Lexology-

The ownership of the promissory note by a subsidiary corporation of the Plaintiff cannot alone establish standing to foreclose. In HSBC Bank USA, N.A. v. Ryan Kahan, et al., the Court granted the borrowers’ motion for involuntary dismissal or directed verdict due to (1) Plaintiff’s failure to establish standing at the commencement of the action; and (2) Plaintiff’s inability to establish a prima facie case of foreclosure due to its failure to provide any testimony as to Plaintiff’s damages.

On October 8, 2012, Plaintiff HSBC Bank USA, N.A. (“HSBC Bank”) commenced this residential foreclosure action. In its complaint, HSBC Bank alleged that it was the owner and holder of the subject promissory note. Attached to the complaint was a copy of an unendorsed promissory note payable to HSBC Mortgage Corp. USA (“HSBC Mortgage”). The borrowers asserted several affirmative defenses, including HSBC Bank’s lack of standing.

During the bench trial, HSBC Bank’s only witness (an employee of its mortgage servicer) testified that HSBC Bank had standing because it was the owner of all outstanding and issued stock of HSBC Mortgage. The witness testified that HSBC Mortgage was therefore a wholly-owned subsidiary of HSBC Bank. In order to establish HSBC Bank’s standing, a composite exhibit was entered into evidence that contained various corporate documents establishing the relationship between HSBC Bank and HSBC Mortgage. HSBC Bank’s witness had no personal knowledge of the corporate documents or the corporate structure of either HSBC Bank or HSBC Mortgage. HSBC Bank argued it had standing by virtue of its alleged status as the parent company of a wholly-owned subsidiary.

[LEXOLOGY]

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