Preview
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NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
------------------------------------------------------------------------X
Deutsche Bank National Trust Company as Trustee for REPLY AFFIRMATION
American Home Mortgage Assets Trust 2007-1 Mortgage- IN FURTHER SUPPORT
Backed Pass-Through Certificates, Series 2007-1, OF DEFENDANT ROYAL
BLUE REALTY HOLDINGS,
Plaintiff, INC.'S MOTION TO DISMISS
AMENDED COMPLAINT
-against-
Royal Blue Realty Holdings, Inc., Board of Managers of
130 Barrow Street Condominium Homeowners
Association, Yu International, Inc. dba SY Marble & Index No. 107030/2009
Granite Importers & Distributors, NY State Department of
Taxation and Finance, State of New York, New York City,
City of New York Environmental Control Board, City of
New York Parking Violations Bureau, and "JOHN DOE
#1"
through "JOHN DOE #10", the last ten names being
fictitious and unknown to the Plaintiff, the person or parties
intended being the person or parties, if any, having or
claiming an interest in or lien upon the mortgage premises
described in the complaint,
Defendants.
----------------------------------------------------------------------x
Martin Shaw, an attorney duly admitted to practice in the Courts of the State of
New York affirms the following to be true, upon information and belief, under penalties of
perjury:
1. I am an attorney at the law firm of Shaw & Associates, the attorneys for
(" Blue"
defendant Royal Blue Realty Holdings, Inc. ("Royal Blue") in the above entitled action, and as
such I am fully familiar with the facts and circumstances herein by virtue of my review of the file
and as an attorney for Royal Blue and as set forth below.
2. I respectfully submit this reply affirmation in further support of Royal
Blue's motion to dismiss the amended complaint pursuant to CPLR 3211(a)(1), (3), (5) and (7)
and cancel the notice of pendency filed by plaintiff on the property owned by Royal Blue and
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"Property"
located at 162-174 Christopher Street, New York, New York (the "Property") pursuant to CPLR
§ 6514(b), as discussed in detail below.
3. As noted in my moving affirmation dated May 11, 2018 in support of
Royal Blue's instant motion to dismiss, plaintiffs Amended Mortgage Foreclosure Complaint
"Complaint"
was e-filed on April 25, 2018 (see ECF Docket No. 6) (the "Complaint"), and contains a total of
four (4) causes of action, as follows: (i) a foreclosure of mortgage lien; (ii) a declaratory
judgment seeking a determination that plaintiff holds an equitable lien; (iii) foreclosure of
equitable mortgage lien; and (iv) unjust enrichment to be included in a judgment of foreclosure.
4. Based on the facts of this case and the documents that have been either
acknowledged by plaintiff as true and correct or submitted as exhibits by plaintiff, Royal Blue's
motion to dismiss pursuant to CPLR 321l(a) (3), (5) and (7) provides the factual, evidentiary and
legal basis that clearly and unequivocally proves that Royal Blue has complete defenses to the
instant action and that the Complaint should be dismissed in itsentirety.
Royal Blue's Motion to Dismiss
Should Be Granted As Plaintiff
Has No Standing
The Chain Of Mortgages is Broken Due To Defective
Assignments And, As A Result, Plaintiff Lacks Standing
5. As noted previously in my moving affirmation, the issue of standing
requires an inquiry into whether a litigant has "an interest ... in the lawsuit that the law will
request."
recognize as a sufficient predicate for determining the issue at the litigant's In a
mortgage foreclosure action, a plaintiff has standing where itis both the holder or assignee of the
subject mortgage and the holder or assignee of the underlying note at the time the action is
(2nd
commenced. Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532 Dep't 2011).
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Here, plaintiff failed to demonstrate itsprima facie entitlement to judgment, as a matter of law,
standing...."
because it did not establish that it had US Bank Natl. Assn. v Madero, 80 A.D.3d
(2nd
751, 915 N.Y.S.2d 612 Dep't 2011).
6. The chain of mortgages on which plaintiff is seeking to foreclose date
from December 1998 and, allegedly, continue through September 21, 2006, with the last being
the 2006 CEMA that is the subject matter of the instant foreclosure action. In order for plaintiff
to have the capacity to maintain this foreclosure action, the chain of mortgages, from 1998
through 2006, must be unbroken through the date of the last mortgage of the chain.
7. It isclear that once the issue of standing has been raised by a defendant (as
Royal Blue has done in the instant action), the burden is placed on the plaintiff to prove that it
owns the note and mortgage underlying the action, and the validity of any associated
assignments upon which the action is predicated. TBZ Corp. . v. Dabbs 25 A.D.3d 787, 808
(2nd
N.Y.S.2d 746 Dept. 2006); Deutsche Bank Trust Co. Americas v. Picon, 2011 Misc Lexis
3131, 2011 NY Slip Op 31736(U) (Sup. Ct, Queens Co. 2011).
8. Plaintiff's lack of standing is based on the fact that there was never an
assignment of the note and mortgage that was entered into between Royal Blue and American
Home Mortgage Acceptance, Inc. ("AHMAI") in 2005 to any entity.
9. Plaintiff claims that AHMAI assigned the note and mortgage Royal Blue
entered into with AHMAI to the Mortgage Electronic Registration System ("MERS") on or
about September 21, 2006, but, in actuality, that assignment never occurred. As a result of the
failure of assignment to occur in 2006, the alleged assignment from MERS, as nominee for
any
AHMAI, to American Home Mortgage ("AHM") was defective due to the chain of all the prior
notes and mortgages having been broken.
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10. Therefore, on the date of the execution and assignment of the 2006
CEMA, there was a gap in title of the prior mortgages from AHMAI into MERS, and thereafter a
resulting gap in titleto the mortgages from MERS into AHM.
