U.S. Bank Nat'l Ass'n v. Davis

196 A.D.3d 530

151 N.Y.S.3d 418

US BANK NATIONAL ASSOCIATION, etc., respondent,

v.Ray Osborn DAVIS, et al., appellants, et al., defendants.

2017–12978

Index No. 17823/10

Supreme Court, Appellate Division, Second Department, New York.

Submitted—April 13, 2021

July 7, 2021

Berg & David PLLC, Brooklyn, N.Y. (Abraham David of counsel), for appellants.

Goodwin Procter, LLP, New York, N.Y. (Allison J. Schoenthal and Richard A. Sillett of counsel), for respondent.

REINALDO E. RIVERA, J.P., SYLVIA O. HINDS–RADIX, COLLEEN D. DUFFY, LINDA CHRISTOPHER, JJ.

DECISION & ORDER

In an action to foreclose a mortgage, the defendants Ray Osborn Davis and 964–966 Myrtle, LLC, appeal from a judgment of foreclosure and sale of the Supreme Court, Kings County (Lawrence Knipel, J.), dated June 28, 2017. The judgment of foreclosure and sale, upon (1) an order of the same court (Peter P. Sweeney, J.), dated December 17, 2015, granting the plaintiff's motion, inter alia, for summary judgment on the complaint insofar as asserted against the defendant Ray Osborn Davis, to strike his answer, and for an order of reference, (2) an order of the same court (Peter P. Sweeney), also dated December 17, 2015, among other things, granting the same relief to the plaintiff and appointing a referee to compute the amount due to the plaintiff, and (3) an order of the same court (Lawrence Knipel, J.), dated June 14, 2017, granting the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale, and denying the cross motion of the defendants Ray Osborn Davis and 964–966 Myrtle, LLC, to dismiss the complaint insofar as asserted against them, inter alia, directed the sale of the subject property.

ORDERED that the judgment of foreclosure and sale is reversed, on the law, with costs, the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale is denied, and that branch of the cross motion of the defendants Ray Osborn Davis and 964–966 Myrtle, LLC, which was pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against the defendant 964–966 Myrtle, LLC, as abandoned is granted, and the order dated June 14, 2017, is modified accordingly.

On March 29, 2006, the defendant Ray Osborn Davis executed and delivered to First United Mortgage Banking Corp. (hereinafter First United) a note promising to repay a loan in the amount of $624,000, and a mortgage securing the loan against real property located at 964 Myrtle Avenue in Brooklyn. By deed dated June 7, 2006, Davis transferred his interest in the property to the defendant 964–966 Myrtle, LLC (hereinafter Myrtle LLC), a company he registered with the New York State Department of State in May 2006. On or about July 1, 2006, the plaintiff entered into a pooling and servicing agreement (hereinafter PSA), pursuant to which the plaintiff became trustee of a trust which holds the defendant's mortgage.

On July 19, 2010, the plaintiff commenced this action against, among others, Davis and 964-966 Myrtle LLC (hereinafter together the defendants), alleging, inter alia, that Davis had defaulted on his mortgage by failing to make the payment due October 1, 2009, and all payments due thereafter. Davis joined issue by interposing, first, a form answer, pro se, and thereafter, an answer and counterclaim by his attorney, which the plaintiff agreed to accept pursuant to a stipulation. Myrtle LLC failed to answer the complaint or otherwise appear in the action.

In August 2013, the plaintiff moved, inter alia, for summary judgment on the complaint insofar as asserted against Davis, to strike his answer, and for an order of reference. Davis opposed the motion.

In an order dated December 17, 2015, the Supreme Court, inter alia, granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against Davis, to strike his answer, and for an order of reference. In a second order, also dated December 17, 2015, the court granted the same relief to the plaintiff and appointed a referee to calculate the amount due to the plaintiff.

In September 2016, the plaintiff moved to confirm the referee's report and for a judgment of foreclosure and sale. The defendants opposed the motion and cross-moved, inter alia, to dismiss the complaint. Among other things, the defendants sought dismissal of the complaint insofar as asserted against Myrtle LLC pursuant to CPLR 3215(c) based upon the plaintiff's failure to move for leave to enter a default judgment against it within one year of its default in answering.

