Opinion
Index No. 504135/2018
03-05-2024
HSBC, Plaintiff, v. BENJAMIN RECHES et al., Defendant,
Unpublished Opinion
DECISION AND ORDER
HON. LAWRENCE KNIPEL, ADMINISTRATIVE JUDGE.
Recitation, as required by CPLR §2219 (a), of the papers considered in the review of this Motion:
Papers Numbered
Motion (MSI 1) 1
Opp/Cross (MS 2) 2
Opp to Cross/Cross-Cross (MS 3) 3
Cross-Reply/Opp to Cross-Cross 4
Cross-Cross-Reply 5
Upon the foregoing cited papers, the Decision/Order on this Motion is as follows:
Defendants entered into a series of loans and CEMAs between 1992 and 2004. Only the final two - dated 2003 and 2004, respectively - appear relevant to the parties' claims. It is undisputed that Defendants and Fairmont Funding entered into a CEMA dated February 14, 2003, thereby consolidating the prior instruments and a new loan into a single note and mortgage. The following year, Defendants again entered into such an agreement, this time with Wells Fargo Home Mortgage which, like Fairmont, advanced new funds as part of the transaction. For reasons that are unclear, Wells Fargo executed a satisfaction of the superseded 2003 consolidated mortgage in October 2005.
Defendants do not appear to challenge Plaintiff's contention that the monies due under the 2003 CEMA were not paid prior to the filing of the satisfaction.
In 2012, Defendants sought to enter into another CEMA transaction, this time with Santander Bank. However, the lender's title report turned up the 2005 satisfaction and, thus, it was only willing to enter into the transaction as a refinance rather than consolidation. For reasons beyond the record, the refinance did not go forward.
Per the email proffered by Defendants (Doc 97), Santander's counsel wrote that "Wells Fargo erroneously filed a Satisfaction of Mortgage in 2005 wiping out the prior chain of recorded mortgages... Accordingly, this loan cannot close as a CEMA transaction. The file is clear to close w/ the lender and will be closing as a straight refinance."
Defendants subsequently stopped paying under the 2004 CEMA, sending letters and faxes seeking a refund of all payments made since the satisfaction was filed and for Wells Fargo to cease billing for any future charges due under the 2004 mortgage. It does not appear that a substantive response was received from Wells Fargo.
In January 2013, Defendants filed a lawsuit against Wells Fargo asserting that "Wells Fargo agreed to file or cause to be filed such documentation as would remove all liens placed on the Property by lenders whose loans were paid-off as part of the refinancing transaction" but failed to do so (2013 Complaint, ¶ 13-14). Defendants requested specific performance - that "Wells Fargo should ... cause to be filed with the Clerk of the County of Kings such documents as are necessary to remove all liens on the Property that were placed by lenders who were paid-off as part of the Refinancing" (Id., ¶l 7). In the alternative, Defendants sought monetary damages based upon the alleged breach.
Pursuant to a stipulation between counsel, Wells Fargo filed an answer in the 2013 action in 2016 - asserting a variety of affirmative defenses and a counterclaim to vacate the satisfaction. Defendants replied through counsel, raising a variety of defenses to the counterclaim, but notably not asserting that the statute of limitations to vacate the satisfaction had run. Wells Fargo subsequently filed a motion for summary judgment which was marked off calendar.
Per counsel, the motion was removed from the calendar in light of the motion to consolidate pending in this action - but will be restored and decided depending on the outcome of the instant motions.
The instant foreclosure action was filed in February 2018 by HSBC as trustee for the trust to which ownership of the 2004 consolidated note and mortgage was ostensibly transferred in 2004. The 2005 satisfaction does not appear to be mentioned in the complaint and no cause of action to expunge it is asserted therein. Defendants answered, raising a variety of affirmative defenses and counterclaims - largely centered around the 2005 satisfaction and Wells Fargo's failure to properly address it when Defendants brought the issue to its attention. They also appear to be asserting claims against Wells Fargo but did not seek to add them as a third-party defendant.
