The mortgagor owned a residential apartment building financed and secured by a consolidated mortgage. The creditor claims that the original lender assigned the mortgage to an intermediary, who later assigned both the promissory note and the mortgage to the creditor. The creditor asserted that the assignments to it occurred by (a) assignment of the note with the mortgage, (b) incorporation of the note by reference, or (c) endorsements of the note by allonge, which incidentally transferred the mortgage as well. After the mortgagor allegedly defaulted on the mortgage, the creditor brought a foreclosure action against the real estate and the mortgagor's personal property, and also sought a conditional right to a deficiency judgment. The creditor moved for summary judgment on its foreclosure claim and for appointment of a temporary receiver. The mortgagor opposed the motions, challenging the creditor’s standing to foreclose.
In 175 W. 76th St. LLC v. Lichter Real Estate No. One, L.L.C., 87 Misc. 3d 601 (N.Y. Sup. Ct. 2025), the court denied the creditor’s motion for summary judgment. On a mortgage-foreclosure claim, a plaintiff moving for summary judgment must establish standing, which may be shown in one of three ways, including by demonstrating that it is the original lender. Here, the creditor was not the original lender. Regarding the second and third ways, the court held that the creditor failed to establish standing to foreclose, either by assignment or physical delivery of the note. Regarding assignment, a party claiming standing to foreclose as the final assignee in a chain of note transfers must prove two things: (1) that the note was validly assigned or delivered at each step in the chain (from A to B and from B to C), and (2) that the first transfer occurred before the second transfer. The court found inconsistencies in the dates of the intermediary’s assignments to the creditor, with one dated May 15, 2024, for the note alone, and another assignment of all loan documents, dated June 19, 2024, but effective May 17, 2024. Further, the court concluded that the creditor provided no prima facie evidence that the intermediary validly held the note before these assignments because the original assignment dated in 2021 from the original lender to the intermediary only applied to the mortgage and lacked language incorporating the note’s obligations by reference. The court ultimately rejected the creditor’s argument that broad language in the 2021 assignment implied a note transfer. Turning to the creditor’s second argument on physical delivery, the court ruled that UCC § 3-202 provides that endorsements of allonges are effective only if firmly affixed to the note before delivery to the creditor, not merely before commencement of an action. Here, the allonges lacked staple marks in filed copies and the electronic version, and supplemental submissions revealed that the allonges were affixed post-delivery by the creditor’s counsel. Drawing from UCC text, the court emphasized that post-delivery affixation risks fraud and undermines clarity in mortgage-note transfers, especially in the post-foreclosure crisis. Because the court held that the creditor failed to prove assignment, it declined to grant summary judgment in the creditor’s favor on its foreclosure claim. Additionally, the court denied the creditor’s motion for appointment of a temporary receiver because it concluded that the creditor had not proven and might never prove its standing to foreclose and that it also did not show an urgent need to prevent waste of the property.
By Deanna Dulske [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]