Supreme Court, Kings County, September 8, 2023

Hogan Lovells US LLP, New York City (Lisa J. Fried and Allison M. Funk of counsel), for plaintiff.

Petroff Amshen LLP, Brooklyn (Christopher Villanti of counsel), for defendants.

The issue presented at trial is whether plaintiff—an assignee at least two times removed from the holder of the original note—has standing to foreclose if the original note cannot be produced because it was lost or destroyed, and a previous court has already denied summary judgment to plaintiff on the grounds that the lost note affidavit prepared by the original owner of the loan is deficient. The subsidiary issue is whether either the servicer of, or a representative of the plaintiff can bolster the information contained in the deficient lost note affidavit when neither entity has any knowledge as to the actions taken by the original owner of the note who subsequently lost the note. This court rules that neither the servicer of the loan nor the plaintiff assignee of the loan possessed any knowledge which could cure the infirmities of the lost note affidavit, thus precluding the admission into evidence of the lost note and mandating that the case be dismissed.

Plaintiff US Bank National Association (plaintiff or US Bank), as Trustee for the Structured Asset Securities Corporation Mortgage Loan Trust 2006-BC1, commenced this action to foreclose a mortgage encumbering the investment property at 719 Bristol Street in Brooklyn (subject property) against Claude Cadeumag, Wendy Cadeumag, and Nancy Cadeumag, as heirs to the Estate of Lorvana Cadeumag (Cadeumag heirs or defendants). The mortgage was executed by Lorvana Cadeumag on October 17, 2005, to secure a note in favor of Aegis{**81 Misc 3d at 662} Funding Corporation (Aegis) in the amount of $420,000. The mortgage was recorded on November 9, 2005, in the name of Mortgage Electronic Registration Systems, Inc. (MERS), a clearinghouse firm, on behalf of Aegis.^[FN1] The underlying note was never sent to MERS.

Sometime between October 17, 2005, and February 7, 2006, Aegis or Lehman Brothers (Lehman) allegedly lost the original note. By affidavit of lost note dated February 7, 2006, Jose Guevara, Assistant Secretary to Aegis, averred that the subject note "cannot be produced because it has been lost or destroyed," and that the note is not in possession of any person having any lawful claim to the same. It also stated that Cadeumag would be indemnified and held harmless from any loss, liability or damages resulting from the unavailability of the original [*2]paper note. The electronic copy of the subject note bears Guevara's endorsement to Aegis.

The chain of custody of the note and date of assignments are in dispute. However, at some point Aegis sold the mortgage to the now defunct Lehman Brothers, which in turn assigned the mortgage to Structured Asset Securities Corporation (SASC). Pursuant to a trust agreement dated April 1, 2006 (the trust agreement), SASC, as depositor, transferred and assigned a pool of mortgage loans to U.S. Bank National Association, as Trustee for Structured Asset Securities Corporation Mortgage Loan Trust Mortgage Pass-Through Certificates Series 2006-BC1. The mortgage loan schedule to the trust agreement indicates that Cadeumag's mortgage loan was among the about 6,500 mortgage loans sold and assigned to the trust pursuant to the trust agreement. The trust agreement lists Lehman Brothers Holdings, Inc. as seller and declares "the Depositor has acquired the Mortgage Loans from the Seller, and at the Closing Date is the owner of the Mortgage Loans and the other property being conveyed by it to the Trustee" (plaintiff's exhibit 7 at 7).{**81 Misc 3d at 663}

US Bank's business records^[FN2] indicate the collateral file received on February 9, 2006, contained a lost note affidavit and a copy of the note which Guevara allegedly endorsed over to US Bank wherein US Bank agreed to pay $420,000.00 to Aegis for the property's mortgage note. Although plaintiff alleges that US Bank became the assignee of the lost note in 2006.^[FN3] The record is also unclear whether the note passed from Aegis to the various intermediate assignees listed above. Aegis also serviced the mortgage loan until the servicing was transferred to Wells Fargo Bank, N.A. (Wells Fargo) in April 2006. Cadeumag made payments to Wells Fargo, as servicer of the Trust, until she defaulted by failing to make the payment due on October 1, 2008, and all payments thereafter due afterward. Ms. Cadeumag passed away soon thereafter in March 2009.

