Federal Natl. Mtge. Assn. ("Fannie Mae") v Martin Rico

[*1] Federal Natl. Mtge. Assn. ("Fannie Mae") v Martin Rico 2018 NY Slip Op 51202(U) Decided on August 3, 2018 Supreme Court, Warren County Muller, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 3, 2018
Supreme Court, Warren County

Federal National Mortgage Association ("Fannie Mae"), A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE UNITED STATES OF AMERICA, Plaintiff,

against

Martin Rico, KATHRYN RICO, BOARD OF DIRECTORS OF THE CRYSTAL LAKE PRESERVE HOMEOWNERS ASSOCIATION AND JOHN DOE, Defendants.



2014-60180



Gross Polowy, LLC, Williamsville (Sarah A. Michalek and Steven Rosenfeld of counsel), for plaintiff.[FN1]

The Clements Firm, Glens Falls (Thomas G. Clements of counsel), for defendant Linda Stemler.
Robert J. Muller, J.

Defendant Linda Stemler (hereinafter defendant) — sued herein as "John Doe" — has resided at 11 Summit Road in the hamlet of Brant Lake, Warren County continuously since 1994. She owned the property until 2007, at which time she deeded it to defendants Kathryn Rico and Martin Rico, her daughter and son-in-law. The Ricos then obtained a loan from Bank of America, N.A. on August 10, 2010 in the amount of $192,800.00, which loan was evidenced by a promissory note and secured by a mortgage on the property. The Ricos made monthly payments under the terms of the loan documents until October 1, 2013, at which time they defaulted. The mortgage was transferred to plaintiff by assignment recorded on December 24, 2013. Plaintiff commenced this foreclosure action on May 9, 2014. The mortgage was thereafter transferred to PROF-2013-S3 Legal Title Trust II by U.S. Bank National Association, as Legal Title Trustee [*2](hereinafter PROF-2013-S3) by assignment recorded on January 9, 2017.

The Ricos and defendant Board of Directors of the Crystal Lake Preserve Homeowners Association (hereinafter Crystal Lake Preserve HOA) have not answered or otherwise appeared. Defendant served an answer on January 4, 2016, which answer included, inter alia, the affirmative defense of standing. While initially rejected by plaintiff as untimely, the answer was ultimately accepted by stipulation of the parties entered on July 12, 2016. Defendant served omnibus discovery demands with her answer which requested, inter alia, the original ink signature note. She also served an amended demand for a bill of particulars on August 2, 2016 requesting that plaintiff "[s]tate each and every basis for . . . alleging that [it] is the current owner of the [p]romissory [n]ote," as well as "each and every basis for . . . alleging that [it] was the owner of the [p]romissory note . . . , specifically the location and custodian of the original note on May 19, 2014." Plaintiff refused to respond to the demands, however, contending that defendant — as neither an obligor on the note nor a mortgagor — could not challenge it's standing. Defendant then moved to dismiss the complaint based upon plaintiff's refusal to respond.

By Decision and Order dated November 14, 2017 (57 Misc 3d 1218[A], 2017 NY Slip Op 51544[U] [Sup Ct, Warren County 2017]), the Court — while finding plaintiff's contentions to be without merit — declined to dismiss the complaint. Instead, the Court issued a conditional order whereby the complaint would be dismissed if plaintiff failed to provide substantive responses to defendant's demands within 30 days of service of the Decision and Order with notice of entry (see id. at *3). Defendant then served the Decision and Order with notice of entry on plaintiff via regular mail on November 21, 2017. Plaintiff provided responses to defendant's omnibus discovery demands on November 28, 2017 and responses to her amended demand for a bill of particulars on December 19, 2017. Plaintiff also permitted defendant to personally inspect the original note on December 8, 2017.

Presently before the Court is plaintiff's motion for (1) summary judgment as against defendant granting the relief requested in the complaint and dismissing her answer; (2) default judgment as against the Ricos and Crystal Lake Preserve HOA; (3) amendment of the caption so as to substitute PROF-2013-S3 for plaintiff and defendant for "John Doe"; and (4) appointment of a referee. Also before the Court is defendant's cross motion to dismiss the action. The motion and cross motion will be addressed ad seriatim.

