Pryce v Nationstar Mtge. LLC

[*1] Pryce v Nationstar Mtge. LLC 2020 NY Slip Op 20239 Decided on September 23, 2020 Supreme Court, Orange County Bartlett, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

Decided on September 23, 2020
Supreme Court, Orange County

Cassius Pryce, Plaintiff,

against

Nationstar Mortgage LLC et al., Defendants.



THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK AS SUCCESSOR IN INTEREST TO JP MORGAN CHASE BANK, N.A. AS TRUSTEE FOR STRUCTURED ADJUSTABLE MORTGAGE LOAN TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-10, Plaintiff,

against

CASSIUS PRYCE, et al., Defendant.



EF004283-2017



For Mr. Pryce: Christopher Anthony Villanti, Esq., Villanti Smith LLP, Brooklyn, NY

For Nationstar and BNY Mellon: Brian Peter Scibetta, McCalla Raymer Leibert Pierce, LLC, New York, NY
Catherine M. Bartlett, J.

I.PROCEDURAL HISTORY

Cassius Pryce v. Nationstar Mortgage LLC, Index No. EF004283-2017 is an action pursuant to Real Property Actions and Proceedings Law ("RPAPL") §1501(4) for a judgment cancelling and discharging a mortgage (the "Mortgage"), enforcement of which he claims is barred by the Statute of Limitations. The Bank of New York Mellon v. Cassius Pryce, Index

No. EF005923-2017, is an action to foreclose the same Mortgage. By prior Decision and Order

dated June 5, 2018, this Court denied Mr. Pryce's motion for summary judgment on his Section 1501(4) action, and joined that action and BNY Mellon's foreclosure action for purposes of discovery and trial. By prior Decision and Order dated January 7, 2019, the Court granted Plaintiff's motion for reargument and renewal, and adhered to its original determination with a supplemental memorandum. By prior Decision dated October 9, 2019, the Court granted BNY Mellon partial summary judgment in the foreclosure action, reserving for trial the issue whether enforcement of the Mortgage is barred by the Statute of Limitations.

The matter came on for trial on March 11, 2020. Mr. Pryce appeared by his attorney, Christopher Villanti, Esq. BNY Mellon appeared by its attorney, Brian P. Scibetta, Esq.

Mr. Pryce did not testify. Plaintiff's case-in-chief consisted of eight (8) stipulated joint exhibits.

BNY Mellon proffered in addition the testimony of Nationstar Mortgage employee Kristin Trompisz, whose testimony the Court finds credible in all respects. Through Ms. Trompisz, both sides introduced a number of additional documents in evidence.

II.THE PARTIES' CONTENTIONS

Mr. Pryce contends that (1) the Mortgage debt was validly accelerated upon the commencement of a prior foreclosure action — Aurora Loan Services v. Cassius Pryce, Index No. 14451-2009 — on December 31, 2009; (2) accordingly, the six-year Statute of Limitations commenced to run on the entire Mortgage debt on December 31, 2009; (3) neither by the voluntary discontinuance of Aurora Loan Services v. Cassius Pryce on June 11, 2015 nor by any other means was a valid revocation of the election to accelerate the Mortgage debt ever effected, hence the Statute of Limitations continued to run; (4) the present foreclosure action was commenced on July 28, 2017, more than six years after acceleration of the Mortgage debt; consequently, (5) BNY Mellon's foreclosure action is barred by the Statute of Limitations, and Mr. Pryce is entitled to judgment on his RPAPL §1501(4) quiet title action.

BNY Mellon contends that (1) the purported acceleration of the Mortgage debt was invalid because Aurora Loan Servicing lacked standing to prosecute the 2009 foreclosure action; (2) even if the Mortgage debt was validly accelerated, the evidence demonstrates that a de-acceleration was validly effected in 2015, within the six-year limitations period; consequently, (3) BNY Mellon's present foreclosure action is not barred by the Statute of Limitations, and Mr. Pryce's affirmative Statute of Limitations defense as well as his RPAPL §1501(4) quiet title action must be dismissed.

III.THE EVIDENCE AT TRIAL

A.Joint Exhibits

Joint Exhibit 1: Summons and Complaint in Aurora Loan Services v. Cassius Pryce

The prior foreclosure action was commenced on December 31, 2009 by Aurora Loan [*2]Services, LLC. The complaint alleges in pertinent part:

FIRST: Plaintiff is a limited liability company duly organized and existing under and by virtue of the laws of the State of Delaware, and the owner and holder of a note and mortgage being foreclosed.SECOND: On or about the 18th day of January, 2005 Cassius Pryce duly executed and delivered an adjustable rate note whereby Cassius Pryce promised to pay the sum of

$327,952.00 with interest on the unpaid balance of the debt.

