FILED WESTCHESTER COUNTY CLERK 01/21/2016 1152 AM INDEX NO. 70104/2015 NYSCEF DOC. NO. 59 RECEIVED NYSCEF 01/21/2016 SUPREME COURT OF THE STATE OF NEW YORK WESTCHESTER COUNTY ------------------------------------X US BANK NATIONAL ASSOCIATION AS TRUSTEE OF J.P. MORGAN ALTERNATIVE LOAN TRUST 2007-A2, -against- Plaintiff. FRANCIS M CAESAR, et al., Defendants. ------------------------------------X Ind. No. 70104/2015 REPLY MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF S MOTION TO AMEND CAPTION TO PROPERLY NAME PLAINTIFF AND/OR FOR SUBSTITUTION BALLARD SPAHR LLP 919 3rd Avenue New York, NY 10022 Telephone 212.223.0200
Table of Contents Page I. INTRODUCTION... 1 II. ARGUMENT... 2 A. Amendment is Proper under NYCPLR 2001... 2 1. HSBC Trust is a Party to this Action.... 3 2. Defendant Cannot Allege any Prejudice or Intent... 4 B. PHH is Not Estopped from Correcting the Caption... 6 C. NYCPLR 1021 Authorizes The Court To Substitute The HSBC Trust As Plaintiff.... 7 III. CONCLUSION... 9 i
TABLE OF AUTHORITIES CASES Page(s) Aurora Loan Servs., LLC v. Taylor, 25 N.Y. 3d 355 (2015)...3 Bank of America, N.A. v. O Donnell, 47 Misc. 3d 1210(A) (N.Y. Sup. Apr. 16, 2015)...4 Deutsche Bank Natl. Trust Co. v Barnett, 88 AD 3d 636, 931 NYS 2d 630 (2011)...3 Deutsche Bank Natl. Trust Co. v Torres, 45 Misc. 3d 1212(A) (N.Y. Sup. Ct. 2014)...8 First Cent. Sav. Bank v. 1467 Bedford Ave., LLC, 42 Misc. 3d 1205(A) (N.Y. Sup. Ct. 2013)...8 Francis Caesar v. PHH, et al., Index No. 6957 (2015) (Westchester County Supreme Court)...6 HSBC Mtge. Corp (USA) v Enobakhare, 2013 N.Y. Misc. LEXIS 4644 (N.Y. Sup. Ct. Oct. 10, 2013)...3 In re Vebeliunas, 332 F. 3d 85 (2d Cir. 2003)...7 Kosakow v. New Rochelle Radiology Assocs., 274 F. 3d 706 (2d Cir. 2001)...7 Port Vill. Hoa, Inc. v. Summit Associates, 33 Misc. 3d 39, 932 N.Y.S.2d 666 (App. Term 2011)...2 RBS Fin. v Montalbano, 2015 N.Y. Misc. LEXIS 2988 (N.Y. Sup. Ct. July 30, 2015)...3, 5 Wells Fargo Bank v. Zelaya, 47 Misc. 3d 1228(A), 18 N.Y.S. 3d 582 (N.Y. Sup. Ct. 2015)...4 ii
I. INTRODUCTION Defendant Francis M. Caesar s ( Defendant ) Response in Opposition (the Opposition ) to Plaintiff HSBC Bank USA, N.A. as Trustee of J.P. Morgan Mortgage Trust 2007-A2 s (the HSBC Trust ) Motion to Amend Caption to Properly Name Plaintiff and/or for Substitution (the Motion ) fails to raise any valid opposition to the Motion. Rather, the Opposition confirms that Defendant grossly misconstrues the significance of the erroneous assignment of mortgage. As set forth in the Motion, HSBC Trust is currently, and at all relevant times was, the proper plaintiff in the above captioned foreclosure action. Moreover, U.S. Bank National Association as Trustee of J.P. Morgan Alternative Loan Trust 2007-A2 ( U.S. Bank Trust ) is a non-party, as it has never held any interest in the Loan, and was merely mis-named as the plaintiff in this action due to an erroneous assignment of mortgage, which has since been corrected. The Motion establishes that HSBC Trust is entitled to have this error corrected under NYCPLR 2001. Moreover, to the extent the Court views the omission of HSBC Trust as more than a mere error, HSBC Trust is entitled to be substituted in this action pursuant to NYCPLR 1018-1021. Defendant s Opposition argues that HSBC Trust should not be permitted to substitute in this action because (1) U.S. Bank Trust has not assented to the Motion, see Opp. p. 5; (2) there is no evidence that PHH Mortgage Corporation ( PHH ) is authorized to verify the Motion on behalf of HSBC Trust, see id.; (3) Plaintiff is estopped from claiming that that HSBC Trust is the proper plaintiff due to its prior contradictory statements, see Opp. p. 6; (4) granting the Motion would be prejudicial to Defendant, see Opp. pp. 8-9; (5) HSBC Trust should not be permitted to substitute under NYCPLR 1021 because HSBC Trust is not the successor of US Bank Trust; and (6) the corrective assignment of mortgage is a nullity. See Opp. p. 13.
