| Wells Fargo Bank, N.A. v Jones |
| 2016 NY Slip Op 03838 [139 AD3d 520] |
| May 17, 2016 |
| Appellate Division, First Department |
[*1]
| Wells Fargo Bank, N.A., Doing Business as America'sServicing Company, Appellant, v Raymond Jones, Respondent, et al.,Defendants. |
Hogan Lovells US LLP, New York (Heather R. Gushue of counsel), forappellant.
Cabanillas & Associates, P.C., White Plains (Quenten E. Gilliam of counsel),for respondent.
Order, Supreme Court, Bronx County (Wilma Guzman, J.), entered July 28, 2014,which denied plaintiff's motion to substitute, nunc pro tunc, an affidavit of merit andamount due for a prior affidavit, and granted defendant Raymond Jones's cross motionfor summary judgment dismissing the complaint, unanimously modified, on the law, todeny plaintiff's motion without prejudice, and to grant defendant's cross motion only tothe extent of remanding to the motion court for a traverse hearing, and otherwiseaffirmed, without costs.
The motion court was correct in denying plaintiff's request to substitute the affidavitof merit by Linda Duncan dated October 24, 2013 (the 2013 Duncan affidavit), nunc protunc, for the affidavit by Steven Patrick dated August 28, 2007 (the 2007 Patrickaffidavit), but for a reason different from that stated. Plaintiff sought to submit the 2013Duncan affidavit in order to comply with Administrative Order of the ChiefAdministrative Judge of the Courts AO/548/10, which was promulgated on October 20,2010, as amended by AO/431/11 on March 2, 2011 (the administrative order).[FN1] Duncan states that shebases the statements in the 2013 Duncan affidavit on "business records maintained byWells Fargo . . . made at or near the time by, or from information providedby, persons with knowledge of the activity and transactions reflected in such records."Plaintiff claims that it first acquired rights with regard to the mortgage by means of anassignment dated August 10, 2007, which purported to be retroactive to June 14, 2007.Therefore, there would have been no reason for Wells Fargo to make records concerningthe mortgage before, at the earliest, June 14, 2007. However, the 2013 Duncan affidavitalleges that defendant Jones failed to make mortgage payments due on and after March 1,2007, and that a notice of default dated May 7, 2007 was sent to him. Accordingly,Duncan cannot attest to those facts based on business records made by Wells Fargo[*2]"at the time of the act, transaction, occurrence or event, orwithin a reasonable time thereafter" (CPLR 4518 [a]). Rather, her statements aboutevents before that date must be based on records in plaintiff's possession "made. . . from information provided by[ ] persons with knowledge of the activityand transactions reflected in such records." We recognize that in seeking to enforce aloan, an assignee may use an original loan file prepared by its assignor, when it reliesupon those records in the regular course of its business (Landmark Capital Invs., Inc. vLi-Shan Wang, 94 AD3d 418 [1st Dept 2012]). In this case, however, Duncandoes not claim to have relied on the original loan file, nor does she describe those"persons" she relied upon; presumably, Duncan is referring to "persons" employed byplaintiff's predecessor in interest. However, the 2013 Duncan affidavit contains nofactual allegations about those "persons" to provide the court with "sufficient indicia ofreliability" as to the documents prepared by plaintiff's predecessor in interest (One Step Up, Ltd. v Webster Bus.Credit Corp., 87 AD3d 1, 11 [1st Dept 2011] [internal quotation marks omitted];see also People v Brown, 13NY3d 332, 341 [2009]; People v Cratsley, 86 NY2d 81, 89 [1995]).Moreover, Duncan cannot rely on the 2007 Patrick affidavit as the basis for her claimsregarding events occurring before the date on which plaintiff allegedly acquired the noteand mortgage, since documents prepared in connection with litigation do not qualify forthe business record exception to the rule against hearsay (National States Elec. Corp.v LFO Constr. Corp., 203 AD2d 49, 50 [1st Dept 1994]). Therefore, the court cannotrely on any statements in the 2013 Duncan affidavit concerning events before the date ofplaintiff's acquisition of the mortgage. Accordingly, the motion court was correct in notpermitting plaintiff to substitute and rely on the 2013 Duncan affidavit.
