MARIAN M. GASS Defendant, Pro Se.
KNUCKLES, KOMOSINSKI & ELLIOTT, LLP, Attorneys for Plaintiff (Frank Badalato, Esq., of Counsel).
MICHAEL C. LYNCH, J.
By Decision and Order (Lynch, J.) dated January 4, 2012, the Court denied defendant's motion to dimiss the action for lack of standing. Thereafter, at a conference on April 4, 2012, the defendant informed the Court that plaintiff, EMC Mortgage Corporation, was the subject of a "Consent Order" between JP Morgan Chase & Co., EMC's parent company, and the Board of Governors of the Federal Reserve System" (see Exhibit "D" annexed to Affidavit of Attorney Badalato). Defendant asserted that the Consent Order undermined plaintiff's authority to pursue this action. The Court informed the parties at the conference that such a contention necessitated a motion.
Now before the Court is defendant's "Supplemental Motion to Dismiss Pending Action of Judgment of Foreclosure and Sale" dated May 29, 2012. By letter order dated June 25, 2012, the Court set the return date of July 25, 2012 for the motion. Plaintiff has opposed the application.
The focus of this motion is on the Consent Order issued April 13, 2011. The Court first learned of this Consent Order at the April 4, 2012 conference when defendant brought the order to the Court's attention. In plaintiff's September, 2011 submissions resulting in the Court's January 4, 2012 Decision and Order, plaintiff failed to disclose the Consent Order, but nonetheless asserted its standing in this action. From the Court's perspective, as more fully discussed below, plaintiff's failure to disclose the Consent order was misleading to both the defendant and the Court and disregarded defendant's right to an independent review required under the Consent Order. 
A review of the Consent Order discloses several pertinent facts. To begin, JP Morgan Chase & Co. (JPMC) owns numerous nonbank subsidiaries, including EMC Mortgage Corporation (Exhibit "D"). Article 3 of the Consent Order requires JPMC and EMC to retain an independent consultant "to conduct an independent review of certain residential mortgage loan foreclosure actions...regarding individual borrowers with regard to the Servicing Portfolio that was serviced by EMC". That review must embrace all foreclosure actions pending from January 1, 2009 to December, 2010 to essentially address the integrity of the action. Defendant's request for an independent review has been confirmed by receipt dated July 23, 2012 (see attachments to reply of Marion Gass dated July 30, 2012). That review, importantly, necessitates a determination as to whether the foreclosing party "properly documented the ownership of the promissory note". Although the Consent Order was signed as a settlement without an admission by JPMC or EMC of wrongdoing, the underlying allegations included the filing of affidavits by persons without personal knowledge or a proper review of the relevant records.
Here, Ms. Gass challenges EMC's standing to pursue this action. She maintains that the assignment relied upon by EMC were "robo-signed" by individuals without authority and that EMC never had possession of the original note and mortgage. Significantly, Ms. Gass challenges the integrity of the lost note affidavit submitted by plaintiff in response to the prior motion (Exhibit "11").  That affidavit dated January 14, 2010 bears the signature of Amy Womack- Hobbs, identified as the "Assistant Secretary" of EMC and was signed in Louisiana. Defendant argues that EMC is a Texas company and that Ms. Womack-Hobbs was an employee of Chase Home Financial, LLC, another subsidiary of JPMC.
Notwithstanding the concerns of "robo-signing" embraced in the Consent Order, the opposition affirmation of Attorney Badaloto ignores the contentions concerning Ms. Womack-Hobbs. Instead, plaintiff's counsel mistakenly asserts that the instant motion is precluded under principles of res judicata. As stated above, the Court considers the Consent Order new and significant information that should have been, but was not disclosed with the submissions on the earlier motion. Further, the Court finds that the Consent Order necessitates a closer scrutiny of the standing issue raised by the defendant. The Court will treat this motion as a motion to renew defendant's motion to dismiss the case for lack of standing.
The procedural history of this case is outlined in the Court's January 4, 2012 Decision and Order. The Court recognizes that defendant was previously found in default and that the initial action commenced by Option One Mortage Corporation in 2000 was consolidated in 2005 with the second action commenced by EMC in 2004. Since that time, however, the laws and rules governing foreclosure actions have evolved (see CPLR 3408). Pursuant to the Rules of the Chief Administrative Judge, plaintiff's counsel must submit an affirmation verifying the integrity of the action (22 NYCRR 202.12-a[f]).  Defendant's application here, bolstered by the Consent Order, directly calls the integrity of this action into question. 
"Standing requires an inquiry into whether a litigant has an interest in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request" (Bank of NY v. Silverberg, 86 A.D.3d 274, 279 [internal quotations and citations omitted]). A plaintiff in a foreclosure action must be either the holder or assignee of the note and mortgage to have standing to commence the action (HSBC Bank v. Hernandez, 92 A.D.3d 843; LaSalle Bank National Assoc. v. Ahearn, 59 A.D.3d 911). An assignment of the mortgage without an assigment or physical delivery of the note is a nullity.
Where, as here, the note is payable to order (i.e. the mortgagee, Option One Mortgage Corp.), it may be negotiated by delivery with any necessary indorsement (UCC3-202). By an indorsement, the holder of a note may transfer its interest in the note to another (80 NY Jur 2d Negotiable Instruments and Other Commercial Paper §244). An indorsement must be written on the note "or on a paper so firmly affixed thereto as to become a part thereof" (UCC 3-202). Typically, the indorsement is written on the back of the note (80 NY Jur 2d Negot. Instruments §250). When the indorsement is attached, the attached paper is called an "allonge" (Id.). When, as here, the validity of an indorsement is called into issue, the plaintiff bears the burden of proving the genuineness of the indorsement ( Id. §253). Actual delivery of an indorsed note is essential to complete the transfer ( Id. §264).
In the Court's January 4, 2012 Decision and Order (Lynch, J.) denying defendant's motion to dismiss the complaint, the Court determined plaintiff had demonstrated its standing to pursue this action. The defendant's current application has called that ruling into question.
The underlying Note, dated April 28, 2000, was payable to Option One Mortgage Corporation. For reasons unclear, the submissions include two separate note documents stamped "original" (see Exhibits "7" and "8" annexed to motion). In any event, to evidence the assignment, plaintiff focused on three items in their submissions on the prior motion. Specifically, in her September 20, 2011 affirmation, Attorney Olson asserted that "this transfer is evidenced by the endorsement stamped on the Note and Assignment of ...