Real Property Law

(Madden, J.)

In an action by assignee to foreclose a mortgage, mortgagor moved to dismiss the complaint for lack of standing and for failure to state a cause of action. The court granted mortgagor's motion, holding that because assignee failed to establish that its assignor, Mortgage Electronic Registration Systems, Inc. (MERS), ever owned the note associated with the mortgage, the assignment from MERS was insufficient to create standing to foreclose.

In 2006, mortgagor executed a note in the amount of $514,000 to Wall Street Bankers, Ltd., and also executed a mortgage on a condominium unit as security for the note. The mortgage agreement named MERS as the mortgagee of record for the purpose of recording the mortgage, and described MERS as the nominee for Wall Street Bankers. MERS itself never owned the note, but instead operates to track ownership interests in the mortgage. When mortgagor defaulted on the mortgage, MERS assigned the mortgage to LPP ' apparently the current registered owner of the mortgage within the MERS system ' and LPP brought this foreclosure action. Mortgagor moved to dismiss for lack of standing and for failure to state a cause of action.

In granting mortgagor's motion, the court emphasized that LPP had never established that MERS had ever acquired an ownership interest in the note underlying the mortgage. If MERS did not own the note, MERS could not assign an ownership interest to LPP. Without an ownership interest in the note, LPP would have no standing to foreclose on the mortgage. Because LPP had not established that MERS ever held an ownership interest, the court did not have to decide whether the mortgage documents gave MERS the right to assign the mortgage.

Article 7a Administrator's Lien Does Not Violate Due Process

Chase Group Alliance, LLC v. City of New York Department of Finance

NYLJ 9/20/10, U.S. Court of

Appeals, Second Circuit

(Opinion by Winter, J.)

In an action by owners of three apartment buildings to remove liens imposed on their properties by city agencies, the owners appealed from District Court's dismissal of the complaint. The Second Circuit affirmed, holding that the Housing Court order offered owners pre-deprivation notice and judicial access sufficient to meet due process standards.

Tenants in the three subject buildings brought an action in state Civil Court seeking appointment of an article 7A administrator to remedy housing code violations and to oversee the properties. The court appointed an administrator, authorizing him to use rent moneys to remedy building conditions, and to borrow money, when necessary, for that purposes. The housing court order, however, provided that any loan which would result in a lien on the premises required court order, which required notice to the owner of the premises. The court would then set reasonable procedures to hear objections to any application. After appointment of the administrator, current owners bought the subject buildings. They allege that the article 7A Administrator subsequently borrowed $712,567.55 from the city's department of Housing Preservation and Development (HPD), and that the City Department of Finance has deemed that loan to be a lien against the properties. Owners further contend that the loans were accepted without prior notice to the owners, and without court approval. They argue that imposition of these liens on the buildings violated their due process rights. The District Court dismissed their complaint, concluding that the owners were not entitled to pre-deprivation process. The owners appealed.

In affirming, the Second Circuit rejected the District Court's conclusion that owners were not entitled to pre-deprivation process, but held that owners received that process. The court emphasized that the complaint itself alleged that the housing court order requires notice and a court hearing before loans could result in liens. That requirement satisfied the pre-deprivation hearing required by the due process clause. The court noted that the complaint did not allege what action was taken by the city or the housing court that was inconsistent with the housing court order, and emphasized that if some action was taken that was inconsistent with that order, state appellate remedies appeared to be available.

Commencement of Partition Action Does Not Sever Joint Tenancy

Goetz v. Slobey

NYLJ 9/20/10, p. 20., col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action for partition and sale of real property, executor of deceased joint tenant appealed from Supreme Court's order dismissing the complaint. The Appellate Division affirmed, holding that deceased joint tenant had not severed the joint tenancy by moving out of the property and bringing a partition action.

In 1953, Brundage and Slobey acquired title to the subject property as joint tenants. In 2004, Brundage moved out of the a house on the subject property and brought this partition action. In 2005, the court appointed a referee to determine whether partition in kind was possible, or whether sale was necessary. Then, in May 2006, Brundage died. Six months later Slobey died. Brundage's executor and Slobey's administrator were substituted for the original parties. The parties then entered into a stipulation that the referee would ascertain and report on the legal status of the joint tenancy. The referee determined that the joint tenancy had been severed prior to Brundage's death. Supreme Court, however, refused to confirm the referee's report, and dismissed the complaint because Brundage's interest in the property terminated at her death. Brundage's executor appealed.

In affirming, the Appellate Division held that moving out of the property and bringing a partition action did not destroy the unity of possession or the unity of interest between the parties. As a result, at Brundage's death, both parties were entitle to common possession of the entire parcel. Therefore, the joint tenancy had not been severed, and Brundage's interest therefore terminated at her death.

