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FTBK Inv. II LLC v Joshua Mgt. LLC 2013 NY Slip Op 30333(U) February 1, 2013 Supreme Court, New York County Docket Number: 810164/11 Judge: Paul Wooten Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication.

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ANNED ON 211412013

SUPREME COURT OF THE STATE OF NEW YORK

- NEW YORK COUNTY
PART 7

PRESENT:

HON,"-PAUL WOOTEN Justice

FTBK INVESTOR II LLC, AS TRUSTEE FOR NY BROOKLYN INVESTOR II TRUST I, Plaintiff, -againstJOSHUA MANAGEMENT LLC, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, NEW YORK CITY DEPARTMENT OF FINANCE, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, CASTLE OIL CORP., NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT, and "JOHN DOE N0.I" to "JOHN DOE NO, XXX," inclusive, the last thirty names being fictitious and irnknown to plaintiff, the persons or parties intended being the tenants, occupants, persons or corporations, if, any, having or claiming an interest in or lien upon the premises described in the complaint,

INDEX NO.

81016411I

MOTION SEQ.NO.

.

003 ~ -

.

I

?

FILED
FEB 14 2013

$

I

Defe tida nts.
~

Y

The following papers, numbered I to 4 were read on this motion by defendant for summary judgment and to amend the answer.
Notice o Motion/ Order to Show Cause f Answering Affidavits - Exhibits
__

~--

- Affidavits - Exhibits ...

(Memo)

Replying Affidavits (Reply Memo)

Cross-Motion:

I Yes

11No .

I/

PAPERS NUMBERED

-

Motion sequences 003 and 004 are hereby consolidated for purposes of disposition. In
this action, FTBK Investor 11, LLC, as Trirstee for N.Y. Brooklyn Investor II Trust I (plaintiff) seeks to foreclose upon a mortgage secured by property located at 2866 Frederick Douglas Boulevard, New York, New York and owned by defendant Joshua Managernent, LLC (Joshua)
The mortgage agreement and an Amended and Restated Promissory Note (Note) in the

amount of $2,812.500.00were originally executed by Joshua in favor of Washington Mutual

Bank, F A (WaMu). In motion sequence 003, Plaintiff moves for an order granting it summary
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on its complaint, striking Joshua's answer, appointing a referee to compute the sums due and owing to plaintiff, entering a default judgment against non-appearing defendants New York State Department of Taxation and Finance, New York City Environmental Control Board and New York City Department of Housing Preservation and Development and dismissing the complaint without prejudice as against defendants John DOE No.1 to John Doe No. XXX. In motion sequence 004, plaintiff moves, by Order to Show Cause (OSC), for the appointment of a temporary receiver. Joshua opposes these motions on the grounds that the plaintiff lacks standing to foreclose upon the mortgage and has failed to adequately demonstrate that Joshua is in default with respect to the Note. BACKGROUND On August 12, 2005, Joshua signed a promissory note and mortgage agreement in favor of WaMu in order to obtain a loan in the aniount of $2,812,500.00. The loan was secured by property located at 2866 Frederick Douglass Boulevard, New York,

New York. The

mortgage was recorded with the Office of the City Register on August 26, 2005 (see Affirmation
of Jerold C. Feuerstein, Esq. [Feuerstein Aff.], exhibits A, B).

On September 25, 2008, the United States Office of Thrift Supervision (OTS) seised WaMu and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). That same day, the FDIC transferred and/or sold most of WaMu's assets, including its deposit liabilities and its secured debts and loans to JPMorgan Chase & Co. (Chase). Pursuant to 12 USC 3 1821 (d)(2)(G)(i)(ll),the FDIC, as receiver of a failed bank, is authorized to "transfer any asset or liability of the institution in default
. .

. without any approval, assignment, or consent

with respect to such transfer." WaMu's loans were transferred to Chase through a Purchase of Assumption Agreement (the PAA) executed by FDIC and Chase on September 25, 2008 (id., exhibit C). As proof that the Note and mortgage executed by Joshua was one of the loans transferred to Chase, the plaintiff relies on an affidavit signed by Robert C. Schoppe (Schoppe
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Affidavit), an authorized representative of the FDIC. The Schoppe Affidavit clairns that "Chase acquired certain of the assets, including all loans and all loan commitments, of Washington

Mutual." However neither the Schoppe Affidavit nor the PAA mention or refer to any specific
loans. On August 19, 201 1 ,the subject mortgage was assigned and the Note endorsed over to
N Y. Brooklyn Investor II, LLC, a New York limited liability company (NY Brooklyn Investor). On

September 12, 201 I , NY Brooklyn Investor assigned the mortgage and Note aver to the plaintiff
(id.,exhibits D, E). Both of these assignments were registered and recorded on October 3,

201 1 ( i d , ) ,

Pursuant to the terms of the Promissary Note, Joshua was obligated to make monthly payments of $15,600.48, starting on October 1, 2005. Plaintiff claims that Joshua is in default because it failed to tender any tnonthly payments on the Note on or after December 1, 2010. The mortgage agreement provides that the mortgagors are in default when they fail to make any regular payment under the Note "so that it was received by the [lender] within 15 days after exhibit B). Section 5.3 of the Mortgage, provides in pertinent part, the date when due" (id., "Upon the occurrence of any Event of Default, all sums secured hereby shall become imtnediately due and payable, without notice or demand ... and Lender may . . . (b) Foreclose this Security Instrument as provided in Section 7 or otherwise realize upon the Property.
.
.I'