With regard to the cross motion, the motion court should have addressed Jones'sclaim of lack of personal jurisdiction over him before reaching any of the other relief hesought. Where, as here, a defendant seeks vacatur of a default under both CPLR 5015 (a)(1) (excusable default) and (4) (lack of jurisdiction), the court should determine whetheror not it has personal jurisdiction over the defendant before reaching the 5015 (a) (1)ground, since the defendant's "lack of a reasonable excuse . . . is obviated ifthe court is without personal jurisdiction over defendant, and all subsequent proceedingswould be rendered null and void" (Cipriano v Hank, 197 AD2d 295, 298 [1stDept 1994]; see also David D. Siegel, Practice Commentaries, McKinney's ConsLaws of NY, Book 7B, CPLR C5015:9 ["(T)he court must always rule first on theparagraph 4 jurisdictional point, which involves no discretion. Only if jurisdiction issustained need the court go on to the paragraph 1 discretionary ground"]).
Plaintiff argues that Jones waived any challenge to personal jurisdiction by appearingin this action "without objection." We disagree. Jones first appeared by filing a pro seorder to show cause dated February 25, 2010, in which he sought, inter alia, an interimstay of the foreclosure sale,[FN2] but did not address his default. WhenJones obtained counsel soon thereafter, the motion court permitted his counsel to file asupplemental affidavit and attorney's affirmation, on or about April 10, 2010, whichraised the issue of improper service. The motion court appears to have treated counsel'saffirmation as an amended order to show cause raising the issue of service.[FN3] Accordingly, Jonesobjected to personal jurisdiction over him in the motion that constituted his firstappearance in this action. He also raised it in the cross motion that is the subject of theinstant appeal. The fact that the motion court did not address that argument does notconstitute a waiver by Jones.
[*3] Plaintiffalleges that it effectuated substitute service upon Jones by serving a copy of the summonsand complaint upon his daughter, Samantha Jones, at a specified address in the Bronx.However, CPLR 308 (2) requires that substitute service be performed "at the actual placeof business, dwelling place or usual place of abode of the person to be served." In hisaffidavit, Jones denied that he lived at that address and stated that he resided in Texas atthe time of the alleged service. In further support of his motion, he submitted an affidavitby his daughter, who swore that her father did not live there and that the summons andcomplaint were not served on her. Accordingly, contrary to plaintiff's characterization ofthese factual submissions as "bare-bones," Jones submitted sufficient facts to rebutplaintiff's affidavit of service, entitling him to a traverse hearing on this issue (Johnson v Deas, 32 AD3d253 [1st Dept 2006]; see also Ortiz v Santiago, 303 AD2d 1, 4 [1st Dept2003]).
Should Jones prevail at the traverse hearing, the action must be dismissed. Wherethere is "a defense of lack of personal jurisdiction, a defendant need not show areasonable excuse and meritorious defense" (Johnson v Deas, 32 AD3d at254).
On the other hand, if the motion court finds that service was properly effectuated onJones, then it will have to address whether Jones has demonstrated a reasonable excuseand a meritorious defense under CPLR 5015 (a) (1) (see 60 E. 9th St. Owners Corp. v Zihenni, 111 AD3d 511[1st Dept 2013]).
