mers ny lost again

8/8/2019 Mers Ny Lost Again

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LPP Mtge. Ltd. v Sabine Props., LLC

2010 NY Slip Op 32367(U)

August 27, 2010

Supreme Court, New York County

Docket Number: 103648/10

Judge: Joan A. Madden

Republished from New York State Unified CourtSystem's E-Courts Service.

Search E-Courts (http://www.nycourts.gov/ecourts) forany additional information on this case.

This opinion is uncorrected and not selected for officialpublication.


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ON 91112010

this motlon to/for3 PAPERS NUMBSREPSUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY

LPP MORTGAGE LTD.SABINE PROPERTIES, LLCSEQUENCE NUMBER : 001DISMISS ACTION

vs.

I..atI-a

-INDEX NO.ndex Number : 103648/2010MOTION DATEMOTION SEQ. NO .ll MOTION CAL. NO.

Cross-Motion: Y e s K N r\ \Upon the foregoing papers, It Is ordered that this motion k's dcc1dd-

Lt L " d W / bL-kL\

J. S.C.

INAL DISPOSITION 0 ON-FINAL DISPOSITIONCheck if appropriate: 0 O NOT POST 0 EFERENCE

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SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK: PART 11~ _ _ _ ~ ~ ~ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ r __ _ _ _ _ _ _ _ - - ~ " ~ ~ ~ ~ "- ~ - - - - - - -- - - - - - ~ --

LP P MORTGAGE LTD. F N A LOANPARTICIPANT PARTNERS, LTD .7 195 Dallas ParkwayPlano, TX 75024

Plaintiff,-against-

IndexNo.: 103648/10

\1ABINE PROPERTIES, LLC, BOARD OFMANAGERS OF C P R I A N I CLUB RESIDENCESAT 5 5 WALL CONDO MINIUM, CITIQUIET INC.,MORTGAGE ELECTRONIC REGISTRATIONSYSTEMS, INC., NEW YORK CITY DEPARTMENTOF FINANCE, NEW YORK CITY ENVIRONMENTAL

CONTROL BOARD, NEW YORK CITY PARKINGVIOLATIONS BUREAU, NEW YORK STATECOMMISSIONER OF JURORS, PEOPLE OF THESTATE OF NEW YORK, WALL STRE ET MORTGAGEBANKERS LTD D/B/A POW ER EXPRESS,JOHN DOES (Said name being fictitious it being theIntention of Plaintiff to designate any and all occupantsOf premises being foreclose herein, and any parties,Corporations or entities, if any, havin g or claiming anInterest in or lien upon the mortgaged premises.),

F\LED '1sEF 0 7 IQ'O@ (OHKOFF\FF-

Defendant Sabine Properties, LLC (L'Sabine'') moves to dis miss the co mplaint on theground that Plaintiff does not ha ve standing to sue and for failure to state a cause of action.Plaintiff LPP Mortgages Ltd. ("LPP) opposes the motion, which is granted for the reasonsbelow.

This action seeks to foreclose on a mortgage on the property located at 55 Wall StreetUnit $35,New Y ork, NY, 10005, which is a condominium unit. The comp laint further allegesthat on October 31, 2006, Sabine executed and delivered an adjustab le rate note i n the amount of$ 5 14,000 and that as security for paymen t of the note S abine executed and d elivered a mortgage1

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in the same amount, which was recorded on November 13,2006. Th e complaint alleges that themortgage was assigned to LPP, a Texas banking corporation. The complaint alleges that Sabinefailed to make payments that came due on January 1,2009, and based on this default, LPP seeksthe entire amount secured by the mortgage. Significantly, the complaint fails to s tate the identityof the original mortgag ee or of the person or entity that assigned the m ortgage to LPP.

Sabine moves to dism iss the complaint on grounds that LPP has no standing to bring theaction and for failure to state a cause o f action. As to the standing issue, Sabine contends thatthe mortgagee is Wall Street Mortgage Banks, Ltd. and that the complaint fails to allege thebasis of LPPs claims, that on inform ation and belief, it is the owner of a note and mortgagebeing foreclosed, and fails to provide any proof of ownership. In addition, Sabine con tends thatwhile the complaint alleges an assign men t of the mortgage, there ha s been no demon stration thatthe mortgage was assigned properly to LPP or that such assignment was valid.

