| Mortgage Elec. Registration Sys., Inc. v Holmes |
| 2015 NY Slip Op 06662 [131 AD3d 680] |
| August 26, 2015 |
| Appellate Division, Second Department |
[*1]
| Mortgage Electronic Registration Systems, Inc., asNominee for Alliance Mortgage Banking Corp., its Successors and Assigns c/o EMCMortgage Corporation, 909 Hidden Ridge Drive, Irving, TX 75038-3817,Appellant, v Caroline Holmes et al., Respondents. |
Stiene & Associates, P.C., Huntington, N.Y. (Charles W. Marino of counsel),for appellant.
In an action to foreclose a mortgage, the plaintiff appeals, as limited by its brief, fromso much of an order of the Supreme Court, Queens County (Grays, J.), entered October21, 2013, as denied its unopposed motion for leave to substitute U.S. Bank NationalAssociation as the named plaintiff, for leave to enter a default judgment against thedefendants, for an order of reference, and to amend the caption and, sua sponte, directedthe dismissal of the complaint without prejudice.
Ordered that on the Court's own motion, the notice of appeal from so much of theorder as, sua sponte, directed the dismissal of the complaint without prejudice is deemedan application for leave to appeal from that portion of the order, and leave to appeal fromthat portion of the order is granted (see CPLR 5701 [c]); and it is further,
Ordered that the order is reversed insofar as appealed from, on the law, without costsor disbursements, and the plaintiff's unopposed motion for leave to substitute U.S. BankNational Association as the named plaintiff, for leave to enter a default judgment againstthe defendants, for an order of reference, and for leave to amend the caption, is granted,and the matter is remitted to the Supreme Court, Queens County, for further proceedingsconsistent herewith.
On March 1, 2005, the plaintiff, Mortgage Electronic Registration Systems, Inc.(hereinafter MERS), as nominee for Alliance Mortgage Banking Corp. (hereinafterAlliance), commenced this action to foreclose a mortgage encumbering certainresidential property after the borrower, the defendant Caroline Holmes, defaulted on therepayment of her mortgage loan. Although Holmes answered the complaint pro se and,later, by counsel, served an amended answer, she never asserted the plaintiff's lack ofstanding as a defense. The remaining defendants failed to appear, except for the State ofNew York, which filed a notice of appearance, and waived all but certain filings such asthe referee's report and transcripts of surplus money proceedings. In October 2012, theplaintiff and Holmes entered into a stipulation, pursuant to which Holmes agreed towithdraw her amended answer, including the defenses and counterclaims assertedtherein, and to permit the action to proceed ex parte. Thereafter, on or about July 1, 2013,the plaintiff moved to substitute U.S. Bank National Association (hereinafter US Bank)as the plaintiff in place of MERS, as nominee for Alliance. The plaintiff also moved forleave to enter a default judgment, for an order of reference to compute the sums dueunder the note, and for leave to amend the caption.
[*2] In the order appealed from, the Supreme Court deniedthe plaintiff's unopposed motion, concluding that the plaintiff lacked standing. The court,sua sponte, directed the dismissal of the complaint.
The Supreme Court should have granted that branch of the plaintiff's unopposedmotion which was for leave to substitute US Bank as the named plaintiff (see United Fairness, Inc. v Town ofWoodbury, 113 AD3d 754, 755 [2014]). CPLR 1018 provides, in relevant part,that "[u]pon any transfer of interest, the action may be continued by or against theoriginal parties, unless the court directs the person to whom the interest is transferred tobe substituted or joined in the action." "Leave to amend a pleading should be freely given(see CPLR 3025 [b]), provided the amendment is not palpably insufficient, doesnot prejudice or surprise the opposing party, and is not patently devoid of merit" (Maspeth Fed. Sav. & LoanAssn. v Simon-Erdan, 67 AD3d 750, 751 [2009], quoting Ruby Land Dev. v Toussie, 4AD3d 518, 519 [2004]; see United Fairness, Inc. v Town of Woodbury, 113AD3d at 755). Here, the substitution of US Bank as the plaintiff is proper since, by itsnature, the substitution would not result in surprise or prejudice to the defendants (seeUnited Fairness, Inc. v Town of Woodbury, 113 AD3d at 755; Matter of Highland Hall Apts.,LLC v New York State Div. of Hous. & Community Renewal, 66 AD3d678, 682 [2009]).
