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PLAINTIFF DID NOT DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION AND DID NOT PROVIDE SUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff did not demonstrate standing to bring the foreclosure action, the defendants properly raised plaintiff’s failure to comply with the notice requirements of RPAPL 1304 in opposition to the plaintiff’s summary judgment motion, and the plaintiff’s proof of compliance with the notice requirements was insufficient:

… [T]he plaintiff failed … to establish its standing to commence this action. The copy of the note submitted in support of the plaintiff’s motion contained two additional pages, the first entitled “Allonge to Note” and the second entitled “Note Allonge.” However, as the defendants correctly contend, the plaintiff did not submit any evidence to indicate that the purported allonges were so firmly affixed to the note so as to become a part thereof (see UCC 3-202[2] …). …

… [S]ince the proper service of a RPAPL 1304 notice is a condition precedent to the commencement of a foreclosure action, the defendants could properly raise this defense for the first time in their opposition to the plaintiff’s motion for summary judgment, and the burden of establishing prima facie compliance with the requirements of RPAPL 1304 was with the plaintiff … . …

… [I]n order to establish its compliance with the notice requirements of RPAPL 1304, the plaintiff submitted two affidavits from its “authorized signer,” Tracy A. Duck. However, contrary to the Supreme Court’s determination, neither affidavit was sufficient to establish the plaintiff’s strict compliance with the notice requirements of RPAPL 1304. Among other things, Duck did not aver that she was familiar with the mailing practices and procedures of the entity that purportedly sent the notices … . Moreover, the business records attached to Duck’s second affidavit were insufficient to establish compliance with RPAPL 1304 … . LNV Corp. v Almberg, 2021 NY Slip Op 02791, Second Dept 5-5-21

 

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A TAX FORECLOSURE PROCEEDING IS AN IN REM ACTION AGAINST THE PROPERTY, NOT THE PROPERTY OWNER; THEREFORE THE ACTION WAS NOT A NULLITY DESPITE THE DEATH OF THE OWNER (FOURTH DEPT). ​

The Fourth Department, reversing Supreme Court, determined the tax foreclosure proceeding was not a nullity and did not violate due process. The foreclosed restaurant belonged to plaintiff’s husband, who died in 2006. The treasurer of Ontario County followed all the proper procedures for notification of the tax foreclosure proceedings. Tax foreclosure is an in rem action to which there are no parties. So the argument that the action could not be brought against the deceased owner of the restaurant was rejected:

… [B]y statute, mortgagors are necessary party defendants to mortgage foreclosure actions (see RPAPL 1311 [1]). In contrast, a petition in a tax foreclosure proceeding relates only to the property and not any particular person (see RPTL 1123 [2] [a]). The distinction between in rem tax foreclosure proceedings and mortgage foreclosure actions with respect to the “parties” is critical. While an action or proceeding cannot be commenced against a dead person who, by necessity, is a named party to the action … , a tax foreclosure proceeding is not commenced against any person; it is commenced against the property itself. The owners are not necessary “parties” to the tax foreclosure proceeding; they are only “[p]arties entitled to notice” of the proceeding (RPTL 1125 [1] [a]; see RPTL 1123 [1], [2] [a]; cf. RPAPL 1131). As a result, the tax foreclosure proceeding was properly commenced even though decedent had died … , and there was no need to substitute someone for the dead owner (see CPLR 1015). Hetelekides v County of Ontario, 2021 NY Slip Op 02697, Fourth Dept 4-30-21

 

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NON-OWNER DID NOT HAVE STANDING TO MOVE TO VACATE AN ERIE COUNTY TAX FORECLOSURE SALE; THE RIGHT TO PAY THE DELINQUENT TAXES HAD BEEN EXTINGUISHED (FOURTH DEPT).

The Fourth Department, reversing County Court, determined the tax foreclosure sale of property owned by Black Rock to appellant should not have been vacated.  Respondent, Fedder, moved to vacate the sale. After County Court granted Fedder’s motion, the delinquent taxes were paid, the County issued a certificate of redemption to Black Rock, which then sold the property to Fedder:

… [T]his is not a mortgage foreclosure action, where the “equity of redemption” permits property owners “to redeem their property by tendering the full sum” owed before a valid sale is effectuated … . Here, instead, the right to pay the delinquent taxes by virtue of the equity of redemption was extinguished several months prior to Fedder’s motion by order to show cause, according to the ECTA [Erie County Tax Act], the public notice of foreclosure, and the terms of the judgment of foreclosure (see ECTA §§ 11-10.0, 11-12.0; see also RPTL art 11 … ). … [T]he purported redemption, the issuance of the certificate of redemption, and the purported sale and transfer of title from Black Rock to Fedder are nullities … . …

