Opinion
No. 14953/11.
12-24-2014
WELLS FARGO BANK, N.A., as Certificate Trustee (not in its Individual Capacity but Solely as Certificate Trustee), In Trust For Registered Holders of VNT Trust Series 2010–2, Plaintiff, v. Sybil WEEKES, et al., Defendants.
Tiffany L. Henry, Esq., Berkman, Henoch, Peterson, Peddy & Fenchel, PC, Garden City, attorney for Plaintiffs. David Bryan, Esq., Brooklyn Legal Services, Brooklyn, attorney for Defendants.
Tiffany L. Henry, Esq., Berkman, Henoch, Peterson, Peddy & Fenchel, PC, Garden City, attorney for Plaintiffs.
David Bryan, Esq., Brooklyn Legal Services, Brooklyn, attorney for Defendants.
Opinion
CAROLYN E. DEMAREST, J.
Plaintiff moves to strike the answer of defendants Sybil and Jason Weekes, for summary judgment pursuant to CPLR 3212, to substitute two necessary additional parties, and to appoint a referee to ascertain and compute the amount due to the plaintiff on the note and mortgage at issue in this foreclosure action.
BACKGROUND
Defendant Sybil Weekes (“Sybil”) and her son, defendant Jason Weekes (“Jason”, collectively, the “Weekes Defendants”), contend that, in 2002, they entered into a joint tenancy with non-party Vilma Durieux (“Durieux”) in a multiple occupancy home located at 121 East 55th Street, Brooklyn, N.Y. 11203 (“Property”). On May 5, 2006, defendant Sybil executed a note (“Note”) to Tribeca Lending Corporation (“Tribeca”) upon a loan of $330,000 in connection with a new deed on the Property removing Durieux. On May 5, 2006, the Weekes Defendants also signed a mortgage in which Mortgage Electronic Registration Systems, Inc. (“MERS”) was identified as a nominee for Tribeca and was listed as the mortgagee of record (“Mortgage”). The appraisal value of the Property has not been revealed, but a pre-existing mortgage of $221,250 appears to have been satisfied at that time. The initial interest rate on the Note was 12.990%, but was adjustable up to a maximum rate of 18.990%. Plaintiff alleges that Sybil did not make a single payment on the Note and has been in default for over eight and a half years.
The Note and Mortgage have been assigned multiple times. By assignment dated November 24, 2010 (“Assignment 1”), MERS, as nominee for Tribeca, assigned the Note and Mortgage to Deutsche Bank National Trust Company, as Trustee for Tribeca Lending Series 1 (“Deutsche”). By assignment also dated November 24, 2010 (“Assignment 2”), Deutsche assigned the Note and Mortgage to Huntington National Bank, as Certificate Trustee of Franklin Mortgage Asset Trust 2009–A (“Huntington”). By assignment dated October 22, 2010 (“Assignment 3”), Huntington assigned the Note and Mortgage to the plaintiff. It is noted that all three assignments are signed by the same individual, “M. Arndt”, who is solely identified as an “Authorized Signator” and it is not clear by which entity this individual is employed.
By letter dated March 24, 2011, from Sheldon May & Associates, on behalf of servicer Acqura Loan Services, LLC (“Acqura”), plaintiff provided defendants with a 90 day pre-foreclosure notice pursuant to CPLR 1304. By letter dated April 5, 2011, also from Sheldon May & Associates, on behalf of Acqura, plaintiff provided a notice of default pursuant to the Mortgage. On June 30, 2011, more than five years after the defendant had defaulted on the Note, plaintiff commenced this foreclosure action. Between May 1, 2012 and May 14, 2013, the parties appeared at numerous settlement conferences pursuant to CPLR 3408. On May 14, 2013, the action was referred to this court. On July 25, 2013, the defendants filed an answer with seven affirmative defenses and one counterclaim.
Plaintiff agreed to accept defendants' late answer. The counterclaim is identified in the answer as the “third” counterclaim. However, it is the only counterclaim.
