OneWest Bank N.A. v. Conroy et al

Filing 154

ORDER granting 150 Motion for Reconsideration. For the reasons set forth herein, the Court grants plaintiff's motion for reconsideration and, on reconsideration, denies defendants' motions for summary judgment on collateral estoppel grounds. The parties' remaining arguments for and against summary judgment will be addressed by separate decision. Ordered by Judge Joseph F. Bianco on 7/20/2018. (Karamigios, Anna)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 14-CV-5862 (JFB)(AKT)
_____________________

CIT BANK N.A.,
Plaintiff,
VERSUS

TARA CONROY A/K/A TARA DONOVAN, ET AL.,
Defendants.

___________________
MEMORANDUM AND ORDER
July 20, 2018
___________________

JOSEPH F. BIANCO, District Judge:
By Memorandum and Order dated May 3,
2017 (“the Order”), the Honorable Leonard
D. Wexler 1 granted separate motions for
summary judgment by defendants Tara
Conroy and James Donovan (together,
“defendants”), denied plaintiff’s crossmotion for summary judgment on its
affirmative claims, granted plaintiff’s motion
for summary judgment on defendants’
counterclaims, and dismissed the complaint.
(ECF No. 148.) Presently before the Court is
plaintiff’s motion for reconsideration of the
Order. (ECF No. 150.) For the reasons that
1

This case was reassigned to the undersigned on April
10, 2018.

2

During this litigation, OneWest’s parent was
acquired by CIT Group Inc., and OneWest’s name was

follow, plaintiff’s motion is granted.
I. BACKGROUND
The Court assumes familiarity with the
facts and procedural history of this case, and
will provide only a brief overview for
purposes of the instant motion.
A. State Court Foreclosure Action
Plaintiff CIT Bank, N.A. (“plaintiff” or
“CIT Bank”), then known as OneWest Bank,
N.A. (“OneWest”), 2 commenced this action
in state court on August 9, 2009, to foreclose
on a mortgage encumbering real property.
changed to CIT Bank N.A. Plaintiff’s motion to
amend the complaint to, inter alia, change its name on
the caption was granted by Order dated September 15,
2015. (ECF. No. 95.)

The at-issue mortgage secured a $600,000
loan that defendants obtained from IndyMac
Bank, F.S.B. (“IndyMac”) on April 25, 2007
(“the Note”). In July 2008, IndyMac was
closed by the Office of Thrift Supervision.
The Federal Deposit Insurance Corporation
(“FDIC”) was appointed as receiver, and
IndyMac’s assets were transferred to
IndyMac Federal Bank (“IndyMac Federal”).

On August 12, 2013, the state court
granted summary judgment to defendants.
(See generally Donovan Decl. Ex. M., ECF
No. 137-3). The state court found that
plaintiff had not established that it had
standing to commence the action, noting that
plaintiff had again relied on an affirmation
from its attorney, who did not have personal
knowledge of the facts asserted therein. (Id.
at 2.) The state court also found the
documentary evidence submitted by plaintiff
to be insufficient to establish standing. In
particular, the state court referenced the
submission by plaintiff of a copy of the Note
that included an endorsement-in-blank by an
officer of IndyMac and two purported
allonges to the Note executed by an attorneyin-fact for FDIC as receiver for IndyMac
Federal. The state court observed that “[a]ll
of the foregoing documents are undated, and
there is no proof in admissible form as to
when they were executed, assuming they are
otherwise valid.” (Id. at 2-3.) Addressing
proof of assignment submitted by plaintiff,
the court found that the proffered documents
failed to establish that defendants’ loan was
one of the assets acquired by OneWest from
IndyMac Federal. In the absence of proof of
OneWest’s standing on August 7, 2009, the
date OneWest commenced the state court
action, the state court granted defendants’
motion for summary judgment.

On March 19, 2009, OneWest acquired
“substantially all” of IndyMac Federal’s
assets. Thereafter, on August 9, 2009,
OneWest instituted a foreclosure action
against defendants, claiming that defendants
had defaulted on their loan payments starting
in February 2009. OneWest immediately
moved for summary judgment. By order
dated December 15, 2010, the state court
denied OneWest’s motion, finding that there
was no admissible proof that OneWest was
the successor in interest to IndyMac Federal
with respect to defendants’ loan and thus had
standing to commence the lawsuit. (Donovan
Decl. Ex. G at 2, ECF No. 137-2.) The state
court noted that the affirmation of plaintiff’s
corporate officer was silent as to standing,
and that the only support for a finding that
OneWest had standing was counsel’s bare
allegation that standing existed. The state
court’s order did not address whether
OneWest asserted that it possessed the Note.
After the state court denied OneWest’s
motion for summary judgment, defendants
moved to dismiss on several grounds
including, inter alia, lack of standing. The
state court converted the motion to dismiss to
a motion for summary judgment, and gave
the parties time to “submit such further proof
on the motion as they determine to be
necessary or advisable.” (Donovan Decl. Ex.
I at 2, ECF No. 137-3.)

