBC Bank USA, N.A. v Baptiste, supra), or by an assignment of the mortgage which also assigns the note (see Emigrant Bank v Larizza, supra; U. S. Bank N.A. v Akande, supra; Wells Fargo Bank. N. A. v Archibald, 150 AD3d 937 [2d Dept 2017]). Such written assignment or physical delivery prior to the commencement of the action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident thereto (see U.S. Bank, NA v Collymore, 68 AD3d 752 [2d Dept 2009]; Bank of NY Mellon v Gales, supra).
As originally argued by plaintiff, the April 8, 2011 assignment of the mortgage by Carrington on behalf of New Century also transferred the note to plaintiff. A copy of this assignment, filed with the Suffolk County Clerk on June 2, 2011 and made part of her official records, was part of plaintiff's original submissions. As indicated by the holding in Ross, supra, New Century granted Carrington a limited power of attorney to execute, record, and assign mortgages on its behalf effective April 8, 2007. As shown in the holding in In Re: Richmond, supra, a servicer for New Century appointed prior to the dissolution plan, such as Carrington, had authority to assign the mortgage on New Century's behalf even while the Liquidating Trust was in effect (see In Re: Richmond at 488-490). As the mortgage that is the subject of this action did not involve Mortgage Electronic Registration Systems, Inc., an assignment of the mortgage which also assigns the note is sufficient to establish plaintiff's standing (see Emigrant Bank v Larizza, supra; Deutsche Bank Nat. Trust Co. v Romano, 147 AD3d 10210 [2d Dept 2017]; Wells Fargo Bank. N. A. v Archibald, supra). Therefore, the proof here establishes that the [*6]mortgage assignment of April 8, 2011 is valid and transfers the note to plaintiff's possession prior to the filing of this action on November 14, 2011. Plaintiff has established its standing.
Although proof of plaintiff's possession of the note on July 1, 2007 could also have established plaintiff's standing (UCC 3-204[2], see Aurora Loan Services, LLC v Taylor, supra; HSBC Bank, JPMorgan Chase Bank, NA v Weinberger, 142 AD3d 643 [2d Dept 2016]; Wells Fargo Bank, NA v Thomas, 150 AD3d 1312 [2d Dept 2017]), the affidavit of Ms. Gonzales submitted by plaintiff is insufficient to establish this pursuant to CPLR 4518 as it fails to establish the records were made in the ordinary course of Carrington's business and at or about the time of the events they refer to (see Aurora Loan Servs., LLC v Mercius, 138 AD3d 650 [2d Dept 2016]; Aurora Loan Servs., LLC v Bartiz, 144 AD3d 618 [2d Dept 2016]; Aurora Loan Servs, LLC v Komarovsky, 151 AD3d 924 [2d Dept 2017]).
Plaintiff's further attempt to establish possession of the mortgage in 2005 as part of the Pooling and Servicing Agreement fails in part because the affidavit in support of it also fails to meet the requirements of CPLR 4518 (a), but additionally the argument is without merit.
DEFENDANT'S AMENDED ANSWER IS DISMISSED
As plaintiff has established its standing, defendant's third affirmative defense, as amended, is dismissed. In light of this decision, there is no reason for the court to vacate and recall the "long form" order it signed on September 26, 2016 granting plaintiff summary judgment and related relief. The terms and conditions of that order remain in effect, as modified by this order setting a different schedule for the acts necessary for the filling of judgment of foreclosure and sale.
To clarify any questions concerning the amendment of the caption directed by the order of September 26, 2016, it is included again herein for use in all future proceedings in this action.
This constitutes the order and decision of the court.
Dated: January 29, 2018
_______________________________________
Hon. Robert F. Quinlan, J.S.C.
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