2013 VT 96
Peter Dernier and Nicole Dernier
v.
Mortgage Network, Inc., Mortgage Electronic Registration Systems, Inc.
and U.S. Bank National Association
No. 2012-226
Supreme Court of Vermont
Filed October 18, 2013
Summaries:
Source: Justia
Plaintiffs Peter and Nicole Dernier appealed the dismissal of their action for: (1) a declaratory judgment that defendant U.S. Bank National Association could not enforce the mortgage and promissory note for the debt associated with plaintiffs' purchase of their house based on irregularities and fraud in the transfer of both instruments; (2) a declaration that U.S. Bank has violated Vermont's Consumer Fraud Act (CFA) by asserting its right to enforce the mortgage and note; and (3) attorney's fees and costs under the CFA. They also appealed the trial court's failure to enter a default judgment against defendant Mortgage Electronic Registration Systems, Inc. (MERS). Plaintiffs fell behind on their mortgage, and brought suit against two parties: Mortgage Network, Inc. (MNI), which is in the chain of title for both the note and the mortgage, and MERS, which is in the chain of title for the mortgage as a "nominee" for MNI. Plaintiffs sought a declaratory judgment that the mortgage was void, asserting that: (1) MERS, as a nominee, never had any beneficial interest in the mortgage; (2) MNI had assigned its interest in both instruments to others without notifying plaintiffs; and (3) no party with the right to foreclose the mortgage had recorded its interest. MNI responded that plaintiffs had named MNI as a party in error, because MNI did "not own the right to the mortgage in question." MERS did not respond. Around this time, plaintiffs received a letter in which U.S. Bank represented that it possessed the original promissory note and mortgage and that it had the right to institute foreclosure proceedings on the property. The trial court denied plaintiffs' motion to amend and dismissed plaintiffs' case for failure to state a claim. Plaintiffs appealed. After careful consideration of the trial court record, the Supreme Court concluded the trial court erred in dismissing Counts 1 and 2 of plaintiffs' amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement. The Court affirmed as to dismissal of Counts 3 and 4 of plaintiffs' proposed amended complaint. The case was remanded for further proceedings.
NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the VermontReports. Readers are requested to notify the Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be made before this opinion goes to press.
Supreme Court On Appeal from Superior Court, Windsor Unit, Civil Division
November Term, 2012
Theresa S. DiMauro, J.
Kimberly B. Cheney of Cheney Saudek & Grayck PC, Montpelier, for Plaintiffs-Appellants.
Andre D. Bouffard of Downs Rachlin Martin PLLC, Burlington, for Defendants-Appellees.
PRESENT: Reiber, C.J., Dooley, Skoglund, Burgess and Robinson, JJ.
¶ 1. DOOLEY, J. Plaintiffs Peter and Nicole Dernier appeal the dismissal for failure to state a claim, of their action for (1) a declaratory judgment that defendant U.S. Bank National Association cannot enforce the mortgage and promissory note for the debt associated with plaintiffs' purchase of their house based on irregularities and fraud in the transfer of both instruments, (2) a declaration that U.S. Bank has violatedVermont's Consumer Fraud Act (CFA) by asserting its right to enforce the mortgage and note, and (3) attorney's fees and costs under the CFA. They also appeal the trial court's failure to enter a default judgment against defendant Mortgage Electronic Registration Systems, Inc. (MERS). We affirm in part and reverse in part.
¶ 2. The following facts set out the basic events that led to the suit and the procedural posture of the case. The allegations as to the alleged irregularities and fraud related to the note and mortgage, and the specific claims in plaintiffs' complaint, will be explained in greater detail thereafter.
¶ 3. Plaintiffs purchased a house in Weston, Vermont in 2005. Kittredge Mortgage Corporation, a Vermont corporation, loaned plaintiffs $242,250 for the purchase, and Peter Dernier executed a promissory note in favor of Kittredge in that amount on October 7, 2005. Plaintiffs also executed a mortgage in favor of Kittredge on the same date. Plaintiffs allege no irregularities with the purchase of the house or the execution of the note or mortgage.
