DEUTSCHE BANK NATL. TRUST CO. v. TORRES

No. 2999/2008, Mot. Seq. No. 006-MOTD.

2014 NY Slip Op 32560(U)

DEUTSCHE BANK NATIONAL TRUST CO., Plaintiff, v. CARMEN L. TORRES, Defendant.

Supreme Court, Suffolk County.

Motion July 16, 2014.

Adj. August 29, 2014.

September 26, 2014.


Attorney(s) appearing for the Case

KOZENY, McCUBBIN, 395 n. Service Rd., Suite 401, Melville, NY 11747, Attys. For Plaintiff.

HOWARD B. ARBER, ESQ. , 64 Hilton Ave., Hempstead, NY 11550, Atty. For Def. Carmen L. Torres.


THOMAS F. WHELAN, Judge.

It is,

ORDERED that this motion (#006) by the plaintiff for, an order awarding summary judgment dismissing the affirmative defenses advanced in the amended answer of mortgagor defendant Carmen Torres and for summary on the plaintiff's complaint against such defendant together with an order appointing a referee to compute is considered and other relief is considered under CPLR 3212 and RPAPL 1321 and granted only to the extent that the Second, Third and Fourth affirmative defenses asserted in the answer of defendant Torres is denied; and it is further

ORDERED that a certification conference shall be held herein on Tuesday, October 28, 2014 at 9:30 a.m, in the courtroom of the undersigned located in the Annex Building of the Supreme Court at One Court Streee, Riverhead, New York 11901.

In this mortgage foreclosure action, the plaintiff moves for summary judgment against the surviving, mortgagor defendant, Carmen Torres. A prior order awarding such relief to the plaintiff dated October 9, 2010 was vacated by order of this court dated January 28, 2011 upon the stipulation of counsel. The instant motion is opposed by defendant Torres who asserts the several affirmative defenses contained in her amended answer, including that the plaintiff lacks standing to prosecute its claims for foreclosure and sale. While the court finds that the moving papers sufficiently demonstrated that three of the four affirmative defenses contained in the answer of defendant Torres are without merit, the plaintiff failed to adequately demonstrate that the affirmative defense of a lack of standing is without merit.

Entitlement to a judgment of foreclosure may be established, as a matter of law, where a mortgagee produces both the mortgage and unpaid note, together with evidence of the mortgagor's default, thereby shifting the burden to the mortgagor to demonstrate, through both competent and admissible evidence, any defense which could raise a question of fact" (Zanfini v Chandler, 79 A.D.3d 1031, 912 N.Y.S.2d 911 [2d Dept 2010], quoting HSBC Bank USA v Merrill, 37 A.D.3d 899, 900, 830 N.Y.S.2d 598 [2d Dept 2010]; see Plaza Equities, LLC v Lamberti, 118 A.D.3d 688, 986 N.Y.S.2d 843 [2d Dept 2014]; Emigrant Mtge. Co., Inc. v Beckerman, 105 A.D.3d 895, 964 N.Y.S.2d 548 [2d Dept 2013]; Solomon v Burden, 104 A.D.3d 839, 961 N.Y.S.2d 535 [2d Dept 2013]; US Bank Natl. Ass'n. v Denaro, 98 A.D.3d 964, 950 N.Y.S.2d 581 [2d Dept 2012]; Baron Assoc., LLC v Garcia Group Enter., 96 A.D.3d 793, 946 N.Y.S.2d 611 [2d Dept 2012]). This standard is enlarged to include a demonstration that the plaintiff is possessed of the requisite standing to pursue its claims where, and only where, the defense of standing is due and timely asserted by a defendant possessed of such defense (see Plaza Equities, LLC v Lamberti, 118 A.D.3d 688, supra; see Peak Fin. Partners, Inc. v Brook, 119 A.D.3d 539, 987 N.Y.S.2d 916 [2d Dept 2014]; Kondaur Capital Corp. v McCary, 115 A.D.3d 649, 981 N.Y.S.2d 547 [2d Dept 2014]; Deutsche Bank Natl. Trust Co. v Whalen, 107 A.D.3d 931, 969 N.Y.S.2d 82 [2d Dept 2013]; Deutsche Bank Natl. Trust Co. v Rivas, 95 A.D.3d 1061, 945 N.Y.S.2d 328 [2d Dept 2012]; Citimortgage, Inc. v Stosel, 89 A.D.3d 887, 888, 934 N.Y.S.2d 182 [2d Dept 2011]; U.S. Bank, N.A. v Adrian Collymore, 68 A.D.3d 752, 890 N.Y.S.2d 578 [2d Dept 2009]; Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 A.D.3d 239, 837 N.Y.S.2d 247 [2d Dept 2007]).

