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A PROPOSED LOAN MODIFICATION DID NOT REVOKE THE ACCELERATION OF THE MORTGAGE DEBT BY THE COMMENCEMENT OF THE FORECLOSURE PROCEEDINGS; THEREFORE THE FORECLOSURE ACTION WAS TIME-BARRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action had not revoked the acceleration of the mortgage debt and the action was therefore time-barred:

… [I]t is undisputed that the mortgage debt was accelerated on February 20, 2008, by the commencement of the 2008 foreclosure action … . Thus, absent an affirmative act of revocation during the ensuing six-year period, the statute of limitations to commence a new action to foreclose the mortgage debt expired on February 20, 2014 (see CPLR 213[4]). Contrary to the finding of the Supreme Court, the January 2013 proposed loan modification did not constitute an affirmative act of revocation sufficient to de-accelerate the mortgage debt. Not only did the January 2013 proposed loan modification fail to clearly and unequivocally indicate that the acceleration was being revoked and the loan was returned to installment status, but it was contingent on the Gardners’ [plaintiffs’] acceptance of the proposed loan modification as well as their successful completion of a trial period, neither of which occurred … . Moreover, contrary to the defendant’s contention, it failed to establish that the plaintiffs are barred from obtaining a judgment in their favor under the doctrine of unclean hands … . Gardner v Wells Fargo Bank N.A.., 2023 NY Slip Op 04304, Second Dept 8-16-23

Practice Point: Commencing a foreclosure action accelerates the debt and starts the statute of limitations. The acceleration can be explicitly revoked to stop the running of the statute. But the bank’s offering a loan modification is not an explicit revocation.

 

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WHERE A COMPLAINT IS DISMISSED WITHOUT A MOTION ON NOTICE, AN APPEAL IS NOT AVAILABLE BUT A MOTION TO VACATE THE DISMISSAL IS APPROPRIATE; THE BANK IN THIS FORECLOSURE ACTION SOUGHT AN ORDER OF REFERENCE WITHIN ONE YEAR OF THE DEFAULT; THEREFORE THE BANK DID NOT ABANDON THE ACTION (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff bank in this foreclosure action demonstrated it had not abandoned the action by moving for an order of reference within one year of the default judgment. The Second Department noted that where, as here, the dismissal of the complaint was not based upon a motion on notice, a motion to vacate the dismissal, as opposed to an appeal, is the appropriate procedure:

A motion pursuant to CPLR 2221(a) is not subject to any specific time limitation … . Where, as here, an order directing dismissal of a complaint is not appealable as of right because it did not decide a motion made on notice, it is procedurally proper for the aggrieved party to move pursuant to CPLR 2221(a) to vacate that order … .

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.” “It is not necessary for a plaintiff to actually obtain a default judgment within one year of the default in order to avoid dismissal pursuant to CPLR 3215(c)” … . Nor is a plaintiff required to specifically seek the entry of a judgment within a year … . As long as the plaintiff has initiated proceedings for the entry of a judgment within one year of the default, there is no basis for dismissal of the complaint pursuant to CPLR 3215(c) … .

Here, the plaintiff initiated proceedings for the entry of a judgment by moving for an order of reference in December 2008, which was within one year of the defendant’s default in the action … . Deutsche Bank Natl. Trust Co. v Campbell, 2023 NY Slip Op 04303, Second Dept 8-16-23

Practice Point: The dismissal of a complaint not based upon a motion on notice is not appealable. A motion to vacate the dismissal, for which there is no time limitation, is appropriate.

Practice Point: In a foreclosure action where defendant defaulted, the bank need only take some action within the year following the default, here seeking an order of reference, to demonstrate the action had not been abandoned.

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ALTHOUGH THE BANK IN THIS FORECLOSURE ACTION SUBMITTED AN AFFIDAVIT TO DEMONSTRATE DEFENDANT’S DEFAULT, AND THE AFFIDAVIT QUOTED FROM THE RELEVANT BUSINESS RECORDS, THE RECORDS THEMSELVES WERE NOT SUBMITTED, RENDERING THE AFFIDAVIT HEARSAY (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the band did not prove defendant defaulted on the note in this foreclosure action. The affidavit which discussed the relevant business records (apparently quoting from them) was hearsay. The business records themselves were not submitted:

While the affidavit submitted by the plaintiff made the requisite showing that the affiant was familiar with the plaintiff’s record-keeping practices and procedures with respect to the payment history, the affiant failed to submit any business record substantiating the alleged default … . “While a witness may read into the record from the contents of a document which has been admitted into evidence, a witness’s description of a document not admitted into evidence is hearsay” … . “[I]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . Christiana Trust v Corbin, 2023 NY Slip Op 04298, Second Dept 8-16-23

Practice Point: Where business records are necessary proof (here to prove defendant’s default in a foreclosure action), it is not enough to submit an affidavit quoting from the records, which is hearsay that will not support summary judgment. The records themselves must be authenticated and submitted.