¶ 4. After that smooth beginning, things began to get murky. The note and the mortgage were immediately transferred, and although their paths were slightly different, by the time of this suit both had entered the secondary mortgage market and had landed in a trust administered by U.S. Bank.
¶ 5. Plaintiffs fell behind on their mortgage, and in March 2011 brought suit against two parties: Mortgage Network, Inc. (MNI), which is in the chain of title for both the note and the mortgage, and MERS, which is in the chain of title for the mortgage as a "nominee" for MNI. Plaintiffs sought a declaratory judgment that the mortgage was void, asserting that (1) MERS, as a nominee, never had any beneficial interest in the mortgage, (2) MNI had assigned its interest in both instruments to others without notifying plaintiffs, and (3) no party with the right to foreclose the mortgage had recorded its interest. MNI responded by letter on April 25, 2011 that plaintiffs had named MNI as a party in error, because MNI did "not own the right to the mortgage in question." MERS did not respond. Around this time, plaintiffs received a letter in which U.S. Bank, through its attorney, represented that it possessed the original promissory note and mortgage and that it had the right to institute foreclosure proceedings on the property.
¶ 6. In June, 2011, plaintiffs moved for a default judgment against MNI and MERS. A few days later, plaintiffs moved to amend their complaint to join U.S. Bank as a defendant, alleging for the first time—in general terms—that the assignment to U.S. Bank was invalid and U.S. Bank's assertion of any interest was an unfair and deceptive practice in violation of the CFA. The complaint as to U.S. Bank called for a declaratory judgment that U.S. Bank had no right to foreclose the mortgage or enforce the note, that U.S. Bank had violated the CFA, and that plaintiffs were entitled to attorney's fees.
¶ 7. The trial court granted plaintiffs' motion to join U.S. Bank as a party, but denied the motion for default judgment. In denying plaintiffs' motion, the trial court noted that, because the case was a declaratory judgment action "in which relief granted as against one defendant may have significant effects on the rights of others," default judgment was not appropriate "until all parties have been added, served, and have had time to file answers." It added, however, that plaintiffs were free to renew their motion for default judgment after those conditions were satisfied.
¶ 8. U.S. Bank moved to dismiss the case and plaintiffs responded by filing an amended complaint, where they explained for the first time their allegations of fraud and noncompliance with the terms of the pooling and servicing agreement (PSA) governing the pool into which the mortgage had been assigned. U.S. Bank again moved to dismiss, noting the heightened pleading requirement for allegations of fraud under V.R.C.P. 9(b). Plaintiffs moved to file a second amended complaint, in which the allegations of fraud were laid out in detail and accompanied by exhibits. U.S. Bank opposed the filing of the second amended complaint and again moved to dismiss. The trial court denied plaintiffs' motion to amend and dismissed plaintiffs' case for failure to state a claim. See Prive v. Vt. Asbestos Grp., 2010 VT 2, ¶¶ 12-13, 187 Vt. 280, 992 A.2d 1035(explaining that when a plaintiff files an amended complaint in response to a motion to dismiss, the correct test is whether the amended complaint would survive a motion to dismiss). Plaintiffs appealed.
¶ 9. While we are technically reviewing the denial of a motion to amend a complaint, the trial court's decision was based on the content of the proposed second amendment to the complaint. Thus, we treat the case as if plaintiffs' complaint were amended as they proposed and the superior court dismissed it for failure to state a claim.
¶ 10. We also note that, although plaintiffs continue to name MNI and MERS as defendants along with U.S. Bank, plaintiffs' amended complaint addresses only claims against U.S. Bank and prays for relief only against U.S. Bank. Accordingly, we treat U.S. Bank as the sole defendant here unless we state otherwise.
¶ 11. In their complaint, plaintiffs allege irregularities and fraud related to the transfer both of the note and the mortgage. For each item, the note and the mortgage, we will first describe the state of the documentation as found in the exhibits attached to the complaint and then summarize the allegations made by plaintiffs. As this case comes to us on a motion to dismiss, we must take the allegations in plaintiffs' complaint as true, a point we stress below—but examining the documents allows us to understand better plaintiffs' claims.
