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THE AFFIDAVIT RELIED UPON BY PLAINTIFF IN THIS FORECLOSURE ACTION TO PROVE DEFENDANT’S DEFAULT DID NOT IDENTIFY OR ATTACH THE RELEVANT BUSINESS RECORDS AND THEREFORE THE AFFIDAVIT HAD NO PROBATIVE VALUE (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 affidavit attesting to defendant’s default did not identify or attach the business records relied upon:

… [A] plaintiff can establish a default by submission of an affidavit from a person having personal knowledge of the facts, or other evidence in admissible form” … . Here, in support of its motion, the plaintiff submitted an affidavit from Elizabeth A. Ostermann, a vice president of the plaintiff’s loan servicer, who attested to the borrower’s default in payment. However, Ostermann’s knowledge was based upon her review of unidentified business records, which she failed to attach to her affidavit, and therefore, her assertions regarding the borrower’s alleged default constituted inadmissible hearsay and lacked probative value … . Deutsche Bank Natl. Trust Co. v Unlimited Assets, 2022 NY Slip Op 06907, Second Dept 12-7-22

Practice Point: Here the affidavit submitted by plaintiff in this foreclosure action to prove defendant’s default did not identify or attach the relevant business records. Therefore the affidavit had no probative value.

 

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THE PROPERTY OWNER, MCWHITE, HAD BEEN DISMISSED FROM THE ORIGINAL FORECLOSURE ACTION AND HER INTEREST IN THE PROPERTY HAD NOT BEEN EXTINGUISHED BY THE JUDGMENT OF FORECLOSURE WHICH FALSELY NAMED HER AS A DEFENDANT; THE REFEREE’S DEED-HOLDER DID NOT STATE A CAUSE OF ACTION FOR REFORECLOSURE AGAINST MCWHITE AND MCWHITE WAS ENTITLED TO SUMMARY JUDGMENT ON HER QUIET TITLE CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s deed-holder’s (I & I’s) complaint failed to state a cause of action for reforeclosure (RPAPL 1503, 1523) against McWhite, the owner of the subject property. McWhite had been dismissed from the original foreclosure action because plaintiff never moved for a default judgment. The foreclosure plaintiff was aware McWhite was not included in the foreclosure when it filed its judgment, which falsely indicated McWhite’s interest in the property had been extinguished. McWhite was entitled to summary judgment on her quiet title action:

Under the circumstances of this case, I & I failed to state a cause of action against McWhite for reforeclosure because the defect in the foreclosure action was due to the willful neglect of the foreclosure plaintiff as a matter of law. The underlying objective of foreclosure actions is “to extinguish the rights of redemption of all those who have a subordinate interest in the property and to vest complete title in the purchaser at the judicial sale” … . The defect in the underlying foreclosure action was that McWhite’s interest was not validly extinguished in the judgment of foreclosure and sale due to her effective dismissal from the action. … [T]he foreclosure plaintiff here knew that McWhite had been effectively dismissed from the action and that the judgment of foreclosure and sale could not validly extinguish her interest in the premises. The foreclosure plaintiff nevertheless made a conscious decision to proceed to judgment and sale without validly extinguishing McWhite’s known interest … . * * *

Here, the judgment of foreclosure and sale was void as to McWhite and the foreclosure sale did not transfer her interest in the premises to I & I. Moreover, McWhite established, prima facie, that the foreclosure action accelerated the mortgage debt, that the foreclosure action was dismissed as abandoned pursuant to CPLR 3215(c), and the commencement of a new foreclosure action would be time-barred by the applicable six-year statute of limitations (see CPLR 213[4] … ). In opposition, I & I failed to raise a triable issue of fact. Accordingly, the Supreme Court should have granted that branch of McWhite’s motion which was for summary judgment on the complaint in the quiet title action. McWhite v I & I Realty Group, LLC, 2022 NY Slip Op 06795, Second Dept 11-30-22

Practice Point: Here the foreclosure plaintiff was aware the owner of the subject property, McWhite, had been dismissed from the original foreclosure action because plaintiff never moved for a default judgment. Yet the foreclosure plaintiff filed the judgment of foreclosure falsely indicating McWhite’s interest in the property had been extinguished. The owner of the referee’s deed therefore could not bring a reforecloscure action (RPAPL 1503, 1523) against McWhite and McWhite was entitled to summary judgment on her quite title action.

