Foreclosure – New York Appellate Digest

IN THIS FORECLOSURE ACTION, THE ACCRUAL OF INTEREST SHOULD HAVE BEEN TOLLED DURING THE BANK’S UNEXPLAINED DELAYS IN PROCURING AND ENTERING AN ORDER OF REFERENCE (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the accrual of interest should have been tolled during the bank’s unexplained delays in procuring and entering an order or reference:

Supreme Court properly found that the nearly 17-month delay in the plaintiff’s service of the notice of entry of the order of reference entered April 30, 2014, was excessive … . However, it improvidently exercised its discretion in tolling the accrual of interest for only one year, as it should have been tolled for the entire period from April 30, 2014, through September 9, 2015. In addition, the court should have also tolled the accrual of interest for the time periods in which the plaintiff made two motions for an order of reference after its initial motion for an order of reference was denied for administrative reasons … . The tolling of the accrual of interest during these time periods is not … penalizing the plaintiff for losing its motions, but is instead a response to the plaintiff’s unexplained delay in prosecuting the action by failing to promptly move for relief after the denial of its first and second motions. … [A]fter the plaintiff’s first motion for an order of reference was denied in August 2011, it failed to move again until February 2013. After the second motion was denied in September 2013, the plaintiff did not make its third motion until February 2014. Deutsche Bank Natl. Trust Co. v Ould-Khattri, 2022 NY Slip Op 00167, Second Dept 1-12-22

January 12, 2022/0 Comments/by Bruce Freeman

Evidence, Foreclosure

THE DOCUMENTS UPON WHICH THE CALCULATIONS IN THE REFEREE’S REPORT WERE BASED WERE NOT PRODUCED RENDERING THE REPORT INADMISSIBLE HEARSAY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report was inadmissible hearsay because the documents upon which the calculations were based were not produced:

The defendant correctly contends, however, that the referee’s calculation was not substantially supported by the record. Modlin’s [the loan servicer’s] affidavit, which was submitted to the referee for the purpose of establishing the amount due on the mortgage loan, appeared to lay a proper foundation for the admission of the business records on which she relied, including the payment history for the loan, in making her calculations. Modlin averred that she was an authorized signatory of Caliber, U.S. Bank’s loan servicer and attorney-in-fact, that she had reviewed Caliber’s electronic records regarding the defendant’s account, and that she had “knowledge of how those electronic records [were] kept and maintained” … . Modlin further averred that the business records of any prior servicer had been “uploaded and boarded into [Caliber’s] computer records” and were “maintained in connection with the servicing of [the subject] loan”,,, , In addition, U.S. Bank Trust demonstrated Caliber’s authority to act on its behalf by submitting the limited power of attorney.

Nevertheless, computations based on the review of unproduced business records amount to inadmissible hearsay and lack probative value … . Here, U.S. Bank Trust did not submit to the referee copies of the business records upon which Modlin purportedly relied in computing the amount due on the mortgage loan. Consequently, the referee’s findings in that respect were not substantially supported by the record … . U.S. Bank Trust, N.A. v Bank of Am., N.A., 2022 NY Slip Op 00213, Second Dept 1-12-22

January 12, 2022/0 Comments/by Bruce Freeman

Civil Procedure, Foreclosure

THE BANK WHICH COMMENCED THE 2006 FORECLOSURE HAD ALREADY ASSIGNED THE NOTE AND MORTGAGE AND DID NOT HAVE STANDING TO FORECLOSE; THEREFORE THE STATUTE OF LIMITATIONS DID NOT START RUNNING IN 2006; THE DISSENT DISAGREED (SECOND DEPT).

The Second Department, over an extensive dissent, determined that the bank (Option One) which commenced foreclosure proceedings in 2006 did not have standing to do so because it had already assigned the note and mortgage (to Residential). Therefore the six-year statute of limitations did not start to run in 2006. The dissent argued Option One, as the original lender, did in fact have standing. Much of the majority’s decision was devoted to demonstrating the dissenting argument was not valid:

We disagree with our dissenting colleague’s assertion that Option One, after its assignment of the note and mortgage to Residential, continued to have standing to commence and prosecute the 2006 action. Our dissenting colleague misreads the holding in Wilmington Sav. Fund Socy., FSB v Matamoro (200 AD3d 79, 90-91), wherein we held that there are three bases to establish standing in residential foreclosure actions. There is no dispute with regard to the second two bases for finding standing; to wit: a plaintiff’s physical possession of the note prior to commencement of the foreclosure action with an allonge or endorsement in blank or to the plaintiff (second basis), or an assignment of the note to the plaintiff prior to the commencement of the foreclosure action (third basis). However, while the Matamoro Court described the first basis for standing as being “where the plaintiff is the original lender in direct privity with the defendant” … , the second part of the description explained that “[t]he direct privity is rarely seen in residential mortgage foreclosure litigations, given the nature of the home lending business where financial instruments are routinely sold, assigned, or ‘bundled’ from one institution to another between the time funds are initially dispersed by a lender and the commencement of a later foreclosure action” … . The Matamoro Court’s holding and description of the nature of the market falls squarely into the facts of this case. Contrary to our dissenting colleague’s rationale that the original lender retains the right to sue on a note that it has fully assigned, we have held that”‘[a]n absolute assignment of a bond and mortgage transfers to the assignee all rights theretofore conferred upon the assignor-mortgagee to enforce the bond and mortgage'” … . 21st Mtge. Corp. v Rudman, 2022 NY Slip Op 00031, Second Dept 1-5-22

January 5, 2022/0 Comments/by Bruce Freeman

Civil Procedure, Foreclosure

ALTHOUGH THE BANK IN THIS FORECLOSURE ACTION INSPECTED THE VACANT PROPERTY AND MADE PERIODIC REPAIRS, IT WAS NOT A “MORTGAGEE IN POSSESSION” SUCH THAT THE STATUTE OF LIMITATIONS WAS TOLLED; IN ORDER TO BE DEEMED A “MORTGAGEE IN POSSESSION,” THE MORTGAGOR MUST CONSENT TO THE BANK’S POSSESSION OF THE PROPERTY (SECOND DEPT).

The Second Department, reversing Supreme Court, over a dissent, determined the statute of limitations had run on defendant bank’s foreclosure counterclaim. The bank argued that the statute of limitations had been tolled because it was a “mortgagee in possession,” in that it kept tabs on the property and made repairs. The majority held that, in order to be a “mortgagee in possession,” the mortgagor must consent to the possession. Such consent constitutes an acknowledgment of the debt. The mortgagor here did not consent to the mortgagee’s possession of the property:

We disagree with our dissenting colleague that determining whether a mortgagee qualifies as a mortgagee in possession for purposes of tolling the statute of limitations requires “an analysis of the actions taken by the mortgagee to secure the property financially and physically.” Rather, the determination only requires an analysis of whether the mortgagee took full possession of the property pursuant to an agreement with the mortgagor. Mardenborough v U.S. Bank N.A., 2022 NY Slip Op 00034, Second Dept 1-5-22

January 5, 2022/0 Comments/by Bruce Freeman

Appeals, Civil Procedure, Foreclosure, Judges

ALTHOUGH THE MOTION TO DISMISS THE FORECLOSURE ACTION AS ABANDONED PURSUANT TO CPLR 3215 WAS DENIED ON A GROUND NOT RAISED BY THE PARTIES, THE ORDER WAS SELF-PRESERVED AND APPEALABLE; THE PRESENTATION OF AN ORDER OF REFERENCE WITHIN ONE YEAR OF DEFENDANT’S DEFAULT PRECLUDES A FINDING THAT THE ACTION WAS ABANDONED PURSUANT TO CPLR 3215, DESPITE THE MOTION COURT’S REJECTION OF THE ORDER AS INCOMPLETE (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Dillon, over a concurrence and an extensive two-justice dissent, determined; (1) the dismissal of the foreclosure complaint as abandoned pursuant to CPLR 3215 was appealable, even though it was dismissed, sua sponte, on a ground not raised by the parties; and (2) the fact that the plaintiff submitted an order, albeit an order which was rejected for incompleteness, within one year of defendant’s default rendered the dismissal pursuant to CPLR 3215 unavailable as a remedy:

The [motion] court employed CPLR 3215(c) reasoning, never argued by the parties, to decide a CPLR 3215(c) motion, just as in Rosenblatt [119 AD3d 45], the court employed reasoning under CPLR 3212, which was never argued by the parties, to decide a CPLR 3212 summary judgment motion. Under the authority of either Rosenblatt or Tirado [175 AD3d 153], the analysis and reasoning of the court, in the order appealed from, although sua sponte, self-preserved the issues for appellate review because it was pursuant to the same CPLR section within which the plaintiff’s motion was based and was dispositive to the action. * * *

… [T]he plaintiff presented a proposed ex parte order of reference within the one-year statutory period. The fact that the Supreme Court rejected the order of reference as defective is beside the point, as the mere presentment of it established the plaintiff’s intent to proceed toward the entry of judgment and not to abandon the action … . Citibank, N.A. v Kerszko, 2022 NY Slip Op 00032, Second Dept 1-5-22

