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CIT Bank N.A. v. Elliott

United States District Court, E.D. New York

April 5, 2018

CIT BANK N.A., Plaintiff,
v.
ELLEN M. ELLIOTT, KEYHOLE CAPITAL-FUND V, and PORTFOLIO RECOVERY ASSOCIATES LLC, Defendants.

          For Plaintiff: Allison J. Schoenthal, Esq. Nicole E. Schiavo, Esq. Hogan Lovells U.S. LLP Rachel B. Stein, Esq. Sean Kevin Monahan, Esq. Robert G. Wilk, Esq. Windels Marx Lane & Mittendorf, LLP

          For Defendants: Ellen M. Elliott Enza M. Brandi, Esq.

          Keyhole Capital - Fund V Adam J. Friedman, Esq. Pulvers, Pulvers, Thompson & Friedman, LLP

          Portfolio Recovery Associates LLC No appearance

          MEMORANDUM & ORDER

          JOANNA SEYBERT, U.S.D.J.

         Pending before the Court in this foreclosure action is Plaintiff CIT Bank N.A.'s (“Plaintiff”) motion for summary judgment against Defendant Ellen M. Elliott (“Elliott”). (Pl.'s Mot., Docket Entry 53.) For the following reasons, Plaintiff's motion is GRANTED IN PART and DENIED IN PART.

         BACKGROUND [1]

         I. Factual History

         Plaintiff, formerly known as OneWest Bank N.A., is a national banking association with a principal place of business in Pasadena, California. (Pl.'s 56.1 Stmt. ¶¶ 1-2.) Elliott is the owner of the mortgaged property at issue, 167 Soundview Drive, Montauk, New York 11954 (the “Property”). (Pl.'s 56.1 Stmt. ¶¶ 3, 5.)

         A. Mortgages and Notes

         On November 10, 2004, Elliott borrowed $1, 105, 000 in principal from Lehman Brothers Bank, F.S.B., executing a note (the “2004 Note”) secured by a mortgage on the Property (the “2004 Mortgage, ” and together with the 2004 Note, the “2004 Loan”). (Pl.'s 56.1 Stmt. ¶ 4; 2004 Note, Brandi Decl. Ex. A, Docket Entry 55-2, ECF pp. 2-6; 2004 Mortg., Marks Aff. Ex. B, Docket Entry 53-11, ECF pp. 3-27.) Mortgage Electronic Registration Systems, Inc. (“MERS”) served as Lehman Brothers Bank, F.S.B.'s nominee and the mortgagee of record. (2004 Mortg. at ECF p. 3.) The 2004 Note is indorsed from Lehman Brothers Bank, F.S.B., to Lehman Brothers Holdings Inc., and further indorsed, in blank, by Lehman Brothers Holdings Inc. (2004 Note at ECF p. 6.)

         On October 18, 2006, Elliott borrowed an additional $395, 000 from MortgageIt, Inc. (“MortgageIt”). (Pl.'s 56.1 Stmt. ¶ 5.) Elliott executed a note (the “2006 Note”) secured by a mortgage (the “2006 Mortgage, ” and together with the 2006 Note, the “2006 Loan”), and the note is indorsed in blank by MortgageIt. (Pl.'s 56.1 Stmt. ¶ 5; 2006 Note, Wilk Cert. of Merit Ex. A Pt. 2, Docket Entry 3-2, ECF pp. 20-25, at ECF p. 24; 2006 Mortg., Wilk Cert. of Merit Ex. A Pts. 3-4, Docket Entry 3-3, ECF pp. 4-25 and Docket Entry 3-4, ECF pp. 1-4.) MERS acted as MortgageIt's nominee and the mortgagee of record. (2006 Mortg. at Docket Entry 3-3, ECF p. 4.)

