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new york quiet title law in the foreclosure defense context

new york quiet title law in the foreclosure defense context. A Discussion of proper pleading, Challenges to mortgage assignments, and Workout Options for homeowners. I. Quiet title in the foreclosure context.

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new york quiet title law in the foreclosure defense context

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  1. new york quiet title law in the foreclosure defense context • A Discussion of proper pleading, Challenges to mortgage assignments, and Workout Options for homeowners

  2. I. Quiet title in the foreclosure context • There are roughly equivalent common law and statutory causes of action to “quiet title” in NY. Presently, the remedy most frequently invoked to quiet title is the statutory action to compel the determination of a claim to real property. NYJUR REALPROPPS § 509. While the statutory action to determine claims to real property under N.Y. Real Prop. Acts. Law art. 15 is somewhat similar in result,[FN1] it is not the same as the equitable action to quiet title or to remove a cloud on title.[FN2] The difference between the two actions is to be found in the fact that after the statutory action to determine claims has been commenced, the law permits the defendant who has been brought in as a claimant to set up his or her own title and demand affirmative relief.[FN3]. Another difference is that a Plaintiff in the statutory context is entitle to a jury trial as a matter of right. Nassau County v. Hardie, 48 N.Y.S.2d 788 (County Ct. 1944). • [FN1]In re Pike St. Borough of Manhattan, City of New York, 101 N.Y.S.2d 457 (Sup 1950); [FN2]O'Donohue v. Smith, 130 A.D. 214, 114 N.Y.S. 536 (1st Dep't 1909); Meyer v. Wilcox, 136 N.Y.S. 337 (Sup 1912); [FN3]Conde Nast, Inc. v. Town of North Hempstead, 160 Misc. 267, 290 N.Y.S. 300 (Sup 1936).

  3. A. Statutory actions • i. Nature and purpose of relief: An action to compel the determination of a claim to real property is not an action in equity,[FN1] and yet the relief awarded is, in a large measure, equitable in nature. Insofar as the distinction between an action at law and an action in equity is concerned, the action is a hybrid one,[FN3] and the court will open its equitable umbrella over the parties and determine the rights and liabilities of each.[FN4] Such an action is authorized for the purpose of securing possession and quieting title, for it is to the interest of the community that real estate shall be readily transferable and that titles thereto shall be reasonably marketable.[FN8] • [FN1]Tyler v. Jahn, 109 Misc. 425, 178 N.Y.S. 689 (Sup 1919); [FN3]New York and Brooklyn Suburban Inv. Co. of New York v. Leeds, 100 Misc. 2d 1079, 420 N.Y.S.2d 639 (Sup 1979); Dowd v. Ahr, 168 A.D.2d 763, 563 N.Y.S.2d 917 (3d Dep't 1990); [FN4]New York and Brooklyn Suburban Inv. Co. of New York v. Leeds, 100 Misc. 2d 1079, 420 N.Y.S.2d 639 (Sup 1979); [FN8]Seneca Nation of Indians v. Appleby, 196 N.Y. 318, 89 N.E. 835 (1909).

  4. A. Statutory actions • 2. Mortgage lien validity as a determinable claim: The claims which may be determined in an action to compel the determination of a claim to real property are limited to those defined in the provisions[FN1] governing the action,[FN2] and they fall into two classes: claims to an estate and claims to any other interest, including an easement, lien, or encumbrance on the real property in question.[FN3] The action must involve a claim to real property.[FN4] • An action to cancel mortgage on realty, brought by alleged legal owner under recorded deed, is an action to determine a claim to the property. Pure Strains Farm Co. v. Smith, 99 Misc. 108, 163 N.Y.S. 615 (Sup 1917). • [FN1] N.Y. Real Prop. Acts. Law art. 15; [FN2]Burnham v. Onderdonk, 41 N.Y. 425, 1869 WL 6588 (1869); [FN3]Terrace Hotel Co. v. State, 19 N.Y.2d 526, 281 N.Y.S.2d 34, 227 N.E.2d 846 (1967); [FN4]Highway Displays, Inc. v. People, 39 Misc. 2d 703, 241 N.Y.S.2d 887 (Sup 1963)

  5. A. Statutory actions • 3. Practice and Procedure (Generally):In an action brought under the provisions relating to actions to compel the determination of a claim to real property,[FN1] the proceedings are governed by the provisions regulating civil actions, except as otherwise provided in the article.[FN2] The statutes prescribing the procedure for compelling the determination of claims to real property do not contain blanket provisions, but impose certain conditions and limitations upon the maintenance of the action.[FN3] This being a statutory action, the plaintiff must by pleading and proof bring it within the terms and conditions of the statute,[FN4] and the defendant is compelled to assert his or her title or be forever barred.[FN5] • Availability of Injunction: An injunction may be issued in such an action to protect the possession of the plaintiff during its pendency, where there is danger of his or her possession being unlawfully disturbed or molested. Dowd v. Ahr, 168 A.D.2d 763, 563 N.Y.S.2d 917 (3d Dep't 1990), order rev'd on other grounds, 78 N.Y.2d 469, 577 N.Y.S.2d 198, 583 N.E.2d 911 (1991). • [FN1] N.Y. Real Prop. Acts. Law art. 15; [FN2]N.Y. Real Prop. Acts. Law § 1519(1); [FN3]Lewis v. Howe, 174 N.Y. 340, 66 N.E. 1101 (1903) (construing former N.Y. Real Prop. Law art. 15); [FN4]New York and Brooklyn Suburban Inv. Co. of New York v. Leeds, 100 Misc. 2d 1079, 420 N.Y.S.2d 639 (Sup 1979); [FN5]Best Renting Co. v. City of New York, 248 N.Y. 491, 162 N.E. 497 (1928).

  6. A. Statutory actions • 3. Practice and Procedure (Jurisdiction): Generally, the supreme court has jurisdiction of an action to compel the determination of a claim to real property, since such court is, by constitutional and statutory provisions, the principal court of general original jurisdiction in the state.[FN1] The jurisdiction of each county court, except the county courts of the counties within the City of New York, extends to an action to compel the determination of a claim to real property where the real property to which the action relates is situated within the county.[FN3] If the real property involved or part of it is situated within the county in the City of New York in which the action is brought, the New York City Civil Court has jurisdiction of an action to compel the determination of a claim to real property where the assessed valuation of the property does not exceed the court's monetary limit at the time the action is commenced.[FN5] • [FN1]N.Y. Jur. 2d, Courts and Judges § 727; [FN3]N.Y. Jud. Law § 190(1); [FN5]N.Y.C. Civ. Ct. Act § 203(i).

