U.S. BANK v. COLLYMORE

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Docket Number

No. 2008-07847.

Attorney(S)

Hiscock Barclay, LLP, Buffalo, N.Y. (Charles C. Martorana and Tara N. Kamble of counsel), and Zeichner Ellman Krause, LLP, New York, N.Y. (Jantra Van Roy of counsel), for appellant (one brief filed). Arnold E. DiJoseph, P.C., New York, N.Y., for respondent.

Judges

Peter B. Skelos
Randall T. Eng
John M. Leventhal
Cheryl E. Chambers

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Smart Summary

Factual and Procedural Background

In 2005, defendant Adrian Collymore executed a note borrowing $569,500 from New Century Mortgage Corporation, secured by a mortgage on his Brooklyn property. In July 2006, New Century assigned the mortgage to Mortgage Electronic Registration Systems, Inc. (MERS), which subsequently assigned it to U.S. Bank, N.A. (the Bank) in December 2007. The Bank commenced a foreclosure action on January 15, 2008, alleging default as of August 1, 2007. The defendant answered, asserting lack of standing as an affirmative defense. The Bank moved for summary judgment and to appoint a referee to compute sums due, while the defendant cross-moved to dismiss, also alleging the Bank lacked standing. The Supreme Court denied both motions, and the Bank appealed the denial of its summary judgment and referee appointment motions.

Legal Issues Presented

Whether the Bank demonstrated its standing as the lawful holder or assignee of the mortgage and underlying note at the commencement of the foreclosure action.
Whether the Bank was entitled to summary judgment and appointment of a referee to compute sums due under the note and mortgage.

Arguments of the Parties

Appellant's Arguments

The Bank contended it was the holder of the note and mortgage and thus had standing to commence the foreclosure action.
It argued it was entitled to summary judgment and appointment of a referee to calculate sums due.

Respondent's Arguments

The defendant asserted that the Bank lacked standing to bring the foreclosure action.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242	Plaintiff must prove standing when challenged by defendant.	Supported the principle that the Bank must prove standing to be entitled to relief.
TPZ Corp. v Dabbs, 25 AD3d 787, 789	Standing requires holding or assignment of both mortgage and note at commencement.	Confirmed that the Bank failed to establish standing, justifying denial of summary judgment.
Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769	Standing must be demonstrated to proceed.	Reinforced the requirement that the Bank prove standing.
Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674	Standing requires holding or assignment of both note and mortgage.	Used to explain the necessity of proper assignment of both instruments.
Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547	Standing depends on holding both note and mortgage.	Supported the court's analysis of standing requirements.
First Trust Natl. Assn. v Meisels, 234 AD2d 414	Standing requires possession or assignment of note and mortgage.	Further confirmed the standing standard.
Merritt v Bartholick, 36 NY 44, 45 (1867)	Assignment of mortgage without note assignment is null.	Applied to reject the Bank's assignment of mortgage without note.
Kluge v Fugazy, 145 AD2d 537, 538	Mortgage assignment without note assignment is ineffective.	Supported the principle that the Bank's mortgage assignment alone was insufficient.
Weaver Hardware Co. v Solomovitz, 235 NY 321	Note delivery or assignment transfers mortgage as inseparable incident.	Explained that physical delivery or assignment of the note is required for standing.
Payne v Wilson, 74 NY 348, 354-355 (1878)	Note delivery or assignment transfers mortgage.	Reinforced the inseparability of note and mortgage transfer.
LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912	Mortgage passes with the debt as an inseparable incident.	Supported the legal framework for standing.
Flyer v Sullivan, 284 App Div 697, 699	Mortgage passes with the note.	Used to clarify transfer principles.
Slutsky v Blooming Grove Inn, 147 AD2d 208, 212	Insufficient evidence of note assignment defeats standing.	Applied to find the Bank's evidence insufficient.