         Plaintiff alleges that on October 18, 2006, Elliott consolidated the 2004 Loan and the 2006 Loan into a single loan from MortgageIt in the original principal amount of $1, 500, 000 (the “Consolidated Loan”), secured by the 2004 and 2006 Mortgages on the Property and memorialized in a consolidated note (the “Consolidated Note”). (Pl.'s 56.1 Stmt. ¶¶ 5-6; Consol. Note, Marks Aff. Ex. A, Docket Entry 53-10.) Elliott also executed a mortgage dated October 18, 2006, securing the Consolidated Note with the Property (the “Consolidated Mortgage”).[2] (Pl.'s 56.1 Stmt. ¶ 6; Consol. Mortg., Marks Aff. Ex. C, Docket Entry 53-12, ECF pp. 1-26.) MERS is named as MortgageIt's nominee and the mortgagee of record. (Consol. Mortg. at ECF p. 1.) Additionally, Elliott entered into a Consolidation, Extension and Modification Agreement (“CEMA”) with MortgageIt dated October 18, 2006, though the original, signed CEMA was not recorded, (Pl.'s 56.1 Stmt. ¶ 7), and cannot be located, [3] (Pl.'s Br., Docket Entry 53-1, at 3). Elliott admits in her Answer that she executed the Consolidated Note, (Elliott Ans., Docket Entry 29, ¶ 7), though she “disputes the validity of the consolidation of the mortgages” and “disputes the legality, propriety and validity of [the CEMA] in that [she] alleges that instrument to be defective.” (Elliott's 56.1 Counterstmt. ¶¶ 5, 7).

         The Consolidated Note bears an indorsement from MortgageIt to IndyMac Bank F.S.B. (“IndyMac”)--evidencing MortgageIt's transfer of the Consolidated Note to IndyMac, (Marks Aff., Docket Entry 53-9, ¶ 7)--as well as an indorsement in blank by IndyMac.[4] (See Pl.'s 56.1 Stmt. ¶ 8; Consol. Note at ECF p. 5.) On July 11, 2008, the now-dissolved Office of Thrift Supervision (“OTS”) closed IndyMac and appointed the Federal Deposit Insurance Corporation (“FDIC”) as its receiver. (Pl.'s 56.1 Stmt. ¶ 11.)[5]That same day, the OTS created IndyMac Federal Bank, F.S.B. (“IndyMac Federal”), into which IndyMac's assets were transferred, and appointed the FDIC as IndyMac Federal's conservator. (Pl.'s 56.1 Stmt. ¶ 11.) On March 19, 2009, the OTS also appointed the FDIC as receiver for IndyMac Federal. (Pl.'s 56.1 Stmt. ¶ 11.) Since the dates of its appointments, the FDIC has served as receiver for IndyMac and as receiver and conservator for IndyMac Federal. (Pl.'s 56.1 Stmt. ¶ 11.)

         The original Consolidated Note was physically delivered to IndyMac Federal, [6] (Pl.'s 56.1 Stmt. ¶ 10), and on March 18, 2009, Plaintiff purchased substantially all of the assets of IndyMac Federal pursuant to a Master Purchase Agreement (“MPA”), (Pl.'s 56.1 Stmt. ¶ 12; MPA, Marks Aff. Ex. D, Docket Entry 53-13). As part of that transaction, on March 19, 2009, the FDIC as receiver of IndyMac Federal entered into a Loan Sale Agreement (“LSA”) with Plaintiff by which Plaintiff acquired certain mortgage loans, including Elliott's Consolidated Loan. (Pl.'s 56.1 Stmt. ¶ 13; LSA, Marks Aff. Ex. E, Docket Entry 53-14.) Since 2009, Plaintiff has serviced the Consolidated Loan under a loan number ending in 5085.[7] (Pl.'s 56.1 Stmt. ¶ 9.)

