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Liability for Lack of Standing: New York Civil Rights Law

Standing is an issue that is front and center in many foreclosure litigation cases, including  ordinary nonpayment foreclosure cases and ones involving title defects.  A foreclosure plaintiff whose standing is questionable should be wary not just of a potential dismissal of the action due to lack of standing, but of potential liability under §70 of the New York State Civil Rights Law.  This section can potentially be used as a sword against a lender that has not performed its adequate diligence to ensure standing.

Civil Rights Law §70 provides in pertinent part that:

If a person vexatiously or maliciously, in the name of another but without the latter’s consent …  commences or continues, or causes to be commenced or continued, an action or special proceeding, in a court … either before or after judgment or other final determination; an action to recover damages therefor may be maintained against him by the adverse party  …; 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.

The effect of this statute is that if a lender or its servicer commences an action without being the holder of the note, a defendant could seek to recover damages based on such lack of standing. Additionally, a determination of lack of standing could result under Civil Rights Law §71 in an award of treble damages. For this additional reason, lenders need to ensure that they are comfortable with their standing position before commencing an action.