Defendant s Opposition lacks any legal or factual basis. The caption should be amended to reflect that HSBC Trust is the proper plaintiff in this action because (1) PHH has at all times acted as servicer on behalf of HSBC Trust, which has standing to foreclose notwithstanding the erroneous assignment of mortgage; (2) Defendant will suffer no prejudice as a result of the amendment; and (3) Defendant s allegation that PHH is estopped from correcting this error fails as a matter of law. Moreover, to the extent the erroneous assignment of mortgage is characterized as more than a mere error, HSBC Trust is entitled to an order substituting it as the plaintiff in this action pursuant to NYCPLR 1021. For these reasons, and as more fully discussed below, HSBC Trust s Motion should be granted. II. ARGUMENT A. Amendment is Proper under NYCPLR 2001. As noted in the Motion, amending the caption is clearly proper under NYCPLR 2001 where, as here, the proper plaintiff has been a party to this action since its commencement, albeit under a defective name. See Port Vill. Hoa, Inc. v. Summit Associates, 33 Misc. 3d 39, 43, 932 N.Y.S.2d 666, 669 (App. Term 2011) (stating that relief under NYCPLR 2001 is proper where (1) the right party plaintiff was in court but under a defective name [ ] [(2)] defendants have failed to demonstrate any prejudice arising from the misnomer and [ ] [(3) there [is not] any showing of an intent by plaintiff to defraud defendants.... ). In the Opposition, Defendant concedes that that HSBC Trust is the holder of the Note, see Opp. p. 8, and that PHH is the servicer of the Loan, see Opp. pp. 13-14, but claims that the substitution should not be allowed because PHH has failed to establish that it has authority to verify the Motion, and because U.S. Bank Trust has not assented to the Motion. See Opp. p. 5. Defendant also claims that he will be prejudiced by the substitution, because it will adversely affect his ability to pursue his counterclaims, as well as affirmative claims raised against PHH 2
and HSBC Trust in two related cases. See Opp. pp. 8-13. None of these arguments have any merit. 1. HSBC Trust is a Party to this Action. Defendant s Opposition fails to recognize that U.S. Bank Trust was never a real party in interest in this action. Rather, HSBC Trust, as the holder of the Note, is currently, and at all relevant times has been, the proper plaintiff. See Aurora Loan Servs., LLC v. Taylor, 25 N.Y. 3d 355 (2015) (stating that the holder of the note is deemed the owner of the underlying mortgage loan ); see also HSBC Mtge. Corp (USA) v Enobakhare, 2013 N.Y. Misc. LEXIS 4644, *7 (N.Y. Sup. Ct. Oct. 10, 2013) (finding that plaintiff, as the holder of the note, had standing notwithstanding an erroneous assignment of mortgage, since the mortgage passes with the [note] as an inseparable incident. ). The lack of a recorded assignment to HSBC Trust has no effect on its standing to foreclose. See Deutsche Bank Natl. Trust Co. v Barnett, 88 AD 3d 636, 931 NYS 2d 630 (2011) (failure to record an assignment prior to the commencement of the action is not necessarily fatal since an assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery ). Indeed, contrary to Defendant s assertion, it is the erroneous assignment of mortgage to U.S. Bank Trust that is a nullity, not the corrective assignment to HSBC Trust. See RBS Fin. v Montalbano, 2015 N.Y. Misc. LEXIS 2988, *6 (N.Y. Sup. Ct. July 30, 2015) ( a transfer of a mortgage without assignment of the underlying note or bond is a nullity [ ] [a] party does not have standing to bring a foreclosure action where it is listed as the mortgagee but was never the actual holder or assignee of the underlying note. ) (internal citations omitted). Therefore, HSBC trust is clearly the real party in interest, and Defendant s attempts to challenge the corrective assignment should be rejected. Moreover, PHH, as the servicer of the Loan, clearly had authority to commence this action on behalf of HSBC Trust, and Defendant s assertion to the contrary lacks merit. See 3
