[*1]
HSBC Bank USA, N.A. v Jae Bok Choi
2014 NY Slip Op 50998(U) [44 Misc 3d 1202(A)]
Decided on June 17, 2014
Supreme Court, Queens County
McDonald, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on June 17, 2014
Supreme Court, Queens County


HSBC Bank USA, N.A., AS INDENTURE TRUSTEE FOR THE REGISTERED NOTEHOLDERS OF RENAISSANCE HOME EQUITY LOAN TRUST 2005-4, RENAISSANCE HOME EQUITY LOAN ASSET-BACKED NOTES, SERIES 2005-4, Plaintiff,

against

Jae Bok Choi, YOUNG HEE CHOI, WEBSTER BANK, NATIONAL ASSOCIATION, "JOHN DOENo.1" through "JOHN DOE#12," the last twelve names being fictitious and unknown 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, Defendants.




3007/2012
Robert J. McDonald, J.

The following papers numbered 1 to 13 were read on this motion by defendant, Webster Bank, National Association, by its Assignee SRP 2012-5, LLC, for an order pursuant to CPLR 1013 permitting the assignee leave to intervene and substituting the assignee, SRP 2012-5, LLC in place and stead of defendant Webster Bank, National Association, vacating the prior Notice of Appearance and Waiver and granting the substituted defendant leave to serve an answer:

PapersNumbered



Notice of Motion-Affirmation-Affidavits-Exhibits........1 - 6



Affirmation in Opposition...............................7 - 10



Reply Affirmation......................................11 - 13



This is a motion brought by Webster Bank, National Association, by its assignee SRP 2012-5, LLC, ("SRP") for an order pursuant to CPLR 1013 permitting the assignee leave to intervene and substituting the assignee SRP 2012-5, LLC in place and stead of defendant Webster Bank, National Association.



The underlying action was brought by the plaintiff, HSBC Bank, N.A., seeking foreclosure and sale of the property located at 141-03 25th Road, Flushing, New York, 11354. The complaint alleges that the defendants, Jae Bok Choi and Young Hee Choi, entered into a mortgage in favor of Delta Funding Corp. on November 9, 2005 to secure payment of a note in the principal sum of $630,000. The note and mortgage were assigned by written agreement to plaintiff, HSBC Bank USA, N.A., by an assignment of mortgage executed on May 7, 2009. The defendants are alleged to have defaulted in payment of the mortgage commencing on April 1, 2008, at which time the plaintiff accelerated the mortgage and elected to have the entire principal sum and all amounts still owing under the note be due and payable in full immediately.



Plaintiff subsequently brought an action to foreclose its mortgage by filing a summons, complaint and lis pendens on February 10, 2012, naming Jae Bok Choi and Young Hee Choi as defendants as well as Webster Bank, National Association. It is alleged that defendant Webster Bank has a claim or lien upon the mortgaged property which the plaintiff seeks to extinguish. Defendant, Webster Bank, by attorney Eric S. Sheidlower, Esq., filed Notice of Appearance, Claim to and Demand for Surplus Monies and Notice of Demand for Deficiency Judgment on October 24, 2012.



Counsel Jeffrey A. Carlino, Esq., now moves on behalf of non-party SRP 2012-5, LLC, the assignee of Webster Bank, for an order substituting SRP as defendant in lieu of Webster Bank and allowing SRP to interpose an answer to the summons and complaint. In support of the motion, SRP Assistant Vice President of AMS Servicing, LLC, attorney in fact of SRP, Ms. Marling, states that [*2]based upon her personal review of the records that the Choi defendants executed a second mortgage known as an Open End Mortgage Deed/Promissory Note to Webster Bank for the sum of $200,000 dated January 12, 2006. This mortgage was recorded on February 8, 2006. In November 2012, subsequent to the commencement of this action, Webster Bank sold its mortgage to SRP. In its initial Notice of Appearance, Webster Bank waived service of all papers and notice of all proceedings except motions for an Order of Reference, motion for Judgment of Foreclosure and copy of Notice and Sale. SRP now seeks leave to be substituted as a party-defendant and to withdraw the notice of appearance filed by Webster Bank. Ms. Marling asserts that a title review was conducted which revealed that the HSBC mortgage for $600,000 that plaintiff is foreclosing on in the instant action was recorded on February 9, 2006, whereas the Webster Bank mortgage for $200,000 was recorded on February 8, 2006 and as such Webster Bank's mortgage is first in time and may not be extinguished herein as it is senior in priority to plaintiff's mortgage interest. Therefore, SRP seeks leave to serve an answer asserting its affirmative defense. Counsel asserts that SRP will be prejudiced in that without interposing its answer and affirmative defense, its mortgage which has priority, may be extinguished.In opposition, Richard O'Brien, Esq., attorney for the plaintiff opposes the motion for leave to intervene on the ground that SRP has failed to provide a reasonable excuse for the delay in requesting to serve a late answer a year and a half after the summons was served. Counsel asserts SRP should have been aware of the potential defense at the time of its assignment of the Webster mortgage in October 2012. Further, plaintiff asserts that the affirmative defense of a senior mortgage is without merit.