11. As such, when AHM allegedly assigned the 2006 CEMA to plaintiff on
April 8, 2009, although the assignment alleged that it was effective as of September 21, 2006,
that was not the case as on September 21, 2006 AHM did not have titleto the 2005 loan and
underlying mortgages. Therefore, as a result, any assignment from AHM to plaintiff was
defective.
Plaintiff Failed To Meet Its Burden That It Owned And Is
In Possession Of The Original Note and Mortgage Underlying
the Action Now And When The Action Was Commenced
12. Critically, nowhere does plaintiff (via Ms. Kearse) state that plaintiff is
currently in possession of the original note and that plaintiff was in possession of the original
note on the date that this action was commenced more than eight (8) years ago. The note was
endorsed in blank and there is no date on the endorsement so it is impossible to determine, from
the face of the note, when the note was endorsed or to what entity itwas delivered at the time it
was endorsed. For that reason alone, the Complaint should be dismissed.
13. As noted in Bank of N.Y. v. Silverberg, supra, the principal for
determination "was whether MERS, as nominee and mortgagee for purposes of recording, can
assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS's
note."
right to, or possession of, the actual underlying promissory The Court in Bank of N.Y. v.
Silverberg, supra, went on to note that:
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Standing requires an inquiry into whether a litigant has "an
interest . .. in the lawsuit that the law will recognize as a
sufficient predicate for determining the issue at the
request."
litigant's (citations omitted) Where, as here, the
issue of standing is raised by a defendant, a plaintiff must
prove its standing in order to be entitled to relief. In a
mortgage foreclosure action, a plaintiff has standing where
itis both the holder or assignee of the subject mortgage and
the holder or assignee of the underlying note at the time the
action is commenced.
14. In this action plaintiff has failed to provide any evidentiary proof that it
was the actual holder or assignee of the note and mortgage at the time of the commencement of
this action, or, for that matter, at present.
15. Similar to the facts of Bank of N.Y. v. Silverberg, plaintiff relies on the
language of Schedule D of its Complaint (Exhibit A hereto) detailing the alleged chain of
assignments of mortgages and which provided that MERS was acting solely as a nominee for
AHMAI.
"nominee,"
However, as MERS's authority was limited to
only those powers which were specifically conferred to it
and authorized by the lender (see Black's Law Dictionary
1076 [8th ed 2004] [defining a nominee as "(a) person
designated to act in place of another, (usually) in a very
limited way"]). Hence, although the consolidation
agreement gave MERS the right to assign the mortgages
themselves, it did not specifically give MERS the right to
assign the underlying notes, and the assignment of the notes
was thus beyond MERS's authority as nominee or agent of
the lender (citations omitted) Bank of N.Y. v. Silverberg,
supra (Emphasis added).
Holder,"
16. The 2005 CEMA (ECF Docket No. 9) defines "Note as the
"Lender or anyone who succeeds to Lender's right under the Agreement and who is entitled to
Agreement."
receive the payments under the AHMAI is defined as Lender in the 2005 CEMA.
Therefore, in the present case, as was the case in Bank of N.Y. v. Silverberg, supra, plaintiff,
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could only be assigned that which MERS was able to assign and did assign to AHM.
17. Not only did AHMAI never assign the 2005 CEMA, but, in addition,
even if there was an effective assignment, MERS could not have assigned the underlying notes
as such assignment was beyond MERS's authority as nominee or agent of AHMAI. Therefore,
plaintiff did not acquire the power to foreclose by way of the MERS to AHM to Deutsche Bank
assignments or any supposed corrected assignment. As the Court noted in Bank of N.Y. v.
Silverberg, supra, the corrected assignment is a nullity.
In sum, because MERS was never the lawful holder or
assignee of the notes described and identified in the
consolidation agreement, the corrected assignment of
mortgage is a nullity, and MERS was without authority to
assign the power to foreclose to the plaintiff. Consequently,
the plaintiff failed to show that ithad standing to foreclose.
Accordingly, the Supreme Court should have granted the
defendants'
motion pursuant to CPLR 3211 (a) (3) to
dismiss the complaint insofar as asserted against them for
lack of standing. Bank of N.Y. v. Silverberg, supra.
18. Royal Blue has therefore met its burden of establishing, by documents
proffered by and admitted to by plaintiff, that plaintiff lacks standing as a matter of law and that
dismissal of the action pursuant to CPLR 3211 (a) (3) should be granted. (See BAC Home Loans
(2nd
Servicing, LP v Rychik, 2018 N.Y. App. Div LEXIS 3507 Dept. 2018).
19. As a result of (i) plaintiff's inability to establish that it had standing to
commence this action; (ii) plaintiffs inability to establish that it was the lawful holder or
assignee of the note and mortgage at the time of the commencement of this action in 2009; and
(iii)the fact that the mortgage chain was broken on the date itcommenced this action, Royal
Blue's motion to dismiss the Complaint pursuant to CPLR 3211(a)(3) should be granted.
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Royal Blue's Motion To Dismiss
Is Not Barred By Law Of The Case
20. Plaintiff's opposition to Royal Blue's motion to dismiss incorrectly claims
Case."
that Royal Blue's motion to dismiss the Amended Complaint is precluded by "Law of the
That claim isjust plain wrong.
21. The doctrine of law of the case is a rule of practice, an articulation of
sound policy, that when an issue is once judicially determined, that should be the end of the
matter as far as judges and courts of co-ordinate jurisdiction are concerned. Martin v. City of
Cohoes, 37 N.Y.2d 162, 165, 371 N.Y.S.2d 687 (1975). The principle is applicable to "legal
decision."
determinations that were necessarily resolved on the merits in the prior (Emphasis
added.) Joseph v. City of New York, 15 Misc. 3d 1136[A], 841 N.Y.S.2d 820 (Sup. Ct. Kings
Co. 2006) quoting Brownrigg v. New York City Housing Authority, 29 A.D. 2d 721, 815
(2nd
N.Y.S.2d 681 Dept. 2006).
