Opinion
INDEX NO. 157879/2018
03-27-2019
NY PRIME HOLDING LLC, Plaintiff, v. NATIONSTAR MORTGAGE, LLC, SHAPIRO, DICARO & BARAK, LLC, PROVEST, LLC, SHERAE OLIVER, REBECCA ZIENKOWICZ, and BAHARUL ISLAM Defendants.
NYSCEF DOC. NO. 121 PRESENT: HON. JOHN J. KELLEY Justice MOTION DATE 09/25/2018 MOTION SEQ. NO. 001
DECISION AND ORDER
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 3, 4, 5, 6, 7, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 61, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 82, 83, 84, 109, 110, 111, 112 were read on this motion to/for DISMISSAL/CROSS MOTION TO CONSOLIDATE.
I. INTRODUCTION
In this action to recover damages for violation of Judiciary Law § 487, abuse of process, and fraud, and for a judgment declaring that a judgment entered in a prior foreclosure action is null and void, the defendants Shapiro, DiCaro & Barack, LLC (SDB), and Nationstar Mortgage, LLC (Nationstar), separately move pursuant to CPLR 3211(a) to dismiss the complaint against each of them. The plaintiff, NY Prime Holding, LLC (NYPH), cross-moves to consolidate this action with the foreclosure action. SDB and Nationstar's motions are granted. The cross motion is denied.
II. BACKGROUND
On October 8, 2008, Badrul Islam (hereinafter Badrul) purchased real property located at 280 West 127th Street in Manhattan (the property) from Jason Hutto Franklin and Jermaine Hutto. On that date, Badrul gave a mortgage on the property to Golden First Mortgage Corp. (GFMC) in consideration of a $972,000 loan. GFMC designated Mortgage Electronic Recording Systems, Inc. (MERS), as its nominee. Badrul allegedly defaulted in the repayment of the mortgage loan. On October 29, 2009, Federal National Mortgage Association (hereinafter Fannie Mae) commenced a foreclosure action (hereinafter the 2009 foreclosure action) against Badrul, Franklin, and Hutto, among others, in the Supreme Court, New York County, under Index No. 115280/09. MERS, however, did not transfer or assign the mortgage and underlying promissory note to Fannie Mae until June 5, 2010. By order dated October 3, 2010, the Supreme Court (Schlesinger, J.) denied Fannie Mae's motion for summary judgment on the complaint in the 2009 foreclosure action, without prejudice to renewal upon proper papers showing that it had standing to prosecute the action.
Over the next several years, ownership of the property was transferred by deed on numerous occasions. On October 5, 2012, Badrul deeded the property to K&S Holding Trading Corp. On December 13, 2012, K&S Holding Trading Corp. deeded the property to Kitty Hawk Holdings, LLC. On March 13, 2014, Kitty Hawk Holdings, LLC, deeded the property to Jericho NY Prime Holding, LLC. On April 17, 2014, Jericho NY Prime Holding, LLC, deeded the property to the plaintiff, NYPH. During that period of time, the mortgage given by Badrul, then held by Fannie Mae, remained unsatisfied and remained a mortgage of record.
By order dated April 2, 2015, the Supreme Court (Schlesinger, J.) denied Fannie Mae's renewed motion for summary judgment on the complaint in the 2009 foreclosure action, and dismissed the complaint in that action, without prejudice.
Inasmuch as the 2009 foreclosure action was commenced on October 29, 2009, thus accelerating Badrul's obligations under the note and mortgage, Fannie Mae or its assignee had six years from that date, or until October 29, 2015, to recommence an action to foreclose on the subject mortgage. Thereafter, any person with an interest in the mortgaged property could maintain an action to cancel the mortgage (see generally RPAPL 1501[4]; Milone v US Bank Natl. Assn., 164 AD3d 145, 156 [2d Dept 2018]; Mizrahi v US Bank, Natl. Assn., 156 AD3d 617 [2d Dept 2017]; NMNT Realty Corp. v Knoxville 2012 Trust, 151 AD3d 1068, 1069-1070 [2d Dept 2017]). On October 27, 2015, Fannie Mae assigned the mortgage and note to the defendant Nationstar. On October 29, 2015, Nationstar, represented by the defendant law firm SDB, commenced a new foreclosure in the Supreme Court, New York County, under Index No. 452981/15 (hereinafter the 2015 foreclosure action), naming NYPH and Badrul as defendants.