Plaintiff commenced the instant action against defendants (the administrator for and heirs of Lorvana's estate) on January 17, 2014. In its amended complaint, plaintiff alleges that it has standing to bring the lawsuit as it is in possession of the note with a proper endorsement and/or allonge and is therefore the holder of both the note and mortgage, which passes as incident to the note. It avers that the trust agreement and related documents prove ownership of the note and establish the chain of assignments and that the transfers from MERS to US Bank establish standing. Defendants contend that plaintiff lacks standing because it failed to conclusively prove the full chain of assignments from Aegis to US Bank or the full chain of assignments to MERS. They also contend that plaintiff failed to establish a prima facie case under UCC 3-804 because Guevara's lost note affidavit is insufficient as a matter of law. Plaintiff moved for summary judgment and defendants cross-moved for summary judgment and to dismiss the complaint pursuant to CPLR 3211 (a) (3), and for an order directing plaintiff to provide an [*3]undertaking pursuant to General Business Law § 394-a (2) and UCC 3-804.

By a lengthy decision and order dated March 20, 2018, the Honorable Mark I. Partnow, J.S.C., denied plaintiff's motion{**81 Misc 3d at 664} on the grounds that it failed to demonstrate its standing, and questioned the sufficiency of the lost note affidavit. (2018 NY Slip Op 34485[U] [Sup Ct, Kings County 2018].) Citing liberally from Justice Partnow's decision, the court first cited the well established precedent that to establish prima facie entitlement to summary judgment in a foreclosure action, a plaintiff must produce the mortgage, the unpaid note, and evidence of default. (Id. at *3, citing Deutsche Bank Trust Co. Ams. v Garrison, 147 AD3d 725, 726 [2d Dept 2017]; Deutsche Bank Natl. Trust Co. v Abdan, 131 AD3d 1001, 1002 [2d Dept 2015]; Plaza Equities, LLC v Lamberti, 118 AD3d 688, 689 [2d Dept 2014].)

Justice Partnow first ruled that a plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder of, or the assignee of the underlying original note. (2018 NY Slip Op 34485[U], *3, *5, citing Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 361-362 [2015]; LGF Holdings, LLC v Skydel, 139 AD3d 814, 814 [2d Dept 2016]; Wells Fargo Bank, N.A. v Jones, 139 AD3d 520, 523 [1st Dept 2016]; Wells Fargo Bank, N.A. v Rooney, 132 AD3d 980, 981 [2d Dept 2015].) A written assignment of the note or physical delivery of the note is sufficient to establish standing. (US Bank N.A. v Madero, 80 AD3d 751, 753 [2d Dept 2011].)

A plaintiff will establish holder status where it possesses a note that, on its face or by allonge, contains an indorsement in blank or bears a special indorsement payable to the order of the plaintiff. (Wells Fargo Bank, NA v Ostiguy, 127 AD3d 1375, 1376 [3d Dept 2015]; US Bank, N.A. v Zwisler, 147 AD3d 804 [2d Dept 2017].) It is the note, and not the mortgage, that is the dispositive instrument that conveys standing to foreclose. (US Bank N.A. v Richards, 155 AD3d 522 [1st Dept 2017]; see Aurora Loan Servs., LLC v Taylor, 25 NY3d at 361.) "Conclusory boilerplate statements, such as a bald assertion that the plaintiff is the holder of the note, will not suffice." (Richards, 155 AD3d at 523, citing Wells Fargo Bank, N.A. v Jones, 139 AD3d at 524.)

