Foreclosure – New York Appellate Digest

IN THIS FORECLOSURE ACTION, A PARTY WHO DID NOT SIGN THE NOTE BUT DID SIGN THE MORTGAGE IS A “BORROWER” ENTITLED TO RPAPL 1304 NOTICE; PLAINTIFF BANK’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that a borrower, Ellen Weininger, who signed the mortgage but not the note, was entitled to notice of foreclosure pursuant to RPAPL 1304:

… [I]t is undisputed that the plaintiff failed to serve Ellen Weininger with timely notice pursuant to RPAPL 1304, and, contrary to the plaintiff’s contention, Ellen Weininger was entitled to such notice as a “borrower” within the meaning of that statute. Although Ellen Weininger did not sign the underlying note, both of the defendants executed the mortgage as a “borrower.” Where, as here, a homeowner defendant is referred to as a “borrower” in the mortgage instrument and, in that capacity, agrees to pay amounts due under the note, that defendant is a “borrower” for the purposes of RPAPL 1304, notwithstanding the absence of a consolidation, extension, and modification agreement signed by that defendant or any ambiguity created by a provision in the mortgage instrument to the effect that parties who did not sign the underlying note are not personally obligated to pay the sums secured … . Since Ellen Weininger signed the mortgage as a “borrower” and, in that capacity, agreed to pay the amounts due under the note, she was entitled to timely notice pursuant to RPAPL 1304 … As the plaintiff conceded that it did not send the requisite notice pursuant to RPAPL 1304 to Ellen Weininger until 17 days before commencement of this action, it failed to meet its prima facie burden of establishing compliance with RPAPL 1304, and those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against the defendants, to strike their answer, and for an order of reference should have been denied. Deutsche Bank Natl. Trust Co. v Weininger, 2022 NY Slip Op 04008, Second Dept 6-22-22

Practice Point: In this foreclosure proceeding, a party who did not sign the note but did sign the mortgage is a “borrower” entitled to the notice required by RPAPL 1304.

June 23, 2022/0 Comments/by Bruce Freeman

Civil Procedure, Evidence, Foreclosure

IN A FORECLOSURE ACTION, THE REFEREE’S FAILURE TO HOLD A HEARING DOES NOT REQUIRE REVERSAL OF THE JUDGMENT OF FORECLOSURE IF THE DEFENDANT HAD THE OPPORTUNITY TO CHALLENGE THE REFEREE’S REPORT BY SUBMITTING EVIDENCE DIRECTLY TO SUPREME COURT (THIRD DEPT).

The Third Department noted that the referee’s failure to hold a hearing in a foreclosure action does not require reversal of a judgment of foreclosure if the defendant had an opportunity the challenge the referee’s report by submitting evidence directly to Supreme Court:

“CPLR 4313 requires a referee to notify the parties of the date and place for a hearing. However, hearings may be performed either on paper or by the taking of in-court evidence” … . Generally, “‘[a]s long as a defendant is not prejudiced by the inability to submit evidence directly to the referee, a referee’s failure to notify a defendant and hold a hearing is not, by itself, a basis to reverse a judgment of foreclosure and sale and remit the matter for a hearing and a new determination of amounts owed'” … . This is because “the referee’s findings and recommendations are advisory only; they have no binding effect and the court remains the ultimate arbiter of the dispute [as] CPLR 4403 expressly authorizes a court not only to reject the report but to make its own findings, to take or retake testimony or to order a new trial or hearing” … .

Here, defendants were provided with “an opportunity to challenge the referee’s report by submitting evidence directly to Supreme Court” upon plaintiff’s motion to confirm the referee’s report — an opportunity of which they did not avail themselves … .Carrington Mtge. Servs., LLC v Fiore, 2022 NY Slip Op 03951, Third Dept 6-16-22

Practice Point: Although the CPLR requires the referee in a foreclosure action to hold a hearing, the failure to hold the hearing is not reversible error as long as the defendant had the opportunity to challenge the referee’s report by submitting evidence directly to Supreme Court.