THIRD: That as security for the payment of said note Cassius Pryce duly executed and delivered a mortgage in the amount of $327,952.00....The mortgage was subsequently assigned to Aurora Loan Services, LLC by assignment...FIFTH: That the Defendant Cassius Pryce so named, has/have failed to comply with the conditions of the mortgage and note by failing to pay principal and interest...and/or other charges that came due and payable on the 1st day of June, 2009 as more fully set forth below. Accordingly, Plaintiff elects to call due the entire amount secured by the loan.

No copy of the Note was annexed to the complaint.

Joint Exhibit 2: Affidavit of Merit and Amount Due

The Affidavit of Merit and Amount Due, executed in connection with Aurora Loan Services v. Cassius Pryce, was sworn to on March 12, 2010 by Cheryl Marchant, who averred:

1. That deponent is the V.P. of Aurora Loan Services, LLC.2. Your deponent has reviewed the books and records of the Plaintiff, as well as the Complaint herein. Based upon personal knowledge, I hereby attest to and verify the truth of the matters asserted in the Complaint. 5. Deponent has reviewed the original note, mortgage, and if applicable, assignments of mortgage, kept in the regular course of business by this institution. Deponent finds the same to be in proper form, duly executed and notarized where applicable, and mortgage tax due paid thereon.10. Deponent makes this affidavit knowing that the Referee in this matter and the Court appointing the same will rely on the truth and veracity of the statements contained herein.

Annexed to the Affidavit of Merit and Amount Due is a copy of Mr. Pryce's January 18, 2005 Adjustable Rate Note. The Lender identified in the Note is NBA Mortgage Group, A Division of National Bank of Arkansas in North Little Rock. The signature page of the Note bears one undated endorsement, as follows:

Pay to the Order of Lehman Brothers Bank, FSB Without RecourseNBA Mortgage Group, A Division of National Bank of Arkansas in North Little RockBy: [*3]Vicki Holcomb Investment Relations Coordinator

Joint Exhibit 3: Affidavit On Motion to Discontinue

In a May 18, 2005 "Affirmation in Support of Order to Cancel Lis Pendens and to Vacate Order of Reference and Discontinue Action Without Prejudice," attorney Mehmet Basoglu, Esq. averred: "Due to an issue with the Affidavit of Merit, on 04/15/15 we were directed to discontinue the foreclosure action and cancel the Notice of Pendency. Plaintiff respectfully requests that this action be discontinued and the Notice of Pendency cancelled."

Joint Exhibit 4: Order Discontinuing Action

By Order dated June 11, 2015, the Hon. Debra J. Kiedaisch, A.J.S.C. granted the Plaintiff's application, directed the Orange County Clerk to cancel the Notice of Pendency and Successive Notice of Pendency, and directed that the action be discontinued without costs.

Joint Exhibit 5: Adjustable Rate Note

This copy of Mr. Pryce's January 18, 2005 Adjustable Rate Note bears three undated endorsements. After the endorsement which appears on the Note annexed to Joint Exhibit 2,

there are two additional endorsements, as follows: Pay to the Order ofLehman Brothers Holdings Inc.Without RecourseLehman Brothers Bank, FSBBy: Rick W. ScoggVice PresidentPay to the Order of________________Without RecourseLehman Brothers Holdings Inc.By: Denise E. ElwellSenior Vice President

Joint Exhibit 6: Mortgage

This is the Mortgage together with the Orange County Clerk's Office Recording Page, which states "Cassius Pryce to MERS as Nominee for NBA Mortgage Group...", and reflects the recording / filing of the Mortgage on February 18, 2005.

Joint Exhibit 7:Summons and Complaint in

Cassius Pryce v. Nationstar Mortgage LLC

On June 8,2017, Mr. Pryce commenced his action pursuant to RPAPL §1501(4) to cancel and discharge the Mortgage.

Joint Exhibit 8:Summons and Complaint in

The Bank of New York Mellon v. Cassius Pryce

BNY Mellon's foreclosure action was filed on July 28, 2017. Annexed to the complaint in this action is a copy of Mr. Pryce's January 18, 2005 Adjustable Rate Note bearing all three endorsements referenced above. Also annexed is a copy of the December 23, 2009 Assignment whereby MERS as Nominee for the mortgage lender, NBA Mortgage Group, purported to assign the Mortgage and the Note to Aurora Loan Services, LLC.

B.Mr. Pryce's Case

Mr. Pryce did not testify. For his case-in-chief he relied entirely on the Joint Exhibits

C.BNY Mellon's Case

In addition to the Joint Exhibits, BNY Mellon adduced evidence as follows.

1.Ownership of the Note

Defendant's Exhibit "B" is a signed "Trust Agreement" dated May 1, 2005 by and between Structured Asset Securities Corporation, as Depositor, Aurora Loan Services LLC, as Master Servicer, and JPMorgan Chase Bank, N.A., as Trustee.

The "Preliminary Statement" states in pertinent part:

The Depositor has acquired the Mortgage Loans [FN1]from the Seller [FN2] , and at the Closing Date [FN3] is the owner of the Mortgage Loans and the other property being conveyed by it

to the Trustee hereunder for inclusion in the Trust Fund.