¶ 12. We begin with the note, and with what appears on the note itself. In what was presumably the first step, although there are no dates on the assignments, Kittredge assigned the note to MNI, a Massachusetts corporation, through a stamp that was signed by Yvonne Pickard. The next transfer was effected by a stamp that reads: "Pay to the order of ** Without Recourse." Under that statement is the name "Mortgage Network, Inc.," followed by "By: Chad M. Goodwin, Pipeline Manager." Above this stamp is typed: "** US Bank National Association, as Trustee for CSMC Mortgage-Backed Pass-Through Certificates, Series 2006-3." What seems to be a signature is placed over Chad Goodwin's name.
¶ 13. The CSMC trust is governed by a PSA, which plaintiffs submitted as an exhibit with their second amended complaint. According to thePSA, defendant is the "Trustee," and Wells Fargo Bank N.A. is the "Servicer." While that accords with the assignment on the mortgage, other elements of the PSA are confusing as they relate to plaintiffs' note. First, according to the PSA, the trust is composed of assets for which DLJ Mortgage Capital, Inc. is the "seller" and Credit Suisse First Boston Mortgage Securities Corp. is the "depositor." As there is no indication that plaintiffs' note was owned by Credit Suisse or DLJ Mortgage Capital, this is certainly perplexing, for the PSA suggests that it is composed entirely of instruments acquired by DLJ Mortgage Capital and transferred to Credit Suisse, and states that an "original Mortgage Note bearing all intervening endorsements" must be delivered to the custodian of the trust. (Emphasis added.) Another strange element of the PSA is that the trust has a "closing date" of March 30, 2006, and gives 90 days from that date for the trust to obtain any missing papers, but the note has no indication of when the transfer was made.
¶ 14. Seizing on these facts, plaintiffs in their complaint assert various conflicting fact patterns surrounding the transfer of the note, in an effort to show that defendant does not have the right to enforce it. First, they assert that DLJ Mortgage Capital acquired the note from MNI and transferred it to Credit Suisse—although there is no evidence of this on the note, this assertion is presumably based on the proposition that because the trust is composed of instruments from DLJ Mortgage Capital and Credit Suisse it must have passed through those entities to become part of the trust. Plaintiffs draw from this the conclusion that the purported transfer to defendant from MNI was invalid, as defendant had given up the note to DLJ Mortgage Capital. Second, plaintiffs assert that defendant acquired the note after the closing date of March 30, 2006, which they claim makes the transfer invalid and prevents the trust from owning the note. There is no stamp on the date of the transfer to defendant, but plaintiffs seem to presume that it occurred after June 30, 2006, while acknowledging that the date has not been precisely determined. Finally, plaintiffs assert that the initial stamp from Chad Goodwin was blank, but that defendant, "by its employees or agents, caused the purported signature of Goodwin to be affixed on the Note." They also state, in a different variation on that allegation, that defendant "knew the endorsement was fraudulent." The justification for these last two statements is that plaintiffs have somehow located Chad Goodwin's signature on a mortgage in Maine, which they submitted as an exhibit, noting that that signature looks very different from the signature on their note.
¶ 15. Moving on to the mortgage, the picture is no clearer. On October 7, 2005—the very day the mortgage was executed by Peter Dernierto Kittredge—Kittredge assigned it to MERS, a Delaware corporation, as nominee for MNI. Plaintiffs allege no irregularity in this assignment, and it was recorded in the Weston land records on October 12, 2005. The next transfer for which there is documentation was on March 18, 2011, from MERS to defendant, again as trustee for Credit Suisse First Boston Mortgage Securities Corp., Mortgage Backed Pass-Through Certificates, Series 2006-3.