June 16, 2022/0 Comments/by Bruce Freeman

Civil Procedure, Foreclosure

PLAINTIFF OFFERED NO EXPLANATION FOR THE SEVEN-YEAR DELAY BETWEEN THE ORDER OF REFERENCE AND THE MOTION FOR A JUDGMENT OF FORECLOSURE AND SALE; THE ACCRUAL OF INTEREST DURING THE DELAY SHOULD HAVE BEEN TOLLED (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the defendant was prejudiced by the unexplained seven-year delay between the order of reference in 2009 and the motion for a judgment of foreclosure and sale in 2016, Therefore the accrual of interest during the delay should have been tolled:

… [A]pproximately seven years elapsed between the entry of the order of reference and the time the plaintiff moved for a judgment of foreclosure and sale. … [Plaintiff] failed to offer any explanation for this delay or establish that the defendant caused this delay, as the record demonstrates that the defendant’s motions and the stays due to the defendant’s bankruptcy petitions did not occur during the period for which the defendant sought to toll the accrual of interest. Since the defendant was prejudiced by the plaintiff’s unexplained delay of approximately seven years, during which time interest had been accruing, the interest on the loan should have been tolled from October 9, 2009, … until September 21, 2016 … . GMAC Mtge., LLC v Yun, 2022 NY Slip Op 03887, Second Dept 6-15-22

Practice Point: Here the plaintiff could not explain the seven-year delay between the order of reference and the motion for a judgment of foreclosure and sale. Interest should not have accrued during the delay.

June 15, 2022/0 Comments/by Bruce Freeman

Civil Procedure, Foreclosure

BECAUSE THE PRIOR FORECLOSURE ACTION WAS DISMISSED FOR LACK OF STANDING, THE PRIOR ACTION DID NOT ACCELERATE THE DEBT; THEREFORE DEFENDANT DID NOT DEMONSTRATE THE INSTANT ACTION WAS TIME-BARRED (SECOND DEPT).

The Second Department noted that the defendant in this foreclosure action did not demonstrate the foreclosure action was time barred. The initial foreclosure action was dismissed for lack of standing. Therefore the debt was not accelerated by the prior action:

Since the prior action was dismissed for lack of standing, [defendant] failed to establish that the plaintiff had the authority to accelerate the debt through the complaint filed in the prior action … . Wells Fargo Bank, N.A. v Rutty, 2022 NY Slip Op 03926, Second Dept 6-15-22

Practice Point: If a prior foreclosure action was dismissed for lack of standing that action will not be deemed to have accelerated the debt. The prior action, therefore, will not have started the statute-of-limitations clock..

June 15, 2022/0 Comments/by Bruce Freeman

Evidence, Foreclosure

ALTHOUGH THE LOAN SERVICER’S AFFIDAVIT MAY HAVE LAID A PROPER FOUNDATION FOR THE DOCUMENTS DEMONSTRATING DEFENDANTS’ DEFAULT IN THIS FORECLOSURE ACTION, THE DOCUMENTS THEMSELVES WERE NOT PRODUCED, RENDERING THE AFFIDAVIT INADMISSIBLE HEARSAY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not prove defendants’ default. The affidavit from the loan servicer may have laid a proper foundation for the relevant documents, but the business records themselves were not attached:

Even assuming that the subject affidavit established a sufficient foundation for the records relied upon, “it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . … [T]he affiant’s assertions regarding the defendants’ default, without the business records upon which he relied in making those assertions, constituted inadmissible hearsay … . U.S. Bank N.A. v Kahn Prop. Owner, LLC, 2022 NY Slip Op 03921, Second Dept 6-15-22

Practice Point: At the summary judgment stage, business records necessary to make out a prima facie case must be produced. An affidavit laying a proper foundation for the documents is inadmissible hearsay it the relevant business records themselves are not submitted.

