You represent the plaintiff-assignee on motion for summary judgment under Civil Practice Law and Rule 3212 in a commercial mortgage foreclosure action. Your “affirmation of regularity” is supported by a complaint verified in New Jersey. The assignment was effected and acknowledged, in Pennsylvania, under a power of attorney notarized in California. All documents – the power of attorney, the assignment of mortgage and the verification – were properly executed in the jurisdictions where they were signed.
So “all of your [predicate legal] ducks are lined up.” No heavy lifting here. File the motion and “judgment day” is near. (Sorry for the mixed metaphors.) But wait a minute!! None of the documents signed outside the state contain the so-called “certificate of conformity” required by CPLR 2309(c) and Real Property Law § 299-a. Was the assignment of the mortgage effective? And is your evidence in admissible form?
THE LEGAL/STATUTORY FRAMEWORK
In order to obtain summary judgment pursuant to CPLR 3212 a party must present uncontroverted and dispositive proof in admissible form. Friends of Animals, Inc. v. Associated Fur Manufacturers, Inc., 46 N.Y.2d 1065, 416 N.Y.S.2d 790, 390 N.E. 2d 298 (1979). However, such proof, if based upon an “oath or affirmation taken without the state” must, according to CPLR 2309(c), be “accompanied by such certificate or certificates as would be required to entitle a deed acknowledged outside the state to be recorded within the state[.]”
And RPL 299-a requires validation of an out-of-state acknowledgement “by a certificate to the effect that [the acknowledgment] conforms with [the laws of the jurisdiction where taken].” Without a so-called “certificate of conformity”, as required CPLR 2309(c) and RPL 299-a, is the mortgagee’s motion for summary judgment based upon a defective “house of [inadmissible] cards”: an attorney’s affirmation that is not based upon personal knowledge of the facts, a New Jersey verification of the complaint, a Pennsylvania assignment, and a California power of attorney?
THE ‘AFFIDAVIT OF REGULARITY’
CPLR 3212(b) mandates that “[a] motion for summary judgment shall be supported by affidavit, by a copy of the pleadings, and by other available proof, such as depositions and written admissions. The affidavit shall be by a person having knowledge of the facts [.]”
The motion for summary judgment is based upon an attorney’s affirmation. The attorney does not have personal knowledge of the facts. The affirmation may not suffice as any evidence, much more proof, upon the lender’s motion because an attorney’s affirmation that is not based upon personal knowledge of the underlying facts or transactions is of no probative value for purposes of a summary judgment motion. Marcus & Millichap Real Estate Investment Services of NY v. Donegan, 26 Misc.3d 1227(A), 907 N.Y.S.2d 438 (Sup. Ct. Kings Co. 2010); Citibank (South Dakota), N.A. v. Martin, 11 Misc.3d 219, 807 N.Y.S.2d 284, 2005 N.Y. Slip Op. 25536 (Civ. Ct. N.Y. Co. 2005).
Accordingly, the motion for summary judgment may be denied because the mortgagee has failed to meet its initial burden of establishing prima facie entitlement to judgment as a matter of law. Emigrant Mortgage Company, Inc. v. Fitzpatrick, 29 Misc.3d 745, 906 N.Y.S.2d 874 (Sup. Ct. Suff. Co. 2010).
Hold on! CPLR 105(u) provides that “[a] ‘verified pleading’ may be utilized as an affidavit whenever the latter is required”. However, the verified complaint fails to satisfy CPLR 2309(c) which requires that:
(c) Oaths and affirmations taken without the state. An oath or affirmation taken without the state shall be treated as if taken within the state if it is accompanied by such certificate or certificates as would be required to entitle a deed acknowledged without the state to be recorded within the state if such deed had been acknowledged before the officer who administered the oath or affirmation.
And, in this regard, RPL 299-a requires validation of an out-of-state acknowledgement “by a certificate to the effect that [the acknowledgement] conforms with [the laws of the jurisdiction where taken]” – the so-called “certificate of conformity”.