SDB retained the services of the defendant Provest, LLC, to serve process upon Badrul. Provest retained the services of the defendants Sherae Oliver and Rebecca Zienkowicz to effectuate the service. According to the affidavits of service filed in the 2015 foreclosure action, Oliver served Badrul with the summons and complaint in April 2016 by affix and mail service at a residence address on Paulding Avenue in the Bronx. Badrul did not answer the complaint.
By order entered December 12, 2016, the Supreme Court (Edmead, J.) denied NYPH's motion to dismiss, as time-barred, the complaint in the 2015 foreclosure action. The Appellate Division, First Department, affirmed, concluding that "the applicable six-year limitations period" for the recommencement of the foreclosure action "commenced upon filing of the 2009 action" (Nationstar Mortgage, LLC v Islam, 158 AD3d 553, 553 [1st Dept 2018]). The Court reasoned that, in accordance with General Construction Law § 20, the filing of the complaint on October 29, 2015, or six years to the day after the commencement of the 2009 foreclosure action, rendered the 2015 foreclosure action timely.
NYPH thereafter answered the complaint in the 2015 foreclosure action. Nationstar moved for summary judgment on the complaint against NYPH and for leave to enter a default judgment against Badrul. NYPH did not oppose the motion. By order dated April 20, 2017, the Supreme Court (Edmead, J.) denied NYPH's motion to stay all proceedings therein. By order dated April 24, 2017, the same court granted Nationstar's unopposed motion.
NYPH thereafter moved to vacate the order awarding Nationstar summary judgment against it, arguing that it had a reasonable excuse for failing to oppose Nationstar's motion because that motion was filed while the matter had been temporarily stayed. NYPH further argued that it had a potentially meritorious opposition to the summary judgment motion, in that discovery had yet to be conducted. It asserted that, inasmuch as the 2009 foreclosure action had been dismissed, there was a possibility that Nationstar did not have standing to commence the 2015 foreclosure action because it did not have possession of the underlying promissory note or did not obtain it via a valid assignment. NYPH pointed to no evidence, however, that suggested that Nationstar was not the transferee or assignee of the subject mortgage or note. NYPH argued that the court should take a close look at "pooling and servicing arrangements" that had recently been found to have been tainted by fraud in connection with mortgage loans initiated by Greenpoint Savings Bank, and that such fraud might also be applicable to the transfer or assignment of the note here from GFMC to Fannie Mae and then to Nationstar, even though Greenpoint had no involvement. NYPH also suggested that Nationstar might not have clean hands because it had entered into a consent decree with the federal Consumer Financial Protection Bureau with respect to violations of the Home Mortgage Disclosure Act between 2012 and 2014; NYPH asserted that the court should presumptively call into question the validity of all mortgages and notes that Nationstar claims to have obtained via transfer and assignment, including the subject mortgage that was assigned to it in 2015. NYPH argued that, in the absence of proof that Fannie Mae or other transferors gave Nationstar powers of attorney, there should be a presumption that the transfer of the mortgage and note was fraudulent. Nowhere in NYPH's motion papers did it argue that the order awarding summary judgment was secured by fraudulent service of process upon Badrul.
By order dated June 16, 2017, the court (Edmead, J.) denied NYPH's motion to vacate its default in opposing the summary judgment motion in the 2015 mortgage foreclosure action. Although the court found that NYPH had a reasonable excuse, it determined that NYPH failed to present a potentially meritorious defense to foreclosure. On September 4, 2018, the court (McMahon, J.) granted Nationstar's motion for leave to enter a judgment of foreclosure, thus disposing of the 2015 foreclosure action. On October 19, 2018, NYPH appealed from the judgment. That appeal is pending.
In the meantime, on August 23, 2018, NYPH commenced the instant action to recover against SDB for violation of Judiciary Law § 487, against SDB, Nationstar, Provest, Oliver, Zienkowicz, and a person named Baharul Islam (Baharul) to recover for abuse of process and fraud, and for a declaration that the judgment entered in the 2015 foreclosure action is null and void. The gravamen of NYPH's complaint is that Nationstar and SDB, as its attorneys, knew that Badrul did not live on Paulding Avenue in the Bronx, and that they purposely served the summons and complaint in the 2015 foreclosure action upon Baharul, an unrelated person with a similar name who did reside there. NYPH asserts that this service was a ruse to trick it and the court into believing that service had been made upon the correct person at the correct address, and that the defendants lied in order to secure a default judgment against Badrul, who actually never received notice of that action in time to defend it. NYPH thus contends that the judgment in the 2015 foreclosure action was secured by fraud and abuse of process, and that it has been damaged by virtue of being divested of its ownership interest in the property.
