Opinion
Index 522464/21
02-23-2022
Rockaway Rutland Lender LLC, Plaintiff, v. Progeny Buildings LLC, Pamela Green, Capital One Bank (USA) N.A., New York State Department of Taxation and Finance, New York City Department of Finance, New York City Parking Violations Bureau, New York City Environmental Control Board and John Doe #1 Through John Doe#10 said John Doe defendants being fictitious, it being intended to name all other parties who may have some interest in or lien upon the premises sought to be foreclosed, Defendants.
Unpublished Opinion
PRESENT: HON. LAWRENCE KNIPEL, Justice
HON. LAWRENCE KNIPEL, JUSTICE
The following e-filed papers read herein: NYSCEF Doc Nos.
Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations)___ 18-29
Opposing Affidavits (Affirmations) ___ 35-27
Reply -Affidavits (Affirmations) ___ 38
Upon the foregoing papers in this action to foreclose a commercial mortgage encumbering the mixed-use property located at 1029 Rutland Road in Brooklyn (Block 4597, Lot 45) (Property), plaintiff Rockaway Rutland Lender LLC (Rockaway) moves (in motion sequence [mot. seq.] one) for an order: (I) granting it summary judgment against defendant Progeny Buildings LLC (Progeny or borrower), pursuant to CPLR 3212; (2) awarding it a default judgment against non appearing defendants Pamela Green (Green or guarantor), Capital One Bank (USA) N.A. (Capital One), New York State Department of Taxation and finance, New York City Department of Finance, New York City Parking Violations Bureau and the New York City Environmental Control Board, pursuant to CPLR 3215 (a); (3) appointing a referee to ascertain and compute the amount due under the note and mortgage being foreclosed and to determine whether the Property should be sold in one or more parcels, pursuant to RPAPL 1321; and (4) amending the caption to delete the John Doe defendants,
Background
On September 1, 2021, Rockaway commenced this commercial foreclosure action hy filing a summons, an itnverified complaint and a notice of pendency against the Property. The complaint alleges that on of about September 30, 2019, borrower, Progeny. executed and delivered to Prime Commercial Lending LLC (Prime) a $375,000.00 note, which was secured by a mortgage on the Property (complaint at ¶¶ 7-8). The complaint also alleges that Green executed: a guarantee of the loan "to- induce" Rockaway's: predecessor. Prime, to make the loan (id at ¶ 15). The complaint alleges that “[t]he Borrower failed to make the monthly payment of principal and interest due under the Note On June 10, 2021, and each month thereafter" and “[b]y a letter dated June 18, 202], Plaintiffs predecessor-in-interest advised the: Borrower and Guarantor of the foregoing events of default and demanded the immediate payment in full of all of Borrower's obligations" (id, at ¶¶18 and 20). Allegedly, "there is now due and owing from the Borrower to Plaintiff, under the Note and the Mortgage, principal in the amount of $373,530, 71, plus interest. . ;" (id. at ¶ 22).
Regarding Rockaway's standing to foreclose, the complaint alleges that "[pursuant to an Assignment of Mortgage dated September 23, 2019, Prime, .. . assigned all of its right, title and interest in and to the Mortgage to KCMI Capital Inc. ('KCMT)" and "Prime ... also executed and delivered to KCMI an allonge with respect to the Note" (id. at ¶¶ 10-11). Importantly, this alleged mortgage assignment was executed one week before the mortgage and guaranty were allegedly executed by Progeny and Green, respectively, on September 30, 2019, The complaint alleges that "[p]ursuant to an Assignment of Mortgage dated July 8, 2021, KGMJ assigned all of its right, title and interest in and to the Note and the Mortgage to Rockaway ..." and "KCMI also executed and delivered to Rockaway an allonge with respect to the Note and a Lost Note Affidavit" (id at ¶¶ 12-13).