 

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A TITLE HOLDER WHO DID NOT SIGN THE NOTE BUT DID SIGN THE MORTGAGE IS ENTITLED TO THE RPAPL 1304 NOTICE OF FORECLOSURE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined a defendant (Courtney) who did not sign the note but did sign the mortgage was a “borrower” entitled to notice of the foreclosure pursuant to RPAPL 1304:

… [I]t is undisputed that the plaintiff failed to serve Courtney [defendant] with notice pursuant to RPAPL 1304, and, contrary to the plaintiff’s contention, he was entitled to such notice as a “borrower” within the meaning of that statute. Although Courtney did not sign the note, both of the defendants were title owners of the subject property and each 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 . . . 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 Courtney “signed the mortgage as a ‘borrower’ and, in that capacity, agreed to pay the amounts due under the note, [he] was entitled to . . . notice pursuant to RPAPL 1304” … . Wells Fargo Bank N.A. v Carney, 2023 NY Slip Op 04231, Second Dept 8-9-23

Practice Point: A title owner who does not sign the note but signs the mortgage is a “borrower” entitled to notice of the foreclosure.

 

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IN THIS FORECLOSURE ACTION, A HEARING SHOULD HAVE BEEN HELD TO DETERMINE IF THE BANK HAD PERSONAL JURISDICTION OVER A DEFENDANT, THE BANK ESTABLISHED STANDING (NOTE AFFIXED TO THE COMPLAINT), THE BANK FAILED TO DEMONSTRATE COMPLIANCE WITH RPAPL 1303 AND 1304 (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined there was a question of fact whether a defendant was properly served, the bank demonstrated standing to foreclose by affixing the note to the complaint, and the bank failed to demonstrate compliance with RPAPL 1303 and 1304:

Ordinarily, a process server’s affidavit of service gives rise to a presumption of proper service … . However, “a sworn denial of service containing specific facts generally rebuts the presumption of proper service established by the affidavit of service and necessitates a hearing” … . “If an issue regarding service turns upon a question of credibility, a hearing should be held to render a determination on this issue” * * *

The plaintiff established, prima facie, that it had standing to commence this action by submitting in support of its motion a copy of the note, endorsed in blank, that was annexed to the certificate of merit filed with the summons and complaint at the time the action was commenced … . Where, as here, the note is affixed to the complaint, “‘it is unnecessary to give factual details of the delivery in order to establish that possession was obtained prior to a particular date'” * * *

… [T]he plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1303  … . RPAPL 1303 requires that the party foreclosing a mortgage on residential property deliver, along with the summons and complaint, a notice titled “Notice to Tenants of Buildings in Foreclosure” to any tenant of the property by certified mail, if the identity of the tenant is known to the foreclosing party … . * * *

… [T]he affiant did not state that he had personal knowledge of the purported mailings, and the documents that he relied upon to affirm that the mailings took place failed to establish that the RPAPL 1304 notices were actually mailed … by both certified and first-class mail. Since the plaintiff “failed to provide proof of the actual mailing, or 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,” the plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1304 … . U.S Bank N.A. v 22-33 Brookhaven, Inc., 2023 NY Slip Op 04228, Second Dept 8-9-23

Practice Point: Here a defendant raised a question of fact whether he was properly served, requiring a hearing.

Practice Point: In this foreclosure action the bank established standing by affixing the note to the complaint.

Practice Point: The bank’s failure to strictly comply with RPAPL 1303 or 1304 precludes summary judgment.

