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DEFENDANTS DID NOT DEMONSTRATE ACTUAL NOTICE OF THE SUMMONS WAS NOT RECEIVED IN TIME TO DEFEND THE ACTION, AND DID NOT PROVIDE A REASONABLE EXCUSE FOR THE DEFAULT; DEFENDANTS’ MOTION TO VACATE THE DEFAULT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s did not demonstrate they did not receive notice of the summons in time to defend the action, and did not demonstrate a reasonable excuse for the default. Therefore defendants’ motion to vacate the default judgment should not have been granted:

Pursuant to CPLR 317, a defaulting defendant that was “served with a summons, other than by personal delivery” may be permitted to defend the action upon a finding by the court that the defendant did not personally receive notice of the summons in time to defend and has a meritorious defense … . Service on a limited liability company by delivery of the pleadings to the Secretary of State does not constitute personal delivery … . “The mere denial of receipt of the summons and complaint is not sufficient to establish lack of actual notice of the action in time to defend for the purpose of CPLR 317” … .

The affidavit … submitted by the … defendants in support of their motion, amounted to nothing more than a mere denial of receipt of the summons and complaint … . … [T]he … defendants did not contend that the address it had on file with the Secretary of State was incorrect … .

… [T]he … defendants’ mere denial of receipt of the summons and complaint, without more, was insufficient to demonstrate a reasonable excuse for its default pursuant to CPLR 5015(a)(1) … .Andrews v Wartburg Receiver, LLC, 2022 NY Slip Op 01980, Second Dept 2-23-22

Practice Point: A denial of the receipt of the summons and complaint, without more, does not demonstrate actual notice of the summons was not received in time to defend, and does not demonstrate a reasonable excuse for a defaulting.

 

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ALTHOUGH NONPARTY JP MORGAN DID NOT APPEAR IN THE UNDERLYING FORECLOSURE, IT COULD RECOVER SURPLUS FUNDS BASED UPON DEFENDANTS’ DEFAULT ON A CREDIT-LINE LOAN SECURED BY THE PROPERTY; JP MORGAN’S ACTION WAS NOT TIME-BARRED BECAUSE THE CREDIT-LINE DEBT WAS NEVER UNEQUIVOCALLY ACCELERATED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined nonparty JP Morgan was entitled to the surplus funds remaining after a foreclosure sale based upon the defendants’ (Breuers’) default on a credit-line loan secured by the property. The defendants’ argument that the credit-line action was time-barred was rejected because the debt was never accelerated. Pursuant to RPAPL 1361, JP Morgan did not have to appear in the underlying foreclosure action to preserve a claim to the surplus funds:

Where, as here, “the acceleration of the maturity of a mortgage debt on default is made optional with the holder of the note and mortgage, some affirmative action must be taken evidencing the holder’s election to take advantage of the accelerating provision, and until such action has been taken the provision has no operation” … .

… [T]he Breuers failed to demonstrate … that the statute of limitations began to run on JP Morgan’s entire claim at the time of the Breuers’ initial default in 2010. A letter introduced into evidence during the hearing, in which JP Morgan informed the Breuers of its intent to accelerate the maturity of the loan and to commence foreclosure proceedings if the Breuers’ default was not cured, was not sufficient to accelerate the debt, because it did not reflect a “clear and unequivocal” election to accelerate … . …

… [T]he applicable statute which governs proceedings to recover surplus funds from a foreclosure sale, RPAPL 1361, did not require JP Morgan to appear in the action to foreclose the primary mortgage prior to the entry of the judgment of foreclosure and sale, in order to preserve its claim to surplus funds … . Wells Fargo Bank, N.A. v Breuer, 2022 NY Slip Op 02037, Second Dept 3-23-22

Practice Point: Although nonparty JP Morgan did not appear in the underlying foreclosure proceedings, it was entitled to the surplus funds remaining after the foreclosure sale based upon defendants’ default on a credit-line loan secured by the property.