THE ASSIGNMENT AND POWER OF ATTORNEY
“Standing to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.” Caprer v. Nussbaum, 36 A.D.3d 176, 182, 825 N.Y.S.2d 55 (2d Dept 2006). If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. Stark v. Goldberg, 297 A.D.2d 203, 746 N.Y.S.2d 280 (1st Dept 2002).
It is well established that “[i]f a plaintiff lacks standing to sue, it may not proceed in the action.” HSBC Bank USA, N.A. v. Vasquez, 24 Misc.3d 1239(A), 901 N.Y.S.2d 899 (Sup. Ct. Kings Co. 2009), citing Stark v. Goldberg, 297 A.D.2d 203, 204, 746 N.Y.S.2d 280 (1st Dept 2002). It has also been held that only “the owner of the note and mortgage at the time of the commencement of a foreclosure action may properly prosecute said action.” LaSalle Bank Nat. Ass’n v. Lamy, 12 Misc.3d 1191(A), at *1, 824 N.Y.S.2d 769 (Sup. Ct. Suffolk Co. 2006), citing Kluge v. Fugazy, 145 A.D.2d 537, 536 N.Y.S.2d 92 (2nd Dept 1988).
A real property mortgagee lacks standing to sue where the lender cannot establish that it owed the subject note and mortgage on the date the action was commenced. Deutsch Bank Nat’l Trust Co. v. Francis, 2011 N.Y. Slip Op. 50423(U) (Sup. Ct. Kings Co. 2011); LPP Mtge. Ltd. v. Sabine Props. LLC, 2010 N.Y. Slip Op. 32367(U), 2010 N.Y. Misc. LEXIS 4216 (Sup. Ct. N.Y. Co. 2010). Accordingly, where an assignee cannot establish the elements of its claim, because the purported assignment documents are inadmissible, the mortgagee may have failed to establish that it has standing to sue.
Needless to say:
a party cannot foreclose on a mortgage without having title, giving it standing to bring the action. (See Kluge v. Fugazy, 145 A.D.2d 537, 538, 536 N.Y.S.2d 92 (2nd Dept. 1988), holding that a “foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity”. Katz v. East-Ville Realty Co., 249 A.D.2d 243, 672 N.Y.S.2d 308 (1st Dept. 1998), holding that “[p]laintiff’s attempt to foreclose upon a mortgage in which he had no legal or equitable interest was without foundation in law or fact”. HSBC Bank USA v. Squitieri, 29 Misc.3d 1225(A), 2010 N.Y. Slip Op. 52000(U) (Sup. Ct. Kings Co. 2010).
The requirement that documents executed out of state be accompanied by a “certificate of conformity” is not waived simply because the mortgagee is an assignee. MBNA America Bank, N.A. v. Nelson, 15 Misc.3d 1148(A), 841 N.Y.S.2d 826 (Civ. Ct. Richmond Co. 2007). Our plaintiff may not be able prove, by the submission of evidence in admissible form, that the mortgage that the assignee seeks to foreclose, and the note allegedly secured thereby, were properly and effectively assigned.1 Chase Bank USA, N.A. v. Cardello, 27 Misc.3d 791, 896 N.Y.S.2d 856 (Civ. Ct. Rich. Co. 2010).
In Chase Bank USA N.A., the Court refused to recognize an assignment because —
[T]he assignment is not accompanied by a certificate of conformity establishing the authority of the notary to take the acknowledgment (see Fort Motor Credit Co. v. Prestige Gown Cleaning Service Inc., 193 Misc.2d 262, 264, 748 N.Y.S.2d 235 (2002); CPLR § 2309(c); RPL § 299-a; Raytsin v. Discover Bank N.A. 6 Misc.3d 48, 790 N.Y.S.2d 808 (2004)). The failure to attach a certificate of conformity makes the assignment ineffective.
Both the First Department and the Second Department have held that out-of-state submissions that lack the required “certificate of conformity” are not properly before the Court. Green v. Fairway Operating Corp., 72 A.D.3d 613, 898 N.Y.S.2d 848 (1st Dept 2010); and PRA III LLC. v. Gonzalez, 54 A.D.3d 917, 864 N.Y.S.2d 140 (2d Dept 2008).
