U.S. Bank, N.A. Ex Rel. Registered Holders of ML-CFC Commercial Mortgage Trust 2006-1 v. Squadron VCD, LLC
504 F. App'x 30
2d Cir.2012Background
- Windsor Realty Associates borrowed $11 million secured by a mortgage on property in New City, NY, with MLM Lending and other entities involved in the loan chain.
- MLM Lending transferred the loan to MLM Investors, which placed it in the ML-CFC 2006-1 Trust, with LaSalle Bank as initial Trustee and custodian of the note and mortgage.
- LaSalle received the original note and mortgage; the loan was later assigned through a sequence of trustees, with U.S. Bank ultimately becoming Trustee on January 1, 2009, after Wells Fargo and LaSalle/BANA changes.
- Assignments occurred via physical delivery and transfers through custodians/agents, culminating in a May 5, 2009 assignment to U.S. Bank (effective June 30, 2008).
- Squadron defaulted on February 1, 2009; the Trust notified default and issued a demand in October 2009; U.S. Bank filed for foreclosure on July 20, 2010, after filing caused by the default.
- U.S. Bank established standing and ownership of both the note and mortgage at the time the action was filed, despite intervening unrecorded assignments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether physical delivery satisfied assignment of note and mortgage | U.S. Bank argues delivery to it through successive custodians effected valid assignments. | Squadron contends missing written assignments and gaps in recording undermine transfers. | Yes; physical delivery satisfied transfers and supported standing. |
| Effect of unrecorded assignments on validity | Unrecorded assignments do not defeat valid transfers where delivery occurred. | Lacking recorded assignments undermines chain of title for foreclosure. | Unrecorded assignments do not nullify the transfer. |
| Note endorsement requirement under MLPA/PSA | Note endorsement was not required; notes in blank or transferred without endorsement were permissible. | Note endorsement or proper transfer is necessary to enforce. | Endorsement not required; blank-transfer provisions valid. |
| Mortgage-only assignment without note | Trust documents show delivery of both note and mortgage; no risk of mortgage-only transfer. | Assignments might have covered only the mortgage. | Assignments accompanied by note; not just mortgage. |
| Standing at time action was filed | U.S. Bank became Trustee and possessed note and mortgage before filing. | Standing may be lacking if transfers occurred after filing. | Standing existed when action commenced. |
Key Cases Cited
- McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184 (2d Cir. 2007) (summary judgment burden requires concrete evidence bearing on the merits)
- Fryer v. Rockefeller, 63 N.Y. 268 (1875) (assignment of mortgage by delivery or written instrument feasible)
- U.S. Bank v. Collymore, 890 N.Y.S.2d 578 (App. Div. 2d Dep't 2009) (delivery can transfer debt without written assignment)
- U.S. Bank v. Denaro, 950 N.Y.S.2d 581 (App. Div. 2d Dep't 2012) (standing requires plaintiff to hold note and mortgage when action commenced)
- Wells Fargo Bank Minn., N.A. v. Mastropaolo, 837 N.Y.S.2d 247 (App. Div. 2d Dep't 2007) (mortgagee entitled to foreclosure with copies of note and mortgage)