The complaint annexes collectively as Exhibit 1: (1) a July 8, 2021 "Allonge" that explicitly states that "[t]hrs Allonge . . . is attached to and made part of the following instrument: Promissory Note dated September 30, 2019, made by Progeny . . . in favor of Prime ., . assignor of KCMI.., . ('Lender') in the original principal amount of $375,000.00, for the purpose of annexing thereto the following endorsement!;, ]" which was executed by Ken Markizon, KCMI's President, to the order of Rockaway; (2) an acknowledgement of Ken Markizoh's signature in Camden, New Jersey, by notary Kenneth Olin that appears alone on a separate, unnumbered page, although there is sufficient room on the page containing the "Allonge"; (3) a July 8, 2021 "Lost Note Affidavit" by Ken Markizon of KCMI attesting that "KCMI is the legal owner and holder of the Note[]" which "was assigned to KCMI by Allonge dated September 27, 2019 . . .” (three days before Progeny took out the loan on September 30, 2019); "KCMI is assigning the Note and Allonge to ROCKAWAY. . ."; "[t]he Note and Allonge have been misplaced, lost and/or destroyed"; "KCMI has conducted a diligent search and Inquiry to find the original Note and Allonge and has been unable to do so":; and "[a]ttached hereto are true, complete and correct copies of the original Note and Allonge"; (4) a one-page, unnumbered and undated 'Allonge" executed by Jpn Cosentinp of Prime, which references "Loan Date: September 27, 2019" and "stales that "[f]or value received, the undersigned hereby assigns, transfers, and pledges without recourse to KCMI . . .the attached mortgage note to which this Allonge is and remains physically affixed' and "[w]itness the due execution of this Allonge on this day of___"; and (5) a copy of the three-page promissory note executed by Green on September 30, 2019 "as 100% member ot Progeny (see NVS.CEF Doc No. 2 [emphasis added]). The complaint also annexes the September 30, 2019 mortgage as Exhibit 2.
The complaint annexes collectively as Exhibit 3: (I) an "Assignment of Mortgage" pursuant to which Prime assigned "[a] certain Mortgage, dated the 27th of September, 2019, executed between Prime . ., and Progeny[J" which assignment is executed by Jon Cosentino of Prime on September 27, 2019 (three days prior to Progeny's alleged execution of the note and mortgage), but is notarized four days earlier on September 23, 2019; (2) the recording page for the Assignment of Mortgage; (3) a September 30, 2019 WL] "Section 275 Affidavit" from Green attesting that "I am a member of Progeny the owner (mortgagor) of the property subject to the mortgage which is being assigned" and "[t]be assignee set forth on the assignment of mortgage to which this affidavit is attached is not acting as a nominee of the owner (mortgagor) of the property, and the mortgage continues to secure a bona fide obligation" (see NYSCEF Doc No. 4 [emphasis added]). The complaint also annexes as Exhibit 4 a July 8, 2021 "Assignment of Mortgage" executed by Ken Markizon, KCMI's President, pursuant to which KCMI assigned only the mortgage to Rockaway (see NYSCEF Doc No. 5)..
The complaint annexes as Exhibit 5 a June 18, 2021 default letter "addressed, to Progency and Green advising that "Events of Default have occurred under the Loan Documents based on, among other things, the Borrower's failure to make the required payments when due under the Note on June 10, 2021" and [b]y reason of the foregoing Events of Default, ail sums due under the Note are hereby accelerated, and demand is hereby made to Borrower and Guarantor for immediate payment in full of all obligations of the Borrower due under the Loan Documents" (see NYSCEF Doc No. 6).
On September 20, 2021, Progeny answered the complaint, denied the material allegations therein and asserted affirmative defenses, including: (1) that the notice of default was either not sent in accordance with the express terms of the mortgage or did not contain the language required; (2) lack of standing; (3) statute of limitations; and (4) failure to join necessary parties. Progeny also asserts a counterclaim for reasonable attorneys' fees, On September 24, 2021, Rockaway replied to Progeny's counterclaim, denied the allegations therein and asserted affirmative defenses.
Rockaway's Instant Motion
On October 27, 2021, Rockaway filed the instant motion for summary judgment against Progeny, a default judgment against the other non-appearing defendants, an order of reference and to amend the caption.
Rockaway submits a July 8, 2021, "Business Record Affidavit" from Ken Markizon, President of KCMI since October 1, 2015, who attests that:
Apparcnily. Ken Markizon's July 8, 2021 ''Business Record Affidavit was executed the very same day that Markizon executed the "Lost Note Affidavit" and the "Assignment of Mortgage" from KCMI to Rockaway and all three doctm1cnts are notarized by Kenneth Olin.
"Annexed hereto are true, accurate and Complete copies of documents evidencing the loan; history for Loan Number 000000002634 (the 'Loan History') . . .The unpaid principal balance as of the date hereof is $373,530.71.