Defendants then moved for consolidation of the 2013 (specific performance) and the instant 2018 (foreclosure) actions (MS 1), alleging that both actions have the same parties, share common issues of law and fact, are based upon the same satisfaction of the CEMA, and the resolution of issues within both actions will have a direct impact on each other. More specifically, they assert that the counterclaims asserted in both actions pertain to the satisfaction and that the validity thereof affects Plaintiffs ability to foreclose.
Plaintiff partially opposed - arguing that the actions should be joined for trial but not consolidated as the parties and issues differ - and cross-moved for summary judgment in this action (MS 2). Defendants opposed and cross-moved for summary7 judgment in their favor based both upon the satisfaction and several defenses to the foreclosure action (MS 3). After the motions were fully briefed and settlement negotiations were unsuccessful, all three motions were taken on submission.
Plaintiff also sought to have Wells Fargo's motion granted in the other action. That motion, however, is pending in a different part before a different judge.
I. Consolidation
"[Consolidation or joinder for trial is favored to avoid unnecessary duplication of trials, save unnecessary costs and expense, and prevent an injustice which would result from divergent decisions based on the same facts (Calle v 2118 Faitbush Avenue Realty, LLC, 209 A.D.3d 961, 963 [2d Dept 2022]). Consequently, "[w]here common questions of fact or law exist, a motion pursuant to CPLR 602(a) for consolidation or joinder should be granted, absent a showing of prejudice to a substantial right by the party opposing the motion (HSBC v Francis, 214 A.D.3d 58, 62 [2d Dept 2023]). In deciding which remedy is appropriate, it has been noted that "[t]he consolidated action has one caption, with one group of plaintiffs against one group of defendants, and results in one verdict or decision and one judgment with one bill of costs. ... [while] the joinder of two or more actions . ..continues the separateness of each of the actions presenting common questions of law or fact, allowing for joint proceedings but separate verdicts and judgments (Id. [citations omitted]).
The parties agree that there are overlapping issues between the two actions - mainly centered around the satisfaction. Defendants' claims in the 2013 action appear to be premised on the defectiveness of the 2005 satisfaction, seemingly seeking to expunge the prior liens (as the satisfaction appears to do) or the award of damages for their inability to refinance due to its existence. Their counterclaims in the 2018 action, on the other hand, appear to be seeking to enforce the satisfaction. While Plaintiff does not assert a claim for vacatur of the satisfaction -unlike Wells Fargo which does so in the 2013 action - it has been argued that the satisfaction could affect the enforceability of the 2004 CEMA and the default(s) thereunder.
Plaintiff accurately notes that the parties differ. Plaintiff is only a party to the 2018 action and, though Defendants assert claims against Wells Fargo (the sole defendant in the 2013 action), it was not impleaded herein. Further, consolidation would leave Defendants as both plaintiffs and defendants - which would be inappropriate (Hilarion-Mahotiere v Metz, 186 A.D.3d 1342, 1343 [2d Dept 2020]).
In light of the foregoing, the Court agrees with Plaintiff that joinder for trial - rather than consolidation - is appropriate herein.
II. Summary Judgment
It is well established that "[i]n a mortgage foreclosure action, a plaintiff establishes its prima facie entitlement to judgment as a matter of law by producing the mortgage and the unpaid note, and evidence of the default" (Loancare v. Firshing, 130 A.D.3d 787 [2d Dept 2015]). Plaintiff has done so.
Defendants argue that the existence of the satisfaction of mortgage bars Plaintiffs foreclosure claims. That is incorrect. Plaintiff is not seeking to enforce the 2003 consolidated mortgage. Rather, it asserts that Defendants breached their obligations under the 2004 CEMA -- which superseded the subsequently "satisfied" mortgage. The Court agrees, however, that issues of fact remain as to whether Defendants' alleged reliance on the satisfaction and Wells Fargo's apparent unwillingness to offer clarification or address the issue was justification for their decision to default, constitute a default by Plaintiff, etc.
