U.S. Bank N.A. v Garcia

[*1] U.S. Bank N.A. v Garcia 2018 NY Slip Op 51067(U) Decided on June 19, 2018 Supreme Court, Bronx County Brigantti, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 19, 2018
Supreme Court, Bronx County

U.S. Bank National Association, Plaintiff,

against

Jeurio Garcia, et al., Defendant.



32811/2016E



Attorneys for Plaintiff: Woods Oviatt Gilman, LLP (Michael Jablonski, Esq.)

Attorneys for Defendant: The Law Offices of Ari Mor, Esq. P.C. (Ari Mor, Esq.)
Mary Ann Brigantti, J.

The following papers numbered 1 to __6___ were read on this motion ( Seq. No. __ ) for ____ORDER OF REFERENCE_______ noticed on ____October 13, 2017_______.

Notice of Motion - Order to Show Cause - Exhibits and Affidavits Annexed No(s). 1,2

Answering Affidavit and Exhibits (Cross-Motion) Nos). 3,4

Replying Affidavit and Exhibits No(s). 5,6

Upon the foregoing papers, the plaintiff U.S. Bank National Association, as trustee, successor in interest to Bank One, National Association, as trustee for Credit Suisse First Boston Mortgage Securities Corp., CSFB Mortgage-Backed Pass-Through Certificates, Series 2002-30 ("Plaintiff") moves for an order of reference, to amend the caption, and to enter a default judgment against all non-answering and non-appearing defendants, and for the relief requested on its second cause of action. Defendant Jeurio Garcia ("Defendant") opposes the motion and cross-moves for an order amending his answer pursuant to CPLR 3025(b), for summary judgment and/or dismissal of the complaint pursuant to CPLR 3212 and CPLR 3211(a)(5) on the ground that the cause of action may not be maintained because of the statute of limitations, and dismissing the complaint pursuant to CPLR 3211(a)(7), on the ground of inadequate service of the predicate notice(s), which renders this proceeding fatally defective, and awarding costs and fees and disbursements. Plaintiff opposes the cross-motion.

"A prima facie showing to warrant summary judgment foreclosure of a mortgage requires the movant to establish the existence of the mortgage and mortgage note, ownership of the mortgage, and the defendant's default in payment." (Witelson v. Jamaica Estates Holding Corp. I, 40 AD3d 284 [1st Dept 2007]). In this matter, Plaintiff has produced the mortgage and the allegedly unpaid note. The note itself contains an endorsement in "blank" signed by an senior [*2]vice president of "Coastal Capital Corp., d/b/a the Mortgage Shop" (hereinafter "Coastal"). Plaintiff also provides an affidavit from Armenia L. Harrell, an employee of it's servicing agent, who contends that upon review of Plaintiff's business records, Plaintiff acquired possession of the original note on August 7, 2006, and had possession of the note at the time this action was commenced. Harrell also states that Defendant defaulted on the loan by failing to make the payment due and owing on January 1, 2011. She further alleges that all 90-day pre-foreclosure notices were sent to Defendant by certified and first class mail. Plaintiff's submissions, as a whole, satisfied its initial burden of proving entitlement to an order of reference, a default judgment against the non-appearing and non-answering defendants, and summary judgment against Defendant, who interposed an answer to the complaint (see Bank of Smithtown v. 264 W.124 LLC, 105 AD3d 468 [1st Dept. 2013]; Bank of New York Mellon Trust Co. NA v. Sachar, 95 AD3d 695 [1st Dept. 2012]). It therefore became incumbent upon Defendant to demonstrate the existence of a triable issue of fact as to his affirmative defenses (see, Zuckerman v. City of New York, 49 NY2d 557 [1957], supra; Barcov Holding Corp. v. Bexin Realty Corp., 16 AD3d 282 [1st Dept. 2005]).

Defendant has opposed the motion and has filed a cross-motion seeking, among other things, leave to serve an amended answer. It is "fundamental that leave to amend a pleading should be freely granted, so long as there is no prejudice to the opposing party" (Kocourek v. Booz Allen Hamilton Inc., 85 AD3d 502 [1st Dept 2011] citing CPLR 3025[b]). On a motion to amend, a movant need not establish the merits of the proposed new allegations, but must simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit (see MBIA Ins. Corp. v. Greystone & Co., Inc., 74 AD3d 499 [1st Dept. 2010]).

