Opinion
12492/12
07-30-2015
U.S. Bank National Association, AS TRUSTEE FOR THE STRUCTURED ASSET INVESTMENT LOAN 2005-10, Plaintiff, v. Soledad Murillo, LUIS DUQUE NASSAU COUNTY CLERK, JOHN DOE (Said name being fictitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, and any parties or corporations or entities, if any, having or claiming an interest or lien upon the mortgaged premises.), Defendants.
Plaintiffs Attorney: Hogan Lovells, LLP 212-918-3000 Defendants Attorney: R. David Marquez, PC 516-478-9302
F. Dana Winslow, J.
Plaintiffs Attorney: Hogan Lovells, LLP 212-918-3000
Defendants Attorney: R. David Marquez, PC 516-478-9302
F. Dana Winslow, J.
The following papers read on this motion (numbered 1-2):
Motion for Leave to Supplement the Summons and Amend the Complaint ....1
Affirmation in Opposition 2
Oral Argument on Motion ....3
Plaintiff moves pursuant to C.P.L.R. §305(a), 1003, and 3025(b) for leave to supplement the summons to add parties and for leave to serve and file an amended complaint adding a cause of action for foreclosure. BACKGROUND
For the last ten years financial institutions, homeowners, and investors have been presented with consistent but desperate problems. Starting before 2005, more potential home buyers noted increases in home values coupled with lower interest rates and easy borrowing criteria.
Financial institutions recognized the profits that could be realized and developed refined the CDO (Collateralized Debt Obligation) which expanded CDS (Credit Default Swaps) with the consequence that the new and burgeoning growth of product nuances and profits drove the need for further investment product with the commensurate demand for more.
The foregoing description is now a part of U.S. history even though the factual, moral assessment and the specific roles played by the involved, including the government, and the moral implications continue to be debated. Ben Bernanke and Henry Paulson and ultimately the financial markets used terms in describing the phenomenon such as the need to avoid "moral hazard", Troubled Asset Relief Program ("TARP"), and "capital injection" to mention a few.
Subsequently, lending to homeowners increased dramatically and laws were developed to address a financial market, in 2008 and 2009, on the brink of collapse.
This environment called for the adoption of rules which were intended to be equitable to all parties. The Court is now faced with one of the earliest applications for the ultimate dismissal of a foreclosure claim based on an assertion that the statute of limitations has run. In every segment of the NY and U.S. civil law a statute of limitations exists to provide fairness for all parties. The question is not whether a statute of limitations exists, but rather when it begins, and when does it preclude the successful assertion of a claim. Statute of limitations have been imposed in various statutes including the NY C.P.L.R., requiring that claims be asserted in a timely fashion. A necessary fair and balanced determination anticipates an acceptance of the proposition that a statute of limitations would preclude a successful claim if it were exceeded. INSTANT MOTION
The instant matter was initially brought to set aside a foreclosure sale pursuant to New York Real Property Law ("RPL") Section 329 and C.P.L.R. Rule 5015. The Court refers to the parties' submissions for a complete recitation of the facts underlying this action and the related foreclosure action entitled US Bank National Association, as Trustee for the Structured Asset Investment Loan Trust, 2005-10 v. Murillo et al., Index No. 6056-08 (the "Foreclosure Action").
However as an overview, on or about September 28, 2005, Defendants obtained a loan from BNS Mortgage Inc. ("BNC") in the original principal amount of $482,000.00. The loan contained a promissory note (the "Note") and was secured by a mortgage (the "Mortgage") on Defendant's residential real property located at 934 Southern Drive, Franklin Square, New York (the "Property"). The named mortgagee was Mortgage Electronic Registrations Systems, Inc. ("MERS"), as nominee for BNC.
According to Plaintiff, the Trust acquired the loan pursuant to the Trust's Pooling and Servicing Agreement dated as of November 1, 2005 (the "PSA"). Plaintiff claims that the original Note, with allonge endorsing the Note in blank, was physically delivered to the Plaintiff pursuant to the PSA, and that the transfer of the Mortgage was memorialized in the "Assignment of the Mortgage" by MERS, dated April 1, 2008 and recorded April 15, 2008 (the "Assignment").
