Aurora Loan Services, LLC, Respondent,v.Monique Taylor,, et al., Appellants, et al., Defendants.BriefN.Y.April 30, 2015APL 2014-00138 State of New York Supreme Court: Westchester County Index No. 13735/10 Appellate Division: Second Judicial Department Docket Number 2013-05156 Court of 2ippeat5 of the STATE OF NEW YORK AURORA LOAN SERVICES, LLC, Plaintiff Respondent, - against - MONIQUE TAYLOR a/kJa Monique Pujol Taylor, LEONARD TAYLOR, Defendants-Appellants, NEW ROC PARCEL IA, LLC, JOHN DOE, JOSEPH MALTESE, Defendants. BRIEF OF AMICUS CURIAE MERSCORP HOLDINGS, INC. AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. HISCOCK & I3ARCLAY, LLP Attorneys for MERSCORP Holdings, Inc. and Mortgage Electronic Registration Systems, Inc. 1100 M&T Center Three Fountain Plaza Buffalo, New York 14203 Telephone: (716) 566-1300 Facsimile: (716) 566-1301 cmartorana@hblaw.corn Charles C. Martorana, Esq. Kimberly A. Colaiacovo, Esq. of Counsel Date Completed: May 11, 2015 TABLE OF CONTENTS Page TABLE OF AUTHORITIES.•...•.••„..............„....„......••••• • e t • 69 4 0000000 010 000.040,"••a”...e•iii CORPORATE DISCLOSURE STATEMENT PURSUANT TO 22 N.Y.C.R.R. § 500.1(f) ....... .......... .......... x PRELIMINARY STATEMENT.. ................ ...... ....... 1 STATEMENT OF INTEREST OF AMICUS CURIAE 3 SUMMARY OF ARGUMENT 5 STATEMENT OF RELEVANT FACTS 6 ARGUMENT 6 I. APPELLANTS LACK STANDING TO CHALLENGE MERS' ASSIGNMENT OF THEIR MORTGAGE 6 II. THE MERS® SYSTEM 9 A. The Role of MERS in Residential Mortgages. ..... ..... 9 B. The Taylor Note and Security Instrument 17 III. AURORA POSSESSED STANDING TO COMMENCE THE FORECLOSURE ACTION 21 A. Aurora Possessed the Note at the Time the Foreclosure Commenced and New York Law Authorizes It to Enforce the Note 21 B. The Taylor Mortgage Follows the Transfer of the Note 22 C. MERS Does Not Separate the Note and Mortgage 26 D. Silverberg Distinguished by Sachar 30 IV. MERS, AS NOMINEE, HAS AUTHORITY TO ASSIGN THE MORTGAGE 34 A. The Mortgage Authorizes MERS to Assign the Mortgage.................. ...... .......... 35 B. The Use of Nominees in Residential Mortgages 38 V. THE TAYLOR MORTGAGE IS ......... 44 A. The Mortgage Constitutes a Conveyance in New York 45 B. The Mortgage Constitutes a Valid Security Interest 48 CONCLUSION . ..... ..... 0".•000•0000 ■100000•000“ ...... 6."1“.". ■••awb• ■ ••7 ..... ”viasO•e•“• ■ •■ •• ■ •••“ ■■ ........... 55 ii TABLE OF AUTHORITIES Cases Amherst Factors v. Kochenberger, 4 N.Y.2d 203 (1958) .............. ... Page 39, 43 Andy Assoc., Inc. v. Bankers Trust Co., 49 N.Y.2d 13 (1979) 29 Baird v. Baird, 145 N.Y. 659 (1895) ..... ........ ...... ........ ....... ......... 30 Bank of America, N.A. v. Greenleaf, 2014 ME 89 (2014) 20 Bank of New York Mellon Trust, N.A. v. Sachar, 95 A.D.3d 695 (1st Dep't 2012) 31, 32, 44 Bank of New York v. Alderazi, 28 Misc. 3d 376 (Sup. Ct. Kings County 2010), rev 'd, 99 A.D.3d 837 (2d Dep't 2012) 39 Bank of New York v. Silverberg, 86 A.D.3d 274 (2d Dep't 2011) 32, 33, 34 Becker v. Wells, 297 N.Y. 275 (1948) 22 Blau v. America's Servicing Co., No. CV-08-773-PHX-MHM, 2009 U.S. Dist. LEXIS 90632 (D. Ariz. Sept. 28, 2009) 14 Bucci v. Lehman Bros. Bank, FSB, et al., 68 A.3d 1069 (R.I. 2013) 27 Carpenter v. Langan, 83 U.S. 271 (16 Wall. 271) (1872) 23, 24, 25 Collins v. Mortgage Elec. Registration Sys., Inc., No. 3:11-ev-00264, 2012 U.S. Dist. LEXIS 33459 (M.D. Tenn. Feb. 24, 2012) 27 Columbus Inv. v. Lewis, 48 P.3d 1222 (Colo. 2002) (en bane) 24 Commonwealth Prop. Advocates LLC v. Mortgage Elec. Registration Sys., Inc., No. 1:11CV00039 DS, 2011 U.S. Dist. LEXIS 69765 (D. Utah June 28, 2011) 24 Commonwealth Prop. Advocates, LLC v. Mortgage Elec. Registration Sys., Inc., 680 F.3d 1194 (10th Cir. 2011) 25, 27 Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282 (1st Cir. 2013) 27 iii Deerman v. Fed. Home Loan Mortg, Corp., 955 F. Supp. 1393 (N.D. Ala. Deutsche Bank Nat'l Trust Co. v. Pietranico, 33 Misc. 3d 528 (Sup. Ct. Suffolk County 2011), aff'd, 102 A.D.3d 724 (2d Dep't 2013) passim Doniger v. Rye Psychiatric Hosp. Center, 122 A.D.2d 873 (2d Dep't 1986) 35, 36 El-Roh Realty Corp. v. Roth, 48 A.D.3d 1190 (4th Dep't 2008) aff'g 836 N.Y.S.2d 489 (Sup. Ct. Onondaga County 2007) 36 Etsy v. Graham, 46 N.H. 169 (1865) ..................... ....... ............ 24 Fairbanks Capital Corp. v. Nagel, 289 A.D.2d 99 (1st Dept 2001) 43 Finn v. Wells, 135 Misc. 53 (Sup. Ct. Tioga County 1929) 46 First Nat'l Ass '11 v. Meisels, 234 A.D.2d 414 (2d Dep't 1996) 22 Flyer v. Sullivan, 284 A.D. 697 (1st Dep't 1954) 22, 29 Fontenot v. Wells Fargo Bank, 189 Cal. App. 4th 256 (2011) 49 Fryer v. Rockefeller, 63 N.Y. 268 (1875) 22, 29 Fuller v. Mortgage Elec. Registration Sys., Inc., 888 F. Supp. 2d 1257 (M.D. Fla. 2012) 27 Gibson v. Thomas, 180 N.Y. 483 (1905) 45 GRP Loan, LLC v. Taylor, 95 A.D.3d 1172 (2d Dep't 2012) 22 Hargrow v. Wells Fargo Bank N.A., 491 F. App'x 534 (6th Cir. 2012) 27 Horvath v. Bank of New York, NA., 641 F.3d 617 (4th Cir. 2011) passim In re Agard, 444 B.R. 231 (2011), vacated in part, No. 8-10- 77338(REG),1 1 -CV-1826(JS),11-CV-2366(JS)2012 U.S. Dist. LEXIS 43286 (E.D.N.Y. Mar. 28, 2012) 39 In re Cushman Bakery, 526 F.2d 23 (1st Cir. 1975) 27, 39, 43, 48 iv In re Falls Estate, 31 Misc. 658 (Sur. Ct. Ostego County 1900), aff'd, 67 A.D. 619 (1st Dept 1900)........ ...... ____________________________ In re Holden, 271 N.Y. 212 (1936) ............. ___________ In re Huggins, 357 B.R. 180 (D. Mass. 2006) .........._ ........ ...... _ ... ........... 22 8 40 In re Ivy Props., Inc., 109 B.R. 10 (D. Mass. 1989) ________ ......... ................ 24, 25 In re MERS Litig., No. 09-2119, 2011 U.S. Dist. LEXIS 117107 (D. Ariz. Oct. 3, 2011) ........ ............. ......... ........ _......... ........ 8 In re Schmiel, 319 B.R. 520 (Bankr. E.D. Mich. 2005) 15 In re Securities Capital Assurance, Ltd. Sec. Litig. 729 F. Supp. 2d 569 (S.D.N.Y. 2010) 10 In re Stockbridge Funding Corp., 145 B.R. 797 (Bankr. S.D.N.Y. 1992) 29 In re Stralem, 303 A.D.3d 120 (2d Dep't 2003) ....... ........................... ................. 37 In re Vargas, 396 B.R. 511 (C.D. Calif. 2008) 24, 25 Jackson v. Mortgage Elec. Registration Sys., Inc., 770 N.W.2d 487 (Minn. 2009) 9, 10, 15, 17 Jennings v. Foremost Dairies, Inc., 37 Misc. 2d 328 (Sup. Ct. N.Y. County 1962) 8 Johnsen v. ACP Distribution, Inc., 31 A.D.3d 172 (1st Dep't 2006) . 36 Karamath v. U.S. Bank, NA., No. 11-cv-1557, 2012 Dist. LEXIS 135038 (E.D.N.Y. Aug. 29, 2012), report and recommendation adopted by 2012 U.S. Dist. LEXIS 135007 (E.D.N.Y. Sept. 17, 2012) 7 Kellogg v. Smith, 26 N.Y. 18 (1862) 28 Kluge v. Fugazy, 145 A.D. 537 (2d Dep't 1988) 24, 27, 28 Kondaur Capital Corp. v. McCary, 115 A.D.3d 649 (2d Dep't 2014) 22 Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011) 8 Merritt v. Bartholick, 36 N.Y. 44 (1867) .................. ..... 26 MERS v. Bellestri, No. 4:09-CV-731 CAS, 2010 U.S. Dist. LEXIS 67753 (ED. Mo. July 1, ............ ............ ....... 12, 40, 41 Merscorp, Inc, v. Romaine, 8 N.Y.3d 90 (2006) .................................................passim Moore v. Lewis, 51 111. App. 3d 388 ....................... ......... ...... 25 Mortgage Elec. Registration Sys., Inc. v. Coakley, 41 A.D.3d 674 (2d Dep't 2007) ......................... ..... ....... ........ ..... 21 Munoz v. Wilson, 111 N.Y. 295 (1888) 48 Muschany v. United States, 324 U.S. 49 (1945) ..... ....... .............. 50 National Live Stock Bank v. First National Bank, 203 U.S. 296 (1906) 23 People v. Prince, 110 Misc. 2d 55 (Sup. Ct. Queens County 1981) 46 Plainfield Pike Gas & Convenience, LLC v. 1889 Plainfield Pike Realty Corp., 994 A.2d 54 (R.I. 2010) 39, 40 RIVIS Residential Prop. LLC v. Miller, 303 Conn. 224 (2011) 26 Slutsky v. Blooming Grove Inn, 147 A.D.2d 208 (2d Dep't 1989) 21 Sprint Comrnc 'ns Co. v. APCC Servs., Inc., 544 U.S. 269 (2008)... ......... ....... 40 Standard Builders Supplies v. Gush, 206 A.D.2d 720 (3d Dep't 1994) .......... .37 Steele v. Drummond, 275 U.S. 199 (1927) 50 Stein v. Chase Home Finance, LLC, 662 F.3d 976 (8th Cir. 2011) 27 Strauss v. Belle Realty Co., 98 A.D.2d 424 (2d Dep't 1983) 9 Sullivan v. International Fidelity Ins. Co., 96 A.D.2d 555 (2d Dep't 1983) 37 Syracuse Savings Bank v. Merrick, 182 N.Y. 387 (1905) 28 vi Tamir v. Bank of N.Y. Mellon, No. 12-cv-4780, 2013 U.S. Dist. LEXIS 122033 (E.D.N.Y. Aug. 27, 2013) ........ ..... ........... ....... ......... 7, 9 Terrian v. Zwit, 467 Mich. 56 (2002)..... ...................... ............__........_ ....... 51 Thoben v. Greenpoint Mortg. Funding Inc. et al. (Sup. Ct. Westchester • County Nov. 8, 2013) (Hubert, J.) (Index No. 61551/2012).................... ....... ........ 7 Trent v. Mortgage Elec. Registration Sys., Inc., 288 F. App'x 571 (11th Cir. 2008)..... ......... .............. . ............... 27 US. Bank, N.A. v. Collymore, 68 A.D.3d 752 (2d Dep't 2009) 5, 20 U.S. Bank, N.A. v. Flynn, 27 Misc. 3d 802 (Sup. Ct. Suffolk County 2011) Utreras v. Aegis Funding Corp., No. 12-cv-00291, 2013 U.S. Dist. LEXIS 30218 (E.D.N.Y. Mar. 1, 2013) 38 7 W.L. Development Corp. v. Trifort Realty, Inc., 44 N.Y.2d 489 (1978) 46, 47, 48, W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757 (1983) 50 Waterbury Trust Co. v. Weisman, 94 Conn. 210 (1919) ....... ..... ........... 24 Weaver Hardware Co. v. Solomovitz, 235 N.Y. 321 (1923) 22 Wechsler v. Hunt Health Systems, Ltd., 216 F. Supp 2d 347 (S.D.N.Y. 2002) 50 Weingartner v. Chase Home Fin., LLC, 702 F. Supp. 2d 1276 (D. Nev. 2010) 24, 40 Williams v. Wisner Bldg. Co., 121 Misc. 32 (Sup. Ct. N.Y. County 1923), aff'd, 208 A.D. 783 (1st Dep't 1924) 47 Wood y. Travis, 231 A.D. 331 (3d Dep't 1931) ......... .................. ....... 48 Zurich Am. Ins. Co. v. ABM Indus., Inc., 397 F.3d 158 (2d Cir. 2005) 36 49 vii Statutes 12 U.S.C.A. § ..... ................. ...... . ...... .......... 14 14 M.R.S. § 6321... ....... ..... .......... 20 15 U.S.C.A. § 1641(f)(2).. ........ ................ ............... .............. 14 15 U.S.C.A. § 1641(g)(1)........... ..... ........ ......... ........... 14 N.Y. Real Prop. Acts Law § 1304(1) 20 N.Y. Real Prop. Acts. Law § 1302(1)(a) 20 N.Y. Real Prop. Acts. Law § 1921(9)(a) 43, 48 N.Y. Real Prop. Law § 124 ......_ ................. ..... ..... 42 N.Y. Real Prop. Law § 240(3)......... ........ .......... ....... ...... ........ ..... ............. 52 N.Y. Real Prop. Law § 257 43, 44 N.Y. Real Prop. Law § 275(2)(a) 42 N.Y. Real Prop. Law § 290(3) 45 N.Y. Real Prop. Law § 291 29, 45 N.Y. Real Prop. Law § 321(3) 30 N.Y. U.C.C. § 1-201(20) 21 N.Y. U.C.C. § 3-104(2)(d) 13, 21 N.Y. U.C.C. § 3-301 5, 21 N.Y. U.C.C. § 9-502(a)(2) 42 N.Y. U.C.C. §§ 3-202(1) 13 N.Y. U.C.C. §§ 3-204(1), (2), (3) 13 viii Rules 22 N.Y.C.R.R. § 500.23(4)....................,.......... ....... Other Materials 4 N.Y. Jur. 2d, Appellate Review §§569-572 (2014) ............ ..... ...... 3 3 78 N.Y. Jur. 2d Mortgages and Deeds of Trust §531 ... .................. 29 9 Warren's Weed, N.Y. Real Prop. Law § 7.02(1) (2006) 45 Allen H. Jones, Setting the Record Straight on MERS, Mortgage Banking 34 (May 2011) ....... ..... .............. ................................. ..... 11, 12, 14 Black's Law Dictionary (10th ed. 2014).... ..... .... .................. ..... ......... ................ 40 Gerald Komgold, Legal and Policy Choices in the Aftermath of the Subprime and Mortgage Financing Crisis, 60 S.C.L.Rev. 727 (2009) ......... 10 Jeffrey J. Miller, The Effect of the S&L Bailout on Title to Real Property, 5 PROB. & PROP. 44 (1991) 15 Phyllis K. Slesinger & Daniel McLaughlin, Mortgage Electronic Registration System, 31 Idaho L. Rev. 805 (1995) ............... ........ ...................... 14 R.K. Arnold, Yes, There Is Life On MERS, 11 Prob. & Prop. 32 (Aug. 1997) 11, 14, 15 Restatement (Third) of Property (Mortgages) § 5.4 23, 24 ix CORPORATE DISCLOSURE STATEMENT PURSUANT TO 22 N.Y.C.R.R. § 500.1(f) MERSCORP Holdings, Inc. is a privately held stock corporation organized under the laws of the State of Delaware, with no parents or affiliates. MERSCORP Holdings, Inc. has two publicly traded shareholders, Fannie Mae and Freddie Mac, which own ten (10) percent or more of MERSCORP Holdings, Inc. Mortgage Electronic Registration Systems, Inc. is a privately held stock corporation organized under the laws of the State of Delaware, is qualified to do business in the State of New York and is a wholly-owned subsidiary of MERSCORP Holdings, Inc. Mortgage Electronic Registration Systems, Inc. does not have any subsidiaries or affiliates. PRELIMINARY STATEMENT It is undisputed that Defendants-Appellants, Monique Pujol a/k/a Monique Taylor and Leonard Taylor (collectively "Taylor" or the "Appellants") defaulted on their $600,000 purchase money mortgage loan on January 2, 2010 and have remained in default ever since. (R. 92.)' In defense of the mortgage foreclosure proceeding commenced by the Plaintiff-Respondent, Aurora Loan Services, LLC ("Aurora" or the "Respondent") on May 24, 2010, Appellants challenged Aurora's standing to commence and maintain such action. (R. 13.) Notwithstanding their continuing default, Appellants attempt to divert the Court's attention to the irrelevant fact that Mortgage Electronic Registration Systems, Inc. ("MERS"), the mortgagee, as nominee for the lender, its successors and assigns, did not possess or transfer the promissory note (the "Note") when MERS assigned the mortgage (the "Mortgage" or "Taylor Mortgage") to Aurora. (R. 13-15.) Relying on this irrelevant fact, they then propound an irrational argument that the Taylor Mortgage, which they gave as security for their Note was void ab initio, caused, they assert, by a divergence or split of the Note and Mortgage, due to the designation of MERS as nominee for the lender, and its successors and assigns. (Appellants' Principal Brief pp. 14-15.)2 Since the Taylor Mortgage was void ab initio, they further argue that MERS' assignment of the Mortgage (the "MERS All references to the Record on Appeal will be referred to as R. 2 All references to Appellants' Principal Brief will be referred to as "App. Brief ." 