By Richter, J.P., Tom, Mazzarelli, Gesmer, Moulton, JJ.Wells Fargo Bank N.A., Plaintiff-Respondent, v. Lawson Ho-Shing a/k/a Lawson H. Ho-Shing, Defendant-Appellant, Audrey Ho-Shing, et al., Defendants. Defendant Lawson Ho-Shing appeals from the judgment of foreclosure of the Supreme Court, Bronx County (Kenneth L. Thompson, Jr., J.), entered on or about May 18, 2017, bringing up for review an order of the same court and Justice, entered on or about April 6, 2017, which denied his CPLR 5015(a)(3) motion to vacate an order of the same court (Betty Owen Stinson, J.), entered January 28, 2016, which granted plaintiff’s motion for summary judgment and/or default judgment on its complaint, and denied defendant’s CPLR 3024(b) motion to strike an affidavit of merit.Lawson Ho-Shing, appellant pro se.Hogan Lovell, US LLP, New York (Leah Edmunds, David Dunn and Cava Brandriss of counsel), for respondent.
TOM, J.In this mortgage foreclosure action, Supreme Court granted plaintiff Wells Fargo Bank, N.A.’s unopposed motion for summary judgment and referred the matter to a referee to determine the amount owed under the consolidated mortgage and note. We find that Supreme Court properly denied the motion of pro se defendant Lawson Ho-Shing to vacate the summary judgment order, as both his claim of fraud and his standing defense lack merit (see Aurora Loan Servs., LLC v. Taylor (25 NY3d 355, 361 [2015]). We also find that the court properly denied defendant’s motion to strike an affidavit pursuant to CPLR 3024(b).The pertinent facts are undisputed. On November 12, 2005, defendant Lawson Ho-Shing and codefendant Audrey Ho-Shing (defendants) obtained a mortgage loan from nonparty Fremont Investment & Loan in the principal amount of $432,000. Defendant and Audrey executed a promissory note and mortgage (both also dated November 12, 2005) on their property located at 1312 Needham Avenue in the Bronx; Mortgage Electronic Registration Systems, Inc. (MERS), was the mortgage nominee.On February 20, 2008, defendants obtained a second loan secured by the property in the amount of $43,338, from plaintiff Wells Fargo. Defendants executed a promissory note and mortgage in connection with the second secured loan, also dated February 20, 2008. Then, defendants executed a Consolidation, Extension and Modification Agreement (CEMA) on February 20, 2008, under which the 2005 and 2008 mortgage loans were consolidated into a single loan in the principal amount of $471,415, which was secured by the property and payable to Wells Fargo. Under the CEMA, they agreed to keep all promises in the notes and mortgage as consolidated and modified. The CEMA explained that the two notes, identified in Exhibit A to the agreement, were combined and that the parties’ rights and obligations were combined into one mortgage and one “loan obligation.” Defendants also executed a consolidated note and a consolidated mortgage that identified Wells Fargo as the payee and mortgagee, respectively. The consolidated note was attached to the CEMA, which provided that it “[would] supersede all terms, covenants, and provisions of the [original] Notes.” Similarly, the consolidated mortgage constituted a “single lien” on the property and “[would] supersede all terms, covenants, and provisions of the [original] Mortgages.” On October 18, 2010, MERS executed a written assignment of the first mortgage to Wells Fargo.After May 1, 2010, defendants defaulted on their payment obligations under the consolidated mortgage. Wells Fargo states that it mailed defendants a notice of default and a 90-day pre-foreclosure notice, as required by Real Property Actions and Proceedings Law §1304, and defendants failed to cure. Although the 90-day notice is not included in the appellate record, the record contains an affidavit of merit and amounts due and owing, signed by Sarah Lee Stonehocker, Wells Fargo’s Vice President, Loan Documentation, who averred that she had reviewed the 90-day pre-foreclosure notice sent to defendant by certified and first class mail, confirmed that the notice was filed with the New York State Banking Department, as required, and that a confirmation number was issued. On or about June 20, 2013, Wells Fargo commenced this foreclosure action by filing a summons, complaint, and notice of pendency. At that time, it was unrefuted that Wells Fargo had physical possession of the consolidated note. Defendants answered, asserting Wells Fargo’s lack of standing as an affirmative defense. In August 2015, Wells Fargo filed a motion for summary judgment, asking that the proceeding be referred to a referee to determine the amount owed under the consolidated mortgage and loan. Wells Fargo states that its motion was supported by copies of the RPAPL 1304 90-day notice mailed to defendant and proof of its filing with the New York State Banking Department pursuant to RPAPL 