 

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PLAINTIFF BANK’S 2017 DE-ACCELERATION LETTER IN THIS FORECLOSURE ACTION WAS NOT AMBIGUOUS AND THEREFORE SERVED TO STOP THE RUNNING OF THE STATUTE OF LIMITATIONS TRIGGERED BY THE INITIAL FORECLOSURE ACTION IN 2012; THEREFORE THE SECOND FORECLOSURE ACTION BROUGHT IN 2018 WAS TIMELY (THIRD DEPT).

The Third Department, reversing Supreme Court, in a full-fledged opinion by Justice Fisher, determined plaintiff bank’s 2017 de-acceleration letter was not ambiguous and served to stop the running of the statute of limitations triggered when the mortgage loan was accelerated by initial the 2012 foreclosure action:

… [P]laintiff submitted … a copy of the September 27, 2018 de-acceleration notice sent by the mortgage servicer, indicating that “we hereby revoke any prior acceleration of the loan, withdrawing any prior demand for immediate payment of all sums secured by the security instrument and re-institute the loan as an installment loan” … . The notice advised that defendants could resume making monthly payments, which would now be accepted by plaintiff, and further provided that defendants “also have the right to pay the monthly payments that came due prior to and would have come due during the prior acceleration, which has not been revoked.” …

Supreme Court found, that this … language — “which has not been revoked” — made the entire notice unclear and ambiguous, we disagree. Such statement was advising defendants of their right to satisfy the arrears and their continuing obligation to make monthly payments; the next sentence in the notice warned that, if defendants failed to “cure the payments in arrears,” plaintiff reserved the right “to accelerate the loan anew.” To this end, defendants’ claim that this language is inconsistent with the monthly statements sent before and after the de-acceleration notice is belied by the record, which confirms that such statements sought payment on the total amount of the arrears plus the monthly mortgage payment, and not the total principal of the mortgage. HSBC Bank, USA, N.A. v Bresler, 2022 NY Slip Op 06671, Third Dept 11-23-22

Practice Point: In a foreclosure action, a de-acceleration letter will stop the running of the statute of limitations as long as the letter is clear and unambiguous. Here Supreme Court found the letter ambiguous and, therefore, ineffective; but the Third Department disagreed.

 

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THE REFEREE’S REPORT IN THIS FORECLOSURE ACTION DID NOT IDENTIFY THE RECORDS RELIED UPON FOR THE CALCULATIONS AND DID NOT ATTACH THE RELEVANT BUSINESS RECORDS; IN ADDITION THE HEARING ON NOTICE REQUIRED BY CPLR 4313 WAS NOT HELD (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report in this foreclosure action was deficient because the business records used for the calculations were not identified or attached. In addition, the referee did not hold the evidentiary hearing required by CPLR 4313:

“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” … . Here, with respect to the amount due on the mortgage loan, the referee based his findings on the affidavit of William Randolph, an employee of Seterus, Inc., the purported servicer of the mortgage loan, who asserted the total amount then due on the mortgage loan. Randolph, however, failed to identify the basis for his calculations, stating generally that the information in his affidavit was taken from the “business activities” of Seterus, Inc. Nor did Randolph attach any business records to his affidavit. Accordingly, Randolph’s assertions regarding the date of the defendant’s default in making his mortgage payments and the total sum due and owing under the mortgage loan constituted inadmissible hearsay and lacked probative value … . Thus, the referee’s findings with respect to the total amount due upon the mortgage loan, as well as payments for taxes, insurance, and other advances, were not substantially supported by the record … .

