Eastern Savings Bank, FSB v. Thompson et al
Filing
50
DECISION AND ORDER: Upon closer scrutiny, a review of the Note, Mortgage, assignment documents, and the evidence offered reveals fatal deficiencies to Plaintiff's foreclosure claim. As much as Plaintiff would like its reputed current physical p ossession to solve the issue, it is proof of the physical delivery between the original lender and the intermediate entity that must be shown to establish good chain of title and, consequently, establish Plaintiff's standing to bring this fore closure action. However, because it has failed to make this showing, Plaintiff lacks the requisite standing. For these reasons, Defendants' motion for summary judgment is GRANTED and Plaintiff's motion for summary judgment is DENIED. Becaus e Plaintiff lacks standing to bring the foreclosure action, it is unnecessary to address either party's remaining arguments. The Clerk of the Court is respectfully directed to close the case. Ordered by Judge William F. Kuntz, II on 11/4/2014. (Fwd'd for judgment) (Brucella, Michelle)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------------------------------)(
EASTERN SAVIN GS, FSB,
Plaintiff,
DECISION AND ORDER
12-CV-1197 (WFK) (RLM)
-againstEBONY THOMPSON, KA TRINA BREEDY
NEW YORK CITY PARKING VIOLATIONS
BUREAU, NEW YORK ENVIRONMENTAL
CONTROL BOARD AND JOHN DOE #1, JOHN
DOE #2, JOHN DOE #3, JOHN DOE #4, JOHN
DOE #5, JOHN DOE #6, the last six names being
fictitious and unknown to plaintiff, the persons or
parties intended being the tenants, occupants,
persons or corporations, if any, having or claiming
interest upon the premises described in the
Complaint,
Defendants.
---------------------------------------------------------------)(
WILLIAM F. KUNTZ, II, United States District Judge
Eastern Savings Bank, FSB ("Plaintiff') brought this action to foreclose on a mortgage
encumbering certain real property located at 1696 Rockaway Parkway, Brooklyn, New York
11236, on which a mortgage was executed on May 26, 2006 by Ebony Thompson and Katrina
Breedy ("Defendants"). On May 21, 2013, Defendants filed a motion for summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure, and Plaintiff filed its own motion
for summary judgment two day later, on May 23, 2013. See Dkts. 32 ("Defs.' Mot.") & 37
("Pl.' s Mot."). Because Plaintiff has failed to establish that it has standing to bring the
foreclosure action, Defendants' motion for summary judgment is granted, and, in tum, Plaintiffs
motion is denied.
FACTUAL BACKGROUND
Plaintiff is a federally chartered savings bank with its primary office located in Maryland,
and Defendants are residents of New York. See Dkt. 1 ("Compl.")
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~~
2-3. On May 26, 2006,
Defendants executed a Note in the amount of $500,000 in favor of non-party Home123
Corporation ("Home123"). See Pl.'s Mot., Ex. A ("Note"); Compl., 10; Dkt. 39 ("Pl.'s 56.1
St.") , 2.
On the same day, Defendants executed and delivered to Home123 a Mortgage
encumbering real property located at 1696 Rockaway Parkway, Brooklyn, NY 11236, as security
for the Note. See Pl's Mot., Ex. B ("Mortgage"); Pl.'s 56.l St., 3.
Home123 then assigned the Mortgage to non-party GMAC Mortgage, LLC ("GMAC")
on May 31, 2006 (Assignment No. 1). GMAC allegedly took title to the loan strictly for the
purpose of servicing the loan for non-party UBS Real Estate Securities, Inc. ("UBS"). Pl. 's 56.l
St. , 10. The Note and Mortgage were then assigned to UBS by Assignment of Mortgage
(Assignment No. 2), which is dated November 6, 2007 and recorded in the Register's Office on
February 20, 2008. See Pl. 's Mot., Ex. E ("Assignment of Mortgage #2"); Compl. , 13; Pl. 's
56.1 St. , 13. UBS assigned the Note and Mortgage to Plaintiff by Assignment of Mortgage
(Assignment No. 3) dated February 6, 2008, and it was recorded in the Register's Office on
February 20, 2008. See Pl.'s Mot., Ex. F ("Assignment of Mortgage #3"); Compl. , 14; Pl.'s
56.1 St., 14. The Note and Mortgage were physically delivered to Plaintiff by UBS. Dkt. 37-2
(Aff. of Terry Brown, ("Brown Aff.")), 13; Dkt. 35-5 (Aff. of Matthew Bollo ("Bollo Aff.")),
5.
