Opinion
Index No. 850031/2019 Motion Seq. No. 001
12-09-2022
EMIGRANT BANK AS ASSIGNEE OF EMIGRANT MORTGAGE COMPANY, INC., Plaintiff, v. GARY FLOM, SVITLANA FLOM, ONESTONE LENDING LLC,BOARD OF MANAGERS OF ONE RIVERSIDE PARK CONDOMINIUM, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, ATLANTIC SPECIALTY INSURANCE COMPANY, VENIAMIN NILVA, 625 W 55 LLC,624 WEST 47TH STREET LLC,JOHN DOE #1 THROUGH JOHN DOE #20 (SAID NAMES BEING FICTITIOUS, IT BEING THE INTENTION OF PLAINTIFF TO DESIGNATE ANY AND ALL OCCUPANTS OF PREMISES BEING FORECLOSED HEREIN, INCLUDING, WITHOUT LIMITATION, TENANTS OR OTHER OCCUPANTS WHO MAY HAVE SOME INTEREST Defendant.
Unpublished Opinion
DECISION+ ORDER ON MOTION
HON. FRANCIS A. KAHN, III, Justice
The following e-filed documents, listed by NYSCEF document number (Motion 001) 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83 were read on this motion to/for JUDGMENT - SUMMARY.
Upon the foregoing documents, the motion is determined as follows:
This is an action is to foreclose on a mortgage encumbering a parcel of real property located at 20 West 64th Street, Apt 27K, New York, New York. The mortgage secures a loan with an original principal amount of $2,200,000.00 which is memorialized by an adjustable-rate note. The note and mortgage, both dated November 30, 2015, were given by Defendants Gary and Svitlana Flom ("Flom") to the original lender, non-party Emigrant Mortgage Company, Inc. ("Emigrant Mortgage"). Plaintiff, Emigrant Bank ("Emigrant Bank") commenced this action on February 2, 2019, alleging Defendants defaulted in making installment payments under the note beginning on or about March 6, 2018. Flom Defendants answered and pled twenty-seven [27] affirmative defenses, including standing and RPAPL §1304.
Now, Plaintiff moves for, inter alia, summary judgment against Flom Defendants, striking their answer and affirmative defenses, a default judgment against all non-appearing parties, to appoint a Referee to compute and to amend the caption. Flom Defendants oppose the motion.
In moving for summary judgment, Plaintiff was required to establish prima facie entitlement to judgment as a matter of law though proof of the mortgage, the note, and evidence of Defendants' default in repayment (see U.S. Bank. N.A. v James, 180 A.D.3d 594 [1st Dept 2020]; Bank of NY v Knowles, 151 A.D.3d 596 [1st Dept 2017]; Fortress Credit Corp, v Hudson Yards, LLC, 78 A.D.3d 577 [1st Dept 2010]). "A default is established by (1) an admission made in response to a notice to admit, (2) an affidavit from a person having personal knowledge of the facts, or (3) other evidence in admissible form" (Deutsche Bank Natl. Trust Co. v McGann, 183 A.D.3d 700, 702 [2d Dept 2020]). Plaintiff was also required to demonstrate its standing since Flom Defendants raised this affirmative defense in their answer (see eg Wells Fargo Bank, N.A. v Tricario, 180 A.D.3d 848 [2nd Dept 2020]; Wells Fargo Bank, N.A. v McKenzie, 186 A.D.3d 1582 [2d Dept 2020]). Likewise, Plaintiff was obliged to demonstrate its strict compliance with RPAPL §1304 as well as its substantial compliance with the requisites under paragraph 22 of the mortgage (see U.S. Bank, NA v Nathan, 173 A.D.3d 1112 [2d Dept 2019]; HSBC Bank USA, N.A. v Bermudez, 175 A.D.3d 667, 669 [2d Dept 2019]; Deutsche Bank Natl. Trust Co. v Pariser, 207 A.D.3d 518 [2d Dept 2022]; Wells Fargo Bank, N.A. v McKenzie, 186 A.D.3d 1582, 1584 [2d Dept 2020]).
Proof supporting a prima facie case on a motion for summary judgment must be in admissible form (see CPLR §3212[b]; Tri-State Loan Acquisitions III, LLC v Litkowski, 172 A.D.3d 780 [1st Dept 2019]). A plaintiff may rely on evidence from persons with personal knowledge of the facts, documents in admissible form and/or persons with knowledge derived from produced admissible records (see eg U.S. Bank N.A. v Moulton, 179 A.D.3d 734, 738 [2d Dept 2020]). No particular set of business records must be proffered, as long as the admissibility requirements of CPLR 4518[a] are fulfilled and the records evince the facts for which they are relied upon (see eg Citigroup v Kopelowitz, 147 A.D.3d 1014, 1015 [2d Dept 2017]).
