NOMINEE? NO POWER NO AUTHORITY

20 May

Posted on May 19, 2010 by Neil Garfield
There’s more than one way to attack the prima facie case though—here’s a good example of a nice result from attacking the assignment…

This NY decision lays out the legal reasoning for dismissing cases for problematic assignments:

Decided on April 19, 2010
Supreme Court, Kings County
The Bank of New York, as trustee for the benefit of the
Certificateholders, CWABS, Inc., Asset Backed Certificates, Series 2007-2, Plaintiff,
against
Sameeh Alderazi, Bank of America, NA, New York City Environmental Control
Board, .
Plaintiff submits anet al

Upon reading the Affirmation of Linda P. Manfredi, Esq., counsel for the
Plaintiff, dated November 20, 2008, together with Plaintiff’s Memorandum of
Law, dated November 19th, 2008, together with the proposed Ex Parte Order
Appointing a Referee to Compute, and all exhibits annexed thereto, the
application is denied without prejudice, with leave to renew upon providing the
Court with proof of the grant of authority from the original mortgagee to
MERS specifically to act in its interest as related to the secured loan
which is the subject of this action.
Plaintiff seeks summary judgment to foreclose upon the property located at
639 East 91st Street, (Block 4751, Lot 31), in Kings County.
In order to establish prima facie entitlement to summary judgment in a
foreclosure action, a plaintiff must submit the mortgage and unpaid note,
along with evidence of default. Capstone Business Credit, LLC v. Imperial
Family Realty, LLC, 70 AD3d 882
, 895 NYS2d 199 (2nd Dept 2010). The Second
Department has also required a showing that the mortgage was valid. Washington Mut.
Bank, FA v. Peak Health Club, Inc., 48 AD3d 793
, 853 NYS2d 112 (2nd
Dept.2008).
In this case, Defendant Sameeh Alderazi borrowed $408,000.00 from
“America’s Wholesale Lender” on January 25, 2007. The mortgage was recorded in the
Office of the City Register, New York City Department of Finance on
February 14, 2007. MERS was referred to in the mortgage as nominee of the
mortgagee, America’s Wholesale Lender, for the purpose of recording the mortgage.
MERS purported to assign the mortgage to Plaintiff BANK OF NEW YORK on
July 23, 2008. The assignment was recorded on September 19, 2008. The
assignment was executed by “Keri Selman, Assistant Vice President of MERS, as
“authorized agent pursuant to Board of Resolutions and/or appointment”. However,
no resolution nor other proof of authority was recorded with the
assignment or submitted to the Court.
A party cannot foreclose on a mortgage without having title, giving it
standing to bring the action. (See Kluge v. Fugazy, 145 AD2d 537, 538 (2nd
Dept 1988 ), holding that a “foreclosure of a mortgage may not be brought by
one who has no title to it and absent transfer of the debt, the assignment of
the mortgage is a nullity”. Katz v. East-Ville Realty Co., 249 AD2d 243
(1st Dept 1998), holding that “[p]laintiff’s attempt to foreclose upon a
mortgage in which he had no legal or equitable interest was without foundation
in law or fact”.
“To have a proper assignment of a mortgage by an authorized agent, a power
of attorney is necessary to demonstrate how the agent is vested with the
authority to assign the mortgage.” [*2]HSBC BANK USA, NA v. Yeasmin, 19 Misc
3d 1127(A), 866 NYS2d 92 (Table) N.Y.Sup.,2008. “No special form or
language is necessary to effect an assignment as long as the language shows the
intention of the owner of a right to transfer it”. Emphasis added, Id.,
citing Tawil v. Finkelstein Bruckman Wohl Most & Rothman, 223 AD2d 52, 55 (1st
Dept 1996); Suraleb, Inc. v. International Trade Club, Inc., 13 AD3d 612
(2nd
Dept 2004).
The claim in this case is that the mortgage was assigned by MERS, as the
nominee, to the Plaintiff. However Plaintiff submits no evidence that
America’s Wholesale Lender authorized MERS to make the assignment. MERS submits
only its own statement that it is the nominee for America’s Wholesale
Lender, and that it has authority to effect an assignment on America’s Wholesale L
ender’s behalf.
The mortgage states that MERS is solely a nominee. The Plaintiff, in its
Memorandum of Law, admits that MERS is solely a nominee, acting in an
administrative capacity.
In its Memoranda, Plaintiff quotes the Court in Schuh Trading Co., v.
Commisioner of Internal Revenue, 95 F.2d 404, 411 (7th Cir. 1938), which
defined a nominee as follows:
The word nominee ordinarily indicates one designated to act for another as
