| Midland Mtge. Co. v Imtiaz |
| 2013 NY Slip Op 06550 [110 AD3d 773] |
| October 9, 2013 |
| Appellate Division, Second Department |
| Midland Mortgage Company,Respondent, v Misbah Imtiaz, Appellant, et al.,Defendants. |
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In an action, inter alia, for a judgment declaring that the plaintiff is the holder of avalid first mortgage lien on the subject property, the defendant Misbah Imtiaz appealsfrom an order of the Supreme Court, Suffolk County (Gazzillo, J.), dated June 23, 2011,which denied her motion pursuant to CPLR 3211 to dismiss the complaint, inter alia, onthe ground that the plaintiff lacks standing to maintain the action, granted the plaintiff'scross motion to substitute another entity as the plaintiff, and directed the Clerk of theCounty of Suffolk to accept and record a certified true copy of the mortgage.
Ordered that the order is reversed, on the law, with costs, those branches of themotion of the defendant Misbah Imtiaz which were pursuant to CPLR 3211 (a) (1) and(3) to dismiss the complaint on the ground that the plaintiff lacks standing to maintain theaction are granted, and the plaintiff's cross motion to substitute another entity as theplaintiff is denied.
By summons, complaint, and notice of pendency filed on January 25, 2010, theplaintiff, Midland Mortgage Company, commenced this action seeking, inter alia, ajudgment declaring that it is the holder of a valid first mortgage lien encumbering certainreal property owned by the defendant Misbah Imtiaz (hereinafter the appellant). Theappellant was served with the summons, complaint, and notice of pendency on February23, 2010.
On April 26, 2010, the appellant moved, inter alia, pursuant to CPLR 3211 (a) (1)and (3) to dismiss the complaint, attaching documentary evidence establishing that shegranted the subject mortgage to Opteum Financial Services, LLC (hereinafter Opteum),to secure a loan from Opteum, and that Mortgage Electronic Registrations Systems, Inc.(MERS), as nominee for Opteum, was the mortgagee of record for the purposes ofrecording the mortgage. The appellant contended that the documentary evidenceestablished that the plaintiff was not the mortgagee and did not have standing to maintainthis action.
On June 10, 2010, the plaintiff cross-moved pursuant to CPLR 1001, 1002 and 1003for joinder of a necessary party, U.S. Bank National Association as trustee on behalf ofthe holders of Citigroup Mortgage Loan Trust Inc. Asset-Backed Pass-ThroughCertificates, Series 2006-FX1 (hereinafter U.S. Bank). The plaintiff conceded that it didnot have standing to maintain [*2]this action because itwas the mortgage servicer of the subject mortgage and note, not the mortgagee. Theplaintiff sought to substitute U.S. Bank as the plaintiff in the action, appending adocument dated May 19, 2010, by which MERS, "acting solely as nominee for Opteum,"assigned the subject mortgage and underlying promissory note to U.S. Bank. In reply tothe appellant's motion to dismiss, the plaintiff submitted a copy of the original noteexecuted by the appellant and by a representative of Opteum, as lender. The notecontained no further endorsement.
In opposition to the cross motion, the appellant contended that U.S. Bank cannot besubstituted as the plaintiff because it was not the holder of the mortgage and note or theassignee of the mortgage and note under a valid assignment prior to the commencementof the action, and thus, it did not have standing to maintain the action.
The Supreme Court deemed the cross motion to be, in effect, pursuant to CPLR 1012(a) (3) for U.S. Bank to intervene as of right, and granted the cross motion, holding thatthe plaintiff established that U.S. Bank was the proper plaintiff with a real and substantialinterest in the outcome of the litigation. Upon substituting the plaintiff, the SupremeCourt denied the appellant's motion to dismiss.
The plaintiff failed to establish that either it, or the party it wished to substitute as theplaintiff, had standing to maintain the action. Standing requires an inquiry into whether alitigant has "an interest . . . in the lawsuit that the law will recognize as asufficient predicate for determining the issue at the litigant's request" (Caprer v Nussbaum, 36 AD3d176, 182 [2006]). "In a mortgage foreclosure action, a plaintiff has standing where itis both the holder or assignee of the subject mortgage and the holder or assignee of theunderlying note at the time the action is commenced" (Bank of N.Y. v Silverberg, 86AD3d 274, 279 [2011]). The instant action, although not an action to foreclose thesubject mortgage, was brought on behalf of the purported mortgagee, inter alia, for ajudgment declaring the validity of the subject mortgage. The documentary evidencesubmitted by the appellant in support of her motion to dismiss the complaint establishedconclusively that the plaintiff was not the mortgagee, a fact which the plaintiff conceded.Thus, the Supreme Court should have granted those branches of the appellant's motionwhich were pursuant to CPLR 3211 (a) (1) and (3) to dismiss the complaint on theground that the plaintiff lacks standing to maintain the action
The plaintiff sought to defeat the appellant's motion to dismiss the complaint bycross-moving, in effect, to amend the complaint to substitute U.S. Bank as the plaintiff."[A]n amendment which would shift a claim from a party without standing to anotherparty who could have asserted that claim in the first instance is proper since such anamendment, by its nature, does not result in surprise or prejudice to the defendants whohad prior knowledge of the claim and an opportunity to prepare a proper defense"(JCD Farms v Juul-Nielsen, 300 AD2d 446, 446 [2002] [internal quotationmarks omitted]; see Fulgum vTown of Cortlandt Manor, 19 AD3d 444, 445-446 [2005]; CPLR 1002 [a];3025 [b]). Here, however, the plaintiff failed to show that U.S. Bank had standing andcould have asserted the claim in the first instance. The plaintiff submitted only adocument executed by MERS, as nominee for the lender Opteum, purporting to assignthe mortgage and note to U.S. Bank. To establish the validity of such an assignment,evidence must be submitted establishing that the note was either physically delivered toMERS or assigned to MERS by the lender prior to the commencement of the action (see Homecomings Fin., LLC vGuldi, 108 AD3d 506, 508 [2013]). The plaintiff failed to submit any suchevidence. The plaintiff improperly submitted a copy of the note in reply papers (see King v Dobriner, 106AD3d 1053, 1054 [2013]), which, in any event, failed to establish delivery of thenote to MERS prior to the execution of the assignment, and failed to establish that U.S.Bank, as opposed to the plaintiff, possessed the note prior to the commencement of theaction.
Moreover, deeming the plaintiff's cross motion, as did the Supreme Court, to bepursuant to CPLR 1012 (a) (3) for leave to intervene, the proposed intervenor mustestablish a "real and substantial interest in the outcome of the proceedings" (Wells Fargo Bank, N.A. vMcLean, 70 AD3d 676, 677 [2010]; see American Home Mtge. Servicing, Inc. v Sharrocks, 92AD3d 620, 621 [2012]). Since U.S. Bank failed to demonstrate that it was the holderor assignee of the subject mortgage and note, it failed to establish a real and substantialinterest in this action. Accordingly, the Supreme Court [*3]should have denied the plaintiff's cross motion. Mastro,J.P., Dillon, Angiolillo and Chambers, JJ., concur.