Firstly, plaintiff claims that the movant's affiant, Kelly Marling, has not shown that she has personal knowledge of the transfer of rights to SRP. Secondly, plaintiff asserts that there is no proof that Webster Bank is in accord with the intervenor's request to intervene and whether Webster Bank seeks to withdraw its Notice of Appearance and allow SRP to intervene. Thirdly, the plaintiff asserts that SRP took its assignment of the loan with the sole intent of commencing litigation in violation of Judiciary Law § 489. Lastly, the plaintiff asserts that the loan which is sought to be foreclosed was a refinance which was used to pay off a prior loan held by Countrywide. As such, plaintiff contends that the SRP loan is still subordinate to the plaintiff's loan to the extent that the plaintiff's loan was used to satisfy a prior lien under the doctrine of equitable subrogation (citing Rite Capital Group, LLC v LMAG, LLC, 91 AD3d [*3]741 [2d Dept. 2012]).



In reply, SRP submits an affirmation of Gary Clark, Vice President at Webster Bank who states that based upon his personal knowledge, in November 2012, Webster Bank sold its interest in the Webster mortgage to SRP who became the assignee and current owner of the Webster Note and Mortgage. He states that Webster Bank has no objection to SRP's request for substitution. Ms. Marling submits a second affidavit clarifying that SRP did not learn of their potential defense until September 2013, ten months after SRP purchased the mortgage. They moved for leave to intervene, in January 2014, four months thereafter.



Movant submits that there was only a short delay in moving to intervene following its discovery in September 2013 that its mortgage had priority over the plaintiff's mortgage. Further, counsel states that they have a potentially meritorious affirmative defense, that there will be no prejudice to the plaintiff, and that there is a strong public policy in favor of resolution of cases on the merits. Counsel also argues that even under the theory of equitable subrogation, the junior lender's interest in subrogated to the senior interest only to the extent that the proceeds of the junior holder's loan were used to satisfy the prior mortgage (citing Rite Capital Group, LLC v LMAG, LLC, 91 AD3d 741 [2d Dept. 2012]). Therefore, SRP asserts that under the circumstances of this case it may still have a senior lien with respect to funds in excess of those used to pay off the Countrywide loan.



Upon review and consideration of the motion by SRP to intervene and be substituted as a party-defendant in place of Webster Bank, the plaintiff's affirmation in opposition, and the movant's reply thereto, this Court finds as follows:



This Court finds that SRP shall be permitted to intervene and be substituted as a party defendant in lieu and place of Webster Bank. SRP has shown by sufficient evidence that it is the assignee and possessor of the Webster Bank mortgage and that it became the assignee after he commencement of the action and as such has established that it is presently the actual party in interest. Further, this court finds that substitution of SRP as party-defendant will not result in prejudice or delay (see Global Team Vernon, LLC v Vernon Realty Holding, LLC, 93 AD3d 819 [2d Dept. 2012][intervention should be permitted where the intervenor has a real and substantial interest in the outcome of the proceedings]; Wells Fargo Bank, Natl. Assn. v McLean, 70 AD3d 676 [2d Dept. 2010]).



Pursuant to CPLR 3012 (d), the Supreme Court has the discretion to permit late service of an answer upon the demonstration of a reasonable excuse for the delay and a potentially meritorious defense (see Mannino Dev., Inc. v. Linares, 2014 NY Slip Op 3802 [2d Dept. 2014]; HSBC Bank USA, NA v Lafazan, 115 AD3d 647 [2d Dept. 2014]; Dinstber v Allstate Ins. Co., 75 AD3d 957 [3rd Dept. 2010]). This court finds that SRP has presented a reasonable excuse to extend its time to answer and a meritorious defense. Here, based upon the affidavits of Mr. Clark and Ms. Marling it is clear that the defendant did not become aware of its potential defense until September 2013 when the matter was referred to counsel for a title review. Thereafter, SRP made a motion without undue delay for leave to intervene.



In addition, this Court finds that the plaintiff has not been prejudiced by the delay as the matter is still in the early stages of prosecution and the movant did not evince an intent to willfully ignore or neglect to defend the action (see Armstrong Trading, Ltd. v MBM Enters., 29 AD3d 835 [2d Dept. 2006]; Acevedo v. NY City Transit Auth., 16 AD3d 144 [1st Dept. 2005]; Scarlett v McCarthy, 2 AD3d 623 [2d Dept 2003]; Lehrman v Lake Katonah Club, 295 AD2d 322 [2d Dept. 2002]).



Further, this court finds that the defendant has shown a potentially meritorious defense based upon the evidence which demonstrates that its mortgage was recorded prior to the plaintiff's mortgage and that SRP may still have in interest in funds in excess of those used to satisfy the prior Countrywide mortgage.



Therefore, for all of the above stated reasons and because New York maintains a strong public policy in favor of resolving disputes on the merits (see Westchester Med. Ctr. v Allstate Ins. Co., 80 AD3d 695 [2nd Dept. 2011], SRP's motion for leave to be substituted as a party-defendant in place of Webster Bank is granted and the motion to vacate the prior Notice of Appearance of Webster Bank and for leave to serve a late answer is granted to the extent that the proposed answer and affirmative defense annexed to the affirmation in opposition shall be deemed served and filed nunc pro tunc and the caption shall be amended accordingly.



Dated: June 17, 2014

Long Island City, NY[*4]______________________________

ROBERT J. MCDONALD

J.S.C.