Bank of N.Y. Mellon v McClintock

2016 NY Slip Op 03234 [138 AD3d 1372]

April 28, 2016

Appellate Division, Third Department

As corrected through Wednesday, June 1, 2016

[*1]

The Bank of New York Mellon, Formerly Known asThe Bank of New York, as Trustee for the Certificateholders CWALT, Inc., AlternativeLoan Trust 2006-16CB Mortgage Pass-Through Certificates, Series 2006-16CB,Respondent, v Judith McClintock, Also Known as Judy McClintock, Appellant,et al., Defendants.

Rusk Wadlin Heppner & Martuscello, LLP, Kingston (Jason J. Kovacs ofcounsel), for appellant.

Bond, Schoeneck & King PLLC, Syracuse (Suzanne M. Messer of counsel), forrespondent.

Clark, J. Appeal from an order of the Supreme Court (Gilpatric, J.), entered October22, 2013 in Ulster County, which, among other things, granted plaintiff's motion forsummary judgment.

In March 2006, defendant Judith McClintock (hereinafter defendant) executed a notein favor of Cliffco Inc., doing business as Cliffco Mortgage Bankers, which was securedby a mortgage on certain real property in Ulster County. Cliffco endorsed the notewithout recourse to Countrywide Bank, N.A., which, in turn, endorsed the note withoutrecourse to Countrywide Home Loans, Inc. Countrywide Home Loans, Inc. subsequentlyendorsed the note in blank without recourse. Plaintiff alleges that, in accordance with theterms of a pooling and servicing agreement (hereinafter PSA), it took physical possessionof the note on April 1, 2006. Mortgage Electronic Registration Systems, Inc., whichacted as a nominee for Cliffco and its successors [*2]andassigns, assigned the mortgage to plaintiff in February 2010.

After defendant defaulted on her obligations under the mortgage, plaintiffcommenced this mortgage foreclosure action in March 2010. Defendant joined issue andasserted various affirmative defenses, including lack of standing. Thereafter, plaintiffmoved for, as relevant here, summary judgment striking defendant's answer andappointing a referee to compute the amount owed.^[FN1] Defendant cross-moved for dismissalof the complaint. Supreme Court, among other things, granted plaintiff's motion anddenied defendant's cross motion. Defendant appeals, and we affirm.

Initially, plaintiff established its prima facie entitlement to summary judgment bysubmitting proof of the mortgage, the unpaid note and defendant's default (see Wells Fargo Bank, NA vOstiguy, 127 AD3d 1375, 1376 [2015]; HSBC Bank USA, N.A. v Sage, 112 AD3d 1126, 1127[2013], lvs dismissed 22 NY3d 1172 [2014], 23 NY3d 1015 [2014]). However,because defendant raised the issue of standing in her answer, plaintiff bore the additionalburden of demonstrating that, "at the time the action was commenced, [it] was the holderor assignee of the mortgage and the holder or assignee of the underlying note" (Deutsche Bank Natl. Trust Co. vMonica, 131 AD3d 737, 738 [2015]; see Chase Home Fin., LLC v Miciotta, 101 AD3d 1307,1307 [2012]). "Either a written assignment of the underlying note or the physicaldelivery of the note prior to the commencement of the foreclosure action is sufficient totransfer the obligation" (Chase Home Fin., LLC v Miciotta, 101 AD3d at 1307,quoting U.S. Bank, N.A. vCollymore, 68 AD3d 752, 754 [2009]).