Defendant's Exhibit "C" is a signed "Servicing Agreement" dated May 1, 2005 by and between Aurora Loan Services LLC, as Servicer, Lehman Brothers Holdings Inc., as Seller, and Aurora Loan Services LLC, as Master Servicer, and acknowledged by JPMorgan Chase Bank, N.A., as Trustee.

The pertinent Recitals in this Agreement state:

Whereas, the Servicer and Lehman Brothers Bank, FSB, a federal savings bank (the "Bank") are parties to a Flow Servicing Agreement, dated as of August 31, 1999 (the "Bank Flow Servicing Agreement"), pursuant to which the Servicer services certainresidential, fixed and adjustable rate mortgage loans identified on Exhibit A hereto(the "Bank Mortgage Loans");

Whereas, at or prior to the Closing Date (as defined herein)[FN4] the Bank and LBH shall enter into an Assignment and Assumption Agreement, dated as of May 1, 2005..., pursuant to which the Bank shall assign all of its rights, title and interest in and to the Bank Mortgage Loans to LBH and LBH shall assume all of the rights and obligations of the Bank with respect to the Bank Mortgage Loans under the Bank Flow Servicing Agreement;

Whereas, the Seller has conveyed the Mortgage Loans on a servicing-retained basisto Structured Asset Securities Corporation (the "Depositor"), which in turn has conveyed the Mortgage Loans to the Trustee under a trust agreement dated as of May 1, 2005 (the "Trust Agreement"), among the Trustee, the Depositor and the Master Servicer; ...

2.Aurora's Authority as Servicer

Section 9.04 of the Trust Agreement provides in pertinent part:

(a) The Master Servicer shall master service the Mortgage Loans and shall have full power and authority, subject to the REMIC Provisions and the provisions of Article X hereof, and each Servicer shall have full power and authority (to the extent provided inthe applicable Servicing Agreement) to do any and all things that it may deem necessary or desirable in connection with the servicing and administration of the Mortgage Loans,including but not limited to the power and authority... (iv) to effectuate foreclosure...in accordance with the provisions of this Agreement and the applicable Servicing Agreement, as applicable....The Trustee shall execute, upon request, any powers ofattorney furnished to it by the Master Servicer empowering the Master Servicer or anyServicer...to foreclose upon or otherwise liquidate Mortgaged Property....

Section 3.01 of the Servicing Agreement provides in pertinent part:

The Servicer, as an independent contractor, shall service and administer the Mortgage Loans from and after the Closing Date or Servicing Transfer Date, as applicable, and shall have full power and authority, acting alone, to do any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable, consistent with the terms of this Agreement and with Accepted Servicing Practices.

3.De-Acceleration

BNY Mellon proffered "Information Statements" dated July 20, 2015, and going forward, with proof that they were mailed to Mr. Pryce. Under the heading "Account Information," the Statement provided the entire "Interest Bearing Principal Balance" of his Mortgage loan (which, in July 2015, was listed as $326,673.13). Under the heading "Explanation of Amounts Payable," the Statement included the "Regular Monthly Payment", "Total Fees and Charges", and [*4]"Overdue Payment(s)" (which, in July 2015, yielded a "Total Amount Due" of $140,707.51).

On cross-examination, Mr. Pryce's attorney proffered additional "Information Statements" dating from (1) 2014, before Aurora Loan Services v. Pryce was discontinued, and (2) 2017, after The Bank of New York Mellon v. Cassius Pryce was commenced. These Statements, too, listed as the "Total Amount Due" not the entire balance due on the Mortgage loan, but only the amount required to cure the default.

IV.LEGAL ANALYSIS

A.RPAPL §1501(4)

RPAPL 1501(4) provides that "[w]here the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage...has expired," any person with an estate or interest in the property may maintain an action "to secure the cancellation and discharge of record of such encumbrance, and to adjudge the estate or interest of the plaintiff in such real property to be free therefrom." See, NMNT Realty Corp. v. Knoxville 2012 Trust,

151 AD3d 1068, 1069 (2d Dept. 2017); RPAPL 1501(4).

B.The Statute of Limitations Governing Mortgage Foreclosure

"An action to foreclose a mortgage is governed by a six-year statute of limitations (see CPLR 213[4]). '[E]ven if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statue of Limitations begins to run on the entire debt' [cit.om.]." Solomon v. HSBC Bank USA, N.A., 185 AD3d 860 (2d Dept. 2020). See also, R.J.T. Food and Restaurant, LLC v. Rescap Liquidating Trust, 127 N.Y.S.3d 270 (2d Dept. 2020); Stewart Title Ins. Co. v. Bank of New York Mellon, 154 AD3d 656, 659 (2d Dept. 2017).