Fedder did not have standing to seek equitable relief in this case. Pursuant to ECTA § 7-10.0, the court could not set aside the sale to appellant “except upon a proceeding brought therefor by the owner of such real property within three months from the date of such sale.” Here, no such proceeding was brought. Instead, Fedder, a nonowner, filed a motion by order to show cause in this foreclosure action, and Black Rock, the owner, was not a party to the motion. In light of the ” ‘clear legislative intent’ ” of section 7-10.0 …, Fedder did not have standing to seek rescission of the sale.  Matter of Foreclosure of Tax Liens, 2021 NY Slip Op 02681, Fourth Dept 4-30-21

 

THE PROCESS SERVER DID NOT TIMELY FILE PROOF OF SERVICE; THEREFORE SERVICE ON DEFENDANT WAS NEVER COMPLETE AND THE DEFAULT JUDGMENT IS A NULLITY; SUPREME COURT CAN CURE THE NONJURISDICTIONAL DEFECT BY ORDERING DEFENDANT TO BE SERVED AND THE DEFENDANT MAY THEN INTERPOSE AN ANSWER (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the default judgment was a nullity because the process server did not timely file the affidavit of service. The defect is not jurisdictional and can be cured. But the default judgment cannot be reinstated retroactively. Once properly served the defendant may submit an answer:

… [P]laintiff’s process server effectuated service by delivery and mail (see CPLR 308 [2]) on November 17, 2017. Plaintiff’s proof of service, however, was not filed with the clerk of the court until December 11, 2017, more than 20 days after the delivery and mailing. Accordingly, the filing was untimely and, as such, service of process was never completed (see CPLR 308 [2] …).

… [F]ailure to timely file proof of service is only a procedural irregularity, as opposed to a jurisdictional defect, and a court may, sua sponte, issue an order curing said irregularity (see CPLR 2001, 2004 … ). “A court may not, however, make that relief retroactive to a defendant’s prejudice by placing the defendant in default as of a date prior to the order, nor may a court give effect to a default judgment that, prior to the curing of the irregularity, was a nullity requiring vacatur” … . Here, no such curative order was ever sought from or issued by Supreme Court and, therefore, defendant’s time to answer never began to run such that the resulting default judgment was a nullity requiring vacatur … . Miller Greenberg Mgt. Group, LLC v Couture, 2021 NY Slip Op 02566, Third Dept 4-29-21

 

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THE ACTION CONTESTING THE AMENDMENT TO THE BY-LAWS OF A NOT-FOR-PROFIT CORPORATION WHICH OWNS RECREATIONAL LAND AND COLLECTS DUES FROM LOT OWNERS MUST BE BROUGHT AS AN ARTICLE 78 PROCEEDING, NOT AN ACTION FOR A DECLARATORY JUDGMENT; THE ACTION IS THEREFORE TIME-BARRED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the amendment to the by-laws defendant not-for-profit corporation which owns land underneath a man-made lake must be contested in an Article 78 action, not a declaratory judgment action. Therefore the four-month Article 78 statute of limitations applied and the action was time-barred. The underlying dispute involved the assessment of annual dues for lots which had been exempt from dues. Plaintiffs are the owners of those lots:

Supreme Court concluded that the action being challenged was a legislative act, which cannot be challenged in a CPLR article 78 proceeding but must be maintained in a declaratory judgment action. However, the cases addressing legislative acts deal with challenges to “governmental activity,” rather than the activity of nonpublic corporations … . This is an important distinction as the rule prohibiting the use of CPLR article 78 proceedings to challenge acts of legislative bodies “is derived from the separation-of-powers doctrine,” and so “has no application to the quasi-legislative acts of administrative agencies” … . Similarly, it does not apply to the actions or decisions of nonpublic corporations. * * *

Whether defendant’s alleged interest in plaintiffs’ property is based on the imposition of restrictive covenants or the possibility of a lien if plaintiffs fail to pay dues on multiple lots, any such alleged interest would be based on the amended bylaws. Accordingly, though all of plaintiffs’ causes of action are couched in declaratory judgment language, they can be distilled to challenges to defendant’s enactment of the amended bylaws that could have been raised in a CPLR article 78 proceeding and are therefore subject to a four-month statute of limitations … . Indeed, other courts have held that a challenge to a corporation’s amendment of its bylaws must be raised via a CPLR article 78 proceeding commenced within four months of such amendment … . Doyle v Goodnow Flow Assn., Inc., 2021 NY Slip Op 02580, Third Dept 4-29-21