  7. A. Statutory actions • 3. Practice and Procedure (limitations): An action to recover real property or its possession cannot be commenced unless the plaintiff, or his or her predecessor in interest, was seized or possessed of the premises within 10 years before the commencement of the action.[FN1] This limitation period applies to an action to determine claims to real property.[FN2] • [FN1]N.Y. C.P.L.R. 212(a). • [FN2]James v. Lewis, 135 A.D.2d 785, 522 N.Y.S.2d 897 (2d Dep't 1987) (stating that an action to compel the determination of a claim to real property was barred, absent proof that the plaintiff was the owner in possession within 10 years before the commencement of the action); Low v. People, 263 A.D. 434, 33 N.Y.S.2d 1015 (3d Dep't 1942).

  8. A. Statutory actions • 3. Practice and Procedure (parties): Appropriate parties to an action to compel the determination of claims to real property are those claiming an interest in the disputed property.[FN1] However, an heir or devisee, as the successor in interest of the ancestor or devisor, is entitled to be substituted for the ancestor or devisor in an action begun by the latter before his or her death; in fact, the defendants have the right to compel the devisee to be substituted in the action where there is nothing to show that he or she renounced his or her interest as devisee under the will.[FN3] • Necessary Party: In an action to compel the determination of a claim to real property, the person in possession must be made a party to the action. N.Y. Real Prop. Acts. Law § 1511(1). When the person in possession claims the right of possession, or an interest in the real property, under another, the other person must also be made a party. N.Y. Real Prop. Acts. Law § 1511(1). A person in possession of property which is the subject of an action for the determination of a claim to real property must be made a party thereto, because his or her right to possession would be clearly affected by any judgment rendered. Burke v. Suburban Mortg. Corp., 43 Misc. 2d 1077, 252 N.Y.S.2d 911 (Sup 1964). • [FN1]Concerned Citizens of Albany-Shaker Road v. State, 140 A.D.2d 842, 528 N.Y.S.2d 230 (3d Dep't 1988); [FN3]Higgins v. City of New York, 136 N.Y. 214, 32 N.E. 772 (1892).

  9. A. Statutory actions • 4. Pleading (generally): In an action to compel the determination of a claim to real property, the proceedings are governed by the provisions regulating civil actions, except as otherwise provided in the provisions governing such actions.[FN1] Thus, an answer or complaint in such a proceeding is subject to a motion for a more definite statement.[FN2] The same right of amendment of pleadings exists in an action to determine adverse claims to real property as exists in other actions,[FN3] and leave to amend pleadings is to be freely given. • By statute, a complaint in an action to compel the determination of a claim to real property must state that the action is brought pursuant to the provisions governing such an action. N.Y. Real Prop. Acts. Law § 1515(1). The complaint must set forth the facts enumerated by the statute.[FN8] It must set forth facts and not the bare language of the statute.[FN9] The complaint is not required to allege that the plaintiff has no other adequate remedy except for that provided by the statute.[FN10] • FN1: N.Y. Real Prop. Acts. Law § 1519(1); [FN2]Noto v. Headley, 39 Misc. 2d 233, 240 N.Y.S.2d 267 (Sup 1963); Bradley v. Condon, 217 N.Y.S.2d 821 (Sup 1961) (complaint); [FN3]Brown v. Leigh, 49 N.Y. 78, 12 Abb. Pr. N.S. 193, 1872 WL 9881 (1872); [FN8]N.Y. Real Prop. Acts. Law § 1515; [FN9]Queensboro Imp. Co. v. Dean, 175 Misc. 655, 23 N.Y.S.2d 865 (Sup 1940); [FN10]Noto v. Headley, 39 Misc. 2d 233, 240 N.Y.S.2d 267 (Sup 1963).

  10. A. Statutory actions • 4. Pleading (property description):The complaint must describe the property claimed with common certainty, by setting forth the name of the township or tract and the number of the lot, if there is any, or in some other appropriate manner, so that from the description, possession of the property claimed may be delivered where the plaintiff is entitled thereto. N.Y. Real Prop. Acts. Law § 1515(2). De minimis errors are not fatal in this context. Mandel v. Estate of Tiffany, 263 A.D.2d 827, 693 N.Y.S.2d 759 (3d Dep't 1999).

  11. A. Statutory actions • 4. Pleading (Plaintiff’s interest):The complaint must set forth facts showing the plaintiff's estate or interest in the real property, the particular nature of the estate or interest, and the source from or means by which the plaintiff's estate or interest immediately accrued to him. [FN1] As a general rule, it is neither permissible nor necessary to go back and set forth the entire chain of the plaintiff's title.[FN2] Neither is it necessary, in order to state a cause of action, that the plaintiff should allege in the complaint that he or she is the sole owner in fee; the sole ownership is fairly implied from an allegation that he or she is the owner in fee.[FN3] Accordingly, an allegation that the plaintiffs are the owners in fee simple and that they acquired title in a year stated, is a sufficient allegation of the plaintiff's title.[FN4] • [FN1]N.Y. Real Prop. Acts. Law § 1515(1)(a); [FN2]Crook v. Licourt, 216 A.D. 237, 214 N.Y.S. 774 (4th Dep't 1926); [FN3]King v. Townshend, 29 N.Y.S. 181 (Gen. Term 1894); [FN4]Norris v. Hoffman, 133 A.D. 596, 118 N.Y.S. 156 (1st Dep't 1909), aff'd, 197 N.Y. 578, 91 N.E. 1118 (1910).

  12. A. Statutory actions • 4. Pleading (Defendants’ claim to property): The complaint must allege that the defendant claims, or that it appears from the public records or from the allegations of the complaint that the defendant might claim, an estate or interest in the real property adverse to that of the plaintiff, and it must allege the particular nature of the estate or interest. N.Y. Real Prop. Acts. Law § 1515(1)(b). A complaint which does not allege that the defendant makes any adverse claim to the plaintiff's property, and which fails to state any facts from which such an inference can be drawn, is insufficient to sustain the action. Beisheim v. People, 255 A.D. 429, 8 N.Y.S.2d 841 (4th Dep't 1938) (construing former N.Y. Real Prop. Law art. 15).

