Opinion
70822/2017
03-10-2020
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, Plaintiff, v. Benjamin CARDUCCI; Marie Carducci, et al., Defendants.
for plaintiff: Angelo Anthony Regina, Esq., McCalla Raymer Leibert Pierce, LLC, 420 Lexington Avenue, Suite 840, New York, NY 10170, 347-329-2071, angelo.regina@mccalla.com for defendant: James Marsico, Esq., 2500 Westchester Avenue, Suite 109, Purchase, NY 10577, 914-313-5298, jamesmarsico@aol.com
for plaintiff: Angelo Anthony Regina, Esq., McCalla Raymer Leibert Pierce, LLC, 420 Lexington Avenue, Suite 840, New York, NY 10170, 347-329-2071, angelo.regina@mccalla.com
for defendant: James Marsico, Esq., 2500 Westchester Avenue, Suite 109, Purchase, NY 10577, 914-313-5298, jamesmarsico@aol.com
Terry Jane Ruderman, J.
This motion, brought one business day before the scheduled foreclosure sale, seeks an order setting aside the judgment of foreclosure and sale that was entered on default, and dismissing the complaint, based on the contention that plaintiff lacks standing. Defendants rely on the newly-enacted RPAPL 1302-a, which became effective December 23, 2019; the new statute provides that the failure to challenge the plaintiff's standing in an answer or a pre-answer motion to dismiss no longer waives the defense.
Determination of the motion requires consideration of the history of the action. The summons and complaint, filed on December 22, 2017, seek to foreclose a mortgage on the property located at 1 Magnolia Drive in Purchase, New York. The note and mortgage were executed by the borrowers on March 17, 2003, in the principal amount of $1,670,000.00, in favor of Washington Mutual Bank. The terms of the Note and Mortgage were then modified by a Modification Agreement executed by the borrowers on April 7, 2008, effective May 1, 2008, modifying the principal balance of the Note to $1,617,053.80, the payment schedule, and the interest rate. After Washington Mutual Bank went into receivership and its assets were turned over to the FDIC, the mortgage was assigned to plaintiff. The note, which had been endorsed in blank by Washington Mutual Bank, was delivered to plaintiff.
The complaint alleged that defendant borrowers were in default as of February 1, 2017. It is alleged that as of the date of default, the principal balance due and owing pursuant to the terms of the Note was $1,382,229.47. The filed affidavits of service indicate that the borrower-defendants, Benjamin and Marie Carducci, were served pursuant to CPLR 308 (2), by service at the subject premises on a co-occupant who identified herself as Natalie Carducci, described as between 22 and 35 years old, between 5'4" and 5'8" tall, weighing between 131 and 160 lbs.
The borrower-defendants did not file an answer. A foreclosure conference notice dated January 22, 2018 was sent to defendant Benjamin Carducci at the subject premises, notifying him of a mandatory settlement conference scheduled for March 13, 2018. Defendants did not appear, and the matter was released for litigation.
Plaintiff's notice of motion for a default judgment and an order of reference was granted without opposition, on September 5, 2018, and the judgment of foreclosure and sale granted, without opposition, on February 5, 2019.
Defendants moved by order to show cause dated April 23, 2019 to vacate the judgment and dismiss the action. However, upon being denied a stay of the foreclosure sale scheduled for April 25, 2019, defendant Benjamin Carducci filed a bankruptcy petition, thereby staying this action and the sale.
According to information provided by defendants on oral argument of this motion, the bankruptcy proceeding was resolved, and the automatic stay vacated, on November 15, 2019. Yet, defendants did not inform the Court that the stay was vacated, nor did they seek to have the Court address their motion to vacate the judgment of foreclosure and sale. They took no further action at all in regard to this litigation, until plaintiff re-scheduled the foreclosure sale for February 18, 2020. They then filed the proposed order to show cause on this motion, one business day before the sale, February 14, 2020, seeking a stay of the sale and to vacate the judgment and dismiss the action. The argument defendants make on the present motion is that newly-enacted RPAPL 1302-a allows for the vacatur of a judgment of foreclosure entered on default, without a showing of excusable neglect, based solely on a contention that the plaintiff lacks standing to bring the action.
The sought stay of the scheduled sale was granted only upon condition that defendants make a payment to plaintiff bank of $50,000; that condition was not satisfied and the foreclosure sale proceeded on February 18, 2020. Defendants nevertheless contend that they are entitled to vacatur of the judgment of foreclosure.