SDB and Nationstar separately move to dismiss the complaint in this action insofar as asserted against each of them on the grounds that the complaint fails to state a cause of action (CPLR 3211[a][7]), documentary evidence provides a complete defense to the action (CPLR 3211[a][1]), NYPH lacks standing to complain about improper service of process upon its codefendant in the 2015 foreclosure action (CPLR 3211[a][3]), and the complaint is barred by res judicata (CPLR 3211[a][5]). They further contend that, even if service upon Badrul were improper, he was not a necessary party to the 2015 foreclosure action, but only a permissible party who was named in order to protect Nationstar's right to collect any monetary deficiency judgment in the event that the foreclosure sale of the property yielded less than the amount owed under the mortgage note. NYPH opposes the motion and cross-moves pursuant to CPLR 602 to consolidate this action with the 2015 foreclosure action
III. DISCUSSION
A. Failure to State a Cause of Action
The complaint fails to state a cause of action because it constitutes an improper collateral attack upon the judgment entered in the 2015 foreclosure action. Any claim that the judgment of foreclosure was obtained by fraud must be made the subject of a motion to vacate the judgment in that action, pursuant to CPLR 5015(a)(3), on the ground that it was secured by extrinsic fraud (see Country Wide Home Loans, Inc. v Harris, 136 AD3d 570 [1st Dept 2016] [judgment properly vacated where mortgagee knew that nonparty to foreclosure action had an interest in subject property, yet purposefully refused to name or join him in action]). "The remedy for fraud allegedly committed during the course of a legal proceeding must be exercised in that lawsuit by moving to vacate the civil judgment (CPLR 5015[a][3]), and not by another plenary action collaterally attacking that judgment" (St. Clement v Londa, 8 AD3d 89, 90 [1st Dept 2004]; see Kai Lin v Department of Dentistry, Univ. of Rochester Med. Ctr., 120 AD3d 932 [4th Dept 2014]; Parker & Waichman v Napoli, 29 AD3d 396, 399 [1st Dept 2006]; Vinokur v Penny Lane Owners Corp., 269 AD2d 226 [1st Dept 2000]).
This rule applies to claims under Judiciary Law § 487 as well. In Yalkowsky v Century Apts. Assocs. (215 AD2d 214, 215 [1st Dept 1995]), the Court dismissed a cause of action against an attorney who allegedly lied to the Civil Court to obtain a judgment in a landlord-tenant dispute that defeated a tenant's constructive eviction defense. The Court explained that, even if it could be proven that the landlord's attorney lied to the Civil Court, the "plaintiff's remedy lies exclusively in that lawsuit itself, i.e., by moving pursuant to CPLR 5015 to vacate the civil judgment due to its fraudulent procurement, not a second plenary action collaterally attacking the judgment in the original action"" (id.; see Crouse v McVickar, 207 NY 213, 217 [1912]).
Contrary to NYPH's contention at oral argument, it never attempted to vacate the judgment in the 2015 foreclosure action on the ground that it was obtained by extrinsic fraud in the service of process and the filing of false or misleading affidavits of service.
For the same reasons that support dismissal for failure to state a cause of action, documentary evidence, consisting of the judgment entered in the 2015 foreclosure action, conclusively establishes a defense to this action, which seeks both to annul that judgment and recover damages purportedly arising from the entry of that judgment.
The cause of action to recover for abuse of process fails to state a cause of action for the additional reason that the complaint does not allege the elements of that cause of action. To recover for abuse of process, a plaintiff must allege "three essential elements: (1) regularly issued process, either civil or criminal, (2) an intent to do harm without excuse or justification, and (3) use of the process in a perverted manner to obtain a collateral objective" (Curiano v Suozzi, 63 NY2d 113, 116 [1984]; see Board of Educ. v Farmingdale Classroom Teachers Assoc., 38 NY2d 397 [1975]). At most, the complaint alleges that the defendants intentionally misrepresented to the court in the 2015 foreclosure action that the person who was in fact served with process was the borrower and mortgagor, Badrul Islam, not that the process itself was used in a perverted manner to obtain a collateral objective.
B. Lack of Standing
SDB and Nationstar correctly argue that NYPH lacks standing to challenge the propriety of service of process upon Badrul. Where codefendants are named in a foreclosure action, a claim of improper service is personal in nature and may only be raised by the person allegedly improperly served (see Home Sav. of Am., F.A. v Gkanios, 233 AD2d 422, 423 [2d Dept 1996]; see also Rhoe v Reid, 166 AD3d 919, 922 [2d Dept 2018]; Matter of Czajka v Koweek, 100 AD3d 1136, 1138 [3d Dept 2012]).
