Bank of New York Mellon, Successor in Interest to JPMorgan Chase Bank, N.A., as Trustee for the Registered Holder of First Franklin Mortgage Loan Trust 2005-FF1 Mortgage Pass-Through Certificates, Series 2005-FF1, Respondent, v. Traci Gales et al., Appellants, et al., Defendants

New York Supreme Court, Appellate Division2014-04-09

116 A.D.3d 723982 N.Y.S.2d 911

Summary · law.co

Holding. The appellate court reversed the trial court's grant of summary judgment to the lender because the lender failed to prove it held both the mortgage and note at the time the action commenced, which is necessary to establish standing in a foreclosure action. The order was modified by denying the lender's summary judgment motion and affirmed in all other respects.

In a mortgage foreclosure action, the defendants appealed from a trial court decision granting the lender's motion for summary judgment. The appellate court found that the lender failed to establish the legal right to bring the foreclosure action because it did not present sufficient evidence showing it held both the mortgage and the underlying promissory note at the time the action commenced. Under applicable law, a mortgage lender must demonstrate possession of either a written assignment of the note or physical delivery of the note itself before initiating foreclosure proceedings; a mortgage assignment alone is insufficient without the note.

The appellate court modified the trial court's order by denying the lender's summary judgment motion while upholding the denial of the defendants' cross motion to dismiss. The court reasoned that the defendants lacked standing to challenge the lender's compliance with a pooling and servicing agreement, which was a separate contractual matter between the lender and other parties. The case was remanded for further proceedings.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a mortgage lender has standing to commence a foreclosure action without proving ownership of both the mortgage and underlying note
Whether written assignment or physical delivery of the promissory note prior to commencing foreclosure is required
Whether a mortgage assignment alone, without the note, is sufficient to confer foreclosure rights

Procedural posture

The defendants appealed from a Supreme Court order granting the lender's motion for summary judgment and denying the defendants' cross motion to dismiss in a mortgage foreclosure action.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

In an action to foreclose a mortgage, the defendants Traci Gales and Germaine Gales appeal from an order of the Supreme Court, Rockland County (Kelly, J.), entered May 4, 2012, which granted the plaintiff’s motion for summary judgment on the complaint insofar as asserted against them and denied their cross motion to dismiss the complaint for failure to state a cause of action and lack of standing.

Ordered that the order is modified, on the law, by deleting the provision thereof granting the plaintiffs motion for summary judgment on the complaint insofar as asserted against the defendants Traci Gales and Germaine Gales, and substituting therefor a provision denying the plaintiffs motion; as so modified, the order is affirmed, without costs or disbursements.

Contrary to the Supreme Court’s determination, the plaintiff failed to demonstrate its prima facie entitlement to judgment as a matter of law, as it did not submit sufficient evidence to demonstrate that it had standing to commence this action. Where, as here, standing is put into issue by the defendant, the plaintiff must prove its standing in order to be entitled to relief (see U.S. Bank, N.A. v Collymore, 68 AD3d 752, 753 [2009]; Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242 [2007]). In a mortgage foreclosure action, “[a] plaintiff has standing where it is the holder or assignee of both the subject mortgage and of the underlying note at the time the action is commenced” (HSBC Bank USA v Hernandez, 92 AD3d 843, 843 [2012]; see U.S. Bank, N.A. v Collymore, 68 AD3d at 753; Countrywide Home Loans, Inc. v Gress, 68 AD3d 709, 709 [2009]). “ ‘Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation’ ” (HSBC Bank USA v Hernandez, 92 AD3d at 844, quoting US. Bank, N.A. v Collymore, 68 AD3d at 754; see Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 108 [2011]). “Where a mortgage is represented by a bond or other instrument, an assignment of the mortgage without assignment of the underlying note or bond is a nullity” (U.S. Bank, N.A. v Collymore, 68 AD3d at 754; see Merritt v Bartholick, 36 NY 44, 45 [1867]; Kluge v Fugazy, 145 AD2d 537, 538 [1988]).

Here, the evidence submitted by the plaintiff in support of its motion did not demonstrate that the note was physically delivered to it prior to the commencement of the action, and the plaintiff similarly failed to submit a written assignment of the note. Accordingly, the plaintiff failed to establish its entitlement to judgment as a matter of law, and the Supreme Court should have denied its motion for summary judgment.

Contrary to the appellants’ contentions, the Supreme Court properly denied their cross motion to dismiss the complaint, as they did not have standing to assert noncompliance with the subject lender’s pooling service agreement (see Rajamin v Deutsche Bank Natl. Trust Co., — F Supp 2d —, 2013 WL 1285160, 2013 US Dist LEXIS 45031 [SD NY 2013]).

The appellants’ remaining contention is without merit. Dillon, J.E, Chambers, Austin and Duffy, JJ., concur.