RESIDENTIAL MORTGAGE FORECLOSURE REVIEW AND UPDATE
Albany County Bar Association Continuing Legal Education (CLE)
MAY 20, 2021 | REPUBLISHED BY LIT: SEP 8, 2021
You will note that the first cases where Chief Judge Janet DiFiore sat at oral argument (zoom videos) and then issued opinions in favor of the Banks, at least two of those cases involved GTLaw (Greenberg Traurig) lawyers for the Bank(s). The Chief Judge is personal friends with the founder of GTLaw and a CLIENT. Indeed, these cases abrogated (repealed) earlier cases in the same court. It is brazen perversion of justice for greed and unlawful taking of citizen’s properties.
Hon. Mark C. Dillon
Appellate Division, 2nd Judicial Department Introduction
Late 2020 and early 2021 brought clarification from the Court of Appeals on the statute of limitations applicable to foreclosure actions where a prior action was discontinued, a plethora of decisions from the Appellate Divisions that transcend nearly all issues in foreclosure matters, and an important statutory addition.
The following are some of the most significant decisions, focused largely decisions from the Second Department rendered in November and December 2020, when a large number of foreclosure cases were decided.
The Chief’s Conflict of Interest…
[2nd] Court of Appeals Addresses Statute of Limitations Where A Prior Action Was Discontinued
The other three cases are: Ditech Financial v Naidu, Vargas v Deutsche Bank National Trust and Wells Fargo Bank, N.A. v Ferrato. In each of the four cases the Court, in a decision authored by Chief Judge DiFiore, with a dissent from Judge Rivera and a concurrence from Judge Wilson, addressed a statute of limitations issue in a foreclosure matter.
The Court summarized the issues as follows:
“In Vargas v Deutsche Bank Natl. Trust Co. and Wells Fargo Bank, N.A. v Ferrato, the primary issue is when the maturity of the debt was accelerated, commencing the six-year statute of limitations period. Applying the long-standing rule derived from Albertina Realty Co. v Rosbro Realty Corp. (258 NY 472 ) that a noteholder must effect an “unequivocal overt act” to accomplish such a substantial change in the parties’ contractual relationship, we reject the argument in Vargas that the default letter in question accelerated the debt, and similarly conclude in Wells Fargo that two complaints in prior discontinued foreclosure actions that each failed to reference the pertinent modified loan likewise were not sufficient to constitute a valid acceleration.
The remaining cases turn on whether the noteholder’s voluntary discontinuance of a prior foreclosure action revoked acceleration of the debt, reinstating the borrower’s contractual right to repay the loan over time in installments.
Adopting a clear rule that will be easily understood by the parties and can be consistently applied by the courts, we hold that where the maturity of the debt has been validly accelerated by commencement of a foreclosure action, the noteholder’s voluntary withdrawal of that action revokes the election to accelerate, absent the noteholder’s contemporaneous statement to the contrary.”
“The central issue in Wells Fargo is whether the commencement of either of two prior, dismissed foreclosure actions constituted a valid acceleration, impacting the timeliness of this foreclosure action (the fifth involving this property), which was commenced in December 2017.”
Noting that the loan had been modified after the commencement of the prior actions, the Court held – “We agree with Wells Fargo that the modified loan debt which it now seeks to enforce could not have been accelerated by the complaints filed in the second (or, for that matter, third) foreclosure action which failed to reference the modified note, we reverse the portion of the Appellate Division order granting Ferrato’s motion to dismiss the complaint in the fifth foreclosure action and deny that motion.”
“In Vargas, an action under RPAPL 1501(4) to discharge a mortgage on real property commenced by borrower Juan Vargas against noteholder Deutsche Bank, the parties dispute whether a default letter issued by the bank’s predecessor-in-interest validly accelerated the debt.
New York courts have observed, consistent with Albertina, that the acceleration of a mortgage debt may occur by means other than the commencement of a foreclosure action, such as through an unequivocal acceleration notice transmitted to the borrower
(see Mejias v Wells Fargo N.A., 186 AD3d 472, 474 [2d Dept.2020]; Lavin, 302 AD2d at 638-639).
However, the Appellate Division departments disagree on the language necessary to render a letter sufficiently unequivocal to constitute a valid election to accelerate.
In Deutsche Bank Natl. Trust Co. v Royal Blue Realty Holdings, Inc. (148 AD3d 529 [1st Dept.2017]), the First Department concluded that a letter stating that the noteholder “will” accelerate upon the borrower’s failure to cure the default constituted clear and unequivocal notice of an acceleration that became effective upon the expiration of the cure period.
But the Second Department has rejected that view (see e.g., Milone v US Bank N.A.,164 AD3d 145 [2d Dept.2018]; 21st Mtge. Corp. v Adames, 153 AD3d 474 [2d Dept.2017]), reasoning that comparable language did not accelerate the debt and was “merely an expression of future intent that fell short of an actual acceleration,” which could “be changed in the interim” (Milone, 164 AD3d at 152).
This disagreement is at the heart of the parties’ dispute in Vargas.”
“In Freedom Mortgage and Ditech, the issue is not whether or when the debt was accelerated but whether a valid election to accelerate, effectuated by the commencement of a prior foreclosure action, was revoked upon the noteholder’s voluntary discontinuance of that action.”
… “Determining whether, and when, a noteholder revoked an election to accelerate can be critical to determining whether a foreclosure action commenced more than six years after acceleration is time-barred. In opposition to motions to dismiss, Freedom Mortgage and Ditech asserted that their foreclosure actions were timely because they had revoked prior elections to accelerate by voluntarily withdrawing those actions. In response, the borrowers did not dispute the noteholders’ right to revoke but contended a voluntary discontinuance does not revoke an acceleration.”
“Rather, we are persuaded that, when a bank effectuated an acceleration via the commencement of a foreclosure action, a voluntary discontinuance of that action–i.e., the withdrawal of the complaint–constitutes a revocation of that acceleration.
In such a circumstance, the noteholder’s withdrawal of its only demand for immediate payment of the full outstanding debt, made by the “unequivocal overt act” of filing a foreclosure complaint, “destroy[s] the effect” of the election (see Albertina, 258 NY at 476).
We disagree with the Appellate Division’s characterization of such a stipulation as “silent” with respect to revocation (Freedom Mtge. Corp., 163 AD3d at 633).
A voluntary discontinuance withdraws the complaint and, when the complaint is the only expression of a demand for immediate payment of the entire debt, this is the functional equivalent of a statement by the lender that the acceleration is being revoked.
Accordingly, we conclude that where acceleration occurred by virtue of the filing of a complaint in a foreclosure action, the noteholder’s voluntary discontinuance of that action constitutes an affirmative act of revocation of that acceleration as a matter of law, absent an express, contemporaneous statement to the contrary by the noteholder.”
