11-4773-cv
U.S. Bank, N.A. v. Squadron VCD, LLC


                 UNITED STATES COURT OF APPEALS
                     FOR THE SECOND CIRCUIT

                             SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT.      CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE
32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A
PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH
THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

     At a stated term of the United States Court of Appeals for
the Second Circuit, held at the Daniel Patrick Moynihan United
States Courthouse, 500 Pearl Street, in the City of New York, on
the 4th day of December, two thousand twelve.
PRESENT:   DENNY CHIN,
           RAYMOND J. LOHIER, JR.,
                     Circuit Judges,
           PAUL G. GARDEPHE,
                     District Judge.*
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U.S. BANK, N.A., as Trustee for the
Registered Holders of ML-CFC
Commercial Mortgage Trust 2006-1,
Commercial Mortgage Pass-Through
Certificates, Series 2006-1,
               Plaintiff-Appellee,

                 -v.-                                 11-4773-cv

SQUADRON VCD, LLC, ALLEN MORTON,
PATSY MORTON,
               Defendants-Appellants,
John Does 1-100, the latter names
being fictitious but intending to
designate tenants and persons in
possession or persons having an
interest in the premises described
in the Complaint herein,
               Defendants.
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     *
          The Honorable Paul G. Gardephe, of the United States
District Court for the Southern District of New York, sitting by
designation.
FOR PLAINTIFF-APPELLEE:                Kenneth S. Yudell, Aronauer,
                                       Re & Yudell, LLP, New York,
                                       New York.

FOR DEFENDANTS-APPELLANTS:             Susan Chana Lask, Law Offices
                                       of Susan Chana Lask, New York,
                                       New York.

          Appeal from the United States District Court for the

Southern District of New York (Briccetti, J.).
          UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the judgment of the district court is AFFIRMED.

          Defendants-appellants Squadron VCD, LLC, Allen Morton,

and Patsy Morton (collectively, "Squadron") appeal from the

district court's judgment of foreclosure and sale entered

November 3, 2011, awarding plaintiff-appellee U.S. Bank, N.A.

("U.S. Bank") $12,893,379.75 plus interest and foreclosing on

certain real property.    Judgment was entered after the district

court granted, by memorandum decision entered October 4, 2011,

U.S. Bank's motion for summary judgment.     We assume the parties’

familiarity with the underlying facts, the procedural history of

the case, and the issues on appeal.

          On September 13, 2005, Windsor Realty Associates, LLC

("Windsor") borrowed $11 million from Merrill Lynch Mortgage

Lending, Inc. ("MLM Lending").   They executed various documents,

including a note and a mortgage to secure the note on property

located at 20 Squadron Boulevard, New City, New York (the

"Mortgaged Property").

          On March 22, 2006, MLM Lending sold the loan to Merrill

Lynch Mortgage Investors, Inc. ("MLM Investors") pursuant to a

Mortgage Loan Purchase Agreement (the "MLPA").     MLM Investors

placed the loan in ML-CFC Commercial Mortgage Trust 2006-1 (the

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"Trust") and securitized it with other loans.     The Trust retained

beneficial ownership of the loan.

            LaSalle Bank, N.A. ("LaSalle") was the Trust's initial

Trustee.    In the MLPA, MLM Lending warranted that it would

deliver both the original note and a copy of the mortgage to

LaSalle, on behalf of MLM Investors.    LaSalle then affirmed, in

the Pooling and Service Agreement dated "as of March 1, 2006"

(the "PSA"), that it had received those documents.    The parties

never recorded the transfer between MLM Lending and MLM

Investors; on August 21, 2006, however, MLM Lending recorded an
assignment from it directly to LaSalle.

            Squadron purchased the Mortgaged Property and assumed

the subject loan obligations on July 16, 2007.

            On June 30, 2008, LaSalle resigned as Trustee.    Wells

Fargo Bank, N.A. ("Wells") succeeded LaSalle as Trustee.

LaSalle, however, remained Custodian of the Trust and therefore

an agent of the Trustee, and it retained custody of the note and

mortgage.    Six months later, on January 1, 2009, Wells resigned

and U.S. Bank was appointed the successor Trustee.    LaSalle's
role did not change, but during this intervening six-month

period, it merged into Bank of America, N.A. ("BANA").    Thus,

after U.S. Bank became the Trustee, LaSalle/BANA was its agent,

as the Trust Custodian.    Because Wells knew that U.S. Bank would

succeed it beginning in 2009, Wells suggested that LaSalle/BANA

assign the mortgages directly to U.S. Bank.    LaSalle/BANA

complied, recording an assignment to U.S. Bank on May 5, 2009,

which was made "effective as of June 30, 2008."



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           Squadron defaulted on its payments on February 1, 2009.

The Trust notified Squadron of its default on February 17, and

issued a demand letter on October 8, 2009.    Squadron failed to

timely cure its default, and on July 20, 2010, U.S. Bank filed

this action to foreclose on the Mortgaged Property.    Squadron now

appeals.

           In a mortgage foreclosure action under New York law, a

lender must prove (1) the existence of a debt, (2) secured by a

mortgage, and (3) a default on that debt.    See R.B. Ventures,

Ltd. v. Shane, 

, 59 n.2 (2d Cir. 1997) (applying New
York law); United States v. Freidus, 

, 1277

(S.D.N.Y. 1991) (same).   The lender is entitled to summary

judgment if it establishes by documentary evidence the facts

underlying its cause of action and the absence of a triable fact.