Plaintiffs motion was supported with an affidavit from Maryann Monteserrato ("Monteserrato"), an Assistant Vice President of Plaintiff. Monteserrato averred that she had personal knowledge of "Emigrant's books and records", including those of the Mortgagors' account, as well as the preparation and recordation of same. Annexed to her affidavit were certain of the records referenced. Also annexed was an affidavit from Aaron Smals ("Smalls") purporting to attest to service of the notice pursuant to RPAPL §1304 along with an alleged copy of the notice sent.
Monteserrato's affidavit laid a proper foundation for the admission of Emigrant Bank's records (see Bank of N.Y.Mellon v Gordon, 171 A.D.3d 197 [2d Dept 2019]). However, her affidavit was insufficient to establish a foundation under CPLR §4518 for admission of the business records the former holder or servicer of the note and mortgage, to wit Emigrant Mortgage, as she did not attest to having familiarity with the record keeping practices of Emigrant Mortgage (see Berkshire Bank v Fawer. 187 A.D.3d 535 [1st Dept 2020]; IndyMac Fed. Bank, FSB v Vantassell, 187 A.D.3d 725 [2d Dept 2020]). Further, Monteserrato did not attest the records of the prior holder of the note were received from the maker, incorporated into the records Emigrant Bank kept and that her employer routinely relied on such records in its business (see U.S. Bank N.A. v Kropp-Somoza, 191 A.D.3d 918 [2d Dept 2021]; Tri-State Loan Acquisitions III. LLC v Litkowski, 172 A.D.3d 780, 782-783 [2d Dept 2019]; cf. Bank of Am., N.A. v Brannon, 156 A.D.3d 1, 10 [1st Dept 2017]).
Here, the records proffered to demonstrate the note, mortgage, Defendants' alleged default, as well as service of the RPAPL §1304 and paragraph 22 default notices, all facially indicate they are records of Emigrant Mortgage, not Plaintiff, Emigrant Bank. As such, none of the records are admissible and fail to establish any of the prima facie elements of the cause of action for foreclosure (see Federal Natl. Mtge. Assn, v Allanah, 200 A.D.3d 947 [2d Dept 2021]).
Concerning Plaintiffs standing, it is established in one of three ways: [1] direct privity between mortgagor and mortgagee, [2] holder status via physical possession of the note prior to commencement of the action which contains an indorsement in blank or bears a special indorsement payable to the order of the plaintiff either on its face or by allonge, and [3] assignment of the note to Plaintiff prior to commencement of the action (see eg Wells Fargo Bank, N.A. v Tricario, 180 A.D.3d 848 [2d Dept 2020]; Wells Fargo Bank, NA v Ostiguy, 127 A.D.3d 1375 [3d Dept 2015]). As to the latter two circumstances, the note is the dispositive instrument (Aurora Loan Servs., LLC v Taylor, 25 N.Y.3d 355, 361-362 [2015]).
The most common basis relied on in foreclosure actions, holder 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 A.D.3d 1375, 1376 [2d Dept 2015] [citations omitted]). The indorsement must be made either on the face of the note or on an allonge "so firmly affixed thereto as to become a part thereof' (UCC §3-202[2]). Evidence of the nature of the attachment is required (see One Westbank FSB v Rodriguez, 161 A.D.3d 715 [1st Dept 2018]), since not every appendment can satisfy the statutory requisite (see HSBC Bank USA, N.A. v Roumiantseva, 130 A.D.3d 983 [2d Dept 2015][Paperclip not a firm annexation]). Attachment of a properly endorsed note to the complaint or proof by affidavit may be sufficient to establish, prima facie, that the plaintiff was the holder of the note at the time of commencement (see Aurora Loan Servs., LLC v Taylor, 25 N.Y.3d 355, 361 [2015]; US Bank NA v Garcia, 183 A.D.3d 506 [1stDept 2020]; Deutsche Bank Natl. Trust Co. v Webster, 142 A.D.3d 636, 638 [2d Dept 2016]).