Deutsche Bank Represented by Greenberg Traurig
New Law, RPAPL § 1321, Requires Additional Information to be Included in Orders of Reference and Judgments of Foreclosure
On November 11, 2020, Governor Cuomo signed into law Assembly Bill 6976/Senate Bill 4190 which requires all Orders of Reference and Judgments of Foreclosure and Sale to include the name and phone number of the servicer for the loan. The law, enacted as RPAPL § 1321, was effective immediately.
Where a Judgment of Foreclosure or Order of Reference was awaiting signature, the Court should request plaintiff’s counsel to submit an addendum which includes the requisite information.
New Law, RPAPL 1302-a, Failure to Assert Affirmative Defense of Standing is Not a Waiver of the Defense
The new RPAPL 1302-a provides that in qualifying foreclosure actions, a defendant’s failure to raise standing as a defense in a responsive pleading or motion to dismiss does not constitute a waiver. The purpose of the law is to help assure that standing issues be resolved on their merits, so that only lenders who own a loan by direct lending, purchase, or assignment are permitted to collect upon the mortgaged debt (NY Sponsor’s Memorandum, 2019 S.B. 5160 [April 14, 2019]). This new statute affects certain mortgage foreclosure cases that are pending before our Court now and which will be reviewed on appeal in the future. The effective date of the statute was December 23, 2019.
The language of RPAPL 1302-a is brief. It reads:
“Notwithstanding the provisions of subdivision (e) of rule thirty-two eleven of the civil practice laws and rules, any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss. A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant’s default.”
The statutory language limits its application to “home loans.” Specifically, a “home loan” is now defined in RPAPL 1304(6)(a)(1) and (2) as existing where:
(I) The borrower is a natural person;
The debt is incurred by the borrower primarily for personal, family, or household purposes;
The loan is secured by a mortgage or deed of trust on real estate improved by a one to four family dwelling, or a condominium unit, in either case, used or occupied, or intended to be used or occupied wholly or partly, as the home or residence of one or more persons and which is or will be occupied by the borrower as the borrower’s principal dwelling; and
The property is located in this state [and]
(2) A home loan shall include a loan secured by a reverse mortgage that meets the requirements of clauses (i) through (iv) of subparagraph one of this paragraph.
GMAC Mtge, LLC v Coombs, 191 AD3d 37 [2nd Dept. 2020]
RPAPL 1302-a provides that a failure to raise standing as a defense in a responsive pleading does not constitute a waiver pursuant to CPLR 3211(e), but the defense must be raised for a court to consider it.
“Although the new statute provides that the defense of standing is not waived pursuant to CPLR 3211(e) by a defendant’s failure to raise it in a responsive pleading or motion to dismiss, it does not absolve a defendant from actually raising the issue before it can be considered by a court.”
Court concludes that RPAPL 1302-a does not “disturb the well-settled case law holding that ‘a party’s lack of standing does not constitute a jurisdictional defect’ … and that the defense should not be raised by a court sua sponte.”
Bank of America, N.A. v Sebrow, 180 AD 3d 982 [2nd Dept.2020] provides a definitive discussion of lost notes.
“Generally, in moving for summary judgment in an action to foreclose a mortgage, a plaintiff establishes its prima facie case through the production of the mortgage, the unpaid note, and evidence of default.”(citations omitted) “Where … a defendant has challenged the plaintiff’s standing in a foreclosure action, a plaintiff must also demonstrate that it was the holder or assignee of the note at the time the action was commenced.” (citations omitted). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident.” (citations omitted).
“Pursuant to UCC 3-804, ‘the owner of an instrument which is lost, whether by destruction, theft or otherwise, may maintain an action in his
Note the distinction between the term “owner” and “holder”.
Under UCC 1-201[b][A], a holder is a person in possession of a negotiable instrument which is payable to bearer or an identified person in possession (through assignment or otherwise). UCC 3-301 permits a holder of a note, whether or not they are the owner, to enforce payment in his [or her] own name. UCC 3-804 limits the ability to enforce a lost note to the owner.
Consequently, in Sebrow, the Court held that the plaintiff servicer lacked standing, even where defendant did not raise the UCC issue in the Supreme Court and raised it for the first time on appeal.
In addition, Sebrow held that the lost note affidavit was inadequate to show ownership of the note because it was (1) over a year old at the time the action was commenced and (2) failed to identify who conducted the search for the lost note and “when and how the note was lost”.
Wells Fargo Represented by Greenberg Traurig
Prima Facie Proof Required for Foreclosure
HSBC Bank USA v Nelson, 190 AD3d 802 [2nd Dept. 2021].
“In a mortgage foreclosure action, a plaintiff establishes its prima facie entitlement to judgment as a matter of law by producing the mortgage, the unpaid note, and evidence of default”.
… Furthermore, where, as here, it is alleged that a plaintiff has failed to comply with a condition precedent to the enforcement of a mortgage, “the plaintiff must proffer sufficient evidence to establish, prima facie, that it complied with the condition precedent
… Here, in support of its motion for summary judgment, the plaintiff submitted an affidavit from a vice president of loan documentation for Wells Fargo Bank, N.A. (hereinafter Wells Fargo), the loan servicer for the plaintiff.
The affidavit described a standard office procedure to ensure that notices of default are timely delivered, established the affiant’s personal knowledge of that procedure, and explained, based on the content of Wells Fargo’s books and records, that the procedure was followed here.
This affidavit, coupled with the copies of Wells Fargo’s records which were attached as exhibits, were sufficient to establish that the plaintiff complied with the condition precedent according to the terms of the mortgage.
… The plaintiff’s evidence established that the mailing of the notice of default by first-class mail created a rebuttable presumption that it was delivered to the defendant.
… In opposition, the defendant failed to raise a triable issue of fact as to whether she received the required notice of default (see id. at 1022).
One West Bank v Rosenberg, 189 AD3d 1600 [2nd Dept. 2020]
Reversed Supreme Court’s denial of a motion to restore a case to the calendar made 3 months after the case was marked off. Held — Marking a case off the calendar is not the same as dismissing the case outright; the automatic dismissal of CPLR 3404 does not occur until one year after the case has been marked off the calendar.
If a court marks the case off the calendar, the plaintiff has one year within which to restore the action to the calendar without any obstacles.
If the motion to restore is made within one year after the date the case was marked off the calendar, restoration is automatic and the plaintiff need not demonstrate a reasonable excuse, a potentially meritorious action, lack of intent to abandon the action, or a lack of prejudice to the defendants.
