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Ohio Supreme Court Oral Arguments: Federal Home Loan Mortgage Corp. v. Duane Schwartzwald et al.

Ohio Supreme Court Oral Arguments: Federal Home Loan Mortgage Corp. v. Duane Schwartzwald et al.


How can you commence an action if you don’t have the proof you’re entitled to to enforce the action in the first place?

Must Lender Have Current Ownership Interest in Promissory Note or Mortgage at the Time Foreclosure Action Is Filed?

Or May Lack of Standing Be ‘Cured’ Through Mortgage Assignment Before Judgment?

Federal Home Loan Mortgage Corp. v. Duane Schwartzwald et al., Case nos. 2011-1201 and 2011-1362
Second District Court of Appeals (Greene County)

ISSUE: If a party files a lawsuit to foreclose on a mortgage and it is later shown that party did not have a current ownership interest in the mortgage or the underlying promissory note on the date the foreclosure action was filed, is the court required to dismiss the suit based on the plaintiff’s lack of standing to bring it? Or may the plaintiff “cure” a defect in standing or in naming the actual party in interest under Civil Rule 17(A) by obtaining an assignment of the mortgage prior to the court’s entry of a judgment in the case?

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Florida Supreme Court hears landmark Foreclosure Fraud suit

Florida Supreme Court hears landmark Foreclosure Fraud suit


Does the rule of law matter?

Why hasn’t David J. Stern not been disbarred? Suspended?

Is Fraud upon the court 100,000’s of time & to the face of a judge not a crime?

Why would the original judge not sanction anyone?

Will the Supreme Court allow fraud to slap it in its face 2nd time around?

Where has justice gone?

Reuters-

The Florida Supreme Court heard arguments on Thursday in a landmark lawsuit that could undo hundreds of thousands of foreclosures and open up banks to severe financial penalties in the state where they face the bulk of their foreclosure-fraud litigation.

Legal experts say the lawsuit is one of the most important foreclosure fraud cases in the country and could help resolve an issue that has vexed Florida’s foreclosure courts for the past five years: Can banks that file fraudulent documents in foreclosure proceedings voluntarily dismiss the cases only to refile them later with different paperwork?

The decision, which may take up to eight months, could influence judges in the other 26 states that require judicial approval for foreclosures.

The case at issue, known as Roman Pino v. Bank of New York Mellon, stems from the so-called robo-signing scandal that emerged in 2010 when it was revealed that banks and their law firms had hired low-wage workers to sign legal documents without checking their accuracy, as is required by law.

If the state Supreme Court rules against the banks, “a broad universe of mortgages could be rendered unenforceable,” said former U.S. Attorney Kendall Coffey, author of the book, “Foreclosures in Florida.”

[REUTERS]

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Florida foreclosure case could SLAM banks

Florida foreclosure case could SLAM banks


Reuters-

The Florida Supreme Court is set to hear oral arguments Thursday in a lawsuit that could undo hundreds of thousands of foreclosures and open up banks to severe financial liabilities in the state where they face the bulk of their foreclosure-fraud litigation.

The court is deciding whether banks who used fraudulent documents to file foreclosure lawsuits can dismiss the cases and refile them later with different paperwork.

The decision, which may take up to eight months to render, could affect hundreds of thousands of homeowners in Florida, and could also influence judges in the other 26 states that require lawsuits in foreclosures.

Of all the foreclosure filings in those states, sixty three percent, a total of 138,288, are concentrated in five states, according to RealtyTrac, an online foreclosure marketplace. Of those, nearly half are in Florida. In Congressional testimony last year, Bank of America, the U.S.’s largest mortgage servicer, said that 70 percent of its foreclosure-related lawsuits were in Florida.

The case at issue, known as Roman Pino v. Bank of New York Mellon, stems from the so-called robo-signing scandal that emerged in 2010 when it was revealed that banks and their law firms had hired low-wage workers to sign legal documents without checking their accuracy as is required by law.

This was a case of an intentionally fraudulent document fabricated to use in a court proceeding,” says former U.S. Attorney Kendall Coffey, author of the book Foreclosures in Florida.

[REUTERS]

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PINO v. BONY Oral Argument set for Thursday May 10, 2012 at 9:00 am

PINO v. BONY Oral Argument set for Thursday May 10, 2012 at 9:00 am


The Oral Arguments in Roman Pino v. Bank of New York will be heard before the Florida Supreme Court on Thursday, May 10, 2012  at 9:00 AM.  In this case the court will be addressing the circumstances under which a voluntary dismissal (a final judgment or other court action) can be set aside long after the case is over, based on underlying fraud on the court.

The Oral Arguments can be watched live on http://thefloridachannel.org/watch/web3/1336655014.

As reflected above, the Fourth District certified this issue to be one of great public importance, and in doing so, noted that “many, many mortgage foreclosures appear tainted with suspect documents” and that Pino’s requested remedy, if imposed, “may dramatically affect the mortgage foreclosure crisis in this State.” Pino, 57 So. 3d at 954-55.

Supreme Court of Florida

No. SC11-697

ROMAN PINO,
Petitioner,

vs.

THE BANK OF NEW YORK, etc., et al.,
Respondents.

[December 8, 2011]

PER CURIAM.

The issue we address is whether Florida Rule of Appellate Procedure 9.350 requires this Court to dismiss a case after we have accepted jurisdiction based on a question certified to be one of great public importance and after the petitioner has filed his initial brief on the merits.1 This narrow question arose after the parties to this action filed a joint Stipulated Dismissal, which advised that they had settled this matter and stipulated to the dismissal of the review proceeding pending before this Court. It cannot be questioned that our well-established precedent authorizes this Court to exercise its discretion to deny the requested dismissal of a review proceeding, even where both parties to the action agree to the dismissal in light of an agreed-upon settlement. The question certified to us by the Fourth District Court of Appeal in this case transcends the individual parties to this action because it has the potential to impact the mortgage foreclosure crisis throughout this state and is one on which Florida’s trial courts and litigants need guidance. The legal issue also has implications beyond mortgage foreclosure actions. Because we agree with the Fourth District that this issue is indeed one of great public importance and in need of resolution by this Court, we deny the parties’ request to dismiss this proceeding.

[…]

[ipaper docId=75141917 access_key=key-10ukvw841p3aqsqqo53z height=600 width=600 /]

 

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Florida Supreme Court to review dismissed foreclosure lawsuit against Greenacres man

Florida Supreme Court to review dismissed foreclosure lawsuit against Greenacres man


This shouldn’t be so difficult, David J. Stern has TONS of fraudulent documents out there. Pick any County, any documents his firm filed and you’re sure to find fraud. Just read the depositions from his former employees.

“We conclude that this is a question of great public importance, as many, many mortgage foreclosures appear tainted with suspect documents,” the appeals court wrote in certification to the Supreme Court.

PALM BEACH POST-

An unassuming drywall hanger from Greenacres has banks warning of a “widespread financial crisis” if the Florida Supreme Court favors him in a landmark foreclosure case justices will hear this week.

Plucked out of the 4th District Court of Appeal, Roman Pino v. the Bank of New York is the first significant foreclosure complaint to be heard by the high court since the state’s legendary housing collapse.

It’s particularly unusual because the 41-year-old Pino had already settled the case when the Supreme Court decided in December to take up a legal question it said could affect the mortgage foreclosure crisis statewide.

At issue is whether a bank can escape punishment for filing flawed or fraudulent documents in a case by voluntarily dismissing it. (A voluntary dismissal allows the bank to refile at a later date.)

That’s what Royal Palm Beach-based foreclosure defense attorney Tom Ice said happened when he challenged a document created by the Law Offices of David J. Stern and sought to question employees about its veracity. On the eve of those depositions, the bank moved to dismiss the case, blocking the court’s ability to address any sanctions.

“The objective here was to hide from punishment for the wrongdoing,” Ice said.

[PALM BEACH POST]

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PINO vs BONY | BRIEF OF AMICUS CURIAE FLORIDA LAND TITLE ASSOCIATION AND AMERICAN LAND TITLE ASSOCIATION

PINO vs BONY | BRIEF OF AMICUS CURIAE FLORIDA LAND TITLE ASSOCIATION AND AMERICAN LAND TITLE ASSOCIATION


Via MATT WEIDNER

EXCERPT:

INTRODUCTION
The Court retained this case so that it could give needed guidance to trial courts and other litigants by its answer to a certified question arising from a mortgage foreclosure action. As the Court wrote: The question certified . . . transcends the individual parties to this action because it has the potential to impact the mortgage foreclosure crisis throughout this state and is one on which Florida’s trial courts and litigants need guidance. The legal issue also has implications beyond mortgage foreclosure actions.
Pino v. Bank of New York, 36 Fla. L. Weekly S711 (Fla. Dec. 8, 2011). Florida Land Title Association (“FLTA”) and American Land Title Association (“ALTA”) file this brief to address the need for this Court to give guidance to trial courts and litigants on the importance of protecting the rights of third parties that have justifiably relied on the finality of a prior court action when buying, extending financing on, or insuring title to real property.

SUMMARY OF ARGUMENT
The Court can expressly limit its decision in this case to the setting aside of a voluntary dismissal in a case where no third party interest in real estate is implicated. Should it choose to do so, FLTA and ALTA have no issues to address. However, if the Court decides to write more broadly, we respectfully ask the Court to emphasize the need to protect the rights of affected third parties when collateral attacks are brought against otherwise final court judgments, orders, decrees or proceedings. The residential mortgage foreclosure crisis has caused a host of problems for homeowners, lenders, and Florida’s court system. The Court addressed many of these problems by forming the Task Force on Residential Mortgage Foreclosures in 2009 and by adopting its recommended amendments to the Florida Rules of Civil Procedure in 2010. However, unlike some other states, the Court has not adequately addressed the protection of third party interests when otherwise final court proceedings are collaterally attacked, especially the interest of those who have purchased foreclosed real estate.

Respectfully, if the Court is to give guidance to trial courts and litigants regarding collateral attacks against foreclosure actions (whether relief is sought under rule 1.540(b) or the use of inherent judicial powers) beyond the narrow facts of this case, it should give guidance on protecting the interests of third parties that purchase, finance and insure title to foreclosed properties. Recognition and protection of these neglected interests is vital to the integrity of our judicial system and to the ultimate resolution of the mortgage foreclosure crisis.

[…]

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STEWART TITLE BULLETIN: RE: Recent Oklahoma Supreme Court Decisions Regarding Foreclosures

STEWART TITLE BULLETIN: RE: Recent Oklahoma Supreme Court Decisions Regarding Foreclosures


Dear Associates:

The Oklahoma Supreme Court has recently issued several opinions:

Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3 {Approved for Publication}

Deutsche Bank National Trust v. Byrams, 2012 OK 4

HSBC Bank USA v. Lyon, 2012 OK 10

Deutsche Bank National Trust Company v. Matthews, 2012 OK 14

Deutsche Bank National Trust Company v. Richardson, 2012 OK 15

CPT Asset Backed Certificates; Series 2004-EC1 v. Kham, 2012 OK 22

Bank of America, N.A. v. Kabba, 2012 OK 23

JPMorgan Chase Bank, N.A. v. Eldridge, 2012 OK 24

(It is important to note that only one of the opinions, Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3, has been approved for publication so far.)

These opinions hold that to commence a foreclosure action, the plaintiff must show that it has the right to enforce the promissory note, and in the absence of such showing, the plaintiff lacks standing to bring the lawsuit.  The fact patterns in each of the cases vary slightly (seven are based on appeals from orders granting summary judgment entered by the trial court, and one is based upon a default judgment), but the basic fact pattern is as follows:  Plaintiff files a foreclosure action either without attaching a copy of the promissory note or attaching the note without proper indorsement(s) by the original lender.  Defendant raises the issue that Plaintiff does not have standing to sue, either in response to a Motion for Summary Judgment or by pleadings filed after the Journal Entry of Judgment.  Motions are denied after Plaintiff provides documentation showing indorsement or allonge.  Defendant appeals.

[STEWART VIRTUAL UNDERWRITER]

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PNMAC Mtge. CO, L.L.C. v Friedman | NYSC ‘endorsement “was erroneous”, subsequently endorsed “en blanc by allonge” and physically delivered to nonparty’

PNMAC Mtge. CO, L.L.C. v Friedman | NYSC ‘endorsement “was erroneous”, subsequently endorsed “en blanc by allonge” and physically delivered to nonparty’


Decided on March 21, 2012

Supreme Court, Richmond County

PNMAC Mortgage CO, L.L.C., Plaintiff,

against

Eva Friedman, JACOB FRANKFURTER, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, and “JOHN DOE”and “JANE DOE”, the last two names being fictitious, said parties intended being tenants or occupants, if any, having or claiming an interest in, or lien upon the premises described in the complaint, Defendants.

130486/11

Thomas P. Aliotta, J.

The following papers were marked fully submitted on the 19th day of January, 2012:

Pages

Numbered

Notice of Motion to Dismiss

by Defendants Eva Friedman and Jacob Frankfurter,

with Supporting Papers, Exhibits and Memorandum of Law

(dated September 1, 2011)………………………………………………………………………….1

Affirmation in Opposition

by Plaintiff, with Supporting Papers and Exhibits

(dated November 8, 2011)………………………………………………………………………….2

Affirmation in Reply

(dated December 12, 2011)…………………………………………………………………………3

Upon the foregoing papers, the motion is granted and the complaint is dismissed.

This is an action to foreclose a mortgage in which plaintiff PNMAC Mortgage Co., LLC. (hereinafter “plaintiff”) alleges that defendants Eva Friedman and Jacob Frankfurter (hereinafter “defendants”) are in default as a result of their having failed to make the required payments since June 1, 2008. To the extent relevant, defendants executed a mortgage in favor of nonparty Mortgage Electronic Registration Systems, Inc (hereinafter “MERS”) as nominee for American Brokers Conduit (hereinafter “ABC”) as security for a note in the principal sum of $440,000 given to fund their purchase of the premises known as 502 Weser Avenue on Staten Island (see Defendants’ Exhibit “C”). Both the mortgage and an “Interest First Adjustable Rate Note” (hereinafter “note”) in favor of ABC were executed on August 29, 2005 (id.).

It is undisputed that the above note was thereafter endorsed to nonparty Wells Fargo Bank, NA (hereinafter “Wells Fargo”). However, plaintiff contends that this endorsement “was erroneous”, and that the note in question either was never delivered or was returned to ABC (see Affirmation of Daniel H. Richland, Esq., para 10). Insofar as it appears, the note was subsequently endorsed “en [*2]blanc by allonge” and physically delivered to nonparty CitiMortgages, Inc. (id. at 11), which acquired ABC’s interest in the subject mortgage via assignment by MERS on behalf of ABC on January 27, 2009 (id. at 12; see Plaintiff’s Exhibit “B”). Following these transfers, MERS sought to foreclose on the subject mortgage, but its action was dismissed with prejudice, as it was the holder of neither the note or mortgage at the time the action was commenced.[FN1] The ensuing order of dismissal, entered on August 4, 2010, also directed the County Clerk to cancel the notice of pendency (see Plaintiff’s Exhibit “C”). CitiMortgage, Inc. subsequently assigned its rights under the above mortgage to plaintiff on March 15, 2011 (see Plaintiff’s Exhibit “B”), which commenced the instant foreclosure action on or about June 21, 2011 (see Defendants’ Exhibit “A”).

In a pre-answer motion to dismiss the complaint, defendants maintain, inter alia, (1) that plaintiff lacks standing; (2) the action is barred under the doctrines of collateral estoppel and/or res judicata; and (3) the complaint fails to state a cause of action (see CPLR 3211[a][3], [5], [7]). In addition, defendants seek an order directing the County Clerk to cancel the notice of pendency and to enter an order pursuant to CPLR 6514(a) declaring the mortgage to be unenforceable because “it has become bifurcated from the note”.

A prima facie case in foreclosure is established by the mortgagee’s production of the mortgage, the unpaid note and evidence of the mortgagor’s default. However, where, as here, a plaintiff’s standing has been placed in issue, it bears the initial burden of proving same before it is entitled to any relief (see Citimortgage, Inc. v. Stosel, 89 AD3d 887 [2nd Dept 2011]).

A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that it is the holder or assignee of both the mortgage and underlying note, “either by physical delivery or execution of a written assignment prior to the commencement of the action” (id. at 888 [internal quotation marks omitted]). While the mortgage passes with the debt as an inseparable incident thereof (see US Bank NA v. Sharif, 89 AD3d 723, 725 [2nd Dept 2011), the reverse is not true, i.e., an assignment of the mortgage without the underlying note is a nullity (id., see Citimortgage, Inc. v. Stosel, 89 AD3d at 888).

In the instant case, plaintiff asserts its ownership of the note by claiming that the erroneous endorsement to nonparty Wells Fargo was properly voided when the endorser, ABC, subsequently added an “allonge endorsed en blanc” while in possession of the note (see Affirmation of Daniel H. Richland, Esq., paras 23-25).[FN2] The “allonge” submitted by plaintiff provides that “[t]his Note Allonge is attached to and made a part of the Note, for the purpose of Noteholder Endorsement to evidence a transfer of Interest”. It names “American Brokers Conduit” as the originator and is made payable to “to the Order of Without Recourse American Brokers Conduit by: Roger Kistler, Assistant Treasurer” (see Plaintiff’s Exhibit “A”). The document is undated, but must have been added after the erroneous endorsement to Wells Fargo. According to plaintiff, this endorsement was sufficient under Uniform Commercial Code (“UCC”) §3-208, which provides, in relevant part, that “[w]here an instrument is returned to or reacquired by a prior party he may cancel any indorsement which is not necessary to his title and reissue or further negotiate the instrument”.

Nevertheless, there is no proof in the papers presently before the Court as to when the subject note was negotiated or transferred to plaintiff. As a result of this failure to establish that it was the [*3]lawful holder of both the note (whether by delivery or assignment) and mortgage prior to the commencement of this action, plaintiff has failed to sustain its burden of demonstrating its standing to commence this foreclosure action (see US Bank NA v. Sharif, 89 AD3d at 725; Deutsche Bank Natl Trust Co v. Barnett, 88 AD3d 636, 637-638 [2nd Dept 2011]). Accordingly, defendants’ motion to dismiss is granted.