June 15, 2022/0 Comments/by Bruce Freeman

Evidence, Foreclosure, Real Property Actions and Proceedings Law (RPAPL)

COMPLIANCE WITH THE NOTICE PROVISIONS OF RPAPL 1304, PARTICULARLY THE MAILING REQUIREMENTS, WAS NOT SHOWN IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff in this foreclosure action did not demonstrate compliance with the notice requirements of RPAPL 1304:

… [A}lthough the plaintiff submitted a certified mail receipt, the receipt did not contain a postal stamp, indication that postage was paid, or an attendant signature, and the plaintiff did not submit any United States Postal Service tracking information … . The affidavit of Nancy Sczubleski, submitted by the plaintiff for the first time in opposition to the defendant’s cross motion, also failed to establish strict compliance with RPAPL 1304. Sczubleski did not have personal knowledge of the purported mailing … . Furthermore, while Sczubleski averred that she was familiar with the plaintiff’s mailing practices and procedures, the notices submitted by the plaintiff in support of its motion for summary judgment indicate that they were not mailed by the plaintiff, but rather were mailed by an entity known as MGC Mortgage, Inc. (hereinafter MGC). Sczubleski, who stated in her affidavit that she was employed by Dovenmuehle Mortgage, Inc., a sub-servicer of the loan, does not address this fact at all, let alone demonstrate that she was familiar with MGC’s mailing practices and procedures … . LNV Corp. v Allison, 2022 NY Slip Op 03716, Second Dept 6-8-22

Practice Point: Yet another example of the mortgagee’s failure to demonstrate the RPAPL 1304 notice was properly mailed in its foreclosure motion papers.

June 8, 2022/0 Comments/by Bruce Freeman

Foreclosure, Fraud, Real Property Law

AFTER THE FORECLOSURE SALE BUT BEFORE THE CLOSING, THE MORTGAGOR STARTED AN ACTION ALLEGING FRAUD IN THE FORECLOSURE PROCEEDINGS; THE FRAUD ACTION DID NOT RENDER THE TITLE UNMARKETABLE SUCH THAT THE PURCHASER COULD SET ASIDE THE FORECLOSURE SALE AND HAVE THE DOWN PAYMENT RETURNED (SECOND DEPT).

The Second Department determined the fact that the mortgagor, after the foreclosure sale but before the closing, started an action alleging fraud in the foreclosure proceeding did not render the title to the property unmarketable. Therefore the purchaser at the foreclosure auction did not have right to set aside the foreclosure sale and have the down payment returned:

“A marketable title is a title free from reasonable doubt, but not from every doubt” … . “[S]omething more than a mere assertion of a right is essential to create an unmarketable or doubtful title” … . Here, contrary to the purchaser’s contention, the mortgagor’s action did not render title unmarketable. Therefore, the Supreme Court properly denied those branches of the purchaser’s motion which were to set aside the foreclosure sale and to direct the plaintiff to return the down payment. DiTech Fin., LLC v Steplight, 2022 NY Slip Op 03710, Second Dept 6-8-22

Practice Point: The title to the property sold at the foreclosure auction was not rendered unmarketable by a subsequent action brought by the mortgagor alleging fraud in the foreclosure proceedings. Therefore the purchaser’s motion to set aside the foreclosure sale and return the down payment was properly denied.

June 8, 2022/0 Comments/by Bruce Freeman

Evidence, Foreclosure, Real Property Actions and Proceedings Law (RPAPL)

PLAINTIFF BANK DID NOT SEND THE 90-DAY FORECLOSURE NOTICE IN A SEPARATE ENVELOPE AS REQUIRED BY RPAPL 1304; THEREFORE THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED AND DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion for summary judgment in this foreclosure action should not have been granted because the plaintiff did not sent the RPAPL 1304 notice in a separate envelope. Defendants’ motion for summary judgment should have been granted for the same reason:

… [T]he copies of the 90-day notice submitted by the plaintiff in support of its motion included additional notices not contemplated by RPAPL 1304(2). The plaintiff acknowledged that the envelopes it sent to the defendants, which contained the requisite RPAPL 1304 notice, also included a separate notice pertaining to the rights of a debtor in military service and a debtor in bankruptcy, among others. This Court recently determined, in Bank of America, N.A. v Kessler (202 AD3d 10), that RPAPL 1304(2) requires that the requisite notice under its provision be mailed in an envelope separate from any other notice. Since the plaintiff failed to demonstrate that the RPAPL 1304 notice was “served in an envelope that was separate from any other mailing or notice” … . …

… [A]s the defendants established their prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against them “by showing that the plaintiff failed to comply with RPAPL 1304 when it sent additional material in the same envelopes as the requisite notice under RPAPL 1304,” and as the plaintiff failed to raise a triable issue of fact in opposition, the Supreme Court should have granted the defendants’ cross motion for summary judgment dismissing the complaint insofar as asserted against them … . Wells Fargo Bank N.A. v Bedell, 2022 NY Slip Op 03413, Second Dept 5-25-22

Practice Point: If the bank doesn’t send the foreclosure notice required by RPAPL 1304 in a separate envelope, the defendants in the foreclosure action are entitled to summary judgment.

May 25, 2022/by Bruce Freeman

Civil Procedure, Foreclosure, Real Property Actions and Proceedings Law (RPAPL)

ONLY AN EXPRESS ACKNOWLEDEMENT OF THE MORTGAGE DEBT PURSUANT TO GENERAL OBLIGATIONS LAW 17-105 COULD REVIVE OR TOLL THE STATUTE OF LIMITATIONS IN THIS FORECLOSURE ACTION; THE REFERENCES TO THE MORTGAGE DEBT IN FINANCIAL STATEMENTS AND TAX RETURNS PROVIDED TO THE MORTGAGOR BY THE MORTGAGEE WERE NOT ENOUGH (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Troutman, over an extensive two-judge dissent, determined that the statute of limitations on the underlying foreclosure action was not tolled based upon acknowledgments of the mortgage debt in financial statements and tax returns. Rather, pursuant to General Obligations Law 17-105, only and express promise to pay the debt would revive an otherwise expired statute of limitations:

The primary question presented by this appeal is which section of article 17 of the General Obligations Law governs the tolling or revival of the statute of limitations period in an action pursuant to Real Property Actions and Proceedings Law (RPAPL) § 1501 (4). RPAPL § 1501 (4) allows a party to cancel a mortgage where the limitations period for commencing a foreclosure action has expired. We hold that General Obligations Law section 17-105, not section 17-101, governs whether the statute of limitations has been tolled or revived in such an action. * * *

Under General Obligations Law § 17-105 (1), the Partnership’s (mortgagee’s) actions in this case could only toll or revive the statute of limitations for the Council (mortgagor) to bring a foreclosure action if the Partnership made an “express” “promise to pay the mortgage debt.” Accordingly, the Appellate Division correctly concluded that the Partnership’s delivery of its financial statements and tax returns to Council did not meet the requirements of section 17-105 (1) because they were not express promises to pay the mortgage debt (189 AD3d at 28). Batavia Townhouses, Ltd. v Council of Churches Hous. Dev. Fund Co., Inc., 2022 NY Slip Op 03361, CtApp 5-24-22

Practice Point: Here references to the mortgage debt in financial statements and tax returns provided to the mortgagor by the mortgagee did not revive or toll the statute of limitations on the underlying foreclosure action. Pursuant to General Obligations Law 17-105, only an express acknowledgement of the mortgage would revive the action.

May 24, 2022/by Bruce Freeman

Civil Procedure, Foreclosure

WHEN THE FAILURE TO PRESENT FACTS IN A PRIOR MOTION IS NOT JUSTIFIED, THE SECOND MOTION DOES NOT FIT THE CRITERIA FOR A MOTION TO RENEW OR AN ALLOWABLE SUCCESSIVE SUMMARY JUDGMENT MOTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s motion in this foreclosure action did not fit the criteria for a motion to renew or an allowable successive summary judgment motion. The judgment of foreclosure should not have been granted;

“When no reasonable justification is given for failing to present new facts on the prior motion, the Supreme Court lacks discretion to grant renewal” … . Here, the plaintiff failed to provide any justification for its failure to present the new evidence supporting its renewal motion as part of its prior motion.