January 5, 2022/0 Comments/by Bruce Freeman

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

THE INCLUSION OF OTHER MATERIAL IN THE ENVELOPE CONTAINING THE RPAPL 1304 NOTICE IN THIS FORECLOSURE ACTION IS A DEFENSE WHICH CAN BE RAISED AT ANY TIME AND WHICH WARRANTED SUMMARY JUDGMENT IN FAVOR OF THE DEFENDANTS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff’s failure to comply with RPAPL 1304 is a defense to a foreclosure action which can be raised at any time. Here the inclusion of other material in the envelope containing the RPAPL 1304 warranted summary judgment in favor of defendants:

Although the defendants failed to oppose the plaintiff’s motion, inter alia, for summary judgment and for an order of reference on the ground that the plaintiff did not comply with RPAPL 1304, “failure to comply with RPAPL 1304 is a defense that may be raised at any time prior to the entry of judgment of foreclosure and sale” … . Here, the issue was raised before the entry of judgment of foreclosure and sale. Thus, the issue of compliance with RPAPL 1304 was properly before the Supreme Court.

The defendants established that the plaintiff failed to strictly comply with RPAPL 1304, on the ground that additional material was sent in the same envelope as the 90-day notice required by RPAPL 1304 … . Citimortgage, Inc. v Dente, 2021 NY Slip Op 07538, Second Dept 12-29-21

December 29, 2021/0 Comments/by Bruce Freeman

Civil Procedure, Foreclosure, Judges

THE JUDGE SHOULD HAVE HELD A HEARING BEFORE GRANTING THE BANK’S MOTION FOR AN ALTERNATIVE METHOD OF SERVICE IN THIS FORECLOSURE ACTION; DEFENDANT AVERRED THE ADDRESS LISTED ON THE MORTGAGE WAS CORRECT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined a hearing should have been held before allowing the bank to use an alternate method of court authorized service on defendant. Defendant’s correct address was on the mortgage:

… [T]he defendant’s submissions “raised a question of fact as to whether it was impracticable for the plaintiff to serve [him] with the summons and complaint pursuant to CPLR 308(1), (2), or (4), such that the plaintiff was entitled to an alternative method of court-authorized service pursuant to CPLR 308(5)” … . In particular, the mortgage listed an address for the defendant in Queens and the defendant averred that he lived at that Queens address at the time, and for several years after this action was commenced. Nothing in the plaintiff’s submissions established or even addressed whether or why it was impracticable to serve the defendant at the address listed on the mortgage. Under these circumstances, the Supreme Court should not have determined the defendant’s motion without holding a hearing … . U.S. Bank N.A. v Ming Kang Low, 2021 NY Slip Op 07572, Second Dept 12-29-21

December 29, 2021/0 Comments/by Bruce Freeman

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

THE AFFIDAVIT SUPPORTING THE ADMISSIBILITY OF THE BUSINESS RECORDS OFFERED BY THE BANK IN THIS FORECLOSURE PROCEEDING DID NOT LAY A SUFFICIENT EVIDENTIARY FOUNDATION FOR THE RECORDS, RENDERING THE AFFIDAVIT INADMISSIBLE HEARSAY (SECOND DEPT).

The Second Department, reversing Supreme Court, determine the evidentiary foundation for the business records submitted by plaintiff bank (JPMorgan) in this foreclosure action was inadequate:

JPMorgan submitted, among other things, the affidavit of Nathan Abelin, a document management specialist for FNMA’s loan servicer, Seturus, Inc. (hereinafter Seturus), who, based upon his review of business records, attested to the defendant’s default in payment, JPMorgan’s standing to commence the action, and JPMorgan’s compliance with RPAPL 1304. Although Abelin averred that he was personally familiar with Seturus’s record-keeping practices and procedures, the business records he relied upon and attached to the affidavit were created by JPMorgan and another entity. Abelin failed to lay a proper foundation for these records because he did not aver either that he had personal knowledge of those entities’ business practices and procedures, or that the records “were incorporated into [Seturus’s] own records and routinely relied upon by [Seturus] in its own business”… . Accordingly, Abelin’s affidavit constituted inadmissible hearsay and lacked probative value … . Federal Natl. Mtge. Assn. v Allanah, 2021 NY Slip Op 07269, Second Dept 12-22-21

December 22, 2021/by Bruce Freeman

Foreclosure, Real Property Actions and Proceedings Law (RPAPL)