         The original Consolidated Note, with two allonges, [8] was delivered to Plaintiff's counsel in May 2014, and Plaintiff's counsel was in physical possession of the Consolidated Note, with allonges firmly affixed, on the date Plaintiff commenced this action.[9] (Pl.'s 56.1 Stmt. ¶ 14.) One of the allonges appended to the Consolidated Note is indorsed from the FDIC as receiver for IndyMac Federal to OneWest Bank, F.S.B., and the other is indorsed in blank by OneWest Bank, F.S.B. (Allonges, Marks Aff. Ex. A, Docket Entry 53-10, ECF pp. 7-8.)

         B. Default

         Based on Marks' testimony, Plaintiff alleges that Elliott defaulted on the Consolidated Loan by failing make the payment due August 1, 2009, and all payments due thereafter. (Pl.'s 56.1 Stmt. ¶ 15; Marks Aff. ¶ 14.) Elliott does not dispute that she failed to make the payment due August 1, 2009--and thus, defaulted--on the Consolidated Loan, though she “objects and disputes . . . as to the propriety of the relief sought by this Plaintiff, vis-à-vis the mortgage chain and ownership of the Note and the defects contained therein.” (Pl.'s 56.1 Stmt. ¶ 15; Elliott's 56.1 Counterstmt. ¶ 15.)

         Plaintiff contends that Elliott does not reside at the Property, but Elliott cites her 2015 affidavit[10] in support of her claim that as of the date of her Counterstatement, February 8, 2017, she “resides at the subject Property.” (Pl.'s 56.1 Stmt. ¶ 16; Elliott's 56.1 Counterstmt. ¶ 16.)

         On February 10, 2015, pursuant to New York Real Property Actions and Proceedings Law (“RPAPL”) § 1304, Plaintiff's servicing division sent 90-day notices dated February 9, 2015 by certified mail and first-class mail addressed to Elliott at the Property. (Pl.'s 56.1 Stmt. ¶ 17; Marks Aff. ¶¶ 15, 18; 90-Day Notices, Marks Aff. Ex. G, Docket Entry 53-16.) Plaintiff filed the 90-day notice with the New York State Department of Financial Services on February 10, 2015. (Pl.'s 56.1 Stmt. ¶ 18.) On February 11, 2015, pursuant to Sections 15 and 22 of the mortgages, Plaintiff's servicing division mailed a notice of default dated February 9, 2015 to Elliott at the Property. (Pl.'s 56.1 Stmt. ¶ 19; Marks Aff. ¶¶ 17-18; Notice of Default, Marks Aff. Ex. I, Docket Entry 53-18.) Elliott purports to dispute that she received the 90-day notices and the notice of default on hearsay grounds (addressed infra at Discussion Section I), and, citing the Elliott Affidavit, because she alleges that she did not receive a 90-day notice or default notice. (Elliott's 56.1 Counterstmt. ¶¶ 17, 19-20.)

         Citing the Marks Affidavit, Plaintiff alleges that despite notices of default and opportunities to cure, Elliott failed to cure her default and, to date, the Consolidated Loan remains in default. (Pl.'s 56.1 Stmt. ¶¶ 20-21; Marks Aff. ¶¶ 19, 21.) Elliott “disputes and objects to the accuracy” of the allegation that she failed to cure her default on three grounds: (1) she contends that “the statements are inadmissible hearsay, ” discussed infra at Discussion Section I; (2) based on the Elliott Affidavit, she “alleges that she did not receive notices of default”; and (3) she “objects and disputes the statement generally as to the propriety of the relief sought by this Plaintiff, vis-à-vis the mortgage chain and ownership of the Note and the defects contained therein.” (Elliott's 56.1 Counterstmt. ¶ 20.) Finally, Elliott disputes that the Consolidated Loan remains in default “to the extent that [she] disputes the legality, propriety and validity of that instrument the mortgage instruments [sic], including but not limited to the [CEMA], multiple endorsements, and allonges to the various Notes and Assignments produced by the Plaintiff, and alleges that the mortgage instruments and the mortgage chain are defective.” (Elliott's 56.1 Counterstmt. ¶ 21.)