Justice Partnow then found that either a written assignment, or the physical delivery of the underlying original 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. (2018 NY Slip Op 34485[U], *4; see U.S. Bank Trust, N.A. v Rose, 176 AD3d 1012, 1014 [2d Dept 2019]; Richards, 155 AD3d at 523; U.S. Bank,{**81 Misc 3d at 665} N.A. v Collymore, 68 AD3d 752, 754 [2d Dept 2009]; Security Lending, Ltd. v New Realty Corp., 142 AD3d 986, 987 [2d Dept 2016].) Since defendant raised the issue of standing, the plaintiff must also establish its standing as part of its prima facie case. (2018 NY Slip Op 34485[U], *4, citing Deutsche Bank Trust Co. Ams. v Garrison, 147 AD3d at 726; Security Lending, Ltd. v New Realty Corp., 142 AD3d 986, 987 [2d Dept 2016]; LGF Holdings, 139 AD3d 814.)

Justice Partnow denied plaintiff's motion because the lost note affidavit attested to by Jose Guevara, Assistant Secretary for Aegis, was not legally sufficient. Guevara merely stated that the subject note could not be located because it had been lost or destroyed. Annexed to the affidavit was a copy of the subject note bearing an indorsement from Aegis to the order of Aegis Mortgage Corporation and an indorsement from Aegis Mortgage Corporation to plaintiff. On a motion for summary judgment, a plaintiff seeking to recover upon a lost note must provide "due proof" of his ownership of the note, "the facts which prevent production of the note, and the [*4]note's terms." (Rose, 176 AD3d at 1014, citing UCC 3-804;^[FN4] Deutsche Bank Natl. Trust Co. v Anderson, 161 AD3d 1043, 1044 [2d Dept 2018].) Justice Partnow found that the lost note affidavit was deficient under section 3-804 since it did not state when the search was made or by whom or when the note was lost. (2018 NY Slip Op 34485[U], *6, citing Richards, 155 AD3d 522.)

Since the note was lost and plaintiff obviously could not have physical possession of the original note, Justice Partnow found that plaintiff had to establish the chain of custody of the copy of the lost note from Aegis through the various entities before it was assigned to plaintiff US Bank. Based upon the Official Commentary to UCC 3-804,^[FN5] Justice Partnow found that "(a)s there is a gap in the chain of written assignments of the note{**81 Misc 3d at 666} from Aegis to plaintiff, plaintiff may not rely on the trust agreement as proof of its standing." (Id. at *7.) The trust agreement only demonstrated that plaintiff was assigned certain notes held by Structured Asset Securities Corporation (SASC) and there was no written assignment of the note from Aegis to SASC prior to the date of the trust agreement. Justice Partnow also found that plaintiff failed to establish standing based upon an assignment of the note and mortgage from MERS to plaintiff prior to commencement of the action, as there was no proof the note was delivered or assigned from Aegis to MERS prior to the execution of the assignment to plaintiff. (Id. at *6-7, citing Aurora Loan Servs., LLC v Mercius, 138 AD3d 650, 652 [2d Dept 2016]; HSBC Bank USA, N.A. v Roumiantseva, 130 AD3d 983, 984 [2d Dept 2015].)

The court also denied defendants' cross-motion on the grounds that they did not demonstrate that plaintiff lacked standing. The court granted that part of defendants' cross-motion seeking an undertaking pursuant to UCC 3-804, and directed plaintiff to post an undertaking of at least $823,392.10 since it found that "an undertaking . . . to protect[ ] defendants from the risk of double liability should the lost instrument[s] reappear" was warranted. (2018 NY Slip Op 34485[U], *9 [internal quotation marks omitted].)

