Assignments Not Standing up

The District Court of Appeal of the State of Florida (4th Dist.) ruled in Murray v. HSBC Bank USA et al., (No. 4D13-4316, Jan. 21, 2015) that HSBC did not have standing to foreclose. This case highlights the difficulties that so many judges have in applying the UCC appropriately in foreclosures. The Court quotes the trial court as stating,

     To me, that’s the only issue in the case; can this Court enter a judgment on what you say is that possession is enough without the [i]ndorsement.

      In every other respect they have it. They got the mortgage. They got the records. They got the servicing. They got the whole thing. They just don’t have the [i]ndorsement, and is that fatal?

       In other words do you have to go and get, and then start over again? That’s the question. I don’t know the answer. (2, n.1)

It is well documented that many, many courts have trouble applying the relevant provisions of the UCC in harmony with the relevant provisions of the state foreclosure procedure statute.

The District Court of Appeal goes to great efforts to get it right here, given that the trial court apparently punted on the analysis. I found the the Appendix to the opinion to be of particular of interest. It carefully walks through the chain of transfers to identify the “missing piece” that results in the HSBC’s lack of standing. It also distinguishes these transfers from those between servicers, which some courts conflate with transfers between those with the right to enforce a mortgage.

From a law reform perspective, I wonder what should be done to get courts to apply the law as it is written, instead of just trying to get the gist of it right. Given that the Permanent Editorial  Board of the UCC has issued guidance in this area, I don’t think the issue is lack of clarity. Rather, I think it is just straightforward complexity — judges have a hard time going through all of the steps of the analysis. Can this area of law be simplified so that courts can achieve more just and equitable results? I wonder if Dale Whitman has any ideas . . ..

Supreme Court of New York (Kings County) Denies Summary Judgment Motion on Plaintiff’s Standing To Foreclose

The court in deciding U.S. Bank Natl. Assn. v Steinberg, 42 Misc. 3d 1201(A) (N.Y. Sup. Ct. 2013) denied the plaintiff’s motion for summary judgment in its entirety.

The Morgan Stanley Mortgage Trust commenced this foreclosure action against the Steinbergs. Plaintiff’s unverified complaint contained a single allegation regarding its standing to maintain this foreclosure action, alleged that plaintiff was the holder of the note and mortgage, which was indorsed by blank indorsement and delivered to plaintiff prior to commencement of this action.

In regards to plaintiff’s standing to foreclose, the court found that the plaintiff was not entitled to the relief it sought because it has failed to proffer any evidence of its standing to foreclose under the Steinberg Note at the time of commencement.

Further, the court found that there were triable issues of fact regarding delivery of the Steinberg note from the originating lender and indorser, Hemisphere National Bank, to the Morgan Stanley Mortgage Trust, requiring denial of the instant summary judgment motion in its entirety.

Since Bank was the Note-Holder it was a Person Entitled to Enforce the Note Pursuant to R.C. 1303.31(A)(1)

The court in deciding Bank of Am., N.A. v. Pasqualone, 2013-Ohio-5795 (Ohio Ct. App., Franklin County, 2013) affirmed the decision of the lower court.

The court found that the promissory note was a negotiable instrument subject to relevant provisions of R.C. Chapter 1303 because it contained a promise to pay the lender the amount of $100,000, plus interest, and did not require any other undertakings that would render the note nonnegotiable.

Further, the court found that since the bank was the holder of the note it was a person entitled to enforce the note pursuant to R.C. 1303.31(A)(1). Based on the authorization, the note became payable to the bank as an identified person and, because the bank was the identified person in possession of the note, it was the holder of the note.

Lastly, as the property owner’s defenses to the mortgage foreclosure did not fit the criteria of a denial, defense, or claim in recoupment under R.C. 1303.36 or R.C. 1303.35, the bank’s right to payment and to enforce the obligation was not subject to the owner’s alleged meritorious defenses.

Ohio Court of Appeals Finds that BAC had Failed to Demonstrate that it had Standing to Accelerate the Note and Foreclose the Mortgage

The court in deciding BAC Home Loans Servicing, L.P. v. Blythe, 2013-Ohio-5775 (Ohio Ct. App., Columbiana County, 2013) reversed the lower court’s judgment.

Appellant Walter J. Blythe appealed the lower court’s decision granting summary judgment in favor of Appellee, BAC Home Loans Servicing, L.P., in this foreclosure action.

Blythe challenged the lower court’s finding that BAC Home Loans Servicing had standing to foreclose in the absence of evidence that BAC was the holder of the note creating the obligation. Blythe relied on the material submitted by BAC in support of this claim. Because the copy of the note filed by BAC was specifically indorsed to Countrywide Bank, FSB, not BAC, and there was nothing to indicate otherwise, BAC had failed to demonstrate that it had standing to accelerate the note and foreclose the mortgage. Thus this court reversed the judgment of the lower court and dismissed the suit for lack of standing.

This court held that a note that had been specially indorsed to a bank under R.C. 1303.25(A) could not be enforced by a loan servicing company (LSC) that was not the transferee or successor in interest of the bank. This court also held that the LSC was not the holder of the note under R.C. 1303.32(A)(1) by virtue of the merger of the bank and a national association (NA). Further, the LSC was not a non-holder in possession entitled to enforce under R.C. 1303.31 as it had not acquired the bank’s right to the note under R.C. 1303.21.

This court noted that even if the NA had filed the foreclosure suit, there was no evidence of the transaction, merger, or mergers that gave rise to an its interest in the note. Lastly, the court held that the note was not bearer paper and could only be enforced by the bank since the note was payable to the bank, as such the bank was the real party in interest in the foreclosure action. Thus the LSC lacked standing to foreclose.