So, too, is that branch of defendants’ motion seeking to cancel the notice of pendency. In this regard, since the matter does not appear to involve issues of faulty service of a summons, bad faith, or any of the other grounds enumerated in CPLR 6514(a), (b) (see generally Lessard Architectural Group, Inc., PC v. X & Y Dev Group, LLC, 88 AD3d 768 [2nd Dept 2011]; Deans v. Sorid, 56 AD3d 417 [2nd Dept 2008]), the notice of pendency will be cancelled in the exercise of the inherent power of the Court (see generally Ewart v. Ewart, 78 AD3d 992 [2nd Dept 2010]; Coleman v. Coker, 66 AD3d 812 [2nd Dept 2009]); Congel v. Malfitano, 61 AD3d 807 [2nd Dept 2009]).

The action being dismissed for lack of standing, there is no occasion for the Court to consider any further issue.

Accordingly, it is

ORDERED that the motion to dismiss is granted, without prejudice; and it is further

ORDERED that the complaint and any cross claims are dismissed; and it is further

ORDERED that the Clerk is directed to cancel the Notice of Pendency filed in connection herewith and mark his records accordingly.

ENTER,

_/s/ Hon. Thomas P. Aliotta_________

J.S.C.

DATED:March 21, 2012

Footnotes

Footnote 1:See Mortgage Electronic Registration Systems, Inc. as Nominee for American Brokers Conduit v. Eva Friedman, Jacob Frankfurther, et al., Index No. 131345/2009.

Footnote 2:UCC §3-204(2) provides that “An indorsement in blank specifies no particular indorsee and may consist of a mere signature. An instrument payable to order and indorsed in blank becomes payable to bearer and may be negotiated by delivery alone until specially indorsed.”

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Green Tree Servicing LLC v Lopez | NYSC “there is no evidence that MERS initially physically possessed the note or had the authority from the lender to assign it”

Green Tree Servicing LLC v Lopez | NYSC “there is no evidence that MERS initially physically possessed the note or had the authority from the lender to assign it”


SUPREME COURT – STATE OF NEW YORK
I.A.S. PART 37 – SUFFOLK COUNTY

GREEN TREE SERVICING LLC,
Plaintiff,

– against –

HILDA LOPEZ, VICTOR CASAS BAUTISTA,
“JOHN DOE #1” through unknown to plaintiff, the
persons or parties intended being the tenants,
occupants, persons or corporations, if any, having
or claiming an interest in or lien upon the premises,
described in the complaint,
Defendants.

Upon the following papers numbered 1 to —12…. read on this motion and cross motion for summary judgment; Notice
of Motion/ Order to Show Cause and supporting papers 1- 15; Notice of Cross Motion and supporting papers 16 – 22;
Answering Affidavits and supporting papers __ ; Replying Affidavits and supporting papers 23 – 25 ; Other __ ; it is,

ORDERED that this motion by plaintiff for an order granting summary judgment on its
complaint; striking the answer of defendants Hilda Lopez and Victor Casas Bautista and dismissing their
affirmative defenses; an order of reference appointing a referee to compute the amount due and owing to
plaintiff; an amendment of the caption of this action; and awarding the costs of this motion is denied;
and 1t is further

ORDERED that the cross-motion by defendants for an order granting summary judgment in their
favor based on fraud and pla111tiffs lack of standing is denied.

This is an action to foreclose a mortgage on property known as 723 Amsterdam Avenue, East
Patchogue, New York. Defendants Hilda Lopez and Victor Casas Bautista signed a note dated July 22,
2008, for a loan in the sum of$245,000.00 from the non-party lender BankUnited, FSB. The note
indicated that the yearly interest would be 6.75 percent and the monthly payments $1,589.07. The note
was secured by a mortgage dated July 22, 2008, on the subject property which was signed by defendants
[* 1]

Hilda Lopez and Victor Casas BautIsta. The mortgage indicated that Mortgage Electronic Registration
Systems, Inc. (MERS) was acting solely as a nominee for the lender BankUnited, FSB and that for the
purposes of recording the mortgage, MERS was the mortgagee of record. The mortgage was recorded in
the Suffolk County Clerk’s Office on July 30,2008. Defendants Hilda Lopez and Victor Casas Bautista
allegedly defaulted on their loan payments due on August I, 2009 and thereafter.

Plaintiff, Green Tree Servicing, LLC, commenced this action to foreclose the mortgage on June
4, 20 10. Defendants Hilda Lopez and Victor Casas Bautista, then pro se, answered by affidavit dated
July 6, 2010. Their answer asserts claims sounding in fraud. Defendants claim that they were regularly
makrng their loan payments until they were offered a modification of their mot1gage agreement, that they
paid fees and other monies, and relied on directions to stop payments until the modification became
effective, and that they received no further instructions only to find that their mortgage was being
foreclosed. Their answer also questions the standing of plaintiff to commence this action inasmuch as
defendants state that they did not enter into a mortgage agreement with plaintiff but were infomled that
plaintiff became the servicing agent for their mortgage loan.

Plaintiff now moves for summary judgment on its complaint, to strike the answer of defendants
Hilda Lopez and Victor Casas Bautista, an order of reference appointing a referee to compute the amount
due and owing to plaintiff, an amendment of the caption of this action to add Louis Casiano as a
necessary pm1y defendant in the plaee and stead of “John Doe #1” and to discontinue the action against
defendants “Jo1m Doe #2” through “John Doe #12.” Plaintiff asserts that defendants Hilda Lopez. and
Victor Casas Bautista admit in their answer their obligation under the note and mortgage and their
default. Plaintiff indicates, upon information and belief, that defendants had hired and paid a third party
in California to assist in the modification process. Plaintiff argues that defendants have failed to submit
any proof that plaintiff made any statements or that defendants could reasonably rely on those alleged
statements to their detriment. Plaintiff also asserts that the parties engaged in settlement conferences
with defendants’ counsel in attendance, exchanged financial documents and informed of any missing
documents, and that by letter dated April 7, 2011, addressed to defendant Hilda Lopez, plaintiff advised
that it was not considering the request for a modification because she withdrew the request on April 6,
201 I. In support of its motion plaintiff submits, among other things, the pleadings, the note, mortgage
and assignment of mortgage, and notices of default. Plaintiffs submissions include the affidavit of its
vice president, William Ashley, signed and notarized in South Dakota, stating that “the said note and
mortgage are now held by the Plaintiff having been physically delivered to the Plaintiff by Mortgage
Electronic Registration Systems, Inc. as nominee of BankUnited, FSB and by BankUnited, FSB on July
22, 2008. Thereafter the said assignment of the note and mortgage was memorialized in a written
 assignment of mortgage.”

Defendants Hilda LDpez and Victor Casas Bautista cross-move for summary judgment
contending that they did not withdraw their request for a modification, that plaintiff will be unjustly
enriched if the foreclosure occurs, and that plaintiff lacks standing to commence This action. 111 SUPPOl1
of their cross motion, defendants submit their answer, the note, mortgage and assignment of mortgage,
and the letter dated April 7, 2011, from plaintiff to defendant Hilda Lopez informing her that she
withdrew her modification request one day prior.

To establish a prima fllcie showing of entitlement to judgment as a matter of law in a foreclosure
action, a plaintiff must submit evidence of the mortgagc and note, and the defcndant’s default thereunder
(see Levitill I’ Boardwalk Capital, LLC, 78 AD3d 1019,912 NYS2d 101 [2£1Dcpt 2010]). Where, as
here, a plaintiff’s standing to commence a foreclosure action is placed in issue by a defendant, it is
incumbent upon the plaintiff to prove its standing to be entitled to relief (see Citimortgage, Inc. v Stosel,
89 AD3d 887, 934 NYS2d 182 [2£1Dept 2011]). A plaintiff establishes Its standing in a mortgage
foreclosure action by demonstrating that it is both the holder or assignee of the subject mortgage and the
holder or assignee of the underlying note, either by physical delivery or by execution ofa written
assignment before commencement of the action (see id.). An assib’l1mcnt of a mortgage without
assignment of the underlying note or bond is a nullity, and no interest is acquired by it (see Deutsche
Bank Natl. Trust CO.I’ Barnett, 88 AD3d 636, 931 NYS2d 630 [2£1Oept 2011]; Bank of N. Y. v
Silverberg, 86 AD3d 274, 926 NYS2d 532 [2d Dept 2011]).

Defendants must produce evidentiary proof in admissible fonn sufficient to demonstrate the
existence of a triable issue of fact as to a bona fide defense to the action (see Argelll Mtge. Co., LLC l’
Melltesalla, 79 AD3d 1079,915 NYS2d 591 [2£1Dept 20tO]). Such defenses include waiver, estoppel,
bad faith, fraud, or oppressive or unconscionable conduct by the plaintiff (see Capstone Business
Credit, LLC v Imperia Family Realty, LLC, 70 AD3d 882, 895 NYS2d 199 [2£1Dcpt 2010]; Cochran
Illv. Co., Illc. v Jacksoll, 38 AD3d 704, 834 NYS2d 198 [2d Dcpt 2007]).

Here, plaintiff failed to establish, prima facie, that it had standing to commence the action (see
HSBC Balik USA v Hemalldez, 92 AD3d 843, 939 NYS2d 120 [2d Dept 2012]). The affidavit from
plaintiffs vice president, based on his review and personal knowledge of the facts and books and records
maintained by plaintiff in his possession, is not in admissible form inasmuch as it was signed and
notarized outside of the State of New York, and was not accompanied by the required certificate of
 conformity (see CPLR 2309 [0]; PRA UI, LLC v Gonzalez, 54 AD3d 917, 864 NYS2d 140 [2d Dcpt
2008]; see also Real Property Law § 299-a [1]). In any event, the affidavit is unclear as to which entity,
MERS or BankUnited, FSB, physically delivered the note to plainti ff so as to establish that plaintiff had
physical possession of the note prior to commencement this action (see HSBC Bank USA v Hernandez,
supra; Citimortgage, Illc. v Stosel, supra; Deutsche Bank Nat!. Trust CO. I’ Barnett, supra; Aurora
Loall Serv,”., LLC v Weisbillm, 85 AD3d 95, 923 NYS2d 609 [2d Dopt 2011]; U.s. Balik, N.A. “
Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]). This is particularly important since the
assignment only assigns the mortgage and there is no evidence that MERS initially physically possessed
the note or had the authority from the lender to assign it (see Aurora Loan Services, LLC v Weisblum,
supra). Therefore, the motion for summary judgment is denied.

With respect to the cross-motion for summary judgment by defendants Hilda Lopez and Victor
Casas Bautista, it is deficient inasmuch as it lacks a copy of the complaint as well as affidavits from
defendants Hilda Lopez and Victor Casas Bautista who have personal knowledge of the alleged
modification transaction (see Airel’ll v Shepherd, 89 AD3d 1046,933 NYS2d 597 [2d Dept 2011]) .
CPLR 3212 (b) requires that a motion for summary judgment must be supported by, among other things,
a copy of the pleadings and an affidavit “by a person having knowledge of the facts” (see CPLR 3212
rb]; Maragos I’Sakurtli, 92 AD3d 922, 938 NYS2d 908 [2£1Dept 2012]; id.). Although the motion
papers indicate that defendants’ counsel was present at the settlement conferences, it is unclear from the
cross-motion papers, which do not contam an affinnation in support in proper form by defendants’
counsel, whether defendants’ counsel had any personal knowledge concerning the alleged modification
Iransactlon (see Rizzo l’ Rizzo, 277 AD 888, 97 NYS2d 779 [2d Dept 1950]; compare Davey v DO/WI, 46
AD3d 854, 851 NYS2d 576 [2d Dcrt 2007]). Therefore, the cross-motion for summary judgment is
denied.

Accordingly. the motion for summary judgment, an order of reference, and related relief~and the
cross-motion for summary Judgment are denied.

Dated: March 28, 2012

Hon. Joseph Farneti
Acting Justice Supreme Court

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U.S. BANK v. MOORE | Oklahoma SC “a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the Note”

U.S. BANK v. MOORE | Oklahoma SC “a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the Note”


U.S. BANK v. MOORE
2012 OK 32

Case Number: 109763
Decided: 04/10/2012

THE SUPREME COURT OF THE STATE OF OKLAHOMA


Cite as: 2012 OK 32, __ P.3d __


NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

 


U.S. BANK, NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE ON BEHALF OF GSAA HOME EQUITY TRUST 2006-6, Plaintiff/Appellee,
v.
DAVID F. MOORE, a/k/a DAVID F. MOORE and BARBARA MOORE a/k/a BARBARA K. MOORE, Defendants/Appellants.

ON APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY
HONORABLE BRYAN C. DIXON
DISTRICT JUDGE

¶0 Appeal of a summary judgment granted on May 13, 2011, in favor of Chase Home Finance, LLC, and against David F. and Barbara Moore. In a Journal Entry of Judgment, filed on August 26, 2011, the trial court found the Appellant was the undisputed owner and holder of the Note and Mortgage. The Moores appealed on September 23, 2011, arguing standing, and this Court retained the matter on November 18, 2011.

REVERSED AND REMANDED WITH INSTRUCTIONS

Gary L. Blevins, GARY L. BLEVINS & ASSOCIATES, PC, Oklahoma City Oklahoma, for Defendants/Appellants.
Bryan Miles Harrington and A. Grant Schwabe, KIVELL, RAYMENT AND FRANCIS, PC, Tulsa, Oklahoma, for Plaintiff/Appellee.

COMBS, J.

FACTUAL AND PROCEDURAL HISTORY

¶1 On October 21, 2005, David F. Moore and Barbara Moore, husband and wife (hereinafter “Appellants”), executed a Note and Mortgage in favor of Colonial Bank, N.A. (hereinafter “Lender”), for property located in Oklahoma County, Oklahoma. Mortgage Electronic Registration Systems, Inc. (hereinafter “MERS”), was designated as the nominee for the lender pursuant to subsection (C) of the Mortgage.1 Within the Mortgage was a security interest provision with the following granting clause:

Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including. . .the right to foreclose and sell the Property.

¶2 Also contained in the Mortgage was a provision entitled “Sale of Note; Change of Loan Servicer.” Per the terms of this provision:

The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower.

Thus, the borrower may have difficulty in determining who holds the note and mortgage, and to whom the payment is due.

¶3 Appellants defaulted on the Note during August of 2008. U.S. Bank, National Association, commenced foreclosure proceedings on December 24, 2008, not in its individual capacity, but solely as trustee on behalf of GSAA Home Equity Trust 2006-6 (hereinafter “Appellee”). According to the verified petition, the Appellee was “the present holder of said Note and Mortgage having received due assignment through mesne assignments of record or conveyance via mortgaging servicing transfer.” The original petition did not attach a copy of the note in question sued upon. Appellants answered, pro se, on May 20, 2009. Appellants disputed all allegations and requested that the Appellee’s “submit additional documentation to prove their claims including the representation that they were the “present holder of said Note.” Appellee subsequently filed an amended petition and a second amended petition to add additional defendants. Neither of these amendments included a copy of the note sued upon.

¶4 Appellee submitted its Motion for Summary Judgment (hereinafter the “Motion”) to the court on November 20, 2009. Again, the Appellee represented that it was the holder of the Note. Documentation attached to the Motion attempted tosupport this representation: it included the Mortgage, the Note, an Assignment of Mortgage, and an Affidavit in Support of Appellee’s Motion for Summary Judgment. For the first time, Appellee submitted the Note and Mortgage to the trial court. The note was indorsed in blank and contained no date for the indorsement.

¶5 Executed on October 21, 2005, the Note designated the Appellants as the Borrowers and Colonial Bank, N.A., as the Lender. The following agreement, inter alia, was made:

I [Appellants] understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the ‘Note Holder.’

An Assignment of Mortgage (hereinafter the “Assignment”) was attached to the motion. MERS, again as nominee for the Lender, assigned the Mortgage, which secured “the payment of a certain promissory note” described therein, to the Appellee.2 The Assignment was executed and notarized on February 11, 2009; it was recorded one week later, but made effective “11/27/2008.” In other words, the Assignment was executed after the foreclosure suit commenced, but made effective before the filing of the petition as well as any subsequent amendments to the petition.

¶6 Appellants did not respond to Appellee’s Motion, and the trial court entered a default judgment against them. The trial court entered a final judgment, on December 17, 2009, (hereinafter “Judgment”) in favor of the Appellee. The judgment concluded that Appellee was the owner and holder of the Note and Mortgage; the court then approved an Order of Sale. Approximately six (6) weeks later, on January 31, 2010, the Appellants filed for protection under Chapter 7 of Title XI of the United States Bankruptcy Code, which stayed the proceedings. On March 2, 2011, the bankruptcy court granted Appellee’s Motion to Lift the Automatic Stay. Shortly thereafter, on March 18, 2011, with the assistance of counsel, the Appellants filed a Petition to Vacate the Judgment. The trial court subsequently dismissed the Appellants Petition to Vacate the Judgment.

STANDARD OF REVIEW

¶7 The standard of review3for a trial court’s ruling either vacating or refusing to vacate a judgment is abuse of discretion. Ferguson Enterprises, Inc. v. Webb Enterprises, Inc., 2000 OK 78, ¶ 5, 13 P.3d 480, 482; Hassell v. Texaco, Inc., 1962 OK 136, 372 P.2d 233. A clear abuse-of-discretion standard includes appellate review of both fact and law issues. Christian v. Gray, 2003 OK 10, ¶ 43, 65 P.3d 591, 608. An abuse of discretion occurs when a court bases its decision on an erroneous conclusion of law, or where there is no rational basis in evidence for the ruling. Fent v. Oklahoma Natural Gas Co., 2001 OK 35, ¶12; 27 P.3d 477, 481.

ANALYSIS

¶8 The Appellants have questioned the standing of the Appellee to commence foreclosure proceedings against them. “Standing refers to a person’s legal right to seek relief in a judicial forum.” Fent v. Contingency Review Board, 2007 OK 27, ¶ 7, 163 P.3d 512, 519-520. Foremost, the party seeking relief must prove that they suffered an actual and concrete injury. Absent an injury of this nature, the party lacks standing. Whether or not such an injury exists is determined at the commencement of the lawsuit. Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n. 5, 112 S. Ct. 2130, 2142, 119 L.Ed. 351 (1992).

¶9 Countering, Appellee argues that Appellants have forfeited the opportunity to question enforcement of the Note. However, a review of the record reveals the Appellants, in their pro se Answer, clearly questioned the ability of the Appellee to enforce the Note.4 It is settled law in Oklahoma that standing “may be raised at any stage of the judicial process by any party or by the court sua sponte.” Hendrick v Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234 (emphasis original). Therefore, this issue is properly before the Court.

