U.S. Bank National Association v. Speller
Categories
Attorneys and Parties
Brief Summary
Mortgage foreclosure standing, specifically whether the foreclosing plaintiff proved it was the holder or assignee of the note when the action began.
After a nonjury trial ordered under CPLR 3212(c) [permits a court to try issues raised on a summary judgment motion], the Supreme Court denied the plaintiff's request for summary judgment dismissing the defendants' lack-of-standing defense, sua sponte dismissed the complaint against those defendants for lack of standing, and sua sponte directed the plaintiff to pay the defendants' expenses under Real Property Law § 282(1) [allows a borrower to recover attorneys' fees and expenses in certain mortgage actions where the mortgage permits the lender to recover such fees].
The Appellate Division reversed the entire order, granted the plaintiff summary judgment dismissing the defendants' affirmative defense of lack of standing, and vacated both the sua sponte dismissal of the complaint and the expense award.
The plaintiff proved standing through the testimony of a Computershare Delaware Trust Company vice president and supporting business records, including a limited power of attorney and transaction addendum, which were properly admitted under CPLR 4518 [business records exception to the hearsay rule]. That proof established that Computershare held the original note on the plaintiff's behalf when the foreclosure action was commenced.
Background
In this mortgage foreclosure action, the defendants asserted lack of standing as an affirmative defense. The Supreme Court previously directed a nonjury trial under CPLR 3212(c) solely on the branch of the plaintiff's motion seeking summary judgment dismissing that defense. At trial, the plaintiff relied on testimony from Charles Brehm, a vice president of Computershare Delaware Trust Company, together with a limited power of attorney and a transaction addendum, to show possession of the note before commencement.
Lower Court Decision
The Supreme Court, Putnam County, found the plaintiff had not established standing, denied summary judgment on the standing defense, sua sponte dismissed the complaint insofar as asserted against Michael M. Speller and Ellen M. Fitzsimmons, and sua sponte directed the plaintiff to pay those defendants expenses pursuant to Real Property Law § 282(1).
Appellate Division Reversal
The Appellate Division held that its review power after a nonjury trial was as broad as that of the trial court and concluded that the plaintiff did establish standing. The court found that Brehm's testimony laid a proper foundation for admission of the limited power of attorney and transaction addendum as business records under CPLR 4518, and that the testimony and records showed Computershare, acting as custodian for the plaintiff, possessed the original note when the action was commenced. Because standing was established, the plaintiff was entitled to summary judgment dismissing the lack-of-standing defense, and the trial court should not have dismissed the complaint or awarded expenses to the defendants.
Legal Significance
The decision reinforces that a foreclosure plaintiff may establish standing by proving that its authorized custodian possessed the original note on the plaintiff's behalf at the time of commencement. It also confirms that properly founded servicing and custodial records can be admitted as business records to prove that fact. Where such proof is sufficient, a court may not deny summary judgment on standing or award borrower expenses premised on a lack-of-standing dismissal.
In a New York mortgage foreclosure case, standing is established if the plaintiff shows it or its authorized custodian had the original note when the action started; competent witness testimony plus admissible business records can satisfy that burden and defeat a borrower's lack-of-standing defense.