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STANDING: Maine, SC (Greenleaf) on 7/3/14 Followed Analysis of BONY v Deane July 2013 Kings County, NY

July 8, 2014

BONY court analyzed UCC 3 PETE (Person Entitled To Enforce) note+ Holder & Admissible Evidence to foreclose:

BANKSTER MUST PROVE 3 elements to FORECLOSE at either Default Prove-Up, MSJ or TRIAL

In sum, in the usual case, a plaintiff has "standing" to prosecute a mortgage foreclosure action where, at the time the action is commenced: (1) the plaintiff is the holder of the note (see NYUCC § 1-201 [20]); or (2) the plaintiff has possession of the note by delivery (see NYUCC § 1-201[14]), from a person entitled to enforce it, for the purpose of giving the plaintiff the right to enforce it; or (3) the plaintiff has been assigned the note, by a person entitled to enforce it, for the purpose of [*10]giving the plaintiff the right to collect the debt evidenced by the note, and the plaintiff tenders the note at the time of any judgment.

Here, Plaintiff The Bank of New York Mellon has not established prima facie with evidence in admissible form either assignment or delivery of the Note from a holder, sufficient to allow Plaintiff to enforce the Note and related Mortgage. The only "evidence" of assignment of the Note to Plaintiff are excerpts from a Pooling and Servicing Agreement consisting of a title page, a table of provisions and exhibits, and 11 pages of provisions, indicating a document of more than 76 pages. There are no signature pages, and, therefore, no authentication of the document by acknowledged signatures (see Prince, Richardson on Evidence § 9-101 [Farrell 11th Ed]; Stein v Doukas, 78 AD3d 1026, 1029 [2d Dept 2012]; NYCTL 1998-2 Trust v Santiago, 30 AD3d 572, 573 [2d Dept 2006] ["a private document offered to prove the existence of a valid contract cannot be admitted into evidence unless its authenticity and genuineness are first established"].)

Even ignoring the evidentiary threshold, the provision headed "Conveyance of Mortgage Loans to Trustee" states that "[t]he Depositor . . . sells, transfers and assigns to the Trust without recourse all its right, title and interest in and to . . . the Mortgage Loans identified in the Mortgage Loan Schedule," but no Mortgage Loan Schedule is provided, and, in any event, the "Depositor" is Structured Asset Mortgage Investments II Inc., which is not shown to have had any power or authority to transfer the subject Note.

The Agreement of Resolution and Assumption between JP Morgan Chase Bank, National Association and The Bank of New York provides that JP Morgan as Resigning Trustee "assigns, transfers, delivers and confirms to [The Bank of New York as] Successor Trustee all right, title and interest in and to each of the Agreements" listed on a Scheduled A and "all rights, powers and trusts of the Resigning Trustee, as trustee or otherwise, under each of the Agreements," but nowhere on Schedule A is the subject Note or Mortgage listed, nor is there any showing that any listed Agreement transferred the Note from JP Morgan to Plaintiff. (Also, only one of the two signatures to the Agreement of Resignation and Assumption is acknowledged.)

The affidavit of Angela Frye states that, "[t]o memorialize the transfer of the mortgage loan to Plaintiff, as successor trustee, a written assignment . . . was subsequently executed on or about June 17, 2009", but, as stated above, the Assignment of Mortgage to Plaintiff by MERS, even if effective, says nothing about the Note, and a transfer of a mortgage does not carry the underlying note (see Bank of New York v Silverberg, 86 AD3d at 280.)

As to delivery and possession, the affidavit of Angela Frye states that "Wells Fargo's regularly maintained records . . . reflect that both the Mortgage and Note were physically delivered to Wells Fargo . . . prior to commencement of this action . . . [and] further reflect that Wells Fargo . . . was in physical possession of the Note and Mortgage at the time this action was commenced," but also states that "Plaintiff is in possession of the Promissory Note, . . . duly indorsed to JP Morgan Chase Bank, NA as Trustee" There are no details as to the delivery to Wells Fargo, and, if there was a subsequent delivery to Plaintiff, which would explain the apparent inconsistency, it [*11]is not described.

