BCMB1 Trust v. Kiely

Upon the following papers numbered 1 to 10 read on this motion for summary judgment and to appoint a referee to compute, among other things; Notice of Motion/Order to Show Cause and supporting papers 1-4; Notice of Cross Motion and supporting papers: 5-7; Opposing papers: 8; Reply papers 9; Other Letter dated March 11, 2022 (not considered); it is. ORDERED that the motion (#001) by the plaintiff for, among other things, summary judgment, striking the answer of the defendants and the appointment of a referee to compute, is granted in its entirety; and it is further ORDERED that the cross motion (#002) by the defendants for, among other things, dismissal of the complaint and vacatur of the notice of pendency, or alternatively, granting defendants leave to amend the answer to include an additional affirmative defense, is denied in its entirety; and it is further ORDERED that the proposed Order submitted by plaintiff, as modified by the court, is signed simultaneously herewith; and it is further ORDERED that plaintiff is directed to file a notice of entry within five days of receipt of this Order pursuant to 22 NYCRR §202.5-b(h)(2). This is an action for foreclosure on property situate in Bay Shore. In essence, on September 20, 2006, defendant Michael A. Kiely borrowed $174,500.00 from the plaintiff’s predecessor in interest and executed a promissory note and a mortgage, with the defendant, Marie J. Kiely. The borrowers failed to pay the monthly installments due and owing as of November 1, 2008, over 13 years ago. This action was commenced by filing on November 27, 2020. On May 14, 2021, defendants filed an answer through counsel, alleging thirty-five affirmative defenses. On July 27, 2021, the matter was released from the foreclosure settlement conference. What followed was this instant motion (#001) for summary judgment, default judgments against the non-answering defendants, and the appointment of a referee to compute, and the cross motion (#002) by the defendants. After the submission of the motions, defendants’ counsel forwarded a letter to the Court citing to a Second Department decision (misnamed in the letter), that is, Bank of America, N.A. v. Kessler, __ AD3d __, 2021 WL 5913148 (2d Dept Dec. 15, 2021) (3-1 dissent). That decision was issued prior to the submission of the cross motion on January 6, 2022 and not mentioned in the affirmation of counsel or the reply affirmation of February 1, 2022. Most importantly, for matters of due process, counsel for the defendants failed to raise a single issue in the cross motion or in any affidavit or affirmation, which addressed, in any way, a challenge to RPAPL §1304. Defendants’ opposition and cross motion are solely addressed to the issue of plaintiff’s standing and the request to add an affirmative defense of “champerty.” Procedurally, for purposes of this summary judgment motion, defendants’ counsel, an experienced foreclosure attorney, waived any argument concerning RPAPL §1304 by failing to raise the issue in opposition to the summary judgment motion. Where a defendant fails to oppose some or all matters advanced on a motion for summary judgment, the facts as alleged in the movant’s papers may be deemed admitted as there is, in effect, a concession that no question of fact exists (see Kuehne & Nagel, Inc. v. Baiden, 36 NY2d 539 [1975]; see also Madeline D’Anthony Enter., Inc. v. Sokolowsky, 101 AD3d 606 [1st Dept 2012]; Argent Mtge. Co., LLC v. Mentesana, 79 AD3d 1079 [2d Dept 2010]). In addition, the failure to raise pleaded affirmative defenses in opposition to a motion for summary judgment renders those defenses abandoned and thus without any efficacy (see New York Commercial Bank v. J. Realty F Rockaway, Ltd., 108 AD3d 756 [2d Dept 2013]; Starkman v. City of Long Beach, 106 AD3d 1076 [2d Dept 2013]). In essence, defendants are in motion default on the issue of RPAPL §1304 by failing to even address the issue in any of its cross moving papers. Just as one must