Further, the referee should not have computed the amount due on the mortgage loan without holding a hearing on notice to the defendant. CPLR 4313 provides in relevant part that “[u]nless the order of reference otherwise provides, the referee shall forthwith notify the parties of a time and a place for the first hearing to be held.” Here, there was no language in the order of reference indicating that a hearing was unnecessary. [plaintiff’s] contention that the defendant waived his right to a hearing is without merit … . Thus, the defendant was entitled to notice pursuant to CPLR 4313 … . Onewest Bank, FSB v Feffer, 2022 NY Slip Op 06707, Second Dept 11-23-22

Practice Point: In a foreclosure action, if the referee’s report does not identify the records relied upon for the calculations and does not attach those records, the report should not be confirmed. In addition, absent language in the order indication a hearing is not necessary, the calculations should not be made unless a hearing on notice pursuant to CPLR 4313 has been held.

 

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IN THIS FORECLOSURE ACTION DEFENDANT DEBTOR ENTERED A MORTGAGE MODIFICATION AGREEMENT WHICH CALLED FOR THREE PAYMENTS; DEFENDANT DEBTOR MADE FOUR ADDITIONAL PAYMENTS IN AMOUNTS HIGHER THAN CALLED FOR IN THE MORTGAGE; THE PAYMENTS AMOUNTED TO AN ACKNOWLEDGMENT OF THE MORTGAGE DEBT WHICH STARTED THE STATUTE OF LIMITATIONS FOR FORECLOSURE ON THE DATE OF THE LAST PAYMENT (CT APP). ​

The Court of Appeals, reversing the appellate division, determined the defendant debtor acknowledged the mortgage debt by paying more than was required by the Home Affordable Modification Trial Payment Plan. Therefore the statute of limitations for foreclosure started running when defendant debtor made the last payment:

In this mortgage foreclosure action, plaintiff contends that Supreme Court erred in concluding that the complaint was timely inasmuch as Maxi Jeanty (debtor) made four payments between August 2009 and March 2010 on account of the mortgage debt which were effective pursuant to General Obligations Law § 17-107 (1) to make the statute of limitations begin running anew on the date of the last such payment. We agree. Plaintiff met its prima facie burden on its motion … by submitting evidence that, after entering a Home Affordable Modification Trial Payment Plan (the Plan), the debtor made a total of seven payments from April 2009 through March 2010, each in an amount exceeding that of the regular installment payments required under the loan documents prior to the acceleration of the debt in August 2008. The first three payments were required pursuant to the Plan, but the remaining four were not. Those four payments established circumstances amounting to ‘an absolute and unqualified acknowledgment by the debtor of more being due, from which a promise may be inferred to pay the remainder’ (… see General Obligations Law § 17-107 [1]). Federal Natl. Mtge. Assn. v Jeanty, 2022 NY Slip Op 06539, CtApp 11-17-22

Practice Point: In this foreclosure action, payments by the debtor which exceeded what was called for in the modification payment plan amounted to an acknowledgment of the mortgage debt. Therefore the statute of limitations on foreclosure began to run on the date of the last of those payments.

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IN THIS FORECLOSURE DEFICIENCY-JUDGMENT CASE, THE FAIR VALUE OF THE PROPERTY WAS CONSIDERABLY HIGHER THAN THE LIQUIDATION VALUE USED BY THE COURT TO CALCULATE THE DEFICIENCY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the fair market value of the property in this foreclosure-deficiency-judgment proceeding was considerably greater than the liquidation valued used by the court:

“RPAPL 1371(2) permits the mortgagee in a mortgage foreclosure action to recover a deficiency judgment for the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher” … . “It is the lender who bears the initial burden of demonstrating, prima facie, the property’s fair market value as of the date of the auction sale” … . “When a lender moves to secure a deficiency judgment against a borrower, ‘the court . . . shall determine, upon affidavit or otherwise as it shall direct, the fair and reasonable market value of the mortgaged premises as of the date such premises were bid [o]n at auction or such nearest earlier date as there shall have been any market value thereof'” … .