“The defendant’s sixth affirmative defense generally and conclusorily alleged that the ‘plaintiff has failed to comply with all conditions precedent to commencement of this action.’ …This Court has held such language to be insufficient to raise the issue of the plaintiff’s compliance with either statutory or contractual notice requirements … . Absent there being a cognizable affirmative defense alleging non- compliance with statutory or contractual notice requirements, the plaintiff was not required to address those issues as part of its prima facie burden in moving for summary judgment.”
CIT Bank N.A. v Schiffman, NY3d , 2021 NY Slip Op. 01933 [March 30, 2021]
A question was certified from the US Circuit Court, Second Circuit, to the New York State Court of Appeals, regarding the quantum of proof required by a defendant homeowner, to rebut the presumption of a plaintiff’s mailing of the RPAPL 1304 notice.
(CORRUPT CHIEF DIFIORE ANSWERED)
Proof of mailing is typically established through an affidavit of a loan officer with reference to admissible business records that are submitted to the court.
Where business mailing practices are established, the Court of Appeals held that “we clarify that to rebut the presumption, there must be proof of a material deviation from an aspect of the office procedure that would call into doubt whether the notice was properly mailed, impacting the likelihood of delivery to the intended recipient.
Put another way, the crux of the inquiry is whether the evidence of a defect casts doubt on the reliability of a key aspect of the process such that the inference that the notice was properly prepared and mailed is significantly undermined.
Minor deviations of little consequence are insufficient.” The emphasis here should be on deviations from practices that are “material.”
Wilmington Trust, National Association v Mausler, AD3d [3rd Dept. March 4, 2021]
The issue on appeal was whether the plaintiff lender established compliance with the mailing requirements of RPAPL 1304.
An officer of the loan servicer did not attest in the supporting affidavit familiarity with the record-keeping practices that spoke to the issue, and therefore, failed to establish admissibility.
The Appellate Division held that summary judgment in favor of the plaintiff should have been denied for that reason, even though the plaintiff’s evidence included a signed certified mail return receipt card, albeit without any dates or postmarks.
Wells Fargo Bank, NA v Quinche, 189 AD3d 1671 [2nd Dept. 2020]
The RPAPL 1304 Notice is a condition precedent to commencement of a foreclosure action, noncompliance with which can be raised at any time. Plaintiff demonstrated compliance with Bank of NY Mellon v Gordon, 171 AD3d 197 by affidavit and attaching copies of the records relied on.
Wells Fargo NA v Barry, 189 AD3d 1665 [2nd Dept. 2020], Lender failed to demonstrate that it complied with the mailing requirements of RPAPL 1304 thus it was error for Supreme Court to grant its motion for summary judgment regardless of the sufficiency of the opposition papers.
Freedom Mtge Corp. v Granger, 188 AD3d 1163 [2nd Dept. 2020]
Reversed Supreme Court’s grant of plaintiff’s motion for summary judgment where plaintiff was unable to show compliance with RPAPL 1304.
Plaintiff submitted an affidavit from a prior loan servicer attesting to the mailing of the notice. Defendant submitted a 90 day notice sent by a different company which was not in the statutorily required 14 point type.
Held – plaintiff failed to demonstrate strict compliance with RPAPL 1304.
The affidavit submitted did not describe the procedures which the servicer’s representative claimed to have followed. Submission by defendant of the 2nd RPAPL 1304 notice established that the 90 day notice was “deficient of its face”.
Plaintiff failed to establish prima facie entitlement to judgment as a matter of law.
US ROF III Legal v Hayes, 188 AD3d 758 [2nd Dept. 2020].
Judgment of foreclosure reversed for failure to prove compliance with RPAPL 1304.
“Proof of the requisite mailing can be established with proof of actual mailings, such as affidavits of mailing or domestic return receipts with attendant signatures, or proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by someone with personal knowledge of the procedure.”
Lender submitted copies of envelopes which were not postmarked or dated and no mailing receipts were submitted. The affidavit of the representative was insufficient because it lacked any indication that affiant was familiar with the mailing procedures.
US Bank, N.A. v Onuogu, 188 AD3d 756 [2nd Dept. 2020]
Plaintiff failed to prove compliance with RPAPL 1304 where the affidavit submitted to establish that the affiant was familiar with the practices and procedures of the entity which served the notices. Affidavit did not comport with the requirements established by Bank of NY Mellon v Gordon, 171 AD3d 197.
Plaintiff submitted the affidavit of the prior servicing agent who attested to the mailing of the RPAPL 1304 notices.
The record demonstrated that a different entity mailed the notices.
The witness did not attest to knowledge of the mailing entity’s procedures or practices and did not explain the current servicer’s relationship with the prior servicer.
Thus, her affidavit was inadequate to prove mailing.
Deutsche Bank National Trust, Co v Afram, 188 AD3d 593 [1st Dept. 2020]
Court properly granted plaintiff’s motion to confirm referee’s report and for summary judgment. Plaintiff demonstrated standing by showing that it was the holder of the note on the date of commencement by submitting a written Assignment of Mortgage” which transferred both the note and mortgage. Plaintiff also established compliance with RPAPL 1304 through the affidavit of a loan servicer employee.
Defendant’s counsel’s “bare claim of law office failure” was insufficient to establish a reasonable excuse for default.
JP Morgan Chase Bank, N.A. v Gold, 188 AD3d 1019 [2nd Dept. 2020]
“Proper service of RPAPL 1304 notice on borrower … is a condition precedent to the commencement of a foreclosure action, and the plaintiff has the burden of establishing satisfaction of this condition.”
“A defense based on non compliance with RPAPL 1304 may be raised at any time during the action.”
Citing Wells Fargo Bank. N.A. v Morales, 178 AD3d 881.
Plaintiff failed to establish compliance with RPAPL 1304…
because the affidavit of the employee submitted did not aver personal knowledge of the plaintiff’s mailing practices and procedures. In addition, the records upon which the affidavit was based were not attached as required by Bank of New York Mellon v Gordon.
Deutsche Bank Natl Trust Co v Gulati, 188 AD3d 999 [2nd Dept. 2020]
Where standing is placed in issue by defendant in her answer, plaintiff must prove standing as part of its prima facie showing on a motion for summary judgment.
Here, plaintiff failed to prove standing…
because it failed to attach the records relied on to create the affidavit in support of the motion as required rendering the affidavit inadmissible hearsay.
Citing Wells Fargo Bank, N.A. v Bakth, 180 AD3d 1106, Federal Natl Mtge Assn. v Brotman, 173 AD3d 1139.
Bank of New York Mellon v Porfert, 187 AD3d 1187 [2nd Dept. 2020]
Plaintiff failed to establish strict compliance with RPAPL 1304 or that it had standing to commence the action.
Witness who attested to compliance with the mailing requirements did not have personal knowledge of the purported mailing, nor did she aver that she was familiar with the mailing procedures of the entity which actually sent the notices.