Plaintiff's Motion

Turning first to that aspect of plaintiff's motion seeking summary judgment, "[w]here, as here, the plaintiff's standing has been placed in issue by the defendant['s] answer, the plaintiff must also prove its standing as part of its prima facie showing on a motion for summary judgment" (Aurora Loan Servs., LLC v Ang, 150 AD3d 649, 650 [2017]; see Wells Fargo Bank, N.A. v Walker, 141 AD3d 986, 987 [2016]; Deutsche Bank Natl. Trust Co. v Monica, 131 AD3d 737, 738 [2015]; Nationstar Mtge., LLC v Catizone, 127 AD3d 1151, 1152 [2015]; Wells Fargo Bank, NA v Ostiguy, 127 AD3d 1375, 1376 [2015]). "In a foreclosure action, a plaintiff has standing if it is the holder or assignee of the underlying note at the time the action is commenced" (Aurora Loan Servs., LLC v Ang, 150 AD3d at 650; see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361-362 [2015]; One W. Bank, FSB v Albanese, 139 AD3d 831, 832 [2016]; Aurora Loan Servs., LLC v Mercius, 138 AD3d 650, 651 [2016]). "Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement [*3]of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident" (U.S. Bank N.A. v Carnivale, 138 AD3d 1220, 1221 [2016], quoting Onewest Bank, F.S.B. v Mazzone, 130 AD3d 1399, 1400 [2015]; see Aurora Loan Servs., LLC v Ang, 150 AD3d at 650; Aurora Loan Servs., LLC v Mercius, 138 AD3d at 651).

Here, plaintiff relies on the affidavit of Joette E. Bonin, a Foreclosure Specialist for Fay Servicing, LLC as attorney in fact for PROF-2013-S3, to establish its standing.[FN2] Bonin states that "[PROF-2013-S3] had possession of the [p]romissory [n]ote on October 1, 2016" and remains "in possession of the [p]romissory [n]ote." She also states that "[plaintiff] was in possession of the [p]romissory [n]ote prior to May 19, 2014." These statements, however, are based solely upon her "familiar[ity] with [the] business records maintained by Fay Servicing, LLC." Bonin does not claim to have any familiarity or personal knowledge of plaintiff's record-keeping practices and procedures. Under these circumstances, plaintiff has failed to demonstrate that it had physical possession of the note prior to commencement of the action (see Aurora Loan Servs., LLC v Ang, 150 AD3d at 650-651; U.S. Bank N.A. v Handler, 140 AD3d 948, 949 [2016]; Aurora Loan Servs., LLC v Mercius, 138 AD3d at 652; Citibank, N.A. v Cabrera, 130 AD3d 861, 861-862 [2015]). Plaintiff thus failed to meet its prima facie burden of establishing its standing and the aspect of its motion seeking summary judgment must be denied.

Turning now to the second aspect of plaintiff's motion, the Court finds that plaintiff has demonstrated its entitlement to a default judgment as against Kathryn Rico and Crystal Lake Preserve HOA (see CPLR 3215 [f]). The Court further finds, however, that plaintiff has failed to demonstrate its entitlement to a default judgment as against Martin Rico. On November 28, 2016, the Court issued an Order extending plaintiff's time to serve Martin Rico with the summons and complaint to 120 days from the date of the Order.[FN3] With that said, plaintiff has not provided proof that Martin Rico was personally served in accordance with the Order. The aspect of plaintiff's motion seeking a default judgment is therefore granted relative to Kathryn Rico and Crystal Lake Preserve HOA and is otherwise denied.

With respect to the third aspect of plaintiff's motion, the Court finds that plaintiff is entitled to substitute defendant for "John Doe." That being said, however, the Court declines to substitute PROF-2013-S3 for plaintiff. While the assignment from plaintiff to PROF-2013-S3 was executed by Nationwide Title Clearing, Inc. (hereinafter Nationwide) as attorney-in-fact for plaintiff, the record does not contain a copy of the power of attorney whereby Nationwide was appointed as plaintiff's attorney-in-fact. The aspect of plaintiff's motion seeking to amend the [*4]caption is therefore granted to the extent that defendant is substituted for "John Doe" and is otherwise denied.

Finally, the aspect of plaintiff's motion seeking to appoint a referee is denied. To the extent that plaintiff has not demonstrated its entitlement to summary judgment as against defendant nor to a default judgment as against Martin Rico, the appointment of a referee would be premature.

Defendant's Cross Motion

Defendant cross-moves to dismiss the complaint based upon plaintiff's willful failure to comply with the November 2017 Decision and Order.

"'While a court may order dismissal in any action . . . as a penalty for noncompliance with disclosure demands or order, this type of drastic remedy is reserved for situations where a party's failure to comply is willful, contumacious, or in bad faith" (Green Tree Servicing LLC v Bormann, 157 AD3d 1112, 1113 [2018], quoting Mary Imogene Bassett Hosp. v Cannon Design, Inc., 84 AD3d 1543, 1544 [2011] [internal quotation marks and citations omitted]; see O'Connor v Syracuse Univ., 66 AD3d 1187, 1191 [2009], lv dismissed 14 NY3d 766 [2010]; Kumar v Kumar, 63 AD3d 1246, 1248 [2009]).