B. Federal Foreclosure Action
Plaintiff commenced this foreclosure
action on October 7, 2014. As to its standing,
plaintiff alleged that the “[a]llonge affixed to
the Note transferred the Note to Plaintiff.”
(Am. Compl. ¶ 22.) 3
The Amended
Complaint did not provide the date on which
this transfer took place, but did provide that
IndyMac assigned the mortgage to plaintiff
on June 18, 2010, and that the assignment
was recorded on July 19, 2010. (Id. ¶ 23.) It

3

Plaintiff filed an Amended Complaint on September
23, 2016. The allegations identified in this decision

were contained in both the original complaint and the
Amended Complaint.
2

precluded from re-litigating this issue
here.

further states that, “[t]o date, Plaintiff
remains the owner and holder of the Note and
Mortgage.” (Id. ¶ 24.)

(ECF No. 148 at 11.) The Court granted
defendants’ motions solely on collateral
estoppel grounds. In light of this decision,
the Court declined to consider the merits of
plaintiff’s foreclosure claim and denied its
motion for summary judgment without
further discussion. The Court did, however,
grant summary judgment to plaintiff on
defendants’ counterclaims.

At the close of discovery, the parties
cross-moved for summary judgment.
Defendant Conroy’s motion was limited to
the argument that plaintiff was precluded
from bringing this action under the doctrines
of res judicata and collateral estoppel.
Defendant Donovan echoed these arguments
and raised others, including an attack on the
sufficiency of any assignment. Plaintiff
cross-moved for summary judgment on its
foreclosure claim and on defendants’
counterclaims.

Plaintiff now claims that the issue of its
standing to commence the state court action
has no bearing on its standing to commence
the instant action. It argues that the Court
overlooked the basis for the state court’s
ruling on standing and, as a result, improperly
found that plaintiff was precluded from
establishing standing in this action.

In the Order, the Court determined that,
although plaintiff’s claims were not
precluded by res judicata, collateral estoppel
barred plaintiff from re-litigating its standing
to bring the action. After reviewing the
opportunities given to plaintiff to provide
proof of its standing, the Court summarized
the basis for its decision as follows:

II. LEGAL STANDARDS
Plaintiff moves under Local Civil Rule
6.3 for reconsideration of the Order. Motions
for reconsideration are subject to a strict
standard, and “reconsideration will generally
be denied unless the moving party can point
to controlling decisions or data that the court
overlooked—matters, in other words, that
might reasonably be expected to alter the
conclusion reached by the court.” Shrader v.
CSX Transp., Inc., 70 F.3d 255, 257 (2d Cir.
1995). Grounds for reconsideration exist
when the movant “identifies an intervening
change of controlling law, the availability of
new evidence, or the need to correct a clear
error or prevent manifest injustice.” Kolel
Beth Yechiel Mechil of Tartikov, Inc. v. YLL
Irrevocable Tr., 729 F.3d 99, 104 (2d Cir.
2013) (quoting Virgin Atl. Airways, Ltd. v.
Nat’l Mediation Bd., 956 F.2d 1245, 1255 (2d
Cir. 1992)). Decisions on motions for
reconsideration are committed to the sound
discretion of the district court. E.g., Suffolk
Fed. Credit Union v. Cumis Ins. Soc., Inc.,
958 F. Supp. 2d 399, 402 (E.D.N.Y. 2013).

It is clear from the orders issued in the
state court that [plaintiff] knew, or
certainly should have known, that
there was an issue regarding its
standing, and that it was afforded
opportunities to contest the issue.
The state court’s decision was not
made in an early stage of the
litigation, but rather after issue was
joined and discovery conducted.
Significantly, the state court
converted Defendants’ motion to
dismiss to one for summary
judgment, a decision that put Plaintiff
on notice that it needed to put forth its
best evidence regarding its standing.
Despite this implicit warning and
multiple opportunities to establish
standing, Plaintiff failed to do so and
the state court granted summary
judgment on that issue in Defendants’
favor.
Accordingly, Plaintiff is
3

III. DISCUSSION

circumstances. The cases permitting a party
to effect such a cure rely on the premise that,
although the party did not have standing at
the time the first action was commenced,
there has been some change in circumstances
that would allow that party to proceed in a
subsequent action.
Thus, a complaint
seeking to foreclose a mortgage may be
dismissed without prejudice where the
mortgage had yet to be assigned at the time
the foreclosure action was commenced. See
LaSalle Bank N.A. v. Ahearn, 875 N.Y.S.2d
595, 597-98 (3d Dep’t 2009); see also Wells
Fargo Bank, N.A. v. Ullah, No. 13 CIV. 0485
JPO, 2014 WL 2117243, at *3 (S.D.N.Y.
May 21, 2014) (granting plaintiff leave to
amend in foreclosure action and noting
plaintiff must allege standing based on
“different circumstances” than those before
the state court); Springwell Navigation Corp.
v. Sanluis Corporacion, S.A., 917 N.Y.S.2d
560, 560-61 (1st Dep’t 2011) (finding that a
plaintiff whose initial action was dismissed
for lack of standing “is not precluded from
reasserting the same claims based on newly
conferred rights that cured the lack of
standing”).