8945147.5 1 Assignment") (R. 115-117) to Aurora is a nullity; hence, Aurora cannot have standing to undertake the foreclosure of their Mortgage (App. Brief at 23). While Appellants cite to various authorities and, in some cases, no authorities, they fail or refuse to understand how MERSCORP Holdings, Inc. ("MERSCORP") and its member lenders operate, they ignore and deny the legitimate and well established authorities that uphold the rights of a transferee of a promissory note such as Aurora, and the rights of MERS, as nominee for the lender, and its successors and assigns, and its ability to hold legal title to the Taylor Mortgage and to assign its interest therein. In doing so, Appellants have challenged the validity and enforceability of the mortgage instrument and MERS' ability to assign its legal title in such mortgage. As will be demonstrated, Appellants' challenges are baseless and misapprehend the fundamental law of New York with regard to the negotiation of promissory notes and assignment of mortgages. As an initial matter, Appellants lack any standing as non-parties to the MERS Assignment of the Mortgage to challenge the assignment contract between MERS as assignor, and the MERS® System Member as assignee, and on that basis alone this appeal warrants dismissal. In addition, given the wide extent or scope of the question certified by the State of New York Supreme Court, Second Department, Appellate Division ("Second Department") by its order dated April 29, 2014: "Was the decision and 2 order of this Court dated February 5, 2014 properly made?" (R. vi), this Court is fully empowered to consider all aspects of the Second Department's Decision and Order granted on February 5, 2014 (R. ix-xii) ("Second Department Decision"). See 4 N.Y. Jur, 2d Appellate Review §§ 569-572 (2014). Accordingly, MERSCORP and MERS submit this brief not only to support Aurora in this appeal, but also because MERSCORP and MERS are uniquely qualified to provide important information and arguments in accordance with 22 N.Y.C.R.R. § 500.23(4) to assist the Court's consideration of the Second Department Decision in this appeal. STATEMENT OF INTEREST OF AMICUS CURIAE The MERS® System is an electronic registration system used for tracking the beneficial ownership interests in and servicing rights for mortgage loans whose repayment is secured by a security instrument held by MERS as mortgagee on behalf of the beneficial owner of the mortgage loan — a system much like the book- entry system successfully used by the Depository Trust Company for the securities industry since the 1970s. (See Affidavit of John A. Murphy, sworn to on March 26, 2015 (the "Murphy Aff.") at ¶¶ 11-12.) MERSCORP is the owner and operator of the MERS® System, a system which is used to track mortgage loans in all fifty states and the District of Columbia. (Id. at ¶ 2.) In conjunction with the MERS® System, MERS serves as the mortgagee of record, as nominee for the 3 originating lender, and its successors and assigns, in security instruments such as mortgages in New York, that are regularly used by the mortgage lending industry to facilitate residential mortgages for millions of Americans. Today, over 3,000 mortgage lenders and servicers nationwide use the MERS CD System, and approximately eight-hundred eighty thousand (880,000) mortgage loans in the state of New York are registered on the MERS® System where MERS is the mortgagee; throughout the United States there are approximately twenty-six million, three- hundred thousand (26,300,000) mortgage loans registered on the MERSO System where MERS is identified as the record mortgagee, beneficiary (or nominee of the beneficiary), or grantee of the security instrument. (Id. at ¶ 4.) While not parties to this action, MERSCORP and MERS have come under direct attack by Appellants, who argue that the Taylor Mortgage is void ab initio and that MERS lacked legal authority to assign the Taylor Mortgage, as nominee of First National Bank of Arizona and its successors and assigns, to Aurora. (App. Brief 15-23.) In light of these direct arguments against MERSCORP and MERS, which have far-reaching implications to MERSCORP, MERS, the MERS® System Members, and the residential mortgage loan industry as whole, MERSCORP and MERS have particular interests in this appeal. The arguments advanced by Appellants are contrary to New York law, and if confirmed by this Court, would result in a destabilization of the primary and secondary mortgage markets in 4 New York and potentially throughout the nation. Accordingly, MERSCORP and MERS submit this brief in support of Aurora because they are able .to provide a unique and different perspective as to the business operations and public policy benefits provided by the MERS® System which are not presently before the Court. Unless stated otherwise, MERSCORP and MERS will be referred to collectively as the MERS entities. SUMMARY OF ARGUMENT The Second Department Decision correctly held that Aurora had standing to commence the underlying foreclosure action because it demonstrated that it had possession of the Note prior to commencement of the action and that the Mortgage followed as an incident to the transfer of the Note. (R. x.) The MERS entities respectfully request that this Court affirm the Second Department Decision with respect to Aurora's standing to bring the foreclosure action, and the Supreme Court's order granting summary judgment in favor of Aurora. A finding that Aurora had standing to foreclose in this case would be consistent with N.Y. Uniform Commercial Code (U.C.C.) § 3-301 and long- standing authority in New York that possession of the note prior to commencement of the foreclosure action is sufficient to confer standing and the mortgage passes with the debt as "an inseparable incident." U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 754 (2d Dep't 2009). A finding that the Taylor Mortgage is a valid 5 security instrument, or not void ab initio and that MERS, as mortgagee in a nominee capacity, possesses legal authority to assign the Taylor Mortgage, as will be discussed infra, would also be consistent with long standing authority in New York. A finding that the Taylor Mortgage is void ab initio or that MERS, the mortgagee, as nominee for the lender, its successors and assigns, lacks authority to assign the Taylor Mortgage would be a stark and troublesome departure from the settled law of New York, and pose destabilizing and adverse impacts to the multi-billion dollar primary and secondary mortgage market in New York and potentially across the United States. STATEMENT OF RELEVANT FACTS The MERS entities adopt and incorporate by reference the Respondent's Counterstatement of relevant facts and procedural history. (See Respondent's Brief, pp. 5-12.) ARGUMENT I. APPELLANTS LACK STANDING TO CHALLENGE MERS' ASSIGNMENT OF THEIR MORTGAGE. Even if the Court ignores the many flawed conclusory statements in the Appellants' Brief, Appellants lack standing to challenge MERS' authority to assign the Mortgage. Because the basis for Taylor's appeal is that MERS allegedly never had legal title to assign the Mortgage to a new lender, and Appellants lack standing 6 to challenge any assignment of their mortgage, the appeal must be dismissed. (App. Brief pp. 15, 22.) It is well recognized that "a non-party to a contract lacks standing to challenge an agreement in the absence of terms demonstrating that it is a third-party beneficiary." Tamir v. Bank of N.Y. Mellon, No. 12-cv-4780, 2013 U.S. Dist. LEXIS 122033, at 7-8 (E.D.N.Y. Aug. 27, 2013). This principle is equally applicable in terms of challenging assignments of a mortgage. Utreras v. Aegis Funding Corp., No. 12-cv-00291, 2013 U.S. Dist. LEXIS 30218, at *6 (E.D.N.Y. Mar. 1, 2013) ("[I]f one party purported to assign the mortgage to another party, but actually failed to do so, there could be a genuine dispute between the putative assignee and assignor over the ownership of the mortgage, but Plaintiff likely would have no standing in such a dispute."); Karamath v. U.S. Bank, N.A., No. 11-cv-1557, 2012 Dist. LEXIS 135038 (E.D.N.Y. Aug. 29, 2012) (plaintiff had no standing to challenge the validity of a mortgage assignment between originator and third party), report and recommendation adopted by 2012 U.S. Dist. LEXIS 135007 (E.D.N.Y. Sept. 17, 2012); Thoben v. Greenpoint Mortg. Funding Inc. et al. (Sup. Ct. Westchester County Nov. 8, 2013) (Hubert, J.) (Index No. 61551/2012) (holding that plaintiff was not a party to the MFRS assignment and thus claims challenging the assignment were dismissed for lack of standing) (copy attached hereto as Exhibit 1). 7 Numerous courts have recognized that borrowers are "uninvolved [in] and unaffected" by mortgage assignments. See, e.g., In re MERS Litig., No. 09-2119, 2011 U.S. Dist. LEXIS 117107, at *42 (D. Ariz. Oct. 3, 2011). If MERS executed a mortgage assignment from lVfERS to a note holder without proper authority, that would be an issue to be resolved between the parties to the assignment, but it would have absolutely no impact upon the borrower. See In re Holden, 271 N.Y. 212, 218 (1936) ("No one could question the validity of the assignments except the assignors . . ."); see also Jennings v. Foremost Dairies, Inc., 37 Misc. 2d 328, 333 (Sup. Ct. N.Y. County 1962) ("`The fact that the assignor might have a valid cause of action against the assignee because of fraud practiced upon him does not affect the legal title of the assignee, and . . no one other than the assignor can question the validity of the assignment.") (quoting Holden, 271 N.Y. at 217). Parties asserting third-party beneficiary status under a contract must establish (1) the existence of a valid and binding contract between other parties; (2) that the contract was intended for their benefit; and (3) that the benefit to them is sufficiently immediate rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate them if the benefit is lost." Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011). Absent a clear intent to confer a benefit of the promised performance, the third party is merely an 8 incidental beneficiary with no right to enforce the contract. Strauss v. Belle Realty Co., 98 A.D.2d 424, 426 (2d Dep't. 1983). In this case, Appellants are neither party to, nor an intended third-party beneficiary of the MERS Assignment of the Mortgage that they allege MERS could not effectuate. See Tamir, 2013 U.S. Dist. LEXIS 122033, at 8 ("Plaintiff is not a party to the mortgage assignment, nor is there language in the governing loan documents or other allegations suggesting that Plaintiff is a third-party beneficiary of that agreement."). Any benefit derived from the MERS Assignment of the Mortgage is merely incidental, and thus Appellants lack standing to challenge the MERS Assignment. Because the basis for the entire appeal is based on MERS' alleged inability to assign the Mortgage, Appellants lack standing and the appeal should be dismissed. IL THE MERS® SYSTEM. A. The Role of MERS in Residential Mortgages. For several decades, the residential mortgage loan industry has been comprised of two interconnected markets. See Jackson v. Mortgage Elec. Registration Sys., Inc., 770 N.W.2d 487, 490 (Minn. 2009). The primary market consists of mortgage backed loans made to consumers, loans typically evidenced by a promissory note and secured by a security instrument. Id. Many originating lenders will then sell the notes, or mortgage loans, on the secondary market to 9 entities such as the Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"), or to private investment banks or other institutional investors,3 providing the loan originators — mortgage brokers, mortgage companies, and local banks — with a return of their capital to make more home loans to more potential home owners. Jackson, 770 N.W. 2d at 490. Once purchased in the secondary mortgage market, an entity that owns the loan may pool it with others and transfer ownership of the pool to a trust. See Horvath v. Bank of New York, NA, 641 F.3d 617, 620 (4th Cir. 2011); In re Securities Capital Assurance, Ltd. Sec. Litig., 729 F. Supp. 2d 569, 575 (S.D.N.Y. 2010). The trust then issues debt securities that investors can purchase shares in, with the pooled loans serving as collateral for the securities. In re Securities Capital Assurance, 729 F. Supp. 2d at 575. The securities often represent different groups or "tranches" of the loans in the trust, grouped and priced according to their expected risk of default. Id. The securities thus represent a right to certain payments that are derived from the monthly interest and principal payments made under the pooled loans (id.), and the investors either hold their shares in the security, or trade them in the markets for such securities. See Korngold, 60 S.C.L. Rev. at 729 n.3. This secondary mortgage market process, involving high-volume 3 See id.; see also Gerald Korngold, Legal and Policy Choices in the Aftermath of the Subprime and Mortgage Financing Crisis, 60 S.C.L. Rev, 727, 729 (2009). 10 transfers of secured debt, creates new capital for the primary market, creating greater access to residential home loans. In 1993, several leading participants in the real estate finance industry developed an electronic registration system for tracking the transfer of interests in the secured debt instruments, or purchased for securitization in the secondary mortgage market, a system much like the book-entry system successfully used by the Depository Trust Company for the securities industry since the 1970s. See R.K. Arnold, Yes, There Is Life On MERS, 11 Prob. & Prop. 32, 33-35 (Aug. 1997). Fannie Mae, Freddie Mac, the Government National Mortgage Association ("Ginnie Mae"), and the Mortgage Bankers Association of America joined forces with other major mortgage banking institutions to create a national electronic registration system and clearinghouse — the MERS® System. Merscorp, Inc. v. Romaine, 8 N.Y.3d 90, 96 n.2 (2006). The MERS® System, which has been fully operational since 1997, tracks transfers of the beneficial ownership interests in mortgage backed loans.4 4 The MERS® System also tracks changes in servicing rights among its Members. The servicer services the loan for the ultimate investor, owner(s) of the beneficial interests in the note, receiving and processing loan payments and payoffs; dealing with tax and insurance escrows; handling delinquencies, forbearance, and modifications; and interacting with borrowers. See, e.g., Deerman v. Federal Home Loan Mortg. Corp., 955 F. Supp. 1393, 1396 (N.D. Ala. 1997). Knowing the identity of the servicer — not the identity of the investor(s) who typically does not interact with a borrower — is what is most essential to the homeowner, because the servicer handles the day-to-day servicing responsibilities just as it did before the advent of the MERS® System_ See also Allen H. Jones, Setting the Record Straight on MERS, Mortgage Banking, 34, 36 (May 2011). 