Lender failed to show that it had standing as required where placed into controversy by defendant.
Note was not shown to be attached to the complaint and plaintiff did not submit any documents to support the allegation that it has standing.
Deutsche Bank Natl Trust Co v Fontanez, 187 AD3d 1143 [2nd Dept. 2020]
“Mere denial of receipt, without more, in a borrower’s affidavit attesting that he or she had not received the RPAPL 1304 notice or notice of default is insufficient to establish prima facie entitlement to judgment as a matter of law”.
Quoting Citibank v Scheuer, 172 AD3d at 23-24.
RPAPL 1303 is a Condition Precedent to a Foreclosure Action
Wells Fargo v Harrison, 188 AD3d 1298 [2nd Dept. 2020]
Where there is a question of fact created by specific denials, including denial of physical resemblance to the individual described in the affidavit of service and of being in New York on the date of the alleged personal service Appellate Division affirmed denial of summary judgment.
Further, plaintiff failed to establish standing.
“Proper service of an RPAPL 1303 notice, where required, is a condition precedent to the commencement of a foreclosure action, and noncompliance mandates dismissal of the complaint.
… Bare and unsubstantiated denial of receipt is insufficient to rebut the presumption of proper service created by the affidavit of service.
… Instead, a defendant must submit a ‘sworn denial of receipt of service containing specific facts to refute the statements in the affidavit of the process server’ in order to rebut the presumption and warrant a hearing.”
Cases on Standing
Bank of NY Mellon v Barkan, 190 AD3d 676 [2nd Dept. 2021]
“Where, as here, the plaintiff’s standing is placed in issue by a defendant, the plaintiff must prove its standing as part of its prima facie showing.
… A plaintiff establishes its standing in a mortgage foreclosure action where it is the holder or assignee of the underlying note at the time the action is commenced.
… “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident.
… “The attachment of an endorsed note to the complaint in a foreclosure action is sufficient to demonstrate, prima facie, that the plaintiff was the holder of the note when the action was commenced.”
Here, the plaintiff submitted, inter alia, a copy of the complaint, attached to which was a copy of the note with an allonge containing a specific endorsement by the original lender to the plaintiff’s predecessor in interest.
Contrary to the defendants’ contention, the plaintiff was not required to submit additional evidence to demonstrate how or when physical possession of the note occurred.
Indeed, “where the note is affixed to the complaint, it is unnecessary to give factual details of the delivery in order to establish that possession was obtained prior to a particular date.”
Bank of Am., N.A. v Lestrade, 189 AD3d 969 [2nd Dep’t. 2020]
Plaintiff established standing where it was the original lender and attached the note to the certificate of merit filed with the original summons and complaint. Assignee of mortgagor lacked standing to assert defects in service of the RPAPL1304 notices. “As a stranger to the note and mortgage agreement, [defendant] lacked standing to assert the defense of plaintiff’s alleged noncompliance with the notice requirements of RPAPL 1304”.
Wells Fargo Bank N.A. v Harrison, 188 AD3d 1298 [2nd Dept. 2020]
“Where a defendant places standing in issue, a plaintiff must prove its standing in order to be entitled to relief”. “A plaintiff has standing in a mortgage foreclosure action when it is the holder or assignee of the underlying note at the time the action is commenced.
“Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation and the mortgage passes with the debt as an inseparable incident.”
JP Morgan Chase Bank, N.A. v Tumelty, 188 AD3d 1022 [2nd Dept. 2020]
Judgment of foreclosure reversed where defendant raised lack of standing as a defense and plaintiff failed to submit the records which it contended supported its representative’s averment of standing.
The affidavit was “inadmissible hearsay and lacked probative value because they are based on unidentified records which were not included with [the] affidavit.”
Citing Deutsche Bank v Dennis, 181 AD3d 864 and Bank of New York v Gordon, 171 AD3d 197.
US Bank, N.A. v Hunte, 176 AD3d 894 [2nd Dept.2020]
Plaintiff failed to meet its prima facie burden of establishing that it had standing.
“The affidavits of … plaintiff’s servicer, failed to lay a proper foundation under the business records exception to the hearsay rule to support her assertion that the note was transferred to the plaintiff’s custodian prior to commencement of the action and remained in the possession of plaintiff’s custodian at the time of commencement” (citing Gordon).
The witness attested that she “reviewed the books and records regularly created, maintained and kept by the plaintiff, but she did not attest that she was personally familiar with the plaintiff’s or [her own company’s] record keeping practices or procedures, or that the records were incorporated into [servicer’s] own records or routinely relied upon in its business.”
CPLR 4403 – Referee Must Hold a Hearing
Countrywide Home Loans, Inc. v Hershkop, 188 AD3d 1148 [2nd Dept. 2020]
Reversed judgment of Foreclosure and Sale where the court confirmed a referee report which was generated 7 years after the referee was appointed and without a hearing. Matter remitted to Supreme Court for hearing and new report and entry of an amended judgment.
CPLR 4403 – Referee Report Must be Based on Admissible Evidence
Wilmington Savings Fund Socy v Moriarty-Gentile, 190 AD3d 890 [2nd Dept. 2021]
Plaintiff moved for default. Defendants cross moved to dismiss for lack of jurisdiction. Defendant Joseph Gentile submitted an affidavit in which denied that he had been served with the summons and complaint and in which he attested that he had end stage renal disease, had suffered numerous strokes and heart failure and was blind.
Supreme Court held a traverse hearing at which the process server testified. Joseph did not appear at the hearing. Instead, his attorney submitted an unsworn statement from Joseph’s physician stating that Joseph had undergone kidney transplant and could not attend court. Joseph was offered the opportunity to appear via Skype but did not.
The Court held that jurisdiction had been acquired and issued an order of reference.
Plaintiff moved to confirm the referee’s report and defendants opposed contending that it was based on unproduced records. Supreme Court granted the motion to confirm and signed a judgment of foreclosure and sale. Joseph moved to vacate his default under CPLR 5015(a)(3) and CPLR 1203 contending that he was incapacitated and that a default judgment was improperly issued against him since he could not defend himself.
Counsel referenced, but did not submit, an order issued by a different Supreme Court Justice which appointed a guardian for Joseph.
Held – “The Supreme Court properly denied that branch of Joseph Gentile’s motion which was to vacate his default in answering the complaint.
Contrary to the defendants’ contention, the record contains no evidence that Joseph Gentile was either “a person judicially declared to be incompetent” or “an adult incapable of adequately protecting his rights”.
… “Joseph Gentile was represented by counsel throughout these proceedings.”
“However, the referee’s report should not have been confirmed because it was based upon unproduced business records.