Justice Partnow's ruling that on its face, the lost note affidavit was insufficient to confer standing and that there was a break in the chain of written assignments of the copy of the note from Aegis to plaintiff is law of the case. In both state and federal court, a judicial decision concerning an issue of law made at one stage of the litigation becomes the "law of the case," i.e., "binding precedent, to be followed in subsequent stages of the same litigation." (Firestone v Berrios, 42 F Supp 3d 403, 411 [ED NY 2013], citing Scottish Air Intl., Inc. v British Caledonian Group, PLC., 152 FRD 18, 24 [SD NY 1993]; see Collins v Indart-Etienne, 59 [*5]Misc 3d 1026, 1033-1034 [Sup Ct, Kings County 2018].) As compared to res judicata (claim preclusion) and collateral estoppel (issue preclusion), which generally deal with preclusion after judgment, the law of the case addresses the potentially preclusive effect of judicial decisions made in the course of single litigation "before final judgment." (People v Evans, 94 NY2d 499, 502 [2000] [emphasis omitted]; see Collins, 59 Misc 3d at 1043.) Thus at trial in order to establish standing, plaintiff had to provide testimony to{**81 Misc 3d at 667} bolster and cure the inadequacies of the lost note affidavit as well as due proof of its ownership.

A "holder" is "the person in possession of [the note] that is payable either to [the] bearer or . . . an identified person that is the person in possession." (Wells Fargo Bank, N.A. v Meisels, 177 AD3d 812, 814 [2d Dept 2019]; Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d 683, 684 [2d Dept 2016].) Thus the plaintiff who seeks to enforce the note must show that the original note was physically delivered to it and either endorsed to it or endorsed in blank. (Windward Bora LLC v Armstrong, 2021 WL 606713,  *7, 2021 US Dist LEXIS 29284, *18-19[ED NY, Feb. 16, 2021, 18-CV-6355-SJ-SJB].) "Where the note has been indorsed in blank, the holder must establish its standing by demonstrating that the original note was physically in its possession at the time of the commencement of the action." (Bank of Am., N.A. v Sebrow, 180 AD3d 982, 985 [2d Dept 2020], citing OneWest Bank, N.A. v FMCDH Realty, Inc., 165 AD3d 128, 131 [2d Dept 2018].)

UCC 3-804 expressly bestows only upon an "owner of an instrument which is lost" the right to maintain an action in his own name. (Sebrow at 985; Anderson, 161 AD3d at 1044.) Both UCC 3-804 and its commentary appear to place the onus of establishing why the original note could not be produced upon the owner of the note under whose watch the note was lost. Any different interpretation would place the final assignee, who might be seven degrees removed from the original owner, in the impossible situation of conjuring up facts totally outside of his knowledge concerning the loss of the note. In U.S. Bank Trust, N.A. v Rose (176 AD3d at 1014-1015), the Court found that it would be impossible for a plaintiff assignee to ever be in possession of the original note when its predecessor in interest submitted a lost note affidavit stating that the note was deemed lost prior to the transfer. Therefore, the plaintiff assignee could only prove ownership of the subject note by written assignment and by showing that the predecessor in interest was in possession of the original.

There appears to be no case where a plaintiff assignee of a loan was able to rectify deficits found in the original lost note affidavit prepared by the predecessor in interest on either summary judgment or at trial. Furthermore, the Second Department has explicitly interpreted UCC 3-804 as requiring due{**81 Misc 3d at 668} proof of all three prongs of the test. It has explicitly held that the owner of a lost note can only maintain an action "upon due proof of [1] his [or her] ownership, [2] the facts which prevent his [or her] production of the instrument and [3] its terms." (U.S. Bank N.A. v Cope, 175 AD3d 527, 529 [2d Dept 2019]; Rose, 176 AD3d at 1014, citing UCC 3-804; see Christiana Trust v Moneta, 186 AD3d 1604, 1605 [2d Dept 2020].) The party seeking to enforce the lost note must "account for its absence." (Cope at 529; see Wells Fargo Bank, N.A. v Zolotnitsky, 195 AD3d 659 [2d Dept 2021], citing Deutsche Bank Natl. Trust Co. v Anderson, 161 AD3d at 1044 [Under UCC 3-804, which is intended to provide a method of recovery on [*6]instruments that are lost, destroyed, or stolen, "a plaintiff is required to submit 'due proof of (the plaintiff's) ownership, the facts which prevent (its) production of (the note,) and its terms' "].) See also Puryear v Prokeen Mgt. Co., Inc. (49 Misc 3d 1207[A], 2015 NY Slip Op 51497[U] [Sup Ct, Kings County 2015]), where the court held that a plaintiff must establish the elements of UCC 3-804 under a standard higher than a preponderance of the evidence—such as "clear and satisfactory."