¶10 Article III of the Uniform Commercial Code (hereinafter “U.C.C.”) governs negotiable instruments and is codified in the Oklahoma Statutes. Promissory notes are negotiable instruments. See, 12A OS 2001, § 3-104. The Appellee has the burden of showing that it is entitled to enforce the instrument. See Reserve Loan Life Ins. Co. v. Simmons, 1929 OK 669, ¶ 9, 282 P. 279, 281. Unless the Appellee was able to enforce the Note at the time the suit was commenced, it cannot maintain its foreclosure action against the Appellants.

¶11 Ownership of the note determines ownership of the mortgage. Engle v. Federal Nat’l. Mortg. Ass’n, 1956 OK 176, ¶ 7, 300 P.2d 997, 999. Oklahoma law does not permit the bifurcation of the security interest from the note. Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3, ___P.3d ___; BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. A party which is assigned a mortgage without the accompanying promissory note holds no rights of enforcement. Id. Plainly, a party must properly acquire rights to both instruments before such party is able to enforce their terms.

¶12 In the present case, the only instrument attached to Appellee’s petition was the Mortgage. Appellee did not produce the Note until the summary disposition stage. Under the U.C.C., both holders and non-holders in possession of a negotiable instrument are permitted to enforce the instrument. 12A OS 2001, § 3-301. A “holder” is “(A) the person in possession of a negotiable instrument that is payable either to bearer5 or to an identified person that is the person in possession. 12A OS 2001, § 1-201(21).6 The evidence in the present matter is not clear as to whether the Appellee held the Note as a “holder” or as a “non-holder in possession with the ability to enforce the Note.

¶13 To enforce a negotiable instrument as a non-holder in possession, the moving party must show (i) that the party possessed the negotiable instrument when suit was filed; (ii) how possession was achieved; and (iii), if necessary, that the purpose of the transfer was to transfer rights of enforcement. 12A O.S. 2001, § 3-301. The Appellee has not demonstrated its possession of the Note at the time it commenced foreclosure proceedings against Appellants.

¶14 Appellants contend Appellee lacks standing to commence this foreclosure action. Appellants further allege the validity of the affidavit offered in support of Appellees Motion for Summary Judgment. The dispositive issue is whether or not Appellee has standing. Appellants’ argument is based on the failure of Appellee to establish Appellee was a person entitled to enforce the Note at the commencement of the action and the inability to establish the effectiveness of the indorsements attached to the Note when the Note was ultimately produced as an exhibit to the Appellees Motion for Summary Judgment.

¶15 This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (Emphasis original)

¶16 Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, “standing [must] be determined as of the commencement of suit; . . .” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S.Ct. 2130, 2142, 119 L.Ed. 351 (1992).

¶17 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.7An assignment of the mortgage, however, is of no consequence because under Oklahoma law, “[p]roof of ownership of the note carried with it ownership of the mortgage security.” Engle v. Federal Nat. Mortg. Ass’n, 1956 OK 176, ¶7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the security interest from the note.” Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3, ___P.3d ___; BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a negotiable instrument, it is subject to the requirements of the UCC. Thus, a foreclosing entity has the burden of proving it is a “person entitled to enforce an instrument” by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 12A-3-309 or subsection (d) of Section 12A-3-418 of this title.” 12A O.S. 2001 §3-301.

¶18 To show you are the “holder” of the Note you must prove you are in possession of the note and the note is either “payable to bearer” (blank indorsement) or to an identified person that is the person in possession (special indorsement).8 Therefore, both possession of the note and an indorsement on the note or attached allonge9 are required in order for one to be a “holder” of the Note.

¶19 Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b) (15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, 3-203(b). Some jurisdictions have held, without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the Note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 50 B.R. 897, 912 (B.A.P. 9th Cir. 2011). See also, 12A O.S. 2001, § 3-203.

¶20 Appellee must also demonstrate it became a “person entitled to enforce” prior to the filing of the foreclosure proceeding. We find there is no evidence in the record establishing Appellee had standing to commence this foreclosure action. The trial court’s granting of a default judgment in favor of Appellee could not have been rationally based upon the evidence or Oklahoma law. Therefore, we find that the trial court abused its discretion by dismissing the Appellants Petition to Vacate the default judgment. Because this issue is dispositive, we will not address the remaining issues on appeal. The order denying Appellant’s petition and motion to vacate should be reversed and remanded back for further proceedings to determine whether Appellee is a person entitled to enforce the Note consistent with this opinion.

CONCLUSION

¶21 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the Note, and to have the proper supporting documentation in hand when filing suit, showing the history of the Note, so that the defendant is duly apprised of the rights of the plaintiff. This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, today’s decision to reverse the dismissal of the petition and motion to vacate cannot cancel their obligation arising from an authenticated Note, or insulate them from foreclosure proceedings based on proven delinquency. This Court’s decision in no way releases or exonerates the debt owed by the defendants on this home. See, U.S. Bank National Association v. Kimball, 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶22 CONCUR: TAYLOR, C.J., KAUGER, WATT, EDMONDSON, REIF, COMBS, JJ.

¶23 DISSENT: WINCHESTER (JOINS GURICH, J.), GURICH (BY SEPARATE WRITING), JJ.

¶24 RECUSED: COLBERT, V.C.J.

FOOTNOTES

1 Subsection (C) of the Mortgage reads as follows: “‘MERS’ is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns. MERS is the mortgagee under this security instrument.”

2 Specifically, the assignment was made to “U.S. Bank National Association, not in its individual capacity, but solely as trustee on behalf of GSAA Home Equity Trust 2006-6.”

3 Summary judgment decisions are reviewed de novo, Carmichael v. Beller, 1996 OK 48, ¶ 2, 914 P.2d 1051, 1053, whereas orders denying or granting a petition to vacate are reviewed for an abuse of discretion, Patel v. OMH Medical Center, Inc. , 1999 OK 33 at ¶ 20.

4 In relevant part, the Answer states: “The defendants hereby dispute the cause and information within the petition and hereby request that the plaintiff provide proper documentation of any and all allegations” including the allegation that the Appellee was present holder of the Note and Mortgage and thereby entitled to enforce its terms.

5 Bearer” means…a person in possession of an instrument, negotiable tangible document of title, or certificated security payable to bearer or endorsed in blank. 12A, O.S. 2001§ 1-201(5).

6 Documents of title are not at issue. Therefore, this is the only relevant U.C.C. definition of “holder.”

7 This opinion occurred prior to the enactment of the UCC. It is, however, possible for the owner of the note not to be the person entitled to enforce the note if the owner is not in possession of the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

812A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205

9 According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” It should be noted that under 12A O.S. 2001, § 3-204(a) and its comments in paragraph 2, it is no longer necessary that an instrument be so covered with previous indorsements that additional space is required before an allonge may be used. An allonge, however, must still be affixed to the instrument.


GURICH, J., with whom WINCHESTER, J. joins dissenting:

¶1 I respectfully dissent. In this case, the record indicates that attached to Plaintiff’s Motion for Summary Judgment was an indorsed-in-blank note, the mortgage, an assignment of mortgage, and an affidavit in support of the motion for summary judgment. Because the Plaintiff was the proper party to pursue the foreclosure and because the Plaintiff presented the proper documentation at summary judgment to prove such, the trial court did not abuse its discretion in denying Defendants’ Petition to Vacate. I would affirm the trial court for the reasons stated in my dissenting opinions in Deutsche Bank National Trust Co. v. Matthews, 2012 OK 14, ___P.3d___ (Gurich, J. dissenting) and Bank of America, NA v. Kabba, 2012 OK 23, ___P.3d___ (Gurich, J. dissenting).1

FOOTNOTES

1 Although I originally concurred in the majority opinion in Deutsche Bank National Trust v. Brumbaugh, 2012 OK 3, ___P.3d___, which the majority now cites as authority in this case, after further consideration, I disagree with the majority’s analysis in that case, and my views on the issues in these cases are accurately reflected in J.P. Morgan Chase Bank N.A. v. Eldridge, 2012 OK 24, ___P.3d___ (Gurich, J. concurring in part and dissenting in part); Kabba, 2012 OK 23, ___P.3d___ (Gurich, J. dissenting); CPT Asset Backed Certificates, Series 2004-EC1 v. Kham, 2012 OK 22, ___P.3d___ (Gurich, J. dissenting); Deutsche Bank National Trust Co. v. Richardson, 2012 OK 15, ___P.3d___ (Gurich, J. concurring in part and dissenting in part); and Matthews, 2012 OK 14, ___P.3d___ (Gurich, J. dissenting).

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NJ gets green light to enter final judgment of uncontested foreclosure actions

NJ gets green light to enter final judgment of uncontested foreclosure actions


“It is FURTHER ORDERED that the Office of Foreclosure is authorized to recommend the entry of final judgment pursuant to Rule 1:34-6 in uncontested actions which the procedures set forth in this Order have been followed.”


 

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Compucredit Corp. v. Greenwood | US Supreme Court “Federal Arbitration Act, Enforceability of Consumer Arbitration Agreements, Right To Sue”

Compucredit Corp. v. Greenwood | US Supreme Court “Federal Arbitration Act, Enforceability of Consumer Arbitration Agreements, Right To Sue”


“requires courts to enforce agreements to arbitrate according to their terms . . . even when the claims at issue are federal statutory claims, unless the FAA’s mandate has been ‘overridden by contrary congressional command.’”

.

SUPREME COURT OF THE UNITED STATES
Syllabus

COMPUCREDIT CORP. ET AL. v. GREENWOOD ET AL.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

No. 10–948. Argued October 11, 2011—Decided January 10, 2012

[ipaper docId=87396392 access_key=key-l9l73t0vwkdubqrki5a height=600 width=600 /]

 

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Onewest Bank, FSB v Galli | NYSC “ASMT between WMC & WAMU a nullity and therefore the plaintiff must establish how it procured the notes and mortgages”

Onewest Bank, FSB v Galli | NYSC “ASMT between WMC & WAMU a nullity and therefore the plaintiff must establish how it procured the notes and mortgages”


SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF RICHMOND

ONEWEST BANK, FSB, as successor in interest to
INDYMAC BANK, FSB,

Plaintiff

against

JOHN A. GALLI,
GEORGANN GALLI, and
“JOHN DOE #1″ through “JOHN DOE #10″,
inclusive the last ten names being fictitious and unknown
to the plaintiff, the persons or parties intended being the persons,
tenants, occupants, or corporations, if any, having or claiming
an interest in or lien upon the mortgaged premises described
in the complaint

Defendants

The plaintiff moves for partial summary judgment dismissing the defendants’ third,
fourth, sixth, seventh, eighth, tenth, eleventh, twelfth, thirteenth, fifteenth and sixteenth
affirmative defenses. In opposition, the defendants cross-move for summary judgment arguing
that the plaintiff lacks standing; lacks capacity to commence and maintain this action; failed to
elect remedies pursuant to RPAPL § 1301; and failed to provide each defendant with the
requisite acceleration notices. The plaintiff’s motion is denied, and the defendants’ motion is
granted.

Facts

This is an action to foreclose real property known as 231 Douglas Road, Staten Island,
New York. On August 26, 2003 John A. Galli and Georgann Galli executed a promissory note
and mortgage in favor of WMC Mortgage Corp. (“WMC”) in the amount of $550,000. The
mortgage contained the following language concerning the business entity known as Mortgage
Electronic Registration Systems, Inc. (“MERS”):

I understand and agree that MERS holds legal title to the rights
granted by me in this Security Instrument, but, if necessary to
comply with law or custom, MERS (as nominee for Lender and
Lender’s successor and assigns) has the right:
(A) to exercise any or all of those rights, including, but not
limited to, the right to foreclose and sell the Property; and
(B) to take any action required of Lender including, but not
limited to, releasing and canceling this Security Instrument.

In addition the Promissory Note submitted in connection with these motions contain an
undated Allonge to Promissory Note stating: “Pay to the Order of INDYMAC BANK, FSB
Without Recourse WASHINGTON MUTUAL BANK”. On October 22, 2004, MERS
purportedly assigned this mortgage as nominee for WMC to Washington Mutual Bank, FA.

On November 16, 2004 the defendants executed a promissory note and mortgage in favor
of Washington Mutual Bank, F.A. in the amount of $457,050.77. Once again, the Promissory
Note submitted for consideration in connection with these motions contains an undated Allonge
to Promissory Note that states “Pay to the Order of IndyMac Bank, FSB Without Recourse
Washington Mutual Bank”. Simultaneously, the defendants executed a Consolidation, Extension
and Modification Agreement (“CEMA”) with Washington Mutual Bank, F.A. on the same day.
Exhibit A of the CEMA lists the 2003 WMC mortgage executed by the defendants as well as the
concurrently executed Washington Mutual Bank, FA mortgage as being consolidated, extended
and modified by this agreement. However, WMC was not a signatory to the November 16, 2004
CEMA.

Two years later on April 5, 2006, MERS as nominee for Washington Mutual Bank, FA
purportedly assigned the 2003 WMC mortgage and the 2004 Washington Mutual Bank, FA
mortgage to Washington Mutual Bank. A second assignment on the same day had Washington
Mutual Bank, F/K/A Washington Mutual Bank, FA purportedly made the following assignments
to MERS as nomminee for Indymac Bank, FSB:

Mortgage dated 08/26/2003 made by John A. Galli and Georgeann
Galli, Husband and Wife to Mortgage Electronic Registration
Systems, Inc. as nominee for WMC Mortgage Corporation in the
principal sum of $550,000.00 and recorded on 01/28/2004, in the
office of the CLERK of the County of RICHMOND, in Book
17109 of Mortgages, page 242.

ASSIGNMENT FROM: Mortgage Electronic Registration
Systems, Inc. as nominee for WMC Mortgage Corporation to
Mortgage Electronic Registration Systems, Inc. as nominee for
Washington Mutual Bank, FA dated 10/22/2004 recorded
6/2/2005.

ASSIGNMENT FROM: Mortgage Electronic Registration
Systems, Inc. As nominee for Washington Mutual Bank FA to
Washington Mutual Bank dated 4/4/2006 to be recorded
concurrently.

2nd Mortgage dated 11/16/2004 recorded 6/2/2005 in document
control 48484 between John A. Galli and Georgeann Galli, aka
Georgeann Galli husband and wife and Washington Mutual Bank,
FA in the amount of $457,050.77

Consolidation, Extension, and Modification Agreement made by
John A. Galli and Georgeann Galli, aka Georeann Galli husband
and wife and Washington mutual Bank, FA dated 11/16/2004
recorded 6/2/2005 in document number 48485 consolidated
mortgages 1 & 2 to form a single lien in the amount of
$1,000,000.00

On April 14, 2006 the defendants executed another Promissory Note and Mortgage this
time in favor of IndyMac Bank, FSB in the amount of $143,595.50. Concurrently with the third
mortgage, the defendants executed a Consolidation, Extension and Modification Agreement in
favor of IndyMac Bank, FSB. Once again, neither WMC, nor Washington Mutual Bank f/k/a
Washington Mutual Bank, FA were signatories to this second CEMA.

According to the affidavit of Brian Burnett, an Assistant Vice President of OneWest
Bank, FSB (“OneWest”) that on or about July 11, 2008, IndyMac Bank, FSB failed and went into
receivership. Upon entering receivership it changed its name to IndyMac Federal Bank, FSB and
on or about March 19, 2009 merged with OneWest. According to Mr. Burnett, OneWest
acquired all of IndyMac’s assets. However, notably absent from the record is a copy of the
purchase and assumption agreement between OneWest and IndyMac.

On or about September 1, 2008 the defendants allegedly defaulted on the notes and
mortgages.

The plaintiff moved for partial summary judgment dismissing the defendants third,
fourth, sixth, seventh, eighth, tenth, twelfth, thirteenth, fifteenth and sixteenth affirmative
defenses. The defendant cross moves to dismiss the plaintiff’s action arguing that the plaintiff:
1) lacks standing; 2) lacks capacity to commence and maintain this action; and 3) failed to elect
remedies pursuant to RPAPL § 1301. In opposition to the defendants’ cross motion, the plaintiff
submits attorney certified copies of the relevant notes and mortgages encumbering 231 Douglas
Road, Staten Island, New York.

Discussion

The court will address the defendants’ cross-motion to dismiss the complaint pursuant to
CPLR § 3211(a). The record in this case shows that MERS assigned the mortgage several times
before the original notes and mortgages found their way to the plaintiff in this action. Here the
court must determine whether the plaintiff in a foreclosure action must establish a clear chain of
title of the relevant notes and mortgages prior to commencing the foreclosure proceeding. This
court concludes that a foreclosing plaintiff must establish how it came to possess the relevant
notes and mortgages it wishes to foreclose.

On June 7, 2011 the Appellate Division, Second Department issued its decision in the
Bank of New York v. Silverberg case.1 In that case the court was called to resolve the issue of,
“. . . whether a party has standing to commence a foreclosure action when that party’s
assignor–in this case, Mortgage Electronic Registration Systems, Inc. . . . was listed as a nominee
and mortgagee for the purposes of recording, but was never the actual holder or assignee of the
underlying notes.”2 The Appellate Division, Second Department held that such a party did not
have standing to commence a foreclosure action.

In a mortgage foreclosure action, a plaintiff must be both the holder or assignee of the
mortgage and the underlying note at the time the action is commenced.3 Here, as was the case in
Silverberg, MERS purportedly transferred the WMC mortgage to Washington Mutual Bank, FA
in connection with a consolidation as nominee. In turn, MERS as the nominee of Washington
Mutual Bank, FA assigned the mortgage to Washington Mutual Bank. Subsequently,
Washington Mutual Bank assigned the mortgages, prior assignments and CEMAs to MERS as
nominee of IndyMac Bank, FSB. The Appellate Division, Second Department found in
Silverberg that “. . . as ‘nominee,’ MERS’s authority was limited to only those powers which
were specifically conferred to it and authorized by the lender.” Here, as was the case in
Silverberg, MERS lacked the authority to assign the underlying notes. Consequently, how the
plaintiff came into possession of the mortgages and notes in this case is suspect.

The plaintiff cites a multitude of cases purportedly holding that possession of the physical
notes establishes its standing to commence this action.4 But each of these cases predate the
Appellate Division, Second Department’s decision in Silverberg. Consequently, this court finds
that the initial transfer between WMC Mortgage and Washington Mutual Bank, F.A. is a nullity
and therefore the plaintiff must establish how it procured the notes and mortgages for 231
Douglas Road, Staten Island, New York.

Given this court’s decision on the cross-motion the plaintiff’s motion for summary
judgment is denied.

Accordingly, it is hereby:

ORDERED, that John A. Galli and Georgann Galli’s cross-motion dismissing the
plaintiff’s complaint is granted and the complaint is dismissed without prejudice; and it is further
ORDERED, that the plaintiff’s motion to foreclose is denied.