11 In addition to the MERS® System which is owned and operated by MERSCORP,5 a separate entity—MERS—serves as the disclosed record mortgagee and common nominee for the beneficial owners of mortgage loans registered on the MFRS® System. (Murphy Aff III 2, 4.) In that capacity, MERS serves as the mortgagee of record (in mortgage states) or as beneficiary, or nominee of the beneficiary (in deed of trust states) of the security instruments securing the promissory notes that evidence the debt and MERS holds legal title to the security instrument on behalf of the beneficial owner. See Jones, supra at 35 n.12. MERS' role as mortgagee is fully disclosed, agreed to by the borrowers, established in the security agreements, and duly recorded in county land records. (Murphy Aff. 9 12, 16.) All persons having an interest in the property are, therefore, on notice of the security interest and the party expressly designated as mortgagee or beneficiary. (Id. at ¶ 13.) MERS becomes the mortgagee of record by being named expressly by the borrower and the lender as mortgagee in the mortgage when the loan is originated, or by assignment of mortgage to MERS. (Id. at 9 16, 17; R. 28.) Once designated the mortgagee, MERS remains the mortgagee when beneficial ownership interests in the note or servicing rights to the loan change, (Murphy Aff. ¶ 18.) Those transactions do not occur through the MERS® System they occur outside of it See also MERS v. Bellestri, No. 4:09-CV-731 CAS, 2010 U.S. Dist. LEXIS 67753, at 12-19 (E.D. Mo. July 1, 2010), for a more comprehensive description of the MERS® System. 12 but they are electronically tracked in the MERS® System. (Murphy Aff. !If 18, 23.) At all times, the security instrument which designates MERS, as mortgagee, or any assignment to MERS is recorded in the public land records, keeping the public on record notice of the security interest in the property, as well as MERS' role as mortgagee and disclosed nominee for the lender, its successors and assigns. (Id. at ¶ 19.) Usually the promissory note is not recorded with county recorders and is not a document available to the public. When a lender transfers its beneficial interest in the promissory note, MERS retains its agency or fiduciary obligations to the new note owner and holds legal title to the mortgage on behalf of the new note owner. MERS continues to act as the mortgagee for the new note owner because the benefit of the security instrument follows the note. (Id.) Beneficial ownership interests in these loans are sold by negotiation of the promissory note by endorsement and delivery, in accordance with the Uniform Commercial Code. See N.Y. U.C.C. §§ 3-202(1), 3-204(1), 3-204(2), 3-204(3). The promissory note is a negotiable, intangible asset, which has value to the financial institutions and investors. See N.Y. U.C.C. § 3-104(2)(d). Like other promissory notes, the right to receive payments under a loan is legally transferred when one holder negotiates the note to another by endorsement and delivery. Id. Prior to the creation of MERS and the MERS® System, when servicing rights in a mortgage loan were transferred, the parties would often change the 13 mortgagee of record by assigning and recording the security instrument in the land records. See Jones, supra at 34, 36. Loans were frequently originated in the name of one lender and then transferred to aggregators, where the aggregators would transfer servicing rights to a third party. In each case, an assignment of mortgage was recorded so that the purchaser or servicer would appear in the land records6 so as to entitle itself to receive service of process and other legal notices on behalf of the note owner. Prior to MERS and the MERS® System, the assignment process could take a long time to complete — up to six months for a modest loan portfolio. In addition, error rates as high as 33% were common, with assignments recorded in the wrong sequence — clouding title to the property. See Arnold, supra, at 34 n.9. MERS and the MERS® System eliminated the need for an assignment of the mortgage in the land records for each transfer of servicing rights,' and reduced the incidence of questions and disputes regarding the ownership interest in the residential mortgage loans bundled into mortgage backed securities. See Blau v. America's Servicing Co., No. CV-08-773-PHX-MHM, 2009 U.S. Dist. LEXIS 90632 (D. Ariz. Sept. 28, 2009). 6 Phyllis K. Slesinger & Daniel McLaughlin, Mortgage Electronic Registration System, 31 Idaho L. Rev. 805 (1995). 7 Borrowers, however, have a federally protected right to notice of changes in servicers and creditors. See 12 U.S.C.A. § 2605(b)(1) which requires each servicer of any federally related mortgage loan to notify the borrower in writing of any assignment, sale or transfer of servicing of such a mortgage loan to any other person; and 15 U.S.C.A. §§ 1641(1)(2) and 1641(g)(1) which require that written notice be given to the borrower of the identity of the creditor and other contact information whenever a mortgage loan is sold, assigned or transferred to a third party. 14 Additionally, mergers, closures or liquidations of financial institutions, including banks and loan servicers, have contributed to title problems faced by the residential mortgage loan industry, which included difficulties in obtaining assignments, releases, satisfactions and reconveyances from closed or liquidated financial institutions. To refinance a residential mortgage loan, payoff information is needed and appropriate satisfactions and releases of mortgages or reconveyances of deeds of trust must be recorded so that the new lender can take a first lien on the property. When the borrower's lender or servicer has been closed or liquidated, homeowners and title insurance companies are unable to get timely assignments, releases or satisfactions of their mortgages.8 When the mortgage refinance boom occurred in the early 1990s, there was a severe backlog of paperwork at the county land records, which also delayed lien assignments, releases and satisfactions and related home purchase and mortgage refinance transactions to the detriment of consumers attempting to benefit from falling interest rates.9 Since the mid-1990's participants in the mortgage loan industry have been able to subscribe as members of the MERS® System ("MERS® System Members" or "Members"), and register their loans in the MERS® System database. Jackson, 8 See, e.g., Jeffrey J. Miller, The Effect of the S&L Bailout on Title to Real Property, 5 PROB. & PROP. 44, 47-49 (1991) (discussing various title-related issues faced by the takeover of certain S&Ls in the 1980s); Arnold, supra, at 34 (explaining issues of title and delays). 9 Id.; see also In re Schmiel, 319 B.R. 520 (Bankr. E.D. Mich. 2005) (addressing issues of perfection of title, preferences and priority of liens when security instruments are not timely recorded). 15 770 N.W.2d at 490. Once Members, they are contractually obligated to abide by certain terms, conditions, rules and procedures. (Murphy Aff. ¶ 20.) Lenders who are MERS® System Members elect to designate MERS as its nominee with respect to the security instrument securing the loan, and if it does so, the Member "cause[s] Mortgage Electronic Registration Systems, Inc. to appear in the appropriate public records as the mortgagee of record with respect to each mortgage loan that the Member registers on the MERS® System." (Murphy Aff. 25.) Under the MERS® System Rules of Membership ("Rules"), MERS serves as the mortgagee of record "solely as a nominee, in an administrative capacity, for the beneficial owner or owners" of the promissory notes secured by the mortgages. (Murphy Aff. 1126.) In that capacity, MFRS is required to: at all times comply with the instructions of the holder of the mortgage loan promissory notes. In the absence of contrary instructions from the beneficial owners, . Mortgage Electronic Registration Systems, Inc. may rely on instructions from the servicer shown on the MERS® System, in accordance with these Rules and Procedures with respect to transfer of beneficial ownership, transfers of servicing rights, and releases of security applicable to such mortgage loan. (Murphy Aff. ¶ 27 (emphasis added).) As a consequence of designating MERS as the mortgagee of record on the mortgage or other security instrument recorded in the land evidence records, Members of the MFRS® System effectively use MERS to serve as their common 16 agent to hold mortgagee interests on behalf of each successive beneficial interest holder in the promissory note secured by the mortgage. See Romaine, 8 N.Y.3d at 96; see also Jackson, 770 N.W.2d at 490. When one MERS® System Member transfers the note to another MERS® System Member, the Members electronically track that transfer within the MERS® System, but MERS remains the mortgagee of record in the land evidence records for the new beneficial owner of the note. Id. In this case on appeal, the original lender and each successive holder of the Taylor Note (which was secured by the Taylor Mortgage), was a Member of the MERS® System, subject to both the MERS Terms and Conditionsl° and its Rules of Membership. (Murphy Aff. ¶ 21.)" B. The Taylor Note and Security Instrument. On July 5, 2006, Monique Taylor borrowed $600,000 from First National Bank of Arizona ("Arizona Bank") for the purchase of a home. (R. 98-108.) To evidence the outstanding debt, Monique Taylor executed the Note. 2 Under the terms of the Note, Monique Taylor acknowledged: It) The MERS Terms and Conditions are no longer in existence, having been incorporated into the MERS Rules of Membership; however, when this loan originated, the MERS Teiius and Conditions did exist separately. (Murphy Aff. 1120.) I I Though this fact is not relevant to the claims of the Appellants, as they lack any standing as non-parties to the MERS Assignment of the Mortgage to challenge the contractual relationship between the MERS® System Members, MERS, and MERSCORP. See, supra Point I. 12 The Note was executed only by Monique Taylor, but the Mortgage was executed by both Monique Taylor and Leonard Taylor. 17 • that Arizona Bank may transfer the Note without notice to the borrowers; • that any entity the Note was transferred to would be considered the "Note Holder" entitled to payment; • and that if she was in default and did not cure the default, the Note Holder could require her to immediately pay the full amount of principal and interest due under the Note. (R. 98-108.) The Note also referenced the Mortgage securing the Note that Appellants executed the same day: "[i]n addition to the protections given to the Note Holder under this Note, a Mortgage . . . dated the same date as this Note, protects the Note Holder from possible losses that might result if I do not keep the promises that I make in this Note." (R. 101.) Arizona Bank subsequently endorsed the Note signed by Monique Taylor over to First National Bank of Nevada, which then endorsed the Note to Residential Funding Company LLC, which in turn endorsed the Note to Deutsche Bank Trust Company Americas, as Trustee. (R. 102.) The Note is currently held by Aurora, as the custodian or servicer for the current beneficial owner(s) of the Note and its agents. (R. 92.) As noted above, as a part of the same transaction, Monique Taylor and Leonard Taylor executed the Mortgage or security instrument that same day as security for the Note which was subsequently recorded in the appropriate land evidence records. (R. 27.) Under the terms of the Mortgage, Taylor expressly 18 granted the Mortgage to MERS, designating MERS as the mortgagee, "acting solely as nominee for Lender [Arizona Bank] and Lender's successors and assigns." (R. 28 (emphasis added).) Like the Note, the Mortgage also notified Taylor that: "[tJhe Note or an interest in the Note, together with this Security Instrument, may be sold one or more times. I might not receive any prior notice of these sales." (R. 41, ¶ 20 (emphasis added).) The Mortgage secured Taylor's repayment of the loan, repayment being a covenant under the Mortgage as well as the Note, (R. 32, 101), by mortgaging and conveying the purchased real estate as security to MERS as the mortgagee, and the nominee for Arizona Bank and Arizona Bank's "successors and assigns" (R. 30). Under the express terms of the Mortgage, MERS is defined as "the mortgagee under this Security Instrument[.]" (R. 28 (emphasis in original).) Taylor agreed that: MERS holds only legal title to the rights granted by me in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lenders' successors and assigns) has 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 Lender, including but not limited to, releasing and cancelling this Security Instrument. (R. 30 (emphasis added).) 