Here, Plaintiff claims holder status by transfer of physical possession of the note with an allonge from Emigrant Mortgage to Emigrant Bank. Montserrado asserts that she personally confirmed that Plaintiff was in possession of the note prior to commencement and a copy of the note with an allonge was annexed to Montserrado's affidavit. However, the allonge purporting to transfer the instrument is on a separate page, is undated and reveals no discernable evidence of firm attachment from a visual inspection. Resultantly, Plaintiff was required to establish the allonge was "firmly affixed" to the original note (see Nationstar Mtge., LLC v Calomarde, 201 A.D.3d 940, 942 [2d Dept 2022]; JPMorgan Chase Bank, N.A. v Grennan, supra at 1516). As Montserrado's affidavit and Plaintiffs other submissions are silent on this issue, Plaintiff has only demonstrated "mere physical possession of a note at the commencement of a foreclosure action [which] is insufficient to confer standing or to [prove] plaintiff the lawful holder of a negotiable instrument for the purposes of enforcing the note" (U.S. Bank N.A. v Moulton, 179 A.D.3d 734, 737 [2d Dept 2020]).
As to the branch of Plaintiff s motion to dismiss all Defendants' affirmative defenses, CPLR §321 l[b] provides that "[a] party may move for judgment dismissing one or more defenses, on the ground that a defense is not stated or has no merit". For example, affirmative defenses that are without factual foundation, conclusory or duplicative cannot stand (see Countrywide Home Loans Servicing, L.P. v Vorobyov, 188 A.D.3d 803, 805 [2d Dept 2020]; Emigrant Bank v Myers, 147 A.D.3d 1027, 1028 [2d Dept 2017]). When evaluating such a motion, a "defendant is entitled to the benefit of every reasonable intendment of its pleading, which is to be liberally construed. If there is any doubt as to the availability of a defense, it should not be dismissed" (Federici v Metropolis Night Club, Inc., 48 A.D.3d 741, 743 [2d Dept 2008]).
The first and nineteenth affirmative defenses, which are directed to the legal sufficiency of Plaintiffs complaint, are unnecessary as a general matter since dismissal cannot be effectuated without a motion pursuant to CPLR 3211 [a][7] (see Riland v Frederick S. Todman &Co., 56 A.D.2d 350 [1st Dept 1977]). Normally, this defense is nothing more than '"harmless surplusage,' and ... a motion by the plaintiff to strike the same should be denied" (Butler v Catinella, 58 A.D.3d 145 [2d Dept 2008]).
However, where all other affirmative defenses fail as a matter of law, it may be dismissed (Raine v Allied Artists Productions, Inc., 63 A.D.2d 914, 915 [1st Dept 1978]).
The second affirmative defense, alleging the action is barred by the statute of limitations, is conclusory and meritless. Defendants failed to offer any facts, or simply allegations, to support that the indebtedness under the note was accelerated more than six-years before this action was commenced (cf. U.S. Bank N.A. v Salvodon, 189 A.D.3d 925 [2d Dept 2020]; 21st Mtge. Corp, v Balliraj, VH A.D.3d 687 [2d Dept 2019]).
The third, fifth, sixth, seventh, eighth, tenth, eleventh, eighteenth, and twenty-seventh affirmative defenses claiming novation, modification, equitable estoppel, waiver, failure to satisfy conditions precedent unclean hands, repayment/modification, predatory lending, breach of the implied covenant of good faith, unjust enrichment and breach of contract are entirely conclusory and unsupported by any facts in the answer. As such, these affirmative defenses are nothing more than unsubstantiated legal conclusions which are insufficiently pled as a matter of law (see Board of Mgrs. of Ruppert Yorkville Towers Condominium v Hayden, 169 A.D.3d 569 [1st Dept 2019]; see also Bosco Credit V Trust Series 2012-1 v. Johnson, 177 A.D.3d 561 [1st Dept 2020]; 170 W. Vil. Assoc, v G &E Realty, Inc., 56 A.D.3d 372 [1st Dept 2008]; see also Becher v Feller, 64 A.D.3d 672 [2d Dept 2009]; Cohen Fashion Opt., Inc. v V&MOpt., Inc., 51 A.D.3d 619 [2d Dept 2008]).
The fourth affirmative defense of mitigation is unavailing in a foreclosure action (see Marine Midland Bank, N. A. v Virginia Woods Ltd., 201 A.D.2d 625 [2d Dept 1994]) as the amount due is not a defense to summary judgment (see eg Excel Capital Group Corp, v 225 Ross St. Realty, Inc., 165 A.D.3d 1233 [2d Dept 2018]). .
