Opinion
INDEX No. 09-50633
10-09-2012
HSBC MORTGAGE CORPORATION (USA), Plaintiff, v. SANDRA L. PUCCINI, JOHN PUCCINI a/k/a JOHN S. PUCCINI, DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for Fremont Home Loan Series 2006-3, et al. Defendants.
PHILLIPS LYTLE LLP Attorney for Plaintiff DOLLINGER, GONSKI & GROSSMAN Attorney for Defendant Deutsche Bank SANDRA L. & JOHN PUCCINI, ProSe
SHORT FORM ORDER
PRESENT
Hon. W. GERARD ASHER
Justice of the Supreme Court
MOTION DATE 8-3-11
ADJ. DATE 6-12-12
Mot. Seq. # 003 - MD
PHILLIPS LYTLE LLP
Attorney for Plaintiff
DOLLINGER, GONSKI & GROSSMAN
Attorney for Defendant Deutsche Bank
SANDRA L. & JOHN PUCCINI, ProSe
Upon the following papers numbered 1 to 42 read on this motion for summary judgment ; Notice of Motion/ Order to Show Cause and supporting papers 1-25; Notice of Cross Motion and supporting papers __; Answering Affidavits and supporting papers 26 - 40; Replying Affidavits and supporting papers 41-42; Other __; (and after hearing counsel in support and opposed to the motion) it is,
ORDERED that this motion by defendant Deutsche Bank National Trust Company, as Trustee for Fremont Home Loan Series 2006-3 (Deutsche Bank) for summary judgment on its first counterclaim against plaintiff, declaring that Deutsche Bank is the lawful owner and holder of a valid first mortgage against the subject premises, declaring that the credit line mortgage was paid in full and is discharged and satisfied of record, and declaring that plaintiff and all persons claiming by, through and under it be forever barred from all claims to an estate or interest in the subject premises, and granting defendant Deutsche Bank summary judgment dismissing the complaint as against it and cancelling the notice of pendency filed by plaintiff is denied.
Plaintiff, HSBC Mortgage Corporation (USA), commenced this action on December 31, 2009 to foreclose a mortgage on premises known as 31 Bay Avenue, Ronkonkoma, New York. The premises was owned by defendants Sandra L. Puccini and John Puccini a/k/a John S. Puccini (defendants Puccini). By its complaint, plaintiff HSBC alleges that defendants Puccini executed and delivered a note on or about December 4, 2004 whereby they promised to pay the sum of $50,000.00 and as security for said note executed and delivered a mortgage on the subject premises. In addition, HSBC alleges that defendants Puccini defaulted on payments due on April 1, 2009 and thereafter, and that there was due and owing the principal balance of $47,052.89. Defendant Deutsche Bank was named as a defendant in this action as the holder of another mortgage. Defendants Puccini have not appeared or answered the complaint.
Defendant Deutsche Bank answered asserting affirmative defenses including payment. It also asserted a first counterclaim against HSBC pursuant to Article 15 of the Real Property Actions and Proceedings Law (RPAPL § 1921) alleging that defendants Puccini executed a note on August 3, 2006 for a loan in the sum of $355,500.00 from non-party Fremont Investment and Loan (Fremont) and a mortgage on the subject property in favor of Fremont securing said note. In addition, the first counterclaim alleges that at the time of said mortgage closing, non-party Homecomings Financial had a first mortgage on the premises in the sum of $242,750.00 and HSBC had a credit line mortgage in the sum of $50,000.00 recorded against the premises. The first counterclaim also alleges that at the time of the mortgage closing, Fremont requested a payoff letter from HSBC to satisfy and discharge HSBC's mortgage, that HSBC delivered a payoff letter, that the sum of $50,950.00 was due and payable, and that HSBC accepted and deposited a check in the sum of $50,950.00 but failed to satisfy and discharge the mortgage of record, as directed, or deliver a satisfaction of mortgage. The first counterclaim further alleges that the Fremont mortgage was assigned to Deutsche Bank and that Deutsche Bank holds a first mortgage on the subject premises superior to any right, title or interest claimed by HSBC.