Here, the record does not support a finding that the estimated liquidation value of $620,000 constituted the fair and reasonable market value of the property at the time of the foreclosure sale … . Rather, the record supports a determination that the higher estimated value of $1,060,000 presented by the plaintiff’s appraiser constituted the fair and reasonable market value of the property at the time of the foreclosure sale. Rhinebeck Bank v WA 319 Main, LLC, 2022 NY Slip Op 06507, Second Dept 11-16-22

Practice Point: Here the court should have used plaintiff’s appraiser’s determination of the fair market value of the foreclosed property to calculate the amount of the deficiency judgment pursuant to RPAPL 1371(2). The court used a much lower “liquidation value.”

 

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THE BANK IN THIS FORECLOSURE ACTION FAILED TO LAY A FOUNDATION FOR THE BUSINESS RECORDS REQUIRED TO SHOW STANDING TO BRING THE ACTION AND DID NOT SUBMIT SUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE-OF-DEFAULT MAILING REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure did not demonstrate standing the bring the action and compliance with the notice-of-default mailing requirement of RPAPL 1304:

A plaintiff has standing to maintain a mortgage foreclosure action where it is the holder or assignee of the underlying note at the time the action is commenced … . Here, in support of its motion, the plaintiff submitted the affidavit of Shamona Marisa Truesdale, a vice president of loan documentation for Wells Fargo Bank, N.A. (hereinafter Wells Fargo), the plaintiff’s loan servicer. Truesdale stated that she was familiar with Wells Fargo’s records and record-keeping practices. She further stated that the plaintiff was in possession of the note on October 8, 2009, the date this action was commenced. Truesdale’s statement that the plaintiff had possession of the note at the time this action was commenced was inadmissible hearsay. Although Truesdale stated that she was familiar with the records and record-keeping practices of Wells Fargo, the plaintiff’s loan servicer, she failed to state that she was familiar with the records and record-keeping practices of the plaintiff itself. Thus, Truesdale failed to lay a proper foundation for the admission of any of the plaintiff’s business records … . * * *

The plaintiff can establish strict compliance with RPAPL 1304 by submitting domestic return receipts, proof of a standard office procedure designed to ensure that items are properly addressed and mailed, or an affidavit from someone with personal knowledge that the mailing of the RPAPL 1304 notice actually happened … .

Here, the plaintiff relied on the affidavit of Jack Whitmarsh, a vice president of loan documentation for Wells Fargo, who averred that, based on his review of Wells Fargo’s records, the required notice was sent by both certified mail and first-class mail. The plaintiff also submitted a copy of the RPAPL 1304 notice, which was sent to the defendants at the mortgaged premises, and which was stamped with a certified mailing number, as well as a printout of a record purportedly evidencing certified mailing of the notice. However, these documents were insufficient to prove the mailing of the notice by certified mail actually occurred … . Moreover, the plaintiff failed to submit any evidence that the notice was mailed by first-class mail … . Further, Whitmarsh did not aver that he had personal knowledge of the mailing and did not describe any standard office procedure designed to ensure that the notices are mailed … . HSBC Bank USA, N.A. v Gordon, 2022 NY Slip Op 06473, Second Dept 11-16-22

Practice Point: Here the bank apparently submitted the business records necessary to demonstrate the bank’s standing to bring the foreclosure action but the accompanying affidavit did not lay a proper foundation for admitting them. In addition the bank failed to demonstrate compliance with the notice-of-default mailing requirements of RPAPL 1304.