In Green, the First Department stated:
Plaintiff fails to show a meritorious cause of action (see Kalisch v. Maple Trade Fin. Corp., 35 A.D.3d 291, 827 N.Y.S.2d 40 ). In order to establish a meritorious cause of action, the affidavit of her nonparty witness who accompanied her to the supermarket, was essential. The affidavit of plaintiff’s witness, purportedly sworn to in the Dominican Republic, lacks the certificate of conformity (Real Property Law § 301-a) required by CPLR 2309(c), and therefore is not properly before the Court (see Matter of Elizabeth R.E. v. Doundley A.E., 44 A.D.3d 332, 841 N.Y.S.2d 871 ).
In GE Business Financial Services, Inc., 2011 NY Slip Op 33000(U) [Sup. Ct. NY Co. November 11, 2011] (Scarpullo, J.), the Court granted the mortgagee’s motion for summary judgment with respect to its foreclosure claim because, among other things, the affidavit submitted in opposition to the application, executed in Dallas, Texas, was not accompanied by a certificate of conformity.
In several cases where an out-of-state affidavit submitted on behalf of a mortgagee in a commercial foreclosure proceeding did not contain a certificate of conformity, the Court permitted the plaintiff to cure “this irregularity in its reply papers by submitting an affidavit with a certificate of conformity[.]” See, e.g., Aurora Bank FSB v. ERA International LLC, 2011 NY Slip Op 31351U (Sup. Ct., Q. Co.) (Elliot, J.) [May 16, 2011].
Many of the issues relating to the requirement for a “certificate of conformity” were recently addressed in MB Financial Bank, N.A. v. 22 Renwick Street, Sup. Ct. NY Co., Index No. 650048/11 (October 12, 2011, Schweitzer, J.). In MB Financial, the Court held that “[t]he irregularity [of the omission of a certificate of conformity attesting to the verification of the complaint] has been rectified nunc pro tunc.” The Court also held that “CPLR 2309(c) does not require a certificate of conformity [with respect to the acknowledgment of the assignments of the mortgages and the power of attorney given by the FDIC] as [such section] relates only to oaths and affirmations [and the acknowledgments] complied substantially with RPL 309-b[.]”
Parenthetically, authenticating documents as “business records” that were “made in the regular course of business”, pursuant to CPLR 4518(a), creates challenges of its own where, as is often the case in commercial mortgage foreclosure proceedings, the plaintiff is one or more steps removed (by assignment or otherwise) from the original lender/ transaction and/or event of default. See, e.g, Chase Bank US N.A. v. Gergis, 2011 NY Slip Op 51068(U),Civ. Ct. Kings Co. June 15, 2011 (Dear, J.), a suit to collect a credit card account, in which the Court denied “business record” status to documents, and characterized as inadmissible, “robo-testimony” by a witness who had no personal knowledge about the practices and procedures of the predecessor bank that created the proferred documents.
POSTSCRIPT – STANDING (MERS) UPDATE
Cases raising the issue of whether MERS, either as mortgagee, assignee and/or nominee, has standing to sue as a mortgage foreclosure proceeding plaintiff are ubiquitous. The Second Department, in Bank of New York v. Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532, 2011 NY Slip Op 05002 (June 7, 2011), recently head on the issue of whether or not MERS had standing to sue where the mortgage, but not the underlying note, had been assigned to MERS. The Appellate Division started with the premises that: “In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced[;] “a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it[;]” and “the foreclosure of a mortgage cannot be pursued by one who has no demonstrated right to the debt[.]”
