| JP Morgan Chase Bank, N.A. v Hill |
| 2015 NY Slip Op 08479 [133 AD3d 1057] |
| November 19, 2015 |
| Appellate Division, Third Department |
[*1]
| Jp Morgan Chase Bank, National Association,Respondent, v Barbara A. Hill et al., Appellants, et al., Defendants. |
Barbara A. Hill and Robert W. Hill, Coral Gables, Florida, appellants pro se.
Buckley Madole, PC, Rochester (Michael T. Ansaldi of counsel), forrespondent.
Lynch, J. Appeal from an order of the Supreme Court (LaBuda, J.), entered April 14,2014 in Sullivan County, which, among other things, granted plaintiff's motion forsummary judgment.
In October 2004, defendants Barbara A. Hill and Robert W. Hill (hereinaftercollectively referred to as defendants) executed a note in favor of BNY MortgageCompany, LLC to borrow the sum of $132,664 to purchase property located in theVillage of Monticello, Sullivan County. The debt was secured by a mortgage on theproperty. When defendants stopped making monthly payments, plaintiff commenced thisaction in February 2013 to foreclose on the mortgage. Supreme Court scheduled asettlement conference (see CPLR 3408; 22 NYCRR 202.12-a), but defendantsdid not appear. Thereafter, with the court's permission, plaintiff moved for summaryjudgment and defendants cross-moved for, among other things, an order directingplaintiff to produce the "wet-ink" note. The court granted plaintiff's motion, denieddefendants' cross motion and defendants now appeal.
In a foreclosure action, a plaintiff seeking summary judgment "must produceevidence of the mortgage and unpaid note along with proof of the mortgagor's default"(Wells Fargo Bank, NA vOstiguy, 127 AD3d 1375, 1376 [2015]; see HSBC Bank USA, N.A. v Sage, 112 AD3d 1126, 1127[2013], lvs dismissed 22 NY3d 1172 [2014], 23 NY3d 1015 [2014]). Plaintiffsupported its motion with the required documentation, but because the self-represented[*2]defendants raised the issue of standing in theiranswer, plaintiff was also obligated to demonstrate that it was a holder or assignee of thenote and subject mortgage at the time the action was commenced (see Wells FargoBank, NA v Ostiguy, 127 AD3d at 1376; Chase Home Fin., LLC v Miciotta, 101 AD3d 1307, 1307[2012]). It is the note, not the mortgage, that is the dispositive instrument that conveysstanding to foreclose under New York law (see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361[2015]).
Here, plaintiff maintains that it has standing because it obtained physical possessionof the note prior to commencement of the action. "Since the note has only an undatedindorsement in blank from the original lender, it does not evidence plaintiff's possessoryinterest" (Deutsche Bank Natl.Trust Co. v Monica, 131 AD3d 737, 738-739 [2015] [citation omitted]; see Bank of Am., N.A. v Kyle,129 AD3d 1168, 1169 [2015]), nor, for that matter, does the June 2012 assignmentof the mortgage from the Mortgage Electronic Registration Systems, Inc. confer standing(see id.). To establish physical possession, plaintiff produced an affidavit by anassistant secretary, who stated that plaintiff's "custodial system of record" showed thatplaintiff "received the original [n]ote on February 16, 2007" and that plaintiff maintained"possession of the [n]ote at its storage facility" in Monroe, Louisiana. Noticeably absentis any representation by the assistant secretary that she examined the original note and,contrary to the dissent, the affidavit is devoid of any detail as to how plaintiff actuallyacquired possession of the original note (compare Aurora Loan Servs., LLC vTaylor, 25 NY3d at 362; Deutsche Bank Natl. Trust Co. v Monica, 131AD3d at 739). Moreover, the dissent's reliance on HSBC Bank USA, N.A. vSage (supra) is misplaced, for the question here is not, as it was in that case,whether plaintiff's representative had personal knowledge as to the creation of theoriginal loan documents, but whether any direct evidence was presented detailing howplaintiff came into actual possession of the original note. The plaintiff in HSBC BankUSA had already established that the custodian of the trust had actual possession ofthe note for over two years prior to commencement of the action (id. at1127-1128). Even accepting that plaintiff met its burden of proving physical possessionof the note through the assistant secretary's review of plaintiff's custodial records, inopposition, defendants cross-moved for an order directing plaintiff to produce theoriginal or "wet-ink" note, as described by defendants. Defendants made the samedemand in their answer.