Here, plaintiff sought to establish its standing by proving that it had physicalpossession of the note at the time that this action was commenced. The note was mostrecently endorsed in blank without recourse and, therefore, did not evidence plaintiff'spossessory interest (see Deutsche Bank Natl. Trust Co. v Monica, 131 AD3d at738-739; Bank of Am., N.A. vKyle, 129 AD3d 1168, 1169 [2015]). To establish its standing as holder of thenote, plaintiff proffered, among other things, the affidavit of Kevin Kerestes, an assistantvice-president of Bank of America, N.A. (hereinafter BANA), who averred that BANAwas the loan servicing agent for plaintiff, that he reviewed records kept and maintainedby BANA in its ordinary course of business and that plaintiff held the note at the time ofhis affidavit in November 2011. In addition, plaintiff produced the affidavit of DavidRichard, a vice-president of Resurgent Capital Services, L.P., BANA's loan subservicer,who, upon his review of records kept and maintained by his employer in the regularcourse of business, asserted that plaintiff was the holder of the note at the time of hisaffidavit in June 2013, and that "[p]laintiff took possession of [the] note and mortgage inaccordance with the [PSA], dated April 1, 2006, and took physical possession of the noteon April 1, 2006."^[FN2] Richard's affidavit was sufficient toestablish, prima facie, that plaintiff had physical possession of the note at the time thatthis action was commenced in March 2010 (see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355,361-362 [2015]; U.S. Bank N.A. v [*3]Carnivale,138 AD3d 1220, 1221 [2016]; EverhomeMtge. Co. v Pettit, 135 AD3d 1054, 1055 [2016]; YMJ Meserole, LLC v 98 MeseroleSt., LLC, 133 AD3d 848, 849 [2015]; compare JP Morgan Chase Bank, N.A. v Hill, 133 AD3d1057, 1058-1059 [2015]). Although the dissent asserts that Richard "provided noexplanation as to how plaintiff came into possession," we are of the view that Richarddid, in fact, provide such information when he stated that plaintiff took possession of thenote "in accordance with the [PSA]" and took physical possession of the note on April 1,2006, the same date as the PSA.

In opposition to plaintiff's motion and in support of her cross motion, defendant didnot produce any evidence to contradict the affidavits of Kerestes or Richard or otherwiseestablish that plaintiff was not in possession of the note at the commencement of thisforeclosure action.^[FN3] Defendant produced, among otherthings, the affidavit of Gail Stein, an assistant secretary of BAC Home Loans Servicing,LP.^[FN4] In thataffidavit, Stein states, "The [m]ortgage and note . . . have been incontinuous possession since March 1, 2009." Although inartfully worded, we do not findher statement to be at odds with Richard's assertion that plaintiff "took physicalpossession of the note on April 1, 2006." Additionally, contrary to the dissent'sconclusion, the mere fact that Stein and Kerestes did not include the date of possession intheir affidavits does not necessarily lead to the conclusion that they were unable todetermine the date of possession.^[FN5]

Finally, although defendant challenged plaintiff's status as the holder of the note byalleging that plaintiff did not comply with certain provisions of the PSA, she lackedstanding to make such a challenge (see Bank of Am. N.A. v Patino, 128 AD3d 994, 994-995[2015], lv dismissed 26 NY3d 975 [2015]; Wells Fargo Bank, N.A. v Erobobo, 127 AD3d 1176, 1178[2015], lv dismissed 25 NY3d 1221 [2015]; Bank of N.Y. Mellon v Gales, 116 AD3d 723, 725 [2014]).In view of the foregoing, Supreme Court properly granted plaintiff's motion for summaryjudgment.

McCarthy, J.P., Egan Jr. and Devine, JJ., concur.

Lynch, J. (dissenting). I respectfully dissent. As explained by the majority, in order toestablish standing, [*4]plaintiff's burden was to show thatit had physical possession of the note prior to commencement of the action on March 2,2010. In my view, through a series of inadequate affidavits presented on three motionsfor summary judgment, plaintiff failed to satisfy this burden. On the first motion made in2010, plaintiff submitted the affidavit of Gail Stein, an assistant secretary of BAC HomeLoans Servicing, LP, attorney-in-fact for plaintiff. Stein averred that "[t]he mortgage andnote . . . have been in continuous possession since March 1, 2009." Notably,she did not say who had possession of the documents and her representation with respectto the mortgage was clearly in error, for the mortgage was not assigned to plaintiff byMortgage Electric Registration Systems, Inc. until February 2010. Not surprisingly, thatmotion was withdrawn. A second motion, returnable in June 2012, was supported by theaffidavit of Kevin Kerestes, an assistant vice-president of Bank of America, N.A.(hereinafter BANA), the loan servicing agent. Pertinent to the issue of physicalpossession, Kerestes averred that "plaintiff is the holder of the note and was assigned themortgage prior to commencement of this action." In denying the motion, Supreme Courtobserved that the Kerestes affidavit "fails to address how or when . . .plaintiff . . . was assigned the note and mortgage and by whom said noteand mortgage was assigned." The court did not address the issue of physical delivery ofthe note to plaintiff, but denied the motion without prejudice. A third motion was filed,returnable in February 2013, again supported by the Kerestes affidavit. In reply,however, plaintiff added the affidavit of David Richard, a vice-president of ResurgentCapital Services, LP, a sub-servicer for BANA. Based on a review of Resurgent'srecords, which included copies of the note and mortgage, Richard averred that plaintiff"took possession of the note and mortgage in accordance with the Pooling and ServicingAgreement (PSA), dated April 1, 2006, and took physical possession of the note on April1, 2006."