Mr. Pryce, as noted above, claims that his Mortgage debt was accelerated on December 31, 2009, when Aurora Loan Services commenced an action to foreclose the Mortgage and pleaded in paragraph 5 of the Complaint: "Plaintiff elects to call due the entire amount secured by the loan."

C.Acceleration of the Mortgage Debt

"An acceleration of a mortgage debt can occur 'when a creditor commences an action to foreclose upon a note and mortgage and seeks, in the complaint, payment of the full balance due' (Milone v. U.S. Bank N.A., 164 AD3d 145, 152...)." Solomon v. HSBC Bank USA, N.A., supra.

However, "an acceleration of a mortgaged debt, by either written notice or the commencement of an action, is only valid if the party making the acceleration had standing at the time to do so [cit.om.]....The absence of a valid acceleration would mean that the statute of limitations had never even begun to run on the full debt, and thereby defeat the plaintiff's RPAPL 1501(4) cause of action in its entirety." Milone v. U.S. Bank N.A., 164 AD3d 145, 153 (2d Dept. 2018).

Thus, where the plaintiff lacks standing to commence a foreclosure action, service of the complaint is ineffective to constitute a valid exercise of the option to accelerate the mortgage debt. In such circumstances, the purported acceleration is deemed a nullity, and it does not cause the six-year statute of limitations on enforcement of the entire mortgage debt to begin to run. See, Q & O Estates Corp., 175 AD3d 1337, 1339 (2d Dept. 2019); U.S. Bank National Ass'n v. Gordon, 158 AD3d 832, 836 (2018); Stewart Title Ins. Co. v. Bank of New York Mellon, supra, 154 AD3d at 662-663; Wells Fargo Bank, N.A. v. Burke, 94 AD3d 980, 983 (2d Dept. 2012); EMC Mortgage Corporation v. Suarez, 49 AD3d 592, 593 (2d Dept. 2008).

D.Standing to Foreclose

In its complaint in foreclosure, filed December 31, 2009, Aurora Loan Services asserted its standing to foreclose on the ground that it was "the owner and holder of a note and mortgage being foreclosed," and referenced the December 23, 2009 Assignment of Mortgage by MERS.

The Court will accordingly consider whether Aurora properly initiated foreclose proceedings (1) as purported owner of the Note and Mortgage, (2) as purported holder of the Note and Mortgage, and/or (3) as servicer of the Mortgage.

1.Owner

The evidence herein demonstrates that Aurora was not in fact the owner of Mr. Pryce's Note and Mortgage, but rather the servicer for the Trustee of the Trust that actually owned that Note and Mortgage. It appears, based on the timing of the 2009 action and the contents of its complaint, that Aurora may have deemed itself the owner of the Note and Mortgage based on MERS purported assignment of the Mortgage and associated Note to Aurora just one week prior to commencement of the action; for it was not until two years later, in 2011, that the Second Department held that the assignment of promissory notes was beyond MERS' authority as nominee for the mortgage lender. See, Bank of New York v. Silverberg, 86 AD3d 274, 281-282 (2d Dept. 2011); Aurora Loan Services, LLC v. Weisblum, 85 AD3d 95, 109 (2d Dept. 2011).

Hence, Aurora's allegation that it owned Mr. Pryce's Note was factually incorrect, and Aurora lacked standing to foreclose as owner of the Note and Mortgage.

2.Holder

"A plaintiff has standing in a mortgage foreclosure action when it is the holder or assignee of the underlying note at the time the action is commenced (see Aurora Loan Servs., LLC v. Taylor, 25 NY3d at 361...). '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' (U.S. Bank, N.A. v. Collymore, 68 AD3d 752, 754...)." HSBC Bank USA, N.A. v. Bermudez, 175 AD3d 667, 668 (2d Dept. 2018). Since, as noted above, MERS lacked authority as nominee for the mortgage lender to assign Mr. Pryce's Note to Aurora (see, Bank of New York v. Silverberg, supra), Aurora's status as "holder" of the Note can have rested only on its physical possession of a properly indorsed Note at the time it commenced the 2009 foreclosure action.

"A promissory note [is] a negotiable instrument within the meaning of the Uniform Commercial Code." HSBC Bank USA, N.A. v. Carchi, 177 AD3d 710, 712 (2d Dept. 2019) (quoting Mortgage Elec. Registration Sys., Inc. v. Coakley, 41 AD3d 674); US Bank N.A. v. Nelson, 169 AD3d 110, 124-125 (2d Dept. 2019). "Significantly, the word 'holder' is a legal term defined in the Uniform Commercial Code as the person 'in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.'" US Bank N.A. v. Nelson, supra, 169 AD3d at 124. See, UCC 1-201[b][21]; Marine U.S. Bank N.A. v. Moulton, 179 AD3d 734, 736 (2d Dept. 2020); HSBC Bank USA, N.A. v. Carchi, supra; McCormack v. Maloney, 160 AD3d 1098, 1099 (2d Dept. 2018); Wells Fargo Bank, NA v. Ostiguy, 127 AD3d 1375, 1376 (2d Dept. 2015).