… The fact that the defendants defaulted in appearing did not mean that they were precluded from contesting the amount owed…. The referee’s report served the function of an inquest on damages, which must be based upon admissible evidence.
Hudson City Savings Bank v DePasquale, 189 AD3d 1558 [2nd Dept. 2020]
Motion to confirm referee’s report was improperly granted where the documents relied on included the agreements between the parties, but not the payment history. Thus, the Court held the computation was improperly premised upon unproduced business records.
Citimortgage, Inc. v Seller, 187 AD3d 1132 [2nd Dept. 2020]
Judgment of Foreclosure and sale reversed where the affidavit submitted to the referee “constituted inadmissible hearsay and lacked probative value because the affiant did not produce any of the business records upon which she purportedly relied in making her calculations.”
Referee’s findings with respect to the amount due were not supported by the record. Remitted to Supreme Court for new hearing and report.
CPLR 3408 – Not Retroactive Applied — Participation in Foreclosure Settlement Conference Does Not Excuse Failure to Answer
One West Bank FSB, v Villafana, 187 AD3d 1201 [2nd Dept.2020]
Three months after a dismissed action was restored, defendants moved for leave to serve and file a late answer. Supreme Court denied the motion. Affirmed. Defendants participated in numerous foreclosure settlement conferences over a 1 ½ year period.
“Participation in settlement conferences and loan modification negotiations did not constitute a reasonable excuse for [defendants’] default, nor did [their] claim that, despite the warning language contained in the summons, [they were] unaware of [their] obligation to serve an answer.”
Defendants did not provide a reasonable excuse for failing to seek leave to answer during the approximately five-year period between the date of default and the earlier dismissal order. Claim of improper service did not constitute a reasonable excuse for failing to answer.
“There is no support for the defendants’ additional contention that the amendments made by the legislature to CPLR 3408, effective December 20, 2016, may be applied retroactively to this case, which was commenced nearly 6 ½ years earlier.”
Reasonable Excuse Required to Vacate Default
Bank of New York v Richards, 192 AD3d 1228 [3rd Dep’t. 2021]
Vacating default judgments under CPLR 5015(a)(1) requires a showing of both a reasonable excuse for the default, and a meritorious claim or defense. Here, the court noted that in meeting the prong of merit, the standard of proof is less than that of opposing summary judgment.
HSBC Bank, USA, NA v Haylett, 190 AD3d 839 [2nd Dept. 2021]
Supreme Court errantly granted defendant’s cross motion to cancel and discharge a mortgage believing it to be unopposed. Lender moved to vacate the order and submitted proof that it had, in fact, opposed the cross motion. Supreme Court denied the motion to vacate.
Appellate Division reversed holding that “the order … should have been vacated without regard to whether the plaintiff proffered an excuse for the purported default or demonstrated a potentially meritorious opposition to the cross motion.”
Wilmington Trust Natl Assn v Modica, 189 AD3d 1675 [2nd Dept. 2020]
Supreme Court providently exercised its discretion in denying that branch of defendant’s cross motion to vacate their default in answering the complaint because defendants failed to provide a reasonable excuse for their default.
Wells Fargo Bank Natl Assn v Hyun Jung Kim, 189 AD3d 1673 [2nd Dept. 2020]
Appellate Division rejected defendant’s claim that she “did not realize that she was supposed to submit an answer to the complaint”.
“A defendant seeking to vacate a default in appearing in the action or answering the complaint must show both a reasonable excuse for the default and a potentially meritorious defense … the defendant’s proffered excuse that she was unaware of the need to answer the complaint was insufficient to demonstrate a reasonable excuse for the default.
… The conclusory assertion of the defendant’s attorney that the defendant’s default was based, in part, on the fact that the defendant was not completely fluent in English was improperly asserted for the first time in reply, not supported by any evidence in the record, and, ultimately, merely an extension of the argument that the defendant lacked understanding of the legal process, which was insufficient to demonstrate a reasonable excuse for the default.
“Although the Supreme Court retains the inherent discretionary power to relieve a party from a judgment for sufficient reason and in the interest of substantial justice, this power is not plenary and should only be exercised to grant relief where a judgment was taken through fraud, mistake, inadvertence, surprise, or excusable neglect”
US Bank. N.A. v Eisler, 188 AD3d 1288 [2nd Dept. 2020]
Plaintiff moved for judgment of foreclosure and sale, defendant cross moved to vacate their default. “To successfully oppose a facially adequate motion for an order of reference based on the failure to appear or timely serve an answer, a defendant must demonstrate a reasonable excuse for the delay and a potentially meritorious defense to the action.”
“Although the defendant did not waive the defense of standing, defendant failed to set forth a reasonable excuse for [her] default, and thus, we agree with the Supreme Court’s determination to grant the plaintiff’s motion for an order of reference.”
Deutsche Bank Natl Trust Co v Amoah, 188 AD3d 647 [2nd Dept. 2020]
Default granted where defendant failed to show reasonable excuse for default.
U.S. Bank National Association v Kaufman, 187 AD3d 1456 [3rd Dept. 2020]
Where a defendant seeks to vacate a default under CPLR 5015(a)(4), for lack of personal jurisdiction, excuse for the non- appearance and merit to the defense is irrelevant.
Here, the plaintiff, in opposition to the defendant’s motion to vacate, did not claim that its service on the defendant was proper, and instead cross-moved for leave to extend service of process per CPLR 306-b.
Extensions may be used if the requesting party can demonstrate good cause or the interests of justice, which are two separate, alternate standards.
In this case, the court held that the plaintiff did not establish good cause for an extension, but did warrant an extension for service of process under the interest of justice standard.
Thus, the default was vacated, the plaintiff obtained the opportunity for re-service, and presumably the action continued from there.
CPLR 5105(a)(3) Motion to Vacate Judgment Based on Fraud
US Bank v Swanson, 189 AD3d 1642 [2nd Dept. 2020]
“Although there is no express time limit for seeking relief from a judgment pursuant to CPLR 5015 (a) (3), a party is required to make the motion within a reasonable time.”
Defendant was aware of the action, having appeared and answered in 2009, but nevertheless failed to oppose the plaintiff’s 2012 motion for summary judgment against her.
Moreover, the arguments raised by defendant in a 2017 motion to vacate the 2013 order of default related to a purported defect in the written assignment of the mortgage and note due to the absence of a certificate of conformity as required by Real Property Law § 299-a previously raised.
Under such circumstances, the defendant’s delay of four years in moving to vacate the prior order dated March 18, 2013, was unreasonable.
ETrade Bank v Ejenam, 188 AD3d 1004 [2nd Dept. 2020]
Following defendant’s default in answering, plaintiff obtained an order of reference. After the referee issued a report, plaintiff moved to confirm the report and defendant cross moved to vacate his default alleging that he was not properly served and that he had meritorious defenses to the action.