Statute of Limitations

Defendant seeks leave to amend his pleading to interpose an affirmative defense alleging that this action is barred by the applicable statute of limitations. Generally, "an action to foreclose a mortgage may be brought to recover unpaid sums which were due within the six-year period immediately preceding the commencement of the action" (Wells Fargo Bank, N.A. v. Burke, 94 AD3d 980, 982 [2nd Dept. 2012]; CPLR 213[4]). "With respect to a mortgage payable in installments, separate causes of action accrue for each installment that is not paid, and the statute of limitations begins to run on the date each installment becomes due" (Nationstar Mortg. LLC v. Weisblum, 143 AD3d 866 [2nd Dept. 2016][internal citations omitted]). However, "even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the statute of limitations begins to run on the entire debt" (EMC Mortgage Corp. v. Patella, 279 AD2d 604, 605 [2nd Dept. 2001]; see also CDR Creances SA v. Euro-American Lodging Corp., 43 AD3d 45 [1st Dept. 2007]). "[O]nce a mortgage debt is accelerated, 'the borrowers' right and obligation to make monthly installments cease[s] and all sums [become] immediately due and payable'" (EMC Mortgage Corp. v. Patella, 279 AD2d at 605, quoting Federal Natl. Mtge. Ass'n v. Mebane, 208 AD2d 892, 894 [2nd Dept. 1994]).

In this case, Defendant has made the required initial showing that this proposed defense has merit by producing evidence that a prior action was commenced on this debt by the original lender Coastal in 2006, thus accelerating the debt, and the prior action was not discontinued until after the expiration of the six-year statute of limitations.Plaintiff initially argues that Defendant waived this defense by failing to assert it in his initial answer, and moreover, Plaintiff [*3]will be prejudiced by the proposed amendment. These contentions are unavailing. Defendant's proposed amendment is not unduly late, as he has made this cross-motion approximately eight months after Plaintiff improperly rejected his initial answer, and Plaintiff has yet to obtain a judgment of any sort. Permission to amend pleadings may be granted at any time in the absence of prejudice, even mid-trial (see Shine v. Duncan Petroleum Transp., 60 NY2d 22, 27 [1983]). Furthermore, Plaintiff has failed to show that it will sustain operative prejudice or surprise as a result of the amendment. "Prejudice" in this context means ""some special right lost in the interim, some change of position or some significant trouble or expense that could have been avoided had the original pleading contained what the amended one wants to add" (see Barbour v. Hospital for Special Surgery, 169 AD2d 385 [1st Dept. 1991]). Plaintiff's own decision to delay the prosecution of its related quiet-title action cannot be attributed to Defendant's "waiver" of the statute of limitations defense, as the quiet-title action was commenced nearly two years before this action was filed. More importantly, Plaintiff was undoubtedly aware of the possibility that this defense would be raised, and therefore it cannot show that it is surprised by the proposed amendment. Defendant's cross-motion seeking leave to interpose this affirmative defense is therefore granted.

Defendant moves for an order dismissing the complaint pursuant to CPLR 3212 and/or CPLR 3211(a)(5) on the ground that the action is barred by the statute of limitations. In moving to dismiss a cause of action as barred by the applicable statute of limitations, the defendant bears the initial burden of demonstrating, prima facie, that the time within which to commence the action has expired (see City of Yonkers v. 58A JVD Indus., Ltd., 115 AD3d 635 [2d Dep't 2014]). "The burden then shifts to the plaintiff to raise an issue of fact as to whether the statute of limitations was tolled or was otherwise inapplicable, or whether it actually commenced the action within the applicable limitations period." (Id.). On this motion record, there exist issues of fact as to whether this action is barred by the applicable statute of limitations.

As noted supra, Defendant has produced evidence indicating that the original mortgage lender commenced an action on this debt in 2006, thus accelerating the debt and commencing the six-year statute of limitations. Moreover, the 2006 action was not discontinued until 2016, after the expiration of the limitations period. However, a lender's election to accelerate a mortgage may be subsequently revoked — thus halting the statute of limitations — by an affirmative, unambiguous act by the lender during the limitations period, provided that there has been no change in the borrower's position in reliance thereon (see Lavin v. Elmakiss, 302 AD2d 638 [3rd Dept. 2003]; see UMLIC VP v. Mellace, 19 AD3d 684 [2nd Dept. 2005]; Federal Nat. Morg. Ass'n v. Mebane, 208 AD2d 892 [2nd Dept. 1994]). In addition, a plaintiff may also show that the loan was never properly accelerated, thus the statute of limitations never commenced, for example where a prior foreclosure plaintiff did not have the requisite standing to sue (see Wells Fargo Bank, N.A. v. Burke, 94 AD3d 980, 983; U.S. Bank NA v. Gordon, 158 AD3d 832, 836 [2nd Dept. 2018]).

