Did you know there are New York state statutes that provide that when a person or entity commences or continues an action without requisite standing, said person or entity is liable for treble damages to the adverse party, liable for damages plus $250 to the actual party in interest, and is “guilty of a misdemeanor, punishable by imprisonment not exceeding six months”?
It is an unfortunate secret that New York Civil Rights Law §70 imposes liability where a person or entity vexatiously or maliciously “in the name of another but without the latter’s consent” commences or continues an action. The companion statute, New York Civil Rights Law §71, will award treble damages when such unauthorized conduct is proved. Think about the hundreds of cases over the last decade where debtors-in-default in New York lost their homes to plaintiffs that lacked standing—i.e., authority—to commence or continue a foreclosure action. It is time for the foreclosure defense bar, district attorneys and New York state courts to step up their excellence and provide debtors-in-default with the justice they deserve.
Indeed, the liabilities imposed by New York Civil Rights Law §§70 and 71 might explain the most perplexing aspect of New York law—i.e., why lack of standing is generally an affirmative defense that can be waived.
What Is Standing? What does that mean to say a plaintiff has standing? For this writer, in litigation involving a breach of contract dispute—and a foreclosure action is a breach of contract dispute—standing means the plaintiff has the authority to commence the action.
Hence, in a contract litigation, the plaintiff has standing when: (1) said plaintiff is a party to the contract entitled to enforce the terms thereof; (2) said plaintiff is an individual or entity authorized by such party to the contract; or (3) said plaintiff is an individual or entity authorized by the contract itself or by law to enforce the terms of the contract. A simple example of this last category is the “holder” of a negotiable instrument: By law, someone with physical possession of a bona fide negotiable instrument indorsed to such individual, indorsed in blank or indorsed to bearer, has the authority to enforce the terms of said instrument.
For point of emphasis, standing focuses on the authority of the plaintiff, not the proof of whom the party to the contract is or the proof of whom owns the underlying instrument.
Yes, it is true that if one is simultaneously the plaintiff and the owner or “holder” of the negotiable instrument, proof of the plaintiff’s standing or authority is presumed. But there is no requirement under New York law that only the owner or holder of the mortgage loan can be the plaintiff in a foreclosure action. For example, the Second Department recognizes that a servicer can be the plaintiff in a foreclosure action without being the owner or “holder” of the underlying negotiable instrument. See, e.g., CWCapital Asset Mgt. v. Great Neck Towers, 99 A.D.3d 850 (2d Dep’t 2012). In fact, the statute that literally defines standing for many foreclosure actions, RPAPL 1302(1)(a), provides that the plaintiff can either identify itself as “the owner and holder of the subject mortgage and note” or claim that said plaintiff “has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the subject mortgage and note.”
The Unwitting Merger of the Analysis of Standing With Proof of Ownership or Holder Status. Unfortunately, there is considerable confusion in recent New York case law in the discussion of what standing means. There is the unwitting tendency to merge the concept of standing—authority to sue—with the concept of ownership or holder status. As Judge Rowan Wilson of the New York Court of Appeals noted in a concurring opinion in US Bank NA v. Nelson, 36 N.Y.3d 998 (2020): “In the past decade, New York courts have firmly adopted the mistaken use of the word ‘standing’ to refer to questions about whether the plaintiff in a foreclosure action holds the defendant’s note.” Id. at 1008.
Why It Matters To Distinguish Between Question of Who Has Standing (Authority To Sue) and Who Is the Owner or ‘Holder’. In mortgage foreclosure cases, there is an unfortunate consequence when the courts merge the analysis of a plaintiff’s standing with the analysis of the ownership or holder status of the underlying loan. Such merger engenders the notion that if a defendant fails to raise the affirmative defense of lack of standing in the lawsuit, said defendant is forever barred from getting redress against that plaintiff that commenced the action without standing. This engendered notion is simply not true under New York law.
Yes, it was almost hornbook law—prior to the adoption of RPAPL §1302-a—that where the defendant in a mortgage foreclosure action waived the issue of standing by failing to assert the defense in an answer or pre-answer motion to dismiss the complaint, the plaintiff did not need not establish its standing in order to demonstrate its prima facie entitlement to judgment as a matter of law. See, e.g., Wells Fargo Bank Minn., N.A. v. Mastropaolo, 42 A.D.3d 239 (2d Dep’t 2007)).