Defendant Deutsche Bank now moves for summary judgment on its first counterclaim on the grounds that the proper payoff figure was obtained from HSBC and a check for that amount was tendered to HSBC, which accepted the check, and HSBC was cognizant of the nature of the transaction and was provided with notice that its home equity line of credit mortgage was to be discharged. Defendant Deutsche Bank asserts that if HSBC believed that the tenderer of the funds on behalf of defendants Puccini had no right to pay off and satisfy the Puccini mortgage and receive a discharge of mortgage, then HSBC was required to reject the tender. It further asserts that inasmuch as HSBC accepted the tender, it was required to accede to the terms of the tender and to satisfy the credit line mortgage. In support of its motion, defendant Deutsche Bank submits, among other things, the affidavit of Steven M. Pollina, the attorney who represented Fremont during the closing of the refinance transaction of defendants Puccini, the affidavit of Evan M. Pomerantz, managing member of Alpha Abstract, LLC (Alpha Abstract), the affidavit of Gina Russell, title closer, the summons and complaint, Deutsche Bank's answer, and HSBC's amended reply to counterclaims. In addition, the submissions include the Streamline Mortgage Corporation application, the Alpha Abstract title report, the letter dated July 20, 2006 from HSBC to defendants Puccini providing payoff information, the note dated August 3, 2006 executed by defendants Puccini in favor of the lender Fremont, and the mortgage dated August 3, 2006 executed by defendants Puccini in favor of the lender Fremont. The submissions also include a notarized hold harmless form dated August 3, 2006 of Alpha Abstract executed by defendants Puccini agreeing that if the monies, including $50,950.00 sent to HSBC, were insufficient to fully pay off the mortgage, defendants Puccini would pay any additional monies required to fully satisfy the mortgage, copies of the check sent to HSBC, and the assignment of mortgage dated November 20, 2008 assigning the Fremont mortgage of defendants Puccini to Deutsche Bank.
In opposition to the motion, HSBC contends that the home equity line of credit was never closed and the mortgage was never discharged because defendants Puccini never provided HSBC with the proper written request and authorization to pay off and close the line of credit and discharge the mortgage. In addition, HSBC contends that in any event, defendants Puccini took additional draws from the line of credit and no one ever contacted HSBC to inquire why a discharge was not recorded. HSBC maintains that it is prejudiced by the five year delay in seeking discharge of the mortgage and that Deutsche Bank has failed to properly seek a discharge pursuant to RPAPL § 1921 (2). In support of its opposition, HSBC submits, among other things, the affidavit of Dana J. St. Clair-Hougham, a Vice President and Assistant Secretary of HSBC, the home equity line agreement signed by defendants Puccini, the home equity line mortgage executed by defendants Puccini and recorded on January 26, 2005, and HSBC monthly statements to defendants Puccini from August 2006 to September 2009.
In reply, Deutsche Bank argues that there is no question that the check written by counsel for its predecessor, Fremont, were authorized and approved by defendants Puccini and refers to a document listing creditors to be paid off and hold harmless letters to Fremont and Alpha Abstract that defendants Puccini signed for the refinance transaction, all submitted with the motion papers.
It is well settled that the party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issues of fact (see Alvarez v Prospect Hosp. , 68 NY2d 320, 508 NYS2d 923 [1986]; Zuckerman v City of New York , 49 NY2d 557, 427 NYS2d 595 [1980]). The failure to make such a prima facie showing requires the denial of the motion regardless of the sufficiency of the opposing papers (see Winegrad v New York Univ. Med. Ctr. , 64NY2d 851, 487 NYS2d 316 [1985]). "Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" ( Alvarez v Prospect Hosp. , supra at 324, 508 NYS2d 923, citing to Zuckerman v City of New York , supra at 562, 427 NYS2d 595).