22. In fact, in determining whether law of the case applies, the procedural
posture and evidentiary burden of the litigants must be considered. Feinberg v. Boros, 99 A.D.
(13
3d 219, 224, 951 N.Y.S.2d 110 Dept 2012), ly denied 21 N.Y.3d 851, 965 N.Y.S.2d 789
(2013).
23. In a case directly on point, the Court in Tenzer, Greenblatt, Fallon &
(1st
Kaplan v. Capri Jewelry, Inc., 128 A.D.2d 457, 513 N.Y.S.2d 157 Dept. 1987), held that the
law of the case doctrine was not applicable on a motion to dismiss under CPLR 3211 (a)(7) for
failure to state a cause of action, which addresses merely the sufficiency of the pleadings, to a
motion for summary judgment pursuant to CPLR 3212 which searches the record and looks to
the sufficiency of the underlying evidence. The court held that because the two motions are
distinguishable the denial of a prior motion to dismiss a complaint does not bar a subsequent
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motion for summary judgment.
24. The same is obviously true with respect in the instant case as Royal Blue's
opposition to plaintiff's motion to amend its complaint (which motions are routinely granted) is
distinguishable from Royal Blue's instant motion to dismiss the Amended Complaint based on,
among other reasons: (i) plaintiff's lack of standing, (ii)the statute of limitations, (iii) failure to
state a cause of action, and (iv) the fact that a foreclosure sale would be in violation of the Martin
Act and in violation Of RPL Article 9-B.
25. Moreover, in this Court's Order granting, in part, plaintiff's motion to
amend itscomplaint to add causes of action for unjust enrichment and an equitable lien (Exhibit
B), the Court did not make any rulings as to the merits of these proposed causes of action. The
Court simply permitted the plaintiff to amend its complaint to add them.
26. In fact, at the oral argument of plaintiff's motion to amend its complaint
on January 23, 20181, this Court acknowledged that it was not making a decision on the merits
of the proposed amended pleading and anticipated that the issue of the validity of the new causes
of action would be resolved at later time, as follows:
The Court: If the mortgage is defective, then there cannot be even an equitable
lien, in my humble opinion, because the whole foreclosure action
is an equitable action.
Mr. Shaw: Agreed, Your Honor.
The Court: Okay. And I know you disagree with but that's - -
may that, look,
there has to be a basis for any lien, there has to be a foundation for
any lien, there has to be a legal reason to have a lien. So that can
all be argued at a different time, it truly can, if it goes any
further. (Emphasis added.)
See Exhibit C, pp. 22-23.
A copy of the transcript of this oral argument is annexed as Exhibit C.
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27. This Court's reasoning is consistent with a recent decision of the
Honorable Justice Charles Ramos in Tudeme v. Walters, 35 Misc. 3d 1217(A), 951 N.Y.S.2d 85
(Sup. Ct. NY Co. 2012). In that case, the court noted that when JHO Ira Gammerman previously
plaintiffs'
granted the motion to amend their complaint to pierce the corporate veil, he indicated
to counsel that if the case was going to be tried by a jury, he would resolve that issue before the
matter was submitted to the jury, and if the case was not going to be tried by a jury, he would
resolve itin the framework of a trial.Justice Ramos correctly noted that these comments by JHO
Gammerman indicated that he "did not make a determination on this matter, but rather preserved
time,"
the issue for a later and that as a result the doctrine of law of the case did not apply to this
issue.
28. As demonstrated by the transcript of the oral argument of plaintiff's
motion to amend its the same holds true with respect to this Court's - that since
complaint, ruling
the Court was not a ruling on the merits of the causes of action, and inasmuch as the Court
acknowledged that the issue would be argued at a different time, the law of the case doctrine
does not apply and does not bar that Royal Blue's instant motion to dismiss the Amended
Complaint.
The Third Cause of Action for
Foreclosure Of An Equitable
Mortgage Lien Should Be
Dismissed Pursuant to CPLR
3211(a)(5) As Time Barred
29. Plaintiff's argument that the statute of limitations for a cause of action for
an equitable lien does not begin to run until the court determines that the plaintiff cannot prevail
on a mortgage foreclosure action makes no sense. Contrary to the intent of CPLR Section
213(4), plaintiff posits that it can start a new action for an equitable lien in the event it does not
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prevail in this mortgage foreclosure action without being subject to the statute of limitations.
30. CPLR Section 213(4) provides that "an action on a bond or note, the
payment of which is secured by a mortgage upon real property, or upon a bond or note and
therein"
mortgage so secured, or upon a mortgage of real property, or interest must be
commenced within six years.
31. Plaintiff was well aware, more than eight (8) years ago, when Royal
Blue interposed its Verified Answer, a copy of which is annexed as Exhibit D, to plaintiffs
initial complaint, that plaintiff could not maintain the instant action because there was not an
declaration"
"effective condominium plan or which, in turn, meant that no separate residential
condominium unit had been created, and therefore the note and/or assignment of mortgage and
the 2006 CEMA were defective.
32. Plaintiff, being fully cognizant of these facts for over eight (8) years, now
attempts to make an end-run around the six (6) year statute of limitations set forth in CPLR
Section 213(4).
33. As plaintiff notes in the affirmation of Allison J. Sanders dated June 18,
2018 (the "Sanders Aff."), CPLR §203(f) indicates that the new claims in an amended pleading
are deemed interposed as of the date of the original pleading "unless the original pleading does
not give notice of the transaction, occurrences, or series of transactions or occurrences, to be
pleading."
proved pursuant to the amended (Emphasis added).