Wells Fargo Bank v. Zelaya, 47 Misc. 3d 1228(A), 18 N.Y.S. 3d 582 (N.Y. Sup. Ct. 2015) (rejecting as unmeritorious mortgagor s claims that servicer lacked authority to execute affidavit on behalf of the foreclosing plaintiff, as the fact [t]hat a loan servicer may testify on behalf of a foreclosing plaintiff is well established [ ] Indeed, a loan servicer has standing to prosecute an action for foreclosure in its own name even in the absence of ownership of holder status of the note and mortgage that follows as an incident to the note ) (citing RPAPL 1302; 1304); Bank of America, N.A. v. O Donnell, 47 Misc. 3d 1210(A) (N.Y. Sup. Apr. 16, 2015) (observing that in New York the legislature has recently conferred standing upon non-owner and non-holder mortgage loan servicers by statute. ). Here, PHH, as the servicer of the Loan, authorized the filing of this foreclosure lawsuit in the name of the foreclosing plaintiff. However, as discussed above, due to a clerical error in the assignment of mortgage, the complaint erroneously identified U.S. Bank Trust as the foreclosing plaintiff. Defendant concedes that PHH has acted as the servicer at all relevant times, see Opp. pp. 13-15, and in response to Defendant s voluminous discovery requests, plaintiff produced documents establishing that PHH remitted all payments made to HSBC Trust. Thus, the facts of this case demonstrate that HSBC Trust, not U.S. Bank Trust, is, and at all times has been, the proper plaintiff. Therefore, contrary to Defendant s assertion, the Motion does not seek to confer subject matter jurisdiction on a new party, see Opp. p. 8, and rather, seeks only to cure the technical infirmity caused by the erroneous assignment of mortgage. Accordingly, the caption should be amended pursuant to NYCPLR 2001 to accurately reflect that HSBC Trust is the proper plaintiff. 2. Defendant Cannot Allege any Prejudice or Intent It is also clear that Defendant has suffered no prejudice as a result of the misnaming of the plaintiff. In the Motion, Defendant fails to allege that he has suffered any 4
prejudice as a result of the error. Indeed, Defendant confirms that he had actual knowledge of the error sine at least April 12, 2013, when he filed his answer to the complaint. See Opp. p. 3. Rather, Defendant focuses on the alleged detrimental impact that correcting the error will have on his counterclaims, as well as his claims in two affirmative lawsuits pending in this Court. See Opp. pp. 8-12. Specifically, Defendant alleges that substitution will (1) allow [HSBC Trust] to assert [a] plethora of creditor defenses against Defendant s counterclaims[,] [which U.S. Bank Trust do not have], see Opp. p. 8; (2) allow HSBC Trust to cure its alleged default and statute of limitations problem in the quiet title action, see Opp. pp. 8-9; and (3) undermine Defendant s claims against PHH, which allegedly have merit precisely because [U.S. Bank [ ] is not Defendant s creditor. See Opp. p. 11. Defendant s argument makes it clear that he will not suffer any prejudice if the caption is amended, and rather, confirm that denying such relief would be greatly prejudicial to HSBC Trust, PHH, and non-party U.S. Bank Trust. Defendant argues that allowing the amendment would prejudice his ability to pursue his counterclaims because U.S. Bank Trust, as a non-party, is unable to raise any creditor defenses to his claims, which HSBC Trust would be able to raise. See Opp. p. 8. The absurdity of this argument is clearly evident because, among other reasons, U.S. Bank was never a party to this action. See Montalbano, 2015 N.Y. Misc. LEXIS 2988, *6. Thus, to the extent that Defendant has any valid counterclaims (which he does not), those claims would exist against HSBC Trust, the party which brought this action in the first place. Even more outlandish is Defendant s contention that amendment will prejudice his pending lawsuits. Defendant seems to suggest that he is entitled to some sort of windfall due to the erroneous mis-naming of the plaintiff. Indeed, in the quiet title action, Defendant asserts that he is entitled to avoid the Loan in its entirety, and receive title to a Property allegedly worth 5