However, because the original assignment from Home123 to GMAC was not properly
recorded, there was a gap in chain of title. Accordingly, Assignment No. 1 was executed on
1
April 29, 2011 and recorded by the Registrar's Office on August 11, 2011-nearly five years
after the original assignment-in order to correct the gap. See Pl. 's Mot., Ex. D; Compl. , 12;
Pl.'s 56.1 St., 12.
1
Plaintiff states in its Complaint that Assignment No. 1 is dated "April 29, 2011," see Compl.,
12, but then represents in its 56.1 Statement that Assignment No. 1 is dated "April 9, 2011," see
Pl.'s 56.1 St., 12. Upon review of Plaintiffs Exhibit Din support of its Motion for Summary
Judgment, it appears the correct date is April 29, 2011.
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The terms of the Note require Defendants to make regular monthly payments to Plaintiff
on the first day of each month, commencing on July 1, 2006. See Brown Aff. if 15; Note at 1
("[Defendants] will pay principal and interest by making a payment every month .... On the first
day of each month beginning on July 1, 2006."). The Note explains that "[i]f [Defendants] do
not pay the full amount of each monthly payment on the date it is due, [Defendants] will be in
default." Note at 3. If such a default occurs, the Note requires Plaintiff to send Defendants
written notice that if the overdue amount is not tendered by a given date, Plaintiff may
immediately demand Defendants to pay the full amount of the loan, in addition to all accrued
interest. Id.
Defendants defaulted on the loan by failing to make the monthly payment due on
September 1, 2006 and all subsequent monthly payments thereafter. Brown Aff. if 17. On
September 19, 2011, Plaintiff sent Defendants a demand letter which informed them that if
Plaintiff "fails to receive payment from [Defendants] in the [overdue amount], plus
reimbursement of [Plaintiffs] attorney's fees and costs in the amount of $300.00, within thirty
(30) days from receipt of this letter ... the entire unpaid balance under this Security Instrument
and Note will be accelerated and become due and owing in full to [Plaintiff]." Pl's Mot., Ex. C
("Default Notice") at 1. Nonetheless, Defendants failed to pay any of the overdue amount as
demanded by the letter. Brown Aff. if 21; Pl. 's 56.1 St. if 8.
As a result, on March 12, 2010, Plaintiff filed the instant foreclosure action. See Compl.;
Pl. 's 56.1 St. if 8. According to Plaintiff, the total amount it is owed, including the unpaid
principal balance due under the Note and all accrued unpaid interest, protective advances and
late charges, totals $782,492.90. Pl.'s 56.1St.if19. Plaintiff originally filed a foreclosure action
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in New York State Supreme Court to enforce the default, but voluntarily dismissed the action
based on perceived defects in chain of title. See Brown Aff.
if 45.
On March 30, 2012, Defendants filed their Answer to the Complaint.
See Dkt. 4
("Answer"). Defendants asserted general denials and five affirmative defenses: ( 1) Plaintiff has
failed to state a viable cause of action against Defendants; (2) Plaintiff lacks standing to bring the
foreclosure action; (3) Plaintiff is not entitled to judgment based on the doctrine of laches and/or
estoppel; (4) the statute of frauds prevents the enforceability of the Note; and (5) the Complaint
must be dismissed because "Plaintiff has engaged in fraudulent acts." Id.
iii! 27-65. Defendants
filed a motion for summary judgment2 on May 21, 2013, principally arguing that Plaintiff lacks
standing to bring the action. See Dkt. 32. Plaintiff filed its own motion for summary judgment
on May 23, 2014, arguing that it has standing and has established its prima facie case to
foreclose.