 

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MAILING THE NOTICE OF FORECLOSURE TO BOTH BORROWERS IN THE SAME ENVELOPE IS A VIOLATION OF RPAPL 1304 REQUIRING DENIAL OF THE BANK’S SUMMARY JUDGMENT MOTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s motion for summary judgment in this foreclosure action should not have been granted. The bank mailed the notice of foreclosure to both borrowers in the same envelope, a violation of RPAPL 1304:

… [T]he defendants are both borrowers for purposes of RPAPL 1304 and, thus, were each entitled to RPAPL 1304 notice … . Although both defendants were entitled to RPAPL 1304 notice, the plaintiff failed to establish that it sent a 90-day notice individually addressed to each defendant in separate envelopes, as required by the statute … . Rather, as the plaintiff concedes, the notices were mailed in a single envelope jointly to both defendants. Since the plaintiff failed to establish, prima facie, its strict compliance with RPAPL 1304, the Supreme Court should have denied those branches of its motion which were for summary judgment … . Deutsche Bank Natl. Trust Co. v Hennessy, 2023 NY Slip Op 03907, Second Dept 7-23-26

Practice Point: If the bank in a foreclosure action does not demonstrate strict compliance with the notice requirements of RPAPL 1304, it is not entitled to summary judgment. Here the bank violated RPALP 1304 by sending the notice of foreclosure to both borrowers in the same envelope.

 

 

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CAVEAT EMPTOR (BUYER BEWARE) DOES NOT APPLY TO JUDICIAL FORECLOSURE SALES; HERE THE BANK DID NOT DISCLOSE THE EXISTENCE OF A SENIOR MORTGAGE; SALE SET ASIDE AND DOWN PAYMENT RETURNED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the foreclosure judicial sale should have been set aside because plaintiff bank failed to disclose the existence of a senior mortgage:

“The rule that a buyer must protect himself [or herself] against undisclosed defects does not apply in all strictness to a purchaser at a judicial sale” … . “‘[A] sale of land in the haste and confusion of an auction room is not governed by the strict rules applicable to formal contracts made with deliberation after ample opportunity to investigate and inquire'” … . “‘As a general rule, a purchaser at a foreclosure sale is entitled to a good, marketable title'” … . “‘[A] purchaser at a judicial sale should not be compelled by the courts to accept a doubtful title,'” and “‘if it was bad or doubtful, he [or she] should, on his [or her] application, be relieved from completing the purchase'” … . Accordingly, since the plaintiff failed to disclose the existence of the senior mortgage at the time of sale, or otherwise, the Supreme Court improvidently exercised its discretion in denying those branches of the nonparties’ motion which were to set aside the foreclosure sale and to direct the referee to return [the buyer’s] down payment. Wells Fargo Bank, N.A. v Schepisi, 2023 NY Slip Op 03943, Second Dept 7-26-23

Practice Point: Caveat emptor (buyer beware) does not apply to judicial foreclosure sales. Here the bank’s failure to disclose the existence of a senior mortgage required the sale be set aside and the down payment returned.

 

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PURSUANT TO THE RECENTLY ENACTED FORECLOSURE ABUSE PREVENTION ACT (FAPA) THE BANK COULD NOT TAKE ADVANTAGE OF THE SIX-MONTH EXTENSION OF THE STATUTE OF LIMITATIONS BECAUSE THE FORECLOSURE ACTION WAS DISMISSED AS ABANDONED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the foreclosure action was dismissed as abandoned and therefore the bank could not take advantage of the six-month extension of the statute of limitations:

The recently enacted Foreclosure Abuse Prevention Act (…hereinafter FAPA) replaced the savings provision of CPLR 205(a) with CPLR 205-a in actions upon instruments described in CPLR 213(4) … . Under CPLR 205-a(a), “[i]f an action upon an instrument described under [CPLR 213(4)] is timely commenced and is terminated in any manner other than . . . a dismissal of the complaint for any form of neglect, including, but not limited to those specified in . . . [CPLR 3215] . . . , the original plaintiff, or, if the original plaintiff dies and the cause of action survives, his or her executor or administrator, may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months following the termination, provided that the new action would have been timely commenced within the applicable limitations period prescribed by law at the time of the commencement of the prior action and that service upon the original defendant is completed within such six-month period.” Here, the complaint in the 2009 action was dismissed insofar as asserted against Santos as abandoned pursuant to CPLR 3215(c) … . Therefore, the plaintiff is not entitled to the benefit of the savings provision of CPLR 205(a) or 205-a. U.S. Bank N.A. v Santos, 2023 NY Slip Op 03942, Second Dept 7-26-23

Practice Point: Where a foreclosure action has been dismissed as abandoned, the bank cannot take advantage of the six-month extension of the statute of limitations. The provisions of the newly enacted Foreclosure Abuse Prevention Act (FAPA) are explained.