Sanders'
34. It is clear from Ms. affirmation that the original complaint could
not possibly have given Royal Blue notice of the transaction or occurrence because, according to
her, that transaction or occurrence could not have been contemplated and could not have
Sanders'
occurred according to Ms. own theory enunciated in paragraph 58 of her affirmation.
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Sanders'
35. Plaintiff's contention, under Ms. theory, is that "the limitations
period [for an equitable lien claim] first accrues when this Court determines that Plaintiff has no
Mortgages."
adequate legal remedy to foreclose the Mortgage Premises based upon itsrecorded
(See Sanders Aff. at para. 60). Ms. Sanders continues on to state that "unless and until Plaintiff
loses its legal remedy, i.e. the ability to foreclose on itsrecorded mortgage lien, the court should
remedy."
not consider a statute of limitations defense to the alternative equitable (See Sanders
Aff. at para. 62).
36. Plaintiff's baseless legal theory is not only contrary to the six (6) year
statute of limitations applicable to instant action pursuant to CPLR Section 213(4), but also a
tacit admission by plaintiff that the claim for an equitable lien does not relate back to the
transactions and/or occurrences in the original pleadings.
37. Plaintiff's intentional and willful failure to assert a claim for foreclosure of
an alleged equitable lien with full knowledge for over eight (8) years that ithad the ability to
raise and allege such purported claim, requires that Royal Blue's motion to dismiss the
Complaint, pursuant to CPLR 3211(a)(5), be granted.
Royal Blue Has Met The Standard
Requiring Dismissal Of The Complaint
Pursuant To CPLR 3211(a)(7)
38. CPLR 3211(a)(7) provides that a party may move for judgment dismissing
one or more causes of action asserted against it on the grounds that the pleading fails to state a
cause of action. Although on a motion to dismiss a pleading pursuant to CPLR 3211(a)(7), the
facts pleaded are generally presumed to be true, where the allegations consist of bare legal
conclusions, as well as factual claims either inherently incredible or flatly contradicted by
documentary evidence, they are not entitled to such consideration. Ullman v. Norma Kamali,
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(13
Inc., 207A.D.2d 691, 616 N.Y.S.2d 583 Dep't 1994); Quail Ridge Associates v. Chemical
(3d
Bank, 162 A.D.2d 917, 558 N.Y.S.2d 655 Dep't 1990). The assumption that allegations in a
complaint are deemed true must fail where the complaint consists of conclusory allegations
lacking factual support. Elsky v. KM Insurance Brokers, 139 A.D.2d 691, 527 N.Y.S.2d 446 (2d
(13t
Dep't 1988); Riffat v Continental Ins. Co., 104 A.D.2d 301, 478 N.Y.S.2d 635 Dep't 1984).
A Foreclosure Sale Would Be In Violation Of The Martin Act
And In Violation Of RPL Article 9-B And Therefore No Cause
of Action for Foreclosure Has Been Pled and Dismissal of
The Complaint Is Required Pursuant To CPLR 3211(a)(7)
39. As previously noted in my moving affirmation, the alleged property on
which plaintiff is seeking to foreclosure does not, as a matter of law, exist as a separate and
distinct residential condominium unit. As a result, plaintiff is barred from the recovery it seeks,
and the remedy itelected, as the Court cannot order or permit an illegal act, to wit: a foreclosure
sale in contravention of a New York State statute.
40. Article 9B of the NY Real Property Law (the "Condo Act") requires a
series of steps and filings to subject a property to a condominium regime and create
condominium units thereby, and pursuant to Section 352 of the N.Y. General Business Law (the
"Martin Act"), condominium units are considered securities and may not be sold without the
filing of an offering plan accepted for filing by the New York State Department of Law, Office
of the New York State Attorney General. Any sale of a condominium unit without such a filed
plan is illegaland in contravention of New York State statutes.
41. Accordingly, under both the Condo Act and the Martin Act, there was
never an actual, legally formed residential condominium unit in existence that secured the
mortgages consolidated by the 2006 CEMA.
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42. As the Commercial Condominium Unit has never been legally subdivided
into separate and distinct residential condominium units as required by the New York State
Department of Law, there may be no sale, whether through foreclosure or otherwise, of a tax lot
or any alleged unit without the acceptance by the Department of Law of an offering plan in
accordance with Part 23 of Title 13 NYCRR.
43. As a result, the relief sought by plaintiff in the Complaint for a foreclosure
sale cannot be legally effected and cannot be sold under the Martin Act. Plaintiff has therefore
failed to state a cause of action for a foreclosure of mortgage or for a foreclosure of an equitable
lien and, as such, the first and third causes of action set forth in the Complaint should also be
dismissed pursuant to CPLR 3211(a)(7).
The Fourth Cause of Action Fails
To State A Claim For Unjust Enrichment
Requiring Dismissal Pursuant to CPLR 3211(a)(7)
44. Plaintiff's fourth cause of action is for unjust enrichment. "To prevail on a
claim for unjust enrichment in New York, a party must establish that the defendant benefitted at
restitution."
the plaintiffs expense, and that equity and good conscience require Beth Israel Med.
Ctr. v. Horizon Blue Cross 4 Blue Shield of N.J., Inc., 448 F.3d 573, 586 (2d Cir. 2006)
(internal quotation marks omitted) (quoting Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir.
2000)).
45. The fact that plaintiff's activities bestowed a benefit on the defendant is
insufficient to establish a cause of action for unjust enrichment and that itis the plaintiff's burden
to prove that the services were performed for the defendant resulting in the defendant's unjust
enrichment. (See Costa v. Deutsche Bank National Trust Company, 247 F. Supp. 3d 329 [Mar.
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30, 2017, S.D.N.Y). That Royal Blue may have received a benefit is insufficient to establish a
cause of action for unjust enrichment.
