Wells Fargo Bank, N.A. v Barbera
Annotate this CaseDecided on December 23, 2019
Supreme Court, Westchester County
Wells Fargo Bank, N.A., Plaintiff,
against
Lauren Barbera, Thomas Nash, Stephanie Nash, Mortgage Electronic Registration Systems, Inc. as nominee for Loan Depot.Com, LLC, and Westchester County Clerk
[FN1], Defendants.
71061/2017
Frenkel, Lambert Weiss, Weisman, & Gordon, LLP
Attorney for plaintiff
20 Lawrence Bell Dr., Suite 200, Williamsville, NY 14221
Craig BumGarner, Esq.
Attorneys for defendant Barbera
1118 Route 52, Suite F, Carmel NY 10512
Taroff & Taitz, LLP
Attorneys for Nashs and Mortgage Electronic Registration Systems as nominee for LoanDepot.Com
630 Johnson Avenue, Suite 105, Bohemia, NY 11716
Lawrence H. Ecker, J.
The following papers were considered on: the motion of defendants THOMAS NASH, STEPHANIE NASH and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS) as nominee for LOAN DEPOT.COM, LLC. (the Nashs and Loan Depot) [Mot. Seq. 1], made pursuant to CPLR 3212, for an order granting the Nashs and Loan Depot summary [*2]judgment dismissing the complaint and the notice of pendency; the motion of defendant LAUREN BARBERA (Barbera) [Mot. Seq.2], made pursuant to CPLR 3212, for an order granting summary judgment dismissing the complaint and cross-claims; and the cross-motion of WELLS FARGO BANK, N.A. (plaintiff) [Mot. Seq. 3], made pursuant to CPLR 3212, for an order granting plaintiff summary judgment on the complaint and dismissing the counterclaims, denying defendants' motions for summary judgment, striking defendants' answers, granting a default judgment against remaining defendants, and vacating, cancelling and discharging the relevant satisfaction of mortgage:
Papers
[Mot. Seq . 1](Nashs and Loan Depot)
Notice of Motion, Affirmation, Memorandum of Law, Exhibits A-BB
Affirmation (Barbera) in Opposition to Motion of Nash and MER and Exhibits A-C
Affirmation (Nashs and Loan Depot) in Opposition to Plaintiff's Cross-Motion and in Reply to Plaintiff's Opposition to Nashs and Loan Depot Motion for Summary Judgment and Exhibit CC
[Mot. Seq. 2] (Barbera)
Notice of Motion, Affirmation, Affidavit, Memorandum of Law, and Exhibits A-Y
Affirmation in Opposition (plaintiff), Affidavit, and Exhibit A
Reply Affirmation (Barbera)
[Mot. Seq. 3](plaintiff)
Notice of Cross-Motion, Affirmations in Support of Cross-Motion(2), Memorandum of Law, Exhibits A-Y[FN2]
Affirmation in Opposition (Barbera), Exhibits A-C, and Memorandum of Law
Bein Affidavit in Support (plaintiff)
Affirmation in Reply (plaintiff) and in Support of Cross-Motion
Upon the foregoing papers, the court determines, as follows:
On October 19, 2005, Barbera took title to real property located at 174 Astor Avenue, Hawthorne, NY (the Premises). Barbera obtained a mortgage loan in the amount of $317,000. from JP Morgan Chase Bank, N.A. (Chase) for the purchase (the First Mortgage).
The loan was modified in January 26, 2008, to form a single lien of $244,000. (the First Modification). [NYSCEF No. 7].
On or about February 9, 2010, Chase assigned the First Mortgage to MERS (the First Assignment). [NYSCEF No. 8].
On February 11, 2010, Barbera executed a second mortgage in favor of MERS in the amount of $47,696.42 (the Second Mortgage). [NYSCEF No. 9]. Around the same time, the parties entered into a Consolidation, Extension and Modification Agreement consolidating the First and Second Mortgage and First Modification (the CEMA). [NYSCEF No. 10]. It provides an unpaid principal balance of $285,000. Of this amount, $47,696.43 was immediately paid to Barbera.
On or about December 21, 2012, MERS assigned the debt to Wells Fargo Bank, N.A. (plaintiff) (the Second Assignment). [NYSCEF No.11].
Sometime in 2013, Barbera fell behind in payments on the debt. On December 11, 2013, plaintiff commenced a mortgage foreclosure action against Barbera under Index No. 69905/2013 (the First Foreclosure Action).