Thus, "[h]older status is established where the plaintiff possesses a note that, on its face or by allonge, contains an indorsement in blank or bears a special indorsement payable to the order of the plaintiff (Wells Fargo Bank, NA v. Ostiguy, 127 AD3d 1375, 1376 [2015]...see UCC [*5]1-201[b][21]; 3-202, 3-204...)." McCormack v. Maloney, supra, 160 AD3d at 1099. See also, Hartford Acc. & Indem. Co. v. American Express Co., 74 NY2d 153, 159 (1989) ("The threshold status of 'holder' requires possession of an instrument 'drawn to him or to his order or to bearer or in blank'"); Marine Midland Bank, N.A. v. Price, Miller, Evans & Flowers, 57 NY2d 220, 224-225 (1982). Conversely:

Where there is no allonge or note that is either endorsed in blank or specially endorsed to the plaintiff, mere physical possession of a note at the commencement of a foreclosure action is insufficient to confer standing or to make a plaintiff the lawful holder of a negotiable instrument for the purposes of enforcing the note.

Marine U.S. Bank N.A. v. Moulton, supra, 179 AD3d at 737; McCormack v. Maloney, supra, 160 AD3d at 1099-1100.

In contravention of the foregoing authority, the Second Department in Bank of New York Mellon Trust Co., NA v. Obadia, 176 AD3d 1020 (2d Dept. 2019), held that a plaintiff in possession of a note indorsed — not in blank or to the plaintiff himself — but instead to the order of a nonparty might nevertheless be deemed a "holder" thereof in the absence of proof that the specially indorsed note had ever been delivered to the special indorsee. Id., at 1022-23. The Court wrote:

Here, although the copy of the note that was attached to the complaint bears a special indorsement from the original lender to a specific nonparty entity, Ocean Villas failed to demonstrate that the specially indorsed note was ever actually delivered to that nonparty entity....Accordingly, Ocean Villas failed to establish, prima facie, that the note was properly negotiated such that the nonparty entity to which it was specially indorsed became a holder of the note entitled to exclusive enforcement thereof (see UCC 3-202[1]). As the Court of Appeals has recognized, "[a]n indorsement is incomplete, and, indeed, may be disregarded and ignored until the instrument is delivered (Hall v. Blasdell, 306 NY 336, 342...). Unless and until a valid negotiation has occurred, a note specially indorsed to a specific party remains "fully negotiable" and may be treated, at the option of the original holder, as a bearer instrument (id. at 342; accord UCC 3-202[1]).

Based on the foregoing, the Second Department held that the defendant had failed to establish as a matter of law that the plaintiff was not the holder of a note that had been specially indorsed to someone else. Id. With all due respect, Obadia's holding is simply wrong.

UCC 3-202(1) provides:

Negotiation is the transfer of an instrument in such form that the transferee becomes a holder. If the instrument is payable to order it is negotiated by delivery with any necessary indorsement; if payable to bearer it is negotiated by delivery.

UCC 3-204(1) further provides: A special indorsement specifies the person to whom or to whose order it makes the instrument payable. Any instrument specially indorsed becomes payable to the order of [*6]the special indorsee and may be further negotiated only by his indorsement.

Inasmuch as the note in Obodia was payable to the order of a nonparty, that nonparty's indorsement was per UCC 3-202(1) and 3-204(1) necessary for the further negotiation required to confer "holder" status on the plaintiff. The Second Department, in the absence of evidence of the note's delivery to the nonparty indorsee, treated that note as instead payable (or possibly payable) to "bearer", such that per UCC 3-202(1) it could be negotiated by "delivery" alone without the nonparty payee's indorsement. The Second Department did so by resort to the "fictitious payee" rule applied by the Court of Appeals in Hall v. Blasdell, supra, 306 NY 336, 342-344 (1954). Obadia, supra, 176 AD3d at 1023.

As the Court of Appeals observed in Hall v. Blasdell, supra, the "fictitious payee" rule is derived from the Negotiable Instruments Law — the predecessor to the Uniform Commercial Code. Under the "fictitious payee" rule, where the indorser does not intend the named payee to receive the instrument, that payee was deemed a nominal or "fictitious" payee, and the Negotiable Instruments Law treated the instrument as payable to bearer, and hence negotiable by delivery without an indorsement in the name of the designated payee. Id., 306 NY at 344.

However, the Uniform Commercial Code abrogated the "fictitious payee" rule. The Official Comment to UCC §3-405 states:

The words "fictitious or nonexisting person" have been eliminated as misleading, since the existence or nonexistence of the named payee is not decisive an dis important only as it may bear on the intent that he shall have no interest in the instrument. The instrument is not made payable to bearer and indorsements are still necessary to negotiation.