46. Rather, "it is [also] the plaintiffs burden to demonstrate that services were
enrichment."
performed for the defendant resulting in the latter's unjust Law Offices of K.C.
Okoli, P.C. v. BNB Bank, N.A., 481 F. App'x 622, 627 (2d Cir. 2012) (quoting Clark v. Daby,
300 A.D.2d 732, 751 N.Y.S.2d 622, 623 (3d Dep't 20023 (emphasis in Clark)).
47. Plaintiff, in fact, admits, in its Complaint, that the services and payments
were performed solely for the benefit of plaintiff and not for defendant.
48. In paragraph Fortieth of its Complaint, plaintiff states that plaintiff has
paid
Preview
FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------------------X Deutsche Bank National Trust Company as Trustee for REPLY AFFIRMATION American Home Mortgage Assets Trust 2007-1 Mortgage- IN FURTHER SUPPORT Backed Pass-Through Certificates, Series 2007-1, OF DEFENDANT ROYAL BLUE REALTY HOLDINGS, Plaintiff, INC.'S MOTION TO DISMISS AMENDED COMPLAINT -against- Royal Blue Realty Holdings, Inc., Board of Managers of 130 Barrow Street Condominium Homeowners Association, Yu International, Inc. dba SY Marble & Index No. 107030/2009 Granite Importers & Distributors, NY State Department of Taxation and Finance, State of New York, New York City, City of New York Environmental Control Board, City of New York Parking Violations Bureau, and "JOHN DOE #1" through "JOHN DOE #10", the last ten names being fictitious and unknown to the Plaintiff, the person or parties intended being the person or parties, if any, having or claiming an interest in or lien upon the mortgage premises described in the complaint, Defendants. ----------------------------------------------------------------------x Martin Shaw, an attorney duly admitted to practice in the Courts of the State of New York affirms the following to be true, upon information and belief, under penalties of perjury: 1. I am an attorney at the law firm of Shaw & Associates, the attorneys for (" Blue" defendant Royal Blue Realty Holdings, Inc. ("Royal Blue") in the above entitled action, and as such I am fully familiar with the facts and circumstances herein by virtue of my review of the file and as an attorney for Royal Blue and as set forth below. 2. I respectfully submit this reply affirmation in further support of Royal Blue's motion to dismiss the amended complaint pursuant to CPLR 3211(a)(1), (3), (5) and (7) and cancel the notice of pendency filed by plaintiff on the property owned by Royal Blue and 1 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 "Property" located at 162-174 Christopher Street, New York, New York (the "Property") pursuant to CPLR § 6514(b), as discussed in detail below. 3. As noted in my moving affirmation dated May 11, 2018 in support of Royal Blue's instant motion to dismiss, plaintiffs Amended Mortgage Foreclosure Complaint "Complaint" was e-filed on April 25, 2018 (see ECF Docket No. 6) (the "Complaint"), and contains a total of four (4) causes of action, as follows: (i) a foreclosure of mortgage lien; (ii) a declaratory judgment seeking a determination that plaintiff holds an equitable lien; (iii) foreclosure of equitable mortgage lien; and (iv) unjust enrichment to be included in a judgment of foreclosure. 4. Based on the facts of this case and the documents that have been either acknowledged by plaintiff as true and correct or submitted as exhibits by plaintiff, Royal Blue's motion to dismiss pursuant to CPLR 321l(a) (3), (5) and (7) provides the factual, evidentiary and legal basis that clearly and unequivocally proves that Royal Blue has complete defenses to the instant action and that the Complaint should be dismissed in itsentirety. Royal Blue's Motion to Dismiss Should Be Granted As Plaintiff Has No Standing The Chain Of Mortgages is Broken Due To Defective Assignments And, As A Result, Plaintiff Lacks Standing 5. As noted previously in my moving affirmation, the issue of standing requires an inquiry into whether a litigant has "an interest ... in the lawsuit that the law will request." recognize as a sufficient predicate for determining the issue at the litigant's In a mortgage foreclosure action, a plaintiff has standing where itis both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is (2nd commenced. Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532 Dep't 2011). 2 2 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 Here, plaintiff failed to demonstrate itsprima facie entitlement to judgment, as a matter of law, standing...." because it did not establish that it had US Bank Natl. Assn. v Madero, 80 A.D.3d (2nd 751, 915 N.Y.S.2d 612 Dep't 2011). 6. The chain of mortgages on which plaintiff is seeking to foreclose date from December 1998 and, allegedly, continue through September 21, 2006, with the last being the 2006 CEMA that is the subject matter of the instant foreclosure action. In order for plaintiff to have the capacity to maintain this foreclosure action, the chain of mortgages, from 1998 through 2006, must be unbroken through the date of the last mortgage of the chain. 7. It isclear that once the issue of standing has been raised by a defendant (as Royal Blue has done in the instant action), the burden is placed on the plaintiff to prove that it owns the note and mortgage underlying the action, and the validity of any associated assignments upon which the action is predicated. TBZ Corp. . v. Dabbs 25 A.D.3d 787, 808 (2nd N.Y.S.2d 746 Dept. 2006); Deutsche Bank Trust Co. Americas v. Picon, 2011 Misc Lexis 3131, 2011 NY Slip Op 31736(U) (Sup. Ct, Queens Co. 2011). 8. Plaintiff's lack of standing is based on the fact that there was never an assignment of the note and mortgage that was entered into between Royal Blue and American Home Mortgage Acceptance, Inc. ("AHMAI") in 2005 to any entity. 9. Plaintiff claims that AHMAI assigned the note and mortgage Royal Blue entered into with AHMAI to the Mortgage Electronic Registration System ("MERS") on or about September 21, 2006, but, in actuality, that assignment never occurred. As a result of the failure of assignment to occur in 2006, the alleged assignment from MERS, as nominee for any AHMAI, to American Home Mortgage ("AHM") was defective due to the chain of all the prior notes and mortgages having been broken. 