"A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note" at the time the action is commenced (US Bank, N.A. v Morrison, ___ AD3d ___, 2014 WL 4435687 quoting Kondaur Capital Corp. v McCary, 115 A.D.3d 649, 650, 981 N.Y.S.2d 547 [2d Dept see Bank of N.Y. v Silverberg, 86 A.D.3d 274, 279, 926 N.Y.S.2d 532 [2d Dept 2011]; U.S. Bank, N.A. v Collymore, 68 A.D.3d 752, 753, 890 N.Y.S.2d 578 [2d Dept 2009]).1 The plaintiff may demonstrate that it is the holder or assignee of the underlying note by showing "[e]ither a written assignment of the underlying note or the physical delivery of the note" (see Midfirst Bank v Agho, ___ AD3d ___, 2014 WL 3929100 [2d Dept 2014]; US Bank, N.A. v Morrison, ___ AD3d ___, 2014 WL 4435687 [2d Dept 2014]; US Bank of NY v Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532 [2d Dept 2011]).

The foregoing rule governing note transfer is the result of the ancient principal/incident rule which provides that a mortgage may not stand separate from the note evidencing the principal debt or obligation because the mortgage is merely security therefor (see Weaver Hardware Co. v Solomovitz, 235 N.Y. 321, 331-332, 139 NE 353 [1923]; US Bank of NY v Silverberg, 86 A.D.3d 274, 280, supra). Accordingly, a mortgage passes as an incident of the note upon such note's written assignment or upon its physical delivery to the plaintiff prior to commencement of the action (see PHH Mortg. Corp. v Israel, ___ AD3d ___, 2014 WL 4627577 [2d Dept 2014]; Deutsche Bank Natl. Trust Co. v Whalen, 107 A.D.3d 931, 969 N.Y.S.2d 82 [2d Dept 2013]; One West Bank FSB v Carey, 104 A.D.3d 444, 960 N.Y.S.2d 306 [1st Dept 2013]; Deutsche Bank Trust Co. Am. v Codio, 94 A.D.3d 1040, 943 N.Y.S.2d 545 [2d Dept 2012]; GRP Loan, LLC v Taylor, 95 A.D.3d 1172, 945 N.Y.S.2d 336 [2d Dept 2012]). In all cases wherein the plaintiff is one other than the original mortgage lender, a valid transfer of the note to the plaintiff prior to the commencement of the action, which effects a valid transfer of the mortgage under the principal/incident rule, will resolve the standing issue in favor of the plaintiff (see PHH Mortg. Corp. v Israel, ___ AD3d ___, 2014 WL 4627577 [2d Dept 2014], supra; Deutsche Bank Natl. Trust Co. v Whalen, 107 A.D.3d 931, supra; One West Bank FSB v Carey, 104 A.D.3d 444, supra; US Bank Natl. Ass'n v Cange, 96 A.D.3d 825, 947 N.Y.S.2d 522 [2d Dept 2012]; Deutsche Bank Trust Co. Am. v Codio, 94 A.D.3d 1040, 943 N.Y.S.2d 545 [2d Dept 2012] U.S. Bank, N.A. v Adrian Collymore, 68 A.D.3d 752, supra).

