HSBC Mtge. Corp.

(USA) v Morocho 2011 NY Slip Op 51023(U) [31 Misc 3d 1237(A)] Decided on May 24, 2011 Supreme Court, Queens County McDonald, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 24, 2011 Supreme Court, Queens County

HSBC Mortgage Corporation (USA) 2929 Walden Avenue Depew, NY 14043, Plaintiff, against Celina Morocho, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR LEND AMERICA, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR HSBC MORTGAGE CORPORATION (USA), NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, ALONSO PEREZ, LUZ GAVYRYA, SUSAN VEGA, , Defendants.

28995/2008 Robert J. McDonald, J.

The following papers numbered 1 to 20 were read on this motion by the defendant, CELINA MOROCHO, for an order dismissing the action pursuant to CPLR 3211(a)(10) and CPLR 1001 for failing to join a necessary party; pursuant to CPLR 3211(a)(7) for failing to state a cause of action; pursuant to CPLR 3211(a)(1) based upon a defense founded on documentary evidence; pursuant to 3211(a)(3) for lack of standing; pursuant to 5015(a)(3) on the ground of fraud, misconduct and misrepresentation: Papers Numbered Order to Show Cause-Affidavits-Exhibits................1 - 6 Affirmation in Opposition-Affidavits-Exhibits..........7 - 11 Reply Affirmation.....................................12 - 15 Sur-Reply Affirmation.................................16 - 20 This is defendant Celina Morocho's motion, commenced by order to show cause, pertaining to the foreclosure of the property located at 31-22 104th Street Elmhurst, New York. Based upon the record before this court the defendant, Celina Morocho, defaulted on her mortgage when she failed to make her monthly mortgage payments beginning on August 1, 2008. Plaintiff subsequently accelerated the defendant's mortgage and brought an action to foreclose its mortgage by filing a lis pendens and a summons and complaint on December 2, 2008.

Defendant, Celina Morocho, the record owner of title of the premises and the mortgagor, was served on December 5, 2008 pursuant to CPLR 308(2) by leaving a copy of the summons and complaint with a person of suitable age and discretion and by mailing a copy of the summons and complaint to the defendant's address (see supplemental affidavit of service dated December 14, 2004 executed by process server Michael Ballato). When no answer had been interposed, the plaintiff moved, ex parte, for an Order of Reference which was entered on March 18, 2008, appointing a referee to compute the sums owed. After the referee issued his report, plaintiff moved for a Judgment of Foreclosure and Sale which was granted by Judgment dated May 27, 2009. Pursuant to the Judgment of Foreclosure, the defendant was in arrears in the amount of $647,990.18 as of May 29, 2009. Both the Order of Reference and Judgment of Foreclosure were served on the defendant On March 18, 2009 and June 12, 2009 respectively. On December 2, 2009, defendant moved by order to show cause for an order pursuant to CPLR 3211(a) and 5015(a), vacating the Judgment of Foreclosure and Sale on the ground that she was never properly served. By decision and order dated January 25, 2010 this Court denied the motion on the ground that the defendant failed to provide both a reasonable excuse for default and a meritorious defense. Counsel now moves in this second Order to Show Cause to dismiss the action based upon certain affirmative defenses pursuant to CPLR 3211(a), CPLR 1001 and CPLR 5015 on the ground that the plaintiff does not now own the loan and did not own the loan at the time the action was commenced. The foreclosure sale has been temporarily stayed pending the determination of the

motion. Counsel concedes that the plaintiff owned the loan on December 2, 2006 as it was the original lender, however, counsel contends that shortly after the loan was executed it was sold to GMAC Mortgage. Counsel also contends that the plaintiff and its attorneys Steven J. Baum, PC fraudulently misled this Court in representing that it owned the loan when the action was [*2]commenced. On that basis the defendant moves pursuant to CPLR 3211(a)(10) and CPLR 1001 to dismiss the action on the ground that GMAC was not named as a necessary party. Counsel contends that "the plaintiff deliberately and with scienter, chose to manufacture a fraudulent assignment, rather than name GMAC MORTGAGE in this action." Counsel also contends that because the mortgage and note are owned by GMAC MORTGAGE that the plaintiff has brought this action without ownership of the mortgage and therefore, pursuant to CPLR 3211(a)(7), the action fails to state a cause of action. Counsel also contends that the plaintiff lacked standing to commence the action and therefore the action should be dismissed pursuant to 3211(a)(1) and CPLR 3211(a)(3). Counsel contends that although the defendant failed to raise the issue of lack of standing in her initial order to show cause from December 3, 2009 that the plaintiff should be equitably estopped from asserting that said defense was waived. Counsel contends that equitable estoppel applies because, "HSBC never notified the defendant that her mortgage and note were transferred to GMAC MORTGAGE." Counsel states that the transfer of the mortgage and note to GMAC was not filed with the Queens County Clerk and it does not appear anywhere in the public record. Counsel states in his affirmation that the plaintiff deliberately concealed this fact.