In addition to seeking summary judgment, Plaintiff requests an order (1) striking
Defendants' Answer, and (2) amending the caption to substitute Evelyn Michelle in lieu of
Defendant John Doe #1 and Louise Sutton in lieu of Defendant John Doe #2, as they were the
tenants served and located at the property in question. Dkt. 38 ("Pl's Br.") at 17.
DISCUSSION
A. Summary Judgment Standard
A court appropriately grants summary judgment if "the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."
Fed. R. Civ. P. 56(a). No genuine issue of material fact exists "where the record taken as a whole
2
It should be noted that the ECF entry indicates concurrent filings of a "Motion to Dismiss for
Failure to State a Claim" and a "MOTION to Dismiss for Lack of Jurisdiction," within the same
docket entry, though only one moving paper was in fact filed. See Dkt. 32. In addition,
Defendants characterize the moving paper as a "motion for judgment on the pleadings" in the
brief' s preliminary statement, but then submit that in the alternative it could be construed as a
motion for summary judgment. Def. Mot. at 1. The Court construes the motion as a motion for
summary judgment.
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could not lead a rational trier of fact to find for the non-moving party." Lovejoy-Wilson v. NOCO
Motor Fuel, Inc., 263 F.3d 208, 212 (2d Cir. 2001) (quoting Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)). The moving party must meet its burden by pointing to
evidence in the record, including depositions, documents, affidavits, or other materials which it
believes demonstrates the absence of a genuine issue of material fact. Fed. R. Civ. P. 56(c)(l)((A),
(2); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
"In determining whether summary
judgment is appropriate, [the] Court will construe the facts in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the
movant." Brod v. Omya, Inc., 653 F.3d 156, 164 (2d Cir. 2011) (internal quotation marks and
citations omitted). The role of the district court is not to weigh the evidence and determine the
truth of the matter, but rather to perform "the threshold inquiry of whether there is the need for a
trial[.]" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986).
If the moving party fulfills its preliminary burden, the burden shifts to the non-movant to
raise the existence of a genuine issue of material fact. Fed. R. Civ. P. 56(c)(l). Statements that
are devoid of specifics and evidence that is merely colorable are insufficient to defeat a properly
supported motion for summary judgment. See Bickerstaffv. Vassar Coll., 196 F.3d 435, 452 (2d
Cir. 1999); Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). "A dispute about a 'genuine
issue' exists for summary judgment purposes where the evidence is such that a reasonable jury
could decide in the non-movant's favor." Beyer v. Cnty. of Nassau, 524 F.3d 160, 163 (2d Cir.
2008) (citing Guilbert v. Gardner, 480 F.3d 140, 145 (2d Cir. 2007)).
B. Plaintiff States a Prima Facie Case
Under New York law, "[t]o establish a prima facie case in an action to foreclose a
mortgage, the plaintiff must establish the existence of the mortgage and mortgage note,
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ownership of the mortgage, and the defendant's default in payment."
Campaign v. Barba, 23
AD 3d 327 (2d Dept 2005)); see also EC! Fin. Corp. v. Resurrection Temple of Our Lord, Inc.,
43 Misc. 3d 1220(A) (Sup. Ct. N.Y. Cnty. May 5, 2014); Builders Bank v. Warburton River View
Condo LLC, 09-CV-5484, 2011 WL 6370064, at *2 (S.D.N.Y. Dec. 20, 2011) (Briccetti, J.).