To the extent that the satisfaction remained unaddressed and Defendants questioned - without meaningful response - what (if anything) was due, it is unclear what the parties respective responsibilities were under the agreement at that time.
Contrary to Defendants' contentions. Plaintiff has demonstrated that the RPAPL 1304 and default notices were mailed pursuant to its mailing procedures. Its affiants - employees of Wells Fargo which services the loan - attest to the use of a vendor, familiarity with the process utilized by Wells Fargo and the vendor, and that the documentation generated by the vendor was incorporated into Wells Fargo's own records and routinely relied upon by it in the course of its regular business. Both the Trackrights and Wells Fargo's letter logs were also proffered. That is sufficient (Wells Fargo v Benitez, 194 A.D.3d 986, 987-988 [2d Dept 2021]; US Bank v Jean-Charles, 198 A.D.3d 998, 999-1000 [2d Dept 2021]).
It is undisputed that the RPAPL 1304 notices appended to Plaintiffs moving papers were addressed to both Defendants and that only one set was mailed at that time. As noted by Defendants, "the mailing of a 90-day notice jointly addressed to two or more borrowers in a single envelope is not sufficient to satisfy the requirements of RPAPL 1304, and that the plaintiff must separately mail a 90-day notice to each borrower as a condition precedent to commencing the foreclosure action" (Wells Fargo Bank, NA v Yapkowitz, 199 A.D.3d 126, 134 [2d Dept. 2021]). In its opposition to the cross-motion (which also served as its reply as to its own motion), Plaintiff proffers another set of notices that its affiant attests were sent only to Benjamin Reches and argues that two sets were sent. Defendants counter that no notices were sent exclusively to Nellie Reches. However, while that is factually accurate, the argument is incorrect. The majority in Yapkowitz noted that "the mailing of a 90-day notice jointly addressed to two or more borrowers in a single envelope is not sufficient to satisfy the requirements of RPAPL 1304" and that it is impermissible to send "a single notice jointly addressed to two or more borrowers and mailed in a single envelope" [emphasis added]. That is not the case here.
Though not proffered as part of its original motion which predated Yapkowitz, the second set of notices were produces in response to an argument raised by Defendants for the first time in the cross-motion and Defendants had the opportunity to - and did - address them in reply. As such, the notices and accompanying affidavit are properly before the Court.
Plaintiff has also demonstrated its standing. "A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced" (Bank of America, NA v Paulsen, 125 A.D.3d 909, 910 [2d Dept 2015]). "Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident" (US Bank, NA v Collymore, 68 A.D.3d 752, 754 [2d Dept 2009] [citations omitted]). Plaintiff attached an attorney-certified copy of the note (endorsed to blank) to the complaint demonstrating that it has standing (Deutsche Bank v Logan, 146 A.D.3d 861, 862-863 [2d Dept 2017]; Nationstar Mtge., LLC v. Catizone, 127 A.D.3d 1151, 1152 [2d Dept 2015]).
Defendants have abandoned their remaining affirmative defenses by failing to address them in opposition to Plaintiffs motion (114 Woodbury Realty, LLC v. 10 Bethpage Rd., LLC, 178 A.D.3d 757, 761 [2d Dept 2019]).
III. Conclusions
Defendants' motion to consolidate (MS 1) is granted to the extent that the instant action and the specific performance action pertaining to the same property (500278/13) are joined for trial. Plaintiffs motion for summary judgment (MS 2) is granted to the extent that Defendants' affirmative defenses and counterclaims other than those in Sections V, VI, VIII of their memorandum of law (Doc 85) are stricken. As Wells Fargo is not a party to this action, Defendants' claims against then are improper and are dismissed without prejudice. Finally, Defendant's motion for summary judgment (MS 3) is denied. The parties are directed to complete discovery and proceed to trial. This constitutes the decision and order of the Court.
It is somewhat difficult to associate specific arguments with many of the affirmative defenses and counterclaims in the answer. As such, the Court uses section numbers in an effort at clarity.