| Arch Bay Holdings, LLC v Albanese |
| 2017 NY Slip Op 00284 [146 AD3d 849] |
| January 18, 2017 |
| Appellate Division, Second Department |
[*1]
| Arch Bay Holdings, LLC,Respondent, v Matthew S. Albanese et al., Appellants, et al.,Defendants. |
Robert F. Zerilli, Yonkers, NY, for appellants.
Sheldon May & Associates, P.C. (Stim & Warmuth, P.C., Farmingville,NY [Glenn P. Warmuth], of counsel), for respondent.
In an action to foreclose a mortgage, the defendants Matthew S. Albanese andRachael Pollack appeal, as limited by their brief, from so much of an order of theSupreme Court, Rockland County (Kelly, J.), dated September 11, 2014, as granted thosebranches of the plaintiff's motion which were, in effect, to vacate an order of the samecourt dated July 17, 2012, sua sponte directing the dismissal of the action for want ofprosecution, to restore the action to the calendar, for summary judgment on the complaintinsofar as asserted against them, to strike their answer, and to appoint a referee tocompute the amount due to the plaintiff.
Ordered that the order is modified, on the law, by deleting the provisions thereofgranting those branches of the plaintiff's motion which were for summary judgment onthe complaint insofar as asserted against the defendants Matthew S. Albanese andRachael Pollack, to strike their answer, and to appoint a referee to compute the amountdue to the plaintiff, and substituting therefor a provision denying those branches of themotion; as so modified, the order is affirmed insofar as appealed from, without costs ordisbursements.
On July 18, 2007, the defendant Rachael Pollack executed a promissory noteobligating her to repay Accredited Home Lenders, Inc. (hereinafter Accredited), for aloan in the principal sum of $462,000. To secure the note, Pollack and the defendantMatthew S. Albanese (hereinafter together the defendants) executed a mortgage in favorof Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), acting solely asnominee for Accredited, encumbering real property located at 29 Terrace Drive, Nyack.Thereafter, on January 12, 2009, MERS assigned the mortgage "TOGETHER with thebond or note or obligation described in said mortgage" to Wachovia Bank, NA(hereinafter Wachovia).
On March 12, 2009, Wachovia commenced this action to foreclose the mortgage.The defendants jointly answered and asserted, inter alia, the affirmative defense of lackof standing. In an order dated July 17, 2012, the Supreme Court sua sponte directed thedismissal of the action for want of prosecution. On or about November 26, 2012,Wachovia moved, inter alia, to restore [*2]the action tothe calendar, for summary judgment on the complaint insofar as asserted against thedefendants, and to amend the caption to substitute Arch Bay Holdings, LLC-Series2009B (hereinafter Arch Bay), as the plaintiff. By stipulation dated January 30, 2013, theparties agreed to adjourn the return date of Wachovia's motion to February 22, 2013.However, the Supreme Court, apparently unaware of the agreed-upon adjournment,granted Wachovia's unopposed motion in an order of reference dated January 30,2013.
Thereafter, Arch Bay moved, inter alia, to vacate the order of reference dated January30, 2013, on the ground that the defendants had not had an opportunity to respond to theprior motion, in effect, to vacate the order dated July 17, 2012, and to restore the actionto the calendar. In addition, Arch Bay moved for summary judgment on the complaintinsofar as asserted against the defendants, to strike their answer, and to appoint a refereeto compute the amount due. The Supreme Court granted Arch Bay's motion, and thedefendants appeal.
Contrary to the defendants' contention, the Supreme Court providently exercised itsdiscretion in granting those branches of Arch Bay's motion which were, in effect, tovacate the order dated July 17, 2012, sua sponte directing the dismissal of the action forwant of prosecution, and to restore the action to the calendar (see CPLR 3216;Baczkowski v Collins Constr. Co., 89 NY2d 499, 503 [1997]; Bell v United Parcel Serv.,Inc., 140 AD3d 1106, 1106-1107 [2016]; Davis v Goodsell, 6 AD3d 382, 383 [2004]; see also Lubov v Welikson, 36AD3d 673, 674 [2007]).
However, the Supreme Court erred in granting those branches of Arch Bay's motionwhich were for summary judgment on the complaint insofar as asserted against thedefendants, to strike their answer, and to appoint a referee to compute the amountdue.