in excess of $2 million dollars, free and clear of the Mortgage. See Opp. p. 9. The fact that amendment will allow the proper party to defend against these claims is clearly not indicative of the type of prejudice contemplated by the rules. If anything, Defendant has benefited from the error, which has allowed him to litigate this foreclosure action for nearly five years, all while residing in the Property without making a single payment on the Loan. Therefore, Defendant will not suffer any prejudice if the Motion is granted. Further, in his lawsuit alleging damages for constructive fraud, Defendant names only PHH and Shapiro, DiCaro & Barak LLC the foreclosure firm which initially represented plaintiff in the instant lawsuit as defendants. 1 Thus, correcting the name of the plaintiff to HSBC Trust in the present case would not affect that action at all since neither HSBC Trust nor U.S. Bank Trust are defendants. Finally, the amendment should be permitted because there is no indication that HSBC Trust intended to mislead the Defendant. As set forth in PHH s affidavit, the misnaming of the plaintiff was a mere error, caused by an erroneous assignment of mortgage. This error has since been corrected through a corrective assignment. Therefore, amending the caption to identify HSBC Trust as the plaintiff is clearly proper under NYCPLR 2001. B. PHH is Not Estopped from Correcting the Caption Defendant also argues that PHH is estopped from correcting the caption due to its prior representations. Specifically, Defendant points to an affidavit executed by Michael Bitterman, Assistant Vice President of PHH, submitted to the Court on July 7, 2014, which stated that [t]he subject Note and Mortgage were transferred to [U.S. Bank Trust] prior to the commencement of this action.... See Opp. p. 6. This argument falls flat however, due to 1 That lawsuit is styled Francis Caesar v. PHH, et al., Index No. 6957 (2015) (Westchester County Supreme Court). 6
several reasons discussed above, the most notable being that Defendant clearly did not rely on the alleged misrepresentation. Estoppel is applied where the enforcement of the rights of one party would work an injustice upon the other party due to the latter s justifiable reliance upon the former s words or conduct. Kosakow v. New Rochelle Radiology Assocs., 274 F. 3d 706, 725 (2d Cir. 2001). The elements of estoppel are (1) a misrepresentation or concealment of material facts; (2) intent that such conduct will be acted upon by the other party; and (3) knowledge of the real facts. In re Vebeliunas, 332 F. 3d 85, 93-94 (2d Cir. 2003). Moreover, the party asserting the defense of estoppel must show that they (1) lacked knowledge of the true facts, and lacked the means of acquiring knowledge of the true facts; (2) relied upon the conduct of the party to be estopped; and (3) prejudicially changed their positions as a result of their reliance. Id. at 94. Here there are no facts to indicate that PHH or HSBC Trust had any intent to mislead Defendant, or that they had actual knowledge of the error prior to the execution of the defective assignment. Moreover, Defendant cannot allege that he lacked knowledge of the true facts at the time the affidavit was executed. Nor, obviously, can he allege that he relied on the alleged misrepresentation, or detrimentally changed his position as a result thereof. Therefore, Defendant s suggestion that PHH and HSBC Trust are estopped from correcting the error should be rejected. C. NYCPLR 1021 Authorizes The Court To Substitute The HSBC Trust As Plaintiff. As noted above, and as set forth in the Motion, the caption should be amended pursuant to NYCPLR 2001, because HSBC Trust has been the true plaintiff in this action since its commencement. However, to the extent that the Court characterizes the erroneous assignment of mortgage as more than a mere error, HSBC Trust should be permitted to substitute in this action under NYCPLR 1021. Substitution is proper where an assignment of mortgage is 7