In Aurora Loan Servs., LLC v Taylor (25 NY3d at 361-362), the Court ofAppeals recently addressed the degree of proof necessary to show possession of a notefor purposes of standing. In that case, the plaintiff's representative averred, upon reviewof its business records and after examining the original note, that it had custody of thenote prior to the commencement of the action. The defendants countered that more detailwas required as to how the plaintiff acquired the note. While observing that "the betterpractice would have been for [the plaintiff] to state how it came into possession of thenote," the Court determined that the trial court did not err in granting summary judgmentto the plaintiff without requiring production of the original note, emphasizing that nosuch demand had been made (id. at 362). Not to be overlooked is the fact that theallonge indorsing the note to the plaintiff in Aurora showed a specific chain ofownership to the plaintiff (id. at 359). Here, by comparison, the original noteincludes only a blank indorsement, the affidavit of the assistant secretary is based on areview of system records without an examination of the original note and defendantsdemanded production of the original note from the outset. Defendants also represent thata prior foreclosure action was commenced by defendant Bank of New York in2008—a year after plaintiff ostensibly obtained possession of the originalnote—and discontinued in 2010, without prejudice. Given this context, andwithout any verification as to how plaintiff came into possession of the note, weconclude that Supreme Court should have first compelled it to produce the original noteprior to resolving plaintiff's motion for summary judgment. This is particularly so giventhe responding affidavit of plaintiff's representative that it was "ready, wiling (sic) andable to produce the original 'wet-ink' note for [*3]inspection"—a representation repeated in plaintiff'sbrief on appeal.
Garry and Egan Jr., JJ., concur.
Devine, J. (dissenting). Our colleagues find that questions of fact exist as to whetherplaintiff actually possesses the note; we do not, and, therefore, respectfully dissent.
Plaintiff undoubtedly "produce[d] evidence of the mortgage and unpaid note alongwith proof of the mortgagor's default" (Wells Fargo Bank, NA v Ostiguy, 127 AD3d 1375, 1376[2015]; see HSBC Bank USA,N.A. v Sage, 112 AD3d 1126, 1127 [2013], lvs dismissed 22 NY3d1172 [2014], 23 NY3d 1015 [2014]). Because defendants Barbara A. Hill and Robert W.Hill (hereinafter collectively referred to as defendants) raised standing as an affirmativedefense, plaintiff was further required to show that it was "both the holder or assignee ofthe subject mortgage and the holder or assignee of the underlying note at the time theaction [was] commenced" (Chase Home Fin., LLC v Miciotta, 101 AD3d 1307, 1307[2012]; see Wells Fargo Bank, NA v Ostiguy, 127 AD3d at 1376). Plaintiffsubmitted a copy of the mortgage that was assigned to it and a copy of the promissorynote indorsed in blank, but a blank indorsement "does not evidence plaintiff's possessoryinterest" in the note and requires proof of actual possession (Deutsche Bank Natl. Trust Co. vMonica, 131 AD3d 737, 738-739 [2015]; see UCC 3-204 [2]; Bank of Am., N.A. v Kyle, 129AD3d 1168, 1169 [2015]).
In that regard, plaintiff provided an affidavit by an assistant secretary, who averredthat she reviewed plaintiff's business records regarding the loan in question, that she waspersonally familiar with the maintenance of those records and that they had been createdand kept in the regular course of business. Her affidavit "was adequately based on areview of the books and records of the company maintained in the ordinary course ofbusiness" under these circumstances and, contrary to the assertion of my colleagues, her"lack of personal knowledge as to the creation of the documents is not fatal" (HSBCBank USA, N.A. v Sage, 112 AD3d at 1127; see CPLR 4518; compareDeutsche Bank Natl. Trust Co. v Monica, 131 AD3d at 739 [records made byanother entity]). The majority complains that this affidavit was deficient in failing to"detail . . . how plaintiff actually acquired possession of the original note,"but that issue is irrelevant, as "[a]n instrument payable to order and indorsed in blankbecomes payable to bearer and may be negotiated by delivery alone until speciallyindorsed" (UCC 3-204 [2]). Possession, regardless of how that possession came about, isall that is required to make plaintiff a bearer and holder of a note indorsed in blank(see UCC 1-201 [b] [5], [21]; UCC 3-204 [2]; Getty Petroleum Corp. vAmerican Express Travel Related Servs. Co., 90 NY2d 322, 328 [1997]; Bank ofAm., N.A. v Kyle, 129 AD3d at 1169; Wells Fargo Bank, NA v Ostiguy, 127AD3d at 1376).