ENTER,
DATED: March 23, 2012

Joseph J. Maltese
Justice of the Supreme Court

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MERS foreclosure issue headed to Oregon Supreme Court

MERS foreclosure issue headed to Oregon Supreme Court


Oregon Live-

With Oregon’s state and federal courts singing a variety of different tunes on the mortgage industry’s controversial nationwide document-registration system, someone has finally asked the state Supreme Court to step in.

If the high court gives the system a thumbs down, it could throw a wrench into thousands of pending foreclosures in Oregon and potentially upend thousands more already completed.

An order filed this week in the U.S. District Court in Portland said that court’s chief judge will certify questions for the Supreme Court. The Supreme Court has to formally accept the questions, and it has the latitude to reject or even reword them.

[OREGON LIVE]

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Citibank, N.A. v Van Brunt Props., LLC | NYSC “plaintiff’s papers are defective, the fact that the limited power of attorney is undated is a further defect”

Citibank, N.A. v Van Brunt Props., LLC | NYSC “plaintiff’s papers are defective, the fact that the limited power of attorney is undated is a further defect”


Decided on March 16, 2012

Supreme Court, Kings County

 

Citibank, N.A., Plaintiff,

against

Van Brunt Properties, LLC; and “John Does” and “Jane Does” No.1-100, the last names being fictitious and unknown to the plaintiff, the persons and parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the verified amended complaint, Defendant. Plaintiff, Sutter Avenue Management, LLC Miller Lumber & Mill Work Inc.; And “John Does” and “Jane Does” #1-100, the last names being fictitious and unknown to the plaintiff, the persons and parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the verified amended complaint, Defendants.

Plaintiff, – against –

against

Sutter Avenue Management, LLC Miller Lumber & Mill Work Inc.; And “John Does” and “Jane Does” #1-100, the last names being fictitious and unknown to the plaintiff, the persons and parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the verified amended complaint, Defendants.

3523/10

Plaintiff Attorney: Dacia C Cocariu, Esq.

Sills Cummis & Gross

Defense Attorney: Kirk P. Tzandies, Esq

Yvonne Lewis, J.

Defendant Van Brunt Properties, LLC (Van Brunt) and defendant Sutter Avenue Management, LLC (Sutter) collectively move for an order, pursuant to [*2]Civil Practice Law and Rules (CPLR) §602(a), to consolidate the foreclosure action of Citibank, N.A. v Sutter Avenue Management, LLC., Midwood Lumber & Mill Work, Inc., et al. (Index No. 354/10), into the foreclosure action of Citibank, N.A. v Van Brunt Properties, LLC, et al. (Index No. 3523/10). Upon consolidation, the defendants seek an order, pursuant to the doctrine of collateral estoppel, declaring that this court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation. Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property.

Citibank cross-moves for an order striking all references to conduct and statements made during settlement negotiations, including a pre-negotiation agreement (signed by all three parties), which together form much of the basis of the defendants’ claims for equitable relief, in the Van Brunt action under CPLR § 4547. Citibank also cross-moves, pursuant to CPLR §1018, to substitute Wells Fargo as the plaintiff in the Van Brunt action, and, pursuant to CPLR §3025, to correspondingly amend the case caption. Finally, Citibank cross-moves for an order clarifying the portion of this court’s March 4th order which requires Van Brunt to commence making monthly payments to Citibank.

Background and Procedural History

Sutter is the legal and equitable owner of premises located at 529 Sutter Avenue in Brooklyn. On October 29, 2007, Citibank entered into a mortgage loan in the principal amount of $2,610,000.00 with Sutter. Van Brunt is the legal and equitable owner of premises located at 252-254 Van Brunt Street, also in Brooklyn, which is encumbered by a mortgage in the amount of $950,000.00 financed by Citibank, dated March 21, 2007. Roland Dib is a managing member of both Sutter and Van Brunt. Both the defendants began to have difficulty meeting their mortgage obligations and assert that attempts were made in late 2008 and early 2009 to negotiate with Citibank for a modification of the interest rate so that the requisite payments could be made. The defendants assert that they expended substantial sums to attract new tenants to the properties.

Commencing on July 1, 2009, Van Brunt failed to make its required monthly payments.. Citibank contends that on December 16,2009, it notified Van Brunt that it was in default and advised that if the default was not cured, Citibank reserved its right to exercise all of its rights and remedies. Citibank initiated a foreclosure proceeding against Van Brunt on February 5, 2010.On August 9, 2010, Citibank moved for summary judgment on its foreclosure action against Van Brunt and sought dismissal of Van Brunt’s answer and affirmative defenses and the appointment of a temporary receiver. Van Brunt cross-moved for an order determining that Citibank was not entitled to: any interest on the principal balance of the mortgage loan, late charges, advances, attorneys’ fees, prepayment penalties, commissions and all other costs and expenses. On October 15, 2010, Citibank transferred all interest in the note and mortgage, as well as the other loan documents, to LSREF2 Nova Investments, LLC (“Nova”). On December 10, 2010, all interest in the note and mortgage , together with the other loan documents, were transferred to Wells Fargo. On June 24, 2011, Citibank moved to substitute Wells Fargo into the action as the plaintiff.

In an order dated March 4, 2011, this Court denied that branch of [*3]Citibank’s motion seeking the appointment of a receiver, and denied without prejudice that branch of the motion seeking substitution and for summary judgment. The order granted Van Brunt’s cross motion to the extent of ordering that Citibank is not entitled to any interest from the date of the alleged default to and through March 31, 2011 and found that Citibank is not entitled to any default interest or expenses, including attorneys fees and prepayment penalties. Van Brunt was directed to pay the principal and interest due under the loan commencing on April 1, 2011. In addition, it was directed to pay to Citibank by April 1, 2011, the principal only from the date of default to March 31, 2011, which would be applied to the reduction of the principal.

As regards Sutter, beginning October 2009 it failed to make its required monthly payments under the mortgage. By letter dated December 16, 2009, Citibank maintains that it advised Sutter that it was in default and that failure to cure could result in Citibank exercising its right to accelerate the indebtedness. On February 5, 2010, Citibank filed a separate foreclosure action against the Sutter property. On February 24, 2010, a receiver was appointed to manage the Sutter property.On May 26, 2011, Citibank moved for summary judgment on its foreclosure action and to dismiss Sutter’s answer and affirmative defense. On October 15, 2010, Citibank transferred all interest in the note and mortgage, as well as the other loan documents, to LSREF2 Nova Investments, LLC (“Nova”). On December 10, 2010, all interest in the note and mortgage , together with the other loan documents, were transferred to Wells Fargo. On April 11,2011, Citibank moved to substitute Wells Fargo into the action as the plaintiff.

Defendants’ Motion

Consolidation

The defendants move to consolidate the Van Brunt and Sutter actions arguing that both actions involve common questions of law and fact and arise from the same facts and circumstances and assert the identical legal theories and defenses, in accord with the direction of §602(a) of the CPLR. If successful on the issue of consolidation, the defendants then seek an order, pursuant to the doctrine of collateral estoppel, declaring that this court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation. Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property.They further contend that the resolution of both cases will involve the same documents and witnesses and thus, such overlap, necessitates consolidation to avoid unnecessary costs, delays and inconsistent judgments. Finally, they contend that there would be no prejudice to Citibank if the actions were consolidated arguing that both actions are in the same pre-discovery stage.

The defendants assert that Citibank treated the two mortgages as a package from the moment of default, noting for example, that Citibank alleges that it notified both properties of default on the same day and that all renegotiation’ efforts were done with both properties and as a package. The defendants note that every transfer of the property – October 15, 2010 to Nova and December 10, 2010 to Wells Fargo – was packaged as well. They argue that both of the defendants’ theory of the case is that foreclosure should be denied due to the bad faith and unconscionable behavior of Citibank throughout the course of said joint negotiations. They allege that they were jointly induced [*4]to make substantial personal investments in the respective properties at issue, based on an implied promise by Citibank that this show of good faith on the defendants’ part would result in a renegotiation of both mortgages, thereby avoiding default. The defendants conclude that the substance and legal theories of both cases are identical, will require the same testimony and evidence to be presented to the court, and should therefore be consolidated to avoid unnecessary costs, delay and inconsistent judgments.In opposition, Citibank argues that Van Brunt and Sutter are foreclosure actions filed separately by Citibank on February 5th, 2010 against two different commercial borrowers, namely Van Brunt Properties LLC, et al. and Sutter Avenue Management, LLC, et. al., each of whom holds a mortgage on a distinct property. They further point out that the circumstances under which each loan was made, the loan documents, and the defaults differ from one another. Moreover, Citibank avers that the receivership status and procedural posture of each case differs. Citibank maintains that consolidation should be denied inasmuch as the two actions do not have the requisite common issues of law and fact. Citibank also argues that it would be prejudiced by consolidation since consolidation would delay the resolution while both actions were aligned with one another. Finally, Citibank claims that the defendants are only seeking consolidation in an attempt to obtain a more favorable outcome, noting that there was no motion for consolidation until, this court’s ruling favorable to Van Brunt in the Van Brunt action.

Discussion

Section 602(a) of the CPLR gives a court discretion to consolidate actions where common questions of law or fact are present. Consolidation is preferred where these commonalities exist, absent proof that consolidation will prejudice a substantial right of the party opposing the motion (Best Price Jewelers.Com, Inc. v Internet Data Stor. & Sys., Inc., 51 AD3d 839 [2008]; Beerman v Morhaim, 17 AD3d 302 [2005]; Progressive Insurance Co. v Vasquez, 10 AD3d 518, 519 [2004]; Zupich v Flushing Hosp. & Med. Ctr., 156 AD2d 677, 677 [1989]). Further, consolidation is appropriate where it will avoid unnecessary duplication of trials, save unnecessary costs and expense, and prevent an injustice which would result from divergent decisions based on the same facts (see Zupich, 156 AD2d at 677). The defendants assert that their respective actions raise identical factual and legal issues, that the two properties have been dealt with as a package since they defaulted, that there will be little delay as the result of consolidation, that there would be no substantial prejudice to the plaintiff and therefore consolidation is required. The plaintiff does not dispute that the two properties were dealt with as a package during the period of renegotiation of their mortgages, but opposes the consolidation of these actions primarily on the ground that substantial prejudice would result from the delay that such a consolidation would cause. It avers that each action has an independent mortgage related to a separate and distinct parcel of land, that consolidation will unduly and additionally delay resolution and that the defendants’ motion is an attempt to forum shop in order to get a more favorable outcome in both actions

Absent a showing of prejudice to a substantial right the existence of common questions of law or fact justifies the grant of a motion for consolidation. (Lamboy v. Inter Fence Co., 196 AD2d 705, 601 N.Y.S.2d 619 (1st Dept.1993).However, a delay which would prevent a trial from taking place for “some time to come” has justified the denial of such a motion, Mulligan v. Farmingdale Union Free School District No. 22, 133 AD2d 617, 519 N.Y.S.2d [*5]725 (2d Dept.1987). In the instant actions, there are, as the plaintiff suggests, different procedural postures but these differences are not likely to cause such a delay as would substantially prejudice the plaintiff. The plaintiff does argue that it will be so prejudiced, but the arguments consist of conclusory self-serving statements that prejudice would occur if consolidation were ordered. The plaintiff suggests that there will be a delay “while the actions [are] brought in line with each other.” The major delay , appears to be caused by the appeals this Court’s March 4, 2011 Order, and the appeal of the instant motion, regardless of the out come. The plaintiff’s counsel says, “[t]rying to bring these actions in line with each other, so that they can proceed together, would only create undue delay and confusion, allowing defendant to prolong the proceedings and avoid judgement to Plaintiff’s severe prejudice.” Counsel does say not how the plaintiff is prejudiced nor what the prejudice is. There is no showing of prejudice to a substantial right of the plaintiff. “[A] and mere delay of the trial is not a sufficient basis upon which to deny a motion for consolidation or a joint trial (see Alsol Enters., Ltd. v. Premier Lincoln—Mercury, Inc., 11 AD3d 494, 783 N.Y.S.2d 620; Zupich, 156 AD2d at 677).” (Whiteman v Parsons Transportation Group of New York, Inc, et al. 72 AD3d 677, 900 N.Y.S.2d 87 ( 2d Dept 2010)

” Although a motion pursuant to CPLR 602 (a) to consolidate two pending actions is addressed to the sound discretion of the trial court, consolidation is favored by the courts in serving the interests of justice and judicial economy (see, Zupich v Flushing Hosp. & Med. Ctr., 156 AD2d 677). As both actions clearly involve similar issues of fact and law, it [would be] an improvident exercise of discretion to deny consolidation….” (Flaherty v RCP Assoc., 208 AD2d 496, 616 N.Y.S.2d 801,[ 1994]). In the case at bar, there are issues, with regard to whether the plaintiff and or its assigns have acted in good faith, which necessarily must be decided prior to a determination of whether the foreclosure of the defendants’ properties should go forward.These actions arise from the same factual events, involve virtually identical legal theories and defenses; they feature nearly the same principal parties. ” Where common questions of law or fact exist, a motion pursuant to CPLR 602(a) to consolidate … should be granted absent a showing of prejudice to a substantial right of the party opposing the motion (see Mas—Edwards v. Ultimate Servs., Inc., 45 AD3d 540, 845 N.Y.S.2d 414; Perini Corp. v. WDF, Inc., 33 AD3d 605, 606, 822 N.Y.S.2d 295; Nationwide Assoc. v. Targee St. Internal Med. Group, P.C. Profit Sharing Trust, 286 AD2d 717, 730 N.Y.S.2d 349).

Collateral Estoppel

The defendants seek an order, pursuant to the doctrine of collateral estoppel, declaring that this Court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. They urge the utilization of the doctrine of issue preclusion which is part of Collateral Estoppel. In order for a court’s ruling to be dictated by the decision made in a prior action under the doctrine of issue preclusion, “the identical issue necessarily must have been decided in the prior action and be decisive of the present action, and second, the party to be precluded from relitigating the issue must have had a full and fair opportunity to contest the prior determination” (Kaufman v Eli Lily and Co., 65 NY2d 449, 455 [1985]; Allied Chemical v Niagra Mohawk Power, 72 NY2d 271, 276 [1988]. When a court decides whether issue preclusion applies in a given case “the party seeking the benefit of collateral estoppel bears the initial burden of demonstrating that an issue in the present litigation is identical to an issue decided in the prior determination” (Lewis v City of New York, 17 Misc 3d [*6]537, 544 [2007]. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation and that Citibank treated Van Brunt and Sutter identically during the course of said negotiation. For which reason, the defendants believe that Sutter is entitled to the relief granted to Van Brunt in this Court’s March 4, 2011 order.

Citing Halyalkar v. Board of Regents of the State of NY, 72 NY2d 261,268, the plaintiff, argues in opposition, that collateral estoppel is inapplicable unless the matter has been “actually litigated” The plaintiff’s counsel buttresses Citibank’s argument with a reminder that the actions “involve, among other things, different loan transactions and different parties. Most notably, the Sutter Loan Documents and the circumstances of Sutter’s default have never even been before this Court.” In sum, the argument is that collateral estoppel cannot be applied herein because there has been no actual litigation of the foreclosure in the Sutter action. Halyalkar,defines actually litigated’ as follows: “To satisfy the identicality requirement, the question must have been actually litigated and, therefore, it must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding.” Halyalkar, supra at 261.

This Court’s March 4, 2011order in the Van Brunt action was issued after consideration of the papers and after oral argument on several motions which were before the Court. The motions and cross motion were before the court on March 4th and they were heard together. The plaintiff’s motions sought a temporary receiver, substitution and summary judgement on the foreclosure. The relief requested was denied with express permission to re-file both as to substitution and summary judgement. The motion for a temporary receiver can be made anew at anytime during the course of the proceeding where new facts arise. The defendants cross motion sought equitable relief; the plaintiff responded with opposition and oral argument was heard on the motion. The March 4th Order resulted from a full presentation by the parties on the issues before the court. As relevant to the collateral estoppel, the order addresses the behavior of the parties in that action and the consequences of that behavior with regard to the period following the “default” and renegotiation efforts made by the parties. It is not a permanent determination with regard to the foreclosures of the subject properties, rather it is the imposition of an equity equalizer put in place in recognition of the fact that Citibank and its assigns, as determined on papers and after oral argument, did actively prolong these proceeding with such lack of good faith as to require that they should forfeit any interest that would have otherwise been owning to them under the terms of the agreement they had with the borrowers. All of the renegotiation efforts were made with both Van Brunt and Sutter and at all the same times and places. Citibank had a full and fair opportunity to contest the prior determination; the issues were actually litigated in the Van Brunt action. In as much as the behavior of the lenders in the Van Buren action were identical, both in substance and in time, to the behavior of the lenders in Sutter, this Court cannot see how any different outcome for the Sutter action can fail to be an inconsistent result and a waste of judicial resources.

Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property. This Court is without sufficient information to make a determination as to wether or not the temporary receiver should be removed. Upon consolidation, and in as much as the papers are already before the Court, defendant Sutter may request a [*7]conference/argument with the plaintiff on the appropriateness/lack of need for the receiver.

Citibank’s Cross Motion.

Citibank cross-moves for an order finding that all conduct and statements over the course of settlement negotiations entered into between Citibank and the defendants, including the pre-negotiation agreement signed by all three parties, be ruled inadmissable in the Van Brunt action, pursuant to CPLR § 4547. Citibank also cross moves for an order seeking to substitute Wells Fargo as the plaintiff in the Van Brunt action and that the case caption be amended accordingly. Finally, Citibank cross-moves for clarification of two rulings contained in this court’s March 4, 2011 order.

In opposition to Citibank’s cross motion, the defendants argue that the cross motion and opposition papers should not be considered as such submissions were untimely and defective. On the issue of timeliness, the court notes that CPLR §2215 pertinently provides that “[a]t least three days prior to the time at which the motion is noticed to be heard, or seven days prior to such time if demand is properly made pursuant to subdivision (b) of rule 2214, a party may serve upon the moving party a notice of cross-motion demanding relief, with or without supporting papers . . .” Here, the defendants motion was served upon the plaintiff on April 6, 2011. The cross motion was not served until June 20, 2011, a full seventy-five days later.