In this case, Plaintiff's submissions in opposition to the cross-motion raise issues of fact, but do not conclusively resolve the issue of whether the prior action constituted a valid acceleration of this debt. The prior action was commenced by Coastal, the originator of the loan who appears on the face of the note itself. Defendant's cross-motion papers include an assignment dated May 29, 2002, purportedly assigning the mortgage and note from Coastal to [*4]Plaintiff before the prior action was commenced. However, this assignment was never recorded, and is the subject of the related quiet-title action, as well as the Plaintiff's second cause of action in this foreclosure action. Plaintiff does not support its reply/opposition papers with an affidavit from someone with personal knowledge explaining the validity of this document or the circumstances surrounding its creation. In addition, in support of its motion to discontinue the prior action (Bronx County Index No. 18771/2006), Coastal argued that it had physical possession of the indorsed-in-blank note and therefore had standing to commence the action (see Affirmation in Reply/Opposition to Cross-Motion, Miranda L. Sharlette, Esq., dated Jan. 7, 2016, at Pars. 30, 32). If Coastal indeed had physical possession of the underlying note when it commenced the prior action, Coastal would have established its standing to sue, even if there were outstanding issues relating to the validity of the May 2002 unrecorded assignment of the note and mortgage to Plaintiff (see, e.g., U.S. Bank, Nat. Ass'n v. Brjimohan, 153 AD3d 1164 [1st Dept. 2017]; see also Deutche Bank Nat. Trust Co. v. Whalen, 107 AD3d 931, 932 [2nd Dept. 2013]). Nevertheless, this issue remains unresolved, because the affidavit from Armenia L. Harrell alleges that Plaintiff (not Coastal) possessed the note as of August 7, 2006, and the prior action was commenced by Coastal on August 16, 2006. Furthermore, Defendant's cross-motion papers include a different version of this purported assignment, wherein the "assignee" field is left blank. In sum, there are outstanding issues concerning whether Coastal indeed had the authority to commence the prior action and thus validly accelerated the debt.

The Court does note that the special forbearance agreement allegedly signed by Defendant did not serve to reset the applicable statute of limitations (see General Obligations Law §17-101; 105). The agreement does not constitute an express acknowledgment of the debt nor an express promise to repay the debt. Rather, it constituted only a promise to pay a specific sum in exchange for the plaintiff's agreement to forego prosecution of the foreclosure action (see Petito v, Piffath, 85 NY2d 1, 8 [1994], rearg den., 85 NY2d 858, cert. den., 516 U.S. 864 [1995]). Moreover, this agreement is not properly before the court as it is unaccompanied by an affidavit from someone establishing its admissibility as a business record (CPLR 4518[a]).

In light of the foregoing, there are issues of fact as to whether the statute of limitations actually commenced as a result of the prior action, and therefore Defendant's cross-motion on this issue is denied. Because the record contains no affidavit from individuals possessing personal knowledge concerning the May 2002 assignment, and because the purported assignment is not annexed to Plaintiff's moving papers or even referenced in the Harrell affidavit, Plaintiff's motion for summary judgment and/or a default judgment on its second cause of action is denied.

Compliance with RPAPL §1304

Defendant argues that it is entitled to dismissal of this action because Plaintiff failed to comply with a condition precedent to foreclosure - specifically, it failed to show that it served Defendant with a "90-day" notice as required by RPAPL §1304.

