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THE BANK IN THIS FORECLOSURE ACTION DID NOT PROVE COMPLIANCE WITH THE MAILING REQUIREMENTS OF RPAPL 1304 AND THEREFORE WAS NOT ENTITLED TO SUMMARY JUDGMENT (SECOND DEPT). ​

The Second Department, reversing Supreme Court in this foreclosure action, determined the plaintiff bank failed to demonstrate compliance with the notice requirements of RPAPL 1304 and therefore was not entitled to summary judgment:

The plaintiff … failed to demonstrate, prima facie, its compliance with RPAPL 1304, in that it failed to establish proof of the requisite mailing. The affidavit of Sarah Stonehocker, a vice president of loan documentation for Wells Fargo, the plaintiff’s loan servicer, was insufficient to establish that the notice was sent to the borrowers in the manner required by RPAPL 1304. Stonehocker averred that she had personal knowledge of Wells Fargo’s record-keeping practices and procedures, but she did not attest to having personal knowledge of the record-keeping practices and standard office mailing procedures of Walz Facility (hereinafter Walz), the entity, that according to tracking information printouts, mailed the RPAPL 1304 notices … . Nor did she attest that Walz’s records were incorporated into Wells Fargo’s own records or routinely relied upon in its business … . Thus, Stonehocker’s affidavit failed to establish “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” … .

Moreover, the plaintiff failed to establish, prima facie, that it strictly complied with RPAPL 1304 since it failed to demonstrate that it sent an individually addressed RPAPL 1304 notice to each borrower, as required by the statute … . U.S. Bank N.A. v Reddy, 2023 NY Slip Op 05417, Second Dept 10-25-23

Practice Point: Once again the bank’s failure to prove compliance with the mailing requirements of RPAPL 1304 resulted in reversal of summary judgment in this foreclosure action.

 

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ALTHOUGH THE TEN-YEAR DELAY BETWEEN THE JUDGMENT OF FORECLOSURE AND THE SALE OF THE PROPERTY WAS NOT WRONGFUL, THE DEFENDANT SHOULD NOT BE REQUIRED TO PAY THE INTEREST ACCRUED DURING THE DELAY (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined plaintiff in this foreclosure action was not entitled to interest for the ten years between the judgment of foreclosure and the sale of the property:

… [T]he plaintiff explained that his delay in proceeding with the sale of the subject property was based upon his opinion that it was not worthwhile to pursue a foreclosure sale due to market conditions and his belief that there was “no significant equity in the property” beyond the amount of the first mortgage on the property, which had priority over that held by the plaintiff. While the plaintiff’s failure to conduct the sale based on a potential financial benefit to him was not wrongful conduct, per se, his inaction was the sole cause of the accrual of more than 10 years of postjudgment interest, which is roughly equivalent to the principal amount awarded in the order and judgment of foreclosure and sale in the first instance (see CPLR 5004). Under these circumstances, it would be inequitable to charge Romano [defendant] with such accrued interest … . Krupnick v Romano, 2023 NY Slip Op 05398, Second Dept 10-25-23

Practice Point: Here the plaintiff did not sell the property until ten years after the judgment of foreclosure due to market conditions. Although the delay was not wrongful, the defendant should not be required to the pay the interest on the judgment accrued during the ten-year delay.

 

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PLAINTIFF BANK DID NOT START PROCEEDINGS TO ENTER A DEFAULT JUDGMENT WITHIN ONE YEAR AND DID NOT PRESENT AN ADEQUATE EXCUSE FOR THE DELAY; THE MOTION TO DISIMISS SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not seek a default judgment within one year and did not offer a reasonable excuse for the delay. Therefore there was no need for the court to consider whether plaintiff had a meritorious cause of action. The complaint should have been dismissed:

CPLR 3215(c) provides that “[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after [a] default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed.” “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” … . …

… [T]his matter was released from the settlement conference part in December 2011, and that the plaintiff failed to take steps to initiate proceedings for the entry of a default judgment by moving for leave to enter a default judgment and for an order of reference until March 2013, “which was too late for the plaintiff to ‘manifest an intent not to abandon the case'” … . … [Plaintiff] offered only vague, conclusory, and unsubstantiated assertions which were insufficient to excuse the plaintiff’s delay in moving for leave to enter a default judgment … .