Plaintiff alleges that it has physical possession of the Note and had physical possession of the Note prior to the commencement of the action. The plaintiff's motion is supported by an affidavit signed by Brady Hannan (“Hannan”), an “agent” of the plaintiff's servicer, Home Servicing, LLC (“Home Servicing”), based in Baton Rouge, Louisiana. The affidavit states,
I have reviewed the statements set forth herein as against the records kept by Plaintiff and have duly executed this affidavit based upon that review and upon my personal knowledge of the stated facts and circumstances and books and records maintained by Plaintiff in my possession. As part of my job responsibilities for Plaintiff, I am familiar with the type of records maintained by Plaintiff in connection with the subject loan. The information in this affidavit is taken from Plaintiff's business records.
...
Plaintiff has physical possession of the Note and had taken physical delivery prior to the commencement of the action.
The affidavit does not include any other details of the physical delivery of the Note. There is no explanation in the affidavit, or any of the papers, as to why Assignment 3 to plaintiff is dated more than a month before Assignments 1 and 2. Plaintiff has not produced a power of attorney indicating that Home Servicing may properly act on behalf of the plaintiff to set forth the facts constituting the claim or an explanation as to when the servicer of the Note and Mortgage changed. Defendant challenges plaintiff's standing to foreclose the Mortgage.
DISCUSSION
In support of its summary judgment motion, plaintiff has submitted the complaint, the Note, Mortgage, and Assignments, as proof that it is the successor to the original mortgagee, and an affidavit by the plaintiff's servicer indicating that the defendant has defaulted on the Note and that the plaintiff had possession of the Note and Mortgage when the action was commenced. However, the chain of assignments is broken. Assignment 3 is clearly dated before Assignments 1 and 2 and no explanation is given for the broken chain. In the answer, the defendants raised the affirmative defense of lack of standing, noting conflicting and “correcting” assignments, and asserting that the plaintiff did not own the Note. Accordingly, plaintiff has not established that Huntington owned the Note and Mortgage on October 22, 2014, thus making the assignment to plaintiff invalid. While physical possession of the Note and Mortgage may suffice to establish standing (Deutsche Bank Nat'l Trust Co. v. Whalen, 107 A.D.3d 931, 969 N.Y.S.2d 82 [2d Dept 2013] ), the conflict between the assignments requires an explanation as it suggests a competing claim may be extant.Moreover, an affidavit from a plaintiff's servicing agent, that contains conclusory statements regarding the plaintiff's possession of the Note and does not give any factual details of the physical delivery, is insufficient to establish that the plaintiff had physical possession of the Note prior to the commencement of the action (see U.S. Bank v. Faruque, 120 A.D.3d 575, 577, 991 N.Y.S.2d 630 [2d Dept 2014] ; U.S. Bank v. Collymore, 68 A.D.3d at 754, 890 N.Y.S.2d 578 ; Homecomings Fin. v. Guldi, 108 A.D.3d 506, 508, 969 N.Y.S.2d 470 [2d Dept 2013] ; HSBC v. Hernandez, 92 A.D.3d at 844, 939 N.Y.S.2d 120 ; compare Aurora Loan Servs., LLC v. Taylor, 114 A.D.3d 627, 628–629, 980 N.Y.S.2d 475 [2d Dept. 2014] (holding that plaintiff established standing where the plaintiff's affidavit specifically stated the date of physical possession of the note four days prior to the commencement of the action)). In the affidavit submitted by plaintiff, Hannan recites a conclusory statement regarding possession of the Note, but does not state the specific date upon which the plaintiff obtained physical possession of the Note. As plaintiff relies on physical possession of the Note to demonstrate its standing at the time of the commencement of this action, defendant has raised an issue of fact as to whether plaintiff obtained physical possession of the Note on or before June 30, 2011 (see U.S. Bank v. Faruque, 120 A.D.3d at 577, 991 N.Y.S.2d 630 ; U.S. Bank v. Collymore, 68 A.D.3d at 754, 890 N.Y.S.2d 578 ; Homecomings, 108 A.D.3d at 508, 969 N.Y.S.2d 470 ; HSBC v. Hernandez, 92 A.D.3d at 844, 939 N.Y.S.2d 120 ). Further, plaintiff has not provided a copy of a power of attorney authorizing “an agent” of Home Servicing to act on behalf of the plaintiff (see Wells Fargo Bank, N.A. v. Edeman, 2014 N.Y. Slip Op 32013[U] [Sup Ct, New York County 2014], citing Lexow & Jenkins v. Hertz Commercial Leasing Corp., 122 A.D.2d 25, 504 N.Y.S.2d 192 [2d Dept 1986] ). Plaintiff's motion for summary judgment, order of reference, and to strike the first and fifth affirmative defenses is therefore denied.
