New York Foreclosure - Standing not established - Material Issue of Fact exists as to Transfer of No
In U.S. Bank v. Noble, 2016 NY Slip Op 07315 (2d Dep't. November 9, 2016), an issue of fact precluded an award of summary judgment. The Plaintiff bank, as often is the case, submitted an affidavit stating that it held the note at all during the proceeding. The Second Department reverses the award of summary judgment, holding that a material issue of fact should preclude such an award. In so doing, the Court states the law for how a Plaintiff bank can establish standing in a foreclosure action:
"A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note" (New York Community Bank v McClendon, 138 AD3d 805, 806; see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 306-361). Although the instant action is not a mortgage foreclosure action, the same standard applies under the circumstances presented (see Midland Mtge. Co. v Imtiaz, 110 AD3d 773, 775). "The plaintiff may demonstrate that it is the holder or assignee of the underlying note by showing either a written assignment of the underlying note or the physical delivery of the note" (U.S. Bank N.A. v Guy, 125 AD3d 845, 846-847; Kondauer Capital Corp. v McCary, 115 AD3d 649, 650). "As a general matter, once a promissory note is tendered to and accepted by an assignee, the mortgage passes as an incident to the note. However, the transfer of the mortgage without the debt is a nullity, and no interest is acquired by it . . . because a mortgage is merely security for a debt or other obligation and cannot exist independently of the debt or obligation" (Citibank, N.A. v Herman, 125 AD3d 587, 588 [citations omitted]; see Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909, 911; Bank of N.Y. v Silverberg, 86 AD3d 274, 280).
Almost reliably, most foreclosure defense attorneys will throw in the affirmative defense of standing in a defendant's answer. Simply putting in the standing defense in a foreclosure action, however, is the start and not the end of the inquiry:
On a defendant's motion to dismiss a complaint based upon the plaintiff's alleged lack of standing, the burden is on the moving defendant to establish, prima facie, the plaintiff's lack of standing as a matter of law (see New York Community Bank v McClendon, 138 AD3d at 806; Arch Bay Holdings, LLC-Series 2010B v Smith, 136 AD3d 719, 719; Deutsche Bank Trust Co. Ams. v Vitellas, 131 AD3d 52, 59-60; HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d 983, 984; U.S. Bank N.A. v Guy, 125 AD3d at 847). "To defeat a defendant's motion, the plaintiff has no burden of establishing its standing as a matter of law; rather, the motion will be defeated if the plaintiff's submissions raise a question of fact as to its standing" (Deutsche Bank Trust Co. Ams. v Vitellas, 131 AD3d at 60; see Arch Bay Holdings, LLC-Series 2010B v Smith, 136 AD3d at 719; HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d at 984; U.S. Bank N.A. v Guy, 125 AD3d at 847).
The Defendant submits that there is a discrepancy in the sworn statements provided by the Plaintiff bank. Perhaps what one of my colleagues would call an "Epstein's mother" affidavit. The Defendant here further notes that the document that alleged a transfer was undated and did not show that the note was actually transferred:
An allonge to the note indicated that the note had been transferred to the plaintiff, but was undated and, thus, did not establish that the transfer was effectuated prior to the commencement of the action (see Flagstar Bank, FSB v Anderson, 129 AD3d 665, 666). However, Winston stated in his affidavit that the plaintiff was the holder of the note "at all times prior, during and since commencement of action" and that the note and mortgage had been in the possession of Rushmore, as servicer and agent for the plaintiff, since February 1, 2013. The summons and complaint, which were annexed to the plaintiff's opposing papers, established the date of commencement of the action as October 14, 2013. The foregoing was sufficient to raise a question of fact as to whether the plaintiff's agent had physical possession of the note at the time of commencement of the action.
The Court reverses the summary judgment award. If you are facing foreclosure, hire a knowledgeable defense attorney: 631-450-2515