Foreclosure – Page 20 – New York Appellate Digest

DEFENDANT IN THIS FORECLOSURE ACTION SHOULD HAVE BEEN ALLOWED TO AMEND THE ANSWER DESPITE THE FAILURE TO MAKE A PRE-ANSWER MOTION TO DISMISS; THE DEFENDANT GETS A SECOND CHANCE TO ADD AN AFFIRMATIVE DEFENSE IF THE COURT GRANT’S LEAVE TO AMEND (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant in this foreclosure action should have been allowed to amend the answer:

… Supreme Court … should not have denied that branch of the defendant’s cross-motion which was for leave to amend his answer to assert an affirmative defense alleging lack of compliance with the condition precedent in the mortgage agreement requiring a notice of default. In the absence of prejudice or surprise to the opposing party, leave to amend a pleading should be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit (see CPLR 3025[b] …). Lateness alone is not a barrier to the amendment … . “‘It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine'” … . Moreover, although a defense is generally waived under CPLR 3211(e) where not raised in an answer or made the subject of a motion to dismiss, it can be interposed in an answer amended by leave of court pursuant to CPLR 3025(b) … . Wall St. Mtge. Bankers, Ltd. v Berquin, 2023 NY Slip Op 01025, Second Dept 2-22-23

Practice Point: The court can grant a defendant leave to amend an answer where the defendant did not make a pre-answer motion to dismiss on the ground which is the subject of the amendment. In other words, if the defendant fails to make a pre-answer motion to dismiss and the initial answer does not include the affirmative defense which could have been the basis of a motion to dismiss, the defendant gets another chance in an amendment of the answer by leave of court.

February 22, 2023

Evidence, Foreclosure

THE BUSINESS RECORDS REFERRED TO IN THE PLAINTIFF’S AFFIDAVIT DEMONSTRATING DEFENDANT’S DEFAULT IN THIS FORECLOSURE ACTION WERE NOT ATTACHED, RENDERING THE AFFIDAVIT HEARSAY (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined the failure to submit the business records referred to in plaintiff’s affidavit rendered the affidavit hearsay. Therefore plaintiff bank did not present prima facie proof of defendant’s default:

… [T]he plaintiff submitted an affidavit of an employee of its loan servicer, who averred that he reviewed certain business records maintained by the loan servicer and the defendant defaulted in making payments on the mortgage debt. However, the affiant failed to submit any business record substantiating the alleged default … . “Conclusory affidavits lacking a factual basis are without evidentiary value” … . Even assuming that the subject affidavit established a sufficient foundation for the records relied upon, “it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . Accordingly, the affiant’s assertions regarding the defendant’s alleged default, without the business records upon which he relied in making those assertions, constituted inadmissible hearsay … . MTGLQ Invs., L.P. v Rashid, 2023 NY Slip Op 00859, Second Dept 2-15-23

Practice Point: An affidavit based upon business records which are not attached is hearsay.

February 15, 2023

Foreclosure, Real Property Actions and Proceedings Law (RPAPL)

THE INCLUSION OF ADDITIONAL INFORMATION IN THE ENVELOPE CONTAINING THE RPAPL 1304 90-DAY FORECLOSURE NOTICE DOES NOT VIOLATE RPAPL 1304 AND IS NOT A PROPER BASIS FOR AWARDING SUMMARY JUDGMENT TO DEFENDANT IN A FORECLOSURE ACTION (CT APP)

The Court of Appeals, in a full-fledged opinion by Judge Wilson, reversing the appellate division, determined the inclusion of additional information in the envelope with the 90-day foreclosure notice required by RPAPL 1304 does not violate the statute and therefore is not a basis for summary judgment in favor of a defendant in a foreclosure action:

The operative statutory language here contains two requirements: (1) the notice “shall include” the specified language and information; and (2) the notice must be sent “in a separate envelope from any other mailing or notice” … . As to the first requirement, subdivision (1) does not say that the notice must state only the cautionary language set forth in the statute, but rather that the notice “shall include” that language. Where the “natural signification of the words employed” “ha[s] a definite meaning, which involves no absurdity or contradiction, there is no room for construction and courts have no right to add or take away from that meaning” Here, the notice indisputably contains all of the mandatory language set forth in the version of section 1304 (1) in effect at the time Bank of America commenced this action. The statute says that the notice “shall include” certain information; the notice here does so.

The question then is the constraint imposed by the requirement that the envelope not contain “any other mailing or notice.” The bright line rule adopted by the lower courts effectively defines “any other mailing or notice” as “any additional material or information whatsoever.” Although it might be possible to read “other notice” as the lower courts did—such that any deviation from the statutory language, however minor, would void the notice—that interpretation would stand in great tension with “shall include,” a phrase that contemplates the addition of something else. The statute must be given “a sensible and practical over-all construction, which . . . harmonizes all its interlocking provisions” … . Application of a bright line rule here would require the use of a highly constrained definition of “other,” where it is more appropriately read to mean mailings or notices “of a different kind.” Here, “other mailing or notice” more aptly refers other kinds of notices, such as pre-acceleration default notices, notices disclosing interest rate changes to borrowers with adjustable-rate mortgages … . Bank of Am., N.A. v Kessler, 2023 NY Slip Op 00804, CtApp 2-14-23

Practice Point: The inclusion of additional information in the same envelope with the RPAPL 1304 90-day foreclosure notice does not violate RPAPL 1304 and is no longer a basis for awarding summary judgment to a defendant in a foreclosure action.