Moreover, the affiant, Angela Frye, does not assert any personal knowledge of delivery to, or possession by, either Wells Fargo or Plaintiff. She does not attach or describe any of Wells Fargo's "regularly maintained records" on which she relies, nor render them admissible as evidence. (See JP Morgan Chase, N.A. v RADS Group, Inc., 88 AD3d 766, 767 [2d Dept 2011]; HSBC Bank USA, N.A. v Betts, 67 AD3d 735, 736 [2d Dept 2009]; Unifund CCR Partners v Youngman, 89 AD3d 1377, 1377-78 [4th Dept 2011]; Reiss v Roadhouse Rest., 70 AD3d 1021, 1024 [2d Dept 2010]; Lodato v Greyhawk North America, LLC, 39 AD3d 494, 495 [2d Dept 2007]; Whitfield v City of New York, 16 Misc 3d 1115, [A], 2007 NY Slip Op 51433 [U] [Sup Ct, Kings County 2007]; aff'd 48 AD3d 798 [2d Dept 2008].) She does not state that the "regularly maintained records" show delivery of the Note by JP Morgan Chase Bank (or anyone else), and, as noted above, there is no evidence that JP Morgan Chase Bank ever had possession of the Note.

Although Plaintiff's failure to establish prima facie that it is entitled to enforce the Note and Mortgage is enough to require denial of its motion for summary judgment against the Deane Defendants (see Aurora Loan Serv., LLC v Weisblum, 85 AD3d at 108-10), denial of summary judgment is warranted on other grounds. The evidentiary deficiencies in the affidavit of Angela Frye, noted above with respect to delivery and possession of the Note, infect as well other elements of Plaintiff's claim, including default, acceleration of the loan, and the amount due.

Section 22 of the Mortgage states that "Lender may require Immediate Payment in Full . . . only if all [specified] conditions are met," including that "Lender sends . . . a notice" that complies with the Section. Giving the requisite notice of default is a condition precedent to acceleration, which is a requirement for seeking the equitable remedy of foreclosure. (See HSBC Mtge. Corp. [USA] v Gerber, 100 AD3d 966, 966-67 [2d Dept 2012]; Wells Fargo Bank, N.A. v Burke, 94 AD3d 980, 982-84 [2d Dept 2012]; G.E. Capital Mortg. Servs. v Mittleman, 238 AD2d 471, 471 [2d Dept 1997]; Moet, II, Inc. v McCarthy, 229 AD2d 876, 877 [3d Dept 1996];

Citimortgage, Inc. v Villatoro-Guzman, 2009 NY SlipOp 30983 [U], * 4 [Sup Ct, Suffolk County 2009]; Weitzel v Northern Golf, Inc., 18 Misc 3d 1134 [A], 2008 NY Slip Op 50305 [U], * 4- * 6 [Sup Ct, Livingston County 2008]; QMB Holdings, LLC v Escava Brothers, 11 Misc 3d 1060 [A], 2006 NY Slip Op 50322 [U], * 3 [Sup Ct, Bronx County 2006]; Manufacturers & Traders Trust Co. v Korngold, 162 Misc 2d 669 [Sup Ct, Rockland County 1994].)
Plaintiff submits no proof of service of the December 21, 2008 notice of default. (See HSBC Mtge. Corp. [USA] v Gerber, 100 AD3d at 967; Norwest Bank Minnesota, N.A. v Sabloff, 297 AD2d 722, 723 [2d Dept 2002]; see also Nocella v Fort Dearborn Life Ins. Co. of NY, 99 AD3d 877, 878 [2d Dept 2012]; Lenchner v Chasin, 57 AD3d 623, 624 [2d Dept 2008]; Dune Deck Owners Corp. v JJ & P Assoc. Corp., 34 AD3d 523, 524 [2d Dept 2006]; Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2d Dept 2001].) Further, the December 21, 2008 notice of default was given by an entity that is not the "Lender," nor shown to have been identified to the mortgagors as authorized to act for the Lender. (See EMC Mtge. Corp. v Suarez, 49 AD3d 592, 593 [2d Dept 2008]; see also QMB Holdings, LLC v Escave [*12]Brothers, 2006 NY Slip Op 50322 [U], at * 3; Manufacturers and Traders Trust Co. v Korngold, 162 Misc 2d 669.)

