Standing not expressly pleaded

Defending Against Foreclosure: When Standing Defenses Don’t Need Express Pleading

Standing to sue is a fundamental requirement in any legal proceeding, particularly in foreclosure actions where banks and mortgage servicers must demonstrate their legal right to foreclose on a property. A recent New York appellate decision highlights an important tactical consideration for defendants: sometimes the way you respond to a complaint can raise standing issues without explicitly stating them as a defense.

The Second Department’s ruling in Bank of America, N.A. v. Paulsen demonstrates how careful pleading strategies can preserve crucial defenses, even when they’re not formally labeled as such. This decision has significant implications for both foreclosure defense attorneys and plaintiffs who must ensure their complaints are thoroughly crafted to avoid inadvertently opening doors for standing challenges.

Jason Tenenbaum’s Analysis:

Bank of Am., N.A. v Paulsen, 2015 NY Slip Op 01597 (2d Dept. 2015)

“Here, contrary to the conclusion reached by the Supreme Court, the appellant did not waive the issue of standing. Although the appellant’s answer did not raise standing as a separate defense, a fair reading of his answer reveals that it contained language which denied that the plaintiff was the owner and holder of the note and mortgage being foreclosed. Under such circumstances, the appellant was not required to expressly plead lack of standing as a defense”

This is interesting. The Court held, in essence, that the denial of certain averments in the complaint was sufficient to raise the affirmative defense of lack of standing. So, the more artfully a complaint is pleaded, the better the chance of a de-facto standing defense being proffered.

Legal Significance

The Paulsen decision establishes an important principle about the relationship between pleading requirements and affirmative defenses in foreclosure litigation. The Second Department’s ruling recognizes that standing challenges can be implicitly raised through strategic denials in the answer, even absent explicit assertion of “lack of standing” as a numbered affirmative defense.

This approach reflects a practical understanding of how foreclosure complaints are structured. When a plaintiff alleges it is “the owner and holder of the note and mortgage,” and the defendant’s answer contains language denying these allegations, the defendant has effectively placed the plaintiff’s standing in dispute. The court recognized that requiring defendants to also separately plead “lack of standing” as an affirmative defense would elevate form over substance.

The decision has significant implications for waiver doctrine in foreclosure cases. Many courts have held that affirmative defenses not pleaded in the answer are waived and cannot be raised later in the litigation. Under a strict application of this rule, defendants who deny ownership allegations but fail to separately plead lack of standing might be deemed to have waived the defense. Paulsen rejects this rigid approach, instead examining the substance of what the answer placed in dispute.

The court’s emphasis on a “fair reading” of the answer suggests that courts should interpret pleadings liberally when determining what issues are properly before them. This principle protects defendants who may not have access to sophisticated legal counsel at the answer stage, while still requiring that the plaintiff receive adequate notice that its standing will be contested.

Importantly, the decision creates different strategic considerations for plaintiffs drafting foreclosure complaints. The more specifically a complaint alleges facts supporting standing—such as identifying the original lender, describing the chain of assignments, and attaching documentary proof of note ownership—the more difficult it becomes for defendants to raise implicit standing challenges through simple denials.

Conversely, generic allegations that plaintiff “is the owner and holder” without supporting factual detail make the complaint more vulnerable to standing challenges raised through denials. This incentivizes plaintiffs to plead standing with specificity, which serves the broader goal of ensuring that only parties with legitimate claims pursue foreclosure.

Practical Implications

For defendants responding to foreclosure complaints, Paulsen provides important guidance on preserving standing defenses even when counsel may be uncertain about all available defenses at the answer stage. Rather than attempting to identify and label every potential affirmative defense, defendants should focus on carefully denying any allegations in the complaint that touch on the plaintiff’s legal right to foreclose.

Specific denials to target include allegations that plaintiff “owns” the note and mortgage, that plaintiff is “the holder” of these instruments, that plaintiff has “standing” to bring the action, and any allegations about the transfer or assignment of the loan. By denying these factual allegations, defendants preserve their ability to challenge standing even if they do not separately plead lack of standing as an affirmative defense.

However, defendants should not rely exclusively on this approach. Best practice remains to include both specific denials of standing-related allegations and a separate affirmative defense explicitly challenging standing. This belt-and-suspenders approach eliminates any ambiguity about whether the issue is properly before the court.

For plaintiffs, Paulsen highlights the importance of detailed pleading regarding standing. Rather than relying on conclusory allegations of ownership, foreclosure complaints should include specific factual allegations establishing the chain of title from the original lender through any assignments to the current plaintiff. Attaching key documents like assignments and allonges to the complaint further strengthens the pleading.

Plaintiffs should also anticipate that denials of ownership allegations will be treated as raising standing challenges. This means plaintiffs must be prepared to establish standing through documentary evidence and testimony, not merely through allegations in the complaint. The burden of proving standing remains with the plaintiff throughout the litigation.

From a practice management perspective, foreclosure defense attorneys should develop standardized answer forms that include comprehensive denials of standing-related allegations. These forms should be reviewed and updated regularly to reflect evolving case law about what constitutes adequate notice of standing challenges.

Plaintiffs’ attorneys, conversely, should implement complaint review protocols ensuring that all foreclosure complaints contain sufficient factual allegations and documentary support for standing. This includes verification that all necessary assignments have been executed and recorded, that the plaintiff’s ownership of the note can be established through documentary evidence, and that the complaint accurately reflects the current state of note ownership.

The decision also suggests that courts should be cautious about granting summary judgment in favor of foreclosure plaintiffs when defendants have denied ownership allegations, even absent an express standing defense. Trial courts should treat such denials as placing standing in issue and requiring the plaintiff to meet its burden of proof on this threshold question.

Key Takeaway

The Paulsen decision establishes that defendants can preserve standing challenges by simply denying the plaintiff’s ownership allegations in their answer, without needing to explicitly plead “lack of standing” as a separate defense. This ruling emphasizes the importance of careful pleading on both sides—defendants should thoughtfully craft their denials, while plaintiffs must ensure their complaints are precisely worded to establish clear ownership claims.

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