In support of its motion, Sabin e attaches the note and mortgage document showing thatWall Street Bankers, Ltd. is the Lend er and that M ortgage Electronic Registration Systems, Inc.(MERS)acting solely as the nominee for Wall Street Bankers LTD is the Mortgagee ofRecord for the purpose of recording the mortgage, ME RS was created in 1993by sev eral largeparticipants in the real estate mortgage industry to track ow nership interests in residentialmortgages. Mortgage lenders and other entities, known as MERS members, subscribe to theME RS system and pay annual fees for the electronic processing and tracking of ownership andtransfers of mortgages. ME RSCO RP. Inc. Y. Roma ne , 8 NY3d 90,96 (2006).

Sabine further contend s that the complaint must be dismissed for failure to state a causeof action as it fails to plead or demonstrate that LPP had sent a 30 day cure or breach letter, acondition precedent under the mortgage document for commencing an action seeking the fullamount due under the note.2

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LPP opposes the motion, arguing that the mortgage had been assigned to it by MERSwhich, as nominee of Wall Stree t Bankers, Ltd., had the authority to assign the mortgage. LPPattaches a copy of the assignment document executed on December 19,2008, indicating that themortgage was assigned by MERS to LPP pursuant to an Asset Purchase Agreement between twonon-parties, DLJ Mo rtgage Capital, Inc. and Loan Acquisition Corporation.

In support of its argument that MER S has the authority to assignm ent the mortgage toit, LPP also points to the second part of a paragraph in the mortgage do cument entitledBORROWERS TRANSFER TO LENDER OF RIGHTS IN THE PROPERTY whichprovides:

I [i.e. Sabine] understand and agree that MERS holds only legal title to the rights grantedby me in this Security Instrument, but, if necessary to com ply with law or custom, MERS(as nominee for Lender and Lenders successors and assigns) has the right: (A) to~ ..The assignment from MERS to LPP provides, in relevant part, that:

THIS ASSIGNMENT WITNESSES THAT, in consideration of Ten Dollars ($10.00) andother good and valuable consideration p aid by Assignee, Assignor hereby assigns,transfers, sets over and conv eys to Assignee and its successors and assigns, withoutrecourse and without representations or warranty, whether express, implied or created byoperation of law, except as expressly set forth in the Purchase Agreement, th e following:1. that certain Mortgage from Sabine Properties, LLC, dated October 3 1,200 6, andrecorded N ovember 13,2006, in Book d a , at Page da,as Instrument No.2006000626979, in the Clerks Office of the County of New York, State of NewYork, (the Mortgage), which M ortgage secures that certain Promissory Notedated October 3 1, 2006, in the original principal amo unt of $ 5 14,500.00, executedby S abine Properties, LLC By: Nooruddin Hussain Man ager and payable to theorder of Wall Street Mortgage Bankers LTD DBA Power Express, as modified oramended (the Note);2. such other documents, agreements, instruments and other coIIateral that evidence,secure or otherw ise relate to Assigno rs right, title or interest in and to theMortgage and/or the N ote and/or the loan evidenced by the Note, includingwithout lim itation the title insurance policies and hazard insurance po liciesrelating thereto that are in effect.

However, Wall Street Mortgage B d s s not a party to the assignment, and there is no evidenceit consented to it.3

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exercise any or all of those rights, including, but not limited to, the right to foreclose andsell the Property; and (B) to take any action required of Lender, including, but not limitedto, releasing and c anceling this Security Instrument.LPP contends that this provision gives MERS, as.the nominee of Wall Street Bankers, Ltdthe right to assign the mortgage o n behalf of Wall Street Banke rs, Ltd, and, n particular, that thephrase releasing and canceling this Security Instrument grants MERS th e authority to assignthe mortgage.

LPP next argues that a condition precedent need not be pleaded and is a question of factto be determined at trial and th at, therefore, the action cannot be dismissed for LPPs failure toplead that it had sent the 30-day cure o r breach letter. LPP also attaches a copy of the demandletter it claims to have sent to Sab ine.

In reply, Sabine argues that the assignmen t produced by LPP is insufficient todemonstrate it has standing as (1) MERS has no ownership rights in the note and thus cannotassign it; (2) the language of the assignment of the mortgage does not evidence an ntent toassign the underlying note, (3) the assignm ent arises out of a purchase agreement with an entitywho is not a party to this action, and (4) the provision of mortgage document relied on by LPPdoes not give MERS the au thority to assign the mortgage or the note.