19 In sum, both the Note and the Mortgage put Taylor on notice that Arizona Bank, the original lender's interests in the promissory Note, "together with [the] Security Instrument," could be sold or transferred one or more times without notice, but that MERS would continue to be the mortgagee and nominee of the lender and the lender's successors in interest in the mortgage loan, exercising all the lender's rights, including the assignment of the Mortgage, even though MERS was not a party to the Note.13 13 The holding of the Supreme Judicial Court of Maine in Bank of America, NA. v. Greenleaf 2014 ME 89, 98 A.3d 700 (2014), which interpreted the standing requirement under Maine's foreclosure law and statutes, is distinguishable from this case. The Court in Greenleaf interpreted Maine's foreclosure statute, 14 M.R.S. § 6321, and found that in addition to being entitled to enforce the note, a foreclosure plaintiff must also prove a separate ownership interest in the mortgage, which was transferred to the foreclosing plaintiff/noteholder by the original lender named in the mortgage. Greenleaf, 2014 ME at *P12, 98 A.3d 706. In contrast to Maine's foreclosure law, which does not recognize a foreclosing plaintiff has an ownership interest in the mortgage based on the fact that it owns the note, and requires that a foreclosure plaintiff prove a separate ownership interest in the mortgage; in New York, note holder status, as a matter of law, is sufficient evidence of an ownership interest in the mortgage because the mortgage follows the note as "an inseparable incident." Collyrnore, 68 A.D.3d at 754. Indeed, New York's foreclosure statute expressly permits delegation of authority to an agent or servicer, including for purposes of assigning a mortgage and does not require the foreclosing plaintiff to be both the owner of the note and the mortgage. Section 1302(1)(a) of the RPAPL requires the plaintiff in a foreclosure action to allege that it is "the owner and holder of the subject mortgage and note, or has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the subject mortgage and note." Id. In addition, RPAPL § 1304(1) contemplates commencement of a foreclosure action by "a lender, an assignee or a mortgage loan servicer . . ." Simply put, in Maine the ownership of the mortgage is a critical requirement and in recognition of this, the Court in Greenleaf ruled MERS could not transfer ownership of the mortgage to the foreclosing lender. 20 III. AURO POSSESSED STANDING TO COMMENCE THE FORECLOSURE ACTION. A. Aurora Possessed the Note at the Time the Foreclosure Commenced and New York Law Authorizes It to Enforce the Note. A promissory note, such as the Note here, is a negotiable instrument governed by New York's Uniform Commercial Code. N.Y. U.C.C. § 3-104(2)(d); see also Mortgage Elec. Registration Sys., Inc. v. Coakley, 41 A.D.3d 674 (2d Dep't 2007) (holding that "a promissory note is a negotiable instrument within the meaning of the Uniform Commercial Code."); Slutsky v. Blooming Grove Inn, 147 A.D.2d 208, 212 (2d Dep't 1989) (holding that the promissory note secured by the mortgage was a negotiable instrument within the meaning of the Uniform Commercial Code). New York Uniform Commercial Code § 3-301 provides that a "holder of an instrument whether or not he is the owner may transfer or negotiate it and . . . discharge it or enforce payment in his own name." (Emphasis added.) Section 1-201(20) in turn defines the "holder" of a note as "a person who is in possession of a document of title or an instrument or an investment certificated security drawn, issued or indorsed to him or to his order or to bearer or in blank. (Emphasis added.) Applying the U.C.C., the standing requirements for foreclosure are well established: 21 A plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note prior to commencement of the action with the filing of the complaint (see Aurora Loan Servs., LLC v. Weisblum, 85 A.D.3d 95, 108, 923 N.Y.S.2d 609; Wells Fargo Bank, N.A. v. Marchione, 69 A.D.3d 204, 207-208, 887 N.Y.S.2d 615) . . . "Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident" (US. Bank, N.A. v. Collymore, 68 A.D.3d 752, 754, 890 N.Y.S.2d 578). GRP Loan, LLC v. Taylor, 95 A.D.3d 1172, 1173 (2d Dep't 2012); see also Kondaur Capital Corp. v. McCary, 115 A.D.3d 649, 650 (2d Dep't 2014); First Nat'l Ass 'n v. Meisels, 234 A.D.2d 414 (2d Dep't 1996) (holding that plaintiff had standing to foreclose because "the plaintiff was both the assignee of the mortgage and, by indorsement, the holder of the underlying note."). S. The Taylor Mortgage Follows the Transfer of the Note A major principle, also recognized in this jurisdiction for over a century, holds that a mortgage securing a note in a mortgage loan follows the note and passes as an inseparable incident to the note. Weaver Hardware Co. v. Solomovitz, 235 N.Y. 321 (1923); Fryer v. Rockefeller, 63 N.Y. 268, 276 (1875); In re Falls' Estate, 31 Misc. 658 (Sur. Ct. Ostego County 1900), aff'd, 67 A.D. 619 (1st Dep't 1900); Becker v. Wells, 297 N.Y. 275 (1948); Flyer v. Sullivan, 284 A.D. 697 (1st Dep't 1954). A necessary corollary of this principle is that because the mortgage is 22 incident to the debt, "Nile note and mortgage are inseparable[,]" and "Nile transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter." Carpenter v. Longan, 83 U.S. 271 (16 Wall. 271), 274, 275 (1872); see also National Live Stock Bank v. First Nat'l Bank, 203 U.S. 296, 306 (1906). The principle that the benefit of the mortgage follows the debt is so common, established, and approved, that it is the Restatement position. See Restatement (Third) of Property (Mortgages) § 5.4(a) ("A transferee of an obligation secured by a mortgage also transfers the mortgage unless the parties to the transfer agree otherwise."); see also id. at § 5.4 cmt. (b) ("A transfer in full of the obligation automatically transfers the mortgage as well unless the parties agree that the transferor is to retain the mortgage.") (emphasis added). Comment e to § 5.4 of the Restatement explains the alternative agreement of the parties which encompasses the nominee (agency) role performed by MERS, as holder of legal title to the mortgage, on behalf of the noteholder(s)." The 14 [A] [m]ortgage may not be enforced except by a person having the right to enforce the obligation or one acting on behalf of such person. As mentioned, in general, a mortgage is unenforceable if it is held by one who has no right to enforce the secured obligation. For example, assume that the original mortgagee transfers the mortgage alone to A and the promissory note that it secures to B. Since the obligation is not enforceable by A, A can never suffer a default and hence cannot foreclose the mortgage. B, as holder of the note, can suffer a default. However, in the absence of some additional facts creating authority in A to enforce the mortgage for B, B cannot cause the mortgage to be foreclosed since B does not own the mortgage . . . . The result is changed i f A has authority from B to enforce the mortgage on B's behalf For example, A may be a trustee or agent of B with responsibility to enforce the mortgage at B's direction. A's enforcement of the mortgage in these circumstances is proper . . The trust or agency relationship may arise from the terms of the assignment, from a separate agreement, or from other circumstances. Courts should be vigorous in seeking to find 23 purpose of this rule (and its purpose for over a century) is the commercial necessity of keeping the debt instrument and the instrument securing the debt in the same hands unless the parties wish to make some alternative arrangement. Id. Essentially, the basic time honored point of law is that the mortgage follows the note it secures as a matter of course, unless the parties direct or act otherwise, as was the case in Kluge v. Fugazy, 145 A.D. 537 (2d Dep't 1988). In the instant case, MFRS, as nominee, stands in the shoes of the note owner(s) or holder(s) with respect to the mortgage such that there is no separation.15 such a relationship, since the result is otherwise likely to be a windfall for the mortgagor and the frustration of B's expectation of security. Restatement of Property§ 5.4 cmt.(e)(emphasis added). 15 See, e.g., In re Vargas, 39613.R. 511, 516 (CD. Calif. 2008); see also Waterbury Trust Co. v. Weisman, 94 Conn. 210, 217-218 (1919) (quoting Carpenter, 83 U.S. 271); Etsy v. Graham, 46 N.H. 169, 170 (1865) ("[T]he assignment of the mortgage debt would carry with it the mortgage[.]"). ("[T]his has long been the law throughout the United States, when a note secured by a mortgage is transferred, 'transfer of the note carries with it the security, without any formal assignment or delivery, or even mention of the latter,'" (quoting Carpenter, 83 U.S. at 275); Horvath, 641 F.3d at 623 (applying Virginia law) ("For over a century, it has been settled that under Virginia law, interests in deeds of trust accompany the promissory notes they secure. * * * The transfer of [the] note [by blank endorsement] thus necessarily involved a transfer of the underlying security."); Commonwealth Prop. Advocates LLC v. Mortgage Elec. Registration Sys., Inc., No. 1:11CV00039 DS, 2011 U.S. Dist. LEX1S 69765, * 1 (D. Utah June 28, 2011) (rejecting theory that home loans were "split" from deeds of trust through process of securitization because it was "contrary to the well-settled principle that [t]he transfer of the note carries with it the security, without any formal assignment or delivery or even mention of the latter.") (quoting Carpenter, 83 U.S. at 275); Weingartner v. Chase Home Fin., LLC, 702 F. Supp. 2d 1276, 1283 (D. Nev. 2010) (applying Arizona law) ("The mortgage goes with the note. If the latter [the note] is transferred or assigned, the mortgage automatically goes along with the assignment or transfer.") (citation omitted); In re Ivy Props., Inc., 109 B.R. 10, 14 (D. Mass. 1989) (applying Massachusetts law) ("[U]nder Massachusetts common law the assignment of a debt carries with it the underlying mortgage, without the necessity of recording a separate mortgage assignment. * * * The security interest is meaningless unless held by the party also holding the obligation."); Columbus Invest. v. Lewis, 48 P.3d 1222, 1226 (Colo. 2002) (en bane) ("The transfer or assignment of a negotiable promissory note carries with it, as an incident, the deed of trust or mortgage upon real estate or chattels that secure its payment"); id. at 1226 n.4 ("Between the parties to a transfer the . . . negotiation of the note itself is all that must be done. 24 Consequently, "[a] secured promissory note traded on the secondary mortgage market remains secured because the mortgage follows the note[.]" In re Vargas, 396 B.R. at 516, and "[t]he holder of the note is deemed the owner of the underlying mortgage loan with standing to foreclose." Deutsche Bank Nat'l Trust Co. v. Pietranico, 33 Misc. 3d 528 (Sup. Ct. Suffolk County 2011), aff'd, 102 A.D.3d 724 (2d Dep't 2013). The reason for this principle is clear: all the authorities universally agree that the debt is the principal thing and the mortgage an accessory to the debt. See Carpenter, 83 U.S. at 275; In re Vargas, 395 B.R. at 317; Pietranico, 33 Misc. 3d at 545. "The note and mortgage are inseparable[.]" In re Ivy Props., Inc., 109 B.R. at 14. Therefore, under both the long-held common law rule and the Restatement position, when the Note was transferred by delivery on the secondary mortgage market, the Taylor Mortgage, held by MERS as nominee (agent) for the original Note owner and its successors, followed the Note and transferred equitable rights under the Mortgage to the subsequent Note Holders, including the present beneficial owner of Taylor's promissory Note. Under contract, however, the Taylors, the Lender and its successor(s)-in-interest reserved legal title to the It is unnecessary to have any separate document purporting to transfer or assign the mortgage on the real estate, for it will follow the obligation automatically."); Moore v. Lewis, 51 Ill. App. 3d 388, 391-392 (1977) ("the transfer of the debt carries with it the mortgage security"); Commonwealth Prop. Advocates, LLC v. Mortgage Elec. Registration Sys., Inc., 680 F.3d 1194, 1204 (10th Cir. 2011) (noting "the long-applied principle in our jurisprudence that when a debt is transferred, the underlying security continues to secure the debt") (citing Carpenter, 83 U.S. at 275). 25 Mortgage in MERS' name so that MERS may act on behalf of the Lender, and its successors and assigns and MERS' role as mortgagee and nominee for the original owner of the Taylor Note would pass to each subsequent owner of the Taylor Note each time the Note was sold. See RMS Residential Prop. LLC v. Miller, 303 Conn. 224 (2011) ("The plaintiffs contend . . that a lender may designate a third party to serve as mortgagee from the very inception of the mortgage. We agree with the plaintiffs . . . a mortgage may be held for the security of the real creditor, whether he is the party named as [the] mortgagee or some other party, for the provisions of a mortgage are not necessarily personal to the mortgagee named."). In short, the Note and the Mortgage were never separated as the note was transferred on the secondary mortgage market, and record title to the Mortgage was reunited with the Note prior to the initiation of foreclosure proceedings. (R. 92.) C. MERS Does Not Separate the Note and Mortgage. Appellants twist the common law rule that the transfer of a mortgage without the note evidencing the debt or obligation is a nullity, citing Merritt v. Bartholick, 36 N.Y. 44 (1867), in an attempt to undermine the validity of the MERS Mortgage. (App. Brief 12.) Appellants' position hinges upon the erroneous contention that the MERS Mortgage separates the debt from the 26 mortgage lien. As this Court recognized in Romaine, MERS is merely serving as the agent for the lender, its successors and assigns. Romaine, 8 N.Y.3d at 98.16 Appellants' reliance on Kluge, 145 A.D.2d 537 (App. Brief at 12) and similar mortgage-note splitting cases is misplaced. In Kluge, the Court denied the mortgagee's action for foreclosure and a deficiency judgment because foreclosure of a mortgage may not be brought by one who does not hold title to the mortgage and the debt. Significantly, however, and unstated by the Appellants, the Kluge Court pointed to the written agreement between the transferor and transferee of the 16 See also Bucci v. Lehman Bros. Bank, FSB, et al., 68 A.3d 1069 (R.I. 2013) ("[T]he holder of the legal title to the mortgage — MERS — always has acted as an agent of the owner of the equitable title."); Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282, 291 (1st Cir. 2013) ("[T]here is no reason to doubt the legitimacy of the common arrangement whereby MERS holds bare legal title as mortgagee of record and the noteholder alone enjoys the beneficial interest in the loan."); Commonwealth Prop. Advocates, LLC, 680 F.3d at 1197, 1204 (MERS may act "as nominee for Lender and Lender's successors and assigns"; "[S]omeone other than the beneficial owner of the debt [may] act on behalf of that owner to enforce rights granted in the security instrument" (internal citations omitted)); Trent v. Mortgage Elec. Registration Sys., Inc., 288 F. App'x 2d 571, 572 (11th Cir. 2008) (MERS "is the mortgagee."); Fuller v. Mortgage Elec. Registration Sys., inc., 888 F. Supp. 2d 1257, 1277 (M.D. Fla. 2012) ("Florida Courts have consistently affirmed the use of MERS as the designated mortgagee of record . . . . "); Collins v. Mortgage Elec. Registration Sys., Inc., No. 3:11-cv-00264, 2012 U.S. Dist. LEXIS 33459, at *6 (M.D. Tenn. Feb. 24, 2012) ("MERS may, in fact, act as a nominee for a lender"). Courts have recognized the legal principle that an entity who is not the noteholder can serve as mortgagee, both in the specific context of MERS serving as mortgagee, and for more than a century before MERS was created. See, e.g., Hargrow v. Wells Fargo Bank N.A., 491 F. App'x 534, 538 (6th Cir. 2012) ("[I[t is lawful for the holder of the mortgage to be different than the holder of the debt"); Commonwealth Prop. Advocates, LLC, 680 F. 3d at 1204 ("[S]omeone other than the beneficial owner of the debt [may] act on behalf of that owner to enforce rights granted in the security instrument . . . ." (internal citation omitted)); Stein v. Chase Home Fin., LLC, 662 F.3d 976, 980 (8th Cir. 2011) ("[A] party can hold legal title to the [mortgage] without holding an interest in the promissory note." (internal citation omitted)); In re Cushman Bakery, 526 F.2d 23, 30 (1st Cir. 1975) ("[T]he recording of the real estate mortgages . . was entirely proper despite the fact that . . [a] nominee . rather than „ the principal creditor was named as the mortgagee and secured party. The use of a nominee in real estate transactions, and as mortgagee in a recorded mortgage, has long been sanctioned as a legitimate practice."). 