Mortgage Servicing Fraud
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William A. Roper, Jr.
I have sometimes found it helpful to collect under a single thread various disparate cases relating to a single topic.  Within this thread, I collect the key New York State cases showing that a plaintiff must have standing to foreclosre and the standing is measured from commencement of the suit.

New York litigants are strongly cautioned about the necessity of getting the standing argument RIGHT in their very first defensive pleading.  New York courts have held that where a defendant fails to raise the standing issue in the first defensive pleading, that the standing defense is WAIVED.

This is a good reason to consult with a really competent New York attorney specializing in foreclosure defense, consumer law and/or bankruptcy, with emphasis on the former. 

It is ESSENTIAL to get the standing defense RIGHT in that very first pleading.

New York defendants also need to understand and appreciate that the foreclosure climate in New York State is probably the single most borrower friendly in the United States.  While it might seem expensive to employ an attorney, IF the borrower employs a capable attorney and raises an effective defense, this can very often stop a foreclosure dead in its tracks for months and even years!

Here are some of the KEY New York appellate decisions on standing:
Plaintiff's attempt to foreclose upon a mortgage in which he had no legal or equitable interest was without foundation in law or fact, and the IAS Court's dismissal of the foreclosure action pursuant to CPLR 3211 (a) (1) was, accordingly, appropriate (see, Kluge v Fugazy, 145 AD2d 537).  Dismissal was also warranted by reason of plaintiff's failure to join the party to whom he assigned the mortgage and who, he concedes, possesses a security interest in the property (see, CPLR 3211 [a] [10]).
Katz v. East-Ville Realty Co., 672 N.Y.S.2d 308, 249 A.D.2d 243 (NY Sup. Ct. App. Div. 1st Dept 1998)
http://scholar.google.com/scholar_case?case=7636722154599527150


Where the plaintiff is the assignee of the mortgage and the underlying note at the time the foreclosure action was commenced, the plaintiff has standing to maintain the action (see First Trust Natl. Assn. v Meisels, 234 A.D.2d 414, 651 N.Y.S.2d 121 [1996]; Slutsky v Blooming Grove Inn, 147 A.D.2d 208, 542 N.Y.S.2d 721 [1989]).
Federal National Mortgage Association v. Youkelsone, 303 A.D.2d 546; 755 N.Y.S.2d 730; 2003 N.Y. App. Div. LEXIS 2656 (NY Sup. Ct. App. Div. 2nd Dept 2003)
http://scholar.google.com/scholar_case?case=9686572543337644117


Standing and capacity to sue are related, but distinguishable, legal concepts (see Silver v Pataki, 96 NY2d 532, 537 [2001]; Community Bd. 7 of Borough of Manhattan v Schaffer, 84 NY2d 148, 154-155 [1994]; Caprer v Nussbaum, 36 AD3d 176, 181-182 [2006]; Security Pac. Natl. Bank v Evans, 31 AD3d 278, 279 [2006]).  Although they are both components of a party's authority to sue (see Matter of Graziano v County of Albany, 3 NY3d 475, 479 [2004]), capacity requires an inquiry into the litigant's status, i.e., its "power to appear and bring its grievance before the court" (Community Bd. 7 of Borough of Manhattan v Schaffer, supra at 155), while standing requires an inquiry into whether the litigant has "an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request" (Caprer v Nussbaum, supra at 182).  Where standing is put into issue by a defendant's answer, a plaintiff must prove its standing if it is to be entitled to relief (see TPZ Corp. v Dabbs, 25 AD3d 787, 789 [2006]; see also Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769 [1991] [standing "is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation" (emphasis added)]).  As discussed below, however, a lack of standing is not such a fundamental defect that it cannot be waived.  Thus, where a defendant does not challenge a plaintiff's standing, the plaintiff may be relieved of its obligation to prove that it is the proper party to seek the requested relief.
Wells Fargo v. Mastropaolo, 837 N.Y.S.2d 247, 42 A.D.3d 239 (NY Sup. Ct. App. Div. 2nd Dept 2007)
http://scholar.google.com/scholar_case?case=12261010414697130317
http://www.nycourts.gov/reporter/3dseries/2007/2007_04626.htm