On May 5, 2014, plaintiff and Barbera entered into a loan modification which was filed with the Clerk of Westchester County on August 11, 2015 (the Second Modification). [NYSCEF No. 12]. The consolidation included an unpaid loan balance of $301,119.89, and an extension of the term of repayment.
On May 19, 2014, plaintiff filed a notice of voluntary discontinuance noting that a settlement was reached, resulting in a loan modification.
Sometime thereafter, Barbera once again fell behind in payments. On May 13, 2015, plaintiff commenced a second mortgage foreclosure action against her under Index No. 58637/2015 (the Second Foreclosure Action).
In July 2015, Barbera listed the Premises with a real estate agent for sale as a "short sale."
On or about July 18, 2015, an employee of plaintiff erroneously noted in the MERS system that the Premises had been sold at a short sale on July 23, 2015. Thereafter, on August 31, 2015, plaintiff erroneously issued a satisfaction of the mortgage, which was filed in the County Clerk's office on September 1, 2015 (the Satisfaction). [NYSCEF No. 13]. It is undisputed that plaintiff filed the Satisfaction based upon erroneous information entered into its internal system indicating that the lender had accepted a "short sale" of the Premises, thereby terminating the outstanding debt. In fact, the debt remains unpaid.
Plaintiff filed a Notice of Voluntary Discontinuance, dated August 3, 2015, in the Second Foreclosure Action, reciting, in part, that "a settlement was reached between the parties as to the mortgage default herein, as a result of a short sale." [Index No. 58637/2015, NYSCEF No. 12].
Plaintiff sent Barbera a notice of satisfaction of the mortgage on September 2, 2015. Plaintiff issued a 1099R form to Barbera as an advisement that the amount of the loan forgiven was subject to income taxation. Barbera used this form to prepare her 2015 Federal and State Income tax returns.
In December 2015, Barbera contacted plaintiff and inquired as to why plaintiff was not paying the real estate taxes and insurance premium for the Premises. In response, on February 1, 2016, plaintiff paid the back taxes and insurance.
On March 22, 2016, Barbera emailed plaintiff asking that her account be marked closed based on the Satisfaction. Barbera claims that plaintiff did not meaningfully respond to her inquires. The Premises remained listed for sale.
By deed dated September 13, 2016, the Nashs took title from Barbera to the Premises for the purchase price of $300,000., paid in part by the Nashs borrowing $285,475. from Loan Depot, whose nominee is MERS. [NYSCEF Nos. 14, 15]. When the Nashs went to the closing to purchase the Premises, to be secured by the mortgage loan obtained from Loan Depot, the title insurer did not note the plaintiff's debt, but rather, in reliance upon the Satisfaction, issued a report stating that the title was not subject to any encumbrances. The Nashs' Deed was executed on September 13, 2016, and recorded with the Nashs' Mortgage on September 20, 2016. [NYSCEF Nos. 14, 15].
More than one year later, on December 4, 2017, plaintiff filed a notice of pendency against the Premises. [NYSCEF No. 2]. This action was commenced thereafter on or about [*3]December 29, 2017. [NYSCEF No. 1].
The Pleadings
In the complaint, plaintiff states that the action is brought in equity and pursuant to Article 15 of the RPAPL, and is founded on the principle that plaintiff has no adequate remedy at law. Plaintiff alleges: entitlement to vacate erroneous satisfaction of mortgage (first cause of action); declaration of an equitable lien (second cause of action); action to quiet title (third cause of action); and imposition of a constructive trust (fourth cause of action). Of note, this is not a foreclosure action.
Loan Depot, in its answer, asserts general denials and affirmative defenses of: failure to state a cause of action; bona fide lender for value; good faith lender for value; failure to plead fraud as required pursuant to CPLR 3016(b); documentary evidence; unilateral mistake relative to the filing of the erroneous satisfaction; laches; lack of standing; and limitation of the equitable lien, if any, to $28,433.64 (the new money realized by Barbera as a result of the last mortgage). In addition, Loan Deport alleges a counterclaim for a declaratory judgment declaring that it is a good faith lender for value and extinguishing the lien by operation of law, citing RPL 266.
The Nashs, in their answer, asserted general denials, and affirmative defenses of: failure to state a cause of action; bona fide purchasers for value; payment of fair and adequate consideration for the conveyance; failure to plead fraud pursuant to CPLR 3016(b); documentary evidence; unilateral error by plaintiff; laches; lack of standing; and limitation of damages, if any, to the new money amount. They assert a counterclaim for a declaratory judgment declaring that plaintiff's mortgage is extinguished. In addition, the Nashs allege two cross-claims against Barbera: the first is a demand for monetary damages and counsel fees based upon breach of the covenant; and the second is a demand that Barbera post a bond or security to obtain a release of the Notice of Pendency filed by plaintiff against the Premises.