Defendant failed to appear for the traverse hearing ordered by the court. The court denied plaintiff’s motion for judgment of foreclosure without prejudice because plaintiff failed to attach a copy of the assignment to its papers. The court granted plaintiff’s renewed motion for judgment.
Defendant then moved to vacate the judgment based on CPLR 5103(a)(3) alleging that plaintiff obtained the judgment by fraudulently representing that it possessed the note at the time of commencement of the action.
Held – “where a defendant seeks to vacate a default pursuant to CPLR 5013(a)(3) based on intrinsic fraud, he or she must establish a reasonable excuse for the default and a potentially meritorious defense to the action.”
Defendant failed to offer a reasonable excuse for his default, “consequently, it is unnecessary to consider whether [the defendant] presented a potentially meritorious defense.”
CPLR 5015(a)(4) Motion to Vacate For Lack of Personal Jurisdiction
Wells Fargo Bank, NA v Rinderman, 190 AD3d 885 [2nd Dept. 2021]
Supreme Court erred in denying defendant’s motion to vacate her default under CPLR 5015(a)(4) where she submitted evidence that she had not resided at the mortgaged premises, where the process server attested he served her, for 20 years.
Defendant’s submissions were sufficient to rebut the presumption of valid service and the Court should have ordered a traverse hearing. Hence, the Appellate Division referred the matter back to Supreme Court to hold the hearing and for a determination of her motion to vacate.
US Bank NA v Joseph, 190 AD3d 878 [2nd Dept. 2021]
In 2013, Supreme Court entered an order dismissing the action under CPLR 3215. In 2016, Plaintiff moved to vacate the dismissal. Defendant did not oppose the motion and the Court granted the motion to vacate the dismissal in April 2016.
Plaintiff moved for default and order of reference in May 2016. Defendant separately moved to dismiss under CPLR 3211(a)(8) [lack of jurisdiction].
The Court denied the defendant’s motion and later granted plaintiff’s motion.
Reversed and referred to Supreme Court for a traverse hearing.
“Here, the process server’s affidavit established, prima facie, that the defendant was served with process pursuant to CPLR 308 (2).
… However, in the affidavit submitted in support of his motion, the defendant averred that, at the time of the alleged service, he did not live at the address recited in the affidavit of service as being his residence, but rather, he lived at the mortgaged premises.
Further, the defendant submitted the mortgage, which required him to occupy the mortgaged premises for a certain period of time.
Additionally, the defendant submitted material that called into question the veracity of the process server.
… Under the circumstances of this case, a hearing is required on the issue of whether the defendant was properly served with process. … “.
Wells Fargo Bank NA v Guerrero, 189 AD3d 1669 [2nd Dept. 2020]
CPLR 5015 (a) (4) provides that “[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just,” upon the ground of, inter alia, “lack of jurisdiction to render the judgment or order.”
“A default must be vacated once the movant demonstrates a lack of personal jurisdiction, and the movant is relieved of any obligation to demonstrate a reasonable excuse for the default and a potentially meritorious defense”.
“Defendant produced documentary evidence, in the form of a copy of her driver license, listing the Jackson Heights address as her residential address, and documentary evidence showing that the Jackson Heights address was known to the plaintiff, since it was listed in the mortgage documents as her address. In addition, the defendant submitted material that implicated the credibility of the plaintiff’s process server.”
Thus, order denying motion to vacate default was reversed and the matter remitted to Supreme Court for a traverse hearing.
RPAPL 1501 – Action to Quiet Title
Daldan, Inc. v Deutsche Bank Natl. Trust. Co., 188 AD3d 989 [2nd Dept. 2020]
Held that where a first foreclosure action was dismissed for failure to properly serve the summons and complaint accelerated the debt, and a second foreclosure action was therefore time barred, plaintiff was entitled to an order quieting title.
No merit to lender’s claim that its failure to serve the summons and complaint in the first action meant that the note was not accelerated.
Dismissal of the first action did not constitute “an affirmative act by the Bank revoking its election to accelerate the mortgage debt.”
Statute of Limitations Cases
MTGLQ Investors, L.P. v Wentworth, 192 AD3d 186 [3rd Dept. 2021]
The statute of limitations period runs separately in mortgage foreclosure actions from each month where payment is missed by the homeowner.
However, the statute of limitations runs on the full balance if the plaintiff lender accelerates the full amount of the balance due on the note, which can be accomplished by means of an expressed acceleration demand or by the commencement of an action for the full amount.
Here, an acceleration occurred in 2011 when a bankruptcy court gave the plaintiff permission to commence a foreclosure action, where the note balance had apparently been a claim at the bankruptcy court.
The plaintiff’s commencement of an action more than six years later rendered it time-barred.
Bank of America, NA v Riche, 190 AD3d 674 [2nd Dept. 2021]
Where an acceleration notice in a default letter “fell short of actual acceleration,” Supreme Court improperly granted defendant’s motion to dismiss a second action as time barred.
Countrywide sent default letter which indicated an intent to accelerate if defendant failed to make certain payments in June 2008. Countrywide commenced an action in April 2009. In June 2014, Supreme Court granted Countrywide’s motion to discontinue.
Second action was filed in December 2014. Supreme Court granted defendant’s motion to dismiss as time barred.
Appellate Division reversed.
“Contrary to the defendant’s contention, the language in the 2008 notice fell short of an actual acceleration. … Accordingly, the debt was not accelerated, and the statute of limitations did not begin to run until the first action was commenced in April 2009. Since this action was commenced approximately 5½ years later, in December 2014, which was within the six-year statute of limitations … the Supreme Court should have denied the defendant’s motion for summary judgment dismissing the complaint insofar as asserted against her as time-barred.”
Citimortgage, Inc. v Ramirez, 192 AD3d 70 [3d Dept. 2020].
Plaintiff commenced the first of three residential mortgage foreclosure actions in 2010, which was dismissed for a failure to prosecute in 2013.
The plaintiff commenced a second action in 2017 which was dismissed for untimeliness measured from the commencement of the first action.
The plaintiff commenced a third action in 2019, not to foreclose upon the property, but to collect on the note only, which the defendant sought to dismiss by motion under CPLR 3211.
The plaintiff argued to the Supreme Court, and on appeal, that since RPAPL 1301(3) provides that while an action for a mortgage debt “is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.”
The plaintiff argued that the commencement of the earlier equitable actions to foreclose on the mortgage prohibited the commencement of the latest action to recover on the note, and thereby tolled the six year statute of limitations.
In a signed opinion, the Third Department agreed with the plaintiff’s analysis and held the third action timely.