SDB and Nationstar also correctly argue that, even if Badrul successfully asserted improper service of process as an affirmative defense, and the action were dismissed as to him, the foreclosure judgment against NPYH would remain valid since Badrul was not a necessary party to the foreclosure action. Where a mortgagee elects to commence a foreclosure action upon non-utility property, the only "necessary defendants" are persons "having an estate or interest in possession, or otherwise, in the property," those "entitled to the reversion, remainder, or inheritance of the real property, or of any interest therein or undivided share thereof," those "having a right of dower or an inchoate right of dower," and those "having any lien or incumbrance upon the real property which is claimed to be subject and subordinate to the lien of the plaintiff (RPAPL 1311[1], [2], [3]). A borrower who does not have a possessory, reversionary, or similar interest in mortgaged property is not a necessary party to a foreclosure action, and the foreclosure may proceed even in the borrower's absence (see NC Venture I, L.P. v Complete Analysis, Inc., 22 AD3d 540, 543 [2d Dept 2005]). Because Badrul transferred the totality of his interest in the property in 2012, he was not a necessary party to the foreclosure action.
RPAPL 1313 provides that "[a]ny person who is liable to the plaintiff for payment of the debt secured by the mortgage may be made a defendant in the action" to foreclose a mortgage. Badrul was thus a proper, albeit not a necessary, party to the subject action because he was the borrower under the note. Nationstar named him as a "permissible" defendant in light of the restrictions otherwise imposed by RPAPL 1301(1), a statute that authorizes a mortgagee to commence a separate action against a borrower to recover a mortgage debt, but conditions the mortgagee's right to commence or maintain a foreclosure action upon proof that it failed to satisfy any money judgment recovered in the action on the debt (RPAPL 1301[1]). Whether or not the court properly obtained personal jurisdiction over Badrul is relevant only to the cause of action against him to recover money damages, and has no bearing on the foreclosure of NYPH's ownership or possessory interest in the property.
C. Res Judicata
"Under res judicata, or claim preclusion, a valid final judgment bars future actions between the same parties on the same cause of action" (Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 347 [1999]; see Matter of Reilly v Reid, 45 NY2d 24 [1978[]). As a general rule, "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy" (O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981]). "The rule applies not only to claims actually litigated but also to claims that could have been raised in the prior litigation. The rationale underlying this principle is that a party who has been given a full and fair opportunity to litigate a claim should not be allowed to do so again" (Matter of Hunter, 4 NY3d 260, 269 [2005]).
NYPH could have raised its claim of extrinsic fraud in the 2015 foreclosure action in its May 2017 motion to vacate its default in opposing Nationstar's summary judgment motion. While "there is no express time limit for seeking relief from a judgment pursuant to CPLR 5015(a)(3), a party is required to make the motion within a reasonable time" (Aames Capital Corp. v Davidsohn, 24 AD3d 474, 475 [2d Dept 2005]; see Molina v Chladek, 140 AD3d 523, 524 [1st Dept 2016]). Thus, to the extent that NYPH did not learn of any misrepresentations contained in the affidavits of service until 2018, it timely could have raised the issue in the 2015 foreclosure action at any time prior to commencing this action in August 2018.
D. Cross Motion to Consolidate
Even were this court to permit this action to proceed, there is no basis for consolidating it with the 2015 foreclosure action. CPLR 602 permits consolidation of two actions that "are pending before a court." Inasmuch as the 2015 foreclosure action has been disposed, it is not "pending," and consolidation would be impermissible (see Gallo Nero, Inc. v Bordeliw, Inc., 2014 NY Slip Op 32461[U], 2014 NY Misc LEXIS 4208 [Sup Ct, N.Y. County, Sep. 23, 2014]).
IV. CONCLUSION
Accordingly, it is
ORDERED that the motion of the defendant Shapiro, DiCaro & Barack, LLC, to dismiss the complaint against it is granted; and it is further,
ORDERED that the separate motion of the defendant Nationstar Mortgage, LLC, to dismiss the complaint against it is granted; and it is further,
ORDERED that the Clerk of the court shall enter judgment accordingly; and it is further,
ORDERED that the plaintiff's cross motion to consolidate this action with a prior action is denied; and it is further,
ORDERED that action against Provest, LLC, Sherae Oliver, Rebecca Zienkowicz, and Baharul Islam is severed.
This constitutes the Decision and Order of the court. 3/27/2019
DATE
/s/_________
JOHN J. KELLEY, J.S.C.