The defendants further argue that the plaintiff’s papers are defective and should not be considered by the court. Specifically, it is argued that the papers are defective because they are submitted in reliance upon an affidavit of Marisa K. McGuaghey, who describes herself as an “authorized representative of Hudson Americas LLC” and bases her authority to submit her affidavit on behalf of Wells Fargo pursuant to an undated, uncertified copy of a Limited Power of Attorney. A power of attorney presented to the Court must be an original or a copy certified by an attorney, pursuant to CPLR §2105. Section 2105 of the CPLR states, inter alia, that “an attorney admitted to practice in the court of the state may certify that it has been compared by him with the original and found to be a true and complete copy” (see Security Pacific Nat. Trust Co. v Cuevas, 176 Misc 2d 846 [1998]). Here, there is nothing in the record indicating that the plaintiff’s attorney has performed this comparison (see Lasalle Bank N.A. v Smith, 26 Misc 3d 1239A [2010]; United States Bank Natl. Assn. v White, 22 Misc 3d 1112A [2009]; U.S. Bank Natl. Assn. v Bernard,18 Misc 3d 1130A [2008]). Additionally, the court notes that the fact that the limited power of attorney is undated is a further defect (see Ameriquest Mortgage Co., v Basevich, 16 Misc 3d 1104A [2007]. Based upon the foregoing, the court finds that the plaintiff’s papers are defective and therefore will not address the merits, or lack thereof, of the plaintiff’s cross motion.

This constitutes the decision and order of the court.

E N T E R,

____________________________

yvonne lewis, JSC

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BANK OF AMERICA, NA v. KABBA | OK Supreme Court: Only presented evidence of an indorsed-in-blank note and an ‘Assignment of Mortgage'” With nothing more

BANK OF AMERICA, NA v. KABBA | OK Supreme Court: Only presented evidence of an indorsed-in-blank note and an ‘Assignment of Mortgage'” With nothing more


BANK OF AMERICA, NA v. KABBA
2012 OK 23
Case Number: 109660
Decided: 03/06/2012

THE SUPREME COURT OF THE STATE OF OKLAHOMA

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

 

BANK OF AMERICA, NA, Plaintiff/Appellee,

v.

MOMODU AHMED KABBA, Defendant/Appellant,
and
HUMU HAWAH KABBA, JOHN DOE and JANE DOE, Defendants.

ON APPEAL FROM THE DISTRICT COURT
OF CLEVELAND COUNTY
HONORABLE TOM A. LUCAS, DISTRICT JUDGE

¶0 Appeal of a June 13, 2011, summary judgment granted in favor of Bank of America, NA, against Momodu Ahmed Kabba (hereinafter Kabba) and his wife Humu Hawah Kabba (defendant below). This Court retained the matter on August 18, 2011. Kabba appeals the granting of Summary Judgment asserting Bank of America, NA, did not have standing to bring the action.

REVERSED AND REMANDED WITH INSTRUCTIONS

A. Grant Schwabe, KIVELL, RAYMENT AND FRANCIS, Tulsa, Oklahoma, for Plaintiff/Appellee.
James P. Cates, BAER TIMBERLAKE COULSON & CATES, PC, Oklahoma City, Oklahoma, for Plaintiff/Appellee.
J.R. Matthews, J R MATTHEWS LLC, Oklahoma City, Oklahoma, for Defendant/Appellants.

COMBS, J.

FACTUAL AND PROCURAL HISTORY

¶1 In a petition filed on March 11, 2010, Bank of America, NA, claiming to be the present holder of the note (hereinafter Bank of America) initiated a foreclosure action against Kabba and his wife. Bank of America claimed, at that time, to hold the note and mortgage as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2. A review of the note shows a blank indorsement. This blank indorsement was filed with the lower court for the first time in the motion for summary judgment. The blank indorsement was not mentioned or referenced in the original petition.

BNC Mortgage, Inc., was the original lender. Bank of America filed with the Court Clerk of Cleveland County, a document entitled “Assignment of Real Estate Mortgage” on January 17, 2011, therein claiming the assignment to be effective as of February 9, 2010. This was nine months after the filing of the petition to foreclose. Additionally, this “Assignment of Mortgage,” signed by Mortgage Electronic Registrations Systems, Inc. (hereinafter MERS), as nominee for BNC Mortgage, Inc., and its successors and assigns, merely named Bank of America as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2. There was no mention of the note in this “Assignment of Mortgage”. On June 13, 2011, Summary judgment was granted and memorialized by a Final Journal Entry of Judgment order in Bank of America’s favor, against Kabba and his wife. Kabba appeals this summary judgment asserting Bank of America failed to demonstrate standing.

STANDARD OF REVIEW

¶2 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 621 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶3 Appellant argues Appellee does not have standing to bring this foreclosure action. Although Appellee has argued it holds the note, there is nothing in the record that shows when Appellee became the holder. The face of the note indicates it was indorsed in blank. However, this indorsement was not filed with the petition but with the motion for summary judgment. The purported “Assignment of Mortgage” was filed after the filing of the foreclosure proceedings and was signed by MERS, and not BNC Mortgage, Inc. The “Assignment of Mortgage” at no time mentioned the note.

¶4 The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, “standing [must] be determined as of the commencement of suit; . . .” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S.Ct. 2130, 2142, 119 L.Ed. 351 (1992).1

¶5 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.2 An assignment of the mortgage, however, is of no consequence because under Oklahoma law, “[p]roof of ownership of the note carried with it ownership of the mortgage security.” Engle v. Federal Nat. Mortg. Ass’n, 1956 OK 176, ¶7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the security interest from the note. BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a negotiable instrument, it is subject to the requirements of the UCC. A foreclosing entity has the burden of proving it is a “person entitled to enforce an instrument” by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 12A-3-309 or subsection (d) of Section 12A-3-418 of this title.” 12A O.S. 2001 §3-301.

¶6 To demonstrate you are the “holder” of the note you must establish you are in possession of the note and the note is either “payable to bearer” (blank indorsement) or to an identified person that is the person in possession (special indorsement).3 Therefore, both possession of the note and an indorsement on the note or attached allonge4 are required in order for one to be a “holder” of the note.

¶7 To be a “nonholder in possession who has the rights of a holder” you must be in possession of a note that has not been indorsed either by special indorsement or blank indorsement. Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, 3-203(b). Some jurisdictions have held, without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011). See also, 12A O.S. 2001, § 3-203.

¶8 In the present case, Appellee has only presented evidence of an indorsed-in-blank note and an “Assignment of Mortgage.” Appellee must prove that it is the holder of the note or the nonholder in possession who has the rights of a holder prior to the filing of the foreclosure proceeding. In the present matter the timeliness of the transfer is in question. Since Bank of America did not file the blank indorsement until it filed its motion for summary judgment it is impossible to determine from the record when Bank of America acquired its interest in the underlying note.

¶9 The assignment of a mortgage is not the same as an assignment of the note. If a person is trying to establish they are a nonholder in possession who has the rights of a holder they must bear the burden of establishing their status as a nonholder in possession with the rights of a holder. Appellee must establish delivery of the note as well as the purpose of that delivery. In the present case, it appears Appellee is trying to use the “Assignment of Mortgage” in order to establish the purpose of delivery. The “Assignment of Mortgage” purports to transfer “[f]or value received, the undersigned, Mortgage Electronic Registration Systems, Inc., as nominee for BNC Mortgage, Inc., and its successors and assigns does hereby assign, transfer and set over unto Bank of America, National Association as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust Agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2, that certain real estate mortgage dated August 30, 2004, granted by Momodu Ahmed Kabba and Humu Hawah Kabba, husband and wife….” This language has been determined by other jurisdictions to not effect an assignment of a note but to be useful only in identifying the mortgage. Therefore, this language is neither proof of transfer of the note nor proof of the purpose of any alleged transfer. See, In re Veal, 450 B.R. 897, 905 (B.A.P. 9th Cir. 2011).

¶10 Appellee must show it became a “person entitled to enforce” prior to the filing of the foreclosure proceeding. In the present case, there is a question of fact as to when and if this occurred and summary judgment is not appropriate. Therefore, we reverse the granting of summary judgment by the trial court and remand back for further determinations. If it is determined Bank of America became a person entitled to enforce the note, as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party.

CONCLUSION

¶11 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and to have the proper supporting documentation in hand when filing suit, showing the history of the note, so that the defendant is duly apprised of the rights of the plaintiff. This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or insulate them from foreclosure proceedings based on proven delinquency and therefore, this Court’s decision in no way releases or exonerates the debt owed by the defendants on this home. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶12 CONCUR: TAYLOR, C.J., KAUGER, WATT, EDMONDSON, REIF, COMBS, JJ.

¶13 DISSENT: WINCHESTER (JOINS GURICH, J.), GURICH (BY SEPARATE WRITING), JJ.

¶14 RECUSED: COLBERT, V.C.J.

FOOTNOTES

1 The dissenting opinion in this matter relies upon Justice Opala’s concurring opinion in Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906, for the proposition that standing is not a jurisdictional question. Justice Opala’s concurring opinion was not the majority opinion of this Court and as such “a minority opinion has no binding, precedential value.” 20 Am.Jur. 2d Courts §138.

2 This opinion was promulgated prior to the enactment of the UCC. It is, however, possible for the owner of the note not to be the person entitled to enforce the note if the owner is not in possession of the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

3 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205.

4 According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

 

GURICH, J., with whom WINCHESTER, J. joins dissenting:

¶1 I respectfully dissent. In this case, the record indicates that attached to Plaintiff’s Motion for Summary Judgment was an indorsed-in-blank note, an assignment of mortgage, and an affidavit verifying Plaintiff was the holder of the note and mortgage.1 Because the Plaintiff was the proper party to pursue the foreclosure and because the Plaintiff presented the proper documentation at summary judgment to prove such, I would affirm the trial court.

¶2 The majority states that “[t]o commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note, and absent a showing of ownership, the plaintiff lacks standing,” citing Gill v. First Nat. Bank & Trust Co., 1945 OK 181, 159 P.2d 717.2 See Majority Op. ¶ 5. I agree that in any foreclosure action a party must demonstrate it is the proper party to request adjudication of the issues. However, the issue of whether a party is the proper party to request adjudication of the issues is a real-party-in-interest issue, not an issue of “standing,” as the majority frames it. See Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring). Justice Opala framed the issue correctly in Toxic Waste Impact Group:

Standing in the federal legal system is imbued with a constitutional/jurisdictional dimension, while in the body of state law it fits under the rubric of ordinary procedure. The U.S. Constitution, Article III, has long been held to require that a “case” or “controversy” is essential to invoke federal judicial jurisdiction and that a person’s competence to bring an action is a core component of standing in a case-or-controversy inquiry. It is for this reason that standing is an integral part of the mechanism for invoking the federal judiciary’s power.

Oklahoma’s fundamental law places no restraint on the judiciary’s power analogous to the federal case-or-controversy requirement. Under the earlier Code of Civil Procedure the suit had to be brought by the real party in interest. That requirement has always been non-jurisdictional. If a state court proceeded to adjudicate a claim pressed by one not in that status, its decision was not fraught with jurisdictional infirmity but rather regarded as erroneous for want of proof to establish an important element of the claim. An error in this category is waivable at the option of the defendant; and, if not asserted on appeal, the reviewing court may reach the merits of the case despite a plaintiff’s apparent lack of standing at nisi prius.

Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring, ¶¶ 2-3) (emphasis added); see also Black Hawk Oil Co. v. Exxon, 1998 OK 70, ¶ 24, 969 P.2d 337, 344 (“Using the term ‘standing’ to designate real-party-in-interest issues tempts courts to apply standing principles outside the context in which they were developed. . . . A defendant is entitled to have the suit against him prosecuted by the ‘real party in interest’ but ‘his concern ends when a judgment for or against the nominal plaintiff would protect defendant from any action on same demand by another.”) (Watt, J., Majority Op.)

¶3 The majority in this case cites Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234 and Fent v. Contingency Review Board, 2007 OK 27, n.19, 163 P.3d 512, 519 for the proposition that “standing may be raised at any stage of the judicial process or by the court on its own motion.” See Majority Op. ¶ 4. Those cases cite Matter of the Estate of Doan, 1986 OK 15, ¶ 7, 7272 P.2d 574, as authority for this proposition. Arguably, however, Doan misstates the law:

Ever since the Code of Civil Procedure was replaced in 1984 by the Pleading Code, our nomenclature for identifying the party entitled to sue, which began to follow that of federal jurisprudence, has used “standing” as if it were a functional equivalent of the earlier procedural terms of art–real party in interest, one with appealable interest, one occupying the aggrieved-party or pecuniary-interest status. It was during this transition that one of our opinions inadvertently referred to “standing” in terms of a jurisdictional requirement, thus creating the misimpression that the term has a jurisdictional dimension. Oklahoma’s constitution has no case-or-controversy clause. Standing is hence to be viewed as an adjective-law concept. The inadvertent reference to the contrary should be treated as ineffective to alter standing’s true character in the body of our procedural law.

. . . .

I concur in today’s opinion and in the disposition of the cause. If I were writing for the court, I would additionally declare that Doan’s inadvertent reference to federal law is to be viewed as withdrawn. Lujan’s tripartite standing test, which we adopt today, must be treated as having been received sans its federal jurisdictional baggage.

See Toxic Waste Impact Group, 1994 OK 148 (Opala, J., concurring ¶ 4).

¶4 Additionally, both Hendrick and Fent were original actions in this Court. As such, “standing” could have been raised at any point by this Court sua sponte. However, in a proceeding in District Court, because it is a non-jurisdictional issue, failure to assert that the Plaintiff is not the real party in interest may be waived. See Liddell v. Heavner, 2008 OK 6, n.5, 180 P.3d 1191 (Opala, J., Majority Op.); see also 12 O.S. 2012 § 2008(D).

¶5 In this case, the facts demonstrate that the Defendant argued below that Plaintiff did not have a stake in the foreclosure and was not the real party in interest. As such, the issue was properly appealed. However, the facts also demonstrate that the Plaintiff was in fact the real party in interest and was the proper party to pursue the foreclosure. 12 O.S. 2012 § 2017. As such, I would affirm the trial court.

¶6 The majority also holds that a foreclosing party must have the “proper supporting documentation in hand when filing suit.” See Majority Op. ¶ 10 (emphasis added). Oklahoma pleading procedure does not require a plaintiff to have all evidence necessary to prevail on its claim at the time of the filing. Rather, what is required is a “short and plain statement of the claim showing that the pleader is entitled to relief.” 12 O.S. 2012 § 2008(A)(1). Additionally, 12 O.S.2012 § 2011(B)(3) provides that an attorney filing anything with the court certifies that to “the best of the person’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances . . . the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.” 12 O.S. 2012 § 2011(B)(3) (emphasis added).3

¶7 Mortgage foreclosures, like other civil actions, allow the parties to continue to investigate and discover evidence up until the time of judgment. In this case, the Plaintiff continued to investigate its claim up until the time of summary judgment. At the time of summary judgment it offered sufficient proof to the trial court that it had the right to foreclose on the mortgage.4

¶8 Plaintiff satisfied its burden of proof, and the trial court was correct in sustaining the motion and granting judgment to the Plaintiff. On appeal where no evidence indicates otherwise, there is a presumption that the judgment of the trial court conforms to the proof present at the trial. Gilkes v. Gilkes, 1964 OK 28, 389 P.2d 503. I cannot agree with the majority’s holding that the plaintiff must have the “proper supporting documentation in hand when filing suit” because no authority states such and the Oklahoma pleading code requires otherwise. The procedure imposed by the majority in this case will result in delay, will not affect the inevitable outcome of foreclosure, and will increase the homeowner’s debt. 5

FOOTNOTES

1 The record also indicates that the Defendant filed an answer and counterclaim pro se, but was later represented by counsel who filed a Combined Response and Objections to Plaintiff’s Motion for Summary Judgment and a Counter-Motion for Summary Judgment. At the hearing on the motions, the trial judge considered arguments of Counsel for the parties and reviewed the evidentiary materials offered, including the original note, the original mortgage, the assignment of the mortgage, and the affidavit.

2 In Gill, the plaintiff brought an action to foreclose a mortgage on real property. There was no discussion in the case of whether the plaintiff had standing to bring the action or whether the plaintiff was the real party in interest. In fact, the case was tried to the Court, and the appeal turned on the sufficiency of evidence presented at trial. The Gill decision stands for the proposition that the assignment of the note carries with it an assignment of the mortgage. It is not relevant to the standing analysis, nor does it stand for the proposition that the plaintiff must prove at the time of filing that it has a right to enforce the note.

3 Likewise, while I agree that the UCC applies in this case because the note is a negotiable instrument, the UCC does not require that a foreclosing entity prove at the time of filing that it is the person entitled to enforce the instrument.

4 Rule 13 of the Rules for District Courts permits a party to file evidentiary material with a motion for summary judgment. In this case, Plaintiff offered an indorsed-in-blank note, an assignment of mortgage, and an affidavit verifying Plaintiff as the holder of the note and mortgage.

5 On remand, rather than dismiss the petition, the trial court may allow the Plaintiff to amend its petition. HSBC Bank USA v. Lyon, 2012 OK 10, ¶ 1, __ P.3d __.

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Mortgage Elec. Registration Sys., Inc. v Lopez | NYSC “Motion for leave to enter the judgment of foreclosure and sale is denied, Affirmation Fail”

Mortgage Elec. Registration Sys., Inc. v Lopez | NYSC “Motion for leave to enter the judgment of foreclosure and sale is denied, Affirmation Fail”


NOTE: Am I the only person that sees MERS named as the Plaintiff and MERS named as a Defendant in this case?

Guess what, this isn’t the only time, there has been several instances like this case where a NY SUPREME COURT JUDGE BASHES ‘MERS’ FOR SUING ITSELF…OWNS NOTHING!

Can MERS even pursue this… since it issued an announcement on 2/2011 to banks to stop foreclosing in its name?


Decided on March 12, 2012

Supreme Court, Queens County

 

Mortgage Electronic Registration Systems, Inc., Plaintiff,

against

Cesar Lopez; MARIA LOPEZ; CHRISTIAN LOPEZ; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., as nominee for WALL STREET MORTGAGE BANKERS LTD. d/b/a POWER EXPRESS; NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE; CRIMINAL COURT OF THE CITY OF NEW YORK; UNITED STATES OF AMERICA; CITY OF NEW YORK BY TRANSIT ADJUDICATION BUREAU; CITY OF NEW YORK BY ENVIRONMENTAL CONTROL BOARD; CITY OF NEW YORK BY PARKING VIOLATIONS BUREAU; EMPIRE INSURANCE GROUP A/S/O CLAUDE HAKIM; JAMAICA SEVEN LLC; THE BIG M CORPORATION d/b/a MANDEE; EMPIRE PORTFOLIOS, INC.; PRA III LCC; AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY INC.; STATE FARM MUTUAL AUTOMOBILE INSURANCE, as sub. of ALBERT SPENCER; NY FINANCIAL SERVICES, LLC; PORTFOLIO RECOVERY ASSOCIATES LLC, WORKERS’ COMPENSATION BOARD OF NEW YORK; LIBERTY POINT CORP.; STUYVESANT FUEL SERVICE CORP.; PEOPLE OF THE STATE OF NEW YORK; METRO PORTFOLIOS INC.; ASTRID LOPEZ; KATERA JOHNSON; ARNOLD RIVERS, Defendants.

