| Bayview Loan Servicing, LLC v Kelly |
| 2018 NY Slip Op 08006 [166 AD3d 843] |
| November 21, 2018 |
| Appellate Division, Second Department |
[*1]
| Bayview Loan Servicing, LLC,Plaintiff, v Carol A. Kelly et al., Appellants, et al., Defendants. Kondaur CapitalCorporation, Nonparty Respondent. |
Legal Aid Society of Rockland County, Inc., New City, NY (Derek S. Tarson ofcounsel), for appellants.
Stim & Warmuth, P.C., Farmingville, NY (Glenn P. Warmuth of counsel), fornonparty-respondent.
In an action to foreclose a mortgage, the defendants Carol A. Kelly and Thomas E.Kelly appeal from (1) an order of the Supreme Court, Rockland County (Gerald E.Loehr, J.), dated November 15, 2016, and (2) an order and judgment of foreclosure andsale (one paper) of the same court dated July 7, 2017. The order, insofar as appealedfrom, granted those branches of the motion of the nonparty, Kondaur CapitalCorporation, which were for summary judgment on the complaint insofar as assertedagainst the defendants Carol A. Kelly and Thomas E. Kelly, to strike their answer andaffirmative defenses, and for an order of reference. The order and judgment offoreclosure and sale, inter alia, is in favor of the nonparty, Kondaur Capital Corporation,and against the defendants Carol A. Kelly and Thomas E. Kelly, directing the foreclosuresale of the property.
Ordered that the appeal from the order is dismissed; and it is further,
Ordered that the order and judgment of foreclosure and sale is reversed, on the law,those branches of the motion of the nonparty, Kondaur Capital Corporation, which werefor summary judgment on the complaint insofar as asserted against the defendants CarolA. Kelly and Thomas E. Kelly, to strike their answer and affirmative defenses, and for anorder of reference are denied, and the order dated November 15, 2016, is modifiedaccordingly; and it is further,
Ordered that one bill of costs is awarded to the defendants Carol A. Kelly andThomas E. Kelly, payable by the nonparty, Kondaur Capital Corporation.
The appeal from the order must be dismissed because the right of direct appealtherefrom terminated with the entry of judgment in the action (see Matter of Aho,39 NY2d 241 [1976]). The issues raised on the appeal from the order are brought up forreview and have been considered on the appeal from the order and judgment offoreclosure and sale (see CPLR 5501 [a] [1]).
In December 2006, the defendants Carol A. Kelly and Thomas E. Kelly (hereinaftertogether the defendants) executed a note in favor of Tribeca Lending Corporation(hereinafter [*2]Tribeca Lending), as well as a mortgageon certain residential property. In 2011, the plaintiff's predecessor, Wells Fargo Bank,N.A. (hereinafter Wells Fargo) commenced an action to foreclose the mortgage(hereinafter the prior action). Attached to the complaint in the prior action was a copy ofthe note, which did not contain any endorsements or allonges. Wells Fargo subsequentlymoved, inter alia, for summary judgment on the complaint, and the defendants opposedthe motion, arguing, among other things, that Wells Fargo lacked standing. In an orderdated January 17, 2013, the Supreme Court denied Wells Fargo's motion on the groundthat Wells Fargo failed to establish its standing. The court also searched the record andawarded the defendants summary judgment dismissing the complaint on the ground thatWells Fargo lacked standing.
By assignment of mortgage dated February 28, 2014, Wells Fargo assigned itspurported interest in the mortgage and the underlying debt to the plaintiff. In or aboutMarch 2015, the plaintiff commenced this action against the defendants, among others,to foreclose the mortgage. Attached to the complaint in this action was a copy of thenote, which contained an endorsement from Wells Fargo to the plaintiff. The next pagewas an allonge from Tribeca Lending, endorsing the note in blank. In their answer, thedefendants raised lack of standing as an affirmative defense. The plaintiff subsequentlyassigned the mortgage and the note to the nonparty, Kondaur Capital Corporation(hereinafter Kondaur). Kondaur moved, inter alia, for summary judgment on thecomplaint insofar as asserted against the defendants, to strike their answer andaffirmative defenses, and for an order of reference. In an order dated November 15,2016, the Supreme Court granted Kondaur's motion. Thereafter, upon the order, the courtentered an order and judgment of foreclosure and sale dated July 7, 2017, inter alia, infavor of Kondaur and against the defendants, directing the foreclosure sale of theproperty. The defendants appeal.
Where, as here, standing is put into issue by the defendant, the plaintiff must proveits standing in order to be entitled to relief (see Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d683, 684 [2016]; DeutscheBank Trust Co. Ams. v Vitellas, 131 AD3d 52, 59 [2015]; Nationstar Mtge., LLC vCatizone, 127 AD3d 1151, 1152 [2015]). A plaintiff establishes its standing in amortgage foreclosure action by demonstrating that it was the holder or assignee of theunderlying note at the time the action was commenced (see Aurora Loan Servs., LLC vTaylor, 25 NY3d 355, 361-362 [2015]; HSBC Bank USA, N.A. v Spitzer, 131 AD3d 1206, 1207[2015]).
Here, triable issues of fact exist as to whether the plaintiff was the holder of the noteat the time the action was commenced. A "promissory note [is] a negotiable instrumentwithin the meaning of the Uniform Commercial Code" (Mortgage Elec. Registration Sys.,Inc. v Coakley, 41 AD3d 674, 674 [2007]; see UCC 3-104 [2] [d]; US Bank, N.A. v Zwisler, 147AD3d 804, 806 [2017]). A "holder" is "the person in possession of a negotiableinstrument that is payable either to bearer or to an identified person that is the person inpossession" (UCC 1-201 [b] [21] [A]; see UCC 3-301). Where an instrument isendorsed in blank, it may be negotiated by delivery (see UCC 3-202 [1]; 3-204[2]).
In the present case, there is a triable issue of fact as to whether the note was properlyendorsed in blank by an allonge "so firmly affixed thereto as to become a part thereof"when it came into the possession of Wells Fargo, which later endorsed the note to theplaintiff (UCC 3-202 [2]; HSBCBank USA, N.A. v Roumiantseva, 130 AD3d 983, 985 [2015]). In the prioraction, the copy of the note that was attached to the complaint did not contain anyendorsements or allonges. The allonge submitted in this action, containing the blankendorsement from Tribeca Lending, was never produced in the prior action, even whenthe issue of the lack of endorsement of the note was raised by the defendants in the prioraction. Further, in the copy of the note produced in this action, the allonge with the blankendorsement from Tribeca Lending appears after the allonge endorsing the note fromWells Fargo to the plaintiff. The allonge also has certain physical attributes inconsistentwith the copy of the note to which it was purportedly firmly affixed. Contrary toKondaur's contention, an affidavit submitted by the plaintiff's vice president, Robert G.Hall, was unavailing, as it only concerned the later endorsement from Wells Fargo to theplaintiff, not the blank endorsement from Tribeca Lending.
Under these circumstances, those branches of Kondaur's motion which were forsummary judgment on the complaint insofar as asserted against the defendants, to striketheir answer [*3]and affirmative defenses, and for anorder of reference should have been denied. Leventhal, J.P., Chambers, Sgroi andConnolly, JJ., concur.