Defendants further argue that the terms of the 12.990% interest loan were unconscionable, the loan was designed “to be securitized into a pool of high yield residential mortgages and then defaulted upon”, and that the defendants were the victims of deceptive conduct. Sybil is alleged to be an elderly woman (no age is given), Jason earned very low wages (no amount is specified), and they are African American. The Property is located in East Flatbush, Brooklyn, which is a “majority minority” neighborhood. The answer alleges that Tribeca targeted the defendants based upon the neighborhood's racial and ethnic makeup by “reverse redlining” in violation of the Equal Credit Opportunity Act (“ECOA”). The defendants argue that the required monthly payments of $3,647.88 were never affordable to the defendants. Defendants have sought discovery in this action from plaintiff, including the original loan application submitted by the defendants for the loan. Sybil's affidavit states,
The area is made up of predominantly African American and Caribbean American residents.
“Redlining is the practice of denying the extension of credit to specific geographic areas due to the income, race, or ethnicity of its residents. The term was derived from the actual practice of drawing a red line around certain areas in which credit would be denied. Reverse redlining is the practice of extending credit on unfair terms to those same communities” (United Companies Lending Corp. v. Sargeant, 20 F Supp 2d 192, 203 n. 5 [D Mass 1998] ; M & T Mtge. Corp. v. Foy, 20 Misc.3d 274, 276 n. 4, 858 N.Y.S.2d 567 [Sup Ct, Kings County 2008] ).
I feel that the loan that was extended to me was unfair from the beginning, it was not able to be paid and that the plaintiff knew this, I have come to believe that they must have had some really bad motives for putting me into a loan that was this harmful. I have come to strongly suspect that the reasons for putting me into this loan may well be based upon the fact that they felt they could swindle me as a poor black woman and cause me to have a loan that was built to fail.
Jason's affidavit includes the identical language other than the changing of pronouns.
In the seventh affirmative defense and counterclaim, defendants allege that Tribeca discriminated against the Weekes on the basis of their race, color and ethnic group in violation of the ECOA and that the plaintiff is liable for Tribeca's acts pursuant to “15 U.S.C. sec. 1691a(3) Reg B 12 C.F.R. sec. 202.2(l) ”. As the affirmative defense and counterclaim alleging violations of the ECOA would require the Weekes to establish that they were qualified for the loans in question, and their defense and counterclaim are based upon the contention that they did not qualify for the loan, the seventh affirmative defense and “third” counterclaim must be dismissed (see Equicredit Corp. of N.Y. v. Turcios, 300 A.D.2d 344, 346, 752 N.Y.S.2d 684 [2d Dept 2002] ).