But entitlement to a judgment, where standing had been presumed, should not have protected the unauthorized plaintiff from liability—even when the defendant in the action had waived the affirmative defense of lack of standing in the action. Said defendant always had the right to seek redress under the long-forgotten New York Civil Rights Law §70 if said plaintiff actually lacked standing.
Simply, New York law for over a century has not permitted unauthorized straw men to win judgments without consequence.
Civil Rights Law §70 provides in pertinent part: “If a person vexatiously or maliciously, in the name of another but without the latter’s consent, or in the name of an unknown person, commences or continues, or causes to be commenced or continued, an action or special proceeding, in a court, of record or not of record, or a special proceeding before a judge or a justice of the peace; or takes, or causes to be taken, any proceeding, in the course of an action or special proceeding in such a court, or before such an officer, either before or after judgment or other final determination; an action to recover damages therefor may be maintained against him by the adverse party to the action or special proceeding; and a like action may be maintained by the person, if any, whose name was thus used. He is also guilty of a misdemeanor, punishable by imprisonment not exceeding six months.” (emphasis added).
The companion Civil Rights Law §71 provides: “In an action, brought by the adverse party, as prescribed in the last section, the plaintiff, if he recovers final judgment, is entitled to recover treble damages. In an action, brought by the person whose name was used, as prescribed in the last section, the plaintiff is entitled to recover his actual damages, and two hundred and fifty dollars in addition thereto.”
Notably, liability under Civil Rights Law §70 was never predicated on any affirmative defense raised or not raised in a civil action. It never had to be counter-claimed while the unauthorized action was pending—the statute gives recourse for both the commencement and continuation of the unauthorized action. See Mintz & Gold v. Zimmerman, 71 A.D.3d 600 (1st Dep’t 2010). The companion statute, Civil Rights Law 71, awards treble damages—no need to plead special damages. See Mintz & Gold v. Zimmerman, 89 A.D.3d 609 (1st Dep’t 2011). Indeed, Civil Rights Law §70 classifies a violation of Civil Rights Law §70 as “a misdemeanor, punishable by imprisonment not exceeding six months.” Imagine a financial institution or servicer having to explain that to its respective regulator.
Furthermore, under Civil Rights Law §70, there is no requirement to plead or prove malice. Civil Rights Law §70 imposes liability where a plaintiff vexatiously or maliciously commences or continues an action. The “or” is an important coordinating conjunction in the statute’s text.
Civil Rights Law §§70 and 71 became effective in 1921, replacing identically worded sections 1900 and 1901 of the Code of Civil Procedure (L. 1920, ch. 924, §§2, 4, 5). They have been a law in this state for over a century. Their existence perhaps gives context to why in New York standing is generally an affirmative defense that can be waived: the plaintiff can secure a judgment when the defendant defaults, but said plaintiff had better have standing because it will be subject to severe liability if it did not.
Of course, prior to the adoption of RPAPL §1302-a, if the mendacious plaintiff in a foreclosure action had pleaded, consistent with RPAPL 1302, that it was the mortgage loan owner/holder or delegate of the mortgage loan owner/holder, then a debtor’s default in the foreclosure action may have been barred from commencing a subsequent civil action that re-addressed the issue of standing. However, the criminal liability under New York Civil Rights Law §70 should not have been affected.
Conclusion: Time for the Foreclosure Defense Bar, District Attorneys and New York State Courts To Step Up Their Excellence. The foreclosure cases in the last decade that have likely awarded hundreds of judgments to plaintiffs who lacked standing have been an intellectual blight on New York state jurisprudence. New York is better than that. Just because the defense of standing could have been waived prior to the adoption of RPAPL §1302-a, a mendacious plaintiff without standing should never have had the unfettered benefit of a judgment entered in a New York state court.
These long-forgotten statutes—New York Civil Rights Law §§70 and 71—must be revived. There has been for over a century severe consequences—civil and criminal—for the unauthorized plaintiff that misused the New York state courts.
It is time for the mortgage defense bar, district attorneys and the New York state courts to step up their respective excellence and use these very powerful Civil Rights Laws to counter the injustices that have openly plagued New York debtors-in-default in the last decade.
Francis M. Caesar is a New York attorney in private practice.