¶ 16. There are three things pertinent to plaintiffs' complaint to flag about this transfer. First, the text of the assignment says that MERS is acting as a nominee for Kittredge Mortgage Corporation.1 Given the earlier transfer from Kittredge to MERS as nominee for MNI, this language appears to be clearly wrong. Second, the assignment is signed for MERS by "Michael Snively, Assistant Secretary." As evidenced by another document attached to the complaint, Michael Snively is an employee of Wells Fargo—the servicer of the trust—not of MERS.2 Finally, similar to the problem of the note discussed above, the date of the assignment to the trust was after the closing date.
¶ 17. Plaintiffs in their complaint assert that the assignment to defendant was invalid for all of these reasons, adding an allegation that the signature of the notary public avowing to the signature by Michael Snively was "forged."
¶ 18. After putting forward these allegations, plaintiffs explain in their complaint that they seek three forms of relief. First, they request a declaratory judgment that defendant has no right to enforce either the note or the mortgage, based on the violations of the PSA and the alleged fraud. Second, they request a declaration that defendant has violated the CFA by stating that it believes it has the right to enforce the mortgage and note. Finally, presumably based on the CFA claim, they request payment of their attorney's fees and costs.
¶ 19. Defendant opposed the motion to amend, essentially arguing that it was futile and would not survive a motion to dismiss. Its primary arguments were that plaintiffs lacked standing to make their claims. As to the alleged violations of the PSA, defendant argued that plaintiffs were neither parties to nor beneficiaries of the PSA, so they have no standing to enforce it. As to the alleged fraud in the assignments, defendant argued that the suit is premature and the issues will become ripe only if and when defendant files a foreclosure action. As we discuss below, defendant attached to its motion documents that show that plaintiffs and the loan servicer, Wells Fargo Bank, twice entered into loan modification agreements to extend the payment terms, but that the loan is now in default.
¶ 20. The superior court decided that the motion to amend was futile because it could not survive a motion to dismiss, essentially accepting defendant's arguments. With respect to the alleged violations of the PSA, it held that plaintiffs had no standing to enforce the PSA terms and that violations of the PSA were irrelevant to the enforceability of the note and mortgage against plaintiffs. With respect to the alleged defects in defendant's title to the mortgage, it held that the suit was premature because defendant did not need to prove its status until it sought to foreclose. The court noted that the defects were not, in any case, a ground for discharge of the mortgage, but instead only a defense to the foreclosure action, which defendant could cure.
¶ 21. The superior court also addressed plaintiffs' claim that defendant had violated the CFA by claiming that it could enforce the note and mortgage against plaintiffs. The court held that plaintiffs failed to show how the representation "could have been material or deceptive as it pertained to them." It also held that because plaintiffs cannot enforce the PSA, they could not make a CFA claim based on a breach of the PSA, and noted the federal cases that have so held.
¶ 22. Based on these allegations and stated causes of action, the trial court dismissed plaintiffs' complaint. On appeal, plaintiffs argue that the trial court erred in ruling that (1) plaintiffs, as mortgagors, have no standing to seek to invalidate an instrument because it violates the terms of a PSA; (2) plaintiffs' declaratory judgment action based on fraud was premature because defendant had not yet sought to foreclose; and (3) plaintiffs stated no claim under the CFA. They also appeal the trial court's failure to enter a default judgment against defendant MERS.
¶ 23. We review a motion to dismiss using the same standard as the trial court. "A motion for failure to state a claim may not be granted unless it is beyond doubt that there exist no facts or circumstances that would entitle the plaintiff to relief." Kaplan v. Morgan Stanley & Co., 2009 VT 78, ¶ 7, 186 Vt. 605, 987 A.2d 258 (mem.) (quotations omitted). "We assume that all factual allegations pleaded in the complaint are true, accept as true all reasonable inferences that may be derived from plaintiff's pleadings, and assume that all contravening assertions in defendant's pleadings are false." Mahoney v. Tara, LLC, 2011 VT 3, ¶ 7, 189 Vt. 557, 15 A.3d 122 (mem.) (quotation, brackets, and ellipses omitted).