In order to commence a foreclosure action, the plaintiff must have a legal or equitable interest in the mortgage (see Katz v East-Ville Realty Co., 249 AD2d 243 [1998]).  "Where the plaintiff is the assignee of the mortgage and the underlying note at the time the foreclosure action was commenced, the plaintiff has standing to maintain the action" (Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547 [2003]; see also First Trust Natl. Assn. v Meisels, 234 AD2d 414 [1996]).  Here, Wells Fargo lacked standing to bring this foreclosure action because it was not the assignee of the mortgage on November 30, 2007, the day the action was commenced.  A "foreclosure of a mortgage may not be brought by one who has no title to it" (Kluge v Fugazy, 145 AD2d 537, 538 [1988]).  Since the complaint was filed prior to the execution of the assignment, and the service occurred subsequent to the execution, the issue of standing in this case hinges upon whether the filing or the service of the summons and complaint effectuates commencement.  A review of prior appellate decisions reveals that there is some confusion regarding whether, to be effective, the assignment must occur prior to the commencement of the action or instead after commencement, but prior to the service of the complaint.
Wells Fargo Bank v. Marchione, No. 2008-02775, 887 N.Y.S.2d 615, 69 A.D.3d 204 (NY Sup. Ct. App. Div. 2nd Dept 2009)
http://scholar.google.com/scholar_case?case=1142744624508210989
http://www.nycourts.gov/reporter/3dseries/2009/2009_07624.htm


Where, as here, standing is put into issue by the defendant, the plaintiff must prove its standing in order to be entitled to relief (see Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242 [2007]; TPZ Corp. v Dabbs, 25 AD3d 787, 789 [2006]; see also Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769 [1991]).  In a mortgage foreclosure action, a plaintiff has standing where it is 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 (see Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674 [2007]; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547 [2003]; First Trust Natl. Assn. v Meisels, 234 AD2d 414 [1996]).
US Bank, NA v. Collymore, 2009 NY Slip Op 9019, 890 N.Y.S.2d 578, 68 A.D.3d 752, 753-4 (NY Sup. Ct. App. Div. 2nd Dept 2009)
http://scholar.google.com/scholar_case?case=12986848906558373013
http://www.nycourts.gov/reporter/3dseries/2009/2009_09019.htm


Where, as here, a plaintiff's standing is put into issue by the defendants, the plaintiff must prove its standing to be entitled to relief (see U.S. Bank, N.A. v Collymore, 68 AD3d 752, 753, 890 N.Y.S.2d 578; Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242, 837 N.Y.S.2d 247).  "In a mortgage foreclosure action, a plaintiff has standing where it is 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" (U.S. Bank, N.A. v Collymore, 68 AD3d at 753).  "Where a mortgage is represented by a bond or other instrument, an assignment of the mortgage without assignment of the underlying note or bond is a nullity" (id. at 754).  "Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident" (id.; see LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912, 875 N.Y.S.2d 595).  Here, the plaintiff failed to demonstrate its prima facie entitlement to judgment as a matter of law because it did not establish that it had standing, as the lawful holder or assignee of the subject note on the date it commenced this action, to commence the action (see U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 N.Y.S.2d 578; see also Suraleb, Inc. v International Trade Club, Inc., 13 AD3d 612, 788 N.Y.S.2d 403; Tawil v Finkelstein Bruckman Wohl Most & Rothman, 223 AD2d 52, 55, 646 N.Y.S.2d 691).
US Bank, N.A v Madero, 2011 NY Slip Op 505; 80 A.D.3d 751; 915 N.Y.S.2d 612; 2011 N.Y. App. Div. LEXIS 532 (NY Sup. Ct. App. Div. 2nd Dept 2011)
http://scholar.google.com/scholar_case?case=11299985545886232717
http://www.nycourts.gov/reporter/3dseries/2011/2011_00505.htm


In order to commence a foreclosure action, the plaintiff must have a legal or equitable interest in the mortgage (see Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 207, 887 N.Y.S.2d 615).  A plaintiff has standing where it is both (1) the holder or assignee of the subject mortgage and (2) the holder or assignee of the underlying note, either by physical delivery or execution of a written assignment prior to the commencement of the action with the filing of the complaint (see Wells Fargo Bank, N.A. v Marchione, 69 AD3d at 207-209; U.S. Bank, N.A. v Collymore, 68 AD3d 752, 754, 890 N.Y.S.2d 578).  Thus, as long as the plaintiff can establish its lawful status as assignee, either by written assignment or physical delivery, prior to the filing of the complaint, the recording of a written assignment after the commencement of the action does not defeat standing (see U.S. Bank, N.A. v Collymore, 68 AD3d at 754).
Aurora Loan Services, LLC, v Weisblum, 2011 NY Slip Op 4184; 923 N.Y.S.2d 609; 2011 N.Y. App. Div. LEXIS 4108 (NY Sup. Ct. App. Div. 2nd Dept 2011)
http://scholar.google.com/scholar_case?case=7634440800047097953
http://www.nycourts.gov/reporter/3dseries/2011/2011_04184.htm


Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident'" (US Bank N.A. v Madero, 80 AD3d at 753, quoting U.S. Bank, N.A. v Collymore, 68 AD3d at 754; see LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d at 912).
Bank of New York, N.A. v Silverberg, 2011 NY Slip Op 5002; 2011 N.Y. App. Div. LEXIS 4899 (NY Sup. Ct. App. Div. 2nd Dept 2011)
http://scholar.google.com/scholar_case?case=17433510560267208864
http://www.nycourts.gov/reporter/3dseries/2011/2011_05002.htm


