Avail 1 LLC v. Adovasio

Background

Avail 1 LLC brought a diversity foreclosure action under New York’s Real Property Actions and Proceedings Law. Andrea C. Adovasio had executed a 2004 note and mortgage with Ponce De Leon Federal Bank for $450,000, secured by property at 24 Elena Drive, Cortlandt Manor, New York. In 2012, she signed a Consolidation, Extension and Modification Agreement, or CEMA, under which the bank provided an additional $59,600.87, combined the prior loan with the new amount for a total principal sum of $500,000, and changed the interest rate, payment schedule, and maturity date.

Adovasio failed to make a monthly payment that Avail identified as due on October 1, 2017, and Avail filed the foreclosure complaint on December 3, 2018. In April 2018, the bank assigned the 2004 mortgage to Avail and attached an allonge—a separate sheet used for endorsements—to the 2004 note directing future payments to Avail.

Avail moved for summary judgment under Rule 56. The court treated Adovasio’s opposition as a cross-motion for summary judgment because the parties had notice of that possibility and agreed that no factual disputes remained for trial.

Standing and the CEMA

In a New York foreclosure case, a plaintiff must show that it has the mortgage, the note, and proof of default. When the defendant challenges standing, the plaintiff must also show that it was the holder or assignee of the underlying note when the action began. A holder is the person possessing a negotiable instrument payable to that person or to the bearer.

The court focused on whether Avail had standing to enforce the CEMA. It concluded that the CEMA was not merely a modification of the original note. Based on the agreement’s language and its inclusion of new money, the court found that the CEMA created a new note and a new mortgage, combined them with the original loan documents, and superseded the prior note and mortgage. The court characterized the transaction as a refinancing that established one new mortgage, one new note, and one claim on the property.

The CEMA was not endorsed in blank, endorsed to Avail, or assigned to Avail. The court therefore found that Avail was not the holder or assignee of the CEMA before it filed the foreclosure action and lacked standing to foreclose. Because standing was absent, the court did not address the other arguments and defenses, including the challenges concerning the allonge, the unrecorded 2009 modification, and compliance with the required foreclosure notices. The court also stated that Adovasio’s remaining affirmative defenses were deemed abandoned because she did not raise them in opposition to Avail’s motion.

Ruling

Judge Paul E. Davison denied Avail 1 LLC’s motion for summary judgment and granted Andrea C. Adovasio summary judgment. The Clerk was directed to enter judgment for Adovasio, terminate the pending motion, and close the case.