The records detailed as to how the original note came into plaintiff's possession, andthe assistant secretary averred with no hesitation that plaintiff "received the original[n]ote on" February 16, 2007 and "maintain[ed] possession of the [n]ote" at its storagefacility in Louisiana. While we agree that "the better practice would have been for[plaintiff] to state how it came into possession of the note in its affidavit in order toclarify the situation completely" (Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 362[2015]), plaintiff nevertheless met its initial burden by providing admissible proofshowing that "physical delivery of the note was made to . . . [it upon an]exact delivery date" that predated the commencement of this action (Aurora Loan Servs., LLC vTaylor, 114 AD3d 627, 629 [2014], affd 25 NY3d 355 [2015]; seeDeutsche Bank Natl. Trust Co. v Monica, 131 AD3d at 738; Deutsche Bank Natl. Trust Co. vWhalen, 107 AD3d 931, 932 [2013]).
[*4] The burden accordingly shifted to defendants "toproduce evidentiary proof in admissible form sufficient to establish the existence ofmaterial issues of fact which require a trial of the action," and they failed to do so(Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). Defendants primarilyargued that the note was "altered, edited, [and] redacted," and cross-moved forproduction of the original note. They made no specific allegations as to how the note hadbeen altered, however, and no obvious changes or material redactions appear in the copyof the note provided. Their conclusory claims therefore constitute the type of"unsubstantiated allegations or assertions" that do not raise a question of fact(Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; see Amatulli vDelhi Constr. Corp., 77 NY2d 525, 533 [1991]). Inasmuch as defendants failed tosubmit any evidence to warrant "the requisite showing that [further] discovery wouldyield material and relevant evidence sufficient to defeat the motion" for summaryjudgment, production of the original note at this late date is not appropriate (Seton Health at Schuyler RidgeResidential Health Care v Dziuba, 127 AD3d 1297, 1300 [2015]; seeCPLR 3212 [f]; Banque Nationale de Paris v 1567 Broadway Ownership Assoc.,214 AD2d 359, 361 [1995]; see also Aurora Loan Servs., LLC v Taylor, 25NY3d at 362).
We perceive nothing in the other arguments advanced by defendants that wouldwarrant a denial of summary judgment. Defendants suggested that something nefariouswas afoot because plaintiff came into possession of the note in 2007, but was notassigned the mortgage until 2012. This assertion ignores the role of Mortgage ElectronicRegistration Systems, Inc., which previously held the mortgage (see Matter of MERSCORP, Inc. vRomaine, 8 NY3d 90, 96 [2006]), and also overlooks "that the note, and not themortgage, is the dispositive instrument that conveys standing to foreclose under NewYork law" (Aurora Loan Servs., LLC v Taylor, 25 NY3d at 361). Moreover,while a mortgage foreclosure action had previously been commenced by defendant Bankof New York, that action was discontinued, and defendants provided nothing to suggestthat the prior action in any way impaired plaintiff's rights (see e.g. Credit-Based AssetServicing & Securitization v Grimmer, 299 AD2d 887, 888 [2002]). The Bankof New York was served with the summons and complaint in this action given its statusas a lienholder, and its failure to appear and assert any interest does not speak well of theinsinuation by defendants that it has any rights to the note and mortgage at issue. Overfive years have passed since the default in payment and, in the absence of any materialissues of fact that would defeat an award of summary judgment, we perceive nothing tojustify a further delay in the resolution of this matter.
Lahtinen, J.P., concurs. Ordered that the order is modified, on the law, with costs todefendants, by reversing so much thereof as granted plaintiff's motion; said motiondenied; and, as so modified, affirmed.