The Court finds that the drastic remedy of dismissal is not appropriate in this case. Plaintiff not only provided written responses to defendant's omnibus discovery demands and amended demand for a bill of particulars within the 30-day time frame set forth in the Decision and Order, but it also permitted defendant to inspect the original note. Defendant contends that plaintiff's responses to her amended demand for a bill of particulars are not sufficient because they fail to include the location of the original note on May 19, 2014. Plaintiff, however, contends that this information is not necessary to establish standing. While the Court is not entirely persuaded that plaintiff is correct,[FN4] this discovery dispute certainly does not rise to the level of willful or contumacious conduct on plaintiff's part.

Based upon the foregoing, the cross motion is denied in its entirety.

Therefore, having considered the Affirmation of Sarah A. Michalek, Esq. with exhibits attached thereto, dated December 29, 2017, submitted in support of the motion;[FN5] Memorandum of Law of Sarah A. Michalek, Esq., dated December 29, 2017, submitted in support of the motion; Affidavit of Thomas G. Clements, Esq. with exhibits attached thereto, sworn to February 26, 2018, submitted in opposition to the motion and in support of the cross motion; Affidavit of Linda Stemler, sworn to February 26, 2018, submitted in opposition to the motion and in support of the cross motion; and Affirmation of Steven Rosenfeld, Esq. with exhibits attached thereto, submitted in further support of the motion and in opposition to the cross motion, and oral [*5]argument having been heard on August 2, 2018 with Susan Quine Laurilliard, Esq. appearing on behalf of plaintiff and Thomas G. Clements, Esq. appearing on behalf of defendant, it is hereby

ORDERED that plaintiff's motion is granted to the extent that it is awarded a default judgment as against Kathryn Rico and Crystal Lake Preserve HOA and the caption is amended so as to substitute defendant for "John Doe"; and it is further

ORDERED that the caption shall hereinafter read as follows:

STATE OF NEW YORK

SUPREME COURTCOUNTY OF WARREN

_________________________________________

Index No. 2014-60180

RJI No. 56-1-2015-0278

FEDERAL NATIONAL MORTGAGE

ASSOCIATION ("FANNIE MAE"), A

CORPORATION ORGANIZED AND

EXISTING UNDER THE LAWS OF THE

UNITED STATES OF AMERICA,

Plaintiff,

v.

MARTIN RICO, KATHRYN RICO, BOARD OF

DIRECTORS OF THE CRYSTAL LAKE

PRESERVE HOMEOWNERS ASSOCIATION

AND LINDA STEMLER,

Defendants.

_________________________________________

; and it is further

ORDERED that plaintiff's motion is otherwise denied; and it is further

ORDERED that defendant's cross motion is denied in its entirety.

The above constitutes the Decision and Order of this Court.

The original of this Decision and Order has been filed by the Court together with the Notice of Motion dated December 29, 2017, the Notice of Cross Motion dated February 26, 2018 and the submissions enumerated above. Counsel for defendant is hereby directed to promptly obtain a filed copy of the Decision and Order for service with notice of entry in accordance with CPLR 5513.

ENTER:

Dated: August 3, 2018

Lake George, New York

____________________________________

ROBERT J. MULLER, J.S.C. Footnotes

Footnote 1: While the Court was advised at oral argument that Knuckles Komosinski & Manfro LLP was substituted as counsel for plaintiff, a consent to change attorney form has not yet been filed.

Footnote 2:Plaintiff has submitted a copy of the Limited Power of Attorney whereby Fay Servicing, LLC was appointed as attorney in fact for PROF-2013-S3.

Footnote 3:Plaintiff filed a motion for a default judgment as against all defendants and the appointment of a referee prior to being served with defendant's answer. Upon review of this motion, the Court noted that Martin Rico had been served with the summons and complaint on May 29, 2014 by personal service upon his attorney, which form of service is not recognized under CPLR 308 and does not confer personal jurisdiction absent consent. The Court requested proof that Martin Rico had consented and the motion was then withdrawn. Shortly thereafter plaintiff moved for an extension of the time in which to serve Martin Rico.

Footnote 4:The case cited by plaintiff in support of its contention — Aurora Loan Servs., LLC v Taylor (114 AD3d 627, affd 25 NY3d 355 [2015]) — states that where "the exact delivery date [of the note] was provided, there is no further detail necessary for the plaintiff to establish standing" (id. at 629). Here, it does not appear that plaintiff has provided defendant with the exact delivery date of the note. (It does not appear that defendant has requested this information either.)

Footnote 5:The Court notes that the Affidavit of Joette E. Bonin is attached as Exhibit "B" to this Affirmation.