The section however recognizes as effective indorsement of the types of paper covered no matter by whom made. This solution is thought preferable to making such instru-ments bearer paper; on the face of things they are payable to order and a subse-quent taker should require what purports to be a regular chain of indorsements.To recapitulate: the instrument does not become bearer paper, a purportedly regular chain of indorsements is required, but any person...can effectively indorse in the name of the payee.

The "New York Annotations" to UCC §3-405 further state:

(1)(a) This is new law and would result in several changes in New York law. Rather than treat the instrument as bearer in form, the instrument is regarded as payable to the impostor...(b) and (c) Accord: N.I.L., §28(3) as amended in 1960, ("Fictitious Payee Act"), the only change being the Code's requirement of an indorsement, not necessary under the N.I.L. treatment of such paper as "bearer paper."

In view of the foregoing, it is clear that the holding in Bank of New York Mellon Trust Co., NA v. Obadia contravenes the Uniform Commercial Code and ample Second Department authority to the contrary. We decline to follow it here, and instead apply UCC 3-202(1) and

3-204(1), the Second Department's holdings in Marine U.S. Bank N.A. v. Moulton, supra, and McCormack v. Maloney, supra, and the other authority cited above.

The proof at trial demonstrates that the Note in Aurora's possession as of December

2009 bore only a single indorsement — a special indorsement by the mortgage lender to the order of Lehman Brothers Bank, FSB — and no indorsement to Aurora, or to bearer or in blank.

Although Mr. Pryce adverts to the possibility that multiple versions of the Note may have existed in Aurora's imaging system, the sworn Affidavit of Merit of Aurora Vice-President Cheryl Marchant demonstrates that she reviewed the original Note in March of 2010, three months after commencement of the action, and the Note annexed to her Affidavit of Merit bears only the single special indorsement to Lehman Brothers Bank, FSB. Witness Kristin Trompisz further testified that she held the same position as Ms. Marchant with Aurora in 2009, and that it was standard practice and procedure to review the original Note in connection with the Affidavit of Merit. In addition: (1) it appears from the allegations of the complaint itself that Aurora was relying not on physical possession of a properly indorsed Note, but rather on the MERS assignment as the predicate for its legal standing to foreclose; and (2) Nationstar subsequently acknowledged that Aurora's foreclosure action was defective and voluntarily discontinued it.

For all of the foregoing reasons, the Court concludes that as of December 31, 2009, when Aurora filed its action to foreclose the Mortgage and purported to accelerate the Mortgage debt, the Note in Aurora's possession bore only the special indorsement to Lehman Brothers Bank, FSB, and no indorsement to Aurora, or to bearer or in blank. As the Second Department has specifically held:

Where there is no allonge or note that is either endorsed in blank or specially endorsedto the plaintiff, mere physical possession of a note at the commencement of a foreclosure action is insufficient to confer standing or to make a plaintiff the lawful holder of anegotiable instrument for the purposes of enforcing the note.

Marine U.S. Bank N.A. v. Moulton, supra, 179 AD3d at 737; McCormack v. Maloney, supra,

160 AD3d at 1099-1100.

Consequently, Aurora was not the "holder" of the Note and lacked standing to foreclose the Mortgage on that basis as of December 31, 2009.

3.Mortgage Servicer

CWCapital Asset Management, LLC v. Great Neck Towers, LLC, 99 AD3d 850 (2d Dept. 2012), much like the case at bar, involved a Trust which owned the note and mortgage being foreclosed, a bank serving as Trustee for the Trust, and a Servicer who by virtue of a pooling and servicing agreement ("PSA") became the servicer for the loan. The Second Department wrote:

CWCapital has standing to commence this action because the complaint identified the Trust as the owner of the note and mortgage, the action was expressly maintained inCWCapital's capacity as servicing agent, and, in the PSA, Bank of America's prede-cessor, as the Trustee for the Trust, delegated to CWCapital the authority to act with respect to the subject mortgage.

Id., 99 AD3d at 851. See also, CWCapital Asset Management LLC v. Charney-FPG 114 41st Street, LLC, 84 AD3d 506, 507 (1st Dept. 2011) (same). Cf., Wells Fargo Bank, NA v. Edwards, 95 AD3d 692, 692-693 (1st Dept. 2012) (plaintiff had standing where "the action was expressly maintained in plaintiff's capacity as trustee under a pooling and servicing agreement").

Assuming arguendo that authority to act with respect to Mr. Pryce's Mortgage loan was delegated to Aurora Loan Services in the Trust Agreement and Servicing Agreement referenced above, Aurora, unlike CWCapital, (1) did not in its complaint in foreclosure identify the Trust as the owner of the Note, and (2) did not expressly maintain the foreclosure action in its capacity as servicing agent, but instead proceeded, erroneously, on the basis that it was itself the owner and holder of the Note and Mortgage.

