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ALTHOUGH THE STATUTE OF LIMITATIONS STARTED RUNNING WHEN THE FORECLOSURE ACTION WAS FIRST BROUGHT, THE SUBSEQUENT LOAN MODIFICATION AGREEMENT, ENTERED WHILE THE FORECLOSURE ACTION WAS STILL PENDING, STARTED THE STATUTE OF LIMITATIONS RUNNING ANEW (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that, although the six-year statute of limitations for the original foreclosure action had run, the loan modification agreement, which was entered after the foreclosure action was started and while it was still pending, restarted the statute of limitations:

RPAPL 1501(4) provides, in pertinent part, that “[w]here the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage . . . has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action . . . to secure the cancellation and discharge of record of such encumbrance.” Pursuant to General Obligations Law § 17-105, however, “a promise to pay the mortgage debt, if made after the accrual of a right of action to foreclose the mortgage . . . by the express terms of a writing signed by the party to be charged is effective . . . to make the time limited for commencement of the action run from the date of the . . . promise”… .  14 Fillm Corp. v Mid-Island Mtge. Corp., 2023 NY Slip Op 03759, Second Dept 7-12-23

Practice Point: Even if a foreclosure had been filed, starting the running of the statute of limitations, a loan modification agreement entered while the the foreclosure action was pending starts the running of the statute of limitations all over again.

 

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​IN A FORECLOSURE PROCEEDING, A REFEREE’S REPORT BASED UPON UNPRODUCED BUSINESS RECORDS SHOULD NOT BE CONFIRMED BY THE COURT (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the referee’s report in this foreclosure action should not have been confirmed because the referenced business records were not attached to the report:

“The report of a referee should be confirmed whenever the findings are substantially supported by the record, and the referee has clearly defined the issues and resolved matters of credibility” … . However, computations based on the “review of unidentified and unproduced business records . . . constitute[ ] inadmissible hearsay and lack[ ] probative value” … .

… [T]he referee’s report was improperly premised upon unproduced business records. … Therefore, the referee’s findings were not substantially supported by the record … . Nationstar Mtge., LLC v Douglas, 2023 NY Slip Op 03798, Second Dept 7-12-23

Practice Point: In a foreclosure proceeding, if the business records upon which the referee’s report is based are not produced, the court should not confirm the report because the report is not “substantially supported by the record.”

 

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THE PROOF THE FORECLOSURE NOTICE WAS MAILED IN ACCORDANCE WITH RPAPL 1304 WAS INSUFFICIENT (SECOND DEPT).

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

… [T]he copy of the notice contains no indication that it was sent by registered or certified mail, or by first-class mail … . Nor is there “[a] copy of any United States Post Office document indicating that the notice was sent by registered or certified mail as required by the statute” … . … [The affiant] did not attest to having any personal knowledge of, or familiarity with, [the company’s] actual standard mailing procedures during the relevant time period, which were designed to ensure that items are properly addressed and mailed … . Accordingly, [the affiant’s] assertion in his affidavit that the RPAPL 1304 notice was sent to the defendant on March 14, 2013, at the address of the mortgaged premises, “by registered or certified and first-class mail,” was unsubstantiated and conclusory … . Ditech Servicing, LLC v McFadden, 2023 NY Slip Op 03452, Second Dept 6-28-23

Practice Point: Yet another instance of the failure to prove the notice of foreclosure was mailed in accordance with RPAPL 1304.

 

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IN THIS SIDEWALK SLIP AND FALL CASE, THE DEFENDANT PROPERTY OWNERS HAD DIED AT THE TIME THE ACTION AGAINST THEM WAS COMMENCED; THAT ACTION WAS A NULLITY; THEREFORE THE MOTION TO AMEND THE COMPLAINT TO SUBSTITUTE THE EXECUTOR SHOULD HAVE BEEN DENIED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the sidewalk slip and fall action brought against defendant property owners was a nullity because the property owners had died before the suit was commenced. Because the action was a nullity, the motion to amend the complaint to substitute the executor as a party should not have been granted:

“A party may not commence a legal action or proceeding against a dead person” … . The deaths of Leon Chain and Hanka Chain (hereinafter together the decedents) prior to the commencement of this action rendered the action, insofar as asserted against them, a legal nullity from its inception. The plaintiff was instead required to commence an action against the personal representative of the decedents’ estates … . Moreover, even assuming that Ziv was the duly appointed executor of each of the decedents’ estates, the decedents were never a party to the action since they died before the commencement of the action, and the decedents’ estates could not be brought into the action by substitution or by amendment of the caption (see CPLR 1015[a]; 1021 …). The plaintiff’s attempt to amend the complaint to designate the purported executor of the decedents’ estates as a defendant in the place of the decedents was invalid and ineffective to retroactively render the action properly commenced against the decedents’ estates … . Hussain v Chain, 2023 NY Slip Op 03455, Second Dept 6-28-23

Similar issues and result in a foreclosure action: Waterfall Victoria Master Fund, Ltd. v Estate of Dennis F. Creese, 2023 NY Slip Op 03497, Second Dept 6-28-23

Practice Point: Here the defendants had died at the time the action was commenced. That action was therefore a nullity. The complaint could not be amended to substitute the executor as a party.