 

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THE PROCESS SERVER IN THIS FORECLOSURE ACTION MET THE DUE DILIGENCE REQUIREMENTS OF CPLR 308 (4); THE COMPLAINT SHOULD NOT HAVE BEEN DISMISSED FOR LACK OF PERSONAL JURISDICTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants’ motion to dismiss for lack of personal jurisdiction should not have been granted. The process server for the bank in this foreclosure action satisfied the due diligence requirement for service pursuant to CPLR 308 (4):

There were four attempts to serve the defendants at their residence at times when they could reasonably have been expected to be found there, including attempts on a late weekday evening, an early weekday morning, a weekend evening, and a weekday afternoon … . As the plaintiff established by a preponderance of the credible evidence that personal jurisdiction was acquired over the defendants, the Supreme Court should have denied the defendants’ motion to dismiss the complaint insofar as asserted against them … and decided the plaintiff’s motion, inter alia, for summary judgment on the merits instead of, in effect, denying it as academic. Wilmington Trust Co. v Gewirtz, 2021 NY Slip Op 02562, Second Dept 4-28-21

 

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SUPREME COURT SHOULD NOT HAVE, SUA SPONTE, DETERMINED DEFENDANT IN THIS FORECLOSURE ACTION WAIVED DISMISSAL FOR FAILURE TO TIMELY MOVE FOR A DEFAULT JUDGMENT BECAUSE THE ISSUE WAS DISPOSITIVE AND NEVER LITIGATED; THE BANK’S FAILURE TO TIMELY MOVE FOR A DEFAULT JUDGMENT PURSUANT TO CPLR 3215 (C) REQUIRED DISMISSAL OF THE BANK’S ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff-bank’s failure to move for a default judgment within one year required dismissal of the complaint pursuant to CPLR 3215 (c). The court noted that Supreme Court should not have, sua sponte, held defendant waived dismissal pursuant to CPLR 3215 (c) because the issue had never been litigated:

Although the Supreme Court keenly observed that the defendants had filed a notice of appearance in the first action in October 2014, it should not have, sua sponte, determined that such notice of appearance constituted a waiver of their right to seek dismissal of the complaint pursuant to CPLR 3215(c), as the parties never litigated the issue of waiver. Since that branch of the defendants’ cross motion which was pursuant to CPLR 3215(c) to dismiss the complaint had “‘dispositive import'” … , the court should have notified the parties of the waiver issue and afforded them an opportunity to be heard prior to determining the cross motion on a ground neither side argued. …

“The language of CPLR 3215(c) is not, in the first instance, discretionary, but mandatory, inasmuch as courts ‘shall’ dismiss claims (CPLR 3215[c]) for which default judgments are not sought within the requisite one-year period, as those claims are then deemed abandoned” … . “‘Failure to take proceedings for entry of judgment may be excused, however, upon a showing of sufficient cause,’ which requires the plaintiff to ‘demonstrate that it had a reasonable excuse for the delay in taking proceedings for entry of a default judgment and that it has a potentially meritorious action'” … . Wells Fargo Bank v Aucapina, 2021 NY Slip Op 02561, Second Dept 4-28-21

 

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IN A FORECLOSURE ACTION A DISMISSAL FOR LACK OF STANDING IS NOT A DISMISSAL ON THE MERITS RE: RES JUDICATA; A SECOND DISCONTINUANCE WHICH IS NOT ON NOTICE IS NOT A DISCONTINUANCE WITH PREJUDICE RE: CPLR 3217 (C) (SECOND DEPT).

The Second Department noted that a foreclosure action dismissed for lack of standing is not a dismissal on the merits. The court further noted that a second discontinuance is not with prejudice, i.e., on the merits, unless it is on notice:

“‘Under the doctrine of res judicata, a final disposition on the merits bars litigation between the same parties of all other claims arising out of the same transaction or out of the same or related facts, even if based upon a different theory involving materially different elements of proof'” … . However, “a dismissal premised on lack of standing is not a dismissal on the merits for res judicata purposes” … .. Here, the instant action was not barred by the doctrine of res judicata because the 2014 action was dismissed for, inter alia, lack of standing, and that does not qualify as a dismissal on the merits for res judicata purposes … .