27 mortgage loan which unambiguously indicated that "no delivery of the underlying obligation was intended ." as the basis for its decision. Kluge, 145 A.D.2d at 537 (emphasis added). By contrast, in the Taylor Mortgage, MERS serves as the disclosed nominee or agent for the beneficial owner of the Note, and the Mortgage follows any transfer as an incident thereto. (R. 30.) As discussed, supra, Appellants misapprehend the negotiation of promissory notes under New York law and Aurora is the undisputed holder of the Note. Courts have uniformly held that a recorded mortgage puts the public on notice of the outstanding claim of the note holder. See Kellogg v. Smith, 26 N.Y. 18 (1862); see also Syracuse Savings Bank v. Merrick, 182 N.Y. 387 (1905). Under this well-established law of New York, there is no legal requirement for an assignment of the mortgage to be in writing, or that the assignment of the mortgage be recorded. Contrary to Appellants' objections, therefore, when the MERS Assignment of the Mortgage is dated or recorded is of no significance or consequence. (App. Brief pp. 11-12.) This well-established rule, of course, can lead to situations where the note has been delivered and endorsed payable to a transferee of the original note holder or lender, but with the mortgage lien still of record in the name of the original lender or mortgagee. Stated otherwise, the fact that an assignment of mortgage may be recorded, does not affect the validity of the transfer of the note or the rights 28 of a subsequent note holder, even though an assignment of a mortgage has not been written or recorded. See Flyer v. Sullivan, 284 A.D. at 698-699 (citing numerous authorities); In re Stockbridge Funding Corp., 145 B.R. 797, 809 (Bankr. S.D.N.Y. 1992). Simply stated, the beneficial interest in the mortgage follows the note. Contrary to the Appellants' assertions, the holder of the note may foreclose on secured property, regardless of whether transfers of the promissory note have been accompanied by a written mortgage assignment, let alone been recorded. Fryer, 63 N.Y. 268; 78 N.Y. Jur. 2d Mortgages and Deeds of Trust § 531 (2014). Similarly, "gaps" in the chain of the mortgage records do not preclude an assignee of a mortgage from foreclosing on the secured property, even though there is a record in the County Clerk's office of a different party as the mortgagee. Andy Assoc., Inc. v. Bankers Trust Co., 49 N.Y.2d 13 (1979).'7 In sum, a note and mortgage are inseparable and constitute personal property that may be transferred by delivery without a written instrument of assignment. 17 In Andy Associates, this Court held that Bankers Trust (the holder of a junior mortgage) may not invoke New York Real Property Law § 291 to defeat Andy Associates' right of priority and foreclose on real property, notwithstanding that such right was derived from an earlier unrecorded conveyance. In so holding, this Court pointed to a restrictive clause in the original mortgage that identified who was entitled to execute and deliver a binding satisfaction of the mortgage, and not just a satisfaction of the collateral security interest in the mortgage. The restrictive clause and other terms in the original mortgage that was recorded twenty-one years before Andy Associates commenced the foreclosure proceeding gave sufficient notice that the: . . interests could and, in fact, necessarily would give rise to two distinct chains of title, both of which should have been 'searched' and investigated by Bankers Trust in the course of its title search. 49 N.Y.2d at 21. 29 Baird v. Baird, 145 N.Y. 659 (1895). The absence of a recorded assignment of mortgage does not prohibit the transfer of rights in or the enforcement of the note and mortgage by the holder thereof. The MERS® System is not a vehicle for the transfer of mortgage interests or mortgage rights, nor does it generate electronic or unrecorded mortgage assignments. (Murphy Aff. ¶ 23.) As shown above, New York law does not require that assignments exist. Because MERS holds the mortgage lien for the lender who may freely transfer its interest in the note, without the need for a recorded assignment document in the land records, MERS holds the mortgage lien for any intended transferee of the note. (Murphy Aff. ¶ 18.) MERS remains the lienholder in the land records. (Id. at ¶ 19.) Contrary to the Appellants' contention (App. Brief pp. 28-30), there are no mortgage assignments to produce, let alone to record pursuant to New York Real Property Law ("RPL") § 321(3) in order to foreclose the Mortgage. See also Romaine, 8 N.Y.3d at 98-99. D. Silverberg Distinguished by Sachar. As has been demonstrated supra, Aurora produced evidence that it is in possession of the Note prior to commencement of the foreclosure action. (R. 92.) Moreover, Aurora demonstrated that MERS assigned the Mortgage prior to commencement. (R. 92.) Thus, there is no question that standing was established. Taylor's misguided argument that MERS lacked an interest in the Note, and 30 therefore it lacked authority to assign the Mortgage, is simply not relevant to the question of Aurora's standing. This precise issue was recently addressed in Bank of New York Mellon Trust, N.A. v. Sachar, 95 A.D.3d 695 (1st Dep't 2012). In Sachar, the borrower challenged standing to foreclose where the mortgage was assigned from MERS. Id. at 696. The trial court rejected borrower's argument that MERS lacked authority to assign the mortgage because it did not have an interest in the note and the Appellate Division, First Department affirmed. The First Department held that "Plaintiff proved its standing to commence this foreclosure action by demonstrating that it was both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action was commenced," Id. at 696. The First Department rejected completely the borrower's arguments that the plaintiff lacked standing because MERS did not have an interest in the underlying note: Defendant is correct that, although Mortgage Electronic Registration System (MFRS) validly assigned the mortgage to plaintiff, and the assignment was properly recorded in the public records, MERS had not been given any interest in the underlying note by the lender. (see Bank of N.Y. v. Silverberg, 86 A.D.3d 274, 283, 926 N.Y.S.2d 532 [2011]. However, the complaint and the documents annexed to plaintiff's motion establish that an assignment of the note had been effectuated by physical delivery of the note before this action was commenced. (see id. at 280, 926 N.Y.S.2d 532; 31 Collymore, 68 A.D.3d at 754, 890 N.Y.S.2d 578). (Emphasis added). Id. at 696. Thus, Sachar is not only consistent with all of the precedent cited above, including that of the Second Department in this case, it also affirms that the test of standing in a mortgage foreclosure is whether the plaintiff holds or owns the promissory note at the commencement of the action. Bank of New York v. Silverberg, on which Appellants exclusively rely, does not hold or suggest otherwise. The issue presented in Silverberg concerned an attempt to transfer a note by a party without rights to the note, which is quite different from the issue presented here. Silverberg involved an attempt to demonstrate standing by virtue of an assignment of a mortgage in the context of a Consolidation, Extension and Modification Agreement ("Consolidation Agreement"), without any evidence of the existence of the promissory note, let alone its transfer to the foreclosing plaintiff. See generally Bank of New York v. Silverberg, 86 A.D.3d 274 (2d Dep't 2011). Critically, in stark contrast to the facts here, the foreclosing party in Silverberg failed to demonstrate transfer to or possession of the note by the foreclosing party prior to commencing foreclosure and relied on a conclusory recitation about the transfer of the debt in the assignment of the mortgage. Id. at 280. Specifically, in Silverberg, MERS was listed in two mortgages as mortgagee, as nominee for the lender. Id. at 275. Like the circumstances 32 presented here, MERS was not the holder or assignee of the related promissory notes, Id. The borrowers then executed a Consolidation Agreement which purportedly merged the two prior notes and mortgages into a single loan obligation. Id. at 276. MERS was listed as nominee for the lender in the Consolidation Agreement; but the lender was not a party to the Consolidation Agreement. Id. After default, MERS, as nominee for the lender, assigned the Consolidation Agreement to the foreclosing party. Id. The Second Department considered whether MERS could assign the right to foreclose "absent MERS's right to, or possession of, the actual underlying promissory note." Id. at 279. The court recognized that "once a promissory note is tendered to and accepted by an assignee, the mortgage passes as incident to the note." Id. at 280. In contrast, a transfer of the mortgage without the note is a "nullity" and foreclosure cannot be pursued by one who has no right to the debt. Id. Ultimately, the court concluded that because MERS was not the holder of the note, it could not assign the right to foreclose. Id. at 282. Contrary to the position advanced by the Appellants, Silverberg did not alter the maxim that the mortgage passes with the note as an inseparable incident. Equally as important, Silverberg does not hold that: • a mortgage to MERS as mortgagee in a nominee capacity for the lender is invalid; 33 • a note secured by a mortgage to MERS as nominee for the lender is unsecured; and • MERS cannot assign the mortgage. In short, the facts and holding in Silverberg are not dispositive of the issues in this case. Here, the original lender, and all subsequent transferees of the Note, endorsed the Note to Deutsche Bank and Aurora has demonstrated that it is in possession of that Note as Deutsche Bank's servicer at the commencement of the foreclosure action. (R. 92.) Thus, standing to foreclose is predicated on Aurora's status as "holder" under the Uniform Commercial Code and not its status as record assignee of the Taylor Mortgage. When the last holder transferred the Note to Aurora, the beneficial interest in the Taylor Mortgage passed as incident to the Note. See id. at 280. There is no concern, as there was in Silverberg, of an attempt to transfer a note by a party without rights to the Note. IV. MERS, AS NOMINEE, HAS AUTHORITY TO ASSIGN THE MORTGAGE. New York courts recognize MERS' ability to act as a nominee/agent, as well as its authority to effectuate an assignment of a mortgage as a nominee for a lender, its successors and assigns. Taylor questioned MERS' ability to execute the MERS Assignment of the Mortgage to further support their baseless argument that Aurora lacked standing to foreclose, presumably to divert attention from the substantive reason for the foreclosure action, i.e., that Taylor has failed to honor 34 their mortgage loan obligations. R. 68.) Taylor's diversionary argument, however, is to no avail. A. The Mortgage Authorizes MFRS to Assign the Mortgage. The Taylor Mortgage clearly demonstrates Arizona Bank's delegation of authority to MERS, and the Taylors' acknowledgement and acceptance of MERS as the disclosed agent of the lender, and its successors and assigns. The Mortgage plainly states that MERS holds legal title in its capacity "as nominee for the Lender and the Lender's successors and assigns." (R. 28.) The Mortgage also grants MERS broad rights, again as nominee for lender and lender's successors and assigns, "to exercise any or all" of the rights granted by the borrower under the Mortgage, "including, but not limited to, the right to foreclose and sell the Property"; and "to take any action required of the Lender . . . ." (R. 30.) The phrase "including but not limited to" and "any or all" is not limiting, but rather was intended to signal the broad powers that MERS has to take action with respect to the Mortgage. Hence, consistent with New York law and general principles of contract construction, it is clear that MERS has the authority to "assign" a mortgage. In construing a contract, use of "[t]he word 'including,' when followed by a list of examples, is designed to broaden the concept being defined." Doniger v. Rye Psychiatric Hosp. Center, 122 A.D.2d 873, 877 (2d Dep't 1986) (citing Red Hook Cold Star. Co. v. Department of Labor, 295 N.Y. 1, 35 8 (1945)); see also Johnsen v. ACP Distribution, Inc., 31 A.D.3d 172, 177-78 (1st Dep't 2006); El-Roh Realty Corp. v. Roth, 48 A.D.3d 1190 (4th Dep't 2008), aff'g 836 N.Y.S.2d 489 (Sup. Ct. Onondaga County 2007). Moreover, as the court set forth in Doniger: . (in searching for the probable intent of the parties) words used must be given their fair and reasonable meaning. The intent of the parties to a contract is presumably expressed by the natural and ordinary meaning of the language employed by them, and such meaning cannot be prevented or destroyed by the courts through construction . . . There is no question that in construing the provisions of a contract, ascertainment of the parties' intention is paramount and due consideration must be given to their purpose in entering into the contract. Thus, if the language were not free from ambiguity, its interpretation would depend on the sense the words were used in view of the subject matter, the relationship of the parties, and the surrounding circumstances; . . 