executed, as the assignee becomes the real party in interest. See First Cent. Sav. Bank v. 1467 Bedford Ave., LLC, 42 Misc. 3d 1205(A), 1205A (N.Y. Sup. Ct. 2013) (granting plaintiff s motion to substitute plaintiff and amending the caption to reflect the substitution where an assignment of mortgage was executed and recorded). Defendant s attempts to challenge the corrective assignment fail as a matter of law. Defendant alleges that the mortgage was previously assigned to MERS, and thus, the corrective assignment was without the note. See Opp. p. 13. However, New York courts recognize that MERS has authority to assign mortgages as nominee of the lender. See Deutsche Bank Natl. Trust Co. v Torres, 45 Misc. 3d 1212(A), 1212A (N.Y. Sup. Ct. 2014) ( A valid written assignment of a mortgage may be made by MERS [ ] provided it was the owner of the note, by delivery or written assignment, at the time such assignment was made [ ] or that it had the requisite authority as agent or nominee of the owner to make such assignment on behalf of the owner ) (internal citations and formatting omitted). Therefore, MERS had authority to execute the corrective assignment, and upon its execution, HSBC Trust became the proper plaintiff in this action. Therefore, HSBC Trust is entitled to an order substituting it as the plaintiff. Lastly, in his Affirmation in Opposition to the Motion, Aymen Aboushi claims that amendment is improper as "there is nothing before the Court from Plaintiff, US Bank, that shows it agrees with the motion, is giving up its rights and responsibilities." See Aboushi Opp. at p. 3. However, Aboushi is incorrect as it is well-established in this action that PHH is the loan servicer for both the U.S. Bank Trust and the HSBC Trust, and as loan servicer, is authorized to act on behalf of either entity. See, e.g., In re Residential Capital, LLC, No. 12 12020, 2014 WL 1410310, at *3 (Bankr. S.D.N.Y. Apr.14, 2014) (stating that loan servicers typically are authorized to act as the agent for the owner of the note. ). Thus, as loan servicer for the U.S. Bank Trust, PHH is allowed to act on behalf of it. 8
In the Affidavit of PHH in Support of the Motion, PHH makes clear that the U.S. Bank Trust was only named as the plaintiff because of an erroneous assignment. As the U.S. Bank Trust never had an interest in the Note or Loan and never authorized PHH to file a foreclosure in its name, it is not giving up any "rights and responsibilities". 2 Because it was only named in the plaintiff due to a clerical error by its own loan servicer, that same loan servicer clearly has authority to correct the mistake on its behalf. III. CONCLUSION For the foregoing reasons, and as discussed in plaintiff s Motion to Amend Caption to Properly Name Plaintiff and/or for Substitution, HSBC Bank USA, N.A. as Trustee of J.P. Morgan Mortgage Trust 2007-A2, erroneously named in this action as US Bank National Association as Trustee of J.P. Morgan Alternative Loan Trust 2007-A2, respectfully requests that its Motion to Substitute Plaintiff be granted, that it be substituted as the record plaintiff in this action, and that the caption be amended to reflect the substitution. By /s/ Justin Angelo. Justin Angelo, Esq. BALLARD SPAHR LLP 919 3rd Avenue New York, NY 10022 (646) 346 8012 (Telephone) (215) 864.8999 (Facsimile) angeloj@ballardspahr.com Attorneys for Plaintiff HSBC Bank USA, N.A. as Trustee of J.P. Morgan Mortgage Trust 2007-A2 2 While Aboushi claims in his Opposition that U.S. Bank Trust received Defendants' mortgage payments (Opp. at p. 5), he cites no records supporting its conclusion. Indeed, the record shows that at all material times PHH was the loan servicer and the recipient of the mortgage payments and that the HSBC Bank Trust was correctly identified as the investor on the Loan. 9
AFFIRMATION OF SERVICE Justin Angelo, an attorney admitted to practice in the State of New York, affirms under penalty of perjury On January 21, 2016, I served this REPLY MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF S MOTION TO AMEND CAPTION TO PROPERLY NAME PLAINTIFF AND/OR FOR SUBSTITUTION by e-filing and mailing a copy to each of the following persons at the last known address set forth after each name below. Francis M. Caesar 19 Hayrake Lane Chappaqua, NY 10514 fmcaesar@yahoo.com Aymen Aboushi, Esq. The Aboushi Law Firm PLLC 1441 Broadway, Suite 5036 New York, NY 10018 aymen@aboushi.com /s/ Justin Angelo. Justin Angelo 10