It is clear that, “[u]nder New York law,
‘[a] plaintiff establishes its standing in a
mortgage
foreclosure
action
by
demonstrating that, when the action was
commenced, it was either the holder or
assignee of the underlying note.” E. Sav.
Bank v. Thompson, 631 F. App’x 13, 15 (2d
Cir. 2015) (quoting Wells Fargo Bank N.A. v.
Rooney, 19 N.Y.S.3d 543, 544 (2d Dep’t
2015)). To determine whether a plaintiff has
standing to foreclose on a mortgage, a court
“must determine whether Plaintiff is the
holder of the Note,” which “may be
established through physical possession of
the Note or written assignment.” OneWest
Bank, N.A. v. Guerrero, No. 14-CV-3754
(NSR), 2016 WL 3453457, at *3 (S.D.N.Y.
June 17, 2016).
Plaintiff seeks reconsideration of the
Order to the extent the Order concluded that
CIT Bank’s standing to bring this action as
the holder of the Note is precluded by the
state court’s decision. 4 Specifically, CIT
Bank contends that the state court’s decision
pertained only to standing as of August 9,
2009, the date on which it filed the state court
action, and not to the question of standing on
October 7, 2014, the date on which it brought
the instant action. In other words, CIT Bank
claims that the issue of whether it had
possession of the endorsed Note on the earlier
date is not identical to the question of whether
it had possession on the later date. Implicit
in CIT Bank’s argument is the representation
that the endorsement-in-blank and allonges
were executed at some point after the state
court action was commenced, but before
initiation of the federal case.

Here, the state court expressed concern
regarding whether the endorsement and
allonges to the Note were executed before or
after that action was commenced. It noted
that these attachments were not part of the
original exhibit to the complaint, and that the
provision of these materials on summary
judgment “suggest[ed] that they were
executed after the action was commenced.”
(Donovan Decl. Ex. M. at 3, ECF No. 137-3.)
The state court concluded that, in the absence
of proof that these documents were executed
prior to commencement of the suit, it could
not find that the plaintiff had standing as the
“lawful holder of the note either by delivery
or valid assignment of the note to it.” (Id.

New York courts permit subsequent
actions to cure a lack of standing in certain
4

Plaintiff states that it disagrees with the Order’s
finding that standing based on assignment of the Note
was precluded by the state court decision, but does not

challenge that finding on this motion. (ECF No. 150
at 3 n.2.)
4

V.

(citation omitted).) Thus, the state court's
decision was concerned only with whether
the plaintiff had standing when the state court
foreclosure action was filed, and not after.

CONCLUSION

For the foregoing reasons, the Court
grants CIT Bank's motion for reconsideration
and, on reconsideration, denies defendants'
motions for summary judgment on the basis
of collateral estoppel. The parties' remaining
arguments for and against summary
judgment will be addressed by separate
decision.

Here, CIT Bank has submitted
affirmations from its corporate representative
and its counsel establishing that CIT Bank
possessed the Note at the time it commenced
this action.
CIT Bank's corporate
representative affirms that the Note, bearing
the endorsements-in-blank, was transferred
. to foreclosure counsel on May 29, 2014.
(Marks Aff. 111, ECF No. 135-21.)
Foreclosure counsel affirms that he received
the Note and endorsements-in-blank on May
30, 2014 (Jacobson Aff. 113-4, ECF No.
135-14) and, thus, that CIT Bank possessed
the Note when this action was filed on
October 7, 2014. Defendants have not
disputed that CIT Bank possessed the Note
when it filed this action. Transfer of the Note
after August 9, 2009 conferred rights on CIT
Bank that it did not possess when it
commenced the state court foreclosure
action. Given that CIT Bank's current basis
for asserting standing is not the same as that
asserted in state court, it is not precluded
from seeking foreclosure in this court. 5

SO ORDERED.

Dated: July 20, 2018
Central Islip, NY

***
Plaintiff is represented by Allison J.
Schoenthal and Nicole E. Schiavo of Hogan
Lovells US LLP, 875 Third Avenue, New
York, New Yo~k 10022 and Andrew L.
Jacobson of Windels Marx Lane &
Mittendorf, LLP, 156 West 56th Street, New
York, New York 10019. Defendant Tara
Conroy a/k/a Tara Donovan is represented by
Christopher Thompson of the Law Offices of
Christopher Thompson, 33 Davison Lane
East, West Islip, New York 11795.
Defendants James Donovan, Annmarie
Clarke, and Fastina Blake proceed prose.

Accordingly, CIT Bank's motion for
reconsideration is granted, and on
reconsideration, defendants' motion for
summary judgment based on collateral
estoppel is denied. Furthermore, the Order is
vacated to the extent that CIT Bank's motion
for summary judgment was denied. In light
of the instant order, the Court will consider
CIT Bank's motion and any arguments made
by defendant Donovan that were not
addressed previously. 6

5

The Court does not rule on the legal sufficiency of
these materials at this time, it decides only that CIT
Bank is not collaterally estopped from proceeding with

its claims.
6

Defendant Conroy's motion is now denied in its
entirety.
5