122 A.D.2d at 877-78 (internal citations omitted). In addition, the doctrine of ejusdem generis teaches that general terms of a contract are construed to embrace those objects and terms that are similar in nature to the objects and terms that are specifically enumerated in the contract, and consistent with the intent of the parties and the language of the contract. See, e.g., Zurich Am. Ins. Co. v. ABM Indus., Inc., 397 F.3d 158, 165 (2d Cir. 2005). Here, the language of the Mortgage, both by itself and even more so when considered in light of the entire 1V1ERS® System, shows that MERS was granted 36 broad powers to take "any and all actions" with respect to the Mortgage. The use of the phrase "including but not limited to" was designed to broaden the boundaries of MERS' authority, and was not intended to limit MERS' powers to only those "examples" listed in the Mortgage including common and reasonable actions of mortgagees such as to assign mortgages. This is more than sufficient to create an agency relationship between MERS and the lender and the lender's successors in interest. No particular words or conduct are necessary to create an agency relationship in New York. Standard Builders Supplies v. Gush, 206 A.D.2d 720 (3d Dep't 1994). All that is required is a manifestation of the parties' assent that the agent will act on behalf of the principal and subject to his control. Id. An agency relation arises where, as here, one party is specifically authorized to act on behalf of another in dealings with third persons. Moreover, the mortgage does not state any prohibitions or limitations on MERS' ability to assign. "Under New York law, contracts are freely assignable absent language which expressly prohibits assignment." In re Stralem, 303 A.D.3d 120, 122 (2d Dep't. 2003) (citing Allhusen v. Caristo Constr. Corp., 303 N.Y. 446 (1952)); Sullivan v. International Fidelity Ins. Co., 96 A.D.2d 555 (2d Dep't 1983) (other citations omitted). Accordingly, the Taylor Mortgage was properly assigned 37 by MERS, as the mortgagee of the mortgagor. US. Bank, N.A. v. Flynn, 27 Misc. 3d 802, 806 (Sup. Ct. Suffolk County 2011). B. The Use of Nominees in Residential Mortgages. In Romaine, this Court recognized that MERS® System Members "contractually agree to appoint MERS to act as their common agent on all mortgages they register in the MERS system." 8 N.Y.3d at 96. Moreover, the Court acknowledged that during the lifetime of the mortgage, the beneficial ownership interests or servicing rights may be transferred among MERS® System Members, but the transfers are not publicly recorded. Instead, they are "tracked electronically in MERS's private system." Id. The Court reviewed the same language in the Mortgage as executed by Taylor and held that MERS as nominee for the lender, its successors and assigns, was the lawful "mortgagee of record" and the County Clerks were obligated to record not only the MERS mortgage but also all "MERS assignments and discharges of mortgage for recording." Id. at 99. Notwithstanding this Court's clear ruling in Romaine, "[c]ourts have struggled to understand the MERS system since it was created in 1993." Pietranico, 33 Misc. 3d at 541. Indeed, "while the use of a nominee as the equivalent of an agent for the lender is not unusual, what is unusual is the extent various courts will go to limit the contractual role of MERS as nominee [internal citations omitted]." Id. at 547. Moreover, the Appellants, and other opponents of 38 MERS and the MERS® System, regularly cite to the partial dissenting opinion in Romaine to support their proposition that as nominee, MERS does not have any authority to assign the mortgage or take other action the lender may take, notwithstanding the express grant of authority to do so in the Mortgage. (App. Brief at 16, 17.) See, e.g., Bank of New York v. Alderazi, 28 Misc. 3d 376 (Sup. Ct. Kings County 2010), rev 'd, 99 A.D.3d 837 (2d Dep't 2012); In re Agard, 444 B.R. 231 (2011), vacated in part, No. 8-10-77338(REG),11-CV-1826(B),11- CV-2366(JS), 2012 U.S. Dist. LEXIS 43286 (E.D.N.Y. Mar. 28, 2012). "The use of a nominee in real estate transactions, and as a mortgagee in a recorded mortgage, has long been sanctioned as a legitimate practice." In re Cushman Bakery, 526 F.2d at 30 (numerous citations omitted) (addressing whether use of a nominee was similarly legitimate under the Uniform Commercial Code and concluding that it was); accord Pietranico, 33 Misc. 3d at 549 ("The use of a nominee in real estate transactions, and as a mortgagee in a recorded mortgage, is a long-standing practice") (citing Amherst Factors v. Kochenberger, 4 N.Y.2d 203, 207 (1958)) ("Certainly it is neither illegal nor improper to give such a mortgage and there appears to be no reason why the position of the lender should be compromised because of such an arrangement."). A nominee is simply "[a] person designated to act in place of another * * ' " Plainfield Pike Gas & Convenience, LLC v. 1889 Plainfield Pike Realty 39 Corp., 994 A.2d 54, 56 n.5 (R.I. 2010) (quoting Black's Law Dictionary 1149 (9th ed. 2009); accord Weingartner, 702 F. Supp. 2d at 1279; In re Huggins, 357 B.R. 180, 183 (D. Mass. 2006), or "[a] party who holds bare legal title for the benefit of others[,]" Plainfield, 994 A.2d at 56 n.5 (citing Black's Law Dictionary, supra, at 1149); accord Weingartner, 702 F. Supp. 2d at 1279. Both definitions envelop the common essential characteristic "that a nominee is a kind of agent working for the benefit of another." Weingartner, 702 F. Supp. 2d at 1279. A nominee's legal title t8 is an interest in a lien that has been recognized as sufficient to bring an action at law and is therefore a species of property protected by due process. The Supreme Court of the United States has held that claims similar to the lien rights MERS holds as nominee for its lenders are entitled to due process protections. Bellestri, 2010 U.S. Dist. LEXIS 67753, at 34. The Supreme Court addressed the issue of standing of a party with legal title to enforce payment in Sprint Commc 'ns Co. v. APCC Servs., Inc., 544 U.S. 269 (2008). In Sprint, payphone owners assigned their claims for collection against long distance carriers to APCC for collection and APCC agreed to remit all proceeds of the litigation back to the assignors. APCC had a comparable interest to that of MERS: a bare legal title to the claims but no equitable or beneficial 18 Legal title refers to that which "evidences apparent ownership but does not necessarily signify full and complete title or a beneficial interest." Black's Law Dictionary p. 1713 (10th ed. 2014). Equitable title, on the other hand, pertains to that which "indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title." Id. 40 interest therein. The Supreme Court held that this interest was sufficient to confer standing to sue in federal court, As part of its analysis, the Supreme Court recognized that: [Fjederal courts routinely entertain suits which will result in relief for parties that are not themselves directly bringing suit. Trustees bring suits to benefit their trusts; guardians ad litem bring suit to benefit their wards; receivers bring suit to benefit their receiverships; assignees in bankruptcy bring suit to benefit bankrupt estates; executors bring suits to benefit testator estates; and so forth. 128 S. Ct. at 2543. In Bellestri, the Court granted MERS' motion for summary judgment for declaratory relief holding that MFRS had standing as nominee to bring the claim and found that Bellestri took title to real property he acquired at a tax foreclosure sale subject to the debt secured by the deed of trust held by MERS at the time of the tax sale and that MERS, as the nominee, was entitled to notice of the tax sale as part of its constitutionally protected right of due process. Bellestri, 2010 U.S. Dist. LEXIS 67753, at 38-42. Similarly, the Mortgage contract Taylor entered into agreed that MERS may act "as a nominee for" Arizona Bank, the original lender, and Arizona Bank's "successors and assigns[,]" that is, all subsequent holders of his Note. (R. 30.) Taylor also agreed to name MERS, rather than Arizona Bank, as the mortgagee under the Mortgage that followed the Note as it was transferred "as nominee" for 41 Arizona Bank and the successor(s) to the Note. (R. 28-30.) To that end, Taylor "mortgage[d], granted] and convey[ed]" the Property they purchased with the loan proceeds to MERS "and its successors in interest subject to the terms of this Security Interest." (R. 30.) They also agreed that as the nominee/agent of the Note Holder — whether it be the original "Lender" or the subsequent Note Holder(s) that succeeded to the rights under the Note — MERS had the right to exercise any of those rights, including, the right to foreclose and sell the Property" under the Mortgage that followed the Note. (R. 30.) As noted by former Chief Judge Judith S. Kaye in her partial dissent in Romaine, "the use of a nominee as the equivalent of an agent for the lender is apparent, and not unusual . ." Id. at 101-102 [emphasis added]. Indeed, the validity of using a nominee is well established under New York law, including recognition of the use in the Uniform Commercial Code. N.Y. U.C.C. § 9-502(a)(2) states that a financing statement is sufficient if it provides the name of a secured party "or a representative of the secured party." Individuals frequently confer rights to a "nominee," "agent," "fiduciary," or "trustee" to enable that individual to act on their behalf. See, for example, RPL § 124 et seq. with regard to trustees' powers in mortgage investments. In addition, RPL § 275(2)(a) expressly recognizes the commercial practice of lenders selling mortgages in the secondary market, as well as the practice of designating 42 "nominees" as representatives in mortgage loan transactions. MERS' identification as the "mortgagee" in a "nominee" (that is, agency) capacity for the lender in a mortgage instrument fits squarely within the scope of persons authorized by New York Real Property Actions and Proceedings Law § 1921(9)(a): "Mortgagee" means (i) the current holder of the mortgage of record or the current holder of the mortgage, or (ii) any person to whom payments are required to be made or (iii) their personal representatives, agents, successors, or assigns. (Emphasis added.) The use of a nominee in real estate transactions, and as a mortgagee in a recorded mortgage, has long been recognized. See Fairbanks Capital Corp. v. Nagel, 289 A.D.2d 99 (1st Dep't 2001) (holding that servicing agent had standing to commence foreclosure action on behalf of trustee because of delegation of authority); Amherst Factors v. Kochenburger, 4 N.Y.2d at 207-208; see also In re Cushman Bakery, 526 F.2d at 30 (holding, under New York law, that "use of a nominee in real estate transactions, and as a mortgagee in a recorded mortgage, has long been sanctioned as a legitimate practice."). Moreover, Appellants ignore the clear direction of RPL § 257 which provides: All covenants contained in any grant or mortgage of real estate bind the heirs, executors, administrators, successors and assigns, of the grantor or mortgagor, and inure to the benefit of the heirs, executors, administrators, 43 successors and assigns of the grantee or mortgagee in the same manner and to the same extent, and with like effect as if such heirs, executors, administrators, successors and assigns were so named in such covenants, unless otherwise in said grant or mortgage expressly provided. (Emphasis added.) Contrary to Appellants' erroneous speculation about MERS' authority to act on behalf of the original lender, and its successors and assigns, RPL § 257 expressly supports MERS' authority to act on behalf of such unnamed successors and assigns. (App. Brief at 3, 21-23.) Thus, this Court should affirm the sound Second Department Decision, just as in Sachar, which rejected an identical argument by the borrower that the foreclosure was invalid because MERS as nominee did not have an interest in the underlying note and could not effectuate an assignment of the mortgage. Id., 95 A.D.3d at 696 (internal citations omitted). V. THE TAYLOR MORTGAGE IS VALID. Despite the fact that MERS and MERSCORP are not a parties to this action, Appellants attack not only the assignment of the mortgage from MERS, as nominee, to Aurora, but the validity of the Taylor Mortgage itself (App. Brief at 11-15.) Appellants argue that because MERS is listed on the Mortgage as mortgagee, as nominee for the Lender, its successors and assigns, but never held the Note itself, there was never a valid Mortgage. This argument is plainly erroneous and was properly rejected in the Second Department Decision. 