In innumerable cases, the courts have denied summary judgment to a plaintiff assignee of the lost note and mortgage where the lost note affidavit was insufficient. (See LaSalle Bank N.A. v Carlton, 204 AD3d 985 [2d Dept 2022] [plaintiff failed to meet the requirements of UCC 3-804, by failing to set forth the facts that prevented the production of the original note as it did not identify who conducted the search for the lost note or explain when or how the note was lost]; Capital One, N.A. v Gokhberg, 189 AD3d 978, 980 [2d Dept 2020]; Deutsche Bank Natl. Trust Co. v Kreitzer, 203 AD3d 800, 802 [2d Dept 2022].) In Rose, the Second Department imposed an exacting standard in assessing whether the plaintiff met the three prong test. It found that the plaintiff failed to demonstrate the facts that prevented production of the lost note as its affidavit only described approximately when the search was conducted and when the loss was discovered but "failed to identify who conducted the search for the lost note" or to explain "when or how the note was lost" (id. at 1015-1016, citing Anderson, 161 AD3d at 1045 [lost note affidavit insufficient because it failed to provide sufficient facts as to when the search for the note occurred, who conducted the search, the steps taken in the search or how and when the note was lost]).

In fact, even where a plaintiff can prove the proper assignment of a copy of the lost note, the courts have denied summary{**81 Misc 3d at 669} judgment based upon the other inadequacies in the lost note affidavit. In Cope, the Second Department found that even though the plaintiff established that a copy of the note was assigned to it and the note's terms, it could not prevail on its motion for summary judgment as it failed to establish the facts that prevented the production of the original note. (Id. at 529.) In Zolotnitsky (195 AD3d at 661-662), the Second Department found that although the copy of the note annexed to the lost note affidavit provided sufficient evidence of its terms, the lost note affidavit failed to sufficiently establish Wells Fargo's ownership as it "failed to establish when the note was acquired and failed to provide sufficient facts as to when the search for the note occurred, who conducted the search, or how or when the note was lost." Similarly, in New York Community Bank v Jennings (2015 NY Slip Op 31591[U] [Sup Ct, Queens County 2015]), the court found the lost note affidavits to be insufficient since the affidavits of the assignee's officers failed to demonstrate that they had personal knowledge about the loss of the note or to

"discuss any procedures for the safekeeping and retrieval of original notes or lost note procedures for determining that an original note is lost. They do not include any indication as to where the original notes are likely to be kept, what efforts if any, were made to preserve them, whether notes were routinely or otherwise destroyed, who conducted the search in this instance and whether a search was conducted in every location where notes were likely to be found." (Id. at *5.)

In sum, without a lost note affidavit or trial testimony which establishes that the proponent had personal knowledge about the details of the original note and how it was kept, how it was lost and what searches were made to find the original, and by whom, the copy of the note simply [*7]cannot be authenticated as actually representing the original and the assignment of said copy cannot confer standing.

Counsel for plaintiff pinpointed the crux of proving standing when the original note has been lost: "In normal cases when you have the original note" you can prove your standing because so long as you just possess the note at the time that the action was actually commenced, "you are good to go." (Tr Apr. 19, 2019 at 42.) "Under the UCC if I possess an original {**81 Misc 3d at 670}note that is endorsed from a bank, then I can enforce it" (tr Dec. 19, 2018 at 121). "However, when the note is lost you have to use other ways to show that the note was assigned and sold to the trust." (Tr Apr. 19, 2019 at 42; see also tr Dec. 19, 2018 at 121.)^[FN6]

