Standing in Residential Mortgage Foreclosure Actions and the Applicability of RPAPL 1302-a to Defaulting Borrower
Print Article- Posted on: Apr 19 2024
In order to prosecute a lawsuit, the plaintiff must have standing to do so. “Standing involves a determination of whether the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution. Graziano,v. County of Albany, 3 N.Y.3d 475, 479 (2004) (citations, internal quotation marks and brackets omitted). Put another way, “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.” Caprer v. Nussbaum, 36 A.D.3d 176, 182 (2nd Dep’t 2006). Accordingly, the question of whether a plaintiff has standing is “is a threshold determination, resting in part on policy considerations, that a person should be allowed access to the courts to adjudicate the merits of a particular dispute that satisfies the other justiciability criteria.” Caprer, 36 A.D.3d at 182 (Citations omitted).
“‘Injury-in-fact has become the touchstone’ and requires ‘an actual legal stake in the matter being adjudicated.’” Big Apple Consulting USA, Inc. v. Belmont Partners, LLC, 20 Misc. 3d 1144(A) (Sup. Ct. Nassau Co. 2008) (quoting Soc. Of Plastics Indus. Inc. v. County of Suffolk, 77 N.Y.2d 761, 772 (1991)). The Carper Court noted that the “Court of Appeals has defined the standard by which standing is measured, explaining that a plaintiff, in order to have standing in a particular dispute, must demonstrate an injury in fact that falls within the relevant zone of interests sought to be protected by law”. Caprer, 36 A.D.3d at 183 (citing Matter of Fritz v. Huntington Hosp., 39 N.Y.2d 339, 346 (1976).
The issue of standing is a frequently litigated issue in mortgage foreclosure actions.1 This is so because of the frequency with which notes and mortgages are sold, assigned or otherwise transferred. As a result of these transfers, the foreclosing plaintiff frequently does not have the necessary documentation to demonstrate that it is the holder of the note. Because of these “paperwork” issues, borrowers frequently raise the standing defense to put foreclosing lenders to their proof on the standing issue.
We have previously noted that in order to “establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and evidence of default.” M&T Bank v. Barter, 186 A.D.3d 698, 700 (2nd Dep’t 2020) (citations omitted). However, where “a plaintiff’s standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief.” Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973-74 (2nd Dep’t 2014) (citation and internal quotation marks omitted). A lender establishes standing in a foreclosure action “by demonstrating that, when the action was commenced, it was either the holder or the assignee of the underlying note.” U.S. Bank National Association v. Seeley, 177 A.D.3d 933, 935 (2nd Dep’t 2019) (citations omitted). “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 underlying mortgage passes with the debt as an inseparable incident.” Dyer Trust 2021-1 v. Global World Realty, Inc., 140 A.D.3d 827, 828 (2nd Dep’t 2016) (citations omitted). While it may seem counterintuitive in the context of a mortgage foreclosure action, the operative document necessary to confer standing is not the mortgage but the promissory note and the “transfer of the full obligation [under the note] automatically transfers the mortgage as well unless the parties agree that the transferor is to retain the mortgage.” Aurora Loan Services, LLC. V. Taylor, 25 N.Y.3d 355, 361-62 (2015).2
Traditionally, in all actions, the defense of standing was waived if not raised by the defendant in an answer or pre-answer motion to dismiss. See, e.g., Wells Fargo Bank Minnesota, Nat. Ass’n v. Mastropaolo, 42 A.D.3d 239, 242-43 (2nd Dep’t 2007). However, RPAPL 1302-a, which became effective in December of 2019, and changed that rule in the context of certain mortgage foreclosure actions, provides:
Notwithstanding the provisions of subdivision (e) of rule thirty-two hundred eleven of the civil practice law and rules, any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss. A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant’s default. [Hyperlinks added.]
On April 17, 2024, the Appellate Division, Second Department, in Citibank, N.A. v. Boyce, addressed the issue of the waiver of a standing defense. The lender in Boyce commenced a foreclosure action and the borrower defaulted. Thereafter, an order of reference was entered. Protracted litigation ensued due to the borrower’s attempt to vacate the default, which included an appeal. The default, however, was not vacated because the borrower failed to demonstrate a reasonable excuse for her default. The borrower interposed similar opposition to the lender’s motion for a judgment of foreclosure and sale, but the opposition was similarly “rejected”.
In March of 2020, several months after the effective date of RPAPL 1302-a, the borrower moved pursuant to that statute for a determination of the lender’s standing. Plaintiff opposed the motion on the ground that the borrower failed to vacate her default. The motion court granted the motion to the extent of directing a hearing on the standing issue. The lender then moved for leave to renew its opposition to the borrower’s RPAPL 1302-a motion. The motion court granted the motion and, upon renewal, denied the borrower’s motion.
On the borrower’s appeal, the Second Department affirmed finding that RPAPL 1302-a does not apply to defaulting defendants. In so doing the Court stated:
“A motion for leave to renew is the appropriate vehicle for seeking relief from a prior order based on a change in the law, including a clarification of decisional law” (Sharan v Christiana Trust, 219 AD3d 1549, 1551 [internal quotation marks omitted]; see CPLR 2221[e][2]). Pursuant to RPAPL 1302-a, which became effective in December 2019, notwithstanding the provisions of CPLR 3211(e), “any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan . . . shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss” (see Citimortgage, Inc. v Rogers, 203 AD3d 1125, 1126). However, RPAPL 1302-a does not apply to a defaulting defendant (see U.S. Bank N.A. v Goldberger, 211 AD3d 1077, 1078; Ditech Fin., LLC v Howell, 201 AD3d 786, 788; see also Wells Fargo Bank, N.A. v Davis, 216 AD3d 704, 706). Accordingly, the Supreme Court properly granted the plaintiff’s motion for leave to renew and, upon renewal, denied the defendants’ motion. [Hyperlinks added.]
- Eds. Note: this BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. At this point, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issues that may be of interest you.
- Eds. Note: this BLOG has addressed standing issues, including a lender’s required proof when the standing issue is raised, here, here and here.
Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.
This article is for informational purposes and is not intended to be and should not be taken as legal advice.