 

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THE BANK IN THIS FORECLOSURE ACTION FAILED TO DEMONSTRATE COMPLIANCE WITH THE NOTICE-OF-DEFAULT MAILING REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

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

“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” ( … see RPAPL 1304[2]). “Proper service of RPAPL 1304 notice on the borrower or borrowers is a condition precedent to the commencement of a foreclosure action, and the plaintiff has the burden of establishing satisfaction of this condition” … .  …

… [T]he plaintiff failed to demonstrate, prima facie, that it strictly complied with the mailing requirements of RPAPL 1304. The affidavit of Daniel Delpesche, a contract management coordinator for the plaintiff’s attorney-in-fact, Ocwen Loan Servicing, LLC …, did not make the requisite showing that Delpesche was familiar with Ocwen’s mailing practices and procedures, and “therefore did not establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed” … . HSBC Bank USA, N.A. v Martin, 2022 NY Slip Op 06471, Second Dept 11-16-22

Practice Point: If the affidavit submitted by the bank in a foreclosure action to prove the notice of default was mailed in accordance with RPAPL 1304 does not state that affiant is familiar with the relevant entity’s mailing procedures the bank’s motion for summary judgment must be denied.​

 

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FAILURE TO SUBMIT THE BUSINESS RECORDS NECESSARY TO DEMONSTRATE DEFENDANTS’ DEFAULT IN THIS FORECLOSURE ACTION REQUIRED DENIAL OF THE BANK’S SUMMARY JUDGMENT MOTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s failure to submit the business records necessary to establish the defendants’ default in this foreclosure action precluded summary judgment in favor of the bank:

In support of the motion, the plaintiff submitted an affidavit from Helen Fraser, a vice president of document control of CitiMorgage, Inc. (hereinafter CitiMortgage), the plaintiff’s loan servicer. Fraser stated that she was familiar with the records and record-keeping practices of both CitiMortgage and the plaintiff. Fraser stated that the defendants “have defaulted under the terms and conditions of the above stated Note by failing to make the July 12, 2016 payment and all successive payments thereafter.” She did not attach any business records to her affidavit. * * *

… [I]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . Here, Fraser’s assertion in her affidavit regarding the defendants’ default, without attaching the business records upon which she relied in making that assertion, constituted inadmissible hearsay … . Citibank, N.A. v Potente, 2022 NY Slip Op 06464, Second Dept 11-16-22

Similar issues and result in Wells Fargo Bank, N.A. v Pane, 2022 NY Slip Op 06516, Second Dept 11-16-22

Practice Point: Yet again: An affidavit which is not supported by the attachment of the business records referenced in the affidavit is considered hearsay which cannot be the basis for summary judgment in favor of the bank in a foreclosure action.

 

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THE SIX-MONTH PERIOD FOR REFILING A COMPLAINT AFTER DISMISSAL (CPLR 205(A)) BEGAN TO RUN ONLY WHEN THE APPEAL OF THE DENIAL OF THE MOTION TO VACATE THE DISMISSAL WAS EXHAUSTED (FOURTH DEPT).

​The Fourth Department, reversing Supreme Court, determined the six-month period for filing a new complaint after dismissal started to run when the appeal of the denial of the motion to vacate the dismissal was exhausted:

Where a plaintiff has sought to appeal as of right from the denial of a motion to vacate the dismissal of its action, the action terminates for purposes of CPLR 205 (a) when the appeal “is truly ‘exhausted,’ either by a determination on the merits or by dismissal of the appeal, even if the appeal is dismissed as abandoned … . “Here, the dismissal of the 2012 action “did not constitute a final termination of that action within the meaning of CPLR 205 (a) because plaintiff’s predecessor in interest was statutorily authorized to file a motion to vacate [the dismissal] and to appeal from the denial of that motion” … . The 2012 action thus terminated for purposes of CPLR 205 (a) on November 30, 2018, when this Court dismissed the appeal and plaintiff’s predecessor in interest thereby exhausted its right of appeal … . Inasmuch as the instant action was commenced within six months of November 30, 2018, we conclude that it was timely commenced. MTGLQ Invs., LP v Zaveri, 2022 NY Slip Op 06335, Fourth Dept 11-10-22

Practice Point: The six-month period for refiling a complaint after dismissal (CPLR 208(a)) begins to run only after the appeal from the denial of a motion to vacate the dismissal is exhausted.

 

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