The majority has determined that the Kerestes and Richard affidavits, combined,were sufficient to demonstrate that plaintiff had physical possession of the note prior tocommencing the action. Given the sequence and discrepancies between the affidavitsoutlined above, I disagree. To begin, in finally granting the motion, Supreme Courtmakes no mention of the Richard affidavit, while concluding that the Kerestes "affidavitstates that [BANA] holds the note and mortgage, which is now substantiated byplaintiff's submissions." Of course, the actual issue here is whether plaintiff, not BANA,took physical possession of the note prior to commencing the action. Neither Stein norKerestes addressed this operative point in either of their affidavits. The curious thing isthat not until the third motion, in reply, did plaintiff put forth the affidavit of Richard.While Richard was entitled to rely on the records maintained by Resurgent assub-servicer (see Deutsche BankNatl. Trust Co. v Monica, 131 AD3d 737, 739 [2015]), he provided noexplanation as to how plaintiff came into possession, or even how it was that he couldconfirm the date plaintiff took possession while Stein and Kerestes could not, when allwere presumably provided with the same records (see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 362[2015]). Neither Stein, Kerestes nor Richard ever indicates that they examined theoriginal note (compare Deutsche Bank Natl. Trust Co. v Monica, 131 AD3d at739), nor can we assume that plaintiff took possession of the note upon the signing of thePooling and Servicing Agreement on April 1, 2006. Under section 2.01 [a] of thatagreement, the seller was required to deliver the note to plaintiff, as trustee, either on theclosing date or within 30 days for any "Delay Delivery Mortgage Loans"—definedas a mortgage loan for which all or a portion of the related file was not delivered on theApril 1, 2006 closing date. From this record, we have no basis upon which to determinewhether the subject note falls into the delay category and, if so, nothing to show whenthe note was actually delivered. While credibility is not at issue on a summary judgmentmotion, it is my view that plaintiff's submissions fall short in establishing a prima faciecase that it has standing to pursue this action. At the very least, a hearing should havebeen held on the issue of physical delivery prior to a determination on the motion(see CPLR 3212 [c]).

Ordered that the order is affirmed, with costs.

Footnote 1:Plaintiff moved for thesame relief on two prior occasions. Plaintiff withdrew its first motion, and SupremeCourt denied the second motion without prejudice.

Footnote 2:As the dissent pointsout, plaintiff produced Richard's affidavit in reply to defendant's opposition to its motionfor summary judgment. We note that defendant had an opportunity to respond to thecontents of Richard's affidavit in her reply to plaintiff's opposition to her cross motion.

Footnote 3:Unlike in JP MorganChase Bank, N.A. v Hill (133 AD3d at 1059), defendant did not submit evidence ofany prior mortgage foreclosure action commenced by a different entity in between thedate on which plaintiff took physical possession of the note and the date ofcommencement. Nor did defendant request that plaintiff produce the "original 'wet-ink'note" (id.).

Footnote 4:BAC Home LoansServicing was plaintiff's attorney-in-fact. BANA is the successor by merger to BACHome Loans Servicing.

Footnote 5:We also note that,although the "better practice" is to explain how it came into possession of the note, aplaintiff's failure to do so does not preclude a court from granting summary judgment inits favor (Aurora Loan Servs., LLC v Taylor, 25 NY3d at 362; see U.S. BankN.A. v Carnivale, 138 AD3d at 1221).