Barbera, in her answer, asserts general denials, and affirmative defenses of: lack of standing; lack of in personam jurisdiction; adequate remedy at law; failure to state a cause of action; laches; equitable estoppel; detrimental reliance; plaintiff's culpable conduct; accord and satisfaction; unclean hands; unilateral mistake; and failure to plead fraud pursuant to CPLR 3016(b).
Plaintiff filed its replies to Loan Depot's counterclaim asserting general denials, and affirmative defenses of: failure to state a cause of action; documentary evidence; failure to satisfy the pleading requirements of RPAPL Article 15; lack of standing; unjust enrichment; defendants' own negligent and/or culpable conduct; and failure to mitigate damages.
Plaintiff filed its reply to the Nashs' counterclaim asserting general denials, and affirmative defenses of: failure to state a cause of action; documentary evidence; failure to satisfy the pleading requirements of RPAPL Article 15; lack of legal capacity; unjust enrichment; defendants' own negligent and/or culpable conduct; and failure to mitigate damages.
The central issue in all of the pleadings and motions is, in essence, given the equitable jurisdiction of the court, which of the parties should bear the loss created by the erroneous filing of the Satisfaction.
Summary Judgment.
CPLR 3212(b) states in pertinent part that a motion for summary judgment "shall be granted if, upon all of papers and proof submitted, the cause of action or defense shall be [*4]established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party." It is well settled that summary judgment is a drastic remedy not to be granted where there is any doubt about the existence of a triable issue of fact. It is nevertheless an appropriate tool to weed out meritless claims. In Andre v Pomeroy, 35 NY2d 361, 364 (1974), the Court stated:
"[s]ummary judgment is designed to expedite all civil cases by eliminating from the Trial Calendar claims which can properly be resolved as a matter of law . . . when there is no genuine issue to be resolved at trial, the case should be summarily decided, and an unfounded reluctance to employ the remedy will only serve to swell the Trial Calendar and thus deny to other litigants the right to have their claims promptly adjudicated."Governed by these principles, the court will now consider the parties' motions for summary judgment. The motion of the Nashs and Loan Depot [Mot. Seq. 1], made pursuant to CPLR 3212, for an order granting them summary judgment dismissing the complaint and, consequently, the notice of pendency.
A mortgagee may have an erroneous discharge of mortgage, without concomitant satisfaction of the underlying mortgage debt, set aside, and have the mortgage reinstated where there has not been detrimental reliance on the erroneous recording (Beltway Capital, LLC.v Soleil, 175 AD3d 451 [2d Dept 2019]; New York Community Bank v Vermonty, 68 AD3d 1074, 1076 [2d Dept 2009]). Only bona fide purchasers and lenders for value are entitled to protection from an erroneous discharge of a mortgage based upon their detrimental reliance thereon (Beltway Capital, LLC.v Soleil, supra; see Bank of America, N.A. v Snyder, 154 AD3d 671 [2d Dept 2017]).
Here, the Nashs and Loan Depot met their prima facie burden to establish their status as bona fide purchaser and encumbrancer for value. The Nashs demonstrate that, at the time that they purchased the Premises for value from Barbera, the Satisfaction had been duly recorded and they were entitled to rely upon that order without conducting any further inquiry. The Nashs' deed and mortgage were recorded on September 20, 2016, well before plaintiff commenced this action, over a year later, in December 2017, inter alia, to vacate the Satisfaction. Thus, the Nashs were not on notice at the time of the purchase of any prior lien against the property which would lead a reasonably prudent purchaser to make inquiry, and there was nothing on the face of the Satisfaction that would have alerted the Nashs to plaintiff's claim. Contrary to plaintiff's contention, the Nashs had no duty to conduct any further inquiry into the propriety of the discharge of plaintiff's mortgage as demonstrated by plaintiff's own recorded document (see Beltway Capital, LLC.v Soleil, supra; DLJ Mtge. Capital, Inc. v Windsor, 78 AD3d 645 [2d Dept 2010]).