*


While the cases shown below lack the authority of decisions of the New York Supreme Court Appellate Division, they give some insight into standing as adjudicated in the trial court:
Standing to sue requires an interest in the claim at issue "that the law will recognize as a sufficient predicate for determining the issue at the litigant's request" (Caprer v Nussbaum, 36 AD3d 176, 182 [2d Dept 2006]).  In general, the right to contest the issue of standing is waived if it is not raised in the Defendant's answer or pre-answer motion to dismiss (Countrywide Home Loans, Inc. v Delphonse, 64 AD3d 624, 625 [2d Dept 2009]).
Deutsche Bank Trust Co. Americas v Picon, Index No. 1070/2008, 2011 NY Slip Op 31747U; 2011 N.Y. Misc. LEXIS 3131 (NY Sup. Ct. Queens Co. 2011)


CPLR 3211[a][3] permits the court to dismiss an action when the party bringing it lacks standing to do so.  "The doctrine of standing is an element of the larger question of justiciability and is designed to ensure that a party seeking relief has a sufficiently cognizable stake in the outcome so as to present a court with a dispute that is capable of judicial resolution" (Community Bd. 7 v. Schaffer, 84 N.Y.2d 148, 154-155, 639 N.E.2d 1, 615 N.Y.S.2d 644 [1994]).
Bank of Am., N.A. v Kim, 2011 NY Slip Op 31602U; 2011 N.Y. Misc. LEXIS 2881 (NY Sup. Ct. New York Co. 2011)
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William A. Roper, Jr.
See also my ancient thread announcing that New York trial courts had begun to dismiss cases due to lack of standing:

New York State Courts Catch On To Foreclosure Plaintiff Fraud/Misconduct and Embrace Ohio Standing Rationale (05/10/08 at 07:47 PM)

http://ssgoldstar.websitetoolbox.com/post?id=2700339


It should probably be noted that the New York appellate courts later disapproved of cases where trial court judges had dismissed cases sua sponte due to standing defects.  Unlike the Federal Courts, where standing is a Constitutional restraint on the court's subject matter jurisdiction to hear a case, in New York State, the courts have found standing to be an issue which is waived if not timely asserted in the first defensive pleading.

Still, some of the earlier trial court rulings set forth more elaborate discussions and justifications for dismissals.  These could be useful and instructive in developing an answer and in selecting the vocabulary for a supporting memorandum of law or brief.  But the appellate decisions are authoritative in New York State and ought to form the foundation of a strong memorandum of law on standing.
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William A. Roper, Jr.
My prior compilation of NY appellate cases above inadvertently omitted the Ahearn decision, out of the Third Department:
Notably, "foreclosure of a mortgage may not be brought by one who has no title to it" (Kluge v Fugazy, 145 AD2d 537, 538 [1988]) and an assignee of such a mortgage does not have standing to foreclose unless the assignment is complete at the time the action is commenced (see Bankers Trust Co. v Hoovis, 263 AD2d 937, 938 [1999]; see also Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674, 674 [2007]).
LaSalle Bank, N.A. v Ahearn, 59 A.D.3d 911, 875 N.Y.S.2d 595 (NY Sup. Ct. App. Div. 2nd Dept 2009)
http://scholar.google.com/scholar_case?case=6698946471877921192
http://www.courts.state.ny.us/REPORTER/3dseries/2009/2009_01388.htm
See also:

NY Appellate Court Finds in Favor of Dismissal of Foreclosure When Plaintiff Lacks Standing at Commencement
http://ssgoldstar.websitetoolbox.com/post?id=3355783

 

It should be noted that Ahearn cites Kluge v. Fugazy in support of the necessity of standing.  Te terse decision in this 2nd Department appellate case may be found at:

http://scholar.google.com/scholar_case?case=11358467522977240670


Decisions rarely get more succinct than Kluge!
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William A. Roper, Jr.
These related threads on New York standing decisions may also be of interest:

NY Appellate 2nd Dept. Case Elaborates on Standing Reqirements Set Out in Lasalle Bank Natl. Assn. v. Ahearn

http://ssgoldstar.websitetoolbox.com/post?id=4689017

 

NY Appellate Court Finds Plaintiff Lacked Necessary Standing at Inception

http://ssgoldstar.websitetoolbox.com/post?id=5068561

 

Major NY Appellate Decision handed down Aurora Loan Services v. Weisblum

http://ssgoldstar.websitetoolbox.com/post?id=5267191

 

MERS goes down for real in NY, Bank of N.Y. v Silverberg

http://ssgoldstar.websitetoolbox.com/post?id=5349630

 

Also, see this related thread on the importance of raising standing in the first defensive pleading:

On the Importance of Raising the Affirmative Defense of Lack of Standing in a Pre-Answer Motion or in the Original Answer in New York State

http://ssgoldstar.websitetoolbox.com/post?id=5268738

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