44 In the Taylor Mortgage, Taylor pledged their property to Arizona Bank and to MERS, as its nominee, to secure the Note given to the lender. (R. 28, 30.) The Taylor Mortgage, among other things, explicitly discloses MERS' role as the agent for the lender, and this role is explicitly acknowledged by the borrower. (R. 30.) Contrary to Appellants' mischaracterization in Appellants' Brief, this disclosure does not render such mortgage void ab initio, nor separate the Note from the Mortgage. (App. Brief at 15.) A. The Mortgage Constitutes a Conveyance in New York. Pursuant to RPL § 291, the Taylor Mortgage constitutes "a conveyance of real property" that is entitled to and was recorded by the Westchester County Clerk. The term "conveyance" is defined in RPL § 290(3) as follows: The term "conveyance" includes every instrument by which an estate or interest in real property is created, transferred, mortgaged or assigned . . . (Emphasis added.) There can be no dispute that mortgages and assignments of mortgages are "conveyances of real property" within the meaning of RPL § 291(3). "A mortgage is a conveyance within the recording statute and is entitled to be recorded." 9 Warren's Weed, N.Y. Real Prop. Law § 7.02(1) (2006). Moreover, this Court, in Gibson v. Thomas, 180 N.Y. 483, 488 (1905), held: Mortgages and assignments of mortgages are conveyances within the intendment of [the Recording 45 Act]. That is clear from its language and is settled by authority. (Citation omitted.) See also Finn v. Wells, 135 Misc. 53 (Sup. Ct. Tioga County 1929) ("The assignment of the mortgage to plaintiffs was a conveyance within the meaning of Sections 290 and 291 of the Real Property Law.") Pursuant to New York law, a "mortgage" must contain these elements: (i) an agreement to convey an interest in property; and (ii) an intent that the interest in property act as security for the payment of money or the doing of some prescribed act. W.L. Development Corp. v. Trifort Realty, Inc., 44 N.Y.2d 489 (1978); see also People v. Prince, 110 Misc. 2d 55 (Sup. Ct. Queens County 1981). The fact that the Taylor Mortgage creates an interest in real property which acts as security for the payment of money is clearly demonstrated in the Mortgage: I [Borrower] mortgage, grant and convey the Property to MERS (solely as nominee for Lender and Lender's successors in interest) and its successors in interest subject to the terms of this Security Agreement. * * * I [Borrower] understand and agree that MERS holds only legal title to the rights granted by me in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has 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 46 (B) to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument. * * * I [Borrower] give MERS (solely as nominee for Lender and Lender's successors in interest) rights in the Property described in (A) through (G) below: (R. 30 (emphasis added)) The critical significance of this conveyance is that the borrower has, as part of the security, designated MERS as the mortgagee in the mortgage contract, and conveyed specific rights and powers to MERS to act with respect to the security interest. (R. 30, 40-43.) The Mortgage may appear different than the mortgages in which only the borrower and the lender have been identified. In New York, a mortgage is a contract, which the parties may adapt to meet the needs of the particular transaction. Williams v. Wisner Bldg. Co., 121 Misc. 32 (Sup. Ct. N.Y. County 1923), aff'd, 208 A.D. 783 (1st Dep't 1924); see also W.L. Development Corp., 44 N.Y.2d at 498 ("A mortgage [is] an agreement . . . [and] requires no specific statutory authorization to be valid . . . ."). Moreover, New York statutory law does not prevent a mortgagor from pledging property to more than one party in the security instrument: "Mortgagee" means (i) the current holder of the mortgage of record or the current holder of the mortgage, 47 or (ii) any person to whom payments are required to be made, or (iii) their personal representatives, agents, successors, or assigns. RPAPL § 1921(9)(a) (emphasis added). Appellants question how MERS can be the "mortgagee" or the "nominee" (that is, the "agent") for the lender in the mortgage instrument, and incorrectly assert that the Mortgage is invalid. Nonetheless, RPAPL § 1921(9)(a)'s definition of "mortgagee" overrides Appellants' unsupported contentions because the mortgagor has named MERS as the "holder of the mortgage of record," or in the role of "nominee" or "agent" for the lender, as well as the "successors or assigns" of such lender. B. The Mortgage Constitutes a Valid Security Interest. It is well settled in New York that where a mortgage is signed by the mortgagor, delivered to and accepted by the mortgagee, or its agent, the mortgage constitutes a valid contract and security or lien. Munoz v. Wilson, 111 N.Y. 295 (1888); Wood v. Travis, 231 A.D. 331 (3d Dep't 1931); see also In re Cushman Baker)), 526 F.2d at 30 (citing New York law). Notably, W.L. Development Corp. defines a mortgage as "the conveyance of an interest in property intended by the parties at the time of its making to be security for the payment of money or the doing of some prescribed act." 44 N.Y.2d at 498. This Court recognized that inasmuch as a mortgage is a contract between two parties, it requires no statutory 48 authorization to be valid and the parties are free to agree upon terms and courts "should not interfere with such rights." Id. at 498499. It is a fundamental principle that the courts should not interfere with the contractual rights set forth in a mortgage agreement: To treat this mortgage as a mechanic's lien, as the Appellate Division did, would constitute an impairment of the obligations of the contract that the parties chose to make. Absent clear statutory authorization to do so, the court should not interfere with such rights. Id. at 499. There is little doubt that Appellants agreed to enter a mortgage contract permitting MERS to be designated as the mortgagee, and nominee, i.e., agent for the lender in order to serve as the common nominee or agent for MERS member lenders and their assigns. See Pietranico, 33 Misc. 3d at 552. "The legal implication of the designation is that MERS may exercise the rights and obligations of a [mortgagee], a role ordinarily afforded the lender, but it will exercise those rights and obligations only as an agent for the lender, not for its own interests." Fontenot v. Wells Fargo Bank, 189 Cal. App. 4th 256, 273 (2011). Through the MERS® System Membership Agreement, MERS became the agent for each new principal, that is, each new MERS® System Member purchasing the Note, each time there was a transfer, and in borrowing the monies to purchase the property Taylor agreed to recognize MERS as the mortgagee of record and permit 49 MERS to exercise any and all rights of the lender and the subsequent holders of the Note, including the right of assignment and even foreclosure. (Murphy Aff ¶ 20.) See also Pietranico, 33 Misc. 3d at 554. "It is a general rule of contract law that 'competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the courts [ unless a violation of the law or public policy is clear and certain[,]'" Wechsler v. Hunt Health Systems, Ltd., 216 F. Supp. 2d 347, 35455 (S.D.N.Y. 2002), and the power to invalidate a contract or contract provision is "cautiously applied" by courts and "only in clear cases." Steele v. Drummond, 275 U.S. 199, 205 (1927). The "public policy" that will justify invalidating a contract is limited; it "must be well defined and dominant, and is to be ascertained `by reference to the laws and legal precedents and not from general considerations of supposed public interests.'" W.R. Grace & Co. v. Rubber Workers, 461 U.S. 757, 766 (1983) (in turn quoting Muschany v. United States, 324 U.S. 49, 66 (1945)). When setting aside a contractual agreement on the grounds that it violates a specific public policy, "a court must speak for a virtual unanimity" that such a policy exists, and can "be found in definite indications in the law[,]" Muschany, 324 U.S. at 51, and "the focus of the judiciary must ultimately be upon the policies that, in fact, have been adopted by the public through . . various legal processes, and are reflected in 50 our state and federal constitutions, our statutes, and the common law." Terrian v. Zwit, 467 Mich. 56, 66-67 (2002). Appellants' ultimate argument is that this Court should invalidate a central part of the contractual agreement they entered into for their mortgage to purchase their home — that their Mortgage is invalid because MERS, as nominee for the lender and its successors and assigns, does not own or possess the Note. As has been demonstrated, this invalidation is completely without foundation. There is no statutory or other legal prohibition against designating MERS as the mortgagee, with the ability to exercise all of the rights of the lender, its successors and assigns, merely because it is a nominee in the mortgage contract. Consequently, this Court is respectfully referred to the intent of the parties — Taylor, the original lender, Arizona Bank and MERS, as its nominee, as expressed in two contemporaneously executed written documents, the Note and Mortgage. See Horvath, 641 F.3d at 624 ("[N]otes and contemporaneous written agreements executed as part of the same transaction will be construed together as forming one contract."); Pietranico, 33 Misc. 3d at 550 ("[T]he mortgage and mortgage note, which were negotiated and executed as part of an integrated agreement for the purchase of real property, 51 should be read and considered together as part of the same transaction[.]") (internal citations and quotations omitted).19 Both the promissory Note and the Mortgage evince an intent that interests in them would subsequently be transferred. While the Note identifies Arizona Bank as the Lender, Taylor agreed "that [the] Lender may transfer this Note," and that the party taking the Note by transfer would be called the "Note Holder." (R. 98.) Similarly, Section 20 of the Mortgage provides that: "[t]he Note or an interest in the Note together with the Security Instrument may be sold one or more times. I might not receive any prior notice of these sales" (R. 41), and the mortgage continually refers to the "Lender and Lender's successors and assigns[.]" (R. 27-44.) Therefore both the Note and the Mortgage demonstrate the parties intended that both the Note and Mortgage would be conjoined and interests would be freely transferable, consistent with the long-settled common law principles and the U.C.C. that a promissory note endorsed in blank or specially is transferable by delivery or indorsement, and if it is secured by a mortgage, the mortgage follows the note. See Horvath, 641 F.3d at 621. 19 Accord, RPL § 240(3) states: "{elvery instrument creating, transferring, assigning or surrendering an estate or interest in real property must be construed according to the intent of the parties, so far as such intent can be gathered from the whole instrument, and consistent with the rules of law." 52 To the extent that the Appellants claim that the Note was separated from the Mortgage when it was transferred by delivery on the secondary mortgage market, that is simply wrong factually and as a matter of the contractual agreement they entered, and wrong as a matter of law. Appellants' "agreement" consists of both the Note and the Mortgage which formed a single transaction, and that agreement provided that the Note would be freely transferable, with subsequent holders of the Note inheriting full rights to enforce it, including MERS, as nominee's right to assign or foreclose that is provided for in the Mortgage. See Horvath, 641 F.3d at 622. As the Fourth Circuit in Horvath has aptly explained: "[i]ndeed, common sense suggests that things could not be any other way. If . . the transfer of a note splits it from [the security instrument], . . . there would be little reason for notes to exist in the first place." 641 F.3d at 624. "One of the defining features of notes is there transferability," if transferring a note endorsed in blank stripped it from the security that gives it value, it would "render the note largely worthless[, this cannot be — and is not — the law." Id.; see also Pietranico, 33 Misc. 3d at 540 ("Reading the note and mortgage together, . . . it is patent that it was the intention of the contracting parties that the note and mortgage would remain united and together[.]") (construing similar a note and mortgage to the Note and Taylor Mortgage). 53 The use of MERS by MERS System Members, as described by the o14, Mortgage, as a mortgagee "solely as nominee for the Lender and Lender's successors and assigns," (R. 30) is essential to one of the central objectives of the agreement comprised of the Note and Mortgage — that they be freely transferable and that MERS holds the mortgage lien and can "take any action required of Lender" (R. 30). To promote that objective, Appellants agreed to give MERS the right to assign and even foreclose and sell the property, but only on behalf of, and "as nominee for," the original holder of the Note and each successive Note holder, (R. 30) — who in this case were all MERS® System Members whose instructions MERS was obligated to comply with under the MERS® System Rules of Membership and membership agreement terms and conditions (Murphy Aff. ¶¶ 20, 21, 25). If Appellants' argument that naming MERS as mortgagee, as nominee for the lender and the lender's successors and assigns, in the Mortgage renders the Mortgage invalid ab initio and eliminates standing for any future foreclosure, then the well settled precedent of New York State and other states throughout the United States would be upended. The practical effect of such a decision would destabilize the real estate market by rendering millions of mortgages void and billions of dollars in real estate left unsecured. This result would be contrary to established law and can be avoided by this Court. 