  13. A. Statutory actions • 4. Pleading (Defendants’ personhood):The complaint must allege whether any defendant is known or unknown, and whether any defendant is or might be an infant, mentally retarded, mentally ill, or an alcohol abuser.[FN1] (comic relief). • Naming “DOES”:The complaint must also state whether the judgment will or might affect a person or persons not in being or ascertained at the commencement of the action who, by any contingency contained in a devise or grant or otherwise, could afterward become entitled to a beneficial estate or interest in the property involved, and whether every person in being who would have been entitled to such estate or interest if such event had happened immediately before the commencement of the action is named as a party thereto.[FN2] These provisions indicate that the legislature intended that every plaintiff must set forth facts showing whether any defendant is known or unknown, showing whether the judgment will or might affect a person or persons not in being or ascertained at the commencement of the action, and showing that to ask any plaintiff under these provisions to join all persons who could possibly be a party defendant would be an impossible task.[FN3] • [FN1]N.Y. Real Prop. Acts. Law § 1515(1)(c); [FN2]N.Y. Real Prop. Acts. Law § 1515(1)(d); [FN3]Quenas Realty, Inc. v. Engelhardt, 223 N.Y.S.2d 636 (Sup 1961) (construing former N.Y. Real Prop. Law art. 15).

  14. A. Statutory actions • 4. Pleading (Demand for Judgment):The demand for judgment in an action to compel the determination of a claim to real property may be to the effect that the defendant and every person claiming under him or her be barred from all claim to an estate or interest in the property described in the complaint, or it may demand that possession be awarded the plaintiff, or may combine two or more of these demands with other demands for appropriate relief,[FN1] • [FN1]N.Y. Real Prop. Acts. Law § 1515(2); N.Y. Real Prop. Acts. Law § 1515(2); Burke v. Suburban Mortg. Corp., 43 Misc. 2d 1077, 252 N.Y.S.2d 911 (Sup 1964).

  15. A. Statutory actions • 5. Judgments: Final judgment must declare the validity of any claim to any estate or interest established by any party to the action. The judgment must also declare that any party whose claim to an estate or interest in the property has been adjudged invalid, and every person claiming under such party, by title accruing after the filing of the judgment roll, or of the notice of the pendency of the action, as prescribed by law, is forever barred from asserting such claim to an estate or interest the invalidity of which is established in the action, and may direct that any instrument purporting to create any such estate or interest be delivered up or cancelled of record or be reformed of record as the facts may require. N.Y. Real Prop. Acts. Law § 1515(2) • Judgment may also be given awarding possession of real property to any party together with damages for the withholding of such property, and two or more of such forms of judgment may be awarded in the same action.[FN2] A judgment must declare the rights of the parties,[FN3] and a court in finding against a plaintiff seeking a declaration of an interest in land should not dismiss the action or simply find in favor of the defendant but should enter a judgment with the requisite declarations.[FN4] • [FN2]N.Y. Real Prop. Acts. Law § 1521(1); [FN3]Thomas Gang, Inc. v. State, 19 A.D.3d 861, 797 N.Y.S.2d 583 (3d Dep't 2005); [FN4]Duke v. Sommer, 205 A.D.2d 1009, 613 N.Y.S.2d 985 (3d Dep't 1994); Iulucci v. James H. Maloy, Inc., 199 A.D.2d 720, 606 N.Y.S.2d 59 (3d Dep't 1993); Keller v. Village of Castleton-on-Hudson, 173 A.D.2d 979, 569 N.Y.S.2d 491 (3d Dep't 1991).

  16. A. Statutory actions • 6. Answers and counterclaims: In an action to compel the determination of a claim to real property, the defendant may, in his or her answer, deny any material allegation of the complaint controverted by him or her, or any knowledge or information thereof sufficient to form a belief, or may set forth facts constituting a defense, and thereupon he or she may demand judgment dismissing the complaint.[FN1] The requirement governing the complaint to the effect that the plaintiff must allege the source from or means by which his or her estate or interest immediately accrued to him or her has been applied to the answer,[FN3] and it imposes on the defendant the duty of giving particulars of the title.[FN4] • A defendant may demand any judgment to which he or she would be entitled in an action brought by him or her to recover that estate or to enforce in any manner the interest which he or she asserts in the property, or he or she may combine any two or more of such demands. N.Y. Real Prop. Acts. Law § 1517. • [FN1]N.Y. Real Prop. Acts. Law § 1517; [FN3]Hooper v. City of New York, 96 Misc. 47, 160 N.Y.S. 14 (Sup 1916); [FN4]Reformed Protestant Dutch Church of Fordham v. Valentine, 12 N.Y.S.2d 989 (Sup 1939).

  17. A. Statutory actions • 7. Burden of proof and Jury trial: In accordance with the general rule that the party who asserts the affirmative of an issue has the burden of proving it, the plaintiff in an action to compel the determination of a claim to real property has the burden of proving the issues upon which his or her cause of action depends. [FN2] • A jury trial is guaranteed in an action for determination of a claim to real property.[FN3] The failure to specifically allege that the action is brought pursuant to statutes governing actions to compel determination of a claim to real property is not fatal to a plaintiff's right to a jury trial.[FN4] The right to a jury trial is to be determined by the facts alleged in the complaint, and not by the prayer for relief.[FN5] A defendant's prayer for affirmative relief by way of injunction enjoining the plaintiff from interfering with the subject matter of an action brought to compel the determination of a claim to real property is not grounds for denying a jury trial.[FN9] • [FN2]Bing v. People, 254 N.Y. 484, 173 N.E. 687 (1930); [FN3]Paciello v. Graffeo, 8 A.D.3d 543, 779 N.Y.S.2d 526 (2d Dep't 2004); [FN4]Lillianfeld v. Lichtenstein, 181 Misc. 2d 571, 694 N.Y.S.2d 600 (Sup 1999); [FN5]Id.; [FN9]Brewer v. Town of Starkey, 275 A.D. 793, 90 N.Y.S.2d 155 (4th Dep't 1949).

