Tuesday, May 25, 2010

Deutsche Bank Lacks Standing in a Kings County Forclosure Action

Deutsche Bank Natl. Trust Co. v. Stevens, 2010 NY Slip Op 50909(U).  This decision was rendered by J. Yvonne Lewis in the Supreme Court, Kings County, and was published on May 24, 2010.  This is a foreclosure action brought by Deutsche Bank which moved for an order of reference among other things.  The originating lender was Fremont Investment & Loan, and Deutsche Bank purportedly became the holder of the note and mortgage by assignment from MERS as nominee of Fremont on June 11, 2008.  Deutsche Bank commenced the foreclosure action June 2, 2008, before the assignment actually took place. For this reason J. Lewis denied Deutsche Bank's motion and dismissed the case without prejudice for lack of standing, and quotes the following well-trodden authority in support of her holding:

"Where the plaintiff is the assignee of the mortgage and the underlying note at the time the foreclosure action was commenced, the plaintiff has standing to maintain the action" (Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547 [2003]; see Natl. Mtge. Consultants v Elizaitis, 23 AD3d 630, 631 [2005]). On the other hand, "foreclosure of a mortgage may not be brought by one who has no title to it" (Kluge v Fugazy, 145 AD2d 537, 538 [1988]) and an assignee of such a mortgage does not have standing to foreclose unless the assignment is complete at the time the action is commenced (see Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204 [2009]; Lasalle Bank Nat. Assn. v Ahearn, 59 AD3d 911 [2009]).
Interestingly, J. Lewis notes that if Deutsche Bank were able to demonstrate that it took physical delivery of the mortgage prior to the commencement of the forelcosure on June 2, 2010, things might have turned out differently.   In fact, I do recall encountering authority indicating that physical delivery of the note and mortgage is the functional equivalent of an assignment; however, that would be true only if the note was a negotiable instrument.

It should also be noted that J. Lewis' decision is somewhat lacking in precision--she appears to be employing a sort of legal short hand--when she refers to "the mortgage", she is presumably referring to the note and the mortgage.  As noted in a previous post, a mortgage cannot have a separate existence from the note.  If the note is assigned, the mortgage automatically follows.  However, if the mortgage is assigned without the accompanying note, the assignment is defective.

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