By now, all lenders have likely been faced with at least one situation where a borrower alleges that the lender lacked standing to sue on a note because the lender was not the holder of the note. While New Jersey courts have largely eliminated this defense, at least in the post-judgment context (see here), a recent decision from the Appellate Division reminds us that a lender can have standing to sue even when it is not a holder in due course.
In Lynx Asset Services, LLC v. Simon Zarour, National City Bank loaned defendant $190,000, and defendant executed a mortgage as security for the note. Thereafter, National City merged with PNC Bank. Sometime later, PNC Bank delivered the original note to Lynx Asset Services, LLC and issued an assignment of the note and mortgage, but did not indorse the assignment. Defendant eventually defaulted on the note and Lynx sued. Defendant admitted that he signed the note and mortgage and that he had stopped paying on the note. He nonetheless argued that Lynx lacked standing to sue because it did not have a signed assignment. The trial court rejected this claim, and the Appellate Division affirmed, holding that, although Lynx was not a holder in due course, it nonetheless had standing to sue on the note because it was a non-holder with the rights of a holder.