It is predicted here that the matter is worthy of appeal to the Court of Appeals, as the Second Department has reached a contrary conclusion in Daldan, Inc v Deutsche Bank National Trust Company, 188 AD3d 989 .
U.S. Bank National Association v Catalfamo, 189 AD3d 1786 [3rd Dept. 2020]
Accelerations of note debt may be de-accelerated, so long as they are communicated plainly and unambiguously to the homeowner. The Third Department held that the timing of the de-acceleration, 13 days before the expiration of the statute of limitations, was pretextual, and hence, ineffective.
This case should no longer be followed, as its reasoning was abrogated the following month by the Court of Appeals’ decision in Freedom Mortgage v Engel.
Deutsche Bank v Ebanks, 189 AD3d 1535 [2nd Dept. 2020]
Held that discontinuance of a prior foreclosure action did not de-accelerate the note.
[No longer good law – see Freedom Mortgage v Engel, 2121 NY Slip Op 01090 .
US Bank, NA v Davids, 188 AD3d 755 [2nd Dept. 2020]
Mortgage debt was accelerated by an action commenced in 2007. Application by lender to discontinue in 2012 did not de-accelerate the debt such that action commenced in 2016 was time barred. Notice of Pendency stricken.
[No longer good law – see Freedom Mortgage v Engel, 2121 NY Slip Op 01090 .
US Bank v Mandracchia, 188 AD3d 1285 [2nd Dept. 2020]
Statute of limitations was extended by GOL 17-101 based on the parties’ forbearance agreement and acknowledgment of the debt.
Wells Fargo, N.A. v Lewin, 188 AD3d 1296 [2nd Dept.2020]
Second foreclosure action was not time barred where commenced within 6 years of default. Defendant’s contention that the debt was accelerated prior to the commencement of a first action which was voluntarily discontinued held without merit.
U.S. Bank National Association v Stewart, 187 AD3d 1330 [3rd Dept. 2020]
For statute of limitations purposes, the limitations period runs separately in mortgage foreclosure actions from each month where payment is missed by the homeowner.
However, the statute of limitations runs on the full balance if the plaintiff lender accelerates the full amount of the balance due on the note. The commencement of an action seeking the full note balance is one means of acceleration.
Here, the defendant was deceased at the time of commencement, rendering the action a nullity, rendering the purported acceleration a nullity then too.
CPLR 308 – Service
Bank of Am, N.A., v Genzler, 188 AD3d 634 [2nd Dept. 2020]
Defendant’s challenge to service resulted in a traverse hearing before a referee who held that defendant was not served in accordance with CPLR 308(2).
Plaintiff claimed service by delivery of the summons and complaint to a person of suitable age and discretion at defendant’s “dwelling place”. Defendant established through his own testimony and that of a tenant who resided at the mortgaged property, that defendant did not live at the premises.
CPLR 5015(a)(4) – Motion to Vacate Default
One W. Bank, FSB v Rotondaro, 188 AD3d 710 [2nd Dept. 2020]
Defendant’s motion to vacate default judgment pursuant to CPLR 5015(a)(4) alleging improper service denied.
“To be entitled to vacatur of a default judgment under CPLR 5015(a)(4), a defendant must overcome the presumption raised by the process server’s affidavit of service.” Minor discrepancies in description of defendant are insufficient to overcome the presumption.
Failure to Take Default in One Year Results in Dismissal Where Lender Failed to Move to Vacate Dismissal within One Year.
Bank of New York v Richards, AD3d [3rd Dept. March 4, 2021]
A foreclosure action was commenced in 2009, and in 2013, the court directed the plaintiff to file and serve a motion for summary judgment and an order of reference within 60 days. No motion was made.
Although there had been a CPLR 3408 settlement conference, the defendant never answered the complaint. The defendant died in 2015, which had the effect of staying the action.
In December of 2018, the plaintiff moved for the order of reference which was granted on default.
The defendant’s estate, upon learning of the order of reference, moved to vacate the default, which was granted.
The estate thereafter cross-moved, in response to another motion, to dismiss the action under CPLR 3125. The plaintiff opposed the 3215 dismiss on the ground that loss mitigation efforts were underway. The cross-motion was denied.
On appeal, the Third Department held that the complaint should have been dismissed, as the plaintiff had failed to move for a default judgment during the four year period between the action’s commencement and the defendant’s death.
Federal Natl Mtge Assn v Mack, 188 AD3d 655 [2nd Dept. 2020]
Action was dismissed for failure to enter default within one year.
Lender, through new counsel, moved to vacate the dismissal but did so more than one year later arguing that the failure to enter the default was excusable based on the need to comply with various Administrative Orders. Motion denied.
“Plaintiff’s motion to vacate pursuant to CPLR 5015(a)(1) based upon an excusable default was untimely because it was not made within one year after service upon it of a copy of the order of dismissal with notice of entry”. CPLR 5015(a)(1).
Federal Natl Mtge Assn v Edmund-Henry, 188 AD3d 652 [2nd Dept. 2020]
Dismissal of action under CPLR 3215 (c) not warranted where some effort was made by lender towards judgment.
“It is not necessary for a plaintiff to actually obtain a default judgment within one year of the default in order to avoid dismissal pursuant to CPLR 3215(c) … As long as the plaintiff has initiated proceedings for the entry of judgment within one year of default, there is no basis for dismissal of the complaint pursuant to CPLR 3215(c)”.
Plaintiff’s predecessor filed an RJI for an order of reference within 4 months of defendant’s default, demonstrating that it did not intend to abandon the action.
Citimortgage, Inc. v Zaibak, 188 AD3d 982 [2nd Dept. 2020]
Action not abandoned if plaintiff files an RJI for a foreclosure settlement conference mandated by CPLR 3408.
“Where, as here, a settlement conference is a necessary prerequisite to obtaining a default judgment … a formal judicial request for such conference in connection with an ongoing demand for the ultimate relief sought in the complaint constitutes ‘proceedings for entry of judgment’ within the meaning of CPLR 3215(c)”.
Motion to dismiss denied.
US Bank v Blagman, 188 AD3d 1284 [2nd Dept. 2020]
Held that proper procedure to vacate default in opposing a motion for summary judgment is not to move to renew/reargue, it is to move to vacate the default (and appeal that determination if necessary). Motion to vacate default requires movant to show reasonable excuse for default and meritorious defense.
Conclusory affidavit which asserted that defendant’s prior attorney neglected to oppose the motion without detail or substantiation did not constitute reasonable excuse for the default.
Green Tree Servicing LLC v Shiow Dei Ju, 182 AD3d 840 [3rd Dept. 2020]
Plaintiff commenced a foreclosure action and the defendant asserted a counterclaim. The plaintiff’s action was discontinued, which would normally not affect the validity of the continuing counterclaim. The plaintiff was in default of the counterclaim. Here, however, the defendant failed to take proceedings on the counterclaim within the year required by CPLR 3215, and therefore, the counterclaim was deemed abandoned.
