B & H Fla. Notes LLC v. Ashkenazi

2022 NY Slip Op 30445(U)

B AND H FLORIDA NOTES LLC, Plaintiff, v. ALEXANDER ASHKENAZI, W89D5 LLC, BCN DEVELOPMENT NY LLC.HERTZL MOEZINIA, THE 251 CONDOMINIUM C/O NEW BEDFORD MANAGEMENT CORP., JOAN UNGARO Defendant.

Motion Seq. No. 002

Index No. 850141/2019

Supreme Court, New York County

February 4, 2022

Unpublished Opinion

DECISION + ORDER ON MOTION

FRANCIS KAHN, III, A.J.S.C.

The following e-filed documents, listed by NYSCEF document number (Motion 002) 144, 145, 146, 147, 148, 149, 150, 151, 152 153, 154, 155, 156, 158, 159, 160, 161, 162, 163, 164, 165 166; were read on this motion to/for JUDGMENT - SUMMARY.

Upon the foregoing documents, the motion and cross-motion are determined as follows:

In this action, Plaintiff B and H Florida Notes LLC ("B and H") seeks to foreclose on a mortgage on real property located at 251 West 89th Street, Unit 5D, New York, New York. Issue was joined separately by Defendants W89D5 LLC ("W89D5") and Board of Managers of the 251 Condominium s/h/a "The 251 Condominium c/o New Bedford Management Corp." ("251 Condo"). The facts underlying this and the several related actions were recounted by the Court in its decision and order dated October 19, 2021 (NYSCEF Doc No 157) and will only be repeated here as necessary.

In that order, the branch of Plaintiff s motion for summary judgment on its cause of action for foreclosure and appointment of a referee was denied as a prima facie case was not proffered. However, the branch of the motion to dismiss Defendant W89D5's affirmative defenses was granted to the extent that the second, fifth, sixth, seventh, eighth, ninth twelfth, thirteenth, fourteenth, eighteenth, nineteenth twenty-first, twenty-second, twenty-third, twenty-fourth and twenty-fifth affirmative were dismissed.

While the foregoing motion was subjudice Defendant W89D5 moved for summary judgment dismissing Plaintiffs complaint. Plaintiff opposed the motion and cross-moved to reargue the Court's October 19, 2021 decision. Opposition to the cross-motion was not filed on NYSCEF.

As Defendant W89D5 is now the movant on a motion for summary judgment, it was required to' establish prima facie that one of the essential elements of Plaintiff s cause of action for foreclosure cannot be met or that one of its remaining affirmative defenses defeats the complaint as a matter of law (see U.S. Bank NA v Pickering-Robinson, 197 A.D.3d 757, 763 [2d Dept 2021]; Bank of NY Mellon v Alli, 175 A.D.3d 1472, 1473 [2d Dept 2019]). Proof supporting a prima facie case on a motion for summary judgment must be in admissible form (see CPLR §3212[b]; Tri-State Loan Acquisitions III, LLC v Litkowski, 172 A.D.3d 780 [1st Dept 2019]).

In support of the motion, Defendant W89D5 posited as follows [1] Plaintiff lacked standing when the ! action was commenced, [2] the action is barred by the statute of limitations, [3] the action was commenced in violation of RPAPL §1301, [4] the action is barred by the parties' stipulation in the Michigan litigation and [5] the action is barred by the doctrine of champerty.

When standing is raised as a defense to a mortgage foreclosure action, it is ordinarily Plaintiffs obligation to prove same to be entitled to foreclose (see eg Wells Fargo Bank, N.A. v Tricario, 180 A.D.3d 848 [2nd Dept 2020]). However, as the movant seeking summary judgment it is Defendant W89D5's obligation to demonstrate prima facie Plaintiff lacked standing as a matter of law (see Wilmington Sav. Fund Socy., FSB v Matamoro, 200 A.D.3d 79 [2d Dept 2021]; DLJMtge. Capital v Mahadeo, 166 A.D.3d 512 [1st Dept 2018]). Standing in a foreclosure action is established in one of three ways: [1] direct privity between mortgagor and; mortgagee, [2] physical possession of the note prior to commencement of the action that contains an; indorsement in blank or bears a special indorsement payable to the order of the plaintiff either on its face or by allonge, and [3] assignment of the note to Plaintiff prior to commencement of the action (see eg Wells Fargo Bank, N.A. v. Tricario, 180 A.D.3d 848 [2d Dept 2020]; Wells Fargo Bank, NA v Ostiguy, 127 A.D.3d 1375 [3d i Dept 2015]). As such, Movant needed to demonstrate prima facie "that the plaintiff was not in direct privity with them, was not in physical possession of the note indorsed to it or in blank at the time of the commencement of the action, and that the assignment of the note ... to the plaintiff was invalid." (Wilmington Sav. Fund Socy., FSB v Matamoro, supra). "To defeat a defendant's motion, the plaintiff has no burden of establishing its standing as a matter of law" (Deutsche Bank Trust Co. Ams. v Vitellas, 131 A.D.3d 52, 60 [2d Dept 2015]).