 

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IF THE 2008 FORECLOSURE ACTION COMMENCED BY AEGIS WAS VALID, THE INSTANT FORECLOSURE ACTION BY A DIFFERENT BANK WOULD BE TIME-BARRED; PLAINTIFF BANK RAISED A QUESTION OF FACT BY SUBMITTING EVIDENCE THAT AEGIS DID NOT POSSESS THE NOTE AND MORTGAGE AT THE TIME THE 2008 ACTION WAS COMMENCED AND THEREFORE DID NOT HAVE STANDING TO FORECLOSE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff raised a question of fact whether Aegis, the company which started a foreclosure action in 2008, had standing to commence that action. Therefore there was a question of fact whether the Aegis action accelerated the debt and started the running of the six-year statute of limitations:

… [P]laintiff proffered the affidavit of Sherry Benight, a document control officer for Select Portfolio Servicing, Inc. (hereinafter SPS), the servicer and attorney-in-fact for the plaintiff. Based upon her review of SPS’s business records, Benight averred that pursuant to a pooling and servicing agreement (hereinafter PSA), dated January 1, 2006, the original note was transferred to SPS, in its capacity as servicer and attorney-in-fact, on May 14, 2008, and SPS has remained in physical possession of the note since that date. Benight attached to her affidavit copies of the PSA, and a mortgage loan schedule listing the subject loan, note, and mortgage. This evidence was sufficient to raise triable issues of fact as to whether Aegis lacked standing to commence the prior action, and whether this action is time-barred … . U.S. Bank N..A. v Nail, 2022 NY Slip Op 02034, Second Dept 3-23-22

Practice Point: If a bank did not possess the note and mortgage at the time it commenced a foreclosure action, the action is a nullity.

 

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DEFENDANTS’ PARTICIPATION IN A SETTLEMENT CONFERENCE DID NOT WAIVE THEIR RIGHT TO MOVE TO DISMISS THE FORECLOSURE ACTION AS ABANDONED PURSUANT TO CPLR 3215 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the foreclosure complaint should have been dismissed as abandoned because the plaintiff did not move for a default judgment within a year (CPLR 3215(c)). The fact that the defendants participated in a settlement conference did not waive their right to move to dismiss the complaint as abandoned:

… [T]he plaintiff failed to take steps to initiate proceedings for the entry of a default judgment against the defendants within one year after their default in the action, and has set forth no reasonable excuse for said failure … .

Contrary to the plaintiff’s contention, the defendants did not waive their right to seek dismissal pursuant to CPLR 3215(c). The defendants’ participation in a settlement conference did not result in a waiver of their right to seek dismissal pursuant to CPLR 3215(c) since they did not actively litigate the action before the Supreme Court or participate in the action on the merits … . Moreover, the defendants’ failure to move to vacate their default in answering the complaint or appearing in this action did not operate as a waiver of their right to seek dismissal of the complaint pursuant to CPLR 3215(c) … . PennyMac Corp. v Weinberg, 2022 NY Slip Op 02010, Second Dept 3-23-22

Practice Point: Participation in a settlement conference does not waive a defendant’s right to move to dismiss a foreclosure action as abandoned based on plaintiff bank’s failure to move for a default judgment within a year.

 

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A LOCAL ONLINE NEWS OUTLET SHOULD NOT HAVE BEEN EXCLUDED FROM A FAMILY COURT HEARING REGARDING WHETHER A DEPUTY COUNTY ATTORNEY SHOULD BE DISQUALIFIED FROM A NEGLECT PROCEEDING ON CONFLICT OF INTEREST GROUNDS; THE OUTLET IS ENTITLED TO A TRANSCRIPT OF THE HEARING (FOURTH DEPT). ​

The Fourth Department, reversing Family Court, determined appellant, an online local news outlet, should not have been excluded from an attorney-disqualification hearing and was entitled to a transcript of the hearing. The respondent in a neglect proceeding had moved to disqualify the deputy county attorney on conflict of interest grounds. Appellant’s owner deemed the motion newsworthy because the deputy county attorney had just been elected City-Court Judge. When appellant’s owner attempted to attend the disqualification hearing he was denied entry:

… “[T]he general public may be excluded from any hearing under [Family Court Act] article [10] and only such persons and the representatives of authorized agencies admitted thereto as have an interest in the case” (§ 1043). In making that determination, however, “[a]ny exclusion of courtroom observers must . . . be accomplished in accordance with 22 NYCRR 205.4 (b)” … . That rule provides that “[t]he general public or any person may be excluded from a courtroom [in Family Court] only if the judge presiding in the courtroom determines, on a case-by-case basis based upon supporting evidence, that such exclusion is warranted in that case” … . The rule further provides certain nonexclusive factors that a Family Court judge may consider in exercising his or her discretion, and requires that the judge make findings prior to ordering any exclusion … .