move to vacate a default before they can raise the RPAPL §1304 defense (see Wells Fargo Bank, N.A. v. Calvin, __ AD3d __, 2022 WL 791380 [2d Dept, March 16, 2022[; Citimortgage, Inc. v. Pierce, __ AD3d __, 2022 WL 791208 [2d Dept, March 16, 2022]; JPMorgan Chase Bank, Nat. Assn. v. Bracco, 200 AD3d 765 [2d Dept 2021]), defendants will be required to demonstrate a reasonable excuse for the default in raising the issue in the motion papers (see generally, MTGLQ Investors, L.P. v. Goddard, __ AD3d __, 2022 WL 697415 [2d Dept, March 9, 2022]; U.S. Bank Nat. Assn. v. Pierce, __ AD3d __, 2022 WL 697443 [2d Dept, March 9, 2022]). It will be hard to argue the concept of “newly discovered evidence which was in existence but undiscoverable” with regard to an appellate holding that was issued two months prior to defendants’ submissions (see generally, JPMorgan Chase Bank, Nat. Assn. v. Borukhov, __ AD3d __, 2022 WL 697429 [2d Dept 2022]). This case is identical to that of Selene Fin., L.P. v. Firshing, __ AD3d __, 2022 WL 697472 (2d Dept, March 9, 2022), where the Court “properly declined to consider” an attempt to raise RPAPL §1304 for the first time in reply papers. Here, the issue is raised not in reply papers but in an after-submission letter. In any event, 22 NYCRR 202.8-c does not support counsel’s actions, since such is only to be used for “citation of any post-submission court decision” and as detailed above, counsel submitted the cross motion and reply papers two months after the issuance of the court decision. Apart from the procedural issue noted above, if the Court were to address the letter submission of the Kessler opinion, the Court would reject the implication it offers. The Court recognizes that, in response to the reversal of numerous Second Department holdings by the Court of Appeals, in Freedom Mortgage Corp. v. Engel, 37 NY3d 1 (2021), the Second Department, by a split decision, has now imposed a bright-line, strict compliance standard in foreclosure actions, which it claims is consistent with the Engel holding. This judicial re-interpretation of a judicial decision concerning a 13-year-old statute has moved the caselaw far afield from the original intent of the state legislators who drafted RPAPL §1304. As James Wilson, one of the original Supreme Court Justices, noted: “The first and governing maxim in the interpretation of a statute is to discover the meaning of those who made it.”¹ Additionally, Joseph Story, who wrote a majority of the Supreme Court opinions during his time on the bench and who is regarded as the “Father of American Jurisprudence,” instructed: “The first and fundamental rule in the interpretation of all documents is, to construe them according to the sense of the terms, and the intention of the parties.”² One of the Founding Fathers, James Madison warned about straying from the original intent of a statue: “What a metamorphosis would be produced in the code of law if all its ancient phraseology were to be taken in its modern sense.”³ Here, the expressed public policy of the State of New York, as continuously set forth in various legislative enactments since the financial crisis of 2008 and as expressed in RPAPL §1304, is clear. By way of background, the Second Department noted, in First Natl. Bank of Chicago v. Silver, 73 AD3d 162, 165 (2d Dept 2010), citing Senate Introducer Mem. in Support, Bill Jacket, L. 2006, ch. 308, at 7-9, that the legislative intent behind the Home Equity Theft Prevention Act (Real Property Law §265 — a, or “HETPA”), as a result of which RPAPL §1304 was enacted, was to provide greater protections to borrowers facing foreclosure. RPAPL §1304 was thereafter enacted in 2008 “to aid the homeowner in an attempt to avoid litigation” (Aurora Loan Services, LLC v. Weisblum, 85 AD3d 95, 107 [2d Dept 2011]). “The legislative history noted a typical lack of communication between distressed homeowners and their lenders prior to the commencement of litigation, leading to needless foreclosure