"Once plaintiff has established its prima facie case by presenting the note, mortgage, and proof
of default, the mortgagee has a presumptive right to foreclose, which can only be overcome by
an affirmative showing by the mortgagor." Builders Bank, 2011 WL 6370064, at *2 (citing
Regency Savs. Bank, F.S.B. v. Merritt Park Lands Assocs., 139 F. Supp. 2d 462, 465-66
(S.D.N.Y. 2001) (McMahon, J.)); see also State Bank of Albany v. Fioravanti, 51 N.Y.2d 638
(1980) ("[T]o defend against a summary judgment motion in a foreclosure action it is incumbent
upon the real property owner ... to produce 'evidentiary proof in admissible form ... sufficient to
require a trial (of that defense) . . . . mere conclusions, expressions of hope, unsubstantiated
allegations or assertions are insufficient."'); United States v. Freidus, 769 F. Supp. 1266, 1277
(S.D.N.Y. 1991) (Sweet, J.) ("[W]here the mortgage holder establishes the basic elements of a
cause of action for foreclosure, the mortgage holder is entitled to a presumptive right to collect,
which can only be overcome by an affirmative showing from the defendant.").
Here, Plaintiff has made an initial showing of the Note and the Mortgage, both executed
by Defendants. See Note; Pl.'s Mot., Ex. B ("Mortgage"). In addition, Plaintiff has presented
evidence of Defendants' default through failure to make loan payments as required by the Note.
See Default Notice; Brown Aff. ~~ 15-21. Therefore, Plaintiff has established its prima facie
case by "presenting the note, mortgage, and proof of default."
63 70064, at *2.
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Builders Bank, 2011 WL
C. Plaintiff Lacks Standing
With Plaintiff satisfying its prima facie case, the burden would normally shift to
Defendants to provide affirmative evidence of a defense. However, because Defendants have
raised standing as an affirmative defense, it remains Plaintiffs burden to show it indeed has
standing before the burden shifts to Defendants. See US. Bank, Nat 'l Ass 'n v. Sharif, 89 A.D.3d
723, 724 (2d Dep't 2011). "Where standing is raised as a defense by the defendant, the plaintiff
is required to prove its standing before it may be determined whether the plaintiff is entitled to
relief." Id. (citing cases); Kluge v. Fugazy, 145 A.D.2d 537, 538, (2d Dep't 1988) (finding that
"'foreclosure of a mortgage may not be brought by one who has no title to it"'). In a foreclosure
action, a plaintiff demonstrates standing "where it is both the holder or assignee of the subject
mortgage and the holder or assignee of the underlying note at the time the action is commenced."
Bank of NY. v. Silverberg, 86 A.D.3d 274, 279 (2d Dep't 2011) (collecting cases). This requires
a closer look at the evidence presented by Plaintiff.
Defendants challenge Plaintiffs standing by arguing that Plaintiff lacks a requisite injury
in fact because Plaintiff holds no interest in the Note at issue. This theory is premised on an
alleged defect in the chain of title.
Defendants suggest that the delivery of the Note from
Home123, a predecessor in interest, to GMAC, a later predecessor in interest, is not satisfactorily
demonstrated. Moreover, Defendants claim that it was only after Home123's bankruptcy and
liquidation that an unknown "attorney-in-fact" effected the assignment of the mortgage
retroactively. Dkt. 40 ("Defs' Opp.") at 3, 14.
Despite Defendants' protestations, the fact that one assignment contained a retroactive
date is not by itself fatal to the chain of title. "Back-dating" is allowable to establish valid chain
of title-so long as physical delivery of the instrument can be shown through affirmative
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evidence. "An assignment of a mortgage does not have to be in writing and can be effective
through physical delivery of the mortgage. However, if it is in writing, the execution date is
generally controlling and a written assignment claiming an earlier effective date is deficient
unless it is accompanied by proof that the physical delivery of the note and mortgage was, in
fact, previously effectuated." LaSalle Bank Natl. Assn. v Ahearn, 59 A.D.3d 911, 912 (3rd Dep't
2009); see also US. Bank, NA. v. Squadron VCD, LLC, 504 F. App'x 30, 33 (2d Cir. 2012) cert.
denied, 134 S. Ct. 1276 (2014) (citing US. Bank, NA. v. Collymore, 68 A.D.3d 752 (2d Dep't
2009) ("[U]nder New York law, physical delivery will effect a valid assignment of a note and
mortgage; a written assignment is not required."). Thus, by offering a written assignment, the
earlier date will not be effective unless Plaintiff provides some proof that the Note and Mortgage
were physically delivered.