"The documents constituting the Loan History produced herewith were created and/or updated by me personally or by personnel or staff under my control or supervision employed by KCMI in the regular course of business of KCMI, at the tone of the transactions or occurrences recorded therein or within a reasonable time thereafter and it was the regular course of business of KCMI to make and maintain the Loan History.
"The Loan History consists of records showing the credits and debits; against the balance of the loan made to the borrower Progeny ... The Loan History is based on the loan information including: the principal amount loaned, the date the loan
commenced, the amount of the monthly payments the breakdown of principal, interest and escrow, city taxes hazard insurance and the interest rate applied and other relevant documents. During the servicing of the: loan, the amounts received and the date the payments were received were also made a part of the. Loan History contemporaneously as said payments were received. Also made apart of the Loan History are the dates and amounts of advances or payments made by KCMI on the loan on the borrower's behalf.
"1 have personal knowledge of the Loan History of this account as 1 reviewed it prior to executing this document. I also oversaw the maintenance of such Loan History in KCMI's business records, in my capacity as: President of KCMI. I hereby affirm . . . that the forgoing and the Loan History annexed hereto as Exhibit A is a true, complete and accurate copy of the electronic printout and other documents constituting the Loan History maintained by KCMI for this account" (see-NYSCEF Doc No. 20).Exhibit A to Markizon's "Business Record Affidavit" is the "Loan History" from "9-30-19" through "6-25/21" containing, the "Note number" of 2634-000 and identifying Progeny. The payment history reflects that the interest rate charged and late fees were assessed beginning in June 2021 (see NYSCEF Doc No. 21).
Rockaway also submits an affidavit from Ralph Dweck (Dweck), who attests that "I am authorized to submit this affidavit on behalf of Plaintiff Rockaway . . ." and that "[t]he facts and matters set forth in this affidavit are based upon my personal knowledge and/or my review of Rockaway ['s] business records, the business records of Rockaway['s] predecessor-in-interest or the publicly-available documents maintained by the Clerk of the Court," Dweck further alleges that "[i]n the regular performance of my job functions, I am familiar with the business records maintained by Rockaway ... in its loan portfolio" which includes documents generated by Rockaway in the ordinary course of its business: operations and -.11 of the, oa„ documents purchased from its predecessors-in-interest and all file documents that were formally in the possession of said predecessors-in-interest." Specifically, Dweck attests that:
"KCMI['sj business records concerning the Loan, including fiansacbonal documents, default notices and loan/payment histories, were incorporated into Rockaway['s] business records when it acquired the Loan and Rockaway. routinely relies Upon said records in the conduct of its business and keeps said records in the ordinary course of its business, "
Dweck attests that Rockaway seeks to foreclose the mortgage against the Property, describes the chain of title Of the mortgage, including the mortgage assignments. Dweck avers that "KCMI also executed and delivered to Rockaway ... an alionge with respect to the Note and a Lost Note Affidavit, both of which are annexed to the Complain," and "Rockaway . . . is the sole, true, and lawful owner and holder of the Note, the Mortgage and the Guaranty . . ." Dweck reiterates the events of default alleged in the complaint, including tha, Progeny -failed to make the monthly payment of principal and interest due under the Note on June 10. 202!, and each month thereafter." Dweeb's affidavit annexes the allowing exhibits: (1) a copy of the complaint with all exhibits; (2) a copy of the guaranty; (3) a copy of KCMI's Loan History, which was incorporated into Rockaway's business records; (4) affidavits of service; (5) Progeny's answer with counterclaim; and (6) Rockaway's reply to counterclaim.
Rockaway also submits an attorney affirmation arguing that "[p]laintiff has made out a prima facic case for summary judgment against the Borrower and Guarantor by submitting true add accurate copies of the subject loan documents and conclusively establishing that the Borrower and Guarantor are in default of their obligations under said loan documents." Rockaway's counsel further affirms that "the Dweck Affidavit (and the exhibits thereto) conclusively established that Plaintiff had standing to commence (and pursue) this foreclosure action" because "Exhibtts A-3 and A-4 ... contain recorded conies of the assignments of the Mortgage underlying this case to Plaintiff and "Exhibit A-1 includes allonges endorsing the Note underlying this case to Plaintiff" Rookaways counsel contends that "Borrower cannot raise a triable issue of fact that should preclude this Court from granting summary judgment in favor of Plaintiff.. ."