 

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PURSUANT TO THE FORECLOSURE ABUSE PREVENTION ACT (FAPA) THE BANK IS ESTOPPED FROM CLAIMING (1) THE VOLUNTARY DISCONTINUANCE STOPPED THE RUNNING OF THE STATUTE OF LIMITATIONS, AND (2) THE DEBT WAS NOT ACCELERATED BECAUSE THE BANK DID NOT HAVE STANDING WHEN THE FORECLOSURE ACTION WAS BROUGHT (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff bank was estopped pursuant to the Foreclosure Abuse Prevention Act (FAPA) from claiming the voluntary discontinuance of the action stopped the running of the statute of limitations. The bank was also estopped by the FAPA from claiming the mortgage debt was not validly accelerated because the bank did not have standing when the foreclosure action was commenced:

… [T]he plaintiff … contends that it raised a triable issue of fact because the voluntary discontinuance of the 2008 action revoked its acceleration of the mortgage debt in that action and, thus, the instant action is timely. The plaintiff also contends that the instant action is timely because it did not have standing to commence the 2008 action, and, therefore, the mortgage debt was not validly accelerated by the commencement of that action. … [U]nder the recently enacted Foreclosure Abuse Prevention Act (… hereinafter FAPA), the voluntary discontinuance of the 2008 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'” … . Also, under FAPA, the plaintiff is estopped from asserting that the debt was not validly accelerated by the commencement of the 2008 action based on its lack of standing, and that, therefore, the instant action is timely. CPLR 213(4), as amended by FAPA, added paragraph (a), which provides that “[i]n any action on an instrument described under this subdivision, if the statute of limitations is raised as a defense, and if that defense is based on a claim that the instrument at issue was accelerated prior to, or by way of commencement of a prior action, a plaintiff shall be estopped from asserting that the instrument was not validly accelerated, unless the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated.” Here, since the 2008 action was voluntarily discontinued, and therefore was not “dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated,” the plaintiff is estopped under FAPA from asserting that the debt was not validly accelerated by the commencement of the 2008 action based on the plaintiff’s lack of standing … . Deutsche Bank Natl. Trust Co. v Wong, 2023 NY Slip Op 03908, Second Dept 7-26-23

Practice Point: The Foreclosure Abuse Prevention Act precluded the bank from claiming the voluntary discontinuance stopped the running of the statute of limitations and the bank’s lack of standing when the foreclosure action was brought invalidated the acceleration of the debt.

 

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PLAINTIFF IN THIS FORECLOSURE ACTION TIMELY COMMENCED THE ACTION PURSUANT TO THE SIX-MONTH EXTENSION OF THE STATUTE OF LIMITATIONS PROVIDED BY CPLR 205-A (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the foreclosure action was timely commenced pursuant to the six-month extension of the statute of limitations provided by CPLR 205-a:

As part of the recently enacted Foreclosure Abuse Prevention Act … , a new section, CPLR 205-a, which governs the termination of certain actions, including an action upon a bond or note, the payment of which is secured by a mortgage on real property related to real property, was enacted. As relevant here, under both CPLR 205(a) and CPLR 205-a, where an action is timely commenced and is terminated for any reason other than those specified in the statutes, the plaintiff may commence a new action upon the same transaction or occurrence within six months following the termination, provided that the new action would have been timely commenced within the applicable limitations period prescribed by law at the time of the commencement of the prior action and that service upon the original defendant is completed within such six-month period … . * * *

Here, the requirements of CPLR 205-a have been satisfied. It is uncontested that the instant action, commenced within six months of termination of the 2017 action … , would have been timely commenced in 2017, and that the instant action is based on the same occurrence as the 2017 action, namely, the default on the payment obligations under the March note (see CPLR 205-a). Further, it is undisputed that the prior action was not terminated for any reason enumerated in CPLR 205-a. Sperry Assoc. Fed. Credit Union v John, 2023 NY Slip Op 03880, Second Dept 7-19-23

Practice Point: The foreclosure action was timely commenced pursuant to CPLR 205-a, the newly enacted Foreclosure Abuse Prevention Act.

 

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