To the extent that Plaintiff's motion seeks judgment by default against Defendants other than the Deane Defendants, as stated above Plaintiff is not required to show its "standing." The other noted deficiencies in Plaintiff's showing as against the Deane Defendants, however, preclude a finding that it has shown "proof of the facts constituting the claim" (see CPLR 3215 [f]) as against the other Defendants to the extent that Plaintiff's claims against those Defendants depend upon foreclosure of the Mortgage. Indeed, Plaintiff makes no showing at all as against any of the other Defendants.

As to "proof of the facts constituting the . . . default" (see id.), therespective affidavits of service fail to show proper service on defendant Mortgage Electronic Registration Systems, Inc. pursuant to CPLR 311 (a) (1), or upon defendants New York City Environmental Control Board or New York City Transit Adjudication Bureau pursuant to CPLR 311 (a) (2). Service upon defendant New York Merchants Protective Co., Inc. by service upon the Secretary of State pursuant to CPLR 311 (a) (1) and Business Corporation Law § 306 would be appropriate if Defendant is a corporation, but no evidence is submitted that it is, and, in any event, there is no service of the additional service required by CPLR 3215 (g).

Plaintiff also submits an affidavit of service upon Lynn Deane as "John Doe" by delivery to defendant "Carl Deane (Husband)," but the affidavit does not show the required mailing in accordance with CPLR 308 (2). In any event, the non-military affidavit, included as part of the affidavit of service, is premature. (See Emigrant Mtge. Corp. Inc. v Daniels, 2010 NY Slip Op 32720 [U], * 4- * 5 [Sup Ct, NY County 2010]; DLJ Mortgage Capital, Inc. v Lawrence, 2009 NY Slip Op 30554 [U], * 6 [Sup Ct, Nassau County 2009]; Sunset 3 Realty v Booth, 12 Misc 3d 1184 [A], 2006 NY Slip Op 51441 [U], * 3 [Sup Ct, Suffolk County 2006] [Sgroi, J.]; U.S. Bank NA v Coaxum, 2003 NY Slip Op 51384 [U], * 2- * 3 [Sup Ct, Westchester County 2003].)

The Court notes that, although no Defendant opposed Plaintiff's motion, Plaintiff is not relieved of its burden of making a sufficient showing for summary judgment(see Yonkers Ave. Dodge, Inc. v BZ Results, LLC, 95 AD3d 774, 774-75 [1st Dept 2003] ["an unopposed summary judgment motion will be denied upon a movant's failure to establish prima facie entitlement to summary judgment or when the evidence creates a question of fact"]; or for judgment by default (see Superior Dental Care, P.C. v Hoffman, 81 AD3d 632, 634 [2d Dept 2011] ["There is no mandatory ministerial duty to enter a default judgment against a defaulting party"] [internal quotation marks and citation omitted].)

Finally, Plaintiff moves to amend the caption (and, presumably to amend the Complaint to conform) in two respects: to substitute for the name of the plaintiff "The Bank of New York Mellon f/k/a The Bank of New York, as Trustee for Structured Asset Mortgage Investments II Inc. Bear Sterns ALT-A Trust, Mortgage Pass-Through Certificates Series 2005-7"; and to substitute "Lynn [*13]Deane" for defendant "John Doe." As to the latter, counsel offers no explanation in either her affirmation or the memorandum of law, and the Court will not speculate.

As to the identification of Plaintiff, counsel explains that The Bank of New York Mellon "is the proper plaintiff in its capacity as Trustee for the Trust, which . . . is the holder of the Deanes' loan" (see Plaintiff's Memorandum at 15.) But the affidavit of Angela Frye states, "Wells Fargo, as custodian for and on behalf of the Trust, is the current holder of the Mortgage loan, pursuant to the PSA". Since a person cannot be a "holder" of a negotiable instrument without possession, both statements cannot be literally accurate. It may be that Plaintiff does not use "holder" as it is understood in the law of negotiable instruments, but the term and concept "holder" is too important to "standing" and a plaintiff's ability to maintain this action for there to be risk of further confusion.

Plaintiff's motion is denied, with leave to renew with papers that cure, or otherwise resolve, the deficiencies noted above.

Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager


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