The third affirmative defense is unconscionability. Defendants argue that there was an enormous disparity in bargaining power between the parties and that the plaintiff's predecessor “sought to profit from this disparity in bargaining power and sophistication and did so by deliberately targeting [Sybil] and [Jason] with misinformation. Said procedural and substantive unconscionability renders void and unenforceable the mortgage.” Defendants have not provided any further explanation as to the nature of the misinformation they were purportedly provided. “In general, an unconscionable contract has been defined as one which is so grossly unreasonable as to be unenforceable because of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party” (US Bank N.A. v. Davis–Clarke, 2014 Slip Op 33142[U] [Sup Ct, Queens County 2014], citing King v. Fox, 7 N.Y.3d 181, 191 [2006] ). “This definition has been broken down into two elements: procedural and substantive unconscionability” (US Bank N.A., 2014 Slip Op 33142[U] ).” Substantive elements of unconscionability appear in the content of the contract per se; procedural elements must be identified by resort to evidence of the contract formation process' and meaningfulness of the choice. Examples of unreasonably favorable contractual provisions are virtually limitless but include inflated prices, unfair termination clauses, unfair limitations on consequential damages and improper disclaimers of warranty.' With respect to procedural unconscionability, examples include, but are not limited to, high pressure commercial tactics, inequality of bargaining power, deceptive practices and language in the contract, and an imbalance in the understanding and acumen of the parties.' [I]n general, it can be said that procedural and substantive unconscionability operate on a sliding scale'; the more questionable the meaningfulness of choice, the less imbalance in a contract's terms should be tolerated and vice versa' “ (Emigrant Mtge. Co., Inc. v. Fitzpatrick, 95 A.D.3d 1169, 1170, 945 N.Y.S.2d 697 [2d Dept 2012], quoting Matter of Friedman, 64 A.D.2d 70, 85, 407 N.Y.S.2d 999 [2d Dept 1978] ; Simar Holding Corp. v. GSC, 87 A.D.3d 688, 690, 928 N.Y.S.2d 592 [2d Dept 2011] ; State of New York v. Wolowitz, 96 A.D.2d 47, 68, 468 N.Y.S.2d 131 [2d Dept 1983] ; internal citations omitted).
With respect to the “procedural elements” of unconscionability, defendants have argued, and it is uncontested, that Sybil was elderly, had little income at the time of entering the loan, lived in a “minority majority” neighborhood, has vision problems, and Tribeca specifically targeted her. With respect to the “substantive elements” of unconscionability, defendants have demonstrated that Sybil was given a loan from Tribeca that required her to make monthly payments of $3801.20 which included a 12.990% interest rate, adjustable up to a maximum rate of 18.990%. The court notes that this rate was significantly higher than standard interest rates atthe time and, if this loan had been closed after September 1, 2008, Banking Law 6–m(4) would have been applicable. Defendants have sought discovery from the plaintiffs with respect to the loan application documents submitted by defendants to Tribeca. “The determination of unconscionability is a matter of law for the court to decide' ” (Emigrant Mtge., 95 A.D.3d at 1170, 945 N.Y.S.2d 697, quoting Simar, 87 A.D.3d at 690, 928 N.Y.S.2d 592 ). As discovery is on-going, and the defendants have raised issues of fact as to the unconscionability of the Note and Mortgage, the motion to dismiss the third affirmative defense is denied (see Emigrant Mtge., 95 A.D.3d at 1170, 945 N.Y.S.2d 697 ).
See, e.g., M & T Mtge. Corp. v. Foy, 20 Misc.3d 274, 278, 858 N.Y.S.2d 567 [Sup Ct, Kings County 2008] (noting that, “[t]he monthly history of the constant maturity Treasury yields reveals that since the year 2000 to [May 1, 2008] there have been only two months where the 30–year treasuries exceeded six percent”).
“No lender or mortgage broker shall make or arrange a subprime home loan unless the lender or mortgage broker reasonably and in good faith believes at the time of the loan closing that one or more of the borrowers, when considered individually or collectively, has the ability to repay the loan according to its terms and to pay applicable real estate taxes and hazard insurance premiums” (Banking Law 6–m[4] ). “In any action by a lender or assignee to enforce a loan against a borrower in default more than sixty days or in foreclosure, a borrower may assert as a defense, any violation of this section” (Banking Law 6–m[13] ).
Similarly, the defendants' second affirmative defense is for deceptive trade practices pursuant to General Business Law § 349. “Section 349(a) of the General Business Law declares as unlawful [d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state' ” (Emigrant Mtge. Co., Inc. v. Fitzpatrick, 95 A.D.3d 1169, 1171, 945 N.Y.S.2d 697 [2d Dept 2012], quoting General Business Law § 349 [a] ). “To assert a viable claim under General Business Law § 349(a), a plaintiff must plead that (1) the challenged conduct was consumer-oriented, (2) the conduct or statement was materially misleading, and (3) [he or she sustained] damages” (Emigrant Mtge. Co., 95 A.D.3d at 1172, 945 N.Y.S.2d 697 ). Here, plaintiff established that Sybil and Jason were presented with written documents describing the terms of the loan. However, as discovery is ongoing with respect to the loan application documents sought by defendants, and defendants have alleged that they were specifically targeted to take a loan which they could not afford, the motion for summary judgment is premature with respect to the second affirmative defense. Accordingly, plaintiff's motion to dismiss the second affirmative defense is denied.
