U.S. Bank Nat'l Ass'n v. Dellarmo

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Docket Number

Attorney(S)

Schloss & Schloss, Airmont, N.Y. (Jonathan B. Schloss of counsel), for appellant. Locke Lord, LLP, New York, N.Y. (R. James DeRose III of counsel), for respondent.

Judges

Peter B. Skelos

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Smart Summary

Factual and Procedural Background

This case arises from a mortgage foreclosure action commenced by U.S. Bank National Association against defendant Joseph Dellarmo, also known as Joseph Dell'Armo. The plaintiff alleged it held the mortgage by assignment dated April 11, 2006, which was recorded with the Rockland County Clerk. Dellarmo failed to respond initially, resulting in a default judgment against him. He subsequently moved to enjoin the foreclosure and vacate the default judgment on the basis that the plaintiff lacked standing. While this motion was pending, a “Corrective Assignment of Mortgage” dated July 28, 2009, was recorded, purportedly correcting the lost original assignment. The Supreme Court initially found the plaintiff had standing based on the original April 11, 2006 assignment and denied Dellarmo’s motion to dismiss for lack of standing. Dellarmo appealed that denial.

Legal Issues Presented

Whether the plaintiff had standing to commence the mortgage foreclosure action, specifically whether it was the holder or assignee of both the mortgage and the underlying promissory note at the time the action was commenced.
Whether the failure to accompany an out-of-state notarized corrective assignment with a CPLR 2309(c) certification was a fatal defect affecting the validity of the assignment and thus the plaintiff’s standing.

Arguments of the Parties

Appellant's Arguments

The corrective assignment was invalid because it was notarized outside New York without the required CPLR 2309(c) certification.
Even if the corrective assignment were valid, the plaintiff lacked standing because it was not the holder in due course of both the mortgage and the note at the commencement of the action.

Respondent's Arguments

The failure to include the CPLR 2309(c) certification with the corrective assignment was not a fatal defect and could be cured nunc pro tunc.
The plaintiff had standing based on the April 11, 2006 assignment as alleged in the complaint, which was described as recorded.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Betz v. Daniel Conti, Inc., 69 A.D.3d 545, 892 N.Y.S.2d 477	Certification under CPLR 2309(c) for out-of-state notarizations may be provided nunc pro tunc.	Supported the conclusion that failure to include CPLR 2309(c) certification was not fatal and could be cured.
Matapos Tech. Ltd. v. Compania Andina de Comercio Ltda, 68 A.D.3d 672, 891 N.Y.S.2d 394	Same as Betz regarding CPLR 2309(c) certification.	Reinforced the court's view on curing certification defects.
Smith v. Allstate Ins. Co., 38 A.D.3d 522, 832 N.Y.S.2d 587	Same as Betz regarding CPLR 2309(c) certification.	Further supported the non-fatal nature of certification omission.
Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532	Standing in foreclosure requires plaintiff to hold both mortgage and note at commencement; assignment of note effectuates assignment of mortgage but not vice versa.	Applied to determine plaintiff lacked standing because it did not hold the note at commencement despite holding the mortgage.
Countrywide Home Loans, Inc. v. Gress, 68 A.D.3d 709, 888 N.Y.S.2d 914	Standing requires possession of both mortgage and note; corrective assignments cannot be given retroactive effect without physical delivery of note.	Used to reject plaintiff’s reliance on the corrective assignment to establish retroactive standing.
CitiMortgage, Inc. v. Rosenthal, 88 A.D.3d 759, 931 N.Y.S.2d 638	When standing is challenged, plaintiff must prove it.	Supported the requirement that plaintiff prove standing when defendant raises the issue.
U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 890 N.Y.S.2d 578	Standing requires possession of both mortgage and note; assignment of note effectuates assignment of mortgage.	Reinforced the principle that assignment of mortgage alone is insufficient for standing.
Mortgage Elec. Registration Sys., Inc. v. Coakley, 41 A.D.3d 674, 838 N.Y.S.2d 622	Assignment of note effectuates assignment of mortgage; physical delivery of note may establish standing even if assignment is unrecorded.	Referenced in assessing whether plaintiff had physical delivery of note before commencement.
Deutsche Bank Natl. Trust Co. v. Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630	Assignment of mortgage without the underlying debt is a nullity and conveys no interest.	Applied to conclude plaintiff’s assignment of only the mortgage was insufficient for standing.
LaSalle Bank Natl. Assn. v. Ahearn, 59 A.D.3d 911, 875 N.Y.S.2d 595	Corrective assignment cannot be given retroactive effect without physical delivery of note.	Supported rejection of plaintiff’s claim that corrective assignment established standing as of commencement date.