R.B. 

n.2; 

.

We review a district court's grant of summary judgment de novo.

Young v. Cnty. of Fulton, 

, 902 (2d Cir. 1998).

           When it moved for summary judgment, U.S. Bank presented

copies of the note and the mortgage, as well as affidavits

establishing that, despite some intervening assignments of the

note and mortgage, the Trust retained beneficial ownership of the

loan.   U.S. Bank also provided undisputed evidence of Squadron's

default.   Thus, U.S. Bank demonstrated that it was entitled to

summary judgment.

           On appeal, Squadron argues:   (1) certain assignments

were not in writing; (2) certain intermediate assignments were

not recorded; (3) the note was not endorsed; and (4) even if the



                                -4-
mortgage had been properly assigned, it was assigned without the

accompanying note.    These arguments lack merit.

          First, under New York law, physical delivery will

effect a valid assignment of a note and mortgage; a written

assignment is not required.    See, e.g., U.S. Bank, N.A. v.

Collymore, 

, 580 (App. Div. 2d Dep't 2009)

("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 . . . ."    (emphasis added)).   The record establishes

the following transfers of the note and mortgage:    (1) MLM

Lending agreed to deliver both the original note and a copy of

the mortgage to LaSalle, which LaSalle received; (2) Wells

succeeded LaSalle as Trustee, but LaSalle -- as Wells's agent --

retained physical custody of the note and mortgage; and (3) U.S.

Bank then succeeded Wells as Trustee while LaSalle/BANA continued

to retain physical custody of the note and mortgage, as U.S.

Bank's agent.   Therefore, this physical delivery resulted in

valid assignments of the note and mortgage from MLM Lending to

U.S. Bank (or more specifically, its agent).    See 

; 77 N.Y. Jur. 2d Mortgages § 116 (noting that a

transfer to a third person, as agent of the mortgagee, operates

as a delivery if intended to be a delivery to the mortgagee).

          Second, even though only two of these various

assignments were recorded -- from MLM Lending to LaSalle, then

from LaSalle/BANA to U.S. Bank -- the validity of the physical

transfers themselves is unaffected.    U.S. Bank, N.A. v. Dellarmo,

, 124 (App. Div. 2d Dep't 2012) ("The failure to

                                 -5-
record an assignment prior to the commencement of the action is

not necessarily fatal . . . ."); 78 N.Y. Jur. 2d Mortgages § 278

("An assignment of a mortgage is valid even though not recorded."

(citing Fryer v. Rockefeller, 

, 276 (1875))).

          Third, contrary to Squadron's allegations on appeal,

neither the MLPA nor the PSA required that the note be endorsed.

Rather, although both documents permit notes "endorsed on its

face or by allonge attached thereto," each also contemplates

notes transferred "in blank."    Therefore, as Squadron does not

otherwise contest the validity of the note, the unendorsed copy

presented by U.S. Bank was sufficient.    See, e.g., Green Point
Sav. Bank v. Papis, 

, 943 (App. Div. 2d Dep't

1998) ("The plaintiff's submission of a copy of the duly executed

mortgage note . . . sufficiently established its cause of action

for foreclosure."); Wells Fargo Bank Minn., N.A. v. Mastropaolo,

, 248, 251-52 (App. Div. 2d Dep't 2007)

(mortgagee entitled to summary judgment on its action to

foreclose where its complaint included copies of the mortgage and

note).

          Fourth, although Squadron asserts that any assignment

was of the mortgage alone (and not of the note), the Trust

documents provide otherwise.    As described above, U.S. Bank

established that each assignment was accompanied by delivery of

both the mortgage and the note.    As a result, Squadron's

conclusory allegations, without more, cannot overcome the

presumption that these assignments-by-delivery occurred.     See
McCarthy v. Dun & Bradstreet Corp., 

, 202 (2d Cir.

2007) (party opposing summary judgment must offer some "hard

                                  -6-
evidence showing that its version of the events is not wholly

fanciful" (internal quotation omitted)).

          Fifth, standing to prosecute a foreclosure action is

determined as of the date the action is filed.      

(standing is established "at the time the action

is commenced" (internal quotation omitted)).      The record shows

that U.S. Bank was appointed Trustee on January 1, 2009.      On that

date, it acknowledged receipt of the mortgage file (including the

note and mortgage), via its agent.      Thus, U.S. Bank possessed

both the mortgage and the note well before July 20, 2010, when it

filed its complaint.   See, e.g., U.S. Bank, N.A. v. Denaro, 

, 582 (App. Div. 2d Dep't 2012) ("In a mortgage

foreclosure action, 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 at the time the action is

commenced." (internal quotation omitted)); cf. Wells Fargo Bank,

N.A. v. Marchione, 

, 619 (App. Div. 2d Dep't

2009) (despite a valid retroactive assignment, plaintiff lacked

standing to bring foreclosure action because assignment was not

executed before the action was first filed).

          We have considered Squadron's remaining arguments and

find them to be without merit.    For the foregoing reasons, we
AFFIRM the judgment of the district court.


                                 FOR THE COURT:
                                 Catherine O’Hagan Wolfe, Clerk




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