The borrower took out a home loan and signed a promissory note and mortgage, giving the lender a security interest in the property. The mortgage was later transferred several times and eventually assigned to the foreclosing party, which claimed to hold both the note and the mortgage. In the meantime, the borrower transferred the property by deed (subject to the mortgage) to a new owner (the “property owner”). There was no evidence that the property owner assumed liability or was added as a party to the note or mortgage. The property owner failed to comply with the mortgage. As a result, the foreclosing party filed a foreclosure action against him as the holder of the deed and moved for summary judgment. The property owner opposed summary judgment and moved to dismiss, arguing that the foreclosing party lacked standing to foreclose because the allonges with the endorsements were not “firmly affixed” to the note and therefore did not prove holder status under N.Y. U.C.C. Article 3 (“Article 3”). The property owner also argued, in the alternative, that the notice of default was improper. The district court denied the property owner’s motion to dismiss and granted the foreclosing party’s summary judgment motion, finding the foreclosing party had standing and entered a judgment of foreclosure and sale. The property owner appealed.
In Courchevel 1850 LLC v. Koznitz I LLC., No. 23-7263-cv, 2025 WL 1512953, 2025 U.S. App. LEXIS 12891 (2d Cir. May 28, 2025) (unpublished opinion), the Second Circuit affirmed the district court’s judgment of foreclosure and sale. The court explained that, under New York law, a foreclosing plaintiff must establish its standing by demonstrating that it was either the holder or assignee of the promissory note at the time the action was commenced. Actual possession of the original note before filing is sufficient to confer standing, even where the endorsements may be technically deficient or not truly “firmly affixed.” Accordingly, the foreclosing party here had demonstrated a complete and continuous chain of title, producing the original note containing special endorsements tracing ownership from the original lender through each transfer, and providing evidence of possession before filing suit. Because the foreclosing party satisfied the requirements under Article 3, it had standing to enforce the instrument and pursue the foreclosure action. Finally, the court rejected the property owner’s affirmative defense challenging the adequacy of the notice of default. Under New York law, “an entity that is ‘not a party to either the note or mortgage [ ] lacks standing to raise as a defense to [a foreclosure] action the [foreclosing party]’s alleged failure to serve a notice of default in accordance with the terms of the note or mortgage.” Bank of N.Y. Mellon Tr. Co., N.A. v. Obadia, 111 N.Y.S.3d 59 (N.Y. App. 2019). The court emphasized that the property owner could not provide any evidence that he had been substituted or added to the note or mortgage; therefore, he lacked standing to raise this defense.
By Landon Womack [email protected]
Edited By Jace Brown [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]