proceedings” (id.). Specifically, “[t]he bill sponsor sought ‘to bridge that communication gap in order to facilitate a resolution that avoids foreclosure’ by providing a pre-foreclosure notice advising the borrower of ‘housing counseling services available in the borrower’s area’ and an ‘additional period of time… to work on a resolution’” (id. at 107, citing Senate Introducer Mem. in Support, Bill Jacket, L. 2008, ch. 472, at 10). To achieve this end, the statute requires that the lender/servicer mail a notice containing “specific, mandatory language” to the borrower at least 90 days prior to commencement of an anticipated foreclosure filing (RPAPL §1304[1]). The content requirements of the notice support the “underlying purpose of HETPA to afford greater protections to homeowners confronted with foreclosure” (Aurora Loan Services, LLC v. Weisblum, 85 AD3d 95, 103, supra, citing First Natl. Bank of Chicago v. Silver, 73 AD3d 162, 165 [2d Dept 2010]). The statute further provides that the mailing should take place “in a separate envelope from any other mailing or notice” (RPAPL §1304[2]). If the lender/servicer knows that the borrower has limited English proficiency, the notice “shall be in the borrower’s native language (or a language in which the borrower is proficient), provided that the language is one of the six most common non-English languages spoken by individuals with limited English proficiency in the state of New York” (RPAPL §1304[5]). In Citibank, N.A. v. Crick, 176 AD3d 776, 778 (2d Dept 2019), the Second Department refused to dismiss an action with a defective RPAPL §1304 notice holding: “Although the notice contained a factual inaccuracy, the inaccuracy did not involve information required under RPAPL 1304 and, on the record before this Court, the defendants did not otherwise establish, prima facie, that the notice failed to strictly comply with RPAPL 1304 (citations omitted).” The Crick court went on to note that given the notice: “…contained the contact information for the loan servicer, it furthered the statutory purpose of HETPA to ‘preserve and protect home equity for the homeowners of this state’ (Real Property Law §265-a [1][d]), and the purpose of RPAPL 1304 to ‘bridge [the] communication gap [between distressed homeowners and lenders] in order to facilitate a resolution that avoids foreclosure’ (Senate Introducer’s Mem in Support, Bill Jacket, L 2008, ch 472 at 10).” With the Crick decision, the statutory intention and purpose supporting RPAPL §1304 was clearly stated, that is, to facilitate communication between distressed homeowners and lenders and/or servicers in an effort to avoid litigation and “a factual inaccuracy” would not hinder the legislative intent, as long as the required language was present (see also, JPMorgan Chase Bank, N.A. v. Condello, 59 Misc3d 427 [Sup Ct, Suffolk County 2018). Recently, the Second Department looked to the legislative intent by examining the Legislative Bill Jacket in addressing the 2013 amendments to CPLR 4106, which allows trial courts to substitute a regular juror with an alternate juror even after deliberations have begun, in Caldwell v. New York City Transit Auth., 203 AD3d 6 (2d Dept 2021) (Barros J.). In Kessler, supra, the borrower challenged the plaintiff's inclusion of certain information in the mailing, including "the rights of a debtor in bankruptcy and in military service." The borrower contended that the extra notices in the same envelope demonstrated that plaintiff did not strictly comply with RPAPL §1304. The split appellate court agreed apparently in response to the reversal of numerous Second Department holdings by the Court of Appeals, in Freedom Mortgage Corp. v. Engel, 37 NY3d 1 (2021). The Second Department has now imposed a new "strict compliance" component to the language of the RPAPL §1304 notice, which the majority claimed is consistent with the Engel holding, which concerns a lender's voluntary discontinuance of an action as constituting a revocation of