Since [plaintiff] failed to proffer a reasonable excuse for the plaintiff’s delay, this Court need not consider whether the plaintiff had a potentially meritorious cause of action … . Citimortgage, Inc. v Kimmerling, 2023 NY Slip Op 05246, Second Dept 10-18-23

Practice Point: Pursuant to CPLR 3215(c). if the plaintiff does not start proceedings to enter a default judgment within a year and does not offer an adequate excuse for the delay, the complaint must be dismissed. There is no need for the court to consider whether plaintiff has a meritorious cause of action.

 

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EVEN THOUGH THE DEBTOR TRANSFERRED THE PROPERTY TO THE NON-DEBTOR CODEFENDANT YEARS BEFORE FILING FOR BANKRUPTCY, THE BANKRUPTCY TOLLED THE FORECLOSURE STATUTE OF LIMITATIONS FOR THE ACTION AGAINST THE DEBTOR; THE TOLL DID NOT APPLY TO THE ACTION AGAINST THE NON-DEBTOR WHICH NEVER FILED FOR BANKRUPTCY (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Connolly, reversing (modifying) Supreme Court, determined the foreclosure statute of limitations was tolled by the bankruptcy stay for the action against the defendant who filed for bankruptcy, but not for the defendant to which the property was transferred (who did not file for bankruptcy):

This appeal requires us to examine whether the stay provided by section 362 of the 1978 Bankruptcy Code (11 USC § 362[a]) operates as a “statutory prohibition” under CPLR 204(a) to toll the statute of limitations to commence a mortgage foreclosure action against a defendant debtor who no longer owns the property that is the subject of the mortgage foreclosure action. We hold that the bankruptcy stay pursuant to subsection 362(a)(1) (see 11 USC § 362[a][1]) tolls the statute of limitations for commencing a mortgage foreclosure action against the defendant debtor, regardless of whether that defendant owns the property at the time of the bankruptcy filing.

This appeal also requires us to determine whether the bankruptcy stay pursuant to subsection 362(a) applies to a nondebtor codefendant to which the defendant debtor transferred the property years before filing for bankruptcy. On the record before this Court, the plaintiff failed to meet its burden of raising a question of fact as to whether the bankruptcy stay applied to the nondebtor codefendant. Bank of N.Y. Mellon v DeMatteis, 2023 NY Slip Op 05242, Second Dept 10-18-23

Practice Point: Filing for bankruptcy tolls the foreclosure statute of limitations, even if the property had been transferred before the filing.

 

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THE FACT THAT THE HOME WAS ILLUMINATED WHEN THE PROCESS SERVER ATTEMPTED SERVICE DID NOT DEMONSTRATE DEFENDANT WAS EVADING SERVICE; THE PROCESS SERVER DID NOT ATTEMPT SERVICE AT DEFENDANT’S PLACE OF EMPLOYMENT; THE “NAIL AND MAIL” SERVICE WAS INVALID (SECOND DEPT).

​The Second Department, reversing Supreme Court, determined the “nail and mail” service of process was invalid because the process server’s affidavit did not demonstrate “due diligence” in attempting other methods of personal service:

“Service of process must be made in strict compliance with [the] statutory ‘methods for effecting personal service upon a natural person’ pursuant to CPLR 308” … . Here, the plaintiff purportedly served the defendant by the “affix and mail” method pursuant to CPLR 308(4). Service pursuant to CPLR 308(4) may be used only where service pursuant to CPLR 308(1) or (2) cannot be made with “due diligence” … . “The due diligence requirement of CPLR 308(4) must be strictly observed, given the reduced likelihood that a summons served pursuant to that section will be received” … .

Here, … the process server made prior attempts at personal delivery of the summons and complaint at the defendant’s residence at different times of the day between Thursday, December 21, 2017, and Friday, December 29, 2017. Although one of those times was on December 23, 2017, a Saturday, the attempts at service occurred at the height of the holiday season, when the defendant may have had reasons not to be home … . The process server noted that holiday lights were on in the windows of the residence on December 23, 2017, and that both floors of the residence were illuminated on December 26, 2017. Nevertheless, considering the holiday season, the process server’s observations were not a sufficient basis to believe that the defendant was evading service. Moreover, the process server stated that he was “unable” to speak to a neighbor regarding the defendant’s whereabouts.