The proceeding involved mortgage documents in favor of MERS, as mortgagee and nominee of Countrywide, that were subsequently assigned to Bank of New York. The Silverberg Court concluded that “because MERS was never the lawful holder or assignee of the notes described in the mortgage consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the plaintiff.”2
Silverberg (decided on June 7, 2011) may simply have become a point of departure in the ongoing “does MERS have standing to sue” dispute. HSBC Bank USA, N.A. v. Taher, 3 Misc.3d 1208A, 2011 NY Slip Op. 51208(U), Sup. Ct. K. Co. July 1, 2011 (Schack, J.), was a residential mortgage foreclosure proceeding in which MERS assigned the subject note and mortgage to HSBC. MERS was the assignee of Delta Funding Corporation for the purpose of recording the mortgage; however, Delta was found by the Court to be the actual “note holder”. Citing Silverberg, the HSBC Court concluded that MERS was simply a nominee of Delta for the limited purpose of recording (but not assigning) the mortgage.
In Deutsch Bank National Trust Company v. Pietranico, 928 N.Y.S.2d 818, 2011 NY Slip Op. 21261, Sup. Ct. N.Y. Co. July 27, 2011 (Whelan, J.), the Court – after referencing Silverberg – noted that “[t]he use of a nominee in real estate transactions, and as a mortgagee in a recorded mortgage, is a long standing practice”; and RPL § 275(3) “recognizes the practice of lenders selling mortgages into the secondary market, as well as the practice of designating ‘nominees’ in such transaction[.]” Justice Shack, as follows, rejected the defendants’ attack against the validity of the assignment of the mortgage: “[S]tanding is demonstrated by possession of the note, under the circumstances of this case, by virtue of the interrelatedness of the note and the mortgage, the role of MERS as the nominee for the underlying lender, and the fact that in the MERS system, members contractually agree to appoint MERS to act as their common agent on all mortgages they register[.]” Accordingly, the Court found “the role of MERS, as nominee is not an impediment to plaintiff’s standing to bring a foreclosure action, particularly where the borrower expressly agreed without qualification that MERS had the right to foreclose in the event of a default[.]”.
The Court in HSBC Bank relied upon Silverberg in finding that MERS, as agent for Delta, “failed to submit documents authorizing MERS, as nominee for [Delta] to assign [the subject mortgage to HSBC].” The PietranicoCourt distinguished Silverberg on the ground that “there is sufficient evidence to demonstrate that MERS had the authority from the lender to assign the mortgage.”
Thus, Silverberg may not be dispositive of the ordinarily fact (document) sensitive question of MERS standing – which issue, it appears, may have to be resolved on a case-by-case (document-by-document) basis.
Clearly, New York courts have shown a willingness to enforce CPLR 2309(c) and RPL 299-a as foreclosure proceedings continue to clog the dockets. Due to the sheer volume of foreclosure proceedings, courts are keen to protect debtors against fraudulent and otherwise improper motion papers.
Further, due to the multi-state reach of the securitization industry, courts must be wary of the legitimacy of out-of-state submissions. In addition, strict judicial enforcement of these seemingly “technical” statutory defenses has the (judicially) desired effect of helping to clear the docket of the avalanche of foreclosure cases. And the Silverberg-HSB-Pietranico MERS-related conundrum remains. For all these reasons, the foreclosing party must be careful to comply with these statutory provisions, and debtors must be alert to these available defenses.
1 As established by the Court of Appeals in Winegrad v. New York University Medical Center, 64 N.Y.2d 851, 476 N.E.2d 642, 487 N.Y.S.2d 316 (1985):
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case (see, Zuckerman v. City of New York, 49 N.Y.2d 557, 562, [427 N.Y.S.2d 595, 404 N.E.2d 718 (1980)]; Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404, [144 N.E.2d 387, 165 N.Y.S.2d 498 (1957)]. Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers. (Matter of Redemption Church of Christ v. Williams, 84 A.D.2d 648, 649, [444 N.Y.S.2d 305 (3d Dept. 1981)]; Greenberg v. Manlon Realty, 43 A.D.2d 968, 969, [352 N.Y.S.2d 494 (2d Dept. 1974)]. (italics added)
2 The significance of the decision in Silverberg cannot be either overstated or ignored. As the Second Department noted: “MERS purportedly holds approximately 60 million mortgage loans…and is involved in the origination of approximately 60% of all mortgage loans in the United States.”
Victor M. Metsch is a senior litigation partner at Hartman & Craven LLP