Counsel also contends that the action should be dismissed pursuant to CPLR 3211(a)(1) in that the assignment from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR HSBC MORTGAGE CORPORATION (USA) to HSBC MORTGAGE CORPORATION (USA) does not strip ownership from GMAC corporation. Counsel also contends that the assignment is not valid in that it only assigns the mortgage and not the note and that without the assignment of the mortgage and the note the plaintiff does not have standing to commence the action. The defendant also contends that the September 10, 2007 assignment from MERS to HSBC is defective in that there was a failure to have and file a power of attorney to assign a corporate resolution to dispose of the property. Lastly, counsel contends that the assignment executed by Elpiniki Bechakas, Esq. as Assistant Secretary and Vice President of MERS is fraudulent as Ms. Bechakas is a member of the plaintiff's firm and lives and works in Erie New York whereas MERS is located in Florida. Counsel contends that the action is fraudulent as the grantee, GMAC MORTGAGE, has not given Elpiniki Bechakas or MERS a power of attorney. [*3] Counsel also submits two affidavits from the defendant, Ms. Morocho, one dated September 23, 2010, and one dated January 31, 2011, both stating that on November 1, 2006 she executed a mortgage and note with HSBC MORTGAGE CORPORATION(USA) and was never notified that they transferred the loan to any other entity. She states however, that on September 21, 2010 at 3:45 p.m. when she called HSBC at the request of her attorney, Mr. Lederman, and asked if they owned her mortgage and note, a representative named "Olga" stated that HSBC they did not own my loan, and that my loan was owned by GMAC MORTGAGE."

Jennifer M. McCann, Esq., counsel for the plaintiff, submits an affirmation in opposition to the motion in which she states that pursuant to CPLR 3211(e), the defendant has waived all of the affirmative defenses raised based upon the fact that she defaulted in answering the summons and complaint and failed to raise any meritorious defenses in her first order to show cause, dated December 3, 2009. Pursuant to CPLR 3211(e) motions based upon CPLR 3211(a)(1), defense based upon documentary evidence and 3211(a)(3), lack of standing are waived if not brought in a prior motion. Counsel also contends that the Second Department has held in Wells Fargo Bank Minn. v. Mastropaolo, 42 AD3d 239 [2d Dept. 2007], that if a defendant fails to raise the issue of standing as an affirmative defense in an answer or pre-answer motion to dismiss, that the issue of standing is waived pursuant to CPLR 3211(e). Although defense counsel claims that plaintiff should be equitably estopped from asserting waiver of standing, plaintiff contends that equitable estoppel is not applicable herein to the issue of standing because there was no showing that the plaintiff changed her position or failed to make the proper motion based upon misleading information supplied by the plaintiff. Counsel also contends that defendant has failed to come forward with any documentary evidence whatsoever to show that GMAC was the holder of the note and mortgage on the date of the commencement of the action. Defendant's contention with regard to GMAC's ownership of the note is based solely upon a statement in Ms. Morocho's affidavit that she was told that GMAC held the mortgage. Moreover, counsel contends that GMAC is not a necessary party as the documentary evidence indicates that the defendant executed a note and mortgage contract with the plaintiff HSBC Mortgage Corp., on November 1, 2006 in the amount of $620,000. Counsel also submits evidence that the mortgage and note were assigned to the plaintiff who had the right to

commence and maintain the action on December 2, 2008. As the plaintiff had proper standing at the time the action was commenced, counsel argues that the complaint states a valid cause of action for foreclosure. With respect to the Defendant's claim of fraud, [*4]counsel contends that the original assignment was executed with MERS as the assigneee in name only for the purpose of recording and that MERS reassigned the mortgage and note back to HSBC Mortgage Corporation. Further, counsel submits a copy of the MERS Corporate Resolution appointing Ms. Bechakas as an Assistant Secretary and Vice President for the purpose of executing mortgage documents. In reply the defendant contends that the gravamen of the defendant's motion is that the plaintiff HSBC has no valid claim against the defendant as they do not own the mortgage and note upon which the foreclosure action is based. The basis of the defendant's knowledge in this regard is a phone conversation which took place on September 21, 2010 between the plaintiff and one "Olga" of the customer service department at HSBC who informed the plaintiff that the loan is owned by GMAC Mortgage. In addition, the defendant claims in his reply that he does not dispute that a 3211 motion is improper at this time as the arguments raised could have been raised in the first motion and were therefore waived pursuant to CPLR 3211(e). Counsel states however, that this is a motion brought pursuant to CPLR 5015. Upon review of the defendant's order to show cause, plaintiff's opposition, defendant's reply and plaintiff's sur-reply thereto, this court finds that the defendant's motion for an order dismissing the action pursuant to CPLR 3211 or vacating the Judgment of Foreclosure and Sale dated May 27, 2009 pursuant to CPLR 5015 is denied.