… [T]he court abused its discretion in excluding appellant from the hearing on the underlying disqualification motion. … [T]he court violated 22 NYCRR 205.4 (b) by failing to make findings prior to ordering the exclusion, and … there is no indication … that the court rendered its determination based on … evidence or considered any of the relevant factors in exercising its discretion. Moreover, … the court lacked an adequate basis to exclude appellant from the hearing on the disqualification motion … . * * *

… [T]he release of the transcript is consistent with Family Court Act § 166 and 22 NYCRR 205.5. … [T]he statute provides in relevant part that although “[t]he records of any proceeding in the family court shall not be open to indiscriminate public inspection[,] . . . the court in its discretion in any case may permit the inspection of any papers or records” … . The statute thus “does not render Family Court records confidential, but merely provides that they are not open to indiscriminate public inspection” … . The statute makes clear that Family Court “has the discretionary statutory authority to permit the inspection of any record by anyone at any time … .Matter of Rajea T. (Niasia J.), 2022 NY Slip Op 01940, Fourth Dept 3-18-22

Practice Point: Although the general public can be excluded from Family Court Article 10 proceedings, the judge exercising the discretion to exclude an observer must make certain findings in accordance with 22 NYCRR 205-4 (b). Family Court here made no findings and abused its discretion by excluding the news outlet. The court proceeding concerned whether the county attorney handling the neglect case should be disqualified on conflict of interest grounds, and did not concern the underlying allegations of neglect. The news outlet is entitled to a transcript of the hearing.

 

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WHERE AN ORDER CONFLICTS WITH A DECISION, THE DECISION CONTROLS (FOURTH DEPT).

The Fourth Department, modifying Supreme Court in this post-judgment matrimonial case, determined the decision controls the discrepancy between the order and the decision:

… [B]oth parties expressly agreed in the oral stipulation that plaintiff’s benefits would be distributed “[i]n accordance with the Majauskas formula.” That oral stipulation was an unambiguous expression of the parties’ intent to follow Majauskas, …

… [T]he amended order conflicts with the court’s written decision insofar as the … amended order purports to award defendant 23.86% of a former spouse survivor annuity under 5 USC § 8341 (h) (1). The stated percentage represents defendant’s share of plaintiff’s gross monthly annuity, as calculated by the court pursuant to the Majauskas formula, but the court in its decision made no award to defendant of a former spouse survivor annuity, which, had it been awarded, would have expressly conflicted with the parties’ agreement. Where, as here, there is a conflict between the decision and the order, the decision controls, and we therefore modify the amended order accordingly … . Reukauf v Kraft, 2022 NY Slip Op 01898, Fourth Dept 3-18-22

Practice Point: If there is a conflict between an order and a decision, the decision controls.

 

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THE MAJORITY HELD THE APPELLATE DIVISION PROPERLY REFUSED TO HEAR APPELLANT FATHER’S APPEAL IN THIS TERMINATION OF PARENTAL RIGHTS PROCEEDING BECAUSE FATHER WAS IN DEFAULT (NO APPEAL LIES FROM A DEFAULT); THE DISSENT ARGUED FATHER WAS NOT IN DEFAULT BECAUSE HE APPEARED BY COUNSEL (CT APP).

The Court of Appeals, affirming the Appellate Division, over a strong dissent, determined the Appellate Division properly concluded it could not hear the appellant father’s appeal in this termination-of-parental-rights proceeding because he was in default (no appeal lies from a default judgment). The dissent argued father appeared by counsel and therefore was not in default:

Before this Court, appellant does not dispute the Appellate Division’s determination that his failure to appear constituted a default.

From the dissent:

The only reviewable issue before us is whether the Appellate Division properly dismissed appellant father’s appeal from a Family Court order terminating his parental rights on the ground that appellant defaulted. That decision was in error because appellant appeared through counsel during the fact-finding and dispositional hearings, as acknowledged by Family Court, and in accordance with the Family Court Act and the CPLR (see Family Ct Act § 165; CPLR 3215 [a]). Matter of Irelynn S., 2022 NY Slip Op 01869, Ct App 3-17-22

Practice Point: No appeal lies from a default judgment. The dissent argued: A party who appears by counsel, as appellant father did in these termination-of-parental-rights proceedings, is not in default.