  18. B. Common Law Actions • 1. Nature of action: A quiet-title action, or an action to remove a cloud on title, is a remedy which originated in the courts of equity. Am. Jur. 2d, Quieting Title and Determination of Adverse Claims § 1. The general object and purpose of an action to remove a cloud on title is to have any adverse title that may be asserted under such cloud passed on, and adjudged void, so that the plaintiff in possession may be forever afterward free from any danger of the hostile claim.[FN1] More specifically, the purpose of such an action is to procure the cancellation, delivery up, or release of an instrument, encumbrance, or claim constituting a claim on the plaintiff's title which could be used to injure or annoy the plaintiff in the enjoyment of his or her title.[FN2]. A court has jurisdiction to remove an existing cloud on a title,[FN4] or to prevent a threatened cloud.[FN5] • [FN1]Sanders v. Saxton, 182 N.Y. 477, 75 N.E. 529 (1905); [FN2]Rector, etc., of St. Stephen's Protestant Episcopal Church v. Rector, etc., of Church of the Transfiguration, 201 N.Y. 1, 94 N.E. 191 (1911); [FN4]Dewitt v. Van Schoyk, 110 N.Y. 7, 17 N.E. 425 (1888); [FN5]King v. Townshend, 141 N.Y. 358, 36 N.E. 513 (1894).

  19. B. Common Law Actions • 2. limitation on action: Although an owner in possession who seeks to have a cloud on his or her title removed may proceed in equity at any time without being barred by the statute of limitations,[FN1] a party not in possession is limited by the six-year limitations period contained in N.Y. C.P.L.R. 213,[FN2] governing actions for which a limitations period is not otherwise provided.[FN3] The owner may wait until his or her possession is disturbed, or his or her title is attacked, before taking steps to vindicate his or her right.[FN4] • [FN1]Orange and Rockland Utilities, Inc. v. Philwold Estates, Inc., 52 N.Y.2d 253, 437 N.Y.S.2d 291, 418 N.E.2d 1310 (1981); [FN2]Ford v. Clendenin, 215 N.Y. 10, 109 N.E. 124 (1915); [FN3]N.Y. C.P.L.R. 213(1), discussed in N.Y. Jur. 2d, Limitations and Laches §§ 210 to 219; [FN4]Ford v. Clendenin, 215 N.Y. 10, 109 N.E. 124 (1915).

  20. B. Common Law Actions • 3. Prerequisites to Action(Possession): In order to bring an action in equity to quiet title, the plaintiff must be in actual possession of the real property involved,[FN1] or be in constructive possession following legal title in the plaintiffs, where no actual hostile occupancy is shown.[FN2] An action may also be brought when the plaintiff alleges facts showing that his or her title is contested, and that although he or she is out of possession, there are special reasons why he or she cannot sue at law, in ejectment, or otherwise.[FN3] • [FN1]Moores v. Townshend, 102 N.Y. 387, 7 N.E. 401 (1886), aff'd, 118 N.Y. 679, 23 N.E. 1147 (1890); [FN2]Whitney v. Considine Investing Company, 200 A.D. 193, 192 N.Y.S. 957 (2d Dep't 1922); [FN3]O'Donohue v. Smith, 130 A.D. 214, 114 N.Y.S. 536 (1st Dep't 1909).

  21. B. Common Law Actions • 3. Prerequisites to Action(No adequate remedy at law): As in equitable actions generally, a plaintiff in an action in equity to quiet title must show that he or she has no adequate remedy at law, or that there are special facts or circumstances which require the intervention of a court of equity. Thus, the statutory provisions relating to the recovery of real property and the determination of a claim to real property are exclusive remedies for any issues coming within the scope of their provisions, and an action in equity will not lie to accomplish the purposes for which such statutes were provided unless special facts are alleged showing that the remedy at law provided by them is not adequate and that resort must be had to a court of equity to secure proper relief. Pure Strains Farm Co. v. Smith, 99 Misc. 108, 163 N.Y.S. 615 (Sup 1917)

  22. B. Common Law Actions • 4. Mortgage liens as “clouds on title”:When a claim or lien purports to affect real property, and appears on its face to be valid, but the defect in it can be made to appear only by extrinsic evidence which will not necessarily appear in proceedings to enforce the claim or lien, there is a case presented for invoking the aid of equity to remove such claim or lien which consequently constitutes a cloud on the title. Elmhurst Fire Co. v. City of New York, 213 N.Y. 87, 106 N.E. 920 (1914) • Instruments executed without authority by agents, officers, and other fiduciaries may be cancelled as constituting clouds on title. For example, sales and conveyances by administrators and executors which are invalid because made without authority may be set aside as clouds.[FN1] Moreover, where an agent makes unauthorized alterations in a deed or mortgage,[FN2] or where officers of a membership corporation make a conveyance without the authority of the trustees,[FN3] the instrument constitutes a cloud on the title. • [FN1]Butler v. Johnson, 111 N.Y. 204, 18 N.E. 643 (1888); [FN2] Smith v. Fellows, 41 N.Y. Super. Ct. 36 (1876); [FN3]Rozwadow Young Men's Ass'n v. Langweil, 136 N.Y.S. 1065 (Sup 1912).

  23. B. Common Law Actions • 4. Mortgage liens as “clouds on title” (COnt’d): The fact alone that a party executes a mortgage which he or she later seeks to remove as a cloud on title does not deprive him or her of the right to maintain the action.[FN5] Instead, if the mortgage debt has been paid, if it is by law presumed to have been paid, or if the mortgage is invalid, the mortgagor may be entitled to maintain an equity action to have the apparent lien of the mortgage removed as a cloud on the mortgagor's title.[FN6] • [FN5]Greenberg v. Schwartz, 273 A.D. 814, 76 N.Y.S.2d 95 (2d Dep't 1948). • [FN6]Reich v. Cochran, 213 N.Y. 416, 107 N.E. 1029 (1915); Miner v. Beekman, 50 N.Y. 337, 14 Abb. Pr. N.S. 1, 1872 WL 10019 (1872).