Similarly, Loan Depot meets its prima facie burden by demonstrating that, at the time it granted a mortgage to the Nashs, secured against the subject property, the Satisfaction had been duly recorded by plaintiff, that a title search did not reveal the prior lien, and that it was entitled to rely upon the title search and the Satisfaction without conducting any further inquiry into the propriety of the recorded Satisfaction (see Beltway Capital, LLC.v Soleil, supra; see Andy Assoc. v Bankers Trust Co., 49 NY2d 13 [1979]).
In opposition, plaintiff fails to raise a triable issue of fact. The mere fact that the Nashs [*5]were on notice that the Premises had previously been the subject of a "short sale," is insufficient to generate a question as to whether the Nashs knew, or should have known, that there was a defect in the title due plaintiff's self-created error (see Emerson Hills Realty, Inc. v Mirabella, 220 AD2d 717 [2d Dept 1995]). Likewise, the court finds that there is no proof in the record showing that Loan Depot knew, or should have known, that the Satisfaction was filed in error (Beltway Capital, LLC.v Soleil, supra; see Andy Assoc. v Bankers Trust Co., supra).
To the extent that plaintiff relies in its arguments on the decisions in Stout Street Fund I, L.P. v Halifax Group, LLC, 148 AD3d 774 [2d Dept 2017] and Mortgage Elec. Registration Sys., Inc. v Rambaran, 97 AD3d 602 [2d Dept 2012], that reliance is misplaced. While these two decisions involved parties seeking to be declared bono fide purchasers and encumbrancers, the court denied their motions finding that questions of fact existed as to whether the parties acted fraudulently. In contrast, here, there is no allegation of fraud on the part of the Nashs, Loan Deport or the title insurance company. As such, there is no legal or factual basis to deny them the status of bona fide purchaser and lender.
Further, contrary to plaintiff's argument, the title insurer is not the agent of its insured, but rather its contractual indemnitor, in that in exchange for the payment of the premium, the title insurer agrees to indemnify its insured for loss occasioned by a defect in title (see Brucha Mortg. Bankers Corp. v Nations Title Ins. of New York, Inc., 275 AD2d 337, 338 [2d Dept 2000]). Hence, to the extent that plaintiff argues that the deposition testimony of the title insurer's representatives sets forth proof that an industry standard was violated, any such departure would enure only to the benefit of the insured, and not to plaintiff (see Renaissance Venture Capital Corp.v Fidelity National Title Insurance Company, 128 AD3d 790 [2d Dept 2015]).
As for plaintiff's argument that the failure of the Satisfaction to include the second modification agreement required inquiry, the proposition is without support in law. The court finds that the "stand alone" satisfaction of mortgage argument put forth by plaintiff likewise does not put the world on notice that the Satisfaction was issued in error. Under the circumstances, the Nashs' and Loan Depot's title insurer was within its rights in certifying unencumbered title.
Accordingly, based on the uncontradicted facts, the court finds that the Nashs and Loan Depot are entitled to the protection afforded by RPL 291 and to summary judgment dismissal of the complaint and the notice of pendency. In light of this holding, the affirmative relief sought in the counterclaims of the Nashs and Loan Depot is moot. Likewise, the Nashs' cross-claims against Barbera are dismissed as moot, given that the Nashs have not sustained a loss that is subject to indemnification, or that warrants the granting of legal fees, in the absence of a statute or agreement providing for same.
The motion of Barbera [Mot. Seq.2], made pursuant to CPLR 3212, for an order granting summary judgment dismissing the complaint and cross-claims and the cross-motion of plaintiff [Mot. Seq. 3], made pursuant to CPLR 3212, for an order granting plaintiff summary judgment on the complaint and dismissing the counterclaims, denying defendants' motions for summary judgment, striking defendants' answers, granting a default judgment against remaining defendants, and vacating, cancelling and [*6]discharging the relevant satisfaction of mortgage.[FN3]In the complaint, plaintiff alleges: entitlement to vacate erroneous satisfaction of mortgage (first cause of action); declaration of an equitable lien (second cause of action); action to quiet title (third cause of action); and imposition of a constructive trust (fourth cause of action). In seeking dismissal of the complaint, Barbera argues that plaintiff's claim is barred by laches and equitable estoppel; the failure to recite the second modification agreement is of no consequence; the second cause of action for the imposition of an equitable lien fails to state a cause of action; the third cause of action to quiet title fails to state a cause of action; the fourth cause of action for the imposition of a constructive trust fails to state a cause of action; the Nashs' cross-claims must be dismissed; and Barbera's motion for summary judgment must be granted.