In Saxon Mortgage Services v. Jackman, 38 Misc 3d 1024(A) (Sup. Ct. Kings Co. 2012), as here, a loan servicer commenced a foreclosure action as the purported holder of the note and mortgage without ever revealing that it was maintaining the action as the servicing agent of the owner of the note. The Court, having adverted to CWCapital Asset Management, LLC v. Great Neck Towers, LLC, supra, held:

Here, however, the plaintiff fails to properly set forth its status in the complaint andnever reveals that there is a principal and the identity of the principal. Accordingly,the defendant's application to dismiss this foreclosure action based on the lack of standing of the plaintiff is granted....

Saxon Mortgage Services v. Jackman, supra, 38 Misc 3d 1024(A) at *1.

Here, then, even if Aurora had been delegated authority to foreclose under the Trust Agreement and Servicing Agreement, its falsely proceeding as purported owner and holder of the Note and failure to expressly maintain the action in its capacity as servicing agent for the Trustee of the Trust was fatal to its standing to prosecute the December 2009 foreclosure action.

E.Conclusion

By virtue of the foregoing, the Court concludes that (1) Aurora Loan Services lacked standing to prosecute the December 31, 2009 foreclosure action; (2) the purported acceleration of the Mortgage debt in the complaint in that action was therefore a nullity; and (3) consequently, the Statute of Limitations did not commence to run on the entire Mortgage debt on December 31, 2009. It follows that Nationstar's July 28, 2017 action to foreclose Mr. Pryce's Mortgage was timely commenced. Therefore, Mr. Pryce's affirmative Statute of Limitations defense as well as his RPAPL §1501(4) quiet title action must be dismissed.

F.De-Acceleration

Since the purported election to accelerate Mr. Pryce's Mortgage debt is a nullity, a revocation thereof was unnecessary and hence the issue of the validity of the purported de-acceleration does not properly arise. Nevertheless, the Court will briefly address the matter as an alternative ground for the ruling herein.

"A lender may revoke its election to accelerate the mortgage, but it must do so by an affirmative act of revocation occurring during the six-year statute of limitations period subsequent to the initiation of the prior foreclosure action." R.J.T. Food and Restaurant, LLC v. Rescap Liquidating Trust, supra, 127 N.Y.S.3d 270 (2d Dept. 2020); NMNT Realty Corp. v. Knoxville 2012 Trust, supra, 151 AD3d at 1069-70 (2d Dept. 2017). To be valid and enforceable, notice to the borrower that the lender has revoked its election to accelerate the mortgage debt must be "clear and unambiguous." See, Milone v. US Bank NA, supra, 164 AD3d 145, 153

(2d Dept. 2018). Beyond that, the law as to what is required for a valid deceleration is unsettled.

In a number of recent decisions, the Second Department has held that evidence of the voluntary discontinuance of a foreclosure action wherein the plaintiff had accelerated the debt is sufficient to raise an issue of fact regarding de-acceleration only if the plaintiff therein explicitly stated that the election to accelerate was revoked or otherwise provided that it would resume accepting monthly installment payments until the next default occurred. However, the Court of Appeals has granted leave to appeal in not just one, but two of these cases. See, Ditech Financial, LLC v. Naidu, 175 AD3d 1387 (2d Dept. 2019), lv granted 34 NY3d 910 (2020); Freedom Mortgage Corp. v. Engel, 163 AD3d 631 (2d Dept. 2018), lv granted in part 33 NY3d 1039 (2019). In yet another recent case, a Second Department panel's effort to provide a reasonable justification for these holdings was met with a searing dissent to the effect that they are wholly at odds with longstanding precedent and legally indefensible. See, Christiana Trust v. Barua, 184 AD3d 140, 125 NYS3d 420, 430-441 (2d Dept. 2020) (Miller, J., dissenting).

Beyond the voluntary discontinuance considered in itself, however, there is some guidance in the caselaw as to what evidence may be regarded as indicative of a valid de-acceleration. In Christiana Trust v. Barua, supra, the majority wrote:

The plaintiff also failed to establish that it ever demanded a resumption of monthly mortgage installment payments, invoiced the defendant for such payments, or offeredany other evidence demonstrating that it was truly seeking to de-accelerate the debt in addition to its discontinuance of the action (see Milone v. U.S. Bank N.A., 164 AD3dat 155...). Other evidence of a valid de-acceleration may include, but is not limited to,the voluntary vacatur of a lender's filed lis pendens (see CPLR 6514[d]), and a for-bearance agreement evincing a clear intent to revoke a prior acceleration and reinstate the homeowner's right to repay the underlying debt in monthly installments (see U.S. Bank Trust, N.A. v. Rudick, 172 AD3d 1430, 1431...)

Id., 125 NYS3d at 1426. See also, Milone v. US Bank N.A., supra, 164 AD3d at 154

(de-acceleration letter expressly demanding monthly payments or enclosing invoices for monthly installment payments evidences valid revocation of election to accelerate); Federal National Mortgage Ass'n v. Rosenberg, 180 AD3d 401, 402 (1st Dept. 2020) (90-day notice seeking an amount lower than accelerated amount may evidence intent to de-accelerate).