The fourth affirmative defense is for “unfair dealing.” With respect to this affirmative defense, the answer states,
Plaintiff intentionally failed to act in good faith or to deal fairly with this Defendant by failing to follow the applicable standards of residential single family mortgage lending and servicing as described in these Affirmative Defenses thereby denying this Defendant access to the residential mortgage servicing protocols applicable to the subject note and mortgage.
Pursuant to CPLR 3013, this affirmative defense is insufficiently particular to give the court and parties notice of the transactions that are intended to be proved or the material elements of the affirmative defense. The “standards of residential single family mortgage lending” are not identified and may not be applicable to this multiple unit home. Further, the defense appears duplicative of the third affirmative defense. Accordingly, the fourth affirmative defense is dismissed (see CPLR 3013 ).
The sixth affirmative defense is for “unclean hands.” In the answer, defendants allege that,
[T]he plaintiff knew that the Weekes had not been able to make their required monthly payments for years prior to their alleged acquisition. Because the Weekes were substantially in arrears, the plaintiff would have known that the mortgage was not free of an uncured default.... Insasmuch as Plaintiff purchased a nonperforming asset it cannot complain of the fact that it has received exactly what it purchased.
The sixth affirmative defense must be dismissed as “the doctrine of unclean hands is not a recognized defense to a foreclosure action” (JP Morgan Chase Bank v. Janet Hamilton, 2013 N.Y. Misc. LEXIS 6564 [Sup Ct, New York County 2013]; Vanderbilt Mtge. & Fin. Inc. v. Davis, 2013 N.Y. Slip Op 32117[U] [Sup Ct, Suffolk County 2013], citing Jo Ann Homes at Bellmore, Inc. v. Dworetz, 25 N.Y.2d 112 [1969] ).
In opposition to the motion, defendants also argue that the plaintiff failed to negotiate in good faith pursuant to CPLR § 3408. Defendants contend that they proposed that plaintiff accept a payoff amount of $250,000 in order for the defendants to obtain a reverse mortgage, and that the plaintiff declined the proposal. At the time of the offer, the amount owed on the loan purportedly was in excess of $570,000. As defense counsel concedes, plaintiff appeared at multiple settlement conferences and considered defendants' offer, which is substantiated by a letter from plaintiff's counsel to defendants' counsel, dated February 20, 2014, requesting an approval letter showing Sybil's approval for the reverse mortgage, the name and address of the lender, and the maximum amount of funds that Sybil would receive from the reverse mortgage. Defendants did not supply such letter. Defendants fail to indicate how the plaintiff violated CPLR 3408.
The plaintiff's motion to amend the caption is granted. The caption shall now read:
X
WELLS FARGO BANK, N.A., AS CERTIFICATE
TRUSTEE (NOT IN ITS INDIVIDUAL CAPACITY
BUT SOLELY AS CERTIFICATE TRUSTEE), IN
TRUST FOR REGISTERED HOLDERS OF VNT
TRUST SERIES 2010–2,
Plaintiff,
against
SYBIL WEEKES, JASON WEEKES, CAPITAL
ONE BANK (USA), MARIE L. PRINCIVIL,
MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC., ESTELLE FULLER, CAROL
BOBB,
Defendants.
X
As there have been no appearances or answers filed by defendants Capital One Bank (USA) N.A., Marie L. Princivil, Mortgage Electronic Registration Systems, Inc., Estelle Fuller, and Carol Bobb, they are held to be in default.
CONCLUSION
The plaintiff's motion for summary judgment is granted only as to the dismissal of affirmative defenses four, six, seven and the defendants' counterclaim, the amending of the caption, and the finding of default. The motion is otherwise denied.
A conference is scheduled for January 6, 2015. The parties will update the court on the status of discovery at that time and a hearing date may be scheduled at that time.
This constitutes the decision and order of the court.