Discussion
Initially, the bank made the necessary showing to properly obtain a judgment of foreclosure. It produced the unpaid note, endorsed in blank, as well as the assigned mortgage and evidence of the mortgagors' default (see Citibank, N.A. v. Van Brunt Props., LLC , 95 A.D.3d 1158, 1159, 945 N.Y.S.2d 330 [2d Dept. 2012] ). Although there was no answer putting plaintiff's standing in issue, plaintiff's submissions proved its standing. The documents submitted with the filed complaint established that plaintiff was assigned the mortgage, and was in physical possession of the note, endorsed in blank by the payee (see Wells Fargo Bank, NA v. Thomas , 150 A.D.3d 1312, 1313, 52 N.Y.S.3d 894 [2d Dept. 2017] ).
Defendants abandoned the previous motion to vacate the judgment, therefore, the issues raised there — an alleged lack of personal jurisdiction and failure to comply with conditions precedent regarding required notices — are deemed to have been abandoned.
Defendants now rely solely on the contention that plaintiff lacks standing. They cite in support newly-enacted RPAPL 1302-a, which provides that "any objection or defense based on the plaintiff's lack of standing in a foreclosure proceeding relating to a home loan ... shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss." However, defendants read too much into the new statute when they argue that defendants who seeks to interpose the standing defense after defaulting in the action need not establish grounds to vacate their default.
In order to vacate a default judgment of foreclosure and sale, a defendant must establish both a reasonable excuse for the default and a meritorious defense (see CPLR 5015 [a][1] ; HSBC Bank, USA v. Dammond , 59 A.D.3d 679, 680, 875 N.Y.S.2d 490 [2d Dept. 2009] ). While RPAPL 1302-a abrogates the portion of HSBC v. Dammond which held that "[h]aving failed to interpose an answer or file a timely pre-answer motion which asserted the defense of standing, the respondent waived such defense pursuant to CPLR 3211 (e)" ( 59 A.D.3d at 680, 875 N.Y.S.2d 490 ), the statute does not alter the remainder of the ruling of that case, that "since the respondent failed to demonstrate any other meritorious defense to the foreclosure action, and did not demonstrate a reasonable excuse for his failure to answer , it was error for the Supreme Court to grant those branches of the respondent's motion which were to vacate the judgment of foreclosure and dismiss the complaint ( id. [emphasis added] ).
Assuming that the defendants established the existence of a newly-available, valid standing defense, they must also establish excusable neglect. At oral argument, counsel for defendants conceded that they are unable to make such a showing. Moreover, nothing in defendants' moving papers makes such a claim. Accordingly, grounds to vacate the default judgment of foreclosure have not been presented. Even if defendants are correct that RPAPL 1302-a authorizes the vacatur of a default judgment solely upon a demonstration of a viable standing defense, defendants' last minute argument challenging plaintiff's standing is not meritorious. Plaintiff was in possession of the note, endorsed in blank by the original lender, when it commenced this action. Defendants' citation to JPMorgan Chase Bank N.A. v. Grennan (175 A.D.3d 1513, 109 N.Y.S.3d 436 [2d Dept. 2019] ) is unavailing. In that matter, the Court found an issue of fact as to whether the note's endorsement in blank, which was situated on a separate page, was on an allonge that was firmly affixed to the note. The endorsement on the note at issue here is on the note's signature page.
This Court rejects defendants' argument that Washington Mutual's endorsement is invalid and has no legal effect, because of Washington Mutual's bankruptcy and takeover by the FDIC, which sold the bank's assets to plaintiff on September 25, 2008. The timing of the official assignment of the mortgage from the FDIC to plaintiff, which did not occur until November 3, 2016, does not invalidate the endorsement in blank of the note, which necessarily occurred while Washington Mutual was still in business. Defendants engage in mere speculation when they contend that the endorsement occurred improperly, at a time when Washington Mutual no longer had an interest in the note.
Based on the foregoing, it is hereby
ORDERED that motion of defendants Benjamin Carducci and Marie Carducci for an order vacating and setting aside the judgment of foreclosure and sale issued in this matter, and/or dismissing the complaint based on a lack of standing (motion sequence 5), is denied.
Motion sequence 4 is denied as abandoned.
This constitutes the decision and order of the Court.