  24. B. Common Law Actions • 5. Procedures, parties, and judgment: The process, pleadings, motions, trial, and judgment in an action in equity to quiet title or remove a cloud on title are governed generally by the Civil Practice Law and Rules. In New York there is no distinction between actions at law and suits in equity, nor between the forms of those actions and suits.[FN1] However, although the Civil Practice Law and Rules have abolished the distinctions between actions at law and suits in equity, such distinction still exists as part of the framework within which civil legal proceedings are brought.[FN2] • The procedures, parties, and judgment in the common law framework is nearly identical to those in the statutory context, with limited exceptions. As such, a detailed discussion of the common law authorities is omitted. • [FN1]N.Y. Jur. 2d, Actions § 1; [FN2]N.Y. Jur. 2d, Actions § 4.

  25. C. post-foreclosure sale relief • 1. nature of claim: When real property has been sold pursuant to a judgment in an action brought under the provisions governing actions to foreclose a mortgage[FN1] or the provisions governing the foreclosure of a mortgage by advertisement,[FN2] or has been conveyed to the mortgagee or the designee of the mortgagee by deed in lieu of foreclosure, and it appears from the public records or from the allegations of the complaint that the judgment, sale, or conveyance was or may have been, for any reason, void or voidable as against any person, including an owner of the real property mortgaged, an action may be maintained pursuant to the provisions governing actions to compel the determination of a claim to real property[FN3] to determine: • [FN1] N.Y. Real Prop. Acts. Law art. 13; [FN2] N.Y. Real Prop. Acts. Law art. 14; [FN3] N.Y. Real Prop. Acts. Law art. 15.

  26. C. post-foreclosure sale relief • 1. nature of claim (Cont’d): (1) the right of any person to set aside such judgment, sale, or conveyance; (2) the right of any person to enforce an equity of redemption; (3) the right of any person to recover possession of the property; or (4) the right of any junior mortgagee to foreclose a mortgage. • Such an action may be maintained even though an action against the defendant to foreclose the mortgage under which the judgment, sale, or conveyance was made, or to extinguish a right of redemption, would be barred by the statutes of limitation. N.Y. Real Prop. Acts. Law § 1503.

  27. C. post-foreclosure sale relief • 2. limitation on action: An action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and the mortgage so secured, or upon a mortgage of real property, or any interest therein, must be commenced within six years. [FN1]N.Y. C.P.L.R. 213(4), discussed in N.Y. Jur. 2d, Limitations and Laches § 176.

  28. C. post-foreclosure sale relief • 3. necessity of possession exception: With respect to real property that has been sold pursuant to a judgment in an action brought under the provisions governing actions to foreclose a mortgage[FN1] or the provisions governing the foreclosure of a mortgage by advertisement,[FN2] or that has been conveyed to the mortgagee or the designee of the mortgagee by deed in lieu of foreclosure, an action to determine claims where the foreclosure of a mortgage was void or voidable may be brought by the purchaser or the mortgagee or designee, or the successor of any such person, in possession of the real property.[FN3] • [FN1] N.Y. Real Prop. Acts. Law art. 13; [FN2] N.Y. Real Prop. Acts. Law art. 14; [FN3]N.Y. Real Prop. Acts. Law § 1503.

  29. C. post-foreclosure sale relief • 4. Judgments: Party may maintain an action as provided in this article to determine the right of any person to set aside such judgment, sale or conveyance or to enforce an equity of redemption or to recover possession of the property, or the right of any junior mortgagee to foreclose a mortgage. Such action may be maintained even though an action against the defendant to foreclose the mortgage under which the judgment, sale or conveyance was made, or to extinguish a right of redemption, would be barred by the statutes of limitation. RPAPL § 1503.

  30. D. case study: proper pleading of statutory action • Barberan v. Nationpoint, 706 F.Supp.2d 408 S.D.N.Y., 2010. • FACTS: (“Plaintiffs”), proceeding pro se, bring this action against Nationpoint, a Division of National City Bank (“Nationpoint”), Mortgage Electronic Registration Systems, Inc., Atima (“MERS”), Home Loan Services, Inc. d.b.a. Nationpoint Loan Services (“HLS”), LaSalle Bank National Association as Trustee for First Franklin Loan Trust 2006–FF–18, Mortgage Loan Asset–Backed Certificates, Series 2006–FF18 (“LaSalle”), First Franklin Mortgage Loan Trust Mortgage Loan Asset–Backed Certificates, Series 2006–FF18 (“Franklin Certificates”), and “unknown owners of the evidence of the debt and/or owners of the note,” asserting claims to quiettitle to the property. • Plaintiffs allege that MERS concealed the identity of the party for which it acted as a nominee and “falsely represent[ed] that MERS is still nominee.” ( Id. ¶ 31.) Plaintiffs further allege that MERS “recorded, or intends to record, a false assignment of the alleged loan” to unknown owners of the Note. ( Id. ¶ 77.) According to Plaintiffs, LaSalle is “not the holder of any note [or] mortgage relevant to Plaintiffs,” despite LaSalle's claims to the contrary. ( Id. ¶¶ 38–39.) Plaintiffs also claim that LaSalle and HLS “started foreclosure proceedings” on the Property in New York state court ( id. ¶ 126), and that HLS reported the foreclosure proceedings to credit bureaus, ( id. ¶ 127.) As a result, Plaintiffs allege that some of their credit cards were canceled and that their credit limit was decreased. ( Id. ¶ 128.)

  31. Barberan v. Nationpoint, 706 F.Supp.2d 408 S.D.N.Y., 2010. • standard of Review:On a Rule 12(b)(6) motion to dismiss a complaint, the court must accept a plaintiff's factual allegations as true and draw all reasonable inferences in [the plaintiff's] favor.” *413Gonzalez v. Caballero, 572 F.Supp.2d 463, 466 (S.D.N.Y.2008); see also Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir.2008). Accordingly, the Court will analyze whether Plaintiffs have adequately stated a claim for either an equitable quiettitle claim or a claim pursuant to RPAPL Article 15. • ruling as to QT:Here, Plaintiffs allege that they are in actual possession of the Property. (Am. Compl. ¶ 85.) Plaintiffs further claim that the Mortgage and Note, documents that Defendants believe are valid on their face, are actually invalid clouds on Plaintiffs' title to the Property because Plaintiffs never signed these documents. ( Id. ¶¶ 53–54.) Plaintiffs also allege that Defendants inserted false statements or fraudulently altered the mortgage documents ( id. ¶¶ 60, 81), and that LaSalle's purported assignment is fraudulent, ( id. ¶¶ 77, 82, 92). Thus, Plaintiffs have alleged facts sufficient to establish a plausible equitable quiettitle claim against Nationpoint, MERS, and LaSalle.