Assignment from MERS Did Not Create Sufficient Standing to Foreclose

LPP Mortgage LTD v. Sabine Properties, LLC

NYLJ 9/15/10, Supreme Ct., N.Y. Cty.

(Madden, J.)

In an action by assignee to foreclose a mortgage, mortgagor moved to dismiss the complaint for lack of standing and for failure to state a cause of action. The court granted mortgagor's motion, holding that because assignee failed to establish that its assignor, Mortgage Electronic Registration Systems, Inc. (MERS), ever owned the note associated with the mortgage, the assignment from MERS was insufficient to create standing to foreclose.

In 2006, mortgagor executed a note in the amount of $514,000 to Wall Street Bankers, Ltd., and also executed a mortgage on a condominium unit as security for the note. The mortgage agreement named MERS as the mortgagee of record for the purpose of recording the mortgage, and described MERS as the nominee for Wall Street Bankers. MERS itself never owned the note, but instead operates to track ownership interests in the mortgage. When mortgagor defaulted on the mortgage, MERS assigned the mortgage to LPP ' apparently the current registered owner of the mortgage within the MERS system ' and LPP brought this foreclosure action. Mortgagor moved to dismiss for lack of standing and for failure to state a cause of action.

In granting mortgagor's motion, the court emphasized that LPP had never established that MERS had ever acquired an ownership interest in the note underlying the mortgage. If MERS did not own the note, MERS could not assign an ownership interest to LPP. Without an ownership interest in the note, LPP would have no standing to foreclose on the mortgage. Because LPP had not established that MERS ever held an ownership interest, the court did not have to decide whether the mortgage documents gave MERS the right to assign the mortgage.

Article 7a Administrator's Lien Does Not Violate Due Process

Chase Group Alliance, LLC v. City of New York Department of Finance

NYLJ 9/20/10, U.S. Court of

Appeals, Second Circuit

(Opinion by Winter, J.)

In an action by owners of three apartment buildings to remove liens imposed on their properties by city agencies, the owners appealed from District Court's dismissal of the complaint. The Second Circuit affirmed, holding that the Housing Court order offered owners pre-deprivation notice and judicial access sufficient to meet due process standards.

Tenants in the three subject buildings brought an action in state Civil Court seeking appointment of an article 7A administrator to remedy housing code violations and to oversee the properties. The court appointed an administrator, authorizing him to use rent moneys to remedy building conditions, and to borrow money, when necessary, for that purposes. The housing court order, however, provided that any loan which would result in a lien on the premises required court order, which required notice to the owner of the premises. The court would then set reasonable procedures to hear objections to any application. After appointment of the administrator, current owners bought the subject buildings. They allege that the article 7A Administrator subsequently borrowed $712,567.55 from the city's department of Housing Preservation and Development (HPD), and that the City Department of Finance has deemed that loan to be a lien against the properties. Owners further contend that the loans were accepted without prior notice to the owners, and without court approval. They argue that imposition of these liens on the buildings violated their due process rights. The District Court dismissed their complaint, concluding that the owners were not entitled to pre-deprivation process. The owners appealed.

In affirming, the Second Circuit rejected the District Court's conclusion that owners were not entitled to pre-deprivation process, but held that owners received that process. The court emphasized that the complaint itself alleged that the housing court order requires notice and a court hearing before loans could result in liens. That requirement satisfied the pre-deprivation hearing required by the due process clause. The court noted that the complaint did not allege what action was taken by the city or the housing court that was inconsistent with the housing court order, and emphasized that if some action was taken that was inconsistent with that order, state appellate remedies appeared to be available.

Commencement of Partition Action Does Not Sever Joint Tenancy

Goetz v. Slobey

NYLJ 9/20/10, p. 20., col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action for partition and sale of real property, executor of deceased joint tenant appealed from Supreme Court's order dismissing the complaint. The Appellate Division affirmed, holding that deceased joint tenant had not severed the joint tenancy by moving out of the property and bringing a partition action.

In 1953, Brundage and Slobey acquired title to the subject property as joint tenants. In 2004, Brundage moved out of the a house on the subject property and brought this partition action. In 2005, the court appointed a referee to determine whether partition in kind was possible, or whether sale was necessary. Then, in May 2006, Brundage died. Six months later Slobey died. Brundage's executor and Slobey's administrator were substituted for the original parties. The parties then entered into a stipulation that the referee would ascertain and report on the legal status of the joint tenancy. The referee determined that the joint tenancy had been severed prior to Brundage's death. Supreme Court, however, refused to confirm the referee's report, and dismissed the complaint because Brundage's interest in the property terminated at her death. Brundage's executor appealed.

In affirming, the Appellate Division held that moving out of the property and bringing a partition action did not destroy the unity of possession or the unity of interest between the parties. As a result, at Brundage's death, both parties were entitle to common possession of the entire parcel. Therefore, the joint tenancy had not been severed, and Brundage's interest therefore terminated at her death.