It is self evident that if plaintiff presented a deficient lost note affidavit at the motion stage, plaintiff could not rectify such deficiencies unless it presented someone with personal knowledge about how, when and why the note was lost and what was done to find it. At trial US Bank presented the testimony of Beverly Decaro, a Wells Fargo loan verification counselor, and Michael Wang, a US Bank research manager and vice president. Neither Decaro nor Wang had any knowledge about the circumstances that led to the original note's disappearance or either Aegis' or US Bank's or any of the other assignees' loan practices and procedures in obtaining or administering records (B at 65-66, 82-85; D at 113-114, 139-141). Both declared that Aegis no longer existed and that they could not present testimony from anyone from Aegis. In fact, both witnesses' trial testimony just bolstered the attenuated history of the lost note and made it clear that the lost note affidavit was vastly insufficient to either permit the copy of the note into evidence or to confer standing upon plaintiff.

Specifically, Decaro testified that her familiarity with the copy of the note and lost note affidavit came solely from reviewing records from the Wells Fargo imaging system and that the note has been lost prior to the formation of the trust agreement (A at 24; B at 66). She was not involved in obtaining any of the records on the file (A at 24). Wells Fargo started servicing the loan in April 2006 after the loan was sold to and deposited into the trust. She did not even know how the certified copy of the lost note got into the file sent to US Bank or how it was copied (B at 48). Decaro testified that Aegis sold the loan to Lehman Brothers who sold it to Structured Asset Securities Corporation (SASC) as depositor which put this and about 6,500 other loans into a trust which appointed US Bank as Trustee. Decaro never worked at Aegis, Lehman Brothers or SASC and did not know whether Aegis transferred the note to Lehman upon its{**81 Misc 3d at 671} sale of the loan (A at 107). On cross she indicated that she had never seen an assignment of the note from Aegis to Lehman Brothers or from Lehman Brothers to SASC (C at 119, 122). She also did not know when or how the note was lost or whether a search took place for the note since the lost note affidavit was silent as to any efforts taken by Aegis to find the note. In fact, [*8]she did not even know Aegis's protocol in making a photocopy of the original note at the closing (B at 82-83). Nor did she know where Aegis kept the original of the note (id. at 84-85). In response to the court's questions as to whether there was anything indicating how or why it was lost, Decaro responded that "[n]o, just what it says here, it doesn't say why or how" (id. at 49).

Mr. Wang first started working at US Bank in 2013, some seven years after the issue of the lost note first arose, and became a research manager in 2018. His knowledge of the Cadeumag mortgage was based solely upon his review of the records (D at 6). US Bank serves as trustee of a residential mortgage-backed security trust (SASC) consisting of approximately 6,500 notes; the trust owns the note. Aegis created the loan and then sold it to Lehman Brothers which aggregated the mortgage with many other mortgages into various securities and then sold the securities to various trusts which were then aggregated into the SASC trust. In 2006 US Bank became the trustee and custodian of this trust and received physical and electronic copies of the notes and mortgages and reviewed and administered the loans on behalf of the investors to the trust.

Wang's testimony as to how US Bank received the loan and subsequently obtained the lost note affidavit could be incorporated into "Through the Looking Glass." Some unknown entity—Asset Mgmt—first deposited the trust into US Bank on January 31, 2006, which was also the date that US Bank received the collateral file which would typically include an original note (D at 115). Wang explained that when US Bank obtained the collateral file someone physically reviewed it and noted an "exception" which indicated that there was an irregularity (D at 75) because the note was missing (D at 76). A reviewer at US Bank ascertained on or about February 2, 2006, that "there was no note and . . . no lost note affidavit" in the file and listed the file as an undeposit (D at 85-86, 116) which led US Bank to reach out to Lehman Brothers (D at 116).