The Third Department also held that the mere existence of the counterclaim did not require the trial court to have the plaintiff’s discontinuance with prejudice, as the discontinuance did not work any particular prejudice upon the defendant.
Rejected Untimely Answer Supports Motion for Default
Bank of NY Mellon v Steinwurzel, 189 AD3d 1527 [2nd Dept. 2020]
Defendant served an untimely answer 8 months after being served with summons and complaint. The answer contended that plaintiff failed to comply with RPAPL 1304.
Plaintiff rejected the untimely answer 3 days later and subsequently moved for default judgment. The motion was denied. Supreme Court adhered to the same determination on 2 separate motions to reargue.
Appellate Division reversed, holding that plaintiff’s motion for default should have been granted.
“In seeking a default judgment against a defendant, the movant must submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defaulting defendant’s failure to answer or appear”.
“In opposition, a defendant must show either that there was no default, or that it has a reasonable excuse for its delay and a potentially meritorious defense to the action.”
“As the defendant failed to demonstrate a reasonable excuse for her default, we need not reach the issue of whether she demonstrated the existence of a potentially meritorious defense.”
“Finally, since the defendant defaulted, the plaintiff’s allegation in the complaint that it complied with the requirements of RPAPL 1304 was sufficient to obtain an order of reference.”
RPAPL 1302-a v CPLR 3211 (e) –Defense of Standing, When Raised, Must be Addressed by Plaintiff
U.S. Bank National Association v Ionnides, 192 AD3d 1405 [3rd Dept. 2021]
Where standing is asserted by a defendant as an affirmative defense, the plaintiff, in moving for summary judgment and an order of reference, must address and establish its standing in its moving papers. Standing must exist at the time the action was commenced, of being either the holder or assignee of the mortgage and note.
Bayview Loan Servicing, LLC v Freyer, 192 AD3d 1421 [3rd Dept. 2021]
Standing may be established via motion by establishing the requirements of business record admissibility under CPLR 4518.
See also, U.S. Bank National Association v Tecler, 188 AD3d 1320 [3rd Dept. 2020].
Deutsche Bank National Trust Company v LeTennier, 189 AD3d 2022 [3rd Dept. 2020]
The plaintiff established its standing by meeting the business record admissibility requirements of CPLR 4518.
What is interesting about the action is that in addition to the standard business records, standing was also established by evidence that the plaintiff’s attorney had been in physical possession of the note from 2015 to the commencement of the action in 2018. Since counsel is an agent of the plaintiff, counsel’s physical possession of the note prior to the commencement of the action was an additional and independent basis of standing.
U.S. Bank Trust, N.A. v Moomey-Stevens, 189 AD3d 220 [3rd Dept. 2020]
The plaintiff attached a copy of the note to its complaint. During discovery, the defendant had the opportunity to examine the original note and confirm that it was identical to the copy annexed to the complaint. Those facts were among the evidence presented that the plaintiff had standing at the time of the action’s commencement.
The defense of standing may be raised for the first time in opposition to a motion for summary judgment even where not raised in an answer. Court may deem the answer to have included the defense on such a motion.
Death of Borrower Who Is Not Named As Defendant Does Not Render Foreclosure Action A Nullity
Bethpage Federal Credit Union v Drab, 190 AD3d 678 [2nd Dept. 2021]
George and John Drab executed a note to purchase a property in July 2008. In March 2013, George died. John defaulted in July 2015. Plaintiff sued in March 2016. Plaintiff moved, ex parte, for leave to serve and file a supplemental summons and complaint, an amended notice of pendency, to serve by publication and for appointment of guardian ad litem.
Supreme Court denied the motion holding that the commencement of the action after George’s death rendered the action a nullity.
“A party may not commence a legal action or proceeding against a dead person … Such an action is a nullity from its inception.” “Here, neither the decedent nor the decedent’s estate was named as a defendant in the action. Therefore, the Supreme Court improperly determined that the action was a nullity and improperly denied the plaintiff’s ex parte motion on that basis.”
Discontinuance Under CPLR 3217(b) – Prejudice/Without Prejudice is in the Discretion of the Court
Aurora Loan Services v Hunte, 189 AD3d 1525 [2nd Dept. 2020]
After filing a foreclosure action in 2011, plaintiff moved to discontinue the action without prejudice in 2018.
Defendant opposed the motion asserting that any discontinuance must be with prejudice. Supreme Court granted plaintiff’s motion.
Defendant moved to reargue and Supreme Court adhered to the earlier determination.
“‘The determination of a motion for leave to voluntarily discontinue an action pursuant to CPLR 3217 (b) rests within the sound discretion of the court.”
… “Generally such motions should be granted ‘unless the discontinuance would prejudice a substantial right of another party, circumvent an order of the court, avoid the consequences of a potentially adverse determination, or produce other improper results’. ”
… “Here, the Supreme Court providently exercised its discretion in granting the plaintiff’s motion for leave to discontinue the action without prejudice, as there was no evidence that Hunte would be prejudiced by a discontinuance.
… Contrary to Hunte’s contention, there is no evidence that the plaintiff was attempting to avoid an adverse determination by discontinuing the action.”
Proof of Default Must Be by Admissible Evidence
HSBC Bank USA v Sandoval, 190 AD3d 844 [2nd Dept. 2021]
“For reasons set forth in Bank of N.Y. Mellon v Gordon (171 AD3d 197, 208-209 ), we find that the plaintiff failed to establish, prima facie, that the defendant Morris Sandoval defaulted in the repayment of the subject loan.
Accordingly, the Supreme Court should have denied those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against Sandoval, to strike his affirmative defenses, and for an order of reference regardless of the sufficiency of the opposing papers.”
HSBC Bank USA, NA v Berdoe, 190 AD3d 840 [2nd Dept. 2021]
Appellate Division affirms Supreme Court’s order confirming referee’s report which found that lender failed to prove defendant’s default and granted defendant’s cross motion to confirm the report.
Court declined to take judicial notice of affidavit filed by lender.
“Default may be established by, inter alia, personal knowledge of the facts or business records introduced in admissible form (citing Bank of N.Y. Mellon v. Gordon, 171 AD3d 197, 208)
… Here, [witness] did not testify to having personal knowledge regarding the defendant’s default. To the extent that her knowledge was based on her review of business records, she failed to lay a proper foundation for, or even identify what records she relied on, and the records were not introduced into evidence…. “
“We decline to take judicial notice of the defendant’s affidavit which was submitted in connection with the summary judgment motions, which affidavit was neither offered nor admitted into evidence at the hearing.” (citations omitted).