 

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UNDER THE 2022 FORECLOSURE ABUSE PREVENTION ACT BANKS CAN NO LONGER STOP THE RUNNING OF THE STATUTE OF LIMITATIONS BY VOLUNTARILY DISCONTINUING A FORECLOSURE ACTION (SECOND DEPT).

​The Second Department, reversing Supreme Court, determined the foreclosure action was time-barred noting that the 2022 Foreclosure Abuse Prevention Act prohibited banks from stopping the running of the statute of limitations by voluntarily discontinuing the action:

… [T]he voluntary discontinuance of the 2010 foreclosure action did not serve to reset the statute of limitations. Under the Foreclosure Abuse Prevention Act (L 2022, ch 821, § 8 [eff Dec. 30, 2022]), the voluntary discontinuance of the 2010 foreclosure 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] …).  ARCPE 1, LLC v DeBrosse, 2023 NY Slip Op 03498, Second Dept 6-28-23

Practice Point: Under the 2022 Foreclosure Abuse Prevention Act banks can no longer stop the running of the statute of limitations by voluntarily discontinuing the foreclosure action.

 

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THE BANK DID NOT DEMONSTRATE IT HAD STANDING TO FORECLOSE; THERE WAS INSUFFICIENT PROOF THE ALLONGE WAS FIRMLY AFFIXED TO THE NOTE AS REQUIRED BY UCC 3-202 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not prove it had standing to bring the action:

A plaintiff has standing to commence a mortgage foreclosure action when it is the holder or assignee of the underlying note at the time the action is commenced … . The plaintiff can establish standing by attaching a properly endorsed note to the complaint when commencing the action … . However, where an endorsement is on an allonge to the note, the plaintiff must establish that the allonge was “so firmly affixed to the note so as to become a part thereof” pursuant to UCC 3-202(2) at the time the action was commenced … . “Where there is no allonge or note that is either endorsed in blank or specially endorsed to the plaintiff, mere physical possession of a note at the commencement of a foreclosure action is insufficient to confer standing or to make a plaintiff the lawful holder of a negotiable instrument for the purposes of enforcing the note” … .

Here, the plaintiff’s submissions failed to eliminate triable issues of fact as to whether the allonges were so firmly affixed to the note as to become a part thereof … . [The bank vice president’s] affidavit did not clarify whether the allonges were firmly affixed to the note … . U.S. Bank N.A. v Duvivier, 2023 NY Slip Op 03496, Second Dept 6-28-23

Practice Point: If the endorsement is on an allonge to the note, the allonge must be firmly affixed to the note (UCC 3-202). If the bank does not prove the endorsed allonge is firmly affixed to the note, it has not proved standing to foreclose.

 

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THE BANK’S SECOND MOTION IN THIS FORECLOSURE ACTION DID NOT MEET THE CRITERIA FOR A MOTION TO RENEW AND VIOLATED THE “SUCCESSIVE SUMMARY JUDGMENT MOTION” RULE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the second motion for summary judgment made by the bank in this foreclosure action was not a valid motion to renew and violated the “successive summary judgment rule:”

“While a court has discretion to entertain renewal based on facts known to the movant at the time of the original motion, the movant must set forth a reasonable justification for the failure to submit the information in the first instance. When no reasonable justification is given for failing to present new facts on the prior motion, the Supreme Court lacks discretion to grant renewal” … . … [P]laintiff failed to provide any justification for its failure to present the new evidence supporting the second 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'” … . Here, the plaintiff failed to present good cause.

The second motion also did not fit within the “narrow exception” to the successive summary judgment rule … . This narrow exception permits entertainment of a successive motion when it is “substantively valid and the granting of the motion will further the ends of justice and eliminate an unnecessary burden on the resources of the courts” … . Here, entertaining a second summary judgment motion involved review of multiple disputed issues, including whether the plaintiff established the defendants’ default, the plaintiff’s compliance with the contractual condition precedent, and the plaintiff’s compliance with RPAPL 1304. Thus, rather than eliminating a burden on the Supreme Court, the court’s consideration of the second motion actually imposed an additional burden on the court. “‘Successive motions for the same relief burden the courts and contribute to the delay and cost of litigation. A party seeking summary judgment should anticipate having to lay bare its proof and should not expect that it will readily be granted a second or third chance'” … . Wells Fargo Bank, N.A. v Gittens, 2023 NY Slip Op 03373, Second Dept 6-21-23

Practice Point: The failure to explain why available evidence was not submitted in the first summary judgment motion will result in denial of a motion to renew.