  32. Barberan v. Nationpoint, 706 F.Supp.2d 408 S.D.N.Y., 2010. • ruling as to QT (Con’d): Although somewhat unclear, Plaintiffs also appear to assert that Nationpoint, or MERS as its nominee, may claim an interest in the Property adverse to their own interest by stating that “[n]one of the Defendants” are owners or holders of the Note (id. ¶ 78), that “[t]he Holder, or a previous holder, has discharged the Promissory Note by materially and fraudulently altering it, and/or cancelling and/or renouncing it” (id. ¶ 81), and that “the alleged Mortgage has never been assigned by the Lender,” (id. ¶ 82). • The court said “Plaintiffs have sufficiently stated a claim under RPAPL Article 15 against LaSalle. Plaintiffs adequately describe the Property, including its address. (Am. Compl. ¶ 47.) Plaintiffs also claim absolute ownership of the Property, describing their interest as “superior and legal title” to the Property. ( Id. ¶ 87.) Plaintiffs further allege that LaSalle currently claims an interest in the Property adverse to their interest through the alleged mortgage, note, and assignment. ( Id. ¶ 38.) Thus, Plaintiffs have adequately alleged facts supporting an RPAPL Article 15 claim against LaSalle. see also *420Harris v. Thompson, No. 296152008, 24 Misc.3d 1248(A), 2009 WL 2915312, at *5 (Sup.Ct. Sept. 10, 2009) (finding plaintiffs' allegations that assignor of mortgage to defendant was not a bona fide encumbrancer sufficient to state claim pursuant to RPAPL Article 15).”

  33. Barberan v. Nationpoint, 706 F.Supp.2d 408 S.D.N.Y., 2010. • ruling as to QT (Con’d): As to Nationpoint and MERS, the court said “Construing Plaintiffs' pro se Amended Complaint liberally, the Court finds that these claims adequately allege that Nationpoint and MERS may claim an interest in the Property on the theory that the mortgage and note were never assigned to LaSalle.” • Defendants Arguments FAIL:Defendants' arguments are not to the contrary. Defendants contend that Plaintiffs' claims must fail because the mortgage, note, and assignment are valid and enforceable. (Defs.' Mem. 8–10.) However, the fact that a plaintiff “executed the mortgage which he now seeks to remove as a cloud on title does not deprive him of the right to maintain [a quiettitle] action.” Greenberg v. Schwartz, 273 A.D. 814, 76 N.Y.S.2d 95, 96 (1948); see also Cain v. Bethea, No. 04–CV–3946, 2007 WL 2859681, at *10–12 (E.D.N.Y. Aug. 17, 2007), adopted in part and rejected in part on other grounds,No. 04–CV–3946, 2007 WL 2846914 (E.D.N.Y.2007) (finding material issues of fact and denying summary judgment claim in RPAPL Article 15 action in which plaintiff claimed she did not knowingly sign deed conveying her property because she believed the document was a refinancing); Johnson v. Melnikoff, 65 A.D.3d 519, 882 N.Y.S.2d 914, 915 (2009) (granting summary judgment to plaintiff who signed deed when plaintiff showed deed was obtained through false pretenses).

  34. E. Assignee’s standing to foreclose • 1. Standing Generally:In order to commence a foreclosure action, a plaintiff must have a legal or equitable interest in the mortgage. A plaintiff has standing where it is the holder or assignee of both the subject mortgage and of the underlying note at the time the action is commenced Deutsche Bank Nat. Trust Co. v. Barnett 88 A.D.3d 636, 931 N.Y.S.2d 630 (2011) (citing Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532;Aurora Loan Servs., LLC v. Weisblum, 85 A.D.3d 95, 923 N.Y.S.2d 609;Wells Fargo Bank, N.A. v. Marchione, 69 A.D.3d 204, 207, 887 N.Y.S.2d 615;U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 890 N.Y.S.2d 578;Countrywide Home Loans, Inc. v. Gress, 68 A.D.3d 709, 888 N.Y.S.2d 914).

  35. E. Assignee’s standing to foreclose • 1. Standing Generally (cont’d): 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 mortgage passes with the debt as an inseparable incident. U.S. Bank, N.A. v. Adrian Collymore, 68 A.D.3d 752, 890 N.Y.S.2d 578 (2d Dep't 2009); see Deutsche Bank Nat. Trust Co. v. Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630 (2d Dep't 2011).

  36. E. Assignee’s standing to foreclose • 2. assignee fills shoes of originator: It has long been the law of New York that the assignee of a mortgage not securing a negotiable instrument is subject to any preexisting equities in favor of the mortgagor which existed against the assignor.[FN1] It is also well settled that an assignee of a mortgage must take it subject to the equities attending the original transaction.[FN2] If the mortgagee cannot enforce the mortgage, the assignee has no greater rights.[FN3] • [FN1] Trustees of Union College v. Wheeler, 61 NY 88; Beck v. Sheldon, 259 NY 208, 181 NE 360; Davis v. Beckstein, 69 NY 440; Ingraham v. Disborough, 47 NY 21; [FN2] Trustees of Union College v. Wheeler, 61 NY 88; Lapis Enterprises, Inc. v. International Blimpie Corp., 84 App Div 2d 286, 445 NYS2d 574; [FN3]Id.

  37. E. Assignee’s standing to foreclose • 3. Mortgage assignments generally: Because a mortgage is merely an incident to the debt which it is intended to secure, a transfer of the mortgage without the debt is a nullity and no interest is acquired by it.[FN1] The security cannot be separated from the debt and exist independently of it.[FN2] Similarly, since a mortgage is a mere incident of the bond or collateral security for the debt, an assignment of the mortgage lien without an assignment of the debt is, in law, a nullity.[FN3] • [FN1]Bank of New York v. Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532 (2d Dep't 2011); [FN2]Merritt v. Bartholick, 36 NY 44; [FN3]Flyer v. Sullivan, 284 App Div 697, 134 NYS2d 521.