his representative in a rather limited sense. It is used sometimes to
signify an agent or trustee. It has no connotation, however, other than that of
acting for another, or as the grantee of another.. Id. Emphasis added.
Black’s Law Dictionary defines a nominee as “[a] person designated to act
in place of another, usually in a very limited way”. Agency is a fiduciary
relationship which results from the manifestation of consent by one person
to another that the other shall act on his behalf and subject to his
control, and consent by the other so to act. Hatton v. Quad Realty Corp., 100
AD2d 609, 473 NYS2d 827, (2nd Dept 1984). “[A]n agent constituted for a
particular purpose, and under a limited and circumscribed power, cannot bind his
principal by an act beyond his authority.” Andrews v. Kneeland, 6 Cow. 354
N.Y.Sup. 1826.
MERS, as nominee, is an agent of the principal, for limited purposes, and
has only those powers which are conferred to it and authorized by its
principal.
In the mortgage in this case, MERS claims, as nominee, that it was granted
the right “(A) to exercise any or all of those rights, including, but not
limited to the right to foreclose and sell the Property, and (B) to take
any action required of the Lender including, but not limited to, releasing
and canceling this Security Instrument.” However, this language quoted by
MERS is found in the mortgage under the section “BORROWER’S TRANSFER TO LENDER
OF RIGHTS IN THE PROPERTY” and therefore is facially an acknowledgment by
the borrower. The fact that the borrower acknowledged and consented to MERS
acting as nominee of the lender has no bearing on what specific powers and
authority the lender granted MERS. The problem is not whether the borrower
can object to the assignees’ standing, but whether the original lender,
who is not before the Court, actually transferred its rights to the
Plaintiff. To allow a purported assignee to foreclosure in the absence of some proof
that the original lender authorized the assignment would throw into doubt
the validity of title of subsequent purchasers, should the original lender
challenge the assignment at some future date.
Furthermore, even accepting MERS’ position that the lender acknowledges
MERS’ authority exercise any or all of the lenders’ rights under the
mortgage, the mortgage does not convey the specific right to assign the mortgage.
The only specific rights enumerated in the [*3]mortgage is the right to
foreclose and sell the Property. The general language “to take any action
required of the Lender including, but not limited to, releasing and canceling
this Security Instrument” is not sufficient to give the nominee authority to
alienate or assign a mortgage without getting the mortgagee’s explicit
authority for the particular assignment. Alienating a mortgage absent specific
authorization is not an administrative act.
Plaintiff submitted no other documents which purport to authorize MERS to
assign or otherwise convey the right of the mortgagor to assign the
mortgage to another party.
A party who claims to be the agent of another bears the burden of proving
the agency relationship by a preponderance of the evidence, Lippincot v.
East River Mill & Lumber Co., 79 Misc. 559, 141 NYS 220 (1913), and “[t]he
declarations of an alleged agent may not be shown for the purpose of proving
the fact of agency”. Lexow & Jenkins, P.C. v. Hertz Commercial Leasing
Corp., 122 AD2d 25, 504 NYS2d 192 (2nd Dept 1986). See also Siegel v. Kentucky
Fried Chicken of Long Island, Inc., 108 AD2d 218, 488 NYS2d 744 (2nd Dept
1985), Moore v. Leaseway Transp. Corp., 65 AD2d 697, 409 NYS2d 746 (1st Dept
1978). “The acts of a person assuming to be the representative of another
are not competent to prove the agency in the absence of evidence tending to
show the principal’s knowledge of such acts or assent to them”. (2 NY Jur
2d, Agency and Independent Contractors, 26).
Plaintiff has submitted no evidence to demonstrate that the original
lender, the mortgagee America’s Wholesale Lender, authorized MERS to assign the
secured debt to Plaintiff.
Thus, Plaintiff has not made out a prima facie case that it is entitled to
foreclose on the mortgage in question.WHEREFORE, it is ORDERED that the
Plaintiff’s application for an Order appointing referee to compute amounts
due to the Plaintiff is denied with leave to renew upon proof of authority.
This shall constitute the decision and order of this Court.

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