Court's Reasoning and Analysis

The court analyzed the validity of the plaintiff’s standing to bring the foreclosure action by examining whether the plaintiff was the holder of both the mortgage and the underlying promissory note at the time the action was commenced. The plaintiff initially relied on an assignment dated April 11, 2006, alleged to have been recorded, but the court found this assertion incorrect. The “Corrective Assignment” recorded in 2009 was intended to replace the lost original assignment but was notarized out-of-state without the required CPLR 2309(c) certification. The court held that this failure was not fatal because such certification can be supplied nunc pro tunc.

However, the critical issue was whether the plaintiff held the note as well as the mortgage at the commencement of the action. The court reiterated that standing requires possession of both, and that an assignment of only the mortgage without the note is a nullity. Since the complaint did not allege physical delivery of the note to the plaintiff before the action began, and no evidence was presented to support such delivery, the corrective assignment could not be given retroactive effect to establish standing at commencement. The court also noted the lower court’s reliance on the incorrect assertion of the recorded April 2006 assignment, without considering the corrective assignment.

Accordingly, the court concluded that the plaintiff failed to demonstrate standing and that the defendant’s motion to dismiss should have been granted.

Holding and Implications

The court REVERSED the Supreme Court’s order and GRANTED the motion of defendant Joseph Dellarmo to dismiss the complaint insofar as asserted against him for lack of standing.

The direct effect of this decision is the dismissal of the foreclosure complaint against Dellarmo due to the plaintiff's failure to establish standing at the commencement of the action. The court did not establish new precedent but applied established principles concerning standing in mortgage foreclosure actions, particularly the requirement that the plaintiff hold both the mortgage and the underlying note. The ruling underscores the necessity of proper assignment and possession of both instruments to maintain standing in foreclosure proceedings.

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U.S. BANK NATIONAL ASSOCIATION, etc., respondent, v. Joseph DELLARMO, also known as Joseph Dell'Armo, appellant, et al., defendants.

PETER B. SKELOS

Schloss & Schloss, Airmont, N.Y. (Jonathan B. Schloss of counsel), for appellant. Locke Lord, LLP, New York, N.Y. (R. James DeRose III of counsel), for respondent.

PETER B. SKELOS, J.P., L. PRISCILLA HALL, LEONARD B. AUSTIN, and ROBERT J. MILLER, JJ.

In an action to foreclose a mortgage, the defendant Joseph Dellarmo, also known as, Joseph Dell'Armo, appeals from an order of the Supreme Court, Rockland County (Weiner, J.), entered October 5, 2010, which denied his motion pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against him for lack of standing.

ORDERED that the order is reversed, on the law, with costs, and the motion of the defendant Joseph Dellarmo, also known as Joseph Dell'Armo, to dismiss the complaint insofar as asserted against him is granted.

In commencing this action on April 25, 2006, to foreclose a mortgage entered into by the defendant Joseph Dellarmo, also known as Joseph Dell'Armo (hereinafter Dellarmo), the plaintiff asserted in its complaint that it had been assigned the subject mortgage by assignment dated April 11, 2006, which was duly recorded with the Clerk of Rockland County. Dellarmo failed to answer or appear, but thereafter moved, inter alia, to enjoin the plaintiff from foreclosing on the property on the ground that it lacked standing, and to vacate a default judgment entered against him. On October 30, 2009, while Dellarmo's motion was pending, a “Corrective Assignment of Mortgage” (hereinafter the corrective assignment) dated July 28, 2009, to the plaintiff was recorded with the Clerk of Rockland County, purporting to “correct and replace the April 11, 2006 assignment ... which was sent for recording but was lost prior to being recorded” by the Clerk of Rockland County. The corrective assignment was notarized outside New York State but unaccompanied by a CPLR 2309(c) certification. By order dated January 4, 2010, the Supreme Court determined, based on the April 11, 2006, assignment, which the complaint described as having been recorded, and without referencing the corrective assignment, that the plaintiff had standing to commence this action, and directed a hearing to determine the validity of the service of process. Following the hearing, the Supreme Court vacated the default judgment entered against Dellarmo.

Dellarmo moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against him, contending, among other things, that the corrective assignment was a nullity, as it had been notarized out-of-state without the required CPLR 2309(c) certification, and, even if the corrective assignment was valid, the plaintiff nevertheless lacked standing to bring this action, as it was not the holder in due course of both the mortgage and note when it commenced the action. The Supreme Court denied the motion, finding that the failure to accompany the corrective assignment with a CPLR 2309(c) certification was not a fatal defect and that Dellarmo raised merely speculative doubts about the validity of the corrective assignment. Dellarmo appeals, and we reverse.