1306, and an affidavit by Amanda J. Weatherly, setting forth Wells Fargo’s standard business practice concerning the mailing of 90-day notices, and stating that it complied with those practices here. Defendant did not oppose the motion.By order entered January 28, 2016, Supreme Court granted the motion and struck defendants’ answer with prejudice, finding that it was “nothing more than a general denial which is insufficient to create an issue of fact” as to default under the consolidated loan. By separate order entered January 28, 2016, the court referred the matter to a referee.On or about September 1, 2016, Wells Fargo served – but did not file – a motion for judgment of foreclosure and sale supported by the Stonehocker affidavit.In September 2016 and January 2017, defendant filed a motion to strike the Stonehocker affidavit under CPLR 3024(b), arguing that it was “impertinent, immaterial, scandalous, and a deliberate fraud,” and separately moved to vacate the summary judgment order and order of reference under CPLR 5015(a)(3), arguing that Wells Fargo lacked standing to foreclose because the first mortgage assignment was invalid. Defendant contended that Wells Fargo “inten[ded] to deceive the Court” by “manufactur[ing] [documents] for the purposes of litigation, in order to get standing.” He also argued that MERS had no authority to assign the first mortgage and note to Wells Fargo and that the entity that issued the original loan, Fremont Investment & Loan, had gone into bankruptcy before the assignment.Supreme Court denied both motions. The court found that defendant failed to establish that Wells Fargo engaged in fraud that would warrant vacatur under CPLR 5015(a)(3), and declined to strike the Stonehocker affidavit under CPLR 3024, since it was never filed and was not a pleading, and, in any event, was neither scandalous nor prejudicial.First, with regard to vacatur, even accepting, as the dissent lays out, that defendant established an excusable default because his attorney, who had been served with the summary judgment motion, filed for bankruptcy and failed to respond, he did not demonstrate a meritorious defense.Initially, defendant’s vacatur motion was primarily predicated on his claim that Wells Fargo had engaged in fraud and misrepresented facts, a point that the dissent overlooks. In any event, defendant argues on appeal that Wells Fargo failed to prove that it gave 90 days’ notice of foreclosure, as required by RPAPL 1304 and 1306.Defendant’s belated notice argument is improperly raised for the first time on appeal (see Lutin v. SAP V/A Atlas 845 WEA Assoc. NF LLC, 157 AD3d 466, 467 [1st Dept 2018]). Moreover, the argument is unavailing. Indeed, Stonehocker averred that she had reviewed the RPAPL 1304 90-day pre-foreclosure notice sent to defendant by certified and first class mail and could confirm that the RPAPL 1306 notice was filed with the New York State Banking Department, as required, and that a confirmation number was issued. Wells Fargo also argues that before the motion court, as further proof, it submitted the Weatherly affidavit, in which Weatherly averred that 90-day pre-foreclosure notice was sent to defendant at the subject property, and documentation of the mailing was filed with the New York State Banking Department. However, that assertion cannot be confirmed or rejected, because the Weatherly affidavit is omitted from the record, and cannot be accessed otherwise.Further, there is no record evidence to support defendant’s claim that Wells Fargo manufactured documents to “get standing.” This is a bare accusation with no evidentiary proof. Nor is defendant aided by reference to an unrelated bankruptcy case in which he claims that Wells Fargo had relied upon a blank endorsement that the court found had been forged.Turning to standing, it is not disputed that Wells Fargo had possession of the consolidated note and the consolidated mortgage at the time this action was commenced. A plaintiff in these cases establishes standing by showing that it is the holder or assignee of the subject note at the time the action is commenced (see Aurora Loan Servs., 25 NY3d at 361). As the dissent recognizes, in Aurora (25 NY3d at 361) the Court of Appeals made clear that “[i]t is the note, and not the mortgage, that is the dispositive instrument that conveys standing to foreclose.” Accordingly, Wells Fargo established standing by showing that it held the consolidated note at the time it commenced this action, as Stonehocker, who had personal knowledge of the facts, averred (see OneWest Bank FSB v. Carey, 104 AD3d 444, 445 [1st Dept 2013]).1 To the extent defendant could challenge standing based on any claims related to the consolidated note, his failure to include the complaint or the underlying summary judgment motion together with the supporting papers is fatal to this potential