  38. E. Assignee’s standing to foreclose • 4. properly effecting mortgage assignments:Even in the absence of an endorsement or other written transfer, the delivery of a bond or note with the intent to assign it operates as an assignment of the debt and, therefore, of the mortgage.[FN8] An assignment may be effected by delivery of the bond or note, or other evidence of debt, together with the mortgage.[FN9] While an assignment may, in some circumstances, be done by spoken word,[FN10] a written assignment is the surest and safest method of accomplishing a transfer. Of course, the assignment must be in writing to obtain the benefits of recording. It is not necessary to specifically prove that a written assignment was made for good and valuable consideration since consideration for a written assignment is presumed.[FN12] The assignee's possession of an instrument of assignment is presumptive evidence of delivery of the instrument for valid consideration.[FN13] • [FN8]Weaver Hardware Co. v. Solomovitz, 235 NY 321, 139 NE 353; Curtis v. Moore, 152 NY 159, 46 NE 168; [FN9]Id.;[FN10]Levy v. Louvre Realty Co., 222 NY 14, 118 NE 207; [FN12] Gen Obligations Law § 5-1107; [FN13]Davin v. Isman, 228 NY 1, 126 NE 257.

  39. E. Assignee’s standing to foreclose • 4. properly effecting mortgage assignments (Cont’d):An assignment which is champertous is not enforceable because it is in contravention of public policy and thus champerty may be asserted in defense to an action brought by the assignee.[FN15] To fall within the statutory prohibition against champerty, an assignment must be made for the very purpose of bringing suit. If the assignment is made for a legitimate business purpose, suit may be brought.[FN15.50] The provisions of the Uniform Commercial Code, rather than the Real Property Actions and Proceeding Law, apply to all facets of transactions using mortgages and notes as collateral except those issues that arise when the mortgage creditor is attempting to enforce the mortgagee's rights under the mortgage.[FN16] • [FN15] See Gen Obligations Law § 13-101; Transbel Inv. Co. v. Roth, 36 F Supp 396; Frank H. Zindle, Inc. v. Friedman's Express, 258 App Div 636, 17 NYS2d 594; See Federal Deposit Ins. Corp. v. Suffolk Place Associates, Inc., 270 A.D.2d 304, 704 N.Y.S.2d 300 (2d Dep't 2000); [FN16]Federal Deposit Ins. Corp. v. Forte, 94 App Div 2d 59, 463 NYS2d 844.

  40. E. Assignee’s standing to foreclose • 5. COntents of written assignment: An allonge endorsement of a mortgage note that constitutes a negotiable instrument effectively transfers any mortgage given as security for the note as an incident thereof.[FN8.60] An assignment in blank has been held to be invalid.[FN9] This holding comports with the ruling of the Court of Appeals with regard to a mortgage in blank, which held that an instrument purporting to be a mortgage, but which is left blank as to the name of the payee, is absolutely void.[FN10] • [FN8.60]Wells Fargo Bank, NA v. Perry, 23 Misc. 3d 827, 875 N.Y.S.2d 853 (Sup 2009); [FN9]Curtis v. Cutler, 76 F 16; [FN10]Hurlburt v. Walker, 258 NY 8, 179 NE 34, followed Chauncey v. Arnold, 24 NY 330.

  41. E. Assignee’s standing to foreclose • 5. COntents of written assignment (cont’d): The assignment should not be worded to imply or indicate that an assignment of the mortgage only is intended. While an assignment of the debt will automatically carry with it an assignment of the security for it,[FN13] an assignment of the security interest alone, without an assignment of the debt, may be considered a nullity[FN14] if it can be established that no assignment of the debt was intended and an instrument of obligation was originally given.[FN15] • It has likewise been held that the assignment of a bank's beneficial interest under a mortgage, rather than the mortgage note or underlying obligation, will not confer standing upon the putative mortgagee to bring a foreclosure action.[FN16] • [FN13] Jackson v. Blodget, 2 Cow 202; In re Falls, 31 Misc 658, 66 NYS 47 affd 66 App Div 616, 73 NYS 1134; [FN14]In re Pirie, 198 NY 209, 91 NE 587; Merritt v. Bartholick, 36 NY 44; Cooper v. Newland, 17 Abb Prac 342; [FN15]Campbell v. Birch, 60 NY 214; Syracuse Sav. Bank v. Merrick, 96 App Div 581, 89 NYS 238, revd on other grounds 182 NY 387, 75 NE 232; [FN16]Deutsche Bank Nat. Trust Co. v. McRae, 27 Misc. 3d 247, 894 N.Y.S.2d 720 (Sup 2010).

  42. E. Assignee’s standing to foreclose • 5. interaction of state assignment law and the UCC:The discussion in the preceding section was specifically limited to those cases where the debt was not evidenced by negotiable commercial paper. Where the debt is so evidenced, there are many problems created by the interaction of the Uniform Commercial Code and the law of mortgages. The most important of these concerns defenses available to the mortgagor against the holder of the paper after its transfer by the original mortgagee. New York early adopted the rule that the holder in due course of such negotiable paper, whether a note or a bond, is not subject to any defenses or equities raised against his transferer by the mortgagor, save those which can be raised against the note itself under the Uniform Commercial Code. See Trustees of Union College v. Wheeler, 61 NY 88; Moore v. Metropolitan Nat. Bank, 55 NY 41.

  43. E. Assignee’s standing to foreclose • 6. SOME ADDITIONAL PRACTICE SUGGESTIONS:The assignment should always be checked for language assigning the bond as well as the mortgage; it should not be accepted unless the original bond, mortgage and related instruments are delivered with it. The assignee should always require an assignment with a covenant as to the principal balance due, and appropriate estoppel certification, as has been pointed out. While the assignment is usually expressed as being in consideration of a nominal sum (e.g., "one dollar and other good and valuable consideration"), the assignment made by an executor, administrator, trustee or other fiduciary should express on its face the full consideration, except that this is not essential when it is part of the distribution of the estate or corpus. 1 Mortgages and Mortgage Foreclosure in N.Y. § 18:13

  44. F. TWO CASE STUDIES ON DENIAL OF STANDING TO FORECLOSE • Deutsche Bank Nat. Trust Co. v. Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630, N.Y.A.D. 2 Dept.,2011. • Facts: Deutche Bank sought foreclosure and was granted summary judgment. Homeowner appealed contending there was insufficient evidence to support the finding that Plaintiff had “standing” to foreclose, and other material fact issues were raised in homeowners responses. • Ruling: “The documentation submitted failed to establish*638 that, prior to commencement of the action, the plaintiff was the holder or assignee of both the note and mortgage. The plaintiff submitted copies of two different versions of an undated allonge which was purportedly affixed to the original note pursuant to UCC 3–202(2) ( see Slutsky v. Blooming Grove Inn, Inc., 147 A.D.2d 208, 212, 542 N.Y.S.2d 721). Moreover, these allonges purporting to endorse the note from First Franklin, A **632 Division of National City Bank of Indiana (hereinafter Franklin of Indiana) to the plaintiff conflict with the copy of the note submitted, which contains undated endorsements from Franklin of Indiana to First Franklin Financial Corporation (hereinafter Franklin Financial), then from Franklin Financial in blank.”