The corrective assignment here, Assignment No. 1, evidencing the transfer from
Homel23 to GMAC, was executed on April 29, 2011, but had an "as of' effective date of May
31, 2006. Plaintiff admits in its Rule 56.1 Statement that the May 31, 2006 assignment "had not
been recorded" which "creat[ed] a gap in the record chain of assignments." Pl.'s 56.l
St.~
12.
This admitted gap caused Plaintiff to back-date the assignment. But in order for this May 31,
2006 date to apply retroactively, it must be "accompanied by proof that the physical delivery of
the note and mortgage was, in fact, previously effectuated." Ahearn, 59 A.D.3d at 912.
1. Plaintiff Fails to Show Physical Delivery
Plaintiff fails to provide any affirmative evidence demonstrating that there was physical
delivery of the Note and Mortgage from Home123 to GMAC. Plaintiff offers the affidavits of
Terry Brown (Senior Asset Manager for Plaintiff) and Matthew Bollo (Director at UBS) to show
the physical delivery of the Note and Mortgage from UBS to Plaintiff-but that assignment was
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never in dispute.
It is Assignment No. 1 that Plaintiff hopes this Court will find to apply
retroactively, and it was because of Assignment No. 1 that Plaintiff voluntarily dismissed its own
state court action. But for this Court to apply the disputed assignment retroactively, some indicia
of evidence must be presented to show that physical delivery of the instruments occurred at the
back-dated time. Upon close review of the evidentiary record, it is clear Plaintiff has failed to do
so. No affidavit or other evidentiary offering purports to show that that physical delivery of
Assignment No. 1 occurred.
Affiant Bollo is a director at UBS, and thus can testify to facts concerning the transfer of
the Note and Mortgage from Home123 to UBS's servicing agent, GMAC. Bollo Aff.
~
1. In his
affidavit, Bollo states that on June 23, 2006 "UBS purchased ownership of the Note and
Mortgage from Home 123, pursuant to a Master Mortgage Loan Purchase Agreement with the
parent of Home 123, New Century Mortgage Corp." Bollo Aff.
~
3. Affiant Bollo also notes
that "GMAC took title (but not beneficial ownership) of the Loan solely for the purpose of
facilitating the servicing of the Loan for UBS." Bollo Aff.
~
4. This is the entirety of Bollo's
representations regarding the factual transfer of the Note and Mortgage from Home123 to
GMAC.
There is no mention to be found of Bollo stating the Note and Mortgage were
physically delivered to GMAC or UBS from Home123.
In sharp contrast, Bollo does make certain to state that "UBS physically delivered (or
directed the delivery of) the original Note indorsed in blank and original Mortgage to [Plaintiff]
in or around late September 2007." Bollo Aff. ~ 5. Bollo specifically states that there was
physical delivery of the instruments and gives at least some level of detail explaining when the
delivery was made. Read together, Bollo's silence as to physical delivery of Assignment No. 1
places the factual deficiency into sharper relief.
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Plaintiff repeatedly stresses that because it purportedly has physical possession of the
Note and the Mortgage, it is "irrelevant" that there may be a defect in the chain of title. Pl's
Reply at 5-6. However, as discussed above, Plaintiff cannot establish standing to bring the
action unless it can show valid chain of title through physical delivery of Assignment No. 1. See
Ahearn, 59 A.D.3d at 912. Moreover, considering Plaintiffs efforts to voluntarily dismiss its
own action in state court based on an admitted defect, its subsequent back-dating of an
assignment for recordation, and then its filing a new foreclosure action in federal court, it is
difficult for this Court to then conclude that an assignment defect is simply irrelevant. See also
Pl' s Mot. at 5-6 (Plaintiff states in its own brief that "a gap in the record chain of assignments
existed" and "it was likely the State Action complaint would have been deemed defective as
New York law provides that the party commencing a foreclosure proceeding must have the legal
or equitable interest in the subject mortgage.").