line of attack. Moreover, defendant does not contest that Wells Fargo brought suit to enforce the consolidated note and mortgage, not the originals given by Fremont, and it is not contested that Wells Fargo was holder of the consolidated note and mortgage before commencing suit. Critically, the CEMA makes clear that the consolidated note superseded the original notes and is the operative document in this case. As did the plaintiff in Weiss v. Phillips (157 AD3d 1 [1st Dept 2017]), Wells Fargo seeks foreclosure based on the CEMA and consolidated note. As we held the plaintiff did in Weiss, Wells Fargo established its entitlement to relief by submitting the CEMA, consolidated note, unchallenged evidence that it is the holder of the consolidated note, and nonpayment of the loan by the borrowers. As we also held in Weiss, “In this case, because of the CEMA, standing is not an issue” and any absence of the underlying notes in this action is likewise accounted for by the CEMA (157 AD3d at 5-6). In other words, “there is no legitimate question that [Wells Fargo] is the party entitled to enforce under the [consolidated] note, as evinced by… the CEMA” (id. at 6).Defendant failed to raise a triable issue of fact regarding standing, and we disagree with the dissent’s limited reading of Weiss. While the facts of Weiss may be unique, the dissent provides no compelling reason that its holding should not be applied here. There is no legitimate question that Wells Fargo is the holder of the consolidated note and can enforce its rights under it.The dissent seeks to entirely avoid our holding in Weiss, and instead prefers to create an additional and inappropriate burden for Wells Fargo, namely the production of the 2005 note and information about how it was endorsed, assigned or transferred. However, as we have held, the CEMA established that Wells Fargo was the holder of the consolidated note that superseded the 2005 note and that therefore made the 2005 note irrelevant to actions based on the consolidated note. Contrary to reason, the dissent would find that even in the face of the CEMA and the undisputed fact that Wells Fargo is the holder of the consolidated note, a borrower in default could somehow raise an issue of fact by attacking a note that is no longer in existence and that the parties agreed had been transferred to Wells Fargo for purposes of consolidation.Significantly, the consolidated note and consolidated mortgage, which identified Wells Fargo as the new payee and mortgagee, were executed by defendant and Audrey as borrower. Mortgage payments were then made by the borrower to Wells Fargo without any objection from Fremont or MERS, a clear acknowledgment of the CEMA. This acknowledgment was subsequently memorialized by MERS’s written assignment of the Fremont mortgage to Wells Fargo in October 2010.Stated differently, defendant did not raise an issue of fact by making unsubstantiated allegations. To raise an issue of fact, he would have had to provide evidence that the 2005 note was not transferred to Wells Fargo. He failed to do so. Nor is there any basis in the record to question the legitimacy of the CEMA, the consolidated note, or Wells Fargo’s right to foreclose. Defendant’s unsubstantiated allegations appear to be nothing more than a tactic to delay foreclosure. It should be noted that defendant has defaulted in mortgage payments since May 2010 and continues to remain in possession and have full beneficial use of the property. Notably, there is no evidence in the record or offered by defendant of any complaints by Fremont or MERS, its nominee, that its 2005 note was misappropriated or not actually transferred to Wells Fargo. To the contrary, the 2010 assignment of the Fremont mortgage validates the entire transaction and demonstrates that Fremont in fact had previously transferred the note to Wells Fargo and authorized its mortgage nominee – MERS – to assign the mortgage to Wells Fargo. Contrary to the dissent’s claim, while the 2010 assignment of mortgage was not necessary to establish standing, the fact that it was transferred actually serves to validate the entire transaction and show that there were no concerns or issues with the consolidation. Further, it is undisputed that Wells Fargo took physical possession of the consolidated note pursuant to the February 20, 2008 CEMA. Once Wells Fargo was the holder of the consolidated note, it became the assignee or transferee of the mortgage. As stated by the Court of Appeals in Aurora (25 NY3d at 361-362): “Once a note is transferred, however, the mortgage passes as an incident to the note’ (Bank of N.Y. v. Silverberg, 86 AD3d 274, 280 [2d Dept 2011]).