Unlike a traditional mortgage that typically begins with a single advance of funds and is amortized over the life of the loan by regular monthly payments that continually decrease the outstanding principal balance, a credit line mortgage anticipates numerous advances, payments and re-advances which may frequently bring the loan to a zero balance during the time that the credit line is outstanding (see Merrill Lynch Equity Mgt. v Kleinman , 246 AD2d 884, 885, 668 NYS2d 726 [3d Dept 1998], Iv denied 92NY2d 802, 677 NYS2d 72 [1998]).
With respect to a credit line mortgage, Real Property Actions and Proceedings Law § 1921 provides that, "[a]fter payment of authorized principal, interest and any other amounts due thereunder or otherwise owed by law has actually been made, and ... on written request, a mortgagee of real property situate in this state ... must execute ... a satisfaction of mortgage" (RPAPL § 1921 [1]). "A letter requesting that a mortgagee close a credit line and send a satisfaction of the mortgage (see Merrill Lynch Equity Mgt. v Kleinman , supra), or the transmission to the mortgagee of a satisfaction of mortgage accompanied by a request to execute it and return it to a title company for recording (see Barclay's Bank of N. Y. v Market St. Mtge. Corp. , 187 AD2d 141, 144, 592 NYS2d 874 [3d Dept 1993]) will satisfy the statutory requirement of a written request for a satisfaction of mortgage" ( HSBC Bank, USA v Pugkhem, 88 AD3d 649, 650, 931 NYS2d 635 [2d Dept 2011]). However, "the mere transmission of a check in the amount necessary to pay the entire outstanding balance of a line of credit, accompanied by a cover letter which does not state that the payment is intended to satisfy the credit line mortgage, or request that the mortgagee send a satisfaction of mortgage, or otherwise indicate that the borrower intends to close the credit line, does not require the mortgagee to close the line of credit or issue a satisfaction of mortgage pursuant to" RPAPL § 1921 (1) (id; Matter of Reitman v Wachovia Natl. Bank, N.A. , 49 AD3d 759,760, 854 NYS2d 179 [2d Dept 2008]).
The instructions in the HSBC payoff letter dated July 20, 2006 addressed to defendants Puccini provided that:
This payoff amount could change if any recent charges or payments have not yet been applied to this account. Therefore, we request that you contact our Customer Service Department to verify the original closeout balance on the date of the payoff...
To close your account and obtain a satisfaction of mortgage, please include with your payoff check a letter requesting this be closed. This must be signed by all parties who established this account. In order to release the property mortgage, a discharge of mortgage must be filed with the County Clerk where your property is located.
To ensure proper handling of the discharge, you must inform us whether or not you would like HSBC to record the discharge. Please complete the tearoff portion of this letter and return it with your payoff to the address mentioned above ...
NOTE: A separate check made payable to the County Clerk's office (where your property is located) is required for us to record the discharge on your behalf...
The affidavits of Mr. Pollina, Mr. Pomerantz and Ms. Russell indicate that at the closing of the refinancing loan of Fremont, Ms. Russell telephoned the HSBC Customer Service Department to confirm the payoff figures provided by HSBC in its payoff letter dated July 20, 2006, and that she was advised that the payoff sum of $50,950.00 was good through August 11, 2006, which she noted on the payoff letter. Mr. Pollina drew a check on his firm's mortgage account and Ms. Russell sent by Express Mail to the address in the payoff letter the check in the sum of $50,950.00 together with the payoff letter and the "tearoff form provided by HSBC. The "tearoff form indicated the selection of the first option that "HSBC record the Discharge of Mortgage for me. I have enclosed the fee made payable to the County Clerk." with the handwritten addition of "and send confirmation letter of full pay-off to: Alpha Abstract, 122-A Remington Blvd., Ronkonkoma, NY 11779." Mr. Pollina states in his affidavit that HSBC received and deposited the check drawn on his firm's mortgage account. The submitted evidence shows that a check in the sum of $50,950.00 drawn from the mortgage disbursement account of Mollo & Pollina, PLLC and made payable to HSBC, with the proper account number and the name "Puccini" written in the memo section of the check, was deposited by HSBC on August 11, 2006. The proffered proof also shows that the September HSBC Home Equity Line of Credit Monthly Statement for defendants Puccini references the payment of $50,950.00 for August 11, 2006 merely as "Payment Thank You" and indicates that a new cash advance of $850.00 was made to defendants Puccini six days later. Mr. Pollina asserts in his affidavit that the Fremont loan was made in reliance on the confirmed payoff amount and would not have been made without receiving a first mortgage on the subject premises.