Practice Point: The second motion here violated the “successive summary judgment motion” rule. The criteria are explained.

 

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THE BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 IN THIS FORECLOSURE ACTION (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not present sufficient proof of compliance with the notice requirements of RPAPL 1304:

… [A]lthough the affidavit of the servicing agent stated that the 90-day notice was mailed to the defendant by certified mail and regular first-class mail, the affiant did not attest to having personally mailed the notices, nor that she was familiar with the mailing procedures of the entity that mailed the notices and that such procedures were designed to ensure that the notices were properly addressed and mailed …  The plaintiff also failed to submit documentation from the United States Postal Service proving the first-class mailing of the 90-day notice to the defendant … . U.S. Bank Trust, N.A. v Smith, 2023 NY Slip Op 03372, Second Dept 6-21-23

Practice Point: Once again, failure to demonstrate the RPAPL 1304 notice of foreclosure was properly mailed results in reversal of summary judgment.

 

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PLAINTIFF-BANK’S MOTION TO EXTEND THE TIME TO SERVE THE SUMMONS AND COMPLAINT IN THE INTEREST OF JUSTICE SHOULD HAVE BEEN GRANTED, CRITERIA EXPLAINED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined it was an abuse of discretion to deny plaintiff-bank’s CPLR 306-b motion to extend the time for the service of the summons and complaint:

CPLR 306-b provides, in pertinent part, that “[s]ervice of the summons and complaint . . . shall be made within one hundred twenty days after the commencement of the action . . . . If service is not made upon a defendant within the time provided in this section, the court, upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service.”

“The interest of justice standard requires a careful judicial analysis of the factual setting of the case and a balancing of the competing interests presented by the parties. Unlike an extension request premised on good cause, a plaintiff need not establish reasonably diligent efforts at service as a threshold matter. However, the court may consider diligence, or lack thereof, along with any other relevant factor in making its determination, including expiration of the Statute of Limitations, the meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff’s request for the extension of time, and prejudice to defendant” … . CPLR 306-b “empowers a court faced with the dismissal of a viable claim to consider any factor relevant to the exercise of its discretion. No one factor is determinative—the calculus of the court’s decision is dependent on the competing interests of the litigants and a clearly expressed desire by the Legislature that the interests of justice be served” … .

Here, the Supreme Court improvidently exercised its discretion in denying the plaintiff’s motion pursuant to CPLR 306-b to extend the time to serve Cruz with the summons and complaint in the interest of justice, considering, inter alia, the expiration of the statute of limitations, the meritorious nature of the plaintiff’s cause of action, the plaintiff’s prompt request for the extension, and the lack of demonstrable prejudice to [defendant]. Deutsche Bank Trust Co. Ams. v Lottihall, 2023 NY Slip Op 02999, Second Dept 6-7-23

Practice Point: The criteria for an “interest of justice,” versus a “good cause shown,” extension of time to serve the summons and complaint pursuant to CPLR 306-b explained.

 

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SENDING THE 90-DAY FORECLOSURE NOTICE TO THE TWO BORROWERS IN THE SAME ENVELOPE VIOLATED RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined sending the notice of foreclosure to the two borrowers in the same envelope violated RAPL 1304 which must be strictly complied with:

RPAPL 1304(1) provides that, “at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, . . . including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower.” “The statute further provides the required content for the notice and provides that the notice must be sent by registered or certified mail and also by first-class mail to the last known address of the borrower” … . Strict compliance with RPAPL 1304 notice to the borrower is a condition precedent to the commencement of a foreclosure action … .

Here, the defendants established, prima facie, that the plaintiff did not comply with RPAPL 1304, since the 90-day notice was jointly addressed to both of the defendants … . Moreover, while the plaintiff contends that two identical copies of the notice were included in the mailing, one for each of the defendants, the plaintiff concedes that they were mailed in the same envelope, which was also improper … . HSBC Bank USA, N.A. v Schneider, 2023 NY Slip Op 02869, Second Dept 5-31-23

Practice Point: To warrant summary judgment in a foreclosure action the bank must demonstrate strict compliance with RPAPL 1304. Here the statute was violated by sending the 90-day foreclosure notice to both borrowers in the same envelope.

 

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