 

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A COMPUTER PRINTOUT FROM THE NYS DEPARTMENT OF STATE WEBSITE PURPORTING TO SHOW THE LOCATION OF DEFENDANT’S PRINCIPAL PLACE OF BUSINESS FOR VENUE PURPOSES WAS NOT ADMISSIBLE AS A BUSINESS RECORD (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s submission of a computer printout from the NYS Department of State website was insufficient to prove defendant’s principal place of business was in Kings County. Defendant had submitted its certificate of incorporation designating Richmond County as its principal place of business. Therefore plaintiff did not demonstrate the proper venue for this traffic accident case was Kings County. Plaintiff lived in New Jersey and the accident occurred in Ulster County:

… [T]he plaintiff failed to establish that the defendant’s certificate of incorporation had been amended to designate a principal office located in Kings County … or that the venue selected was otherwise proper. Contrary to the Supreme Court’s conclusion, a computer printout from the website of the New York State Department of State, Division of Corporations, submitted by the plaintiff, did not conclusively establish that Kings County is a proper venue for this action. The printout was not certified or authenticated, and it was not supported by a factual foundation sufficient to demonstrate its admissibility as a business record … . Faulkner v Best Trails & Travel Corp., 2022 NY Slip Op 01770, Second Dept 3-16-22

Practice Point: Here a printout from the NYS Department of State purporting to show the location of defendant’s principal place of business was not admissible in this dispute over proper venue. The printout was not certified or authenticated and was not supported by a factual foundation sufficient for admissibility as a business record.

 

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IN THIS CHILD VICTIM’S ACT PROCEEDING PLAINTIFF ALLEGED ABUSE BY A PRIEST AND TEACHER IN ELEMENTARY SCHOOL; PLAINTIFF ALLEGED THE SCHOOL WAS OVERSEEN BY DEFENDANTS PARISH AND DIOCESE; THE 2ND DEPARTMENT HELD THE BREACH OF FIDUCIARY DUTY CAUSE OF ACTION SHOULD HAVE BEEN DISMISSED BECAUSE THERE WAS NOTHING UNIQUE ABOUT THE RELATIONSHIP BETWEEN DEFENDANTS AND PLAINTIFF, AS OPPOSED TO THE RELATIONSHIPS WITH THE OTHER PARISHIONERS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the parish and diocese defendants’ motions to dismiss the breach of fiduciary duty cause of action in this Child Victims Act case should have been granted. Plaintiff alleged he was sexually abused when he was 10 in 1973 by a priest and teacher in elementary school. Plaintiff alleged the parish and the school were overseen by the diocese:

“[T]he elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendants misconduct” … .. A cause of action to recover damages for breach of fiduciary duty must be pleaded with particularity under CPLR 3016(b) … .

“A fiduciary relationship exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation” … .Two essential elements of a fiduciary relationship are de facto control and dominance … .

Here, the amended complaint did not allege facts that would give rise to a fiduciary relationship between the plaintiff and the defendants. The amended complaint failed to allege facts that demonstrated that the plaintiff’s relationship with the defendants was somehow unique or distinct from the defendants’ relationships with other parishioners generally … . J. D. v Roman Catholic Diocese of Brooklyn, 2022 NY Slip Op 01766, Second Dept 3-16-22

Practice Point: Here the breach of a fiduciary duty cause of action against the parish and diocese which oversaw the elementary school where plaintiff allegedly was sexually abused was dismissed. There was nothing unique about the relationship between the defendants and plaintiff which set it apart from the relationships with the other parishioners.

 

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THE AFFIDAVIT SUBMITTED BY THE BANK TO PROVE (1) STANDING TO FORECLOSE THE REVERSE MORTGAGE, (2) DEFAULT AND (3) NOTICE WAS NOT ACCOMPANIED BY THE RELEVANT BUSINESS RECORDS, RENDERING THE AFFIDAVIT HEARSAY (FIRST DEPT). ​

The Second Department, reversing Supreme Court, determined the bank’s summary judgment motion in this reverse mortgage foreclosure proceeding should not have been granted.  The affidavit submitted to prove standing, default and notice was not accompanied by the relevant business records, rendering the affidavit inadmissible hearsay:

CIT Bank [plaintiff] submitted an affidavit of its assistant secretary, Elizabeth Birk, who, upon review of the business records maintained by CIT Bank, averred that CIT Bank was the “holder of the instrument of indebtedness at the time this action was commenced,” the borrower was “in default,” the “mortgage debt remains unpaid,” and a default notice “was thereafter duly sent.” However, since Birk failed to attach or otherwise incorporate any of CIT Bank’s business records to her affidavit, her assertions regarding the contents of such business records constituted inadmissible hearsay … . CIT Bank, N.A. v Fernandez, 2022 NY Slip Op 01764, Second Dept 3-16-22

Similar issue (no business records attached to the bank’s affidavit demonstrating defendant’s default) and result in JPMorgan Chase Bank, Natl. Assn. v Newton, 2022 NY Slip Op 01777, Second Dept 3-16-22

Practice Point: An affidavit submitted in support of summary judgment which purports to demonstrate what business records say, but which is not accompanied by those business records, in inadmissible hearsay.

 

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