The dissenting justice in Christiana Trust v. Barua, supra, goes further:

An acceleration is either revoked, in fact, or it is not. Evidence of the amount demanded by the holder during the relevant period is dispositive on this point. There is no reason to add a mens rea component or inject an additional layer of analysis to explore the holder's metaphysical motivations in choosing their contractual remedy. Regardless of intent, an acceleration has not been revoked, "in fact," if the holder of the note and mortgage continues to demand the immediate payment of the entire mortgage debt or refuses to accept prospective monthly installment payments in accordance with the terms of the original agreements (cit.om.).

Here, the borrower has not alleged that Chase or any subsequent holder continued to demand the immediate payment of the entire mortgage debt after it discontinued the 2009 action, [*7]or that it otherwise refused to accept any tendered monthly install-ment payments. Nor is there any evidence in the record indicating that Chase engaged in any such conduct.

Rather, the evidence in the record shows that Chase formally and affirmatively withdrew its only demand for the immediate payment of the entire mortgage debt. This evidence is relevant because it has a tendency to make it more likely that Chase had revoked its election to accelerate to pursue a different remedy than the one it sought in the withdrawn complaint (cit.om.)....

Id., 125 NYS2d at 441 (Miller, J., dissenting).

Here, Mr. Pryce's Mortgage debt was accelerated only by Aurora Loan Services' declaration in the December 2009 complaint in foreclosure. The voluntary discontinuance of this action in June 2015 arguably "destroyed the effect of the sworn statement that the plaintiff had elected to accelerate the maturity of the debt." See, Deutsche Bank Nat. Trust Co. v. Adrian,

157 AD3d 934, 935-936 (2d Dept. 2018). See also, Loeb v. Willis, 100 NY 231, 235 (1885)

("The foreclosure action was discontinued, and all the proceedings therein thus annulled").

The voluntary discontinuance of the action was accompanied by a voluntary vacatur of the lender's filed lis pendens, which per Christiana Trust v. Barua, supra, constitutes evidence of a valid de-acceleration. Finally, the only evidence of the amount demanded of Mr. Pryce after the 2009 foreclosure was the monthly "Information Statements" wherein the amount stated to be due was only the default balance, not the far higher accelerated balance of the entire Mortgage debt. In opposition to this showing, Mr. Pryce adduced no evidence of continued demands for the immediate payment of the entire Mortgage debt, or of any refusal to accept monthly installment payments. Under these circumstances, no borrower in Mr. Pryce's shoes could reasonably have believed after the voluntary discontinuance of the December 2009 foreclosure action that the owner / holder of his Mortgage was still seeking immediate payment of the whole accelerated debt.

In view of the foregoing, the Court concludes that if there were a valid acceleration of the Mortgage debt by virtue of the December 2009 complaint in foreclosure, that election to accelerate was validly revoked in 2015 prior to the expiration of the six-year Statute of Limitations. For this reason too, then, Nationstar's July 28, 2017 action to foreclose Mr. Pryce's Mortgage was timely commenced, and Mr. Pryce's affirmative Statute of Limitations defense as well as his RPAPL §1501(4) quiet title action must be dismissed.

It is therefore

ORDERED, ADJUDGED AND DECREED, that the Complaint in Cassius Pryce v. Nationstar Mortgage LLC, Index No. EF004283-2017, is dismissed with prejudice, and it is further

ORDERED, that the Plaintiff in The Bank of New York Mellon v. Cassius Pryce, Index

No. EF005923-2017, is awarded judgment of foreclosure, the defendant Cassius Pryce's answer and counterclaims are stricken, and the matter will be referred as required by Executive Order to the court attorney for a COVID assessment conference.

The foregoing constitutes the decision, order of the Court.

Dated: September 23, 2020

E N T E R

Goshen, New York

HON. CATHERINE M. BARTLETT, A.J.S.C. Footnotes

Footnote 1:The term "Mortgage Loan" is defined in the Agreement to mean "[a] Mortgage and the related notes or other evidences of indebtedness secured by each such Mortage...including without limitation, each Mortgage loan listed on the Mortgage Loan Schedule, as amended from time to time." The term "Mortgage Loan Schedule is defined in the Agreement to mean "[t]he schedule attached hereto as Schedule A, which shall identify each Mortgage Loan, as such schedule may be amended from time to time to reflect the addition of Mortgage Loans to, or the deletion of Mortgage Loans from, the Trust Fund." Schedule A includes Mr. Pryce's Mortgage loan.

Footnote 2:The term "Seller" is defined in the Agreement to mean "Lehman Brothers Holdings Inc. or any successor in interest thereto."

Footnote 3:The term "Closing Date" is defined in the Agreement to mean "May 31, 2005."

Footnote 4:The term "Closing Date" is defined in the Agreement to mean "May 31, 2005."