THE BANK FAILED TO DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION; THERE WERE QUESTIONS OF FACT WHETHER THE “HOLDER (OF THE NOTE)” REQUIREMENTS OF THE UCC WERE MET (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not demonstrate standing to bring the foreclosure action:

… [T]here was no evidence that the plaintiff is the assignee of note, and triable issues of fact exist as to whether the plaintiff was the holder of the note at the time the action was commenced. A promissory note is a negotiable instrument within the meaning of the Uniform Commercial Code (see UCC 3-104[2][d] …). A “holder” is “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession” (UCC 1-201[b][21][A] …). Where an instrument is endorsed in blank, it may be negotiated by delivery (see UCC 3-202[1]; 3-204[2] …). In the present case, there is a triable issue of fact as to whether the note was properly endorsed in blank by an allonge “so firmly affixed thereto as to become a part thereof” when it came into the possession of the plaintiff (UCC 3-202[2] …). …

The plaintiff’s reliance on the assignments of the mortgage is misplaced “because the mortgage is not the dispositive document of title as to the mortgage loan” … . HSBC Bank USA, N.A. v Herod, 2022 NY Slip Op 01444, Second Dept 3-9-22

Practice Point: To establish standing, a bank has to prove it was the “holder” of the promissory note within the meaning of the UCC at the time the foreclosure action was commenced. Here there were questions of fact whether the note in the bank’s possession was endorsed in blank by an attached “allonge” as required by the UCC.