The seventh, twentieth and twenty-sixth affirmative defenses are unnecessary as they relate to the amount due and owing under the mortgage. Even a mortgagor that has defaulted in appearing in a foreclosure action can appear and contest the amount due and owing under the mortgage (see Wilmington Sav. Fund Socy., FSB v Moriarty-Gentile, 190 A.D.3d 890, 892-893 [2d Dept 2021]).
The ninth affirmative defense that Plaintiff lacks standing is, based on the foregoing findings of the Court, presently viable.
The twelfth affirmative defense based upon alleged violations of the Real Estate Settlement Procedures Act [12 USC §2614] is entirely conclusory and lacking in any facts identifying the acts attributable to Plaintiff or the original lender. This is of particular significance as Plaintiff is not the originator of the loan.
The fourteenth affirmative defense based upon the Home Ownership and Equity Protection Act of 1994 ("HOEPA") (see 15 USC § 1639) is inadequately pled. HOEPA is an amendment to the TILA, which imposes additional truth-in-lending disclosure requirements when a borrower is involved in a "high cost" loan transaction (see Palmer v GMAC Commercial Mortg., 628 F.Supp.2d 186, 189 [D DC 2009]). Defendants failed to plead a basis for applicability of this statute or the precise violation thereunder.
The fifteenth affirmative defense that Plaintiff violated yet unidentified statutes is incomprehensible and inadequately pled.
The sixteenth affirmative defense fails as "documentary evidence is not by itself an affirmative defense, but merely one way in which a defense may be raised or proven" (see Sotomayor v Princeton Ski Outlet Corp., 199 A.D.2d 197 [1st Dept 1993]).
The twenty-first affirmative defense alleging Plaintiff lacks capacity as it is not authorized to do business in New York was established by Plaintiff to be without basis in fact.
The twenty-second affirmative defense claiming failure to join necessary parties is insufficiently pled as the parties not joined and their interests are not identified.
The twenty-third affirmative defense that Plaintiffs lien it subordinated to other liens of record is not a viable defense to foreclosure for a mortgagor. Indeed, only parties with subordinate, not superior, liens are necessary parties to a foreclosure action (see RPAPL §1311).
The twenty-fourth and twenty-fifth affirmative defenses that relate to contract default notice and RPAPL §1304 are, based on the foregoing findings of the Court, presently viable.
Defendants' opposition to dismissal of the affirmative defenses was entirely conclusory and, by failing to raise specific legal arguments in rebuttal, those affirmative defenses found insufficient were abandoned (see U.S. Bank N.A. v Gonzalez, 172 A.D.3d 1273, 1275 [2d Dept 2019]; Flagstar Bankv Bellafiore, 94 A.D.3d 1044 [2d Dept 2012]; Wells Fargo Bank Minnesota, N.A v Perez, 41 A.D.3d 590 [2d Dept 2007]).
The branch of Plaintiff s motion for a default judgment against the non-appearing parties is granted (see CPLR §3215; SRMOFII2012-1 Trust v Telia, 139 A.D.3d 599, 600 [1st Dept 2016]).
The branch of Plaintiff s motion to amend the caption is granted (see generally CPLR §3025; JP Morgan Chase Bank, N.A. v Laszio, 169 A.D.3d 885, 887 [2d Dept 2019]). .
Accordingly, it is
ORDERED that the branch of Plaintiff s motion for summary judgment on its cause of action for foreclosure, for the appointment of a referee is denied, and it is
ORDERED that the branch of the motion for a default judgment against the non-appearing parties is granted, and it is
ORDERED that all the affirmative defenses in Defendants' answer, except the ninth, twenty-fourth and twenty-fifth are dismissed, and it is
ORDERED, that defendants John Doe #1 through John Doe #20 are hereby dismissed from this action, and it is
ORDERED the caption is amended as follows:
Emigrant Bank as assignee of Emigrant Mortgage Company, Inc, Plaintiff,
-against-
Gary Flom a/k/a Gary B. Flom, Svitlana Flom, Onestone Lending LLC, Board of Managers of One Riverside Park Condominium, New York State Department of Taxation and Finance, Atlantic Specialty Insurance Company, Veniamin Nilva, 625 W 55 LLC, 624 West 47th Street LLC, Defendants.
SUPREME COURT STATE OF NEW YORK COUNTY OF NEW YORK
Index No. 850031/2019
This matter is set down for a status conference on February 9, 2023 @ 10:40 am via Microsoft Teams.