"[P]roper service of RPAPL 1304 notice on the borrower or borrowers is a condition precedent to the commencement of a foreclosure action" (Deutche Bank Nat. Trust Co. v. Quinn, 120 AD3d 609 [2nd Dept. 2014], citing Aurora Loan Servs., LLC v. Weisblum, 85 AD3d 95, 106; see RPAPL 1304[1], [2] ). The presumption of receipt of a mailing "may be created by either proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed" (Residential Holding Corp. v. Scotsdale Ins. [*5]Co., 286 AD2d 679 [2nd Dept. 2001]). In this case, contrary to Defendant's contentions, Plaintiff established compliance by submitting the affidavit of Harnell who affirms her familiarity with the loan servicer's office procedures in sending letters, and alleges that the 90-day notices were sent via regular and first class mail. Annexed to her affidavit are copies of the notices, along with copies of the certified mailing receipts and bar codes reflecting that they were sent via certified mail. Plaintiff also presents a copy of the certified mailing return receipt which is signed with a date of delivery of June 24, 2016. The foregoing demonstrates, prima facie, that Plaintiff fulfilled the requirements of RPAPL §1304 (see Citimortgage, Inc. v. Espinal, 134 AD3d 876, 879 [2nd Dept. 2015]; see also U.S. Bank, N.A. v. Brjimohan, 153 AD3d at 1165-1166). Furthermore, Defendant has submitted no personal affidavit denying receipt of the 90-day notices. Accordingly, Defendant's motion to dismiss the complaint on this ground is denied, and any affirmative defense predicated upon Plaintiff's alleged failure to comply with RPAPL §1304 is stricken.

Plaintiff's Standing

Defendant also claims that Plaintiff has failed to meet its burden of stating a prima facie cause of action pursuant to CPLR 3215, because it has not demonstrated its standing to commence this action. Specifically, Defendant argues that Plaintiff has not attached the assignment of the mortgage to its complaint or moving papers, and the one assignment that is filed with ACRIS is one purportedly from Coastal to an entity called "Letom Management, LLC." In addition, Defendant argues that Plaintiff has proffered fraudulent assignments of the mortgage. Defendant further argues that Plaintiff has failed to demonstrate the physical delivery of the original, wet-ink note prior to commencement of this action, and the Harrell affidavit of merit is conclusory and lacks detail concerning the physical delivery of the note. Defendant also contends that Plaintiff has failed to effectuate a valid conveyance of the note as required by the Pooling and Servicing Agreement and IRS Code 860D(a)(4).

A plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note prior to commencement of the action with the filing of the complaint. (GRP Loan, LLC v. Taylor, 95 AD3d 1172 [2nd Dept. 2012]). Where, as here, the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief (Id., citing Bank of NY v. Silverberg, 86 AD3d 274 [2nd Dept. 2011]). "Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident." (LaSalle Bank Nat'l Assn. v. Ahern, 59 AD3d 911, 912 [2nd Dept. 2009]). A party has standing to foreclose under a "pay to the order" promissory note that was indorsed in blank—like the note at issue here—by evidencing that the note was negotiated by the indorser's physical delivery of the note to the foreclosing party, or where there is written evidence of a proper assignment prior to commencement of the action (GRP Loan, LLC v. Taylor, supra.).

In this case, contrary to Defendant's contentions, Plaintiff demonstrated its physical possession of the subject note by appending a CPLR 2105- attorney-certified copy of it to the summons and complaint (see Deutche Bank Nat. Trust Co. v. Umeh, 145 AD3d 497 [1st Dept. 2016]). The foregoing establishes Plaintiff's physical possession of the note notwithstanding the alleged deficiencies in the Harrell affidavit concerning delivery or possession. Moreover, [*6]Plaintiff has also submitted an affirmation from its counsel in opposition to the cross-motion, averring that his office has had possession of the original note since October 4, 2016, before this action was commenced. Plaintiff's proof of possession establishes its standing to sue, even assuming that there are outstanding issues concerning the validity of the purported assignment from Coastal to Plaintiff (see U.S. Bank, Nat. Ass'n v. Brjimohan, 153 AD3d 1164). Defendant provides no proof supporting his contention that Plaintiff has failed to comply with certain requirements contained in the Pooling and Servicing Agreement ("PSA"). In any event, Defendant has no standing to challenge Plaintiff's compliance with provisions of that document (see Wells Fargo Bank, N.A. v. Erobobo, 127 AD3d 1176, 1178 [2nd Dept. 2015]).

In light of the foregoing, Defendant's motion to dismiss the complaint for lack of standing is denied, and any purported amendment to the answer predicated upon Plaintiff's alleged lack of standing is denied.