7439/09

Robert J. McDonald, J.

In this foreclosure action commenced on March 25, 2009, plaintiff previously obtained an order dated July 28, 2009, appointing a referee to ascertain and compute the amount due plaintiff and to examine and report whether the mortgaged premises known as 168 Marvin Street, Far Rockaway, New York can be sold in parcels. The Referee appointed pursuant to such order executed his oath and rendered his report dated September 1, 2009, indicating the sum of $486,471.41 was due plaintiff as of August 13, 2009, and that the mortgaged premises should be sold in one parcel.

Plaintiff previously sought to obtain a judgment of foreclosure and sale, but by order dated April 22, 2010, the application was denied with leave to renew following the holding of a conference, or evidence that the mortgagors failed to appear for a conference. The court determined that a settlement conference had yet to be held in the Residential Foreclosure Settlement Part, plaintiff had failed to provide certain documents, and the proposed judgment lacked a certain provision. After defendants Lopez failed to attend the settlement conference held on August 6, 2010, plaintiff renewed its application, but by order dated November 19, 2010, that application also was denied with leave to renew upon proper papers, including an affirmation by plaintiff’s counsel pursuant to the administrative order of the Chief Administrative Judge of the Court dated October 20, 2010 then in effect (see AO/548/10). Plaintiff asserts that by assignment dated April 4, 2011, it, as nominee for Wall Street Mortgage Bankers Ltd., d/b/ Power Express (Wall Street Mortgage), the mortgagee, assigned the subject mortgage to Vanderbilt.

That branch of the motion by plaintiff for leave to amend the caption as proposed is denied (CPLR 1018). Although substitution is appropriate where the mortgage and note have been assigned to a new party after commencement of a foreclosure action (see Saxon Mortg. [*2]Services, Inc. v Coakley, 83 AD3d 1038 [2011], lv to appeal denied 17 NY3d 708 [2011]), plaintiff has failed to establish that Vanderbilt presently holds the note, which was endorsed by Christine Holman, assistant vice-president of Wall Street Mortgage, in blank and without recourse on behalf of Wall Street Mortgage (see Bank of New York v Silverberg, 86 AD3d 274, 280 [2011]). Thus, plaintiff has failed to show that Vanderbilt rightfully may pursue, or be awarded, a judgment of foreclosure and sale (see id.).

With respect to the cross motion,

“[a] defendant who has failed to timely appear or answer the complaint must provide a reasonable excuse for the default and demonstrate a meritorious defense to the action, when opposing a motion for leave to enter judgment upon its failure to appear or answer and moving to extend the time to answer or to compel the acceptance of an untimely answer (see Juseinoski v Board of Educ. of City of NY, 15 AD3d 353, 356 [2005]; Ennis v Lema, 305 AD2d 632, 633 [2003])” (see Lipp v Port Auth. of NY & N.J., 34 AD3d 649 [2006]).

The determination of what constitutes a reasonable excuse for a default in answering lies within the sound discretion of the court (see Adolph H. Schreiber Hebrew Academy of Rockland, Inc. v Needleman, 90 AD3d 791 [2011]; Maspeth Fed. Sav. & Loan Assn. v McGown, 77 AD3d 889 [2010]; Grutman v Southgate At Bar Harbor Home Owners’ Assn., 207 AD2d 526, 527 [1994]).

Defendants Lopez, appearing by Queens Legal Services, assert that they were victims of predatory lending practices committed by the lender regarding the financing of the purchase of their home from Autumn Equities, LLC (Autumn Equities). They claim that a real estate agent employed by Autumn Equities/United Homes induced them to purchase a two-family house, which was then still under construction, for $579,000.00, without a down payment, advising them, in effect, they could live with defendant Christian Lopez, their adult-aged son, in one of the units, and rent out the other unit, to make the house affordable. They also claim that the agent advised them they would need two mortgage loans to finance the entire $579,000.00 purchase price, and that his office could arrange for them to get two fixed-rate mortgages with a combined monthly payment of approximately $3500.00 per month from Wall Street Mortgage. They further claim that the agent failed to tell them they had the right to hire an independent real estate appraiser or home inspector, or shop for financing from a lender of their own choosing. Defendants Lopez additionally claim that at the suggestion of Wall Street Mortgage, they added defendant Christian Lopez as an applicant to the mortgage application to insure approval of the loans. They assert Wall Street Mortgage failed to disclose to them when they applied for the loans that the primary mortgage loan would have an adjustable interest rate, the initial payments would be sufficient only to pay the interest accruing on the loan, and the monthly mortgage payment would increase significantly once the loan became fully amoritizing. Defendants Lopez also claim that they were represented at the closing by an attorney provided to them by Autumn Equities or United Homes, but still no one disclosed to them the actual loan terms. They further claim that the “Truth in Lending” disclosure form provided to them at the closing fails to [*3]disclose, clearly and conspicuously the proper payment schedule reflecting the terms stated in the note. According to defendants Lopez, they never would have entered into the transaction if they knew the truth about the repayment terms of the primary mortgage loan. They assert they struggled to pay their mortgage payments for two years, but because of illness and financial setbacks, they were no longer able to maintain their payments, and the property fell into foreclosure.

Defendants Lopez state that shortly after they received the summons and complaint, they sought help from the Legal Aid Society at a foreclosure prevention clinic held at the Queens Civil Courthouse. Sumani Lanka, a staff attorney with Legal Aid Society, states she informed defendants Lopez that the Society would not be able to represent them in this case because of the Society’s own limited resources. Defendants Lopez assert they were unaware of the availability of any other free or low-cost legal services, and believed that without legal representation, they could not defend themselves in this action. They state the servicing agent for the lender denied their application for a loan modification, and the servicing agent and Vanderbilt denied their requests to consent to proposed short sales. Defendants Lopez also state that Vanderbilt then contacted them asking them to reapply for a loan modification, which they did. They additionally state that on or about August 11, 2011, they attended a foreclosure clinic at the Queens Civil Courthouse, and met with Franklin Romeo, of counsel to Jennifer Ching, Esq., Queens Legal Services, who informed them that in the event his office was not able to represent them, they had the right to represent themselves in the case, but would need to make a motion since their time to respond to the complaint had expired. Defendants Lopez state that prior to this conversation, they did not realize they could have filed an answer to the complaint without the assistance of an attorney. They state that Mr. Romeo informed them a few weeks later that plaintiff had filed the instant motion. Defendants Lopez assert that Vanderbilt then denied their loan modification application by letter dated August 31, 2011.

The copy of the summons on file in the clerk’s records in this action provided notice of commencement of this suit, but also called upon defendants Lopez to answer the complaint and to serve a copy on plaintiff’s attorney. It warned, in bold type, that failure to respond to the summons and complaint by “serving the answer on the plaintiff for the mortgage company who filed this foreclosure proceeding against you and filing the answer with the court, a default judgment may be entered and you can lose your home.” Furthermore, it advised (again in bold type) defendants Lopez to “[s]peak to an attorney or go to the court where your case is pending for further information on how to answer the summons and protect your property.” It, thus, clearly provided notice that if defendants Lopez did not have an attorney or were unable to obtain legal representation, they could proceed to the court and get help in answering the complaint. In addition, it reiterated, in larger, bold type, “[Y]OU MUST RESPOND BY SERVING A COPY OF THE ANSWER ON THE ATTORNEY FOR THE PLAINTIFF (MORTGAGE COMPANY).” Defendants Lopez make no claim that they were not personally served with a copy of the summons and complaint, or the additional notice provided pursuant to CPLR 3215(g)(3) by service of a copy of the summons by first-class mail (see affidavit of Erin E. DiFrancesca dated May 27, 2009 annexed as Plaintiff’s Exhibit B in opposition). Therefore, [*4]defendants Lopez have failed to show that they reasonably believed they could not defend themselves in the case without an attorney. Defendants Lopez, moreover, make no claim that they were lulled into inaction as a consequence of any negotiations with the servicing agent or Vanderbilt. Under such circumstances, defendants Lopez have failed to demonstrate a reasonable excuse for their failure to timely serve an answer. The cross motion by defendants Lopez to vacate their default in answering and for leave to serve a late answer is denied (see C & H Import & Export, Inc. v MNA Global, Inc., 79 AD3d 784 [2010]; 599 Ralph Ave. Dev., LLC v 799 Sterling Inc., 34 AD3d 726 [2006]; Elite Limousine Plus, Inc. v Allcity Ins. Co., 266 AD2d 259 [1999] ).

That branch of the motion by plaintiff for leave to amend the complaint nunc pro tunc to the time of the commencement of the action to reflect that amount of the claimed monthly installment payment was $2389.24 and the date of the claimed default was December 1, 2008 is granted.

That branch of the motion by plaintiff to confirm the Referee’s report of computation is granted.

To the extent defendants Lopez oppose that branch of the motion by plaintiff for leave to enter a judgment of foreclosure and sale on the ground plaintiff failed to serve them with a copy of the notice of the motion for a judgment of foreclosure and sale, they were not entitled to such notice, because they failed to answer the complaint, or appear and demand such personal service (see Polish Nat. Alliance of Brooklyn, U.S.A. v White Eagle Hall Co., 98 AD2d 400, 404 [1983]).

Defendants Lopez also oppose that branch of the motion by plaintiff for leave to enter a judgment of foreclosure and sale on the ground plaintiff has failed to demonstrate it served them with a notice pursuant to RPAPL 1304. Plaintiff’s counsel previously submitted a statement dated September 10, 2009 to the court indicating that the subject mortgage is neither a subprime home loan nor a high-cost home loan, and that the annual percentage rate at consummation did not exceed three percentage points over the yield on treasury securities as of the fifteenth day of the month in which the loan was consummated. In addition, the subject mortgage is not a “non-traditional home loan” as that phrase was defined in the version of RPAPL 1304 in effect at the time of the commencement of this action (see L 2008, c 472, § 2, eff. Sept. 1, 2008). A nontraditional home loan was defined as “a payment option adjustable rate mortgage or an interest only loan consummated between January first, two thousand three and September first, two thousand eight” (see former RPAPL 1304[5][e]). The subject mortgage is not a “payment option adjustable rate mortgage” because it does not grant the mortgagor an option to make a payment of less than the actual payment of interest and principal necessary to amortize the loan. Nor is it an “interest only” loan insofar as the note calls for interest only for the first ten years of the loan, but principal and interest for the next 20 years. Under such circumstances, plaintiff was under no obligation to serve defendants Lopez with a notice pursuant to RPAPL 1304 as a condition precedent to suit (cf. Aurora Loan Services, LLC v Weisblum, 85 AD3d 95 [2011]). [*5]

Plaintiff’s counsel submits her affirmation dated August 11, 2011, pursuant to the administrative order the Chief Administrative Judge of the Court dated March 11, 2011 (AO 431/11), indicating that she communicated with one “Jackie Mash,” “Legal Affairs Representative,” of plaintiff on June 21, 2011. According to the affirmation, Jackie Mash informed plaintiff’s counsel that she “personally reviewed plaintiff’s documents and records relating to this case for factual accuracy; and … confirmed the factual accuracy of the allegations set forth in the Complaint and any supporting affidavits or affirmations filed with the Court, as well the accuracy of the notarizations contained in the supporting documents filed therewith” (emphasis supplied). Such affirmation, however, is at odds with the other affirmation of plaintiff’s counsel dated June 4, 2011 wherein counsel stated the complaint contained errors as to the date of default and the amount of the monthly payment. Thus, the branch of the motion for leave to enter the judgment of foreclosure and sale is denied without prejudice to renewal based upon proper papers, including an affirmation by plaintiff’s counsel, clarifying this issue, and upon proper service, including service upon defendants Lopez (see Home Sav. Bank v Chiola, 203 AD2d 525 [1994]).

Dated: Long Island City, NY

March 12, 2012

______________________________

ROBERT J. MCDONALD

J.S.C.

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NEW YORK CONTINUES ASSAULT ON MERS

NEW YORK CONTINUES ASSAULT ON MERS


By Jonathan C. Cross and Stacey Trimmer

New York government officials are continuing their assault against foreclosure actions where Mortgage Electronic Registration Systems, Inc. (“MERS”) was the assignee of the mortgage, and challenges to foreclosures involving MERS are increasingly gaining traction in New York courts. Recently, the New York State Attorney General filed a complaint against MERS and several banks alleging fraud and deception in foreclosure proceedings. People v. JPMorgan Chase Bank N.A., No. 2012/2768 (N.Y. Sup. Ct. Feb. 3, 2012). In addition, three New York trial courts have decided motions involving standing and other issues in such actions. CIT Group/Consumer Fin., Inc. v. Platt, 33 Misc. 3d 1231(A) (N.Y. Sup. Ct. 2011); U.S. Bank N.A. v. Bressler, 33 Misc. 3d 1231(A) (N.Y. Sup. Ct. 2011); Bank of New York Mellon v. Martinez, 33 Misc. 3d 1215(A) (N.Y. Sup. Ct. 2011). Two courts ruled against the foreclosing banks, finding they did not have standing to foreclose where MERS assigned a mortgage without express authority to do so or sufficient documentation evidencing that the note was also transferred. Although the third court dismissed a lack of standing defense, it did so solely for procedural reasons.

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U.S. Bank N A. v Nyarkoha | NYSC “endorsement on the underlying note, however, is undated, and in blank…does not state the actual date of physical delivery of the note.”

U.S. Bank N A. v Nyarkoha | NYSC “endorsement on the underlying note, however, is undated, and in blank…does not state the actual date of physical delivery of the note.”


Decided on February 29, 2012

Supreme Court, Queens County

 

U.S. Bank National Association, as Trustee, for CSFB ARMT 2006-2, 3476 Stateview Boulevard, Ft. Mill, SC 29715, Plaintiff,

against

Dorcas Nyarkoha, et al., Defendants.

13409/2009

Appearances of Counsel:

For the Plaintiff:Hogan Lovells U.S. LLP, by Allison J. Schoenthal, Danielle Mastriano, & Nicole Schiavo, Esqs., 875 Third Avenue, New York, NY 10022

For Defendant Dorcas Nyarkoha: Sumani Lanka, Esq., The Legal Aid Society – – Civil Practice, 120-46 Queens Boulevard, Kew Gardens, New York 11415-1204

Charles J. Markey, J.

The following papers numbered 1 to 13 read on this motion by defendant Dorcas Nyarkoha, pursuant to CPLR 3012(d), for leave to serve and file a late answer, as proposed.

Papers Numbered

Notice of Motion – Affidavits – Exhibits ……………………………………………………………….1-4

Answering Affidavits – Exhibits …………………………………………………………………………5-10

Reply Affidavits ……………………………………………………………………………………………..11-13

This mortgage foreclosure action raises two controversial issues that will persist in the case law, with incongruent and inconsistent results, until a definitive ruling is eventually made by the New York Court of Appeals. The first issue, especially in the area of mortgage foreclosures, where the statutory framework provides for a conference to all answering defendants in an attempted foreclosure of a residential mortgage (see, CPLR 3408, L 2008, ch 472, § 3), is whether or not a non-answering defendant’s failure to answer timely be excused because he or she relied on ongoing settlement talks, discussions, and negotiations. The second thorny issue is whether or not a plaintiff bank’s alleged lack of standing is a meritorious defense that may be asserted by a defendant seeking permission to file a late answer.

Defendant Nyarkoha, in effect, moves to vacate her default in answering the complaint and for leave to serve a late verified answer as proposed. She claims that her default is excusable, insofar as she believed her engagement in settlement negotiations with plaintiff’s [*2]servicing agent, Wells Fargo Home Mortgage Inc. d/b/a America’s Servicing Company (“ASC”), excused her from taking further action with respect to the suit. Defendant Nyarkoha also claims she has meritorious defenses and counterclaims. The plaintiff opposes the motion.

A defendant who has failed to timely answer the complaint must provide a reasonable excuse for the default and demonstrate a potentially meritorious defense to the action, when moving to compel the acceptance of an untimely answer (see, Palmer Ave. Corp. v. Malick, 91 AD3d 853 [2nd Dept. 2012]; Lipp v Port Auth. of NY & N.J., 34 AD3d 649 [2nd Dept. 2006]; Juseinoski v Board of Educ. of City of NY, 15 AD3d 353, 356 [2nd Dept. 2005]; see also, Rodriguez v Triani, 28 Misc 3d 130(A), 2010 WL 2802747, 2010 NY Slip Op 51256(U) [App T. 2nd Dept. 2010]). The determination of what constitutes a reasonable excuse for a default in answering lies within the sound discretion of the court (see, Adolph H. Schreiber Hebrew Academy of Rockland, Inc. v Needleman, 90 AD3d 791 [2nd Dept. 2011]; Maspeth Fed. Sav. & Loan Assn. v McGown, 77 AD3d 889 [2nd Dept. 2010]; Grutman v Southgate At Bar Harbor Home Owners’ Assn., 207 AD2d 526, 527 [2nd Dept. 1994]).

Defendant Nyarkoha states that she was out of the country at the time of the service of the copy of the summons and complaint, but after her return on June 28, 2009, contacted ASC, seeking to obtain a modification of the subject mortgage. ASC, which participated in the federal Home Affordable Modification Program (“HAMP”), accepted her application for loan modification under HAMP. Defendant Nyarkoha entered into a three-month Trial Period Plan with ASC through HAMP, commencing October 1, 2009, and attended seven conferences held in the Residential Foreclosure Part, wherein she was represented by the Legal Aid Society for the purpose of the conferences.

While the case was assigned to that Part, defendant Nyarkoha twice moved, in effect, to stop the running of interest on the mortgage debt. Both motions were denied. In addition, defendant Nyarkoha filed, on July 1, 2010, a pro se motion for leave to serve an answer to the complaint, which motion was repeatedly adjourned. The case was released from the Residential Foreclosure Part on December 1, 2010.