Even considered as a successive motion for summary judgment, such a motion “should not be entertained in the absence of good cause, such as a showing of newly discovered evidence” … . Wells Fargo Bank, N.A. v Osias, 2022 NY Slip Op 03275, Second Dept 5-18-22

Practice Point: Attempting to bring a second motion which includes “new” facts, without a reasonable justification for leaving them out of the first motion, does not fit the criteria for a motion to renew or an allowable successive summary judgment motion.

May 18, 2022/by Bruce Freeman

IN THIS FORECLOSURE ACTION, A PARTY WHO DID NOT SIGN THE NOTE BUT DID SIGN THE MORTGAGE IS A “BORROWER” ENTITLED TO RPAPL 1304 NOTICE; PLAINTIFF BANK’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

IN A FORECLOSURE ACTION, THE REFEREE’S FAILURE TO HOLD A HEARING DOES NOT REQUIRE REVERSAL OF THE JUDGMENT OF FORECLOSURE IF THE DEFENDANT HAD THE OPPORTUNITY TO CHALLENGE THE REFEREE’S REPORT BY SUBMITTING EVIDENCE DIRECTLY TO SUPREME COURT (THIRD DEPT).

PLAINTIFF OFFERED NO EXPLANATION FOR THE SEVEN-YEAR DELAY BETWEEN THE ORDER OF REFERENCE AND THE MOTION FOR A JUDGMENT OF FORECLOSURE AND SALE; THE ACCRUAL OF INTEREST DURING THE DELAY SHOULD HAVE BEEN TOLLED (SECOND DEPT).

BECAUSE THE PRIOR FORECLOSURE ACTION WAS DISMISSED FOR LACK OF STANDING, THE PRIOR ACTION DID NOT ACCELERATE THE DEBT; THEREFORE DEFENDANT DID NOT DEMONSTRATE THE INSTANT ACTION WAS TIME-BARRED (SECOND DEPT).

ALTHOUGH THE LOAN SERVICER’S AFFIDAVIT MAY HAVE LAID A PROPER FOUNDATION FOR THE DOCUMENTS DEMONSTRATING DEFENDANTS’ DEFAULT IN THIS FORECLOSURE ACTION, THE DOCUMENTS THEMSELVES WERE NOT PRODUCED, RENDERING THE AFFIDAVIT INADMISSIBLE HEARSAY (SECOND DEPT).

COMPLIANCE WITH THE NOTICE PROVISIONS OF RPAPL 1304, PARTICULARLY THE MAILING REQUIREMENTS, WAS NOT SHOWN IN THIS FORECLOSURE ACTION (SECOND DEPT).

AFTER THE FORECLOSURE SALE BUT BEFORE THE CLOSING, THE MORTGAGOR STARTED AN ACTION ALLEGING FRAUD IN THE FORECLOSURE PROCEEDINGS; THE FRAUD ACTION DID NOT RENDER THE TITLE UNMARKETABLE SUCH THAT THE PURCHASER COULD SET ASIDE THE FORECLOSURE SALE AND HAVE THE DOWN PAYMENT RETURNED (SECOND DEPT).

PLAINTIFF BANK DID NOT SEND THE 90-DAY FORECLOSURE NOTICE IN A SEPARATE ENVELOPE AS REQUIRED BY RPAPL 1304; THEREFORE THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED AND DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

WHEN THE FAILURE TO PRESENT FACTS IN A PRIOR MOTION IS NOT JUSTIFIED, THE SECOND MOTION DOES NOT FIT THE CRITERIA FOR A MOTION TO RENEW OR AN ALLOWABLE SUCCESSIVE SUMMARY JUDGMENT MOTION (SECOND DEPT).

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