138 A.D.3d 805
N.Y. App. Div.2016Background
- McClendon executed a mortgage and an electronically-signed promissory note (eNote) in favor of AmTrust Bank on November 7, 2008, securing a $544,000 loan.
- AmTrust Bank was closed on December 4, 2009; the FDIC was appointed receiver and entered a Purchase & Assumption (P&A) agreement with New York Community Bank (NYCB) the same day.
- The FDIC, as receiver, transferred the eNote to NYCB on March 23, 2010, according to the eNote transfer history submitted by NYCB.
- NYCB commenced this mortgage foreclosure in June 2012, alleging McClendon defaulted in October 2010.
- McClendon moved under CPLR 3211(a)(3) to dismiss for lack of standing; the Supreme Court granted the motion. NYCB appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NYCB had standing to foreclose | NYCB relied on the eNote and eNote transfer history showing FDIC transferred control of the eNote to NYCB on March 23, 2010 | McClendon argued NYCB lacked standing because it did not prove valid assignment/possession of the note | NYCB had standing: the transfer history and eNote raised a factual showing of control as of March 23, 2010, so dismissal was improper |
| Sufficiency of eNote evidence to establish control | The eNote plus transfer history are "reasonable proof" of control under federal transferable-record law | Lack of a traditional physical assignment/endorsement defeats standing | Court held transferable-record statute and UCC permit control to be shown without physical possession; NYCB satisfied that showing |
| Burden on motion to dismiss for lack of standing | Plaintiff need only raise a question of fact; does not have to prove standing as a matter of law at this stage | Defendant bears prima facie burden to show lack of standing | Court applied standard: defendant must prima facie show lack of standing; plaintiff's submissions raised question of fact, defeating dismissal |
| Relevance of P&A and FDIC transfer | NYCB argued FDIC's transfer under the P&A conveyed control of the eNote to NYCB | McClendon maintained P&A/transfer didn't establish enforceable ownership/control for foreclosure | Court found transfer history showed FDIC transferred the eNote and NYCB obtained control, making lack of formal assignment irrelevant |
Key Cases Cited
- Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d 355 (2015) (holding possession/control of the note establishes standing and physical possession is not strictly required for eNotes)
- Arch Bay Holdings, LLC-Series 2010B v. Smith, 136 A.D.3d 719 (2d Dep't 2016) (standing in foreclosure requires holder or assignee of the note when action was commenced)
- Wells Fargo Bank, N.A. v. Charlaff, 134 A.D.3d 1099 (2d Dep't 2015) (possession of the note prior to commencement supports standing)
- Deutsche Bank Trust Co. Ams. v. Vitellas, 131 A.D.3d 52 (2d Dep't 2015) (on a CPLR 3211(a)(3) motion the defendant must prima facie show lack of standing)
- HSBC Bank USA, N.A. v. Roumiantseva, 130 A.D.3d 983 (2d Dep't 2015) (plaintiff need not prove standing as a matter of law to defeat a facial dismissal motion)