the election to accelerate the debt. In keeping with the original intent of the legislation, that is, "to aid the homeowner in an attempt to avoid litigation, and to facilitate communication between distressed homeowners and lenders and/or servicers" and to "bridge that communication gap in order to facilitate a resolution that avoids foreclosure," there is no showing how this newly created strict compliance rule, with regard to the language in a RPAPL §1304 notice, is in keeping with the original legislative intent detailed above. One could easily argue that the additional information provided in the mailing of plaintiff's notice does not alter any of the protections provided by the statute. The purpose of and intent behind RPAPL §1304 was to facilitate communication between the plaintiff and the borrower. In many cases, as in Kessler, supra, the content of the additional paragraphs furthers that intent "to provide a homeowner with information necessary… to preserve and protect home equity" (Real Property Law §265 --- a[1][d]) by providing borrowers with additional contact options available to obtain information in connection with home retention options. With the proof of actual mailing of the required language of the notice, the legislative purpose of RPAPL §1304 has been satisfied. The statutory opportunity to “bridge the communication gap” between the lender and the borrower has been fulfilled. To argue to the contrary is to read a new judicial interpretation into the statute, not the original intent as proposed in 2008. This new argument by borrowers raises an additional issue that courts have often faced in such statutory interpretation cases. For instance, in People ex rel. Baez v. Superintendent, Queensboro Corr. Facility, 127 AD3d 110, 119 (2d Dept 2015), the Second Department proclaimed, in examining the Drug Law Reform Act, “[t]his Court will not permit the petitioner to convert a shield into a sword.” The same court, in interpreting General Municipal Law §50-e, in Se Dae Yang v. New York City Health & Hosps. Corp., 140 AD3d 1051,1052 (2d Dept 2016), held that the statute “was not meant as a sword to cut down honest claims, but merely as a shield to protect municipalities against spurious ones.” Finally, as the Court of Appeals stated in Benjamin v. Koeppel, 85 NY2d 549, 553 (1995), “the courts are especially skeptical of efforts by clients or customers to use public policy ‘as a sword for personal gain rather that a shield for public good,’” quoting Charlebois v. Weller Assn., 72 NY2d 587, 595 (1988). It appears that with the Kessler holding, defaulting borrowers will similarly seek to use public policy as a sword and not as the legislatively intended shield. In light of the ever-changing interpretations from the Second Department on various aspects of foreclosure law, that then are applied retroactively to determinations in the appellate pipeline, lower court judges, who deal with thousands upon thousands of foreclosure cases, year after year,⁴ are especially well-positioned to offer a rare statement of reconsideration as to the precedent they must apply. Apropos are the words of another Founding Father, Thomas Jefferson, who advised on questions of construction: “[O]n every question of construction, carry ourselves back to the time when the [statute] was adopted, recollect the spirit manifested in the debates, and instead of trying what meaning may be squeezed out of the text, or invented against it, conform to the probable one in which it was past.”