Progeny's Opposition
Progeny, in opposition, submits an affidavit from Green, its "managing member," who attests that "[p]lantiff is unable to establish standing as a review of Plaintiffs own submissions shows that Plaintiffs predecessor was somehow allegedly assigned the subject note and mortgage prior to the execution and existence of the subject note and mortgage" (emphasis added). Green further attests that "[p]laintiff [] has not produced evidence in adrmssible form to prove standing, the default, and other aspects of its prima facie case-for foreclosure."
Progeny also submits an attorney affirmation in which defense counsel asserts that there are "inconsistent accounts presented in the affidavits and affirmations which result in questions of fact which require trial for resolution." Defense counsel argues that "both the Dweek and Markizon affidavits along with the documents they relied upon, have no evidentiary value as the documents and testimony derived from them constitute hearsay ..." because they arc conclusory. Defense counsel further argues:
“In the Dweck Affidavit at Paragraph 11, Dweck testifies that the subject note arid mortgage were executed on September 30 20U. However, at paragraph 15, Dweck claims the Plaintiffs predecessor-in-interest (KCMI) was assigned the subject note and mortgage by virtue of an assignment executed and dated September 23, 2019, seven days prior to the existence of the subject note and mortgage.
.. The dates testified to by Plaintiff are crucial because if Plaintiffs testimony is accurate, it must follow that KCMI (later by extension Plaintif1) was assigned a note and mortgage that did not exist at the time of its execution.
“Further, in Plaintiffs complaint, and as reproduced in Plaintiff's Exhibit A at page 31, there is the initial assignment where the loan originator Prime ... by and through President Jon Cosentino, purports to assign the ... mortgage to KCMI. However this assignment references a mortgage dated September 27, 20 I 9, not as referenced by Plaintiffs Affirmation, the Dweck Affidavit, and Plaintiffs complaint at paragraph 8 as the note and mortgage dated September 30, 2019.
"It must follow that either Plaintiff was assigned a different note and mortgage which is fatal to this foreclosure action or Plaintiffs records contain factual errors which require examinations of credibility."
Defense counsel also notes that the September 27, 2019 mortgage assignment states that it was executed by Prime's President on September 27, 2019, yet his signature was previously notarized on September 23, 2019. Defense counsel contends that "[t]he factual implausibility or clear errors in record keeping utterly refute any inference of reliability of this document'· and "[w]ithout those hallmarks of reliability, they cannot qualify as business records and would therefore be inadmissible hearsay.'' Defense counsel further asserts that the inconsistencies in Rockaway's records and testimony "draws into question the totality of Plaintiff's submissions ..." and "[p]laintiff's prima facie case regarding standing, evidence of the default, notice requirements, and compliance with any other contractual provisions is in doubt."
Rockaway's Reply
Rockaway, in reply, submits an attorney affirmation asserting that Rockaway's "moving papers conclusively established the Borrower's execution and delivery of the Note and the Mortgage and Borrower's default under same" and "[b]ased on this showing by Plaintiff, the burden has shifted to the Borrower ..." to raise material issues of fact.
Regarding standing, Rockaway's counsel argues that:
"Plaintiff's Complaint and its moving papers include as an Exhibit a written assignment (i.e., an allonge) of the subject Note from the original lender Prime ... to KCMI ... and a subsequent allonge from KCMI ... to Plaintiff ... Borrower's opposition does not contest the validity of these allonges.
This written assignment of the Note to Plaintiff, which predates the commencement of this action by more than two months, in and of itself, establishes Plaintiffs standing to pursue this action."
Rockaway's counsel also asserts that the assignments of mortgage are not the "dispositive documents'' and that ''the assignment of mortgage includes as an attachment an affidavit of Borrwer's principal Pamela Green attesting as to the validity of the assignment!"
Discussion
Summary judgment is a drastic remedy that deprives a litigant of his or her day in court and should, thus, only be employed when there is no doubt as to the absence of triable issues of material fact (Kolivas v Kirchoff, 14 A03d 493 [2005]; see also Andre v Pomeroy, 35 N.Y.2d 361. 364 f 1974]). 'The proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment, as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Manicone v City of New York, 75 A.D.3d 535. 537 [2010], quoting Alvarez v Prospecvt Hosp., 68 N.Y.2d 320, 324 [1986]; see also Zuckerman v City of New York, 49 N.Y.2d 557, 562 [1980]; Winegrad v New York Univ. Aled. Ctr., 64 N.Y.2d 851, 853 [1985]). If it is determined that the movant has made a prima facic showing of entitlement to summary judgment, "the burden shifts to the opposing party to produce evidentiary proof in admissible form sufficient to establish the existence of' material issues of fact which require a trial of the action" (Garnham & Han Real Estate Brokers v Oppenheimer, 148 A.D.2d 493 [1989]).
