Thursday, July 17, 2008

Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced

In a recent article in the National Law Journal, Brooklyn Supreme Court Justice Arthur M. Schack, in connection with his approach to the apparent sloppy paperwork being filed by foreclosing lenders and their attorneys, was quoted as follows:
  • "I deny more foreclosures than I approve," [...]. "I want to see the servicing agent's power of attorney, I want to see all the paperwork before I approve it. If the paperwork is garbage, I deny it. If you're going to take away someone's home, it should be done properly."
After a review of some of his foreclosure cases, it appears that he wasn't kidding. Certainly, he has opted against using the ever-popular "rubber stamp method" of adjudicating foreclosures that many of his judicial colleagues around the country have found so handy when in a hurry to clear their respective caseloads.

Further, in most of the cases listed below, the homeowner facing foreclosure either was not represented by an attorney, or didn't bother to show up to court at all. Inspite of this, Justice Schack took out his fine tooth comb anyway, went through all the documents, and asked a lot of questions that the lenders were going to have a tough time answering.

Among the issues Justice Schack points to in some of his decisions when denying a foreclosure because the alleged plaintiff did not have legal standing to file the action are:
  1. defective powers of attorney,
  2. faulty affidavits,
  3. failure to file pooling and servicing agreements with the court,
  4. conflicts of interest of individuals signing assignments, affidavits, etc. as officers for various mortgage companies,
  5. defective verified complaint,
  6. assignments of the mortgages being foreclosed subsequent to the commencement of the foreclosure action,
  7. failure to record corporate resolution, and
  8. no evidence of alleged assignments.
He has also shown no reluctance in admonishing lenders' attorneys by giving terse warnings of sanctions for filing actions that may be frivolous, in that, by filing foreclosure actions for companies that lacked standing to sue, the actions appear to be a waste of judicial resources, typically discussing the Part 130 Rules of New York law, which give the courts a remedy to deal with frivolous conduct.

In rendering these decisions, he gives this reminder to the lenders and their attorneys of the requirement that if they don't have legal standing to sue, they have no business bringing the foreclosure actions and wasting judicial resources:
  • The Court of Appeals (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d, 901, 812 [2003]), cert denied 540 US 1017 [2003]) held that "[s]tanding to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress." In Carper v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that "[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request." If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. (Stark v Goldberg, 297 AD2d 203 [1d Dept 2002]). "Sine [sic] standing is jurisdictional and goes to a court's authority to resolve litigation [the court] can raise this matter sua sponte." (Axelrod v New York State Teachers' Retirement System, 154 AD2D 827, 828 [3d Dept 1989]).

HSBC Bank USA, N.A. v Yeasmin, 5/02/2008, 2008 NYSlipOp 50924(U) [19 Misc 3d 1127(A)]; Decided May 2, 2008.


In Ameriquest Mtge. Co. v Basevich, 6/26/2007, 16 Misc 3d 1104(A), 2007 NYSlipOp 51262(U), (among other cases), Justice Schack writes:

  • Professor David Siegel, in NY Prac, § 136, at 232 [4th ed] instructs that: [i]t is the law's policy to allow only an aggrieved person to bring a lawsuit . . . A want of "standing to sue," in other words, is just another way of saying that this particular plaintiff is not involved in a genuine controversy, and a simple syllogism takes us from there to a "jurisdictional" dismissal: (1) the courts have jurisdiction only over controversies; (2) a plaintiff found to lack "standing" is not involved in a controversy; and (3) the courts therefore have no jurisdiction of the case when such a plaintiff purports to bring it."(1)

The following is a compilation of links of some of Justice Schack's decisions over the last year and a half or so in which he has denied foreclosure because of the questionable and/or faulty paperwork submitted in a foreclosure action that led him to the conclusion that the alleged plaintiffs in the following foreclosure actions did not have legal standing to bring suit:

  1. American Brokers Conduit v Zamalloa, 9/11/2007, 2007 NYSlipOp 32806(U);

  2. Ameriquest Mtge. Co. v Basevich, 6/26/2007, 16 Misc 3d 1104(A), 2007 NYSlipOp 51262(U);

  3. Aurora Loan Servs., LLC v Sattar, 10/09/2007, 17 Misc 3d 1109(A), 2007 NYSlipOp 51895(U);

  4. Bank of New York v Mulligan, 6/03/2008, 2008 NYSlipOp 31501(U);

  5. Bank of New York v Orosco, 11/19/2007, 2007 NYSlipOp 33818(U);

  6. Countywide Home Loans, Inc. for the Benefit of DB Structured Products, Inc. v Persaud, 01/15/2008, 2008 NYSlipOp 30076(U);