On December 28, 2010, the Legal Aid Society served and filed a notice of appearance on behalf of defendant Nyarkoha in this action. On January 27, 2011, defendant Nyarkoha served and filed a notice, indicating her withdrawal of the pro se motion for leave to serve a late answer, without prejudice to her right to refile it. The instant motion was filed six months later.

Regarding defendant Nyarkoha’s argument that she relied on ongoing settlement discussions and negotiations, the cases are mixed. A number of cases show a great reluctance, if not loathing, for such a defense as an excuse for not taking concrete action in a litigation, such as filing an answer (see, e.g., Community Preservation Corp. v Bridgewater Condominiums, LLC, 89 AD3d 784 [2nd Dept. 2011] [reliance on settlement discussions does not constitute reasonable excuse]; Mellon v Izmirligil, 88 AD3d 930 [2nd Dept. 2011] [motion to vacate was properly denied]; Maspeth Fed. Sav. & Loan Assn. v McGown, 77 AD3d 889, supra [purported reliance [*3]on settlement discussions was unsubstantiated]; Jamieson v Roman, 36 AD3d 861 [2nd Dept. 2007] [upholding denial of motion to vacate default despite party’s claim of ongoing settlement discussions, since party delayed in appearing after being served with a copy of the judgment]; Flora Co. v Ingilis, 233 AD2d 418 [2nd Dept. 1996] [reliance on settlement discussions was questionable at best]; Bank of New York v Jayaswal, 33 Misc 3d 1214(A), 2011 WL 5061626, 2011 NY Slip Op 51922(U) [Sup Ct Suffolk County 2011] [Whelan, J.] [denying motion to file a late answer, court stated that “the mere engagement in discussions aimed at a potential modification of the subject mortgage loan may not serve as a means to open up an otherwise inexcusable default in answering the summons and complaint by the defendant/mortgagor.”; discussing the competing cases and reasoning that defendant’s conversation with the plaintiff bank’s “operations consultant” could not be reasonably characterized as “legal advice” that “allegedly duped defendant . . . into not answering the complaint in a timely manner.”).

The defense or excuse of a party’s abstaining from taking any action in good faith reliance on ongoing settlement discussions and negotiations has, nevertheless, been sustained if the underlying facts and circumstances are substantiated and reasonable (see, e.g., Performance Constr. Corp. v Huntington Bldg., LLC, 68 AD3d 737, 738 [2nd Dept. 2009] [record revealed that party was actively engaged in settlement negotiations, and adversary unfairly and manipulatively failed to disclose plan to enter default judgment]; Scarlett v McCarthy, 2 AD3d 623 [2nd Dept. 2003]; HSBC Bank USA, N.A. v Cayo, ____ Misc 3d, 934 NYS2d 792, 794 [Sup Ct Kings County 2011] [party presented meritorious defense and substantiated belief that action was stayed pending settlement talks]; Emigrant Mortgage, Inc. v Abbey, 2011 WL 972555, 2011 NY Slip Op 30600(U) [Sup Ct Queens County 2011] [McDonald, J.]).

This Court, in the present action, concludes that defendant Nyarkoha’s reliance upon settlement negotiations with ASC was reasonable and her participation in the conferences is substantiated and thus constituting a sufficient and reasonable excuse for her failure to serve an answer through at least December 1, 2010.

To the extent Defendant Nyarkoha’s pro se motion for leave to serve a late answer was withdrawn prior to its submission, and the instant motion was not made for another six months, such additional delay may be attributable to her counsel and constitutes, at most, law office failure, which is excusable (see, CPLR 2005). Plaintiff has not demonstrated it has been prejudiced by the additional delay (see, Merchants Ins. Group v. Hudson Valley Fire Protection Co., Inc.,72 AD3d 762, 764 [2nd Dept. 2010]).

Plaintiff made no motion seeking any relief during that six-month period, notwithstanding that the order dated December 1, 2010, permitted it to seek an order of reference, and makes no cross motion for such relief. A strong public policy, furthermore, exists favoring the disposition of matters on their merits (see, Berardo v Guillet, 86 AD3d 459, 459 [1st Dept. 2011]; Yu v Vantage Mgt. Servs., LLC, 85 AD3d 564[1st Dept. 2011]; Billingly v Blagrove, 84 AD3d 848, 849 [2nd Dept. 2011]; Khanal v Sheldon, 74 AD3d 894, 896 [2nd Dept. 2010]; Rakowicz v [*4]Fashion Institute of Technology, 65 AD3d 536, 537 [2nd Dept. 2009]; Reed v Grossi, 59 AD3d 509, 511-512 [2nd Dept. 2009]; Bunch v Dollar Budget, Inc., 12 AD3d 391 [2nd Dept. 2004]).

The motion papers, in the case at bar, adequately demonstrate that the defendant Nyarkoha may have a meritorious defense based upon lack of standing (compare Citigroup Global Markets Realty Corp. v. Randolph Bowling, 25 Misc 3d 1244(A), 2009 WL 4893940, 2009 NY Slip Op 52567(U), slip op at 3 [Sup Ct Kings County 2011] [standing issue was not raised as a last minute gesture to avert sale of property and was thus properly raised on a motion to file a late answer] with Deutsche Bank Nat. Trust Co. v. Young, 66 AD3d 819,819 [2nd Dept. 2009] [upholding lower court’s denial of motion to vacate default in mortgage foreclosure action, Second Department stated that “the Supreme Court did not err in determining that they waived the issue of standing by failing to timely appear or answer”] and HSBC Bank, USA v. Dammond, 59 AD3d 679, 680 [2nd Dept. 2009] [where it was “undisputed that the respondent was personally served” and the defendant did not raise the standing defense until “immediately prior to the date scheduled for the sale of the property,” the Second Department stated: “The respondent waived any argument that HSBC lacked standing to commence the foreclosure action. Having failed to interpose an answer or file a timely pre-answer motion which asserted the defense of standing, the respondent waived such defense pursuant to CPLR 3211(e).”]; and Deutsche Bank Nat. Trust Co. v. Pietranico, 33 Misc 3d 528 [Sup Ct Suffolk County 2011] [Whelan, J.] [alleged lack of standing was untimely asserted on motion to vacate a default in a mortgage foreclosure action]; see, U.S. Bank, N.A. v Collymore, 68 AD3d 752 [2nd Dept. 2009] [upholding denial of plaintiff bank’s motion for summary judgment and appointment of a referee, Second Department stated: “Contrary to the Bank’s contentions, it failed to demonstrate its prima facie entitlement to judgment as a matter of law because it did not submit sufficient evidence to demonstrate its standing as the lawful holder or assignee of the subject note on the date it commenced this action.”]).

In the present action, the assignment agreement indicates that the mortgage, “[t]ogether with all moneys . . . owing or that may . . . become due or owing in [r]espect thereof,” were assigned by First United Mortgage Banking Corp. to plaintiff on May 12, 2009. The endorsement on the underlying note, however, is undated, and in blank and without recourse, and the affidavit of Jennifer Robinson, the vice-president of loan documentation for Wells Fargo, indicates that the note was physically delivered to Wells Fargo as custodian for plaintiff “prior to the commencement of this action on May 25, 2009.” The action, however, was commenced on May 21, 2009, and Ms. Robinson does not state the actual date of physical delivery of the note.

The Court holds, under the circumstances of the present action, that the alleged lack of standing of the plaintiff bank may be considered on a motion to vacate a default in a mortgage foreclosure action. Absent express legislation barring a litigant from proving a meritorious defense in an attempt to vacate a default because of an alleged lack of standing, courts should not engraft such a prohibition on the case law of this State.

The Court grants defendant’s motion for leave to serve a late answer is granted, and the [*5]proposed answer annexed to the motion papers shall be deemed served upon service of a copy of this order bearing the date stamp of the County Clerk, with notice of entry. Plaintiff shall serve a reply or move with respect to the answer, within 30 days of the service of a copy of this order with notice of entry. Defendant Nyarkoha shall file a copy of the answer within 20 days of service of a copy of this order with notice of entry.

The foregoing constitutes the decision, opinion, and order of the Court.

______________________________________

J.S.C.

Dated: February 29, 2012

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CIT GROUP CONS. FIN., INC. v. Platt | NYSC “failed to demonstrate that MERS initially physically possessed the note or had the authority from Wilmington to assign it”

CIT GROUP CONS. FIN., INC. v. Platt | NYSC “failed to demonstrate that MERS initially physically possessed the note or had the authority from Wilmington to assign it”


2011 NY Slip Op 52185(U)

THE CIT GROUP/CONSUMER FINANCE, INC., Plaintiff,
v.
BRUCE W. PLATT, SOLE HEIR AT LAW OF DORSEY PLATT AND MARY PLATT, AND “JOHN DOE NO. 1” THROUGH “JOHN DOE #10,” THE LAST 10 NAMES BEING FICTITIOUS AND UNKNOWN TO THE PLAINTIFF, THE PERSONS OR PARTIES INTENDED BEING THE PERSONS OR PARTIES, IF ANY, HAVING OR CLAIMING AN INTEREST IN OR LIEN UPON THE MORTGAGED PREMISES DESCRIBED IN THE VERIFIED COMPLAINT, Defendants.

 

 

 

11410/08.
Supreme Court, Queens County. 

Decided December 7, 2011.
ROBERT J. McDONALD, J.Upon the foregoing papers it is ordered that the motion is determined as follows:Plaintiff commenced this action on May 6, 2008, seeking to foreclose on a mortgage given by defendant Bruce W. Platt, “as sole heir at law of Dorsey Platt and Mary Platt,” to secure his indebtedness in the principal amount of $484,000.00 plus interest, pursuant to a promissory note, with respect to the real property known as 224-19 143rd Avenue, Laurelton, New York. The mortgage lists Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee of Wilmington Finance, Inc. (Wilmington) and its assignees, refers to MERS as the mortgagee for the purpose of recording, and provides that the underlying promissory note is in favor of Wilmington. Further, the mortgage provides that “MERS holds only legal title to the rights granted by [defendant Platt] …, but, if necessary to comply with law or custom,” MERS has the right to foreclose and “to take any action required of [Wilmington].” In its complaint, plaintiff alleged that it was the holder of the subject mortgage pursuant to an assignment dated April 1, 2008, and that defendant Platt defaulted under the terms of the mortgage and note by failing to make the monthly installment payment of interest due on November 1, 2007 and thereafter, and as a consequence, it elected to accelerate the entire mortgage debt.Defendant Platt, appearing pro se, served a verified answer, asserting affirmative defenses based upon lack of standing, failure by plaintiff to serve him with notices pursuant to RPAPL 1303 and 1304, and fraud. Defendant Platt claims that the mortgage is a subprime mortgage loan and that he did not receive the requisite statutory notices. He further claims that the lender and mortgage broker conspired to obtain an inflated appraisal of the subject premises and falsified his income, to induce him to enter into a mortgage loan beyond that which he could afford.

A residential foreclosure conference was held on March 8, 2011, but did not result in a settlement. By order of the same date, it was determined that the action could proceed by motion.

With respect to that branch of the motion by plaintiff for summary judgment as against defendant Platt, it is well established that the proponent of a summary judgment motion “must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact” (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). The failure to make such a prima facie showing requires the denial of the motion regardless of the sufficiency of the opposing papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). In support of its motion, plaintiff offers a copy of the pleadings, affidavits of service, an affirmation by its counsel, a copy of the subject mortgage, underlying note and allonge, assignments, and an affidavit of Paul Laird, a vice president of Vericrest Financial, Inc., the attorney in fact for plaintiff, attesting to defendant Platt’s default under the mortgage and note.

Plaintiff has failed to establish its prima facie entitlement to judgment as a matter of law. “CPLR 3212 (b) provides that a summary judgment motion shall be supported by affidavit’ of a person having knowledge of the facts’ as well as other admissible evidence (see GTF Mktg. v Colonial Aluminum Sales, 66 NY2d 965, 967 [1985])” (JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 384 [2005]). The affidavit of Paul Laird is without evidentiary value insofar as the basis of his knowledge and representations regarding the mortgage documents and defendant Platt’s default in payment are not revealed or inferable (see Zuckerman v City of New York, 49 NY2d 557, 562-563 [1980]). In addition, because the complaint is verified by counsel, who lacks personal knowledge of the facts, it also does not constitute competent evidence to stand in the place of a proper affidavit of merit (see Alvarez v Prospect Hosp., 68 NY2d at 327 [1986]). That branch of the motion by plaintiff for summary judgment against defendant Platt is denied.

With respect to that branch of plaintiff’s motion to strike the affirmative defense asserted by defendant Platt based upon lack of standing,

“[w]here, 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])”

(U.S. Bank, N.A. v Adrian Collymore, 68 AD3d 752, 753-754 [2009]).

Plaintiff offers a copy of an assignment executed by Bonnie McGinnis, “ASST. SECRETARY,” which purports to show the subject mortgage, together with the note, were assigned by MERS to plaintiff on April 1, 2008.

Plaintiff, however, has failed to demonstrate that MERS initially physically possessed the note or had the authority from Wilmington to assign it (see Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95 [2011]). Wilmington is not a party to the assignment, and the mortgage itself does not specifically give MERS the right, as the nominee or agent of the Wilmington, to assign the underlying note (see Bank of New York v Silverberg, 86 AD3d 274 [2011]; Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95 [2011], supra). To the extent plaintiff presents a copy of an undated allonge, executed by one “Don Malabuyo,” on behalf of Wilmington, to demonstrate the note was endorsed to it without recourse, the allonge merely indicates that Malabuyo is the “Designated Signer,” which, without more, is insufficient to show Malabuyo had the requisite authority to act on behalf of Wilmington. Moreover, to the degree plaintiff offers the affidavit of Paul Laird, a vice-president of Vericrest Financial, Inc., to show the allonge was created “[c]oncurrently” with the assignment, Laird does not indicate he had personal knowledge of the date of the execution of such allonge, or of Malabuyo’s authority. The affirmation of Michael H. Cohn, Esq., counsel for plaintiff, dated June 10, 2011, indicating Brian Casey, “Assistant Vice President,” “confirmed” to Cohn the factual accuracy of the allegations set forth in … [the] supporting affirmations filed with the Court,” cannot serve to fill these gaps in evidence. The attorney’s affirmation does not make clear to which entity Casey serves as an assistant vice-president, and in any event, to the degree it relates to when the allonge was executed and the authority of Malabuyo, it constitutes hearsay, and lacks probative value. Plaintiff additionally has failed to establish that the allonge is “so firmly affixed” to the note “as to become part thereof” (UCC 3-202[2]; Slutsky v Blooming Grove Inn, 147 AD2d 208 [1989]). That branch of the motion by plaintiff to dismiss the affirmative defense asserted by defendant Platt based upon lack of standing is denied.

With respect to that branch of the motion by plaintiff to dismiss the affirmative defense asserted by defendant Platt based upon failure to comply with RPAPL 1303, the version of RPAPL 1303 in effect at the time of the commencement of the action (L 2006, c 308, § 4, effective February 1, 2007, amended L 2007, c 154, § 13, effective July 3, 2007), required that “[t]he foreclosing party in a mortgage foreclosure action, which involves residential real property consisting of owner-occupied one-to-four family dwellings” provide notice to the mortgagor, in accordance with the provisions of the section, with regard to information and assistance about the foreclosure process. The statute set forth the specific language and format of the notice, requiring that the notice be “on its own page,” be “in bold, fourteen-point type,” be “printed on colored paper that is other than the color of the summons and complaint,” and have its title be in “bold, twenty-point type.” The statute also required the notice to be “delivered” with the summons and complaint in the foreclosure action (RPAPL 1303[2]). Proper service of the notice pursuant to RPAPL 1303 is a condition precedent to the commencement of the action which is the plaintiff’s burden to meet (see First Natl. Bank of Chicago v Silver, 73 AD3d 162, 169 [2010]; see also Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 102 [2011], supra).

Plaintiff offers an affidavit of service dated June 6, 2008 of a licensed process server, which indicates, among other things, that attempts were made at effecting personal delivery of a copy of the summons and complaint, together with a notice required by RPAPL 1303, upon defendant Platt at his dwelling place at the mortgaged premises, on May 23, 2008, May 28, 2008 and June 4, 2008, at various stated times, and an unsuccessful inquiry was made of a neighbor to determine Platt’s place of employment. The affidavit also indicates that on June 4, 2008, at 2:17 P.M., the process server affixed copies of the summons and complaint, and the RPAPL 1303 notice, to the door of the premises, and in addition, mailed, on June 6, 2008, copies of the summons and complaint and the RPAPL 1303 notice to defendant Platt at his last known residence. Plaintiff, however, has failed to present a copy of the notice served with the copy of the summons and complaint. Under such circumstances, this court cannot determine whether plaintiff strictly complied with the requirements of RPAPL 1303. That branch of the motion by plaintiff to strike the affirmative defense based upon failure to comply with RPAPL 1303 is denied.

That branch of the motion by plaintiff to strike the affirmative defense based upon failure to comply with RPAPL 1304 is granted. Defendant Platt asserts that plaintiff failed to serve him with a notice pursuant to RPAPL 1304 prior to commencing the action. That statute was enacted and made effective after the institution of this action (see L 2008, c 472, §§ 2, 28 [approved August 5, 2008, eff. Sept. 1, 2008]). The Legislature made no explicit provision for retroactive application, and the court also is unaware of any case wherein the statute was retroactively applied to any date prior to the statute’s effective date. Thus, plaintiff was not obligated to comply with the requirements found in RPAPL 1304 as a condition precedent to bringing this action, and the affirmative defense based upon noncompliance with RPAPL 1304 is without merit.

With respect to that branch of the motion by plaintiff to dismiss the affirmative defense asserted by defendant Platt based upon alleged fraud, plaintiff offers a copy of the mortgage loan application submitted to Wilmington on behalf of defendant Platt, indicating Platt’s gross monthly income to be $8975.00. The application includes an acknowledgment by defendant Platt that the information provided therein was “true and correct,” as of February 23, 2003, and is executed by defendant Platt. Plaintiff also offers a copy of an appraisal dated February 2, 2007 of the subject premises, prepared by Ronald S. Faltz, of R & D Appraisals, LLC, and relied upon by Wilmington in financing the loan. The appraisal indicates the property had a fair market value of $615,000.00 as of February 2, 2007. Defendant Platt has failed to present any evidence to raise a triable issue of fact as to whether Wilmington, or plaintiff, committed fraud or conspired to commit fraud in the preparation of these documents, or to induce him to enter into the mortgage transaction. That branch of the motion by plaintiff to dismiss the affirmative defense asserted by defendant Platt based upon alleged fraud or conspiracy to commit fraud is granted.