Based on this court's determination herein that the Premises is the property of the Nashs, subject to the Loan Depot purchase money mortgage, Barbera's and plaintiff's motions, which are based in equity, must be denied. This is not a foreclosure action, but is, as plaintiff states in the complaint, an action brought in equity and pursuant to Article 15 of the RPAPL, that is founded on the principle that plaintiff has no adequate remedy at law. However, as set forth herein, the Premises legally belongs to the Nashs and there is no equitable justification for awarding plaintiff, in essence, a financial interest in their property.
In any event, plaintiff possesses an adequate remedy at law as Barbera's debt to plaintiff is not disposed. Plaintiff may pursue an action based on the debt secured by the mortgage (see McSorley v Spear, 13 AD3d 495 [2d Dept 2004])[FN4] . Consequently, an action at law is available to plaintiff, such as claims against Barbera for breach of contract or unjust enrichment, and this decision does not deprive plaintiff of its remedies against Barbera in a new action. Certainly, the balance of equity in favor of plaintiff as against Barbera is not served by encumbering the Premises, as Barbera no longer has any interest in the property.
Based on the undisputed facts and given the court's findings, therefore, the court grants Barbera's motion for summary judgment, and denies the cross-motion of plaintiff for summary judgment.
The court has considered the additional contentions of the parties not specifically addressed herein. To the extent that any relief requested by either party was not addressed by the court, it is hereby denied. Accordingly, it is
ORDERED that the part of the motion of defendants THOMAS NASH, STEPHANIE [*7]NASH, and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS as nominee for LOAN DEPOT.COM, LLC. (the Nashs and Loan Depot) [Mot. Seq. 1], made pursuant to CPLR 3212, for an order granting the Nashs and Loan Depot summary judgment dismissing the complaint and the notice of pendency is granted; and it is further
ORDERED that the part of the motion of the Nashs and Loan Depot [Mot. Seq. 1], made pursuant to CPLR 3212, for an order granting the Nashs and Loan Depot summary judgment on their counterclaims for a declaratory judgment is denied, and their counterclaims are dismissed as moot; and it is further
ORDERED that the motion of defendant LAUREN BARBERA (Barbera) [Mot. Seq.2], made pursuant to CPLR 3212, for an order granting summary judgment dismissing the complaint and cross-claims alleged against Barbera is granted; and it is further
ORDERED that the cross-motion of WELLS FARGO BANK, N.A. (plaintiff) [Mot. Seq. 3], made pursuant to CPLR 3212, for an order granting plaintiff summary judgment on the complaint and dismissing the counterclaims, denying defendants' motions for summary judgment, striking defendants' answers, granting a default judgment against remaining defendants, and vacating, cancelling and discharging the relevant satisfaction of mortgage is denied; and it is further
ORDERED the complaint and counterclaims are dismissed in their entirely; and it is further
ORDERED that the Clerk of this County is directed, upon payment of proper fees, if any, to cancel and discharge the notice of pendency filed in this action, dated December 4, 2017, against the property at 174 Astor Ave., Hawthorne, NY 10532, Tax Map/Parcel ID No.: Section:111.16, Block: 2, Lot: 31.
The foregoing constitutes the decision and order of the court.
Dated: December 23, 2019
White Plains, New York
HON. LAWRENCE H. ECKER, J.S.C. Footnotes
Footnote 1: The Westchester County Clerk was served on January 12, 2018, but did not appear in the action. That fact does not affect the decision.
Footnote 2: Time and again, plaintiff's attorneys have been advised that court rules direct plaintiff to use numbered exhibit tabs.
Footnote 3: Initially, Barbera argues that standing is a bar to this action. Standing to commence the foreclosure action, however, is not properly raised in an action to quiet title (JP Morgan Chase Bank, N.A. v Bank of America, 164 AD3d 565 [2d Dept 2018]). Since the plaintiff sufficiently established that it claims "an estate or interest" in the subject property (see RPAPL 1501 [1]), plaintiff has proven standing to commence this action (Id.; Ditech Financial LLC v Levine, 176 AD3d 1521 [3d Dept 2019]). Of note, only Barbera argues on these motions that plaintiff lacks standing (see Wells Fargo Bank, N.A. v Hallock, 138 AD3d 735 [2d Dept 2016]).
Footnote 4: Pursuant to CPLR 17-101, the debt was re -acknowledged, and a new promise made in the 2015 Second Loan Modification. Pursuant to CPLR 213(2), the statute of limitations on a contractual obligation was thus extended for a new six year term.
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