Court's Reasoning and Analysis

The court analyzed the Bank's evidentiary submissions concerning standing and found them insufficient to establish that the Bank was the lawful holder or assignee of the note at the time the foreclosure action commenced. The Bank failed to prove that MERS had effectively assigned the note before the action was filed, and the assignment of the mortgage alone was deemed a nullity without the note assignment. The Bank also did not establish physical delivery of the note prior to commencement. Conflicting affidavits and differing versions of the note further created factual disputes. Consequently, an issue of fact existed regarding standing, precluding summary judgment and appointment of a referee.

Holding and Implications

The court affirmed the order denying those branches of the Bank's motion for summary judgment and to appoint a referee.

This decision directly affects the parties by requiring the Bank to provide sufficient proof of standing before proceeding with foreclosure. No new precedent was established; the ruling adheres to existing standing principles in mortgage foreclosure actions.

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U.S. BANK, N.A., Appellant, v. ADRIAN COLLYMORE, Respondent, et al., Defendants.

Ordered that the order is affirmed insofar as appealed from, with costs.

In 2005 the defendant Adrian Collymore (hereinafter the defendant) executed a note to borrow the sum of $569,500 from the New Century Mortgage Corporation (hereinafter New Century). The note was secured by a mortgage on the defendant's property located in Brooklyn. In July 2006 New Century assigned the mortgage to Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), and MERS subsequently assigned the mortgage to U.S. Bank, N.A. (hereinafter the Bank) in December 2007.

On January 15, 2008 the Bank commenced this foreclosure action alleging that it was the holder of the note and mortgage, and that the defendant had defaulted upon his payment obligations as of August 1, 2007. In his verified answer, the defendant alleged lack of standing as an affirmative defense. The Bank thereafter moved, inter alia, for summary judgment and to appoint a referee to compute the sums due and owing under the note and mortgage, and the defendant cross-moved to dismiss the complaint, alleging, inter alia, that the Bank lacked standing to commence this action. In the order appealed from, the Supreme Court denied the motion and cross motion, and the Bank appeals from so much of the order as denied those branches of its motion which were for summary judgment and to appoint a referee to compute the sums due and owing under the subject note and mortgage.

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 Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242; TPZ Corp. v Dabbs, 25 AD3d 787, 789; see also Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769). 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; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547; First Trust Natl. Assn. v Meisels, 234 AD2d 414). 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 ( see Merritt v Bartholick, 36 NY 44, 45 [1867]; Kluge v Fugazy, 145 AD2d 537, 538). 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, and the mortgage passes with the debt as an inseparable incident ( see Weaver Hardware Co. v Solomovitz, 235 NY 321; Payne v Wilson, 74 NY 348, 354-355 [1878]; LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d at 674; Flyer v Sullivan, 284 App Div 697, 699).

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. The Bank's evidentiary submissions were insufficient to establish that MERS effectively assigned the subject note to it prior to the commencement of this action ( see Slutsky v Blooming Grove Inn, 147 AD2d 208, 212), and the mere assignment of the mortgage without an effective assignment of the underlying note is a nullity ( see Merritt v Bartholick, 36 NY at 45; Kluge v Fugazy, 145 AD2d at 538). Furthermore, the Bank failed to establish that the note was physically delivered to it prior to the commencement of the action. The affidavit of a vice-president of the Bank submitted in support of summary judgment did not indicate when the note was physically delivered to the Bank, and the version of the note attached to the vice-president's affidavit contained an undated indorsement in blank by the original lender. Furthermore, the Bank's reply submissions included a different version of the note and an affidavit from a director of the Residential Funding Corporation which contradicted the affidavit of the Bank's vice-president in tracing the history of transfers of the mortgage and note to the Bank. In view of the Bank's incomplete and conflicting evidentiary submissions, an issue of fact remains as to whether it had standing to commence this action. Accordingly, those branches of the Bank's motion which were for summary judgment and to appoint a referee to compute the sums due and owing under the note and mortgage were properly denied ( see TPZ Corp. v Dabbs, 25 AD3d 787, 789).