¶ 24. We stress the very limited standard of review under the procedural posture in this case. As we discuss below, the standing questions on which the trial court relied are based, in part, on the substantive rights of the parties, which are generally unbriefed and unexplored and present complex questions of first impression. Except to identify many of the issues, we largely leave their resolution to future proceedings, if any.
¶ 25. There is an additional point about our review in this case. Although the case was decided essentially on a motion to dismiss, numerous documents and representations were presented by the parties. Generally, when additional material is presented in support of, or in opposition to, a motion to dismiss, the trial court is required to treat the motion to dismiss as a motion for summary judgment and notify the parties of the change in procedure. See V.R.C.P. 12(c); Nash v. Coxon, 152 Vt. 313, 314-15, 565 A.2d 1360, 1361 (1989). This did not happen here.3 Essentially the parties added facts that they thought favored their position. Apart from the validity of those actions, the inevitable result is that we have a very incomplete picture of the circumstances of the parties, and this affects our ability to resolve the issues before us. As an overview of our decision, at least some of the issues in this case should have been resolved on a more complete record that could be presented only by summary judgment.
¶ 26. We begin with plaintiffs' request for declaratory judgment that defendant has no right to enforce the mortgage or the note. This question must be broken down into two components, for plaintiffs allege that the mortgage and note are unenforceable based on (1) violations of the PSA; and (2) fraud and irregularities in the chain of title. We first address the question of the violations of the PSA.
¶ 27. Defendant argues that plaintiffs, because they are neither parties to nor third-party beneficiaries of the PSA, lack standing to challenge assignments in contravention of that agreement. This has been the conclusion of the vast majority of courts that have considered this question.4See, e.g., In re Correia, 452 B.R. 319, 324–25 (B.A.P. 1st Cir. 2011) (finding that an individual who is not a party or a third party beneficiary of the PSA lacks standing to object to breaches of the PSA's terms); Butler v. Deutsche Bank Trust Co., No. 12-10337-DPW, 2012 WL 3518560, at *7 (D. Mass. Aug. 14, 2012) ("[A] mortgagor does not have standing to challenge a foreclosure on the basis of the non-compliance of an assignment with the provisions of the PSA governing a foreclosing trust."); Abubo v. Bank of N.Y. Mellon, No. 11–00312 JMS–BMK, 2011 WL 6011787, at *9 (D. Haw. Nov. 30, 2011) ("[E]ven assuming terms of the PSA were not followed, Plaintiffs may not set aside the assignment of the Mortgage . . . on that basis."); Anderson v. Countrywide Home Loans, No. 10-2685 (MJD/JJG), 2011 WL 1627945, at *4 (D. Minn. Apr. 8, 2011) ("Plaintiffs do not have standing to challenge the validity of the assignment to the Trust because they are not parties to the PSA.").
¶ 28. This is a question of first impression for this Court. While we ultimately agree with the conclusion of those courts cited above, a bit more elucidation is in order. We begin with the longstanding contract-law principle, applied by this Court in past decisions, that a plaintiff who is not a party to a contract does not have standing to challenge a breach of that contract. See Bischoff v. Bletz, 2008 VT 16, ¶ 16, 183 Vt. 235, 949 A.2d 420 (citing Palmer v. Bahm, 2006 MT 29, ¶ 13, 128 P.3d 1031, for the proposition that individuals who "are strangers to [a] contract . . . have no right to challenge the validity" of that contract); Bryant v. Strong, 141 Vt. 244, 245 n.1, 448 A.2d 142, 143 n.1 (1982) (noting that individual who was not a party to contract has no standing to challenge contract's validity); see also 13 S. Williston & R. Lord, A Treatise on the Law of Contracts § 37:1, at 5 (4th ed. 2000) ("[C]ourts recite talismanically . . . that ‘strangers to a contract' have no rights under the contract.").
