The Jakobovitz Rule: Affixing Undated Allonges to a Copy of a Lost Note Does Not Confer Standing in New York Foreclosure Actions

1. Introduction

1900 Capital Trust II v. Jakobovitz (2025 NY Slip Op 03848) marks a pivotal development in New York foreclosure jurisprudence. The Appellate Division, Third Department, squarely addressed whether a foreclosing plaintiff can establish standing to enforce a lost note merely by attaching undated, specially-indorsed allonges to a photocopy of that note. Confronting a procedural history that involved a prior, failed foreclosure and conflicting documentary proof, the court articulated a new, bright-line limitation: possession of a copy of a lost note with later-affixed indorsements is insufficient, as a matter of law, to confer standing at the time the action is commenced.

The parties were:

• Plaintiff–Respondent: 1900 Capital Trust II, by U.S. Bank Trust N.A., as Trustee (“1900 Capital”).
• Defendant–Appellant: Yisroel Jakobovitz, the mortgagor.

The central issues were (i) whether 1900 Capital established standing under UCC 3-804 to enforce a lost promissory note, and (ii) whether Supreme Court properly granted summary judgment in its favor.

2. Summary of the Judgment

Reversing Supreme Court’s grant of summary judgment, the Third Department held that 1900 Capital failed to prove, as a matter of law, that it owned the lost note when the foreclosure action was started. Crucially, the court ruled that:

• Undated allonges purportedly indorsing the note from Bank of America to Wilmington and then to 1900 Capital, when affixed only to a copy of the lost note, are not sufficient evidence of a valid negotiation under UCC 3-202.
• Discrepancies between those allonges and earlier trial testimony created triable issues of fact that barred summary judgment.
• The later “Corrective Assignment of Mortgage” could not retroactively confer standing because it post-dated commencement of the action.

Accordingly, the order granting summary judgment and an order of reference was modified to deny 1900 Capital’s motion, with costs awarded to Jakobovitz.

3. Analysis

3.1 Precedents Cited

• Wilmington Sav. Fund Socy. v. LaFrate, 215 AD3d 1023 (3d Dept 2023) – Reiterates that a plaintiff must show the mortgage, unpaid note, and default to obtain summary judgment.
• U.S. Bank N.A. v. Sansone, 230 AD3d 1183 (2d Dept 2024) – Clarifies proof required under UCC 3-804 to enforce a lost instrument; the court adopted its “who-what-when-how” framework for lost note searches.
• Deutsche Bank Natl. Trust Co. v. Anderson, 161 AD3d 1043 (2d Dept 2018) – Holds that litigants must prove ownership, reason for loss, and note terms under UCC 3-804.
• Bank of N.Y. Mellon v. Hardt, 173 AD3d 1125 (2d Dept 2019) – Allowed standing where the note was negotiated before it was lost; the Third Department distinguished and limited this case.
• Nationstar Mtge. LLC v. Goeke, 151 AD3d 1237 (3d Dept 2017) – Stresses that on summary judgment the evidence must be viewed in the light most favorable to the non-movant.

By synthesizing these authorities, the court confirmed that when a note is already lost prior to any negotiation, the transferee must rely on written assignment and full compliance with UCC 3-804; “possession” cannot be conjured by paperwork attached to a photocopy.

3.2 Legal Reasoning

1. Standing Burden. Because Jakobovitz pleaded lack of standing, 1900 Capital bore the burden of establishing it was either (i) the holder of the note, or (ii) a proper assignee under written transfer.
2. Holder Theory Rejected. Holder status requires possession of the original, indorsed instrument. The note was admittedly lost while still with Bank of America; thus 1900 Capital could not be a “holder.”
3. Assignee Theory Tested under UCC 3-804. To recover on a lost note, the plaintiff had to:
   • Prove ownership;
   • Explain the loss with due diligence;
   • Prove the note’s terms.
   The affidavit, trial testimony, and business records met the loss and terms prongs, but ownership remained deficient.
4. Ineffective Allonges. UCC 3-202(2) requires an indorsement to be “on the instrument” or on a paper “so firmly affixed thereto as to become a part thereof.” The court reasoned that attaching undated indorsements to a copy of a previously lost note is not a negotiation recognized by the Code. Possession cannot be “transferred” once the original is missing, absent a written assignment specifically of the note.
5. Documentary Conflict & Fact Issues. Wilmington’s witnesses in the prior (failed) action never found an allonge from Bank of America, contradicting 1900 Capital’s new affidavit. That credibility gap mandated denial of summary judgment.
6. Timing of Corrective Assignment. Execution after commencement cannot retroactively satisfy standing, following the temporal rule in U.S. Bank N.A. v. Onuoha, 216 AD3d 1069 (2d Dept 2023).

3.3 Potential Impact

The “Jakobovitz Rule” significantly tightens the evidentiary path for mortgagees relying on lost-note affidavits:

• Allonge Scrutiny. Courts will inspect the physical nexus between indorsement and the original instrument. Photocopy allonges are no longer presumed valid transfers.
• Transaction Chains. Each transfer must be supported by contemporaneous, dated documentation. “Corrective” assignments executed after suit begins likely will not cure standing defects.
• Litigation Strategy. Plaintiffs may be forced to plead alternative contract or equitable assignments, or obtain lost-note indemnity bonds, rather than rush to summary judgment.
• Secondary Market Caution. Purchasers of distressed mortgage assets must verify that original notes exist or that written, dated assignments of the note accompany any lost-note affidavit.

4. Complex Concepts Simplified

• Note: The borrower’s promise to repay – the core evidence of the debt.
• Mortgage: The lien on real property securing payment of the note.
• Holder: A party in physical possession of a negotiable instrument that is properly indorsed to it.
• Allonge: A separate sheet of paper physically attached to a negotiable instrument to provide additional indorsements when the original document lacks space.
• UCC 3-804 (Lost Instrument Provision): Allows enforcement of a note that has been lost, destroyed, or stolen, provided the claimant proves (a) ownership, (b) reason for non-production, and (c) the instrument’s terms.
• Assignment vs. Negotiation: Negotiation transfers both ownership and the right to enforce by delivery and indorsement of the instrument; assignment transfers whatever rights the assignor had but must be in writing if the instrument is lost.
• Standing: The legal capacity to bring a lawsuit; in foreclosure, the plaintiff must show it can enforce the debt instrument.

5. Conclusion

1900 Capital Trust II v. Jakobovitz crystallizes an exacting standard for proving standing on lost-note foreclosures in New York. By refusing to equate possession of a photocopy—with belatedly appended allonges—to possession of the original, the Third Department underscores both the sanctity of negotiable instrument formalities and the evidentiary rigor demanded of large-scale mortgage assignees. Foreclosing plaintiffs must now ensure that each link—negotiation or written assignment—was forged before they file suit, and that lost-note affidavits are supported by unimpeachable documentation. The decision will likely reduce summary judgments premised on questionable paper trails, encourage more thorough pre-litigation due diligence, and offer mortgagors an additional defense where custody of the original note is murky. In the broader context, Jakobovitz rebalances the equities in foreclosure litigation, reaffirming that expediency cannot supplant statutory requirements designed to protect both borrowers and the integrity of commercial paper markets.