As we said in our case summaries, the questions in these cases are whether a foreclosure defendant forfeits the affirmative defense of standing by failing to raise it in an answer or motion to dismiss and how, once the defense is raised, a foreclosure plaintiff establishes standing. In Nelson, the Court (Mem.) held that, under the law in effect when the case was dismissed, plaintiffs forfeit a standing defense unless they raise it in an answer or pre-answer motion to dismiss. And in Caliguri, the Court (Mem.) held that a foreclosure plaintiff may establish standing by submitting a copy of the original note endorsed in blank.
The defendants in Nelson were homeowners who took out a mortgage loan for which they signed a promissory note in favor of Knightsbridge Mortgage Bankers. Knightsbridge transferred the note to Wells Fargo, which then endorsed the note in blank—allowing any holder to demand repayment—to a mortgage-backed-securitization trust. When the Nelsons defaulted, U.S. Bank, the trustee for the trust and holder of the note, sued. On summary judgment, the Nelsons claimed, for the first time, that US Bank lacked standing because it had not shown that it was the holder of the note.
The Court held that the Nelsons raised the defense too late. Because CPLR 3211(e) requires that lack of standing be raised as an affirmative defense in an answer or pre-answer motion to dismiss, the Nelsons waived it by waiting until summary judgment to raise it. The Court noted that its holding was based on “the law in effect at the time of the orders appealed from.” That was a reference to RPAPL 1302-A, which was passed while the case was pending in the Court of Appeals and which allows a foreclosure defendant to raise an “objection or defense based on the plaintiff’s lack of standing” at any time before a judgment of foreclosure.
Judge Wilson concurred in the result. He explained that whether a foreclosure plaintiff is the holder of a note is not an issue of standing. Because the holder of a promissory note endorsed in blank is considered to be a party to the note, and because a promissory note is a contract, the real issue is whether the plaintiff is a party to the contract. And whether a plaintiff is a party to the contract is a substantive element of a claim based on that contract, not a question of standing. Standing, Judge Wilson noted, concerns “whether a plaintiff has suffered some injury and is arguably within the zone of interest to be protected by the statute or regulation.”
Still, Judge Wilson voted to affirm the judgment in U.S. Bank’s favor. U.S. Bank produced a copy of the note endorsed in blank, the mortgage, and the assignment of mortgage on summary on summary judgment. “Doing so,” Judge Wilson observed, established, prima facie, U.S. Bank’s right to judgment as a matter of law.” And the Nelsons offered no contradictory evidence.
In Caliguri, the defendant preserved his standing defense by raising it in his answer. On summary judgment, the bank (JPMorgan Chase) submitted a copy of the note endorsed in blank, along with “other supporting material, including an affidavit of possession based on an employee’s review of [the bank’s] business records.” Although “[t]here is no ‘checklist of required proof to establish standing,” Chase’s submission sufficed in this case. The Court rejected the defendant’s request to bless a bright-light rule that a foreclosure plaintiff must produce the original note. Chase’s submission of a copy was enough.