Defendants defaulted on their mortgage payments by failing to pay the amounts due on November 1, 2007 and thereafter. Plaintiff commenced the Foreclosure Action on April 1, 2008, and obtained a Judgment of Foreclosure and Sale on July 17, 2009, which was entered on July 21, 2009 (the "Judgment"). Pursuant to the Judgment, the Property proceeded to a foreclosure sale. Plaintiff was the highest bidder. A referee's deed to Plaintiff was executed on July 20, 2010 and recorded on July 28, 2010 (the "Referee's Deed").
In or about October 2010, Defendants moved to vacate the Judgment on the ground that Plaintiff failed to obtain personal jurisdiction over the Defendants. After a traverse hearing to determine service of process, the motion was granted. By Order of the Court dated December 15, 2011, the Judgment was vacated and the Foreclosure Action was dismissed. On April 9, 2012, a stipulation was recorded cancelling the Notice of Pendency in the Foreclosure Action.
Plaintiff asserted, however, that the foreclosure sale was never rescinded, and that the Referee's Deed still appeared of record in the Nassau County Clerks records. On or about October 2, 2012, Plaintiff commenced an action for relief pursuant to New York Real Property Law ("RPL") Section 329 and C.P.L.R. Rule 5015(the "October 2012 action"). The Complaint sought judgment (1) setting aside the foreclosure sale held in the Foreclosure Action; (2) relieving Plaintiff of its bid in the foreclosure sale; and (3) declaring the Referee's Deed null and void, and expunging it from the record in Nassau County.
On February 4, 2014, the Court issued a Short Form Order, granting Plaintiff's motion for summary judgment, in part, as to the affirmative relief sought in the Complaint and dismissing Defendants' First, Second, and Fifth Counterclaims; and denying Plaintiff's motion for summary judgment, in part, as to the remaining affirmative defenses and counterclaims.
On September 9, 2014, Defendant Luis Duque ("Mr. Duque") died intestate. Plaintiff now moves for leave to amend the complaint to allege a cause of action to foreclose on the subject mortgage. Plaintiff also seeks to supplement the summons to name Mr. Duque's heirs as defendants.
The Court notes that the Plaintiff has produced the original note and certified copy of the mortgage. The finding is one that is made with the approval of the Defendant. However, the date at which the note was initially possessed and more importantly part of the Plaintiff's records has not been established. DISCUSSION
Pursuant to C.P.L.R. §213, "an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein;" must be commenced within six years. "The statute of limitations in a mortgage foreclosure action begins to run from the due date for each unpaid installment, or from the time the mortgage is entitled to demand full payment, or from the date the mortgage debt has been accelerated." Zinkler v. Makler, 298 AD2d 516, 517 (2002).
Under Section 22 of the Mortgage, the "Lender" (Plaintiff) may require "Immediate Payment in Full" where the "Borrower" (Defendants) fails "to keep any promise or agreement made in the Security Instrument". Section 22 also establishes the notice required in order for the Plaintiff to accelerate the mortgage debt, which includes at least thirty days for the Defendant to cure the default.
Plaintiff sent a letter dated December 24, 2007 to Defendants notifying Defendants that their loan was in default. The letter indicated that it would become necessary to accelerate the Mortgage Note unless payments on the loan could be brought current by January 23, 2008. Defendants did not cure the default by January 23, 2008. Therefore, this was the date at which the mortgage debt was accelerated, and thus the date at which the cause of action began to accrue.
Plaintiff moved on May 6, 2015 pursuant to C.P.L.R. §305(a), 1003, and 3025(b) for leave to supplement the summons to add parties and for leave to serve and file an amended complaint adding a cause of action for foreclosure, such motion was fully submitted on June 29, 2015. The Court must consider such an amendment, which is freely granted, in the context of C.P.L.R. §203(f), the relation back doctrine. Such proposition is widely accepted and was acknowledged and approved on the record by both parties on June 23, 2015.