CPLR 3217(c) provides that “[u]nless otherwise stated in the notice, stipulation or order of discontinuance, the discontinuance is without prejudice, except that a discontinuance by means of notice operates as an adjudication on the merits if the party has once before discontinued by any method an action based on or including the same cause of action.” The dismissal of the second action after a previous discontinuance only operates as an adjudication on the merits if that second discontinuance is achieved by means of notice … . Here, after the 2010 action was discontinued by means of notice, the 2014 action was dismissed after the defendant’s motion to dismiss was granted. Since the 2014 action was not discontinued by means of notice, CPLR 3217(c) is inapplicable to this instant action. US Bank Trust, N.A. v Loring, 2021 NY Slip Op 02559, Second Dept 4-28-21

 

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THE CONTINUING WRONG DOCTRINE APPLIES TO THIS COMPLEX BREACH OF CONTRACT ACTION SUCH THAT EACH BREACH WAS AN ACTIONABLE EVENT; THEREFORE THE STATUTE OF LIMITATIONS DID NOT START RUNNING FOR ALL SUBSEQUENT BREACHES WHEN THE FIRST BREACH OCCURRED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Mazzarelli, over a two-justice dissent, reversing Supreme Court, determined the continuing wrong doctrine applied to this breach of contract action such that each breach was actionable and, therefore, the statute of limitations for all subsequent breaches was not triggered by the first breach. The subjects of the contracts were commercial mortgage-backed securities (CMBS). The complaint alleged defendant CWCI breached a collateral management agreement (CMA):

Generally speaking, a claim accrues for statute of limitations purposes when “all of the factual circumstances necessary to establish a right of action have occurred, so that the plaintiff would be entitled to relief” … . However, the mere fact that a claim has accrued and the time to bring an action on it has commenced to run does not mean that a new claim, with a new limitations period, may not arise out of a new set of facts that forms part of a series with the original wrong. [Plaintiff] maintains that the allegations against CWCI comprise such a series of individual wrongs. Thus, it relies on cases such as Bulova Watch Co. v Celotex Corp. (46 NY2d 606 [1979]). There, a new claim, with a new limitations period, was held to have accrued each time the plaintiff, the obligee under a bond that guaranteed that the defendant roofer would make repairs necessary to ensure the watertightness of the plaintiff’s roof over the 20-year life of the bond, asked the defendant, to no avail, to repair a leak. Accordingly, the plaintiff’s failure to commence suit within the limitations period based on the initial leak did not bar the action. * * *

We find that the continuing wrong doctrine does apply to this case. CWCapital Cobalt VR Ltd. v CWCapital Invs. LLC, 2021 NY Slip Op 02487, First Dept 4-27-21

 

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THE BUILDING AND FIRE CODES DID NOT CREATE A PRIVATE RIGHT OF ACTION AGAINST THE CITY TO CONTEST THE ANNUAL INSPECTION FEES; A NEGLIGENCE ACTION AGAINST A MUNICIPALITY BASED UPON A STATUTORY DUTY WILL NOT FLY UNLESS THE STATUTE PROVIDES A PRIVATE RIGHT OF ACTION; A PRE-ANSWER MOTION TO DISMISS A REQUEST FOR A DECLARATORY JUDGMENT MUST BE DENIED IF IT SETS FORTH A CAUSE OF ACTION, THE MERITS OF THE REQUEST CANNOT BE CONSIDERED (SECOND DEPT).

The Second Department determined the putative class action suit by two realty companies alleging the city charges annual fire and building code inspection fees but does not do the inspections was properly dismissed, with the exception of the request for a declaratory judgment. The suit alleged breach of contract, breach of fiduciary duty and negligence, and requested a declaratory judgment finding the fee violates the NYS Constitution. The Second Department held that the fire and building codes do not give rise to a private right of action. With respect to municipal liability for negligence and the request for a declaratory judgment, the court wrote:

To sustain liability against a municipality engaged in a governmental function, “the duty breached must be more than that owed the public generally” … . The Court of Appeals has recognized that a special duty can arise “when the municipality violates a statutory duty enacted for the benefit of a particular class of persons” … . “To form a special relationship through breach of a statutory duty, the governing statute must authorize a private right of action” … [N]either the Uniform Code nor the Yonkers Fire Code gives rise to a private right of action. * * *

… [T]he Supreme Court should have denied that branch of the defendants’ motion which was to dismiss the sixth cause of action, which sought a declaration, inter alia, that the inspection fees were invalid as an unconstitutional tax. “‘A motion to dismiss a declaratory judgment action prior to the service of an answer presents for consideration only the issue of whether a cause of action for declaratory relief is set forth, not the question of whether the plaintiff is entitled to a favorable [disposition]'” … . WMC Realty Corp. v City of Yonkers, 2021 NY Slip Op 02440, Second Dept 4-21-21

 

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