The question in this case is whether a foreclosure defendant preserves the defense of lack of standing if the answer denies the plaintiff’s allegation of standing but does not separately plead lack of standing as an affirmative defense.
The facts are straightforward. Defendants defaulted on a loan secured by a mortgage, and US Bank commenced this action to foreclose on the loan. The complaint alleged that US Bank was “the owner and holder” of the mortgage being foreclosed. Defendants’ answers denied information sufficient to confirm the truth of that allegation, but did not separately allege that plaintiff lacked standing to commence the action. Supreme Court granted US Bank’s motion for a judgment of foreclosure and denied defendants’ motion to dismiss for, among other reasons, lack of standing.
A divided panel of the Second Department affirmed. The majority noted that, as a general matter, a defendant is not required to affirmatively plead in its answer that the plaintiff failed to allege some essential element of a claim; it is enough to simply deny the plaintiff’s allegations. But a defendant is required to affirmatively plead any matter that is not the plaintiff’s burden to prove as part of the claim. And standing is not an essential element of a foreclosure claim; the issue arises only if defendant raises it. So, the majority held, a defendant could forfeit the defense of lack of standing by failing to affirmatively plead it in the answer or raise the defense in a pre-answer motion to dismiss. And while the majority stressed that no “magic words” or “ritualistic formulation” was required, a “mere denial of factual allegations will not suffice.”
A single judge dissented. The dissenter concluded that a denial of the plaintiff’s factual allegations of standing would put a plaintiff on notice that standing would be in issue. And given the notice function of pleading, such a denial should be sufficient to plead the defense of lack of standing, regardless whether it is expressly labeled a “defense” or an “affirmative defense.”
The Second Department granted defendants leave to appeal.
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