The relation back doctrine "allows a claim asserted against a defendant in an amended filing to relate back to claims previously asserted against a codefendant for Statute of Limitations purposes where the two defendants are united in interest'." Buran v. Coupal, 87 NY2d 173, 177 (1995). Three conditions must be met in order for claims to relate back:
"(1) both claims arose out of same conduct, transaction or occurrence, (2) the new party is united in interest' with the original defendant, and by reason of that relationship can be charged with such notice of the institution of the action that he will not be prejudiced in maintaining his defense on the merits and (3) the new party knew or should have known that, but for an excusable mistake by plaintiff as to the identity of the proper parties, the action would have been brought against him as well." Id.
In the instant action, the Court finds that these conditions are met. Both claims here arise out of the Defendants' default on the mortgage. The Court of Appeals determined that "if the interest of the parties in the subject-matter is such that they stand or fall together and that judgment against one will similarly affect the other, then they are otherwise united in interest.'" Prudential Ins. Co. of America v. Stone, 270 NY 154, 159 (1936). Here, the Defendants' heirs' interests in the matter are such that they would stand together or fall together with the other Defendants. Therefore, the Defendant and his heirs are presumptively "united in interest" as between themselves. As to the last condition, Defendant's heirs should have known that in the event of Defendant's death, the foreclosure action would have been brought against those with an interest in the property.
In English v. Ski Windham Operating Corp., 263 AD2d 443 (1999), the Court affirmed the Supreme Court, Suffolk County's grant of Plaintiff's cross motion for leave to amend the complaint where "the allegations in the original complaint gave notice of the transactions and occurrences to be proved pursuant to the amended complaint." Id. at 444. In 2006, the Second Department reversed the Supreme Court, Queens County's denial of the Plaintiff's motion for leave to amend the complaint and add a new cause of action, noting that "because the proposed amendment relates back to the allegations contained in the original complaint, it was not time-barred." 39 College Point Corp. v. Transpac Capital Corp., 27 AD3d 454, 455 (2006).
Here, the Court finds that allegations contained in the October 2012 Complaint directly referred to the 2008 Action seeking to foreclose on the property, and the October 2012 action references the Plaintiff's intention to foreclose. Accordingly, the Court finds that Defendants had notice of the transactions and occurrences giving rise to the proposed cause of action for foreclosure. Therefore Plaintiff's motion for leave to serve and file the proposed amended Complaint is granted.
Plaintiff has demonstrated entitlement to the relief sought. Even though the Court notes that Plaintiff has not included a Proposed Amended Complaint. Such a defect is not fatal.
The Court's concern is whether or not approximately sixteen months between the October 2014 determination which removed Defendants' impediments to proceed with the foreclosure and the May 6, 2015, Notice of Motion to Amend submitted June 29, 2015, exceeds a period of time contemplated by the relation back doctrine. The cases hold strongly that the most important consideration is timely notice of the substance of the intended amendment. See generally Pendleton v. City of New York, 44 AD3d 733 (2007), Cooper v. Sleepy's LLC, 126 AD3d 664 (2015). Here the Plaintiff provided the requisite notice to the Defendants.
This Court notes that were it not for the intervening 2012 action, the result would have confined the timeline to the commencement in 2008 of the foreclosure action and the running of the statute of limitations in 2014, ultimately resulting in the dismissal of the foreclosure.
In light of the Court's determination to continue this action, Defendants' Cross-motion to discontinue the above-captioned action is denied. Defendants' Cross-motion to dismiss Counter-claims, without prejudice is granted, with leave to renew these Counter-claims in their Answer to any Amended Complaint.
Plaintiff must file and serve an Amended Complaint consistent with this decision.
Accordingly, it is
ORDERED that Plaintiff's Motion is granted, in accordance with the foregoing decision.
ORDERED that in light of the Court's determination to continue this action,
Defendants' Cross-motion to discontinue the above-captioned action is denied.
ORDERED that Defendants' Cross-motion to dismiss Counter-claims, without prejudice is granted, with leave to renew these Counter-claims in their Answer to the Amended Complaint.
This constitutes the Order of the Court. Submit Order on ten business days notice after entry.
Dated:July 30, 2015, 2015_____________________________