Even more confusing, the SASC trust was not even created until April 2006, so that US Bank was basically acting as{**81 Misc 3d at 672} administrator for Lehman Brothers when, on January 31, 2006, it deposited an unfunded pool of loans that it had not even paid for yet (D at 118-119). This meant that Lehman Brothers did not even own the loans in the pool at the time it deposited them into the trust so that technically Aegis would still have owned the loan (D at 119). Yet on February 9, 2006, some UNIDENTIFIED entity made an addition to the file consisting of the lost note affidavit and copy of the note. The lost note affidavit is dated February 7, 2006, and thus postdates when the originator of the loan—Aegis—turned the file over to Lehman Brothers. One can only conclude that when Aegis transferred the file over to Lehman Brothers the file did not contain the lost note affidavit or a copy of the note.

The court queried how Aegis even got involved in allegedly writing the lost note affidavit and providing a copy of the note since by January 31st or February 2nd Aegis no longer owned the file and US Bank did not receive the collateral file from Aegis (D at 91). Wang replied that when US Bank discovered that the original note was missing it sent the file back for corrections to the client, who at the time was Lehman Brothers. Wang stated that it was Lehman Brothers' responsibility to correct or option the loan before US Bank accepted it since Lehman Brothers was the seller, meaning that it had purchased all of the loans from the originators who were listed in the trust agreements.

The court then noted that the file was silent as to whether US Bank spoke to Lehman [*9]Brothers or how the latter obtained the lost note affidavit from Guevara. Nor did the lost note affidavit contain an endorsement from Aegis to Lehman Brothers. Wang reiterated that since the trust had not yet been created in January 2006, US Bank would had to have sent the certification report to Lehman Brothers to fix the problem and if the problem had not been fixed, then US Bank would not have been able to securitize the loan (D at 96-97). Wang then admitted that US Bank never went to Aegis to obtain the documentation, but only to its client Lehman although he has no knowledge of, and there is nothing in the records as to what Lehman did when notified that the file lacked a note and a lost note affidavit! (D at 121.)

The court noted that there was no proof that Lehman ever obtained the note from Aegis and no proof of who even made annotations on the copy of the note (D 104-105). Counsel for defendants argued that the only submitted assignment was{**81 Misc 3d at 673} from SASC to US Bank but that there was no evidence of assignment and/or endorsement from Aegis to Lehman or Lehman to SASC. Above and beyond this omission, counsel queried how Aegis could have endorsed the note directly to US Bank and skipped the previous assignments when at the time of the endorsement it was out of Aegis possession and already allegedly owned by US Bank.

On cross, Wang admitted that he had no knowledge of any of the recordkeeping practices and procedures of Aegis, Lehman Brothers, or SASC (D at 113). He also had no personal knowledge of what efforts if any Aegis, Lehman Brothers or SASC took to locate the note (D at 141). Based upon his review of the records, US Bank never had a physical copy of the note (D at 142). He could not explain how Aegis endorsed the copy of the note directly to US Bank as Trustee for SASC although it no longer owned the note and why Guevara never first endorsed the note to Lehman Brothers. Nor did Wang have personal knowledge as to what Aegis did to try and find the original note or to prepare the lost note affidavit or how it sent the lost note affidavit to Lehman Brothers or who US Bank even got the lost note affidavit or a copy of the note from (D at 121-122).

Wang also admitted on cross that he did not know whether it was actually Guevara who certified that the copy of the note was a true copy of the original, and did not know whether Guevara even saw the original so as to be able to certify that there was a true copy of the original note that was lost (D at 137). The court commented that the issue is "we don't know how they were able to get a copy of it if the original was lost because the people who got the copy . . . are not here to tell us" (D at 138). Based upon the above testimony, the court did not allow the lost note affidavit and copy of the note into evidence due to the lack of personal knowledge of either Decaro or Wang as to how the lost note affidavit was even created and when it was created, much less how US Bank even obtained the affidavit and from whom. (See A at 60-61; D at 143-146.)