3 3 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 10. Therefore, on the date of the execution and assignment of the 2006 CEMA, there was a gap in title of the prior mortgages from AHMAI into MERS, and thereafter a resulting gap in titleto the mortgages from MERS into AHM. 11. As such, when AHM allegedly assigned the 2006 CEMA to plaintiff on April 8, 2009, although the assignment alleged that it was effective as of September 21, 2006, that was not the case as on September 21, 2006 AHM did not have titleto the 2005 loan and underlying mortgages. Therefore, as a result, any assignment from AHM to plaintiff was defective. Plaintiff Failed To Meet Its Burden That It Owned And Is In Possession Of The Original Note and Mortgage Underlying the Action Now And When The Action Was Commenced 12. Critically, nowhere does plaintiff (via Ms. Kearse) state that plaintiff is currently in possession of the original note and that plaintiff was in possession of the original note on the date that this action was commenced more than eight (8) years ago. The note was endorsed in blank and there is no date on the endorsement so it is impossible to determine, from the face of the note, when the note was endorsed or to what entity itwas delivered at the time it was endorsed. For that reason alone, the Complaint should be dismissed. 13. As noted in Bank of N.Y. v. Silverberg, supra, the principal for determination "was whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS's note." right to, or possession of, the actual underlying promissory The Court in Bank of N.Y. v. Silverberg, supra, went on to note that: 4 4 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 Standing requires an inquiry into whether a litigant has "an interest . .. in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the request." litigant's (citations omitted) Where, as here, the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief. In a mortgage foreclosure action, a plaintiff has standing where itis both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced. 14. In this action plaintiff has failed to provide any evidentiary proof that it was the actual holder or assignee of the note and mortgage at the time of the commencement of this action, or, for that matter, at present. 15. Similar to the facts of Bank of N.Y. v. Silverberg, plaintiff relies on the language of Schedule D of its Complaint (Exhibit A hereto) detailing the alleged chain of assignments of mortgages and which provided that MERS was acting solely as a nominee for AHMAI. "nominee," However, as MERS's authority was limited to only those powers which were specifically conferred to it and authorized by the lender (see Black's Law Dictionary 1076 [8th ed 2004] [defining a nominee as "(a) person designated to act in place of another, (usually) in a very limited way"]). Hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS's authority as nominee or agent of the lender (citations omitted) Bank of N.Y. v. Silverberg, supra (Emphasis added). Holder," 16. The 2005 CEMA (ECF Docket No. 9) defines "Note as the "Lender or anyone who succeeds to Lender's right under the Agreement and who is entitled to Agreement." receive the payments under the AHMAI is defined as Lender in the 2005 CEMA. Therefore, in the present case, as was the case in Bank of N.Y. v. Silverberg, supra, plaintiff, 5 5 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 could only be assigned that which MERS was able to assign and did assign to AHM. 17. Not only did AHMAI never assign the 2005 CEMA, but, in addition, even if there was an effective assignment, MERS could not have assigned the underlying notes as such assignment was beyond MERS's authority as nominee or agent of AHMAI. Therefore, plaintiff did not acquire the power to foreclose by way of the MERS to AHM to Deutsche Bank assignments or any supposed corrected assignment. As the Court noted in Bank of N.Y. v. Silverberg, supra, the corrected assignment is a nullity. In sum, because MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff. Consequently, the plaintiff failed to show that ithad standing to foreclose. Accordingly, the Supreme Court should have granted the defendants' motion pursuant to CPLR 3211 (a) (3) to dismiss the complaint insofar as asserted against them for lack of standing. Bank of N.Y. v. Silverberg, supra. 18. Royal Blue has therefore met its burden of establishing, by documents proffered by and admitted to by plaintiff, that plaintiff lacks standing as a matter of law and that dismissal of the action pursuant to CPLR 3211 (a) (3) should be granted. (See BAC Home Loans (2nd Servicing, LP v Rychik, 2018 N.Y. App. Div LEXIS 3507 Dept. 2018). 19. As a result of (i) plaintiff's inability to establish that it had standing to commence this action; (ii) plaintiffs inability to establish that it was the lawful holder or assignee of the note and mortgage at the time of the commencement of this action in 2009; and (iii)the fact that the mortgage chain was broken on the date itcommenced this action, Royal Blue's motion to dismiss the Complaint pursuant to CPLR 3211(a)(3) should be granted. 6 6 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 Royal Blue's Motion To Dismiss Is Not Barred By Law Of The Case 20. Plaintiff's opposition to Royal Blue's motion to dismiss incorrectly claims Case." that Royal Blue's motion to dismiss the Amended Complaint is precluded by "Law of the That claim isjust plain wrong. 21. The doctrine of law of the case is a rule of practice, an articulation of sound policy, that when an issue is once judicially determined, that should be the end of the matter as far as judges and courts of co-ordinate jurisdiction are concerned. Martin v. City of Cohoes, 37 N.Y.2d 162, 165, 371 N.Y.S.2d 687 (1975). The principle is applicable to "legal decision." determinations that were necessarily resolved on the merits in the prior (Emphasis added.) Joseph v. City of New York, 15 Misc. 3d 1136[A], 841 N.Y.S.2d 820 (Sup. Ct. Kings Co. 2006) quoting Brownrigg v. New York City Housing Authority, 29 A.D. 2d 721, 815 (2nd N.Y.S.2d 681 Dept. 2006). 22. In fact, in determining whether law of the case applies, the procedural posture and evidentiary burden of the litigants must be considered. Feinberg v. Boros, 99 A.D. (13 3d 219, 224, 951 N.Y.S.2d 110 Dept 2012), ly denied 21 N.Y.3d 851, 965 N.Y.S.2d 789 (2013). 