Sabines argument that MERS has not own ership rights in the note is dispositive here. Itis well established that [ilf a plaintiff lacks standing to sue, it may not proceed in the action.H$BC Bank USA, N.A.v. Vasquez, 24 Misc3d 1239(A), 1239 (Sup Ct Kings Co. 2009),guoting, Starky, Goldberg, 29 7 AD2d 203,204 (1 Dept 2002). It has been held that only theowner of the note and mortgage at the time of commencement of a foreclosure action mayprosecute said action. LaSalle Nat. Assn v. L,amv, 12 Misc3d 1191(A), 3 (Sup Ct

Suffolk Co. 2006), citing, Kluge v . Fuaazy, 145 AD2d 537,53 8 (2dDept 1988), gee also Katz v.East-Ville Re&v Cot. 24 9 AD2d 243,243 ( Et ept 1998);C MEPSCORp, nc . v, Roma ne, 84

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NY3d at 99 (concurrence)(stating the argument that MERS violated th e clear prohibitionagainst separating a lien from its debt and that MERS does not have standing to bringforeclosure actions ... emain issues for another day).

Here, there are no allegations or evidence that MERS was the owner of the note such thatit could assign it to LPP. Thus, the assignment from MERS was insufficient to confer ownershipof the note to LP P and it has no standing to bring this action. Kluge v. F u m z ~ , 45 AD2d at 53 8(holding that the assignment of a mortgage without transfer of the debt is a nullity); Johnson v .Melnikoff, 20 Misc3d 1142(A), 2 (Sup Ct Kings Co. 2008), n.2, afr, 5 AD3d 519 (2d Dept20 1Oj(noting that assignments by MERS which did not include the underlying debt were a legalnullity); m e lec ropic Reg istration Svstem v, Coakley, 41 AD3d 674 (2d Dept2007)(holding that MERS had standing to bring foreclosure proceeding based on evidence thatMERS was the lawful holder of the promissory note and the mortgage).

Thus, even assuming arguendo that the language of the assignment from MERS to LPPcould be interpreted as purporting to assign not only the mortgage but also the note, suchassignment is invalid since based on the record, MERS lacked an ownership interest in the note.$ee LaSalle Bank Nat. Assn v. Lamv, 12 Misc3d 1191(A), 3 (Sup C t Suffolk Co. 2006)(noting that the mortgage is merely an ncident of and collateral security for the debt and anassignment of the m ortgage does not pass ownership of the debt itself );National Mortggrre Assocs. v, Youkelsone, 303 AD2d 546 (2dDept 2003).

b o ederal

As LPP lacks stand ing to bring this action to foreclose on the mortgage based on thefailure of MERS to demonstrate an effective assignment of the note, the court need not reach theother issues raised herein including w hether the mortgage documen ts give MER S the right to

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ass ign the rn~ rt ga ge ,~r if the complaint adequately alleges compliance with the notice ofdefault provision of the mortgage document.

In view of the above, it isORDERED that defendants motion to dismiss the complaint is granted, and the Clerk is

directed to en ter judgm ent dismissing the complaint.A copy of this decision and o rder is being mailed by my cham bers to counsel for the

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3The courts have come to different conclusions on this issue. See e& Bank of New York v.Alderazi, 28 Misc3d 376,379 (Sup Ct Kings Co. 2010) (holding that [tlhe ge neral language totake any action required of the L ender including, but not limited to, releasing and canceling thisSecurity Instrument is not sufficient to give the nominee au thority to alienate or assign amortgage without getting the mortgagees explicit authority fo r the particular assignment);Bank of New York v. Trezzq, 14 Misc3d 1201 A)(Sup Ct Suffolk Co.2006)(mortgage documentconferring nominee status of ME RS did not give MERS the authority to assign the m ortgage);!2QmIz= Farf ibds C a m d C o r p VfNagel, 289 AD2d 99 (1 Dept 2001)(delegation of mortgageto service agent by mortgagee w as sufficient to give service agent standing to sue);N,A. v. Flvnn, 27 M isc3d 802, 806 (Sup Ct Suffolk Co. 2010) (finding that language in themortgage document con ferring broad authority to act in all ways that the original lender coyldact, including relea sing.. . the mortgage w as sufficient to confer authority to MER S asnominee to assign the mortgage).6

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