Generally, to establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and admissible evidence of the borrower's default (see Deutsche Bank Natl. Trust Co, v Karibandi, 188 A.D.3d 650, 651 [2020]; Christiana Trust v Moneta, 186 A.D.3d 1604, 1605 [2020]; Deutsche Bank Trust Co. Ams. v Garrison, 147 A.D.3d 725. 726 [2017]). Where the jssuc of standing is raised by a defendant, a plaintiff must also establish its standing as part of its prima facie case (see Deutsche Bank Trust Co. Ams. v Garrison, 147 A.D.3d at 726; Security Lending, Ltd v New Realty Corp., 142 A.D.3d 986, 987 [2016]; LGF Holdings, LLC v Skydel, 139 A.D.3d 814, 814 [2016]).
"A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that it is both the holder or assignee of the subject mo1igage and the holder or assignee of the underlying note al the time the action is commenced., ." and may do so "by showing either a written assignment of the underlying note or the physical delivery of the note· (US. Bank N.A. v Guy, 125 A.D.3d at 846-847). It is well-established that "either a written assignment or the underlying note or 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" (US. Bank, NA. v Adrian Collymore, 68 A.D.3d 752, 754 [2009]; see also Deutsche Bank Nat'l Tr. Co. v Horowitz, 163 A.D.3d 764, 765 [2018]).
Where a plaintiff establishes prima facie entitlement to judgment, the burden then shifts to th-e defendant to raise a triable issue of fact as to a bona fide defense to the action (CitiMortgage, Inc. v Guillermo, 143 A.D.3d 852, 853 [2016]; Mahopac Natl. Bank v Baisley, 244 A.D.2d 466, 467 [19971).
Here, Rockaway has failed to establish its standing to foreclose and Roekaway's own pleading and moving submissions raise several triable issues of feet regarding Rockaway and its predecessor's ownership and possession of the underlying note that preclude the relief Rockaway now seeks. For example, Ken Markizon's July 8, 2021 "Lost Note Affidavit" (annexed, s part of Exhibit 1 to the complaint), in which Markizon attests that-KCMI is the legal owner and holder of the Note" because the note "was assigned to KCMI by Allonge dated September 27, 2019 . . ."raises serious questions regarding Rbckaway's standing to foreclose because the promissory note could not possibly have been transferred" to Roekaway's predecessor, KCMI, three days before Progeny executed the promissory note on September 30, 2019. The September 27, 2019 "Allonge-referenced in- Murkizon's "Lost Note Affidavit" (annexed to the complaint as Exhibit 1) reflects that it has a blank space where the date was not filled in and it erroneously references "Loan Date; September 27, 2019" (see NYSCEF Doc Nos. 2 and 23).
Furthermore, the allonges annexed to Roekaway's moving papers do not appear to be firmly affixed to the promissory note, as required under the Uniform Commercial Code (UCCJ, and appear on separate, unnumbered pages, raising triable issues of tact (see, Bayview Loan Servicing, LLC v Kelly, 166 A.D.3d 843, 846 [2018] [holding that "there is a triable issue of fact as to whether the note was properly endorsed in blank by an allonge 'so firmly affixed thereto as to become a part thereof when it came into the possession of Wells Fargo, which later endorsed the note to the plaintiff']).
Finally, Roekaway's contention that Green's September 30, 2019 affidavit (see NYSCEF Doc No. 4) “attest[ed] to the validity of the [mortgage] assignment" is rejected since a mortgage is merely security for a debt evidenced by a promissory note and a transfer of the mortgage without the underlying promissory note is a nullity, and no interest is acquired: by it (Bank of NX v Siherberg, 86 A.D.3d 274, 280 [2011] [emphasis added]). Accordingly, it is hereby
ORDERED that Kockaway's motion (mot. Seq. one) is only granted to the extent that the caption is amended to delete the John Doe defendants; the motion is otherwise denied.