Editor: David Reiss
Brooklyn Law School

January 29, 2013

New York Appellate Court Holds that Bank Lacks Standing to Bring Foreclosure Action if it did not Own the Mortgage Note and Mortgage on the Date it Commenced the Foreclosure Suit

By Rachel Sherman

In Wells Fargo Bank, N.A. v. Marchione69 A.D.3d 204 (N.Y. App. Div. 2d Dep’t 2009), the New York Supreme Court, Appellate Division, Second Department held that an assignee of a note and a mortgage does not have standing to commence a foreclosure action prior to the date of execution of the assignment.

Defendants Vincent and Debbie Marchione executed a mortgage with Option One Mortgage Corporation on September 2, 2005 for real property in Mamaroneck, New York. Vincent Marchione also signed an adjustable rate note on the same day.

On November 30, 2007, plaintiff Wells Fargo (acting as trustee for Option One Mortgage Corporation) commenced a foreclosure action against Defendants, alleging that they had not made payments beginning April 1, 2007. The assignment to Wells Fargo from Option One occurred on December 4, 2007—5 days after Wells Fargo commenced the action. Although a provision in the assignment said it became effective on October 28, 2007, it was not attached to the November 30th complaint.

The defendants were served on December 7, 2007, and the assignment was not submitted to the court until January 18, 2008, following a pre-answer motion to dismiss made by the defendants, who did not yet know of the contents of the assignment. The defendants then filed a reply, properly challenging the standing of Wells Fargo. The Supreme Court found that because Wells Fargo was not yet the assignee of the mortgage on the day the action was commenced the bank lacked standing to file the action.

Wells Fargo argued that it did have standing because the assignment was executed before the defendants were served. This argument failed because in New York an action is commenced when the summons and complaint (or summons with notice) is filed with the County Clerk, not when service is made upon the defendant. Here, the summons and complaint were filed a week before the defendants were served, and the assignment was executed during that week – after the summons was filed but before service upon the defendant was made.

Wells Fargo argued further that the assignment became valid on October 28, 2007, before the commencement of the action. Citing LaSalle Bank Natl. Assn v. Ahearn,.59 A.D.3d 911, 912 (N.Y. App. Div. 3d Dep’t 2009), the court held that with no proof that the mortgage and note were actually delivered on a retroactive date, the execution date of a written assignment is controlling.

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