¶ 29. While we have never so held, courts in other states have qualified this strong proposition in the case of assignment of debts, explaining that a debtor may challenge the assignment of his or her debt if it is void or entirely ineffective—even if that means allowing a "stranger to a contract" to assert reasons related to the breach of that contract. They have been careful to emphasize, however, that this exception does not allow a debtor to challenge an assignment of the debt that is merely voidable. See, e.g., Puente v. CitiMortgage, Inc., No. 3:11-CV-2509-N, 2012 WL 4335997, at *6 (N.D. Tex. Aug. 29, 2012) ("The law is settled that the obligors of a claim may defend the suit brought thereon on any ground which renders the assignment void, but may not defend on any ground which renders the assignment voidable only." (internal quotation omitted));Miller v. Homecomings Fin., LLC, 881 F. Supp. 2d 825, 831 (S.D. Tex. 2012) ("Texas has long followed the common law rule which permits a debtor to assert against an assignee any ground that renders the assignment void or invalid." (emphasis added) (citing Tri–Cities Constr., Inc. v. American Nat'l Ins. Co., 523 S.W.2d 426, 430 (Tex. Civ. App 1975)); Bergquist v. Deutsche Bank Nat. Trust Co., No. 3:11-CV-01303-AC, 2012 WL 3288859, at *5 (D. Or. Mar. 14, 2012) (identifying a "long-standing principle of contract law, that a debtor may assert as a defense any matter which renders the assignment absolutely invalid or ineffective, or void" (emphasis added) (quotation omitted)); Wolf v. Fed. Nat'l Mortg. Ass'n, 830 F. Supp. 2d 153, 161 (W.D. Va. 2011) (stating that plaintiff who is not a party to the assignment or an intended beneficiary can challenge a void but not a voidable assignment). We agree with this reasoning. We conclude therefore that plaintiffs can assert their claims based on violations of the PSA only if those violations rendered the assignment to defendant absolutely invalid for breach of the PSA provisions.
¶ 30. The obvious next step, then, is to determine whether the alleged violations of the PSA would serve to render the assignment of plaintiffs' mortgage and note void or merely voidable. We evaluate this question under New York law, which governs the trust in this case.
¶ 31. Plaintiffs argue that because of the alleged violations of the PSA, the assignment of their mortgage to defendant as trustee for the trust is void. They base this argument on their understanding of New York trust law, particularly New York Estates, Powers and Trusts Law (EPTL), which states:
If the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void.
N.Y. Est. Powers & Trusts Law § 7-2.4.
¶ 32. As an initial observation, the assignments to the trust of the note and the mortgage were signed by MNI and MERS, respectively, and therefore would not seem to be in a strict sense actions of the "trustee," defendant. See Deutsche Bank Nat'l Trust Co. v. Stafiej, No. 10 C 50317,2013 WL 1103903, at *4 (N.D. Ill. Mar. 15, 2013) (noting that because "[t]he assignment, which was not accompanied by proof that it followed the correct chain of assignment to get to the trust, was not filled out by the trustee; it was signed by an agent of . . . the original lender, . . . this court would find their attempt to void the assignment unpersuasive"). However, because plaintiffs allege in their complaint that defendant caused these assignments to be made, and because in any case defendant has clearly accepted the assignments, we will proceed under the assumption that defendant as trustee did in fact act in violation of the PSA.
¶ 33. Unfortunately for plaintiffs, New York courts—while somewhat conflicted on the matter—generally find, despite the strong statutory language of EPTL § 7-2.4, that actions of a trustee in contravention of the trust are voidable rather than void. This issue was analyzed at great length by the Illinois Appellate Court in Bank of America National Ass'n v. Bassman FBT, LLC, 2012 IL App (2d) 110729, 981 N.E.2d 1. As explained by that court, under New York law, unauthorized actions by a trustee are ratifiable by the beneficiary of the trust and ratifiable actions are voidable rather than void. 2012 IL App (2d) 110729, ¶¶ 19-21; see also Mooney v. Madden, 597 N.Y.S.2d 775, 776 (App. Div. 1993) ("A trustee may bind the trust to an otherwise invalid act or agreement which is outside the scope of the trustee's power when the beneficiary or beneficiaries consent or ratify the trustee's ultra vires act or agreement."); Aronoff v. Albanese, 446 N.Y.S.2d 368, 370 (App. Div. 1982) (explaining that voidable acts may be ratified, but void acts may not). A recent New York case declined to find, at summary judgment, that a borrower's "debt was void under EPTL 7–2.4" because "defendant's submissions did not demonstrate as a matter of law" that the borrower—the trustee of a trust, who had executed the promissory note for the debt—"lacked actual or apparent authority to bind the Trust to the note." Feldman v. Torres, 939 N.Y.S.2d 221, 224 (App. Term 2011). This analysis makes clear, by reference to the doctrine of apparent authority, that the trustee's actions in contravention of the trust were not absolutely invalid.