⁵ As to the merits of the motions before the Court, defendants’ submission only challenges plaintiff’s standing and alternatively, seeks to add an additional affirmative defense. The Court notes that the defense of standing has lost its significance and vitality with the advent of CPLR 3012-b. One of the various methods standing may be established is by due proof that the plaintiff or its custodial agent was in possession of the endorsed note prior to the commencement of the action. The production of such proof is sufficient to establish, prima facie, the plaintiff’s possession of the requisite standing to prosecute its claims for foreclosure and sale (see Aurora Loan Servs., LLC v. Taylor, 25 NY3d 355 [2015]; Wells Fargo Bank, NA v. Frankson, 157 AD3d 844 [2d Dept 2018]; U.S. Bank v. Ehrenfeld, 144 AD3d 893 [2d Dept 2016]; JPMorgan Chase Bank, Natl. Assn. v. Weinberger, 142 AD3d 643 [2d Dept 2016]; Citimortgage, Inc. v. Klein, 140 AD3d 913, [2d Dept 2016]; U.S. Bank Natl. Assn. v. Godwin, 137 AD3d 1260 [2d Dept 2016]; Wells Fargo Bank, N.A. v. Joseph, 137 AD3d 896 [2d Dept 2016]; Emigrant Bank v. Larizza, 129 AD3d 904 [2d Dept 2015]; Deutsche Bank Natl. Trust Co. v. Whalen, 107 AD3d 931 [2d Dept 2013]). The plaintiff’s attachment of a duly indorsed mortgage note to its complaint or to the certificate of merit required by CPLR 3012-b has been held to constitute due proof of the plaintiff’s possession of the note prior to the commencement of the action and thus its standing to prosecute its claim for foreclosure and sale (see Green Tree Servicing, LLC v. Molini, 171 AD3d 880 [2d Dept 2019]; U.S. Bank N.A. v. Offley, 170 AD3d 1240 [2d Dept 2019]; Nationstar Mtge LLC v. Balducci, 165 AD3d 959 [2d Dept 2018]; HSBC Bank USA, NA v. Oscar, 161 AD3d 1055 [2d Dept 2018], citing US Bank NA v. Cohen, 156 AD3d 844 [2d Dept 2017]; US Bank NA v. Saravanan, 146 AD3d 1010, 1011 [2d Dept 2017]; JPMorgan Chase Bank, NA v. Weinberger, 142 AD3d 643, 645 [2d Dept 2017]; Deutsche Bank Natl. Trust Co. v. Leigh, 137 AD3d 841, 842 [2d Dept 2016]; Emigrant Bank v. Larizza, 129 AD3d 904 [2d Dept 2015]; Nationstar Mtge., LLC v. Catizone, 127 AD3d 1151, 1152 [2015]; see also HSBC Bank USA v. Ozcan, 154 AD2d 822 [2d Dept 2017]). Here, the plaintiff alleged in its complaint that it was the current holder of the note and attached a copy of the note, with an allonge bearing an endorsement in blank, to the complaint. Plaintiff’s counsel has submitted an attorney certification copy of the Note as Exhibit 15. Importantly, the attorney, at par. 29, states: “I further affirm that the Note consists of three pages, firmly held together by a staple on the upper left-hand corner of the pages, and that the two endorsements are on the back of the third page of the Note, i.e., the page containing the allonge to Countrywide Bank, N.A. Id.” Here, the attorney asserts personal knowledge of the facts in his affirmation, to which he has annexed the Note as an exhibit. Such satisfies the requirements of CPLR 3212 (see Branch Servs. Inc. v. Cooper, 102 AD3d 645, 648 [2d Dept 2013]). The Court finds that plaintiff has demonstrated that the endorsement is located on the page firmly affixed to the note. “[W]here the note is affixed to the complaint, ‘it is unnecessary to give factual details of the delivery in order to establish that possession was obtained prior to a particular date’” (U.S. Bank N.A. v. Henry, 157 AD3d 839, 841 [2d Dept 2018] [citations omitted]). Additionally, the Court of Appeals has held that inspection of the original note is not necessary for purposes of establishing standing (see JPMorgan Chase Bank, N.A. v. Caliguri, 36 NY3d 953 [2020]; Bayview Loan Ser. LLC v. Freyer, 192 AD3d 1421 [2d Dept 2021]; Deutsche Bank Nat. Trust Co. v. Auguste, 185 AD3d 657 [2d Dept 2020]). Contrary to defendants’ contention, there is no need to inspect the original note. Based on the above, the plaintiff, through its submissions, has demonstrated the requisite possession of the note prior to the commencement of the action (see Nationstar Mtge LLC v. Balducci, 165 AD3d 959, supra; HSBC Bank USA, NA v. Oscar, 161 AD3d 1055, supra; Wells Fargo Bank, NA v. Frankson, 157 AD3d 844, supra; US Bank Natl. Assn. v. Richards, 151 AD3d 1001 [2d Dept 2017]; Silvergate Bank v. Calkula Prop., Inc., 150 AD3d 1295 [2d Dept 2017]; Central Mtge. Co. v. Jahnsen, 150 AD3d 661 [2d Dept 2017]; Bank of America, N.A. v. Barton, 149 AD3d 676 [2d Dept 2017]). As the defendants have failed to