(id.),

By letter dated April 22, 201 1, counsel for Chase informed Joshua that Chase was exercising
its option to declare the entire principal amount of the loan in default, together with all accrued

and unpaid interest and to commence a foreclasure proceeding against Joshua (id., exhibit C). Prior to its assigning the mortgage and Note to NY Brooklyn Investor, Chase cornmenced this action to foreclose upon t h e property via a summons and complaint dated May
20, 201 1 In addition to Joshua, Chase named various other parties with an interest in the

property as well as defendants John Doe No.1 through John Does No. XXX, as potential
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tenants of or unknown creditors or lien holders on the property. On July 12, 201 1, Joshua interposed an answer which, inter alia, raised seven affirmative defenses: (1) failure to state a cause of action; (2) unclean hands; (3) denial of default and, alternatively that default was "wrongfully induced by the Plaintiff; (4) denial of any non-monetary default; (5) failure to provide notice and a cure period; (6) reservation of the right to arnend the answer to include new affirmative defenses; and (7) denial of waiver of affirmative defenses. On November 16, 201 1, this Court signed an order amending the caption of this action to reflect the substitution of
FTBK Investor I I , LLC, as trustee for NY Brooklyn Investor II Trust I as the plaintiff in the action.

In motion sequence 003, plaintiff moves for an order granting sumniary judgment, striking Joshua's answer, and appointing a referee to compute the

suins due and owing to

Plaintiff. Joshua opposes this relief. Plaintiff also seeks an order dismissing the John Doe defendants without prejudice and entering a default judgment against defendants New York
State Department of Taxation and Finance, New York City Environmental Control Board and

New York City Department of Housing Preservation and Development, all of whom have failed
to answer the complaint or otherwise appear in this action. Joshua does not offer any

opposition to the granting of this relief. In motion sequence 004, Plaintiff moves, by OSC for
the appointment of a temporary receiver for the property. Joshua opposes.

CONTENTIONS OF THE PARTIES Plaintiff asserts that it is the valid holder of the Note and mortgage, signed by Joshua, that Joshua has failed to make the required payments pursuant to the Note and is therefore in default.

As such, plaintiff proffers that it has established a prima facie case that it is entitled to

foreclose on the property. Plaintiff also maintains that Joshua's answer does not raise any meritorious defenses that would negate the plaintiff's pr-jma facie showing. In addition to producing the indorsed Note, the mortgage agreement, and the two niortgage assignments, plaintiff has also submitted an affidavit from Brian Shatz (Shatz), the managing member of the
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plaintiff trustee. Shatz states that he has personal kriowledge of the existence of Joshua's default arid the atyiount of the principal balance due "based upon Plaintiff's books and records" (Feuerstein Aff., Shatz Affid., r[ 21). Shatz states in his affidavit that he reviewed files maintained in the ordinary course of business by plaintiff and Chase that relate to the loan that is the subject of this action.
Joshua contends that sumrnary judgment should be denied because plaintiff has failed

to provide any proof that the mortgage and note were transferred from the FDIC to Chase, plaintiff's predecessor-in-interest, and therefore plaintiff has failed to sufficiently demonstrate that it has standing to foreclose on the mortgage. Joshua further claims that plaintiff lacks standing because there is no endorsement or allonge on the Note evidencing its valid assignment to Chase. Furthermore, Joshua claims that Shatz's affidavit is insufficient proof of Joshua's default on the Note because he has not demonstrated sufficient personal knowledge of the circunistances surrounding Joshua's alleged default.

In reply, plaintiff claims that a formal assignment of the mortgage and note to Chase
was not necessary to effectuate a transfer. Plaintiff also submits a Supplemental Affidavit from Shatz. In his Supplemental Affidavit, Shatz claims that he reviewed the files concerning the subject loan before plaintiff acquired the loan from NY Brooklyn Investor, including all loan
related files such as the underwriting file, loan documents, payment histories, default and

acceleration letters and other correspondences. Shatz indicates in the Supplemental Affidavit, that the documents he reviewed were presented to him as "business records of the predecessors in interest to NY Brooklyn (and Plaintiff for that matter) and they appeared to
[him] to be consistent with similar business records customarily held in the mortgage lending

industry" (Feuerstein Reply Aff., Shatz Sup. Affid. at p. 3). With regards to the appointment of a temporary receiver, plaintiff relies on section 5.3 of the mortgage agreement which states that in the event of a default 'I Mortgagee may
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[hJave a

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receiver appointed as a matter of right on an ex parte basis without notice to Mortgagor and without regard to the sufficiency of the Property or any other security for the indebtedness secured hereby and, without the necessity of posting a bond or security, such receiver shall

take possession and control of the Property and shall collect and receive all of the rents, issues
and profits thereof" (Feuerstein Aff., exhibit B). Plaintiff contends that this provision, read in conjunction with Real Property

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