23. In a case directly on point, the Court in Tenzer, Greenblatt, Fallon & (1st Kaplan v. Capri Jewelry, Inc., 128 A.D.2d 457, 513 N.Y.S.2d 157 Dept. 1987), held that the law of the case doctrine was not applicable on a motion to dismiss under CPLR 3211 (a)(7) for failure to state a cause of action, which addresses merely the sufficiency of the pleadings, to a motion for summary judgment pursuant to CPLR 3212 which searches the record and looks to the sufficiency of the underlying evidence. The court held that because the two motions are distinguishable the denial of a prior motion to dismiss a complaint does not bar a subsequent 7 7 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 motion for summary judgment. 24. The same is obviously true with respect in the instant case as Royal Blue's opposition to plaintiff's motion to amend its complaint (which motions are routinely granted) is distinguishable from Royal Blue's instant motion to dismiss the Amended Complaint based on, among other reasons: (i) plaintiff's lack of standing, (ii)the statute of limitations, (iii) failure to state a cause of action, and (iv) the fact that a foreclosure sale would be in violation of the Martin Act and in violation Of RPL Article 9-B. 25. Moreover, in this Court's Order granting, in part, plaintiff's motion to amend itscomplaint to add causes of action for unjust enrichment and an equitable lien (Exhibit B), the Court did not make any rulings as to the merits of these proposed causes of action. The Court simply permitted the plaintiff to amend its complaint to add them. 26. In fact, at the oral argument of plaintiff's motion to amend its complaint on January 23, 20181, this Court acknowledged that it was not making a decision on the merits of the proposed amended pleading and anticipated that the issue of the validity of the new causes of action would be resolved at later time, as follows: The Court: If the mortgage is defective, then there cannot be even an equitable lien, in my humble opinion, because the whole foreclosure action is an equitable action. Mr. Shaw: Agreed, Your Honor. The Court: Okay. And I know you disagree with but that's - - may that, look, there has to be a basis for any lien, there has to be a foundation for any lien, there has to be a legal reason to have a lien. So that can all be argued at a different time, it truly can, if it goes any further. (Emphasis added.) See Exhibit C, pp. 22-23. A copy of the transcript of this oral argument is annexed as Exhibit C. 8 8 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 27. This Court's reasoning is consistent with a recent decision of the Honorable Justice Charles Ramos in Tudeme v. Walters, 35 Misc. 3d 1217(A), 951 N.Y.S.2d 85 (Sup. Ct. NY Co. 2012). In that case, the court noted that when JHO Ira Gammerman previously plaintiffs' granted the motion to amend their complaint to pierce the corporate veil, he indicated to counsel that if the case was going to be tried by a jury, he would resolve that issue before the matter was submitted to the jury, and if the case was not going to be tried by a jury, he would resolve itin the framework of a trial.Justice Ramos correctly noted that these comments by JHO Gammerman indicated that he "did not make a determination on this matter, but rather preserved time," the issue for a later and that as a result the doctrine of law of the case did not apply to this issue. 28. As demonstrated by the transcript of the oral argument of plaintiff's motion to amend its the same holds true with respect to this Court's - that since complaint, ruling the Court was not a ruling on the merits of the causes of action, and inasmuch as the Court acknowledged that the issue would be argued at a different time, the law of the case doctrine does not apply and does not bar that Royal Blue's instant motion to dismiss the Amended Complaint. The Third Cause of Action for Foreclosure Of An Equitable Mortgage Lien Should Be Dismissed Pursuant to CPLR 3211(a)(5) As Time Barred 29. Plaintiff's argument that the statute of limitations for a cause of action for an equitable lien does not begin to run until the court determines that the plaintiff cannot prevail on a mortgage foreclosure action makes no sense. Contrary to the intent of CPLR Section 213(4), plaintiff posits that it can start a new action for an equitable lien in the event it does not 9 9 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 prevail in this mortgage foreclosure action without being subject to the statute of limitations. 30. CPLR Section 213(4) provides that "an action on a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and therein" mortgage so secured, or upon a mortgage of real property, or interest must be commenced within six years. 31. Plaintiff was well aware, more than eight (8) years ago, when Royal Blue interposed its Verified Answer, a copy of which is annexed as Exhibit D, to plaintiffs initial complaint, that plaintiff could not maintain the instant action because there was not an declaration" "effective condominium plan or which, in turn, meant that no separate residential condominium unit had been created, and therefore the note and/or assignment of mortgage and the 2006 CEMA were defective. 32. Plaintiff, being fully cognizant of these facts for over eight (8) years, now attempts to make an end-run around the six (6) year statute of limitations set forth in CPLR Section 213(4). 33. As plaintiff notes in the affirmation of Allison J. Sanders dated June 18, 2018 (the "Sanders Aff."), CPLR §203(f) indicates that the new claims in an amended pleading are deemed interposed as of the date of the original pleading "unless the original pleading does not give notice of the transaction, occurrences, or series of transactions or occurrences, to be pleading." proved pursuant to the amended (Emphasis added). Sanders' 34. It is clear from Ms. affirmation that the original complaint could not possibly have given Royal Blue notice of the transaction or occurrence because, according to her, that transaction or occurrence could not have been contemplated and could not have Sanders' occurred according to Ms. own theory enunciated in paragraph 58 of her affirmation. 