The plaintiff's failure to comply with CPLR 2309(c) in submitting various documents, including, among others, the corrective assignment, which were notarized outside the state but not accompanied with a certificate in conformity with CPLR 2309(c), was not a fatal defect, as such certification may be provided nunc pro tunc ( see CPLR 2001; Betz v. Daniel Conti, Inc., 69 A.D.3d 545, 892 N.Y.S.2d 477; Matapos Tech. Ltd. v. Compania Andina de Comercio Ltda, 68 A.D.3d 672, 673, 891 N.Y.S.2d 394; Smith v. Allstate Ins. Co., 38 A.D.3d 522, 832 N.Y.S.2d 587).

“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” ( Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 279, 926 N.Y.S.2d 532; see Countrywide Home Loans, Inc. v. Gress, 68 A.D.3d 709, 888 N.Y.S.2d 914). Where a defendant raises the issue of standing, the plaintiff must prove its standing to be entitled to relief ( see CitiMortgage, Inc. v. Rosenthal, 88 A.D.3d 759, 931 N.Y.S.2d 638; U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 753, 890 N.Y.S.2d 578). Moreover, while assignment of a promissory note also effectuates assignment of the mortgage ( see Bank of N.Y. v. Silverberg, 86 A.D.3d at 280, 926 N.Y.S.2d 532; U.S. Bank, N.A. v. Collymore, 68 A.D.3d at 753–754, 890 N.Y.S.2d 578; Mortgage Elec. Registration Sys., Inc. v. Coakley, 41 A.D.3d 674, 838 N.Y.S.2d 622), the converse is not true: since a mortgage is merely security for a debt, it cannot exist independently of the debt, and thus, a transfer or assignment of only the mortgage without the debt is a nullity and no interest is acquired by it ( see Deutsche Bank Natl. Trust Co. v. Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630; Bank of N.Y. v. Silverberg, 86 A.D.3d at 280, 926 N.Y.S.2d 532). The failure to record an assignment prior to the commencement of the action is not necessarily fatal since “an assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery” ( Bank of N.Y. v. Silverberg, 86 A.D.3d at 280, 926 N.Y.S.2d 532; see Deutsche Bank Natl. Trust Co. v. Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630; U.S. Bank, N.A. v. Collymore, 68 A.D.3d at 754, 890 N.Y.S.2d 578; LaSalle Bank Natl. Assn. v. Ahearn, 59 A.D.3d 911, 912, 875 N.Y.S.2d 595).

Here, as the plaintiff concedes, the complaint incorrectly asserts that the April 11, 2006, assignment of the mortgage to the plaintiff had been duly recorded. Further, there is no allegation that the note or mortgage was physically delivered to the plaintiff prior to commencement of the action ( compare Mortgage Elec. Registration Sys., Inc. v. Coakley, 41 A.D.3d 674, 838 N.Y.S.2d 622). The record also suggests that in the order dated January 4, 2010, in which the Supreme Court held that the plaintiff had standing pursuant to the April 11, 2006, assignment, the court relied upon the incorrect assertion in the complaint that the April 11, 2006, assignment had been recorded. The Supreme Court referred only to the April 11, 2006, assignment and made no reference to the corrective assignment's purported replacement of the April 11, 2006, assignment.

The plaintiff now relies on the corrective assignment, which was recorded with the Clerk of Rockland County on October 30, 2009, to demonstrate that it was a holder of the mortgage as of the April 25, 2006, commencement of this action. The corrective assignment recites, in pertinent part, that it “is meant to correct and replace the April 11, 2006 assignment by and between the parties herein which was sent for recording but was lost prior to being recorded” in Rockland County. However, inasmuch as the complaint does not allege that the note was physically delivered to the plaintiff, and nothing in the plaintiff's submission in opposition to Dellarmo's motion could support a finding that such physical delivery occurred, the corrective assignment cannot be given retroactive effect ( see Countrywide Home Loans, Inc. v. Gress, 68 A.D.3d at 710, 888 N.Y.S.2d 914; Wells Fargo Bank, N.A. v. Marchione, 69 A.D.3d 204, 210, 887 N.Y.S.2d 615; LaSalle Bank Natl. Assn. v. Ahearn, 59 A.D.3d at 912–913, 875 N.Y.S.2d 595). Moreover, both the unrecorded April 11, 2006, assignment and the recorded corrective assignment indicate only that the mortgage was assigned to the plaintiff. Since an assignment of a mortgage without the underlying debt is a nullity ( see Deutsche Bank Natl. Trust Co. v. Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630; Bank of N.Y. v. Silverberg, 86 A.D.3d at 280, 926 N.Y.S.2d 532), the plaintiff has failed to demonstrate that it had standing to commence this action ( see Bank of N.Y. v. Silverberg, 86 A.D.3d at 280, 926 N.Y.S.2d 532; U.S. Bank, N.A. v. Collymore, 68 A.D.3d at 754, 890 N.Y.S.2d 578).

Accordingly, the Supreme Court should have granted Dellarmo's motion pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against him for lack of standing.

In light of the foregoing, we need not reach Dellarmo's remaining contentions.