A plaintiff proves it has standing to commence a mortgage foreclosure action byshowing that it was "both the holder or assignee of the subject mortgage and the holderor assignee of the underlying note at the time the action was commenced" (Bank of N.Y. Mellon Trust Co. NAv Sachar, 95 AD3d 695, 695 [1st Dept 2012]). The assignment in this case,dated August 10, 2007, after plaintiff commenced the mortgage foreclosure action onJuly 17, 2007, stated that it was effective June 14, 2007. However, "a retroactiveassignment cannot be used to confer standing upon the assignee in a foreclosure actioncommenced prior to the execution of the assignment" (Wells Fargo Bank, N.A. vMarchione, 69 AD3d 204, 210 [2d Dept 2009]). Moreover, "[c]onclusory boilerplate statements such as '[p]laintiff is the holder and is in possession of the original note,'or '[p]laintiff is the holder and is in possession, or is otherwise entitled to enforce thenote . . .' will not suffice when standing is raised as a defense" (DeutscheBank Natl. Trust Co. v Maio, 2013 NY Slip Op 30858[U], *4 [Sup Ct, SuffolkCounty 2013], citing DeutscheBank Natl. Trust Co. v Barnett, 88 AD3d 636 [2d Dept 2011]; Aurora Loan Servs., LLC vWeisblum, 85 AD3d 95 [2d Dept 2011]; see also HSBC Bank USA v Hernandez, 92 AD3d 843 [2dDept 2012]). Here, even if plaintiff were permitted to substitute the 2013 Duncanaffidavit, the affiant's bare claim that plaintiff "was in possession of the Promissory Noteprior to July 17, 2007" would not be sufficient to establish plaintiff's standing. Similarly,the undated endorsement of the note to plaintiff is insufficient to establish that plaintiffwas the holder or asignee of the note prior to commencement of the foreclosure action(Deutsche Bank Natl. Trust Co.v Haller, 100 AD3d 680 [2d Dept 2012]). Accordingly, it appears that Jonesmay have a meritorious defense.
Plaintiff argues that Jones has waived a defense based on standing, citing CPLR3211 (e) (defense of lack of standing waived if not asserted in an answer or pre-answermotion to dismiss), and citing this Court's decision in Wells Fargo Bank, NA v Edwards (95 AD3d 692 [1st Dept2012]) for the proposition that a defaulting defendant waives a defense based onstanding. However, in Edwards, defendant had failed to rebut plaintiff's primafacie showing of proper service. Here, since defendant sought in his cross motion tovacate the default judgment and interpose an answer, if he shows that he has a reasonableexcuse for default, he will not have waived a defense based on standing (see Wells Fargo Bank, N.A. vRiley, 23 Misc 3d 1107[A], 2009 Slip Op 50616[U] [Sup Ct, WestchesterCounty 2009] [defendants who never appeared and whose default was vacated had notwaived standing defense]; Citigroup Global Mkts. Realty Corp. v Randolph Bowling, 25Misc 3d 1244[A], 2009 NY Slip Op 52567[U] [Sup Ct, Kings County 2009] [wheredefendant was not personally served and had not appeared, standing [*4]defense not waived]; see also U.S. Bank, N.A. v Sharif, 89 AD3d 723, 724 [2dDept 2011] ["defenses waived under CPLR 3211(e) can nevertheless be interposed in ananswer amended by leave of court"]). Concur—Tom, J.P., Sweeny,Manzanet-Daniels, Gische and Gesmer, JJ.
Footnote 1:The administrative orderrequires counsel representing plaintiff in a residential mortgage foreclosure proceeding toverify the accuracy of factual allegations set forth in the complaint and supportingaffidavits, as well as the accuracy of the notarization of supporting documents. Sincecurrent counsel for plaintiff was substituted in after the 2007 Patrick affidavit was filed,current counsel could not certify his statements. Effective August 30, 2013, CPLR3012-b requires that counsel's certificate of merit be filed with the complaint.
Footnote 2:It appears that themotion court issued the default judgment of foreclosure and sale on December 1, 2008,before Administrative Order AO548/10 was issued.
Footnote 3:Although it appears thatJones's order to show cause was disposed of on April 2, 2014, the decision is not part ofthe record on this appeal, and does not appear to be available on the Bronx CountyClerk's website.