In addition, in the year prior to the commencement of this action, the defendant was granted a loan modification, and as part of his application for a loan modification, the defendant was required to and did, in fact, disclose his employer and address of employment to the plaintiff. No attempts were made to serve the defendant at his place of employment. Bank of Am., N.A. v Fischer, 2023 NY Slip Op 05112, Second Dept 10-11-23

Practice Point: Here the process server’s affidavit did not demonstrate “due diligence” in attempting service at defendant’s home and there was no attempt to serve defendant at his place of employment. The “nail and mail” service was deemed invalid.

 

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​ A VOLUNTARY DISCONTINUANCE OF A FORECLOSURE ACTION NO LONGER STOPS THE STATUTE OF LIMITATIONS (SECOND DEPT). ​

The Second Department, reversing Supreme Court, noted that a voluntary discontinuance of a foreclosure action no longer stops the running of the statute of limitations:

… [T]he six-year statute of limitations began to run on the entire debt in July 2011, when the plaintiff’s predecessor in interest commenced the 2011 action and elected to call due the entire amount secured by the mortgage … . The instant action was commenced in October 2017, more than six years later (see CPLR 213[4] …). Under the recently enacted Foreclosure Abuse Prevention Act (L 2022, ch 821, § 8 [eff Dec. 30, 2022]), the voluntary discontinuance of the 2011 action did not “in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim, unless expressly prescribed by statute” (CPLR 3217[e]; see CPLR 203[h] … ). Under these new legal principles, the plaintiff cannot rely upon the voluntary discontinuance of the 2011 action to establish entitlement to judgment as a matter of law on the issue of whether enforcement of the mortgage loan is barred by the statute of limitations. CIT Bank, N.A. v Byers, 2023 NY Slip Op 04978, Second Dept 10-4-23

Practice Point: Pursuant to the Foreclosure Abuse Prevention Act (2022) the bank can no longer stop the running of the statute of limitations by voluntarily discontinuing the foreclosure action.

 

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THE REFEREE’S REPORT WAS BASED ON BUSINESS RECORDS WHICH WERE NOT PRODUCED RENDERING THE AFFIDAVIT HEARSAY; THE REPORT SHOULD NOT HAVE BEEN CONFIRMED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report in this foreclosure action should not have been confirmed because the relevant business records were produced to support the affidavit:

Here, the referee based her findings upon her review of the note and mortgage, the summons and complaint, and an affidavit of merit and amount due of the plaintiff’s employee, which listed the amounts due by month and the interest rate, as well as the taxes and insurance paid on the defendant’s account. However, as the defendant correctly contends, the affidavit “constituted inadmissible hearsay and lacked probative value because the affiant did not produce any of the business records [s]he purportedly relied upon in making [her] calculations” … . Moreover, while the referee’s report found that the mortgaged premises should be sold in one parcel, the referee failed to identify the documents or other sources upon which she based that finding … . Under the circumstances, the referee’s findings with respect to the total amount due and whether the subject property could be sold in one parcel were not substantially supported by the record … . Wells Fargo Bank, N.A. v Laronga, 2023 NY Slip Op 04793, Second Dept 9-27-23

Practice Point: If the referee’s report in a foreclosure action is based on business records, those records must be produced.

 

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IN THIS FORECLOSURE ACTION, THE PROOF THE NOTICE OF FORECLOSURE WAS MAILED IN ACCORDANCE WITH RPAPL 1304 WAS INSUFFICIENT; THE REFEREE’S REPORT SHOULD NOT HAVE BEEN CONFIRMED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report in this foreclosure action should not have been confirmed. The proof the notice of foreclosure was mailed in accordance with RPAPL 1304 was insufficient:

… [T]he testimony of the plaintiff’s sole witness at trial, Lawrence Nardi, a case manager for the plaintiff’s servicer, Select Portfolio Servicing (hereinafter SPS), was insufficient to establish a standard office mailing procedure designed to ensure that notices were properly addressed and mailed … . Moreover, while the plaintiff presented copies of 90-day notices containing a 20-digit bar code, those letters contained no language indicating that they were sent by first-class or certified mail, or even that a mailing was done by the U.S. Postal Service … . In addition, the plaintiff failed to present any receipt or corresponding document issued by the U.S. Postal Service showing that the notice was actually sent by first-class or certified mail more than 90 days prior to commencement of the action … . Thus, the plaintiff failed to demonstrate its strict compliance with RPAPL 1304 … . U.S. Bank N.A. v Kissi, 2023 NY Slip Op 04790, Second Dept 9-27-23

Practice Point: Here the bank did not prove the notice of foreclosure was mailed in accordance with RPAPL 1304. Therefore the referee’s report should not have been confirmed.