The Supreme Court also should have granted that branch of the plaintiff's motionwhich was for an order of reference. In support of its unopposed motion, the plaintiffsubmitted documentary proof showing that the defendants failed to answer the complaintwithin the time allowed, that the proposed substituted plaintiff was the holder of themortgage and note, that Holmes defaulted thereon, and that, as a preliminary step inobtaining a judgment of foreclosure, the appointment of a referee to compute the amountdue on the mortgage would be proper (see RPAPL 1321; HSBC Bank USA, N.A. vAlexander, 124 AD3d 838, 839 [2015]; HSBC Bank USA, N.A. v Taher, 104 AD3d 815, 816[2013]; Bank of N.Y. vAlderazi, 99 AD3d 837, 837-838 [2012]; Aurora Loan Servs., LLC v Shahmela Shah Sookoo, 92 AD3d705, 707 [2012]; EmigrantMtge. Co., Inc. v Fisher, 90 AD3d 823, 824 [2011]).
Furthermore, the Supreme Court also erred in denying that branch of the plaintiff'sunopposed motion which was for leave to enter a default judgment against thedefendants. By submitting proof of service of a copy of the summons and complaint,proof of the facts constituting the claim, and proof of Holmes' withdrawal of her answer,as well as evidence of the other defendants' failures to answer or appear, or limitedappearance, the plaintiff demonstrated its entitlement to a judgment of foreclosure andsale against the defendants (see CPLR 3215 [f]; HSBC Bank USA, N.A. vAlexander, 124 AD3d at 839-840; U.S. Bank, N.A. v Razon, 115 AD3d 739, 740 [2014]; Mortgage Elec. Registration Sys.,Inc. v Smith, 111 AD3d 804, 806 [2013]; Loaiza v Guzman, 111 AD3d 608, 609 [2013]).
The Supreme Court abused its discretion in, sua sponte, directing the dismissal of thecomplaint for the plaintiff's lack of standing. A court's power to dismiss a complaint, suasponte, is to be used sparingly and only when extraordinary circumstances exist towarrant dismissal (see HSBC Bank USA, N.A. v Taher, 104 AD3d at 817; see Aurora Loan Servs., LLC vSobanke, 101 AD3d 1065, 1066 [2012]; U.S. Bank, N.A. v Emmanuel, 83 AD3d 1047, 1048[2011]). Here, the court was not presented with extraordinary circumstances warrantingsua sponte dismissal of the complaint. Holmes had waived the defense of lack ofstanding by failing to assert it in her amended answer, which she withdrew in any event,the State waived the defense by serving and filing a limited notice of appearance, and theremaining defendants waived the defense by failing to appear or answer (see Freedom Mtge. Corp. vToro, 113 AD3d 815 [2014]; JP Morgan Mtge. Acquisition Corp. v Hayles, 113 AD3d821 [2014]; HSBC Bank USA, N.A. v Taher, 104 AD3d at 817; Bank ofN.Y. v Alderazi, 99 AD3d at 838; CitiMortgage, Inc. v Rosenthal, 88 AD3d 759, 761 [2011];Wells Fargo Bank Minn., N.A.v Mastropaolo, 42 AD3d 239, 242 [2007]). Furthermore, a party's lack ofstanding does not constitute a jurisdictional defect and does not warrant a sua spontedismissal of the complaint by the court (see Wells Fargo Bank, N.A. v Gioia, 114 AD3d 766, 767[2014]; HSBC Bank USA, N.A. v Taher, 104 AD3d at 817; Bank of N.Y. vAlderazi, 99 AD3d at 838; U.S. Bank, N.A. v Emmanuel, 83 AD3d at1048-1049).
Accordingly, we reverse the order insofar as appealed from, grant the plaintiff'sunopposed motion, and remit the matter to the Supreme Court, Queens County, forfurther [*3]proceedings on the complaint consistent withthis order. Dillon, J.P., Dickerson, Cohen and Duffy, JJ., concur.