As to the first category of standing, there is no dispute that Plaintiff is not the original lender and not in privity with Defendant W89D5. With respect to the second category of standing, "[f]he attachment of a properly endorsed note to the complaint may be sufficient to establish, prima facie, that the plaintiff is the j holder of the note at the time of commencement" (Deutsche Bank Natl. Trust Co. v Webster, 142 A.D.3d 636, { 638 [2d Dept 2016]; cf. JP Morgan Chase Bank, N.A. v Grennan, 175 A.D.3d 1513 [2d Dept 2019]). However, "mere physical possession of a note at the commencement of a foreclosure action is insufficient to confer standing or to make a plaintiff the lawful holder of a negotiable instrument for the purposes of enforcing the note" (U.S. Bank N.A. v Moulton, 179 A.D.3d 734, 737 [2d Dept 2020]). "Holder status is established where the plaintiff possesses a note that, on its face or by allonge, contains an indorsement in blank or bears a special ₍ indorsement payable to the order of the plaintiff (Wells Fargo Bank, NA v Ostiguy, supra at 1376 [citations omitted]; see also Federal Natl. Mtge. Assn. . Hollien, 198 A.D.3d 615, 617 [2d Dept 2021]). The indorsement must be made either on the face of the note or by an allonge "so firmly affixed thereto as to become a part 'II thereof (UCC §3-202[2]; see also Wells Fargo Bank, N.A. v Maleno-Fowler, 194 A.D.3d 1094 [2d Dept 2021]).

In support of its claim that the allonges in this case were not appropriately affixed to the note, Movant' argues its prima facie case is demonstrated by: [1] Plaintiffs motion for summary judgment which had the note and allonges annexed as separate exhibits, [2] Plaintiffs introduction of the note and allonge as separate exhibits at the trial of the prior foreclosure action, [3] the face of the allonge endorsing the note to Plaintiff, and [4] Plaintiffs complaint which had the allonges annexed before the note.

Annexing copies of the note and allonges as separate or misordered exhibits does not ipso facto mean the originals were disconnected or likewise misordered. It is obvious that even firmly affixed documents are capable of being photocopied. Further, this evidence does not verify that the note and allonges were not firmly affixed at the time they were delivered or when the action was commenced. The purported absence of hole punches in the face of the allonge endorsing the note to Plaintiff, while probative, is hardly conclusive of the, state of the note and allonges when the action was commenced. The exhibits introduced and referenced at the 2013 trial of the prior action to foreclose on the within mortgage are similarly inconclusive. Copies of the note and allonges, which were contained in Plaintiffs trial book and were introduced into evidence with Defendant' consent, does not disprove the originals were not firmly affixed. The trial judge's comment about the documents shown to the witness is also not definitive as the Court noted the copies proffered were "not stapled now" (emphasis added).

Defendant W89D5 also posits that Plaintiff is collaterally estopped from establishing the validity of the allonge transferring the note to Plaintiff based upon a finding by the Appellate Division, First Department^[1] affirming Justice Engoron's trial decision. Movant argues this finding is decisive on the issue of standing in this matter.

The doctrine of collateral estoppel prevents a party from relitigating an issue that was "raised, necessarily decided and material in the first action", provided the party had a full and fair opportunity to litigate the issue (see Parker v Blauvelt Volunteer Fire Co., 93 N.Y.2d 343, 349 [1999]; Ryan v New York Tel Co., 62 N.Y.2d 494, 500 [1984]; Sclafani v Story Book Homes, Inc., supra). The doctrine is an equitable defense "grounded in the facts and realities of a particular litigation, rather than rigid rules" (Buechel v Bain, 97 N.Y.2d 295, 303 [2001]). "[T]he burden rests upon the proponent of collateral estoppel to demonstrate the identicality and decisiveness of the issue, while the burden rests on the opponent to establish the absence of a full and fair opportunity to litigate the issue in [the] prior action or proceeding" (Ryan v New York Tel Co., supra at 501).

Justice Engoron's entire decision, dated April 17, 2019, is as follows:

After a non-jury trial in this matter held on December 12-13, 2018, this Court finds as a matter of fact that plaintiff did not physically possess either the subject mortgage of note at the time it commenced this action and therefore lacks standing to do so. Thus, the case must be dismissed, mooting all other issues, and the clerk is hereby directed to enter a judgment in favor of defendants and against plaintiff, dismissing the instant action without prejudice (see CPLR 205).

The portion of the Appellate Division, First Department's affirmance that Defendant W89D5 relies on i as follows:

The trial evidence establishes, at most, that the note was in the possession of Grand Pacific Holdings Corp. at that time, and there is no evidence showing that, as the complaint

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