54 CONCLUSION For the foregoing reasons, MERSCORP and MFRS respectfully submit that the Decision and Order of the Appellate Division, Second Judicial Department, should be affunied with respect to Aurora's standing to bring the foreclosure action, and the Supreme Court's Order granting summary judgment in favor of Aurora. DATED: May 11, 2015 Respectfully submitted, HISCOCK & BARCLAY, LLP By: Charles C. Martorana Attorneys for Amicus Curiae MERSCORP Holdings, Inc. and Mortgage Electronic Registration Systems, Inc. 1100 M&T Center Three Fountain Plaza Buffalo, New York 14203 Telephone: (716) 566-1300 8945147.5 - 55 - EXHIBIT 1 Copy of Thoben v. Greenpoint Mortgage Funding, Inc. (Index No. 61551/2012) Supreme Court of New York, Westchester County dated November 8, 2013 8945147,5 FILED: WESTCHESTER COUNTY CLERK 11 NYSCEF DOC. NO. 42 INDEX NO. 61551/2012 RECEIVED NYSCEF: 11/12/2013 To comorierice the statutory time period for appeals as of right (CPLR §5513151), you are advised to serve a copy of this order, with notice of entry upon all parties. SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF WESTCHESTER x . BEVERLY THOBEN, Plaintiff, against- DECISION & ORDER DISMISSING THE GREENPOINT MORTGAGE FUNDING, INC., WELLS COMPLAINT FARGO BANK MINNESOTA, NA f/k/a NORWEST BANK MINNESOTA, NA SOLELY AS TRUSTEE FOR STRUCTURED ASSET MORTGAGE INVESTMENTS II, Index No. 61551/2012 INC. GREENPOINT MTA TRUST 2005-AR2, MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2005-AR2, Defendants. x Hubert, A.J.S.C. Plaintiff Beverly Thoben filed the instant action against Defendants seeking monetary damages and equitable relief arising from a purportedly invalid assignment of Plaintiffs mortgage. Defendants move to dismiss the complaint pursuant to CPLR § 3211 (a)(1) and (7). Plaintiff opposes the motion and cross moves for leave to amend the complaint. For the reasons set forth below, Defendants' motions to dismiss are granted, Plaintiff's motion for leave to amend is denied, and the complaint is dismissed. The complaint alleges that on or about April 7, 2005, Plaintiff refinanced her home in the amount of $400,000.00 designating Greenpoint Mortgage Funding, Inc. ("Greenpoint") as lender and Mortgage Electronic Registration System, Inc. ("MERS") as nominee for the lender and lender's successors and assigns. The mortgage states that MERS, as nominee, has 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 Lender including, but not limited to, releasing and canceling this Security Instrument." The complaint alleges that an assignment of mortgage dated April 18, 2012, was recorded on May 11, 2012, with MERS as nominee for Greenpoint to Wells Fargo. As far as this Court can ascertain, both before and after the assignment, Plaintiff made regular monthly mortgage payments. It does not appear that any foreclosure or collection proceedings have been commenced. The complaint alleges that the assignment of mortgage was a "complete fraud" and "legal impossibility" because (1) the assignment occurred after the closing date for mortgage assignments to enter the pool of qualified mortgages held by Greenpoint MTA Trust 2005-AR2, the trust holding plaintiff's mortgage and (2) MERS, acting as nominee for Geenpoint, had no possessory interest in the subject property and therefore could not assign any title. Plaintiff asserts claims for fraud, unjust enrichment and seeks punitive damages and a refund of all monies paid from April 7, 2005 in addition to an order quieting title. Preliminarily, the Court notes that borrowers generally lack standing to challenge the assignment of their loans. Here, Plaintiff was not a party to the MERS assignment or the Pooling and Service Agreement. Parties asserting third-party beneficiary rights under a contract must establish (1) the existence of a valid and binding contract between other parties; (2) that the `Specifically, the complaint alleges that "the Prospectus Supplement dated May 26, 2005 that Greenpoint MTA Trust2005-AR2 filed with the Securities and Exchange Commission (SEC) stated a cut-off date of May 1, 2005. By operation of law, no mortgages can be part of the Trust after May 1, 2005. The purported assignment, which is almost seven years later, is a complete fraud, and almost certainly evidences the fact that the original wet ink note has been lost and was never in the possession of the Trust 2 contract was intended for their benefit; and (3) that the benefit to them is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate them if the benefit is lost. Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182, 919 N.Y.S.2d 465 (2011). Absent a clear intent to confer the benefit of the promised performance, the third party is merely an incidental beneficiary with no right to enforce the contract. Strauss v. Belle Realty Co., 98 A.D.2d 424, 426, 469 N.Y.S.2d 948 (2d Dep't 1983). Plaintiff has made no such showing here. Accordingly, she lacks standing to challenge the validity of the assignment. See, e.g., Karamath v. U.S. Bank, N.A., 2012 U.S. Dist. LEX1S 135038, 2012 WL 4327613, at *7 (E.D.N.Y. Aug. 29, 2012)(plaintiff had no standing to challenge the validity of mortgage assignment between originator and third party), report & recommendation adopted by 2012 U.S. Dist. LEXIS 135007, 2012 WL 4327502 (E.D.N.Y. Sept. 20, 2012); see also Livonia Property Holdings, LLC v. 12840-12976 Farmington Road Holdings, LLC, 717 F. Supp. 2d 724, 736-37 (E.D. Mich. 2010) ("for over a century, state and federal courts around the country have [held] that a litigant who is not a party to an assignment lacks standing to challenge that assignment"), gird 399 F. Appx. 97 (6'h Cir. 2010). Moreover, plaintiff has not demonstrated that she suffered any injury as a result of the assignment. Plaintiff does not contest the validity of the'rnortgage or the adjustable rate note at the time they were executed. As noted above, she has made monthly mortgage payments. And even if the assignment were invalid, it would not affect her obligation to repay her debt or otherwise alter the terms and conditions of the note and mortgage. "[T]he validity of the assignment does not affect whether borrowers owe their ,obligations, but only to whom the borrowers are obliged." Livonia Prop. Holdings, L.L.C. v. Farmington Road Holdings, L.L.C., at 3 735-36; see also, Benson v Deutsche Bank National Trust, Inc., 109 A.D.3d 495, 970 N.Y.S.2d 794 (2d Dep't. 2013)("an assignment of a loan obligation, means that the obligation has been transferred, not paid in full and, thus, contrary to the plaintiffs allegation, does not render the obligation satisfied and discharged"); Jenkins v. JP Morgan Chase Bank N.A., 216 Cal. App. 4' 497, 514-15, 156 Cal. Rptr. 3d 912 (2013)("As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [plaintiff] lacks standing to enforce any agreements, including the investment trust's pooling and servicing agreement, relating to such transactions. [. . ] Furthermore, even if any subsequent transfers of the promissory note were invalid, [plaintiff] is not the victim of such invalid transfers because her obligations under the note remained unchanged"). Even if plaintiff had standing to challenge the assignment at issue here, the complaint does not sufficiently plead a cause of action for fraud. "In assessing the adequacy of a complaint under CPLR 3211 (a) (7), the court must give the pleading a liberal construction, accept the facts as alleged in the complaint to be true and afford the plaintiff the benefit of every possible favorable inference." J.P. Morgan Sec. Inc. v. Vigilant Ins. Co., 21 N.Y.3d 324, 334, 970 N.Y.S.2d 733 (2013)(citations and quotation marks omitted). In order to to state a claim for fraud, a plaintiff must allege: (1) a misrepresentation ora material omission of fact which was, false and known to be false by the defendant; (2) that the misrepresentation or omission was made for the purpose of inducing the other party to rely upon it; (3) that there was justifiable reliance, and; (4) that injury resulted. Curtis-Shanley v. Bank of Am., 109 A.D.3d 634, 970 N.Y.S.2d 830 (2d Dep't 2013), citing Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76 (1996). CPLR § 3016 (b) also providep that where a cause of action is based 4 upon fraud, the circumstances constituting the wrong must be stated in detail in order "to permit a reasonable inference of the alleged misconduct" Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 150 (2009)(intemal quotation marks omitted). Here, the complaint fails allege any facts to support her claim for fraud, and merely parrots, in conclusory form, the elements of the claim. Plaintiff has not identified any specific statements made by the Defendants, nor has she set forth when, where and by whom any alleged statements were made, how Plaintiff allegedly relied on them, and how she was harmed. Plaintiffs memorandum of law argues that the mortgage assignment from MERS to Wells Fargo was fraudulent because MERS was only a nominee and thus had no ownership interest in the note or mortgage and that "MERS had absolutely no capacity to make any assignment." The Memorandum further states that Greenpoint and MERS intended to "deceive and defraud" Plaintiff by withholding material information and making misrepresentations of fact." Nowhere, however, does Plaintiff provide any supporting detail about any alleged communications made by defendants to reasonably suggest that Defendants had a motive or opportunity to defraud her, or that she relied on any misrepresentations to her detriment. See Wint v. ABN Amro Mortg. Group, Inc., 19 A.D.3d 588, 800 N.Y.S.2d 411 (2d Dep't 2005)(plaintiff failed to allege any material misrepresentation by lender and/or a material omission it knew to be false). Plaintiff has also failed to state a plausible claim for unjust enrichment. In order to state a claim for unjust enrichment, a plaintiff must establish that the defendant benefitted at the plaintiff's expense, and that equity and good conscience require restitution. 1133 Taconic, LLC v. Lartrym Servs:, Inc., 85 A.D.3d 992, 925 N.Y.S.2d 840 (2d Dep't 2011)(intemal citations omitted). A claim for unjust enrichment is "an obligation imposed by equity to prevent injustice, 5 in the absence of an actual agreement between the parties concerned." IDT Corp. v. Morgan Stanley Dean Witter .& Co., 12 N.Y.3d 132, 142, 879 N.Y.S.2d 355 (2009). However, where a valid and enforceable agreement exists between the parties governing a particular subject matter, "recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded." Id. Here, Plaintiffs relationship with defendants is governed by the terms of the note and mortgage. An agreement consisting of a note and mortgage is a contract which bars recovery for unjust enrichment. Lurn v. New Century Mortg. Co., 19 A.D.3d 558, 559-60, 800 N.Y.S.2d 408 (2d Dep't 2005), app, den. 6 N.Y.3d 706, 812 N.Y.S.2d 35 (2006). Moreover, Plaintiff remains obligated to make loan payments under the terms of the note. Her claim that she could at some point be subject to double liability is speculative and not sufficient to withstand the instant motion to dismiss. Similarly, Plaintiff has failed to state a claim for quiet title. Article 15 of the RPAPL governs so called "quiet title" claims. To properly plead a quiet title claim, the putative plaintiff must set forth facts showing (1) a plaintiff's interest in the real property; and (2) that the defendant claims, or that it appears from the public records or the allegations in the complaint, that the defendant might claim an estate or interest in the real property, adverse to that of the plaintiff and the particular nature of such estate or interest. RPAPL § 1515 (1) (a), (b). Here, Plaintiff seeks the requested relief but does not even state a separate cause of action or allege any facts giving rise to a plausible inference that the mortgage is invalid. Nor has Plaintiff asserted any underlying causes of action or facts upon which a demand for punitive damages can be grounded. See Rocanova v. Equitable Life Assur. Sac' y, 83 N.Y.2d 6 603, 612 N.Y.S.2d 339 (1994). Finally, Plaintiff requests leave to amend her complaint and has submitted a proposed amended complaint which includes a claim for declaratory judgment, as well as a class action claim on behalf of borrowers "whose mortgage obligations originated with Greenpoint and are now sought to be collected upon by Wells Fargo Bank." Ordinarily, leave to amend a complaint should be freely given absent prejudice or surprise resulting from the delay, unless the proposed amendment is palpably insufficient as a matter of law or is totally devoid of merit. Leszczynski v. Kelly & McGlynn, 281 A.D.2d 519, 722 N.Y.S.2d 254 (2d Dep't 2001)(internal citations omitted). Here, plaintiffs proposed amended complaint adding a class action does not alleviate Plaintiffs burden of showing standing. Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 40, 48 L. Ed. 2d 450, 96 S. Ct. 1917 (1976)("That a suit may be a class action . . . adds nothing to the question of standing, for even named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent")(citation omitted). As noted above, borrowers lack standing to challenge transfers of their notes and mortgages, as well as compliance with pooling and servicing agreements, and the complaint fails to state a cause of action for unjust enrichment. Nor does the complaint satisfy the prerequisites of CPLR § 901. See Mittelman v. GE Capital Mortg. Servs., 265 A.D.2d 311, 696 N.Y.S.3d 222 (2d Dep't 1999). With respect to the proposed cause of action seeking a declaratory judgment, the Court notes that Itlhe declaratory judgement procedure is intended to deal with actual problems and not with remote possibilities which may never eventuate." Fairhaven Props. v. Garden City 7 s W. Hubert g Supreme Court Justice Plaza, 119 A.D.2d 796, 501 N.Y.S.2d 422 (2d Dept. 1986), citing Guibord v. Guibard, 2 A.D.2d 34, 153 N.Y.S.2d 457 (1' Dep't 1956). Accordingly, it is hereby: ORDERED, that Defendants' motion to dismiss is granted; and it is further ORDERED, that Plaintiffs motion for leave to amend the complaint is denied; and it is further ORDERED, that the complaint is dismissed. The foregoing constitutes the Decision and Order of the Court. Dated: White. Plains, New York November 8, 2013 Abel L. Pierre, Esq. Law Office of Abel L. Pierre, P.C. Attorney for Plaintiff 40 Exchange Place, Suite 2010 Anthony Del Guerico, Esq. Parker Ibrahim & Berg LLC 5 Penn Plaza, Suite 2371 New York, NY 10001 Stephen F. Elliman, Esq. Zeichner Ellman & Krause LLP 575 Lexington Avenue New York, NY 10022 8