“‘[A]ny disparity between the holder of the note and the mortgagee of record does not stand as a bar to a foreclosure action because the mortgage is not the dispositive document of title as to the mortgage loan; the holder of the note is deemed the owner of the underlying mortgage loan with standing to foreclose’ (14A Carmody-Wait 2d §92:79 [2012] [citation omitted]).”MERS subsequently assigned the Fremont mortgage to Wells Fargo on October 18, 2010. Defendant’s bare assertion that MERS had no authority to assign the first mortgage and note to Wells Fargo is without merit. MERS was the designated mortgage nominee for Fremont and thus had authority to act on behalf of Fremont with respect to the subject mortgage. Moreover, the dissent’s fear that “a borrower and subsequent lender could agree to appropriate an original lender’s investment merely by executing a CEMA” is not supported by the evidence in this case. However, the dissent’s holding would mean that despite a party’s being the undisputed holder of a note, and a CEMA evidencing that prior notes were superseded and no longer in effect, as well as an undisputed default by the borrower, the borrower could impede a clear right to foreclose by raising speculative questions without proof about inconsequential notes. The dissent’s reliance on US Bank N.A. v. Richards (155 AD3d 522 [1st Dept 2017]), a case decided after Weiss, is misplaced. Richards involved a consolidated note, and we found that the plaintiff failed to show that it was assigned one of the original notes. However, Richards did not involve a CEMA that clearly set forth the plaintiff’s entitlement to enforce the consolidated note, as is the case here. Rather, Richards involved the issue of the sufficiency of a lost note affidavit, an issue not raised in this case. Further, in Richards there was no proof that the original note was assigned to the plaintiff. In contrast, here there is clear record evidence of the assignment of the underlying notes and mortgages. Defendant seeks to raise questions about the original loan from Fremont. In particular, he contends that Wells Fargo lacks standing to foreclose on the consolidated mortgage and loan because the original loan originator, Fremont Investment & Loan, filed for Chapter 11 bankruptcy on June 18, 2008, at which point Fremont’s interest in the original loan became part of its bankruptcy estate. Defendant also focuses on the fact that MERS assigned the original mortgage to Wells Fargo on October 18, 2010, following execution of the consolidated loan papers on February 20, 2008. Defendant claims that it is undisputed that MERS’s assignment was not approved by the bankruptcy court, and hence the assignment was invalid, depriving Wells Fargo of standing.As to the original loan from Fremont, that note was consolidated with and superseded by the consolidated note under the CEMA in February 2008, which identified Wells Fargo as the payee and mortgagee and therefore is irrelevant to defendant’s standing analysis. Thus, any issues concerning Fremont’s bankruptcy reorganization in January 2009, which occurred after consolidation of the notes and mortgage, are of no moment. The 2005 Fremont note was superseded and no longer in existence at the time of the Fremont bankruptcy. As the dissent recognizes, Wells Fargo is not seeking to foreclose on the 2005 note and thus is not required to demonstrate anything with regard to that note.Defendant’s claims regarding the assignment of the mortgage in 2010 are also unavailing, as only the consolidated note, and not the mortgage, is relevant to the standing analysis (see Aurora, 25 NY3d at 361). Further, the assignment of the Fremont mortgage in 2010 was clearly a ministerial act and had no bearing on the earlier valid transfer of the note. We also find that Supreme Court properly denied defendant’s motion to strike the Stonehocker affidavit. Simply, the Stonehocker affidavit is not a pleading, and hence is not subject to being struck under CPLR 3024(b), and (as Supreme Court found) defendant failed to comply with 3024(c), which requires service of notice of a motion to strike within 20 days of service of a challenged pleading. In any event, the Stonehocker affidavit states only that defendant defaulted on his loan obligations and was sent 90-day pre-foreclosure notice, and is not scandalous or prejudicial, as defendant claimed. Accordingly, the judgment of foreclosure, Supreme Court, Bronx County (Kenneth L. Thompson, Jr., J.), entered on or about May 18, 2017, bringing up for review an order, same court and Justice, entered on or about April 6, 2017, which denied defendant Lawson Ho-Shing’s CPLR 5015(a)(3) motion to vacate an order (same court, Betty Owen Stinson, J.), entered January 28, 2016, which granted plaintiff Wells Fargo Bank’s motion for summary judgment and/or default judgment on its complaint, and denied defendant’s CPLR 3024(b) motion to strike an affidavit of merit, should be affirmed, without costs. All concur except Gesmer and Moulton, JJ. who dissent in an Opinion by Moulton, J.