 

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THE PROOF THE NOTICE OF FORECLOSURE WAS MAILED TO DEFENDANT WAS INADEQUATE AND THE NOTICE DID NOT INCLUDE A STATEMENT REQUIRED BY RPAPL 1304; THEREFORE THE BANK’S SUMMARY JUDGMENT MOTION SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT). ​

The Frist Department, reversing Supreme Court in this foreclosure action, determined compliance with the notice-of-foreclosure requirements in the mortgage as well land the notice requirements imposed the RPAPL 1304 was not demonstrated. Plaintiff should not have been awarded summary judgment:

… [N]either the affidavits nor the business records made the requisite demonstration of mailing as required by the mortgage agreement … . Although one of Serterus’s [the mortgage servicer’s] employees stated that Serterus followed the prior mortgage servicer’s procedures for mailing the default notice, she stated only that she had personal knowledge of Serterus’s recordkeeping practices and procedures, not that she had personal knowledge that the notice of default was actually mailed. Nor did the employee attest to her familiarity with the mailing procedures of either Chase, which the default notice identified as the sender, or its servicer … . Although the employee stated that records of the mailing were attached, the only record of mailing of the notice was the notice itself, which contained no information about whether and when it was mailed. Similarly, the affidavit by the other Serterus employee lacked any indication of how she concluded that the contractual default notice was, in fact, sent. In addition, defendant submitted an affidavit denying ever having received the notice … .

Further, service of the 90-day notice pre-foreclosure notice required by RPAPL 1304 did not comply with the requirement of service of the default notice required under the mortgage agreement. The mortgage agreement required that the default notice thereunder inform the defendant borrower that if the default was not cured by the date stated in the notice, the lender may require immediate payment in full. However, the RPAPL 1304 notice contains no such statement. Federal Natl. Mtge. Assn. v Adago, 2023 NY Slip Op 04717, First Dept 9-26-23

Practice Point: Proof of compliance with the notice-of-foreclosure requirements in the mortgage as well as the notice requirements imposed by RPAPL 1304 are prerequisites to foreclosure.

 

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THE BANK DID NOT DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION AND DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE-OF-DEFAULT PROVISION IN THE MORTGAGE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not demonstrate standing to bring the action and did not demonstrate it complied with the notice-of-default requirement in the mortgage:

… [T]he plaintiff failed to establish … that it had standing to commence this action. Although the plaintiff attached to the complaint copies of the note and three undated purported allonges, one of which was endorsed in blank, the plaintiff did not demonstrate that the purported allonges, which were each on a piece of paper completely separate from the note and the other allonges, were “so firmly affixed” to the note “as to become a part thereof,” as required by UCC 3-202(2) … .

Additionally, the plaintiff failed to establish its status as the holder of the note at the time of the commencement of the action. In her affidavit, a representative employed by the plaintiff’s loan servicer did not attest that she was personally familiar with the plaintiff’s record-keeping practices and procedures, and therefore, the plaintiff failed to demonstrate that the records relied upon by the affiant were admissible under the business records exception to the hearsay rule … .

The plaintiff also failed to establish, prima facie, that it complied with the condition precedent contained in the mortgage agreement, which required that it provide the defendant with a notice of default prior to demanding payment of the loan in full. The evidence submitted by the plaintiff did not establish that a notice of default was mailed by first-class mail or actually delivered to the defendant’s “notice address” if sent by other means, as required by the terms of the mortgage agreement … . U.S. Bank N.A. v Yoel, 2023 NY Slip Op 04682, Second Dept 9-20-23

Practice Point: If the defendant in a foreclosure action alleges the bank lacks standing to bring the action, the bank must demonstrate it was the holder of the note at the time the action was brought. In addition, the UCC requires that allonges endorsed in blank be “firmly affixed” to the note.

 

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