Here, the plaintiff predicates upon its possession of the mortgage note that was endorsed in blank by the original lender on the face of such note. In addition, the plaintiff rests its standing upon an indenture entitled "Assignment of Mortgage" in favor of the plaintiff that was executed by Mortgage Electronic Registration Systems, Inc., [hereinafter "MERS"] as nominee of WMC Mortgage Corp., the original lender, on January 17, 2008, which predates the commencement of this action on January 22, 2008 by five days.

Mortgage notes may be transferred by mere delivery to a third party transferee as it has long been recognized that "a good assignment is made by delivery only" (see Fryer v Rockefeller, 63 N.Y. 268, 276 [1875]). In addition, it is clear "`[n]o special form or language is necessary to effect an assignment as long as the language shows the intention of the owner of a right to transfer it'" (Bank of New York v Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532 [2d Dept 2011], quoting Suraleb, Inc. v International Trade Club, Inc., 13 A.D.3d 612, 612, 788 N.Y.S.2d 403 [2d Dept 2004]; see also OneWest Bank FSB v Carey, 104 A.D.3d 444, 960 N.Y.S.2d 306 [1st Dept 2013]; Chase Home Finance, LLC v Miciotta, 101 A.D.3d 1307, 956 N.Y.S.2d 271 [3d Dept 2012]). As a general matter, once a promissory note is tendered to and accepted by an assignee, the mortgage passes as an incident to the note (see HSBC Bank USA, Nat. Ass'n v Gilbert, 120 A.D.3d 756, 991 N.Y.S.2d 358 [2d Dept 2014]; U.S. Bank Nat. Ass'n v Faruque, 120 A.D.3d 575, 2014 WL 3928918 [2d Dept 2014]; Bank of New York v Silverberg, 86 A.D.3d 274, supra).

In addition to mere delivery, mortgage notes may be transferred to third party "holders" by negotiation provided that such notes qualify as negotiable instruments under the Uniform Commercial Code (see UCC 3-104; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 A.D.3d 674, 838 N.Y.S.2d 622 [2d Dept. 2007]). New York's Uniform Commercial Code (UCC) § 1-201(20) defines "holder" as "a person who is in possession of a document of title, an instrument or an investment security drawn, issued or indorsed to him or to his order or to bearer or in blank" and a person becomes the holder of an instrument "through its negotiation" to him or her (see UCC §3-202[1]). Where the instrument is payable to order, it is negotiated by delivery and all necessary endorsements and where it is payable to the bearer by virtue of an indorsement in blank or otherwise, delivery alone is sufficient to transfer it to a third party (see UCC 3-204[2]; Franzese v Fidelity New York FSB, 214 A.D.2d 646, 625 N.Y.S.2d 275 [2d Dept 1995]).

Holder status of a note and mortgage may thus arise where the plaintiff possesses a mortgage note which bears, on its face or in an affixed allonge, a special indorsement payable to the order of the plaintiff or where the plaintiff takes possession of a mortgage note that contains an indorsement in blank that is similarly affixed (see UCC §1-201[20]; §3-202; §3-204; §9-203[g]; Spielman v Manufacturers Hanover Trust Co., 60 N.Y.2d 221, 469 N.Y.S.2d 69 [1983]; Nationstar Mortgage, LLC v Davidson, 116 A.D.3d 1294, 983 N.Y.S.2d 705 [3d Dept 2014]; Citimortgage, Inc. v Friedman, 109 A.D.3d 573, supra; Deutsche Bank Trust Co. Am. v Codio, 94 A.D.3d 1040, supra; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 A.D.3d 674, supra; First Trust Natl. Ass'n v Meisels, 234 A.D.2d 414, 651 N.Y.S.2d 121 [2d Dept 1996]; Deutsche Bank Natl. Trust Co. v Pietranico, 33 Misc.3d 528, 928 N.Y.S.2d 818 [Sup. Ct. Suffolk County 2011], aff'd, 102 A.D.3d 724, 957 N.Y.S.2d 868 [2d Dept 2013]). As in the case of an unendorsed note, delivery of an endorsed note is essential to holder status.