Remaining Issues

Defendant's proposed answer includes a proposed second affirmative defense predicated upon a lack of personal jurisdiction. However, Defendant waived this affirmative defense by failing to assert it in his original answer or in a pre-answer motion to dismiss (see CPLR 3211[e]; see McGowan v. Hoffmeister, 15 AD3d 297 [1st Dept. 2005]). Therefore, Defendant's cross-motion seeking leave to amend his answer to include this affirmative defense is denied. Defendant has also failed to demonstrate the merit of his proposed affirmative defense predicated upon Plaintiff's lack of subject matter jurisdiction. Defendant's proposed affirmative defense predicated upon a failure to mitigate damages is denied because a mortgagee has no duty to mitigate damages under these circumstances (see, e.g., Marine Midland Bank, N.A. v. Virginia Woods, Ltd., 201 AD2d 625, 626-27 [2nd Dept. 1994]).

Defendant's proposed fifth, sixth and eleventh affirmative defenses will be permitted insofar as they are substantially similar to the affirmative defenses originally pled, and Plaintiff has not demonstrated that they are prejudicial, palpably insufficient or lacking in merit. Defendant's motion to interposed the nonspecific ninth and tenth affirmative defenses are denied as they have not been plead with the requisite particularity (CPLR 3013). Defendant's third proposed counter-claim, that "Plaintiff does not have the legal right to enforce the promissory Note securing the mortgage debt," is without merit, because as noted supra, Plaintiff has demonstrated its standing to commence this action and enforce the loan.

Because there are outstanding issues concerning the validity of the assignment from Coastal to Plaintiff, Defendant is granted leave to serve an amended answer interposing his proposed fourth, fifth, and sixth counterclaims. The Court notes, however, that Defendant's is precluded from raising issues concerning Plaintiff's alleged non-compliance with the PSA, and moreover, Plaintiff has established its standing to commence this action.

Finally, Defendant did not address the merits of his first, second, seventh or eighth proposed counter-claims, therefore his motion to include those amendments is denied.

Accordingly, it is hereby

ORDERED, that Plaintiff's motion is granted only to the extent that plaintiff is entitled to leave to amend the caption to add Daisy Albino and Dani Perez as party defendants to this action in place of "John Doe," and it is further,

ORDERED, that Plaintiff's motion for summary judgment against Defendant, and for an [*7]order of reference, is denied without prejudice, and it is further,

ORDERED, that all non-appearing and non-answering defendants are in default, and it is further,

ORDERED, that Plaintiff's motion for judgment on its second cause of action is denied without prejudice, and it is further,

ORDERED, that defendant Columbia Federal Savings Bank is removed as a party defendant, and the caption is amended accordingly, and it is further,

ORDERED, that Defendant's motion for leave to serve an amended answer is granted only to the extent that Defendant is permitted to interpose its proposed fifth, sixth, eighth, and eleventh affirmative defenses, and his proposed fourth, fifth, and sixth proposed counterclaims, and it is further,

ORDERED, that the remaining branches of Defendant's motion for leave to serve an amended answer are denied, and it is further,

ORDERED, that Defendant is directed to file and serve an amended answer in accordance with this decision within thirty (30) days after service of a copy of this Order with Notice of Entry, and it is further,

ORDERED, that Defendant's motion for summary judgment/motion to dismiss the complaint pursuant to CPLR 3212 and 3211(a)(5) on the ground that this action is barred by the statute of limitations is denied, without prejudice, and it is further,

ORDERED, that Defendant's motion to dismiss pursuant to CPLR 3211(a)(7), on the ground that Plaintiff failed to provide predicate notices, is denied, and it is further,

ORDERED, that Defendant's motion for costs, attorney's fees, and disbursements, is denied, and it is further,

ORDERED, that the caption is amended accordingly, to read as follows:

X Index No.: 32811/2016EU.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, SUCCESSOR IN INTEREST TO BANK ONE, NATIONAL ASSOCIATION, AS TRUSTEE FOR CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP., CSFB MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2002-30,Plaintiff,against-JEURIO GARCIA, A/K/A JEURIS GARCIA, A/K/A JEURIS D. GARCIA, NEW YORK CITY HOUSING AUTHORITY, PETRO INC., MIDLAND FUNDING, LLC., DISCOVER BANK, CITY OF NEW YORK ENVIRONMENTAL CONTROL BOARD, CITY OF NEW YORK TRANSIT ADJUDICATION BUREAU, ATLANTIC MORTGAGE & INVESTMENT CORPORATION, OFFICE OF THE CITY REGISTER OR THE CITY OF NEW YORK, DAISY ALBINO, DANI PEREZ,Defendants

X

This constitutes the Decision and Order of this Court.

Dated: June 19, 2018

Hon. Mary Ann Brigantti