Additionally, in arguing its case Plaintiff curiously relies on the Second Department's
Collymore decision, 68 A.D.3d 752. See Dkt. 33 ("Pl's Opp.") at 15; Dkt. 43 ("Pl.'s Reply") at
4--5. In Collymore, the Second Department held that the plaintiff attempting to foreclose on the
defendants' mortgage did not submit evidence sufficient to demonstrate that it had standing as
the lawful holder of the note at issue. Id. More specifically, the court found that the defendant
bank "failed to establish that the note was physically delivered to it prior to the commencement
of the action." Id. at 754.
The plaintiff in Collymore provided the affidavit of its vice-president to support its
summary judgment motion, but that affidavit "did not indicate when the note was physically
delivered to the Bank." Id. Similarly, Plaintiff here has offered an affidavit of Brown, its agent,
and Bollo, UBS's agent, as evidentiary support for physical delivery.
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But neither affidavit
indicates when-or if-the Note and Mortgage were physically delivered to UBS from
Home123. Both Brown and Bollo only attest to the physical delivery of the instruments from
UBS to Plaintiff. This is insufficient to establish standing on Plaintiff where the assignment
between Home123 and GMAC is at issue.
See Bank of New York Mellon v. Deane, 970
N.Y.S.2d 427, 433 (Sup. Ct. Kings Cnty. 2013) (finding that plaintiff bank failed to establish
primafacie assignment or delivery of note because, inter alia, "[t]here [were] no details as to the
delivery to [the intermediate entity], and, if there [were] a subsequent delivery to Plaintiff ... it
[was] not described.").
Homecomings Fin., LLC v. Guidi, 108 A.D.3d 506 (2d Dep't 2013) is also instructive. In
Guidi, the Second Department reversed summary judgment for plaintiff bank and dismissed the
complaint because it found plaintiff lacked standing. The court held that the plaintiff failed to
show that the intermediate entity that assigned plaintiff the note and mortgage was in fact the
lawful holder of the instruments at the time of assignment. Id. at 508. The note identified the
original lender as the "note holder," and the plaintiff was unable to provide any evidence
demonstrating that the original lender physically delivered the instruments to the intermediate
entity. Id. The court ruled that the intermediate entity "could not transfer that which it did not
hold." Id. While the plaintiff did offer an affidavit to show it had received physical delivery of
the note and mortgage, such evidence did nothing to demonstrate that the intermediate entity had
received physical delivery of the note and mortgage. Id. at 508-09.
Just as in Guidi, Plaintiff here has provided no evidence that the original lender,
Homel23, physically delivered the Note and Mortgage to the intermediate entity, GMAC.
Plaintiff only provides affidavit evidence of physical delivery as between UBS and itself.
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Without making the necessary showing of physical delivery, Plaintiff has failed to demonstrate
standing.
CONCLUSION
Upon closer scrutiny, a review of the Note, Mortgage, assignment documents, and the
evidence offered reveals fatal deficiencies to Plaintiffs foreclosure claim. As much as Plaintiff
would like its reputed current physical possession to solve the issue, it is proof of the physical
delivery between the original lender and the intermediate entity that must be shown to establish
good chain of title and, consequently, establish Plaintiffs standing to bring this foreclosure
action. However, because it has failed to make this showing, Plaintiff lacks the requisite
standing.
For these reasons, Defendants' motion for summary judgment is GRANTED and
Plaintiffs motion for summary judgment is DENIED. Because Plaintiff lacks standing to bring
the foreclosure action, it is unnecessary to address either party's remaining arguments. The
Clerk of the Court is respectfully directed to close the case.
SO ORDERED
Dated: November 4, 2014
Brooklyn, New York
s/WFK
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