raise an issue of fact with regard to same, the court hereby declares, pursuant to CPLR §3212(g), that the issue of the plaintiff’s standing is resolved in favor of the plaintiff for all purposes of this action. As to the second branch of defendants’ cross motion, the defendants contend that plaintiff, BCMB1TRUST, a foreign corporation, lacks proper authorization to do business in New York and therefore fails to demonstrate the capacity to maintain an action in New York pursuant to Business Corporation Law §1312(a). “[T]he party relying upon this statutory barrier bears the burden of proving that the corporation’s business activities in New York were not just casual or occasional, but so systematic and regular as to manifest continuity of activity in the jurisdiction” (JPMorgan Chase Bank, N.A. v. Didato, 185 AD3d 801, 802-03 [2d Dept 2020], citing S&T Bank v. Spectrum Cabinet Sales, 247 AD2d 373, 373 [1998] [citation and internal quotation marks omitted]). “[A]bsent proof establishing that the plaintiff is doing business in New York, it is presumed that the plaintiff is doing business in its state of incorporation and not in New York” (Airline Exch., Inc. v. Bag, 266 AD2d 414, 415 [2d Dept 1999], citing S & T Bank v. Spectrum Cabinet Sales, 247 AD2d at 374, supra; Construction Specialties v. Hartford Ins. Co., 97 AD2d 808 [1983]). This presumption is one that must be overcome by the movant. Here, the movants allege that plaintiff incorporated for the purpose of engaging in litigation in New York. No business is alleged to have been transacted in New York. The Court finds that defendants have failed to demonstrate that plaintiff is “doing business” in New York. There is no indication that plaintiff “maintained an office, a telephone, or a sales representative in New York. Nor did it do any advertising in New York. Under these circumstances, ‘there is no showing that plaintiff conducted continuous activities in [New York] essential to its corporate business’” (S & T Bank v. Spectrum Cabinet Sales, Inc., 247 AD2d at 374, supra, citing Von Arx A.G. v. Breitenstein, 52 AD2d 1049, 1050, affd. 41 NY2d 958 [1977]). This branch of defendants’ motion is therefore denied. Finally, the Court denies the request to amend the answer to allege an affirmative defense of champerty (see G.G.F. Dev. Corp. v. Andreasis, 251 AD2d 624 [2d Dept 1998]). In any event, defendants failed to attach a copy of the proposed amendment with their cross motion (see CPLR 3025[b]) and submission of one by way of a reply affidavit is improper with a cross motion. The plaintiff’s moving papers have established all of the elements necessary for the fixation of the remaining defendants’ default in answering and the appointment of a referee to compute amounts due under the subject note and mortgage as contemplated by RPAPL §1321 (see CPLR §3215; RPAPL §1321; Todd v. Green, 122 AD3d 831, 832 [2d Dept 2014]; US Bank v. Razon, 115 AD3d 739 [2d Dept 2014]). The moving papers further established the plaintiff’s entitlement to an order amending the caption (see CPLR §1024; Deutsche Bank Natl. Trust Co. v. Islar, 122 AD3d 566 [2d Dept 2014]; Flagstar Bank v. Bellafiore, 94 AD3d 1044, 1046 [2d Dept 2012]; Neighborhood Hous. Servs. of NY City, Inc. v. Meltzer, 67 AD3d 872, 873-74 [2009]). The Court notes that since this loan has been in default since 2008 and this action was not commenced until November 27, 2020, plaintiff will only be able to collect on the unpaid mortgage payments for the six years prior to commencement (see EMC Mtge. Corp. v. Cielo, 49 AD3d 592 [2d Dept 2008]; see also Wells Fargo Bank, N.A. v. Cohen, 80 AD3d 753, 754 [2d Dept 2011], Loiacono v. Goldberg, 240 AD2d 476, 477 [2d Dept 1997]; Sce v. Ach, 56 AD3d 457 [2d Dept 2008]). Accordingly, plaintiff’s motion (#001) is granted and defendants’ motion (#002) is denied. The proposed order of reference, as modified by the court, has been signed simultaneously with this Memorandum Decision and Order. Dated: February 4, 2022