The testimony of Ms. Decaro and Mr. Wang makes it abundantly clear that they had no clue as to who lost the original note, how it was lost, or what the party who lost the note did to try and recover it. Their testimony is much more scant than the more detailed affidavits submitted in Rose, and other cases cited above which the courts found were deficient to meet the three prong test under UCC 3-804. Therefore, US Bank has not established a prima facie case for recovery against Ms.{**81 Misc 3d at 674} Cadeumag et al. because it has failed to bolster the deficiencies found by Justice Partnow as to the circumstances that led to the note's disappearance. In fact, the testimony of its two witnesses at trial merely bolstered the attenuated nature of the assignments [*10]much less the authenticity of the lost note affidavit of the copy of the note.

Additionally, the terms of the original note are in dispute. Ms. Cadeumag argues that there are very little facts that speak to the authenticity of the copy. Ms. Decaro testified that she has very little knowledge about Aegis' protocol for photocopying notes or who made the certification (B at 83) and Wang had no idea whether Guevara even saw the original note so as to be able to certify that there was a true copy of the original note that was lost (D at 137). Furthermore, Guevara allegedly certified the copy of the note in February 2006 after the loan was out of Aegis' possession leading to the question as to whether Guevara even had a copy of the original at the time he wrote the lost note affidavit. The last page of the note contains two boxes, one of which states pay to the order of Aegis mortgage in one box and pay to the order of ** on the other; underneath the second box is an explanation that ** refers to US Bank as Trustee for the SASC Mortgage Loan Trust 2006-BC1 with no evidence as to whether these boxes were on the original note or affixed to the copy of the note. Nor is there any date in either of these boxes as to when the assignment occurred.

The deficient lost note affidavit was executed in February 2006; the original note was executed in October 2005. Since the testimony from the two witnesses indicates that the trust was not even created until April 2006, it begs credulity to argue that the original note could have contained the box on the last page assigning the loan from Aegis to US Bank as Trustee for the SASC Mortgage Loan Trust in February 2006 when the trust had not even been created as of that date. (See Windward Bora LLC v Armstrong, 2021 WL 606713, *8, 2021 US Dist LEXIS 29284, *20 [ED NY, Feb. 16, 2021, 18-CV-6355-SJ-SJB] ["It confounds logic for an allonge to be affixed—not just once, but twice—to a note after it has been lost or destroyed." If the last assignee plaintiff cannot "explain this paradox, it will lack standing to pursue foreclosure"].)

Finally, there is no evidence that Aegis assigned the note to Lehman or whether it was Aegis or Lehman who lost the note. Nor is there any assignment of the note from Lehman to SASC or from SASC to US Bank. Such a break in the chain of assignment{**81 Misc 3d at 675} is fatal to US Bank's standing. See Wilmington Sav. Fund Socy., FSB v Tamisi (2023 WL 2561787, 2023 US Dist LEXIS 45439 [ED NY, Mar. 17, 2023, 22-CV-01982 (DG)]), where the Eastern District held that the loss of the original note alongside the trajectory of multiple assignments was fatal to the final plaintiff assignee's claim of standing. There, the original owner of the note assigned it to DLJ, who somehow misplaced or lost the note yet transferred its rights and interests under the note to plaintiff Wilmington. The court held that Wilmington was required to show that DLJ physically possessed the note such that it had a legal interest to assign it to Wilmington (2023 WL 2561787, *5, 2023 US Dist LEXIS 45439, *11). Wilmington produced a lost note affidavit from a DLJ vice president which contained the same boilerplate language contained in the Guevara affidavit. The Eastern District affirmed a bankruptcy court ruling that a "boilerplate lost note affidavit that is devoid of facts as to what actually happened to the note is insufficient to establish ownership." (2023 WL 2561787, *2, 2023 US Dist LEXIS 45439, *4.)

In sum, plaintiff has failed to establish standing through assignment or through its lost note affidavit and its complaint seeking foreclosure on the mortgage encumbering the subject property against defendants is therefore denied.

"[t]he plaintiff who claims to be the owner of such an instrument is not a holder as that term is defined in this Act, since he is not in possession of the paper, and he does not have the holder's prima facie right to recover under the section on the burden of establishing signatures. He must prove his case. He must establish the terms of the instrument and his ownership, and must account for its absence."