  45. Deutsche Bank Nat. Trust Co. v. Barnett, 88 A.D.3d 636, 931 N.Y.S.2d 630, N.Y.A.D. 2 Dept.,2011. • RULING (CONT’D): The plaintiff also failed to establish that the note was physically delivered to it prior to the commencement of this action. The vice president of the plaintiff's servicing agent and the plaintiff's counsel both affirmed that the original note is in the possession of the plaintiff's counsel. However, the affidavits did not state any factual details concerning when the plaintiff received physical possession of the note and, thus, failed to establish that the plaintiff had physical possession of the note prior to commencing this action ( see Aurora Loan Servs., LLC v. Weisblum, 85 A.D.3d at 108, 923 N.Y.S.2d 609;U.S. Bank, N.A. v. Collymore, 68 A.D.3d at 754, 890 N.Y.S.2d 578). • Finally, the Certificates of Resolution and Incumbency submitted to establish the authority of one Eileen Gonzales to execute a September 14, 2007, assignment of mortgage from Franklin Financial to the plaintiff were executed after the subject assignment and, thus, cannot establish that she had such authority at the time the mortgage assignment was made. These inconsistencies raise an issue of fact as to the plaintiff's standing to commence this action. Thus, the Supreme Court should have denied those branches of the plaintiff's motion which were to strike the answer, for summary judgment on the complaint, and for an order of reference; the cross motion was properly denied ( see U.S. Bank N.A. v. Madero, 80 A.D.3d 751, 753, 915 N.Y.S.2d 612).

  46. U.S. Bank, N.A. v. Adrian Collymore, 68 A.D.3d 752, 890 N.Y.S.2d 578, N.Y.A.D. 2 Dept.,2009. • Facts: On January 15, 2008, the Bank commenced this foreclosure action alleging that it was the holder of the note and mortgage, and that the defendant had defaulted upon his payment obligations as of August 1, 2007. In his verified answer, the defendant alleged lack of standing as an affirmative defense. The Bank thereafter moved, inter alia, for summary judgment and to appoint a referee to compute the sums due and owing under the note and mortgage, and the defendant cross-moved to dismiss the complaint, alleging, inter alia, that the Bank lacked standing to commence this action. • RULING: BANK Failed to demonstrate its prima facie entitlement to judgment as a matter of law because it did not submit sufficient evidence to demonstrate its standing as the lawful holder or assignee of the subject note on the date it commenced this action. The Bank's evidentiary submissions were insufficient to establish that MERS effectively assigned the subject note to it prior to the commencement of this action ( see Slutsky v. Blooming Grove Inn, 147 A.D.2d 208, 212, 542 N.Y.S.2d 721), and the mere assignment of the mortgage without an effective assignment of the underlying note is a nullity ( see Merritt v. Bartholick, 36 N.Y. at 45;Kluge v. Fugazy, 145 A.D.2d at 538, 536 N.Y.S.2d 92). Furthermore, the Bank failed to establish that the note was physically delivered to it prior to the commencement of the action. The affidavit of a vice president of the Bank submitted in support of summary judgment did not indicate when the note was physically delivered to the Bank, and the version of the note attached to the vice president's affidavit contained an undated indorsement in blank by the original lender.

  47. U.S. Bank, N.A. v. Adrian Collymore, 68 A.D.3d 752, 890 N.Y.S.2d 578, N.Y.A.D. 2 Dept.,2009. • RULING (CONT’D): Furthermore, the Bank's reply submissions included a different version of the note and an affidavit from a director of the Residential Funding Corporation which contradicted the affidavit of the Bank's vice president in tracing the history of transfers of the mortgage and note to the Bank. In view of the Bank's incomplete and conflicting evidentiary submissions, an issue of fact remains as to whether it had standing to commence this action. Accordingly, those branches of the Bank's motion which were for summary judgment and to appoint a referee to compute the sums due and owing under the note and mortgage were properly denied ( see TPZ Corp. v. Dabbs, 25 A.D.3d 787, 789, 808 N.Y.S.2d 746).

  48. F. BASIC MORTGAGE WORKOUT OPTIONS • BASICS OF A WORKOUT:One of the primary reasons for the lender to agree to a workout of a securitized loan is to have the borrower reconfirm the original information that the lender received and, most importantly, waive any claims that the borrower may have or think that he or she may have against the lender. Considering the cost of litigation with the borrower or other creditors, even one with a limited or nonexistent claim, executing an agreement providing the borrower with a short respite to get its affairs in order or attempt to solve some or all of its financial problems is a small price to pay for the peace of mind that can be achieved through an agreement that contains a waiver of the lender.

  49. F. BASIC MORTGAGE WORKOUT OPTIONS • When a loan is in default and the parties decide that some change must be made, the principal alternatives (including workouts) are:[FN1] • A. Judicial foreclosure. • B. Voluntary or involuntary bankruptcy by the Borrower. • C. Litigation over the loan or over acts by the parties. YES! • D. Workout with the property being deeded to third party. • E. Workout with an uncontested foreclosure and agreement. • F. Restructuring the loan. A restructuring of the debt usually takes one of these forms: • a. Transfer of real estate from the borrower to the lender to fully or partially satisfy the debt (deed in lieu of foreclosure).[FN1.30] • b. The transfer of an equity interest to the lender to fully or partially satisfy the debt.[FN1.70] • Cont’d next slide: • COn

  50. F. BASIC MORTGAGE WORKOUT OPTIONS • c. Modification of terms of a debt, such as one or a combination of: • — Reduction of the interest rate. • — Extension of the maturity date at an interest rate that is lower than market rate. • — Reduction of the face amount of the loan. • — Reduction of accrued interest.

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