In an order dated June 14, 2017, the Supreme Court granted the plaintiff's motion and denied the defendants’ cross motion, finding, inter alia, that the excuse proffered by the plaintiff for its failure to timely move for leave to enter a default judgment against Myrtle LLC was reasonable. In a judgment of foreclosure and sale dated June 28, 2017, the court, inter alia, directed the sale of the subject property. The defendants appeal.

A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note (see Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d 355, 361, 12 N.Y.S.3d 612, 34 N.E.3d 363 ). "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" ( U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 754, 890 N.Y.S.2d 578 ; see Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d at 361–362, 12 N.Y.S.3d 612, 34 N.E.3d 363 ; Citimortgage, Inc. v. Laupot, 190 A.D.3d 680, 135 N.Y.S.3d 889 ). Here, by submitting copies of excerpts from the PSA, and its attached mortgage loan schedule, which included the subject mortgage loan, the plaintiff established, prima facie, that, as of July 1, 2006, the plaintiff, as trustee under the PSA, was an assignee of the mortgage loan and "the lawful owner of the note" ( Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d at 361, 12 N.Y.S.3d 612, 34 N.E.3d 363 ). As such, it had standing to commence this action on July 19, 2010 (see id. ; Wilmington Trust Co. v. Walker, 149 A.D.3d 409, 410, 51 N.Y.S.3d 64 ).

In opposition, the defendants failed to raise a triable issue of fact. Their assertions that a subsequent assignment of mortgage was invalid, and that the PSA did not prove the physical delivery of the note, are irrelevant in light of the proof of assignment by the terms of the PSA.

Contrary to the defendants’ contention, as the record reflects that the mortgage loan was not a "home loan" subject to the notice requirements of RPAPL 1304, the plaintiff was not required to comply with the statutory notice provisions of RPAPL 1304 (see RPAPL 1304[5] ; Federal Natl. Mtge. Assn. v. Onuoha, 172 A.D.3d 1170, 1172, 102 N.Y.S.3d 214 ; HSBC Bank USA, N.A. v. Oscar, 161 A.D.3d 1055, 1056–1057, 78 N.Y.S.3d 428 ; HSBC Bank USA, N.A. v. Ozcan, 154 A.D.3d 822, 825, 64 N.Y.S.3d 38 ).

CPLR 3215(a) provides that "[w]hen a defendant has failed to appear, plead or proceed to trial ... the plaintiff may seek a default judgment against him [or her]." However, pursuant to CPLR 3215(c), "[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after [a defendant's] default, the court shall not enter judgment but shall dismiss the complaint as abandoned ... unless sufficient cause is shown why the complaint should not be dismissed." "The language of CPLR 3215(c) is not, in the first instance, discretionary, but mandatory, inasmuch as courts ‘shall’ dismiss claims ( CPLR 3215[c] ) for which default judgments are not sought within the requisite one-year period, as those claims are then deemed abandoned" ( Giglio v. NTIMP, Inc., 86 A.D.3d 301, 307–308, 926 N.Y.S.2d 546 ; see Wilmington Trust, NA v. Gawlowski, 189 A.D.3d 1521, 1522, 134 N.Y.S.3d 730 ; American Home Mtge. Acceptance, Inc. v. Lubonty, 188 A.D.3d 767, 136 N.Y.S.3d 130 ). "Failure to take proceedings for entry of judgment may be excused, however, upon a showing of sufficient cause, which requires the plaintiff to demonstrate that it had a reasonable excuse for the delay in taking proceedings for entry of a default judgment and that it has a potentially meritorious action" ( Wilmington Trust, NA v. Gawlowski, 189 A.D.3d at 1522, 134 N.Y.S.3d 730 [internal quotation marks omitted]; see HSBC Bank USA, N.A. v. Jean, 165 A.D.3d 632, 634, 85 N.Y.S.3d 125 ). The determination of what constitutes a reasonable excuse for a delay in seeking a default judgment is a matter addressed to the sound discretion of the Supreme Court (see Select Portfolio Servicing, Inc. v. Marshall, 173 A.D.3d 1097, 1098, 100 N.Y.S.3d 554 ; Park Lane N....