With respect to that branch of the motion for leave to amend the caption deleting reference to the “John Doe” defendants, the only defendants named in the summons and complaint are defendants Platt and “John Doe #1” through “John Doe #10.” Plaintiff asserts it has been determined that defendants “John Doe #1” through “John Doe #10” are not necessary parties to the action. Plaintiff, however, presents two affidavits of service of a licensed process server dated June 6, 2008, indicating service of process upon defendants Platt and “Jane Doe #1-#30” pursuant to CPLR 308(4). Each affidavit indicates that the licensed process server spoke with one “Mr. Graham,” a neighbor, who allegedly stated that “the defendant/respondent lives at the aforementioned address but was unable to divulge the defendant’s/respondent’s place of employment.” It is unclear whether a “Jane Doe” has been joined by plaintiff as a party defendant and the caption should be amended to substitute “Jane Doe #1″” for “John Doe #1” (see Douglas v Kohart, 196 App Div 84 [1921]; Krotchta v Green, 121 Misc 2d 471 [1983]; see also Empire Sav. Bank v Towers Co., 54 AD2d 574 [1976]). Plaintiff notably asserts that “all of the [d]efendants have been served with the summons and verified complaint in this action as appears by the affidavits of service on file in this action” and “[n]one of the [d]efendants have appeared herein except Bruce W. Platt” (emphasis supplied). Under such circumstances, that branch of the motion for leave to amend the caption deleting reference to the “John Doe” defendants is denied without prejudice to renewal upon a proper showing that “Jane Doe” is not a necessary party defendant.

That branch of the motion by plaintiff to substitute BoNY for it, and for leave to amend the cation to reflect the substitution is denied. A question of fact exists as to whether plaintiff has standing to bring this action, and therefore, plaintiff has failed to establish prima facie that it has standing to assign the subject mortgage and note to BoNY.

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Carpenter v. Longan, 83 US 271 – Sup. Court | The note and mtg are inseparable…ASMNT of the note carries the mtg with it, while an ASMNT of the latter alone is a nullity.

Carpenter v. Longan, 83 US 271 – Sup. Court | The note and mtg are inseparable…ASMNT of the note carries the mtg with it, while an ASMNT of the latter alone is a nullity.


H/T Dawn M. Rapoport, The Rakusin Law Firm & TitleLaw

83 U.S. 271 (____)
16 Wall. 271

CARPENTER
v.
LONGAN.

Supreme Court of United States.
Messrs. J.M. Carlisle and J.D. McPherson, for the appellant; Messrs. Bartley and Casey contra.

Mr. Justice SWAYNE stated the case, and delivered the opinion of the court.

On the 5th of March, 1867, the appellee, Mahala Longan, and Jesse B. Longan, executed their promissory note to Jacob B. Carpenter, or order, for the sum of $980, payable six months after date, at the Colorado National Bank, in Denver City, with interest at the rate of three and a half per cent. per month until paid. At the same time Mahala Longan executed to Carpenter a mortgage upon certain real estate 272*272 therein described. The mortgage was conditioned for the payment of the note at maturity, according to its effect.

On the 24th of July, 1867, more than two months before the maturity of the note, Jacob B. Carpenter, for a valuable consideration, assigned the note and mortgage to B. Platte Carpenter, the appellant. The note not being paid at maturity, the appellant filed this bill against Mahala Longan, in the District Court of Jefferson County, Colorado Territory, to foreclose the mortgage.

She answered and alleged that when she executed the mortgage to Jacob B. Carpenter, she also delivered to him certain wheat and flour, which he promised to sell, and to apply the proceeds to the payment of the note; that at the maturity of the note she had tendered the amount due upon it, and had demanded the return of the note and mortgage and of the wheat and flour, all which was refused. Subsequently she filed an amended answer, in which she charged that Jacob B. Carpenter had converted the wheat and flour to his own use, and that when the appellant took the assignment of the note and mortgage, he had full knowledge of the facts touching the delivery of the wheat and flour to his assignor. Testimony was taken upon both sides. It was proved that the wheat and flour were in the hands of Miller & Williams, warehousemen, in the city of Denver, that they sold, and received payment for, a part, and that the money thus received and the residue of the wheat and flour were lost by their failure. The only question made in the case was, upon whom this loss should fall, whether upon the appellant or the appellee. The view which we have taken of the case renders it unnecessary to advert more fully to the facts relating to the subject. The District Court decreed in favor of the appellant for the full amount of the note and interest. The Supreme Court of the Territory reversed the decree, holding that the value of the wheat and flour should be deducted. The complainant thereupon removed the case to this court by appeal.

It is proved and not controverted that the note and mortgage were assigned to the appellant for a valuable consideration 273*273 before the maturity of the note. Notice of anything touching the wheat and flour is not brought home to him.

The assignment of a note underdue raises the presumption of the want of notice, and this presumption stands until it is overcome by sufficient proof. The case is a different one from what it would be if the mortgage stood alone, or the note was non-negotiable, or had been assigned after maturity. The question presented for our determination is, whether an assignee, under the circumstances of this case takes the mortgage as he takes the note, free from the objections to which it was liable in the hands of the mortgagee. We hold the affirmative.[*] The contract as regards the note was that the maker should pay it at maturity to any bonâ fide indorsee, without reference to any defences to which it might have been liable in the hands of the payee. The mortgage was conditioned to secure the fulfilment of that contract. To let in such a defence against such a holder would be a clear departure from the agreement of the mortgagor and mortgagee, to which the assignee subsequently, in good faith, became a party. If the mortgagor desired to reserve such an advantage, he should have given a non-negotiable instrument. If one of two innocent persons must suffer by a deceit, it is more consonant to reason that he who “puts trust and confidence in the deceiver should be a loser rather than a stranger.”[†]

Upon a bill of foreclosure filed by the assignee, an account must be taken to ascertain the amount due upon the instrument secured by the mortgage. Here the amount due was the face of the note and interest, and that could have been recovered in an action at law. Equity could not find that 274*274 less was due. It is a case in which equity must follow the law. A decree that the amount due shall be paid within a specified time, or that the mortgaged premises shall be sold, follows necessarily. Powell, cited supra, says: “But if the debt were on a negotiable security, as a bill of exchange collaterally secured by a mortgage, and the mortgagee, after payment of part of it by the mortgagor, actually negotiated the note for the value, the indorsee or assignee would, it seems, in all events, be entitled to have his money from the mortgagor on liquidating the account, although he had paid it before, because the indorsee or assignee has a legal right to the note and a legal remedy at law, which a court of equity ought not to take from him, but to allow him the benefit of on the account.”

A different doctrine would involve strange anomalies. The assignee might file his bill and the court dismiss it. He could then sue at law, recover judgment, and sell the mortgaged premises under execution. It is not pretended that equity would interpose against him. So, if the aid of equity were properly invoked to give effect to the lien of the judgment upon the same premises for the full amount, it could not be refused. Surely such an excrescence ought not to be permitted to disfigure any system of enlightened jurisprudence. It is the policy of the law to avoid circuity of action, and parties ought not to be driven from one forum to obtain a remedy which cannot be denied in another.

The mortgaged premises are pledged as security for the debt. In proportion as a remedy is denied the contract is violated, and the rights of the assignee are set at naught. In other words, the mortgage ceases to be security for a part or the whole of the debt, its express provisions to the contrary notwithstanding.

The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.[*]

275*275 It must be admitted that there is considerable discrepancy in the authorities upon the question under consideration.

In Baily v. Smith et al.[*] — a case marked by great ability and fulness of research — the Supreme Court of Ohio came to a conclusion different from that at which we have arrived The judgment was put chiefly upon the ground that notes, negotiable, are made so by statute, while there is no such statutory provision as to mortgages, and that hence the assignee takes the latter as he would any other chose in action, subject to all the equities which subsisted against it while in the hands of the original holder. To this view of the subject there are several answers.

The transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter. If not assignable at law, it is clearly so in equity. When the amount due on the note is ascertained in the foreclosure proceeding, equity recognizes it as conclusive, and decrees accordingly. Whether the title of the assignee is legal or equitable is immaterial. The result follows irrespective of that question. The process is only a mode of enforcing a lien.

All the authorities agree that the debt is the principal thing and the mortgage an accessory. Equity puts the principal and accessory upon a footing of equality, and gives to the assignee of the evidence of the debt the same rights in regard to both. There is no departure from any principle of law or equity in reaching this conclusion. There is no analogy between this case and one where a chose in action standing alone is sought to be enforced. The fallacy which lies in overlooking this distinction has misled many able minds, and is the source of all the confusion that exists. The mortgage can have no separate existence. When the note is paid the mortgage expires. It cannot survive for a moment the debt which the note represents. This dependent and incidental relation is the controlling consideration, and takes the case out of the rule applied to choses in action, 276*276 where no such relation of dependence exists. Accessorium non ducit, sequitur principale.

In Pierce v. Faunce,[*] the court say: “A mortgage is pro tanto a purchase, and a bonâ fide mortgagee is equally entitled to protection as the bonâ fide grantee. So the assignee of a mortgage is on the same footing with the bonâ fide mortgagee. In all cases the reliance of the purchaser is upon the record, and when that discloses an unimpeachable title he receives the protection of the law as against unknown and latent defects.”

Matthews v. Wallwyn[†] is usually much relied upon by those who maintain the infirmity of the assignee’s title. In that case the mortgage was given to secure the payment of a non-negotiable bond. The mortgagee assigned the bond and mortgage fraudulently and thereafter received large sums which should have been credited upon the debt. The assignee sought to enforce the mortgage for the full amount specified in the bond. The Lord Chancellor was at first troubled by the consideration that the mortgage deed purported to convey the legal title, and seemed inclined to think that might take the case out of the rule of liability which would be applied to the bond if standing alone. He finally came to a different conclusion, holding the mortgage to be a mere security. He said, finally: “The debt, therefore, is the principal thing; and it is obvious that if an action was brought on the bond in the name of the mortgagee, as it must be, the mortgagor shall pay no more than what is really due upon the bond; if an action of covenant was brought by the covenantee, Cthe account must be settled in that action. In this court the condition of the assignee cannot be better than it would be at law in any mode he could take to recover what was due upon the assignment.” The principle is distinctly recognized that the measure of liability upon the instrument secured is the measure of the liability chargeable upon the security. The condition of the assignee cannot be better in law than it is in equity. 277*277 So neither can it be worse. Upon this ground we place our judgment.

We think the doctrine we have laid down is sustained by reason, principle, and the greater weight of authority.

DECREE REVERSED, and the case remanded with directions to enter a decree

IN CONFORMITY WITH THIS OPINION.

[*] Powell on Mortgages, 908; 1 Hilliard on Mortgages, 572; Coot on Mortgages, 304; Reeves v. Scully, Walker’s Chancery, 248; Fisher v. Otis, 3 Chandler, 83; Martineau v. McCollum, 4 Id. 153; Bloomer v. Henderson, 8 Michigan, 395; Potts v. Blackwell, 4 Jones, 58; Cicotte v. Gagnier, 2 Michigan, 381; Pierce v. Faunce, 47 Maine, 507; Palmer v. Yates, 3 Sandford, 137; Taylor v. Page, 6 Allen, 86; Croft v. Bunster, 9 Wisconsin, 503 Cornell v. Hilchens, 11 Id. 353.

[†] Hern v. Nichols, 1 Salkeld, 289.

[*] Jackson v. Blodget, 5 Cowan, 205; Jackson v. Willard, 4 Johnson, 43.

[*] 14 Ohio State, 396.

[*] 47 Maine, 513.

[†] 4 Vesey, 126.

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HSBC Bank USA, N.A. v Sene | NYSC “without further hearings, that a FRAUD has been committed UPON this COURT” – “Two Versions of Assignment of Note”

HSBC Bank USA, N.A. v Sene | NYSC “without further hearings, that a FRAUD has been committed UPON this COURT” – “Two Versions of Assignment of Note”


Decided on February 28, 2012

Supreme Court, Kings County

 

HSBC Bank USA, N.A. as Trustee of behalf of ACE Securities Corp. Home Equity Loan Trust And for the Registered Holders of Ace Securities Corp. Home Equity Loan Trust, Series 2007-HE4, Asset Backed Pass-Through Certificates, Plaintiff,

against

Marie Sene, et al, Defendants.

18600/09

Plaintiff was represented by Alissa L. Wilson, Esq., Shapiro, DiCaro & Barak, LLC, 250 Mile Crossing Blvd., Rochester, NY 14624. Defendant was represented by Yolande I. Nicholson, PC, 26 Court St., Brooklyn, NY 11242.

Herbert Kramer, J.

The following papers have been read on this motion:

Notice of Motion/Order to Show Cause/Papers Numbered

Petition/Cross Motion and

Affidavits (Affirmations) Annexed _____________________________

Opposing Affidavits (Affirmations) _______ ______________________

Reply Affidavits (Affirmations)______________________________

_______________(Affirmation)______________________________

Other Papers______________________________

Good faith is absent when two versions of the assignment of the note are presented to the Court. Parties are required to come into the court with clean hands despite having instituted the action prior to the effective date of CPLR §3408.[FN1] [*2]

This matter was referred to this Court for a bad faith hearing under the appropriate statutory scheme. See CPLR §3408.

The instant matter illustrated the wild west mentality that was so prevalent in the early part of this past decade, which allowed for practically anyone breathing to obtain a mortgage by signing their name.[FN2] It appears that the process of securitization of mortgages led to major improprieties, this case being a prime example.

However, all of that pales in significance to what follows. During the bad faith hearing, two separate notes with attendant assignments were put into evidence by the plaintiff.

The first was in Exhibit “C.” of plaintiff’s “1.” which is the summons and complaint filed on July 23, 2009.The note itself was endorsed by Marie Sene, only. In addition, there is an allonge, dated July 15, 2009, with the “effective date” of April 30, 2007, signed by Kevin M. Jackson.[FN3]

The allonge is assigned to “HSBC Bank USA, N.A. as Trustee on behalf of Ace Securities Corp. Home Equity Loan Trust and for the Registered Holders of Ace Securities Corp., Home Equity Loan Trust, Series 2007-HE4, asset backed Pass-Through Certificates, without recourse, representation or warranty express or implied…”

The second note was introduced as Exhibit “E.” of plaintiff’s “1.” labeled as the note and assignment. That note included an endorsement from Marjorie Jorgensen, the Collateral Control Manager or ResMae Mortgage Corporation in addition to Ms. Sene’s signature. There was also a purported allonge which was not permitted into evidence. However, the existence of an allonge does not explain the apparent disparity between the two assignments. Both cannot be accurate.[FN4]

This Court emphatically now joins the judicial chorus who have been wary of the paperwork supplied by plaintiffs and their representatives. There is ample reason for Chief Judge’s requirement for an attorney affirmation in residential foreclosure cases. As stated by [*3]Chief Judge Jonathan Lippman,”we cannot allow the courts in New York State to stand idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs-such as a family home-during this period of economic crisis.”[FN5]

Furthermore, the form affidavit which is now required by Administrative Order 548/10 states that “numerous and widespread insufficiencies in foreclosure filings in various courts around the nation were reported by major mortgage lenders and other authorities…”. See also, HSBC Bank v. Taher, 932 N.Y.S2d 760 [2011].[FN6]

It is clear in this case, without further hearings, that a fraud has been committed upon this Court. Thus, the only remedy that can be utilized by this Court is to stay these proceedings and any mortgage foreclosure until this matter is cleared up to the satisfaction of this Court.

Further, in connection with this matter, the litigants were directed to submit memorandums of law on issues that arose during the hearing. Plaintiff submitted an affirmation with exhibits. Therein plaintiff attempts to establish Ocwen’s authority to sign as “attorney in fact” for ResMae corporation.

Allegedly, Ocwen’s authority arises from a limited power of attorney attached as exhibit “H.” to Plaintiff’s “1.” The power of attorney between ResMae Mortgage Corporation (the Servicer) and Ocwen, grants the “express power and authority to, for any mortgage loan transferred by the Servicer to Ocwen under that certain Pooling and Servicing Agreement between the Servicer and Deutsche Bank National Trust Company dated March 1, 2006.”

Oddly, the pooling and servicing agreement submitted as plaintiff’s Exhibit “2.” allegedly evidencing Ocwen’s power of attorney is dated April 1, 2007 and is between Ace Securities Corp., Ocwen Loan Servicing, LLC, GMAC Mortgage, LLC, Wells Fargo Bank, National Association, HSBC Bank USA, NA. These submissions fail to establish that Ocwen was granted authority as ResMae’s attorney-in-fact. Regardless, the defect in the assignments remain.

This Court is further reporting the matter to the District Attorney, Kings County, the Attorney General of the State of New York and the U.S. Attorney for the Eastern District of New York. Copies of the two notes are annexed hereto and made a part hereof.

This constitutes the decision and order of the Court.

J.S.C.

Footnotes

 

Footnote 1:The plaintiff asserts that the language of “good faith” contained in CPLR § 3408 does not apply as this action was commenced prior to the February 13, 2010 amendment. Plaintiff does not argue that the remainder of CPLR 3408 is applicable, which directs settlement conferences in residential foreclosure matters. This Court disagrees with plaintiff that its obligation to act in good faith throughout the litigation is dependent upon a statutory mandate. Honeywell International v. National Avionics Sys. Corp., 343 F.Supp.2d 272 [2004]. “A mortgagee who is invoking the aid of foreclosure action, may be required, as condition precedent to relief, to do equity.” Farmers’ & Mechanics’Sav. Bank of City of Lockport v. Eagle Bldg. Co. et al., 271 N.Y.S. 306 [1934]. This Court has purposefully cited a decision from 1934 due to the discussion found therein as to the devastating economic conditions at that time, and unfortunately finds many parallels to the current economic climate.

Footnote 2: This court was prepared to update its decision regarding reverse redlining and whether the rebuttable presumption followed with the assignment of the note and mortgage. See, M & T Mortgage v. Foy, 858 NYS2d 567 [2008]. In this Court’s view, it is unnecessary to delve into the other legal arguments when faced with the conflicting assignments.

Footnote 3:As manager for Resmae Mortgage Corporation by its attorney-in-fact Ocwen Loan Servicing, LLC

Footnote 4:It should also be noted that ResMae filed for bankruptcy protection in 2007.

Footnote 5:In regards to the issuance of Administrative Order 548/10

Footnote 6:The decision outlines the numerous and widespread irregularities specific to HSBC Bank USA, NA, the plaintiff in this case. A, NA, the plaintiff in this case.

[ipaper docId=83435780 access_key=key-29jb7yoyxz38dwntiqma height=600 width=600 /]

 

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