IN A FORECLOSURE PROCEEDING, THE REAL PROPERTY ACTIONS AND PROCEEDINGS LAW (RPAPL) 1304 NOTICE MUST BE SENT TO THE BORROWER IN A SEPARATE ENVELOPE; HERE OTHER NOTICES WERE INCLUDED IN THE ENVELOPE ALONG WITH THE RPAPL 1304 NOTICE; DEFENDANT’S SUMMARY JUDGMENT MOTION WAS PROPERLY GRANTED (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Duffy, determined, in a foreclosure action, the requirement that the RPAPL 1304 notice be sent to the borrower “in a separate envelope from any other mailing or notice” must be strictly complied. Because other notices were included in the same envelope, the defendant’s motion for summary judgment was properly granted:

… [T]he plaintiff acknowledged that the envelope that it sent to the defendants, which contained the requisite notice under RPAPL 1304, also included other information in two notices pertaining to the rights of a debtor in bankruptcy and in military service. Since the plaintiff failed to establish, prima facie, that it strictly complied with the requirements of RPAPL 1304, the Supreme Court properly denied those branches of its motion which were for summary judgment … . … [O]n his cross motion, [defendant] established his … entitlement to judgment as a matter of law dismissing the complaint … by showing that the plaintiff failed to comply with RPAPL 1304 when it sent additional material in the same envelope as the requisite notice under RPAPL 1304. Bank of Am., N.A. v Kessler, 2021 NY Slip Op 06979, Second Dept 12-15-21

December 15, 2021/by Bruce Freeman

Evidence, Foreclosure

THE COMPUTATIONS IN THE REFEREE’S REPORT IN THIS FORECLOSURE ACTION WERE BASED UPON BUSINESS RECORDS WHICH WERE NOT PRODUCED; THE REPORT SHOULD NOT HAVE BEEN CONFIRMED (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined the referee’s report should not have been confirmed because computations were based on business records which were not produced:

The Supreme Court should have denied the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale because the referee’s computations as to escrow disbursements and advancements and property inspection fees were premised upon unproduced business records … . JPMorgan Chase Bank, N.A. v Bracco, 2021 NY Slip Op 06839, Second Dept 12-8-21

December 8, 2021/by Bruce Freeman

IN THIS FORECLOSURE ACTION, THE ACCRUAL OF INTEREST SHOULD HAVE BEEN TOLLED DURING THE BANK’S UNEXPLAINED DELAYS IN PROCURING AND ENTERING AN ORDER OF REFERENCE (SECOND DEPT).

THE DOCUMENTS UPON WHICH THE CALCULATIONS IN THE REFEREE’S REPORT WERE BASED WERE NOT PRODUCED RENDERING THE REPORT INADMISSIBLE HEARSAY (SECOND DEPT).

THE BANK WHICH COMMENCED THE 2006 FORECLOSURE HAD ALREADY ASSIGNED THE NOTE AND MORTGAGE AND DID NOT HAVE STANDING TO FORECLOSE; THEREFORE THE STATUTE OF LIMITATIONS DID NOT START RUNNING IN 2006; THE DISSENT DISAGREED (SECOND DEPT).

THE INCLUSION OF OTHER MATERIAL IN THE ENVELOPE CONTAINING THE RPAPL 1304 NOTICE IN THIS FORECLOSURE ACTION IS A DEFENSE WHICH CAN BE RAISED AT ANY TIME AND WHICH WARRANTED SUMMARY JUDGMENT IN FAVOR OF THE DEFENDANTS (SECOND DEPT).

THE JUDGE SHOULD HAVE HELD A HEARING BEFORE GRANTING THE BANK’S MOTION FOR AN ALTERNATIVE METHOD OF SERVICE IN THIS FORECLOSURE ACTION; DEFENDANT AVERRED THE ADDRESS LISTED ON THE MORTGAGE WAS CORRECT (SECOND DEPT).

THE AFFIDAVIT SUPPORTING THE ADMISSIBILITY OF THE BUSINESS RECORDS OFFERED BY THE BANK IN THIS FORECLOSURE PROCEEDING DID NOT LAY A SUFFICIENT EVIDENTIARY FOUNDATION FOR THE RECORDS, RENDERING THE AFFIDAVIT INADMISSIBLE HEARSAY (SECOND DEPT).

THE COMPUTATIONS IN THE REFEREE’S REPORT IN THIS FORECLOSURE ACTION WERE BASED UPON BUSINESS RECORDS WHICH WERE NOT PRODUCED; THE REPORT SHOULD NOT HAVE BEEN CONFIRMED (SECOND DEPT).

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