         II. Procedural History

         Plaintiff commenced this action on July 28, 2015 against defendants Elliott, Keyhole Capital-Fund V (“Keyhole”), Portfolio Recovery Associates LLC (“Portfolio”), [11] and John Does 1 through 10. (See generally Compl.) On July 15, 2016, pursuant to the parties' stipulation, the Court dismissed the John Doe defendants and amended the caption to reflect Plaintiff OneWest Bank N.A.'s name change to CIT Bank, N.A. (July 15, 2016 Elec. Order.) Keyhole has appeared but not answered or otherwise responded to the Complaint, and Portfolio has not answered or appeared in this action. On July 21, 2017, the Clerk of the Court entered a certificate of default against Keyhole and Portfolio. (Cert. of Default, Docket Entry 54.)

         On September 4, 2015, Elliott filed a motion to dismiss for lack of personal jurisdiction, arguing that she was not properly served with the Summons and Complaint. (Mot. to Dismiss, Docket Entry 15.) The Court referred the motion to Judge Arlene R. Lindsay for a report and recommendation (“R&R”), (Referral Order, Docket Entry 27), which she issued on May 23, 2016, (R&R, Docket Entry 28), and which the Court adopted on July 8, 2016, denying Elliott's motion to dismiss. (July 2016 Mem. & Order, Docket Entry 30.)

         On June 14, 2016, Elliott answered the Complaint, asserting fourteen affirmative defenses as well as counterclaims for a declaratory judgment of quiet title and for quiet title pursuant to RPAPL Article 15. (Answer, Docket Entry 29, ¶¶ 11-89.) Plaintiff answered Elliott's counterclaims on July 8, 2016. (Pl.'s Answer, Docket Entry 35.)

         Plaintiff moved for summary judgment on July 5, 2017, (Pl.'s Br.), and Elliott opposed the motion on August 3, 2017, (Elliott's Opp., Docket Entry 55). Plaintiff filed a reply brief in further support of its motion on August 18, 2017. (Pl.'s Reply, Docket Entry 57.)

         DISCUSSION

         I. Elliott's Evidentiary Objections

         As an initial matter, as referenced in the Factual History, Elliott “objects generally to statements cited to” the Marks Affidavit and the Jacobson Affirmation “as inadmissible hearsay lacking grounds in personal knowledge.” (Elliott's 56.1 Counterstmt. at 1.) She “further objects to any documents purporting to be qualified as business records to the extent that the documents are not properly qualified as business records.” (Elliott's 56.1 Counterstmt. at 1.) Notably, while Elliott alleges in her Opposition that “[n]either the Marks Affidavit nor the Jacobson Affirmation lay sufficient basis for the introduction of business records, and are inadmissible hearsay, ” (Elliott's Opp. at 11), her Opposition contains no legal argument on her hearsay objections, (see Elliott's Opp. at 11-14).

         The testimony contained in and the documents accompanying the Marks Affidavit and the Jacobson Affirmation are admissible.

         First, the mortgage-servicing documents attached to the Marks Affidavit fit within Federal Rule of Evidence 803(6)'s “records of a regularly conducted activity” exception to the rule against hearsay. See Fed.R.Evid. 803(6). Marks is a “qualified witness, ” as she testified that “[i]n the regular performance of [her] job functions, [she] ha[s] access to and regularly review[s] business records maintained by [Plaintiff] for the purpose of servicing mortgage loans and, therefore, [is] personally familiar with the practices and procedures for maintaining these business records.” (Marks Aff. ¶ 3); see Fed.R.Evid. 803(6)(D). Further, she testified that the records were “made at or near the time by, or from information provided by, persons with knowledge of the activity and transactions reflected in such records, ” the records were “kept in the course of business activity conducted regularly by [Plaintiff], ” and it was “the regular practice of Plaintiff's mortgage servicing business to make and maintain these records, including the relevant records of prior servicers.” (Marks Aff. ¶ 3); see Fed.R.Evid. 803(6)(A)-(C). Finally, ...


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