"Generally, in moving for summary judgment in an action to foreclose a mortgage, aplaintiff establishes its prima facie case through the production of the mortgage, theunpaid note, and evidence of default" (Deutsche Bank Natl. Trust Co. v Abdan, 131 AD3d 1001,1002 [2015] [internal quotation marks omitted]; see HSBC Bank, USA v Hagerman, 130 AD3d 683,683-684 [2015]; Plaza Equities,LLC v Lamberti, 118 AD3d 688, 689 [2014]). However, where, as here, aplaintiff's standing to commence a foreclosure action is placed in issue by the defendants,it is incumbent upon the plaintiff to prove its standing to be entitled to relief (seeDeutsche Bank Natl. Trust Co. v Abdan, 131 AD3d at 1002; Wells Fargo Bank, N.A. vArias, 121 AD3d 973, 973-974 [2014]; Plaza Equities, LLC v Lamberti,118 AD3d at 689).
In a mortgage foreclosure action, a plaintiff has standing where it is the holder orassignee of the underlying note at the time the action is commenced (see U.S. Bank, N.A. vCollymore, 68 AD3d 752, 753-754 [2009]). "Either a written assignment of theunderlying note or the physical delivery of the note prior to the commencement of theforeclosure action is sufficient to transfer the obligation, and the mortgage passes withthe debt as an inseparable incident" (id. at 754; see Aurora Loan Servs., LLC vTaylor, 25 NY3d 355, 361-362 [2015]; Bank of N.Y. v Silverberg, 86 AD3d 274, 280 [2011])."Moreover, [n]o special form or language is necessary to effect an assignment as long asthe language shows the intention of the owner of a right to transfer it" (Bank of N.Y.v Silverberg, 86 AD3d at 280-281 [internal quotation marks omitted]; see Chase Home Fin., LLC vMiciotta, 101 AD3d 1307 [2012]). However, "the mere assignment of themortgage without an effective assignment of the underlying note is a nullity" (U.S.Bank, N.A. v Collymore, 68 AD3d at 754), and no interest is acquired by it becausea mortgage is merely security for a debt or other obligation and cannot existindependently of the debt or obligation (see HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d983, 984 [2015]; Citibank,N.A. v Herman, 125 AD3d 587, 588 [2015]; Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909,911 [2013]; Bank of N.Y. v Silverberg, 86 AD3d at 280).
"In the event that a note and mortgage are validly assigned to a third partysubsequent to the commencement of a foreclosure action, . . . the assigneecan continue an action in the name of the original mortgagee, even in the absence of aformal substitution," or it may, "if it chooses, take the steps necessary to effect a formalsubstitution" (Brighton BK,LLC v Kurbatsky, 131 AD3d 1000, 1001 [2015]; see Mortgage Elec. RegistrationSys., Inc. v Holmes, 131 AD3d 680, 681-682 [2015]).
[*3] Here, in support of its motion, Arch Bay produced themortgage, the unpaid note, and evidence of default (see Deutsche Bank Natl. TrustCo. v Abdan, 131 AD3d at 1002; HSBC Bank, USA v Hagerman, 130 AD3dat 683-684; Plaza Equities, LLC v Lamberti, 118 AD3d at 689). However, ArchBay failed to establish that Wachovia had standing as the holder or assignee of the noteat the time it commenced the action (cf. U.S. Bank N.A. v Akande, 136 AD3d 887, 890 [2016]).In support of its motion, Arch Bay submitted the affidavit of Selena Mitcherson, anassistant vice president of Rushmore Loan Management Services (hereinafterRushmore), the loan servicer for Arch Bay's assignee. Mitcherson averred, based uponher review of Rushmore's business records, that "[t]he note . . . was inPlaintiff's physical possession of the note [sic] when the action was commenced." Underthese circumstances, Arch Bay failed to demonstrate the admissibility of the recordsrelied upon by Mitcherson under the business records exception to the hearsay rule(see CPLR 4518 [a]), since Mitcherson did not attest that she was personallyfamiliar with the record-keeping practices and procedures of Wachovia (see Aurora Loan Servs., LLC vBaritz, 144 AD3d 618, 619-620 [2016]; Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d 683,685 [2016]; U.S. Bank N.A. vHandler, 140 AD3d 948, 949 [2016]; Aurora Loan Servs., LLC v Mercius, 138 AD3d 650, 652[2016]).
Arch Bay also failed to establish standing based upon an assignment of the note andmortgage from MERS to Wachovia prior to commencement of the action, as Arch Bayfailed to establish delivery or assignment of the note to MERS prior to its execution ofthe assignment to Wachovia (see Aurora Loan Servs., LLC v Mercius, 138 AD3dat 652; HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d at 984). Since ArchBay failed to meet its prima facie burden, the Supreme Court should have denied thosebranches of its motion which were for summary judgment on the complaint insofar asasserted against the defendants, to strike their answer, and to appoint a referee tocompute the amount due, without regard to the sufficiency of the defendants' oppositionpapers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).Leventhal, J.P., Cohen, Miller and Connolly, JJ., concur.