Ms. St. Clair-Hougham emphasizes in her affidavit that HSBC would not have provided a discharge of mortgage without the closing of the home equity line of credit, and that it could not be closed without proper written authorization from defendants Puccini in the form of a personal written request to pay off and close the line of credit, as required under its terms. HSBC notes the actions of defendants Puccini are inconsistent with the argument that they desired to close the home equity line of credit inasmuch as they continued to draw on the line of credit, drawing the sum of $850.00 less than a week after the subject payment, then on September 21, 2006 the sum of $2,500.00, and that the withdrawals and payments continued until 2009 when they defaulted.
Here, there is no evidence that the payoff check and "tearoff" portion of the HSBC letter was accompanied by a letter signed by defendants Puccini requesting that the credit line be closed, as expressly required by the payoff letter (see HSBC Bank, USA v Pugkhem , supra; compare Merrill Lynch Equity Mgt. v Kleinman , supra [second mortgagee making the tender of payment ignorant of credit line agreement terms requiring notice from borrowers to close account]). Nor was there any accompanying letter expressly indicating that the check was intended to satisfy the mortgage (see HSBC Bank, USA v Pugkhem , supra; Matter of Reitman v Wachovia Natl. Bank, N.A. , supra). Nor was there a request that the mortgagee send a satisfaction of mortgage, which was the second option on the "tearoff portion of the HSBC payoff letter (see id). Instead, the payoff letter was returned to HSBC with a request that HSBC record the discharge of mortgage, the first option on the "tearoff portion of the HSBC payoff letter. However, there is no evidence that a check was enclosed for the County Clerk recording fee, also required by the payoff letter. Thus, there was no clear indication that defendants Puccini intended to close the credit line (see id.) nor was there a clear indication of the condition on which the check was tendered, such that HSBC was not required to reject the check (compare Merrill Lynch Equity Mgt. v Kleinman , supra [two letters sent to bank requesting that tenderer receive satisfaction or discharge of mortgage]).
Moreover, HSBC's insistence upon strict compliance with its requirement of written authorization from borrowers under the terms of the line of credit agreement and payoff letter is not unfounded (see generally Bankers Trust Co. of California, N.A. v Sciarpelletti , 28 AD3d 408, 816 NYS2d 71 [2d Dept 2006] [issue of fact whether mortgagee disbursed loan proceeds to payees without mortgagor's proper authorization]; cf. Merrill Lynch Equity Mgt. v Kleinman , supra). Without a letter to HSBC from defendants Puccini expressly requesting that the home equity line of credit be closed and the mortgage be discharged, there is no proof that HSBC had notice that the request to discharge the mortgage was actually authorized by defendants Puccini or that HSBC should have known that Mollo & Pollina, PLLC, which represented Fremont, or Alpha Abstract, which provided the title report to the mortgage broker Streamline, were the authorized representatives of defendants Puccini (compare Barclay's Bank of N. Y. v Market St. Mtge. Corp. , supra [bank's letter indicated that bank knew that title company would be paying off the loan]). Furthermore, there is no evidence that HSBC had any notice of the refinance documents signed by defendants Puccini that are referred to in the reply papers.
Accordingly, the instant motion is denied.
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J.S.C.