February 14, 2023

Foreclosure, Real Property Tax Law

THE COUNTY HAD IN REM JURISDICTION IN THIS TAX FORECLOSURE PROCEEDING AND MADE ADEQUATE ATTEMPTS TO NOTIFY THE NECESSARY PARTIES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Rivera, affirming the appellate division, determined the county had in rem jurisdiction in this tax foreclosure proceeding and the county’s attempts to notify all parties of the tax foreclosure proceedings were sufficient:

Two fundamental legal principles govern our decision in this appeal. First, a tax foreclosure proceeding is in rem against the “res”—the taxable real property—and not an action in personam commenced against an individual to establish personal liability. Second, New York statutory law and state and federal constitutional guarantees of due process require that the petitioner in a foreclosure proceeding must attempt notice that is reasonably calculated to alert all parties with an interest in the property.

Here, defendants commenced an in rem tax foreclosure proceeding and mailed the statutorily-required notice to the publicly-listed owners of the property, posted and filed the notice, and publicized the notice in the press. Upon learning that a person listed as an owner died before the notices were issued, defendant County Treasurer also personally contacted the sole business located on the property in an effort to identify and personally inform a manager, owner, or any person in charge of the pending foreclosure proceeding. Under these circumstances, defendants provided legally adequate notice of a validly commenced tax foreclosure action. Hetelekides v County of Ontario, 2023 NY Slip Op 00803, CtApp 2-14-23

Practice Point: A tax foreclosure proceeding is an in rem proceeding against the taxable real property, not an in personam action against an individual.

February 14, 2023

Civil Procedure, Foreclosure, Trusts and Estates

DEFENDANT WAS IMPROPERLY SUBSTITUTED AS A JOHN DOE IN THIS FORECLOSURE ACTION AND BECAUSE HE WAS SUED AS AN HEIR TO THE MORTGAGEE, AND NOT AS A REPRESENTATIVE OF THE MORTGAGEE’S ESTATE, THE ACTION WAS TIME BARRED (FOURTH DEPT).

The Fourth Department, reversing Supreme Court in this foreclosure action, determined defendant was not properly substituted in the amended complaint for a John Doe in the original complaint and, because defendant was sued in his capacity as the heir of the decedent, and not as a representative of the decedent’s estate, the action was time-barred:

Plaintiff commenced this mortgage foreclosure action … against … the mortgagee, David B. Bailey (decedent), and certain “John Does” and “Jane Does” defined in the complaint as “the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises, described in the complaint.” Plaintiff subsequently discovered that decedent had died in 2018 and made an ex parte application seeking … to substitute Arthur Bailey, in his capacity as heir to decedent’s estate (defendant), as a John Doe defendant and for leave to file an amended complaint. …

We agree with defendant that his motion should be granted insofar as it seeks dismissal of the amended complaint against him. Defendant correctly contends that he was improperly substituted as John Doe #1 pursuant to CPLR 1024. Inasmuch as the original complaint “fail[ed] to mention decedent’s death” and defendant is being sued in the amended complaint in his capacity as an heir to decedent’s estate, defendant does not fit within the categories of John and Jane Does set forth in the original complaint and thus cannot be substituted therefor … . Further, although here plaintiff also filed and served an amended complaint on defendant solely in his capacity as heir to decedent’s estate and not as a representative thereof (… see generally EPTL 3-3.6 [a], [b] …), … the relevant statute of limitations expired prior to the order granting plaintiff’s ex parte application for leave to file the amended complaint (see generally CPLR 213 [4]). Citibank, N.A. v Bailey, 2023 NY Slip Op 00777, Fourth Dept 2-10-23

Practice Point: If a defendant does not fit any of the “John Doe” categories described in the original complaint, he cannot be added as a John Doe in an amended complaint.

February 10, 2023

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

THE BANK IN THIS FORECLOSURE ACTION DID NOT SUBMIT SUFFICIENT PROOF OF STANDING OR COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

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

“[A] plaintiff may demonstrate its standing in a foreclosure action through proof that it was in possession of the subject note endorsed in blank, or the subject note and a firmly affixed allonge endorsed in blank, at the time of commencement of the action” … . Although the plaintiff attached to the complaint copies of the note and a chain of purported allonges ending with an undated purported allonge endorsed in blank, the plaintiff did not demonstrate that the purported allonges, which were on pieces of paper completely separate from the note, were “so firmly affixed thereto as to become a part thereof,” as required by UCC 3-202(2) … . …

Johnson’s [the foreclosure specialist’s] affidavit did not establish proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed … Further, Johnson’s affidavit failed to address the nature of Fay’s [plaintiff’s loan servicer’s] relationship with LenderLive [third-party vendor which sent the RPAPL 1304 notice] and whether LenderLive’s records were incorporated into Fay’s own records or routinely relied upon in its business … . Thus, Johnson’s affidavit failed to lay a foundation for admission of the transaction report generated by LenderLive (see CPLR 4518[a] …). Finally, the tracking numbers on the copies of the 90-day notices submitted by the plaintiff, standing alone, did not suffice to establish, prima facie, proper mailing under RPAPL 1304 …) . US Bank N.A. v Okoye-Oyibo, 2023 NY Slip Op 00457, Second Dept 2-1-23

Practice Point: Here there was no evidence the allonge was firmly attached to the note; therefore the bank’s standing to bring the foreclosure action was not demonstrated.

Practice Point: The bank in this foreclosure action did not demonstrate compliance with the notice requirements of RPAPL 1304.

February 1, 2023