10 10 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 Sanders' 35. Plaintiff's contention, under Ms. theory, is that "the limitations period [for an equitable lien claim] first accrues when this Court determines that Plaintiff has no Mortgages." adequate legal remedy to foreclose the Mortgage Premises based upon itsrecorded (See Sanders Aff. at para. 60). Ms. Sanders continues on to state that "unless and until Plaintiff loses its legal remedy, i.e. the ability to foreclose on itsrecorded mortgage lien, the court should remedy." not consider a statute of limitations defense to the alternative equitable (See Sanders Aff. at para. 62). 36. Plaintiff's baseless legal theory is not only contrary to the six (6) year statute of limitations applicable to instant action pursuant to CPLR Section 213(4), but also a tacit admission by plaintiff that the claim for an equitable lien does not relate back to the transactions and/or occurrences in the original pleadings. 37. Plaintiff's intentional and willful failure to assert a claim for foreclosure of an alleged equitable lien with full knowledge for over eight (8) years that ithad the ability to raise and allege such purported claim, requires that Royal Blue's motion to dismiss the Complaint, pursuant to CPLR 3211(a)(5), be granted. Royal Blue Has Met The Standard Requiring Dismissal Of The Complaint Pursuant To CPLR 3211(a)(7) 38. CPLR 3211(a)(7) provides that a party may move for judgment dismissing one or more causes of action asserted against it on the grounds that the pleading fails to state a cause of action. Although on a motion to dismiss a pleading pursuant to CPLR 3211(a)(7), the facts pleaded are generally presumed to be true, where the allegations consist of bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence, they are not entitled to such consideration. Ullman v. Norma Kamali, 11 11 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 (13 Inc., 207A.D.2d 691, 616 N.Y.S.2d 583 Dep't 1994); Quail Ridge Associates v. Chemical (3d Bank, 162 A.D.2d 917, 558 N.Y.S.2d 655 Dep't 1990). The assumption that allegations in a complaint are deemed true must fail where the complaint consists of conclusory allegations lacking factual support. Elsky v. KM Insurance Brokers, 139 A.D.2d 691, 527 N.Y.S.2d 446 (2d (13t Dep't 1988); Riffat v Continental Ins. Co., 104 A.D.2d 301, 478 N.Y.S.2d 635 Dep't 1984). A Foreclosure Sale Would Be In Violation Of The Martin Act And In Violation Of RPL Article 9-B And Therefore No Cause of Action for Foreclosure Has Been Pled and Dismissal of The Complaint Is Required Pursuant To CPLR 3211(a)(7) 39. As previously noted in my moving affirmation, the alleged property on which plaintiff is seeking to foreclosure does not, as a matter of law, exist as a separate and distinct residential condominium unit. As a result, plaintiff is barred from the recovery it seeks, and the remedy itelected, as the Court cannot order or permit an illegal act, to wit: a foreclosure sale in contravention of a New York State statute. 40. Article 9B of the NY Real Property Law (the "Condo Act") requires a series of steps and filings to subject a property to a condominium regime and create condominium units thereby, and pursuant to Section 352 of the N.Y. General Business Law (the "Martin Act"), condominium units are considered securities and may not be sold without the filing of an offering plan accepted for filing by the New York State Department of Law, Office of the New York State Attorney General. Any sale of a condominium unit without such a filed plan is illegaland in contravention of New York State statutes. 41. Accordingly, under both the Condo Act and the Martin Act, there was never an actual, legally formed residential condominium unit in existence that secured the mortgages consolidated by the 2006 CEMA. 12 12 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 42. As the Commercial Condominium Unit has never been legally subdivided into separate and distinct residential condominium units as required by the New York State Department of Law, there may be no sale, whether through foreclosure or otherwise, of a tax lot or any alleged unit without the acceptance by the Department of Law of an offering plan in accordance with Part 23 of Title 13 NYCRR. 43. As a result, the relief sought by plaintiff in the Complaint for a foreclosure sale cannot be legally effected and cannot be sold under the Martin Act. Plaintiff has therefore failed to state a cause of action for a foreclosure of mortgage or for a foreclosure of an equitable lien and, as such, the first and third causes of action set forth in the Complaint should also be dismissed pursuant to CPLR 3211(a)(7). The Fourth Cause of Action Fails To State A Claim For Unjust Enrichment Requiring Dismissal Pursuant to CPLR 3211(a)(7) 44. Plaintiff's fourth cause of action is for unjust enrichment. "To prevail on a claim for unjust enrichment in New York, a party must establish that the defendant benefitted at restitution." the plaintiffs expense, and that equity and good conscience require Beth Israel Med. Ctr. v. Horizon Blue Cross 4 Blue Shield of N.J., Inc., 448 F.3d 573, 586 (2d Cir. 2006) (internal quotation marks omitted) (quoting Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000)). 45. The fact that plaintiff's activities bestowed a benefit on the defendant is insufficient to establish a cause of action for unjust enrichment and that itis the plaintiff's burden to prove that the services were performed for the defendant resulting in the defendant's unjust enrichment. (See Costa v. Deutsche Bank National Trust Company, 247 F. Supp. 3d 329 [Mar. 13 13 of 15 FILED: NEW YORK COUNTY CLERK 06/24/2018 08:58 AM INDEX NO. 107030/2009 NYSCEF DOC. NO. 51 RECEIVED NYSCEF: 06/24/2018 30, 2017, S.D.N.Y). That Royal Blue may have received a benefit is insufficient to establish a cause of action for unjust enrichment. 46. Rather, "it is [also] the plaintiffs burden to demonstrate that services were enrichment." performed for the defendant resulting in the latter's unjust Law Offices of K.C. Okoli, P.C. v. BNB Bank, N.A., 481 F. App'x 622, 627 (2d Cir. 2012) (quoting Clark v. Daby, 300 A.D.2d 732, 751 N.Y.S.2d 622, 623 (3d Dep't 20023 (emphasis in Clark)). 47. Plaintiff, in fact, admits, in its Complaint, that the services and payments were performed solely for the benefit of plaintiff and not for defendant. 48. In paragraph Fortieth of its Complaint, plaintiff states that plaintiff has paid