As stated by the defendant's counsel, the gravamen of the defendant's motion is that HSBC CORPORATION (USA) is not the owner of the mortgage and note upon which the instant action is predicated. Defendant claims, based upon a telephone call she made to a service representative that GMAC Corporation owns her loan. The defendant, however, has not provided any documentary evidence to support that claim nor has defendant provided the date on which GMAC allegedly became the owner of the mortgage and note. Counsel only submits that it was sometime after the mortgage was executed with HSBC. Therefore, this Court finds that the defendant has failed to provide a sufficient factual basis other than speculative and conclusory allegations for her contention that the mortgage and note were owned by GMAC at the time the action was commenced. Moreover, the plaintiff submitted documentary evidence, in opposition to the motion, demonstrating that HSBC Mortgage Corporation (USA), the plaintiff herein, was the actual entity with whom the defendant executed the Note and [*5]Mortgage on November 1, 2006. The mortgage was executed with the plaintiff as original lender with MERS as nominee for the plaintiff. Further the assignment from MERS in November, 2008 indicates that plaintiff was the record holder of the Note and Mortgage prior to the date this action was commenced and thus had standing to commence the action. Defendant has also not supplied any documentary evidence pursuant to CPLR 3211(a)(1) which would demonstrate that GMAC, rather than plaintiff, is the holder of the note and mortgage (see Countrywide Home Loans, Inc. v Gress, 68 AD3d 709 [2d Dept. 2009][where the plaintiff is the assignee of the mortgage and the underlying note at the time the foreclosure action was commenced, the plaintiff has standing to maintain the action]; U.S. Bank, N.A. v Collymore,68 AD3d 752 [2d Dept. 2009]; Fannie Mae v Youkelsone, 303 AD2d 546 [2d Dept. 2003]; First Trust Nat'l Ass'n v. Meisels, 234 AD2d 414 [2d Dept. 1996]). Here although the plaintiff's counsel states in

her sur-reply that GMAC may presently be the investor of the loan, the documents submitted indicate that HSBC was the holder of the loan at the time the action was commenced. "In order to commence a foreclosure action, the plaintiff must have a legal or equitable interest in the mortgage (see Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204 [ ]). A plaintiff has standing where it is both (1) the holder or assignee of the subject mortgage and (2) the holder or assignee of the underlying note, either by physical delivery or execution of a written assignment prior to the commencement of the action with the filing of the complaint" (Aurora Loan Servs., LLC v Weisblum, 2011 NY Slip Op 041 [2d Dept. 2011]; also see Countrywide Home Loans, Inc. v. Gress, 68 AD3d 709 [ ]; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674 [2nd Dept. 2007]). In addition, this Court finds that the defendant waived any defense that the plaintiff lacked standing to commence the foreclosure action by failing to interpose an answer or file a timely pre-answer motion which asserted the defense of standing or to raise that issue in the defendant's first order to show cause filed after the Judgment of Foreclosure was executed (see CPLR 3211(e); US Bank v Eaddy, 79 AD3d 1022 [2d Dept. 2010]; Countrywide Home Loans Servicing, LP v Albert, 78 AD3d 983 [2d Dept. 2010]; Deutsche Bank Natl. Trust Co. v Hussain, 78 ASD3d 989 [2d Dept. 2010]; HSBC Bank, USA, v Dammond, 59 AD3d 679 [2d Dept. 2009]). As explained by the Appellate Division, Second Department, in Wells Fargo Bank Minnesota, N.A. v Mastropaola, 42 AD3d 242-243 [2d Dept. 2003], the defense of lack of standing is waivable as it affects only a court's power to render a judgment on the merits for the plaintiff and does not implicate the court's jurisdiction or competence to entertain an action. [*6]

Therefore, as the plaintiff, as the holder of the note and mortgage at the time the action was commenced had proper standing and as the defendant failed to prove that GMAC was an indispensable party when the action was commenced, the defendant's motion to dismiss the complaint for failure to join all necessary parties and to apply the doctrine of equitable estoppel is denied. This court also finds that the complaint sufficiently pleads a cause of action for foreclosure. "On a motion to dismiss a complaint, the pleading is to be afforded a liberal construction. The court is to determine only whether the facts as alleged fit within any cognizable legal theory. The facts pleaded are presumed to be true and are to be accorded every favorable inference (see Lucia v Goldman,68 AD3d 1064 [2d Dept. 2008]; Salvatore v Kumar, 45 AD3d 560 [2d Dept. 2007]). Here, the complaint was sufficient to set forth a cause of action for foreclosure. The complaint sufficiently alleges that the plaintiff is the holder of the note and mortgage for which the defendant is in default (see Wells Fargo Bank v Cohen, 80 AD3d 753 [2d Dept. 2011]). Although plaintiff's counsel states in her surreply that GMAC is the investor of the loan, the investor status would not effect the plaintiff's showing that plaintiff was the holder of the note and mortgage and had a legal interest in the mortgage on the date the action was commenced. Lastly, this court finds that the Defendant has failed to demonstrate that any of the documents or actions on the part of the plaintiff were fraudulent or that Ms. Bechakas had a conflict of interest as counsel has affirmed that Steven Baum's office does not represent MERS in this action. Accordingly, for all of the above stated reasons, the defendant's motion to dismiss the complaint is denied in its entirety.

The temporary stay of the foreclosure sale contained in the order to show cause is hereby vacated. Dated: May 24, 2011 Long Island City, NY ______________________________ ROBERT J. MCDONALD J.S.C.
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