PROOF OF NOTE DELIVERY:

Appellate case authorities have recently instructed that delivery of a note may be established in the following ways: 1) physical delivery of the note to the plaintiff or its custodial agent, servicer or nominee prior to the commencement of the action (see Kondaur Capital Corp. v McCary, 115 A.D.3d 649, supra; Deutsche Bank Natl. Trust Co. v Whalen, 107 A.D.3d 931, 932, supra; Mortgage Electronic Registration Systems, Inc. v Coakley, 41 A.D.3d 674, supra; 2) delivery of an endorsed note to the endorsee or bearer on a specific date that is prior to the commencement of the action, from which it may be reasonably inferred that physical delivery of the note was made to the plaintiff by the endorser (see Aurora Loan Serv., LLC v Taylor, 114 A.D.3d 627, 980 N.Y.S.2d 475 [2d Dept 2014]); or 3) pre-commencement possession of the note by a custodial agent of a trustee plaintiff named in a pooling and servicing agreement (see HSBC Bank USA, Nat. Ass'n v Sage, 112 A.D.3d 1126, 977 N.Y.S.2d 446 [3d Dept 2013]). Delivery of an instrument such as a promissory note to an agent of the plaintiff may thus effect a valid transfer of the note to the plaintiff (see Deutsche Bank Natl. Trust Co. v Whalen, 107 A.D.3d 931, supra; Mortgage Electronic Registration Systems, Inc. v Coakley, 41 A.D.3d 674, supra; Depew Dev., Inc. v AT&A Trucking Corp., 210 A.D.2d 974, 621 N.Y.S.2d 242 [4th Dept 1994]; Wolfin v Security Bank, 170 A.D. 519, 156 N.Y.S. 474, 476 [1915]; see also Corporation Venezolana de Fomento v Vintero Sales Corp., 452 F.Supp. 1108 [SDNY 1978]). The essential element of a constructive delivery is that it be made with the unmistakable intention of transferring title to the instrument (see id. at 1117).

Appellate case authorities have likewise instructed that the absence of due and sufficient proof of note delivery to the plaintiff prior to the commencement of the action warrants the denial of a finding in favor of the plaintiff on the issue of its standing to the extent such issue is premised upon delivery (see HSBC Bank USA, Nat. Ass'n v Gilbert, 120 A.D.3d 756, 756, supra [2d Dept 2014]; U.S. Bank Nat. Ass'n v Faruque, 120 A.D.3d 575, 2014 WL 3928918 [2d Dept 2014], supra; Bank of N.Y. Mellon v Gales, 116 A.D.3d 723, 982 N.Y.S.2d 911[2d Dept 2014]; MLCFC 2007-9 Mixed Astoria, LLC v 36-02 35th Ave. Development, LLC, 116 A.D.3d 745, 983 N.Y.S.2d 604 [2d Dep 2014]; Homecomings Financial, LLC v Guldi, 108 A.D.3d 506, 969 N.Y.S.2d 470 [2d Dept 2013]; Deutsche Bank Nat. Trust Co. v Spanos, 102 A.D.3d 909, 961 N.Y.S.2d 200 [2d Dept 2013]; Deutsche Bank Natl. Trust Co. v Haller, 100 A.D.3d 680, 954 N.Y.S.2d 551 [2d Dept 2012]; HSBC Bank USA v Hernandez, 92 A.D.3d 843, 939 N.Y.S.2d 120 [2d Dept 2012]; Deutsche Bank Nat. Trust Co. v Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630 [2d Dept 2011]). Other appellate case authorities suggest that the mere tender of a mortgage note by an assignor and acceptance by the assignee of the note are sufficient indicia of an effective transfer such note and of the mortgage securing it (see HSBC Bank USA, Nat. Ass'n v Gilbert, 120 A.D.3d 756, supra; U.S. Bank Nat. Ass'n v Faruque, 120 A.D.3d 575, supra; US Bank Natl. Ass'n v Cange, 96 A.D.3d 825, supra; Bank of N.Y. v Silverberg, 86 A.D.3d 274, supra).