  7. Deutsche Bank Natl. Trust Co. v Castellanos, 5/11/2007, 15 Misc 3d 1134 (A), 2007 NYSlipOp 50978(U);

  8. Deutsche Bank Natl. Trust Co. v Castellanos, 1/14/2008, 18 Misc 3d 1115(A), 2008 NYSlipOp 50033(U);

  9. Deutsche Bank Natl. Trust Co. v Clouden, 9/18/2007, 16 Misc 3d 1140(A), 2007 NYSlipOp 51767(U);

  10. Deutsche Bank Natl. Trust Co. v Maraj, 1/31/2008, 18 Misc 3d 1123(A), 2008 NYSlipOp 50176(U);

  11. EMC Mtge. Corp. v Batista, 6/05/2007, 15 Misc 3d 1143(A), 2007 NYSlipOp 51133(U);

  12. Fremont Inv. & Loan v McBean, 11/26/2007, 17 Misc 3d 1132(A), 2007 NYSlipOp 52229(U);

  13. GE Capital Mtge. Servs., Inc. v Powell, 11/13/2007, 18 Misc 3d 228, 2007 NYSlipOp 27463;

  14. HSBC Bank USA v Perboo, 7/11/2008, 2008 NYSlipOp 51385(U);

  15. HSBC Bank USA, N.A. v Betts, 4/23/2008, 2008 NYSlipOp 31170(U);

  16. HSBC Bank USA, N.A. v Charlevagne, 11/15/2007, 2007 NYSlipOp 33673(U);

  17. HSBC Bank USA, N.A. v Cherry, 12/17/2007, 18 Misc 3d 1102(A), 2007 NYSlipOp 52378(U);

  18. HSBC Bank USA, N.A. v Valentin, 1/30/2008, 18 Misc 3d 1123(A), 2008 NYSlipOp 50164(U);

  19. HSBC Bank USA, N.A. v Yeasmin, 5/02/2008, 2008 NYSlipOp 50924(U);

  20. NYCTL 2006-A Trust v Kin Kan Wong, 1/09/2008, 2008 NYSlipOp 30037(U);

  21. NYCTL-1 Trust v Cruz, 6/07/2007, 15 Misc 3d 1144(A), 2007 NYSlipOp 51144(U);

  22. NetBank v Vaughan, 6/13/2007, 15 Misc 3d 1147(A), 2007 NYSlipOp 51197(U);

  23. Nomura Credit & Capital, Inc. v Washington, 4/30/2008, 2008 NYSlipOp 50883(U);

  24. Perla v Real Prop. Solutions Corp., 4/28/2008, 2008 NYSlipOp 50846(U);

  25. U.S. Bank National Association v Maynard, 11/26/2007, 2007 NYSlipOp 33766(U);

  26. U.S. Bank National Association, Trustee v Grant, 11/09/2007, 2007 NYSlipOp 33631(U);

  27. U.S. Bank Natl. Assn. v Bernard, 2/14/2008, 18 Misc 3d 1130(A), 2008 NYSlipOp 50247(U);

  28. U.S. Bank v Videjus, 4/29/2008, 2008 NYSlipOp 50851(U);

  29. Wells Fargo Bank, N.A. v Farmer, 2/04/2008, 18 Misc 3d 1124(A); 2008 NYSlipOp 50199(U);

  30. Wells Fargo Bank, N.A. v Farmer, 6/05/2008, 2008 NYSlipOp 51133(U);

  31. Wells Fargo Bank, N.A. v Guy, 5/01/2008, 2008 NYSlipOp 50916(U);

  32. Wells Fargo Bank, Natl. Assn. v Reyes, 6/19/2008, 2008 NYSlipOp 51211(U).

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here, and Go Here.

(1) If a court grants a foreclosure judgment in a case where it is subsequently determined that the plaintiff mortgage lender lacked standing (and accordingly, the court lacked jurisdiction over the case), does this mean that the foreclosure judgment is void? If so, does this mean that everything devolving from that judgment (ie. the subsequent foreclosure sale, and any subsequent private sales or other conveyances of the foreclosed property) is also void? Can anyone imagine the mess that may currently exist with defective real estate titles around the country that have a recent foreclosure in its chain of title where the court lacked jurisdiction because of mortgage lenders and their attorneys who were as sloppy as those described in the above list of cases? I can only imagine that this is an issue that title insurance underwriters and agents don't want anyone thinking or asking about. missing mortgage foreclosure docs beta missing mortgage foreclosure docs gamma SloppyForeclosuresAlpha