¶ 34. Of course, neither the Illinois Appellate Court nor this Court has the authority to finally interpret New York law, and the use of the word "void" in EPTL § 7–2.4 is troubling. Nor, as Bassman points out, do all New York cases seem to agree that the acts of a trustee in contravention of a trust are voidable rather than void. 2012 IL App (2d) 110729, ¶ 23; see, e.g., Knight v. Knight, 589 N.Y.S.2d 195, 197 (App. Div. 1992) (suggesting that a "void assignment" cannot be ratified). However, a sufficient number of cases decline to find actions of a trustee in contravention of the trust void that we agree with the Bassman court that EPTL § 7–2.4 cannot be taken literally. We interpret the current state of New York law to be that a transfer into a trust that violates the terms of a PSA is voidable rather than void.5 As that court explained, the "tension between these cases and the apparently plain language of section 7-2.4" is "for New York courts to reconcile—not this one." Bassman, 2012 IL App (2d) 110729, ¶ 21. While the New York courts have not yet made that "reconciliation," both state and federal courts in New York have found that non-parties to a PSA lack standing to challenge violations of the PSA by a trustee, suggesting that they agree with the Bassman analysis. SeeCimmering v. Merrill Lynch Mortg. Investors, Inc., No. 8727/2011, 2012 WL 2332358, at *11 (N.Y. Sup. Ct. June 13, 2012) ("Moreover, plaintiffs lack standing to allege a claim for breach of the PSA because they are not parties to this contract, nor do they allege that they are third-party beneficiaries to the agreement."); Karamath v. U.S. Bank, N.A., No. 11 CV 1557(NGG)(RML) 2012 WL 4327613, at *7 (E.D.N.Y. Aug. 29, 2012) (magistrate decision) ("[P]laintiff is not a party to the PSA or to the Assignment of Mortgage, and is not a third-party beneficiary of either, and therefore has no standing to challenge the validity of that agreement or the assignment."), report and recommendation adopted by 2012 WL 4327502 (E.D.N.Y. Sept. 20, 2012). We therefore hold that plaintiffs do not have standing to challenge the assignments of the note and mortgage based on the perceived violations of the PSA in its assignment to the trust, because any such violations would render the assignments voidable rather than void.
¶ 35. We stress one result of our holding because it informs our analysis of the next issue (whether plaintiffs' allegations of fraud and irregularities in the assignment of the note and mortgage to defendant survive the motion to dismiss). In their prayer for relief, plaintiffs sought a declaratory judgment that defendant "does not now have, and cannot now acquire, rights to enforce the note." (Emphasis added.) Plaintiffs' claim that defendant cannot acquire a right to enforce the note in the future was based on provisions of the PSA and the timing of defendant's receipt of the note. By holding that plaintiffs cannot enforce the PSA, we have taken away this potential remedy against defendant.
¶ 36. We next turn to the second basis of plaintiffs' claim for declaratory judgment that defendant may not enforce the mortgage or the note: the presence of fraud and irregularities in the transfer of title of both instruments. The trial court found that these "allegations are premature because the holder of a note need not prove its status until such time as it seeks enforcement of the instrument." (Citing Wells Fargo Bank Minn.,N.A., v. Rouleau, 2012 VT 19, ¶ 13, 191 Vt. 302, 46 A.3d 905; U.S. Bank Nat'l Ass'n v. Kimball, 2011 VT 81, ¶ 14, 190 Vt. 210, 27 A.