Here, the plaintiff, in attempt to establish its standing, relies upon its possession of the subject mortgage note which contains a payable to the order indorsement in blank from the original lender. However, no allegations of note delivery to the plaintiff are advanced in the affidavit of merit by the plaintiff's servicer. The court is thus left with the nuanced and conclusory allegations of note possession that are advanced in the affirmation of plaintiff's counsel, none of which include specifics as to the date of delivery. Nor are counsel's allegations probative due to the absence of personal knowledge on the part of defense counsel or documentary proof. The court thus finds that the plaintiff failed to satisfy its prima facie burden of establishing, by due and sufficient proof, its possession of the subject note prior to the commencement of this action by the physical delivery of such note. The plaintiff's demand for summary judgment dismissing the First affirmative defense of the defendant and its demand for summary judgment upon its complaint is thus denied to the extent such demands are premised upon the plaintiff's pre-action possession of the endorsed note via delivery.

WRITTEN ASSIGNMENTS OF NOTES:

As indicated above, a pre-action written assignment of a note, with or without a concomitant written assignment of the mortgage, is sufficient to effect a transfer of the note and the mortgage to the assignee, irrespective of delivery, under the principal/incident rule (see PHH Mortg. Corp. v Israel, ___ AD3d ___, 2014 WL 4627577 [2d Dept 2014], supra; MLCFC 2007-9 Mixed Astoria, LLC v 36-02 35th Ave. Development, LLC, 116 A.D.3d 745, supra). The proper test to determine the validity of an assignment is whether the assignor intended to transfer some present interest to the transferee (see In re Stralem, 303 A.D.2d 120, 758 N.Y.S.2d 345 [2d Dept 2003]; Matter of Jordan, 199 A.D.2d 998, 605 N.Y.S.2d 596 [4th Dept]). When a valid assignment is made, the assignee steps into the assignor's shoes and acquires whatever rights the latter had (In re Stralem, 303 A.D.2d 120, supra; Furlong v Shalala, 156 F.3d 384, 392 [2d Cir.1998]). An assignment of a mortgage need not be recorded in order to be effective (see Weisblum v Aurora Loan Services, LLC, 85 A.D.3d 95, 923 N.Y.S.2d 609 [2d Dept 2011]).

Nevertheless, the mere assignment by writing of a mortgage does not effect an assignment of the note and it leaves the assignee of the mortgage alone without standing to prosecute a claim for foreclosure and sale (see U.S. Bank Nat. Ass'n v Faruque, 120 A.D.3d 575, 2014 WL 3928918 [2d Dept 2014]; supra; Bank of New York Mellon v Gales, 116 A.D.3d 723, supra; Homecomings Financial, LLC v Guldi, 108 A.D.3d 506, supra; U.S. Bank Nat. Ass'n v Dellarmo, 94 A.D.3d 746, 942 N.Y.S.2d 122 [2d Dept 2012]; US Bank Nat. Ass'n v. Madero, 80 A.D.3d 751, 915 NYS2dd 612 [2d Dept 2011]; U.S. Bank, N.A. v Adrian Collymore, 68 A.D.3d 752, supra). In addition, the general rule is that mortgage note assignments must be effective prospectively, rather than retroactively (see Countrywide Home Loans, Inc. v Gress, 68 A.D.3d 709, 888 N.Y.S.2d 914 [2d Dept 2009]) and they must be authored by entities having the requisite interests or authority to make such assignment (see Homecomings Financial, LLC v Guldi, 108 A.D.3d 506, supra; Bank of New York v Silverberg, 86 A.D.3d 274, supra; CW Capital Asset Management, LLC v Great Neck Towers, LLC, 99 A.D.3d 850, 953 N.Y.S. 89 [2d Dept 2012]). A valid written assignment of a mortgage may be made by the Mortgage Electronics Registration System MERS] (see Saxon Mortg. Services, Inc. v Coakley, 83 A.D.3d 1038, 921 N.Y.S.2d 552 [2d Dept 2011]), provided it was the owner of the note, by delivery or written assignment, at the time such assignment was made (see Mortgage Electronic Registration Systems, Inc. v Coakley, 41 A.D.3d 674, supra; see also Homecomings Financial, LLC v Guldi, 108 A.D.3d 506, supra; Bank of New York v Silverberg, 86 A.D.3d 274, supra), or that it had the requisite authority as agent or nominee of the owner to make such assignment on behalf of the owner (see Deutsche Bank Natl. Trust Co. v Pietranico, 33 Misc.3d 528, 928 N.Y.S.2d 818 [Sup. Ct. Suffolk County 2011], aff'd, 102 A.D.3d 724, 957 N.Y.S.2d 868 [2d Dept 2013], supra; Fairbanks Capital Corp. v Nagel, 289 A.D.3d 99, supra; cf., Deutsche Bank Nat. Trust Co v. Haller, 100 A.D.3d 680, supra).

Here, the plaintiff rests its alternative claim of standing on the pre-action, January 17, 2008 written assignment of the note and mortgage that was executed by MERS as nominee of the original lender under the signature of an attorney whose claims authority under a corporate resolution. The defendant's only challenge to this assignment is "that it does not contain the required language regarding the authority of the individual who executed it" (see ¶ TENTH of the affirmation in opposition by defense counsel). While the court rejects this contention as lacking merit, the court finds, that questions of fact were not eliminated by the proof adduced by the plaintiff in support of its motion as there was insufficient proof that MERS was the lawful owner or holder of the note at the time of the assignment (see Homecomings Financial, LLC v Guldi, 108 A.D.3d 506, supra; Bank of New York v Silverberg, 86 A.D.3d 274, supra; cf., Mortgage Electronic Registration Systems, Inc. v Coakley, 41 A.D.3d 674, supra), or that MERS possessed the requisite authority to sue on behalf of the owner or holder of the note at the time of the commencement of this action (see Deutsche Bank Nat. Trust Co v. Haller, 100 A.D.3d 680, supra; Bank of New York v Silverberg, 86 A.D.3d 274, supra; cf., Deutsche Bank Natl. Trust Co. v Pietranico, 33 Misc.3d 528, 928 N.Y.S.2d 818 [Sup. Ct. Suffolk County 2011], aff'd, 102 A.D.3d 724, 957 N.Y.S.2d 868 [2d Dept 2013], supra; CW Capital Asset Management LLC v. Charney-FPG 114 41st Street, LLC, 84 A.D.3d 506, supra; Fairbanks Capital Corp. v Nagel, 289 A.D.3d 99, supra).

In view of the foregoing, the plaintiff's motion for summary judgment is granted only to the extent that the Second, Third and Fourth affirmative defenses asserted in the answer of Carmen Torres are dismissed while the remaining portions of the instant motion are denied due to insufficient proof.

A certification conference shall be held herein on Tuesday, October 28, 2014, at 9:30 a.m in the courtroom of the undersigned located in the Annex Building of the Supreme Court at One Court Street, Riverhead, NY. Counsel are directed to appear thereat ready for such conference.

FootNotes


1. Original lenders are exempt from the foregoing rules as are non-owner entities who are authorized by statute or contract to act on behalf of the owner those who own or hold the note and mortgage at the time of the commencement (see RPAPL § 1302; § 1304]; Emigrant Mortgage Co., Inc. v Persad, 117 Ad3d 676, 985 N.Y.S.2d 608 [2d Dept 2014; CW Capital Asset Management LLC v. Charney-FPG 114 41st Street, LLC, 84 A.D.3d 506, 923 NYS,2d 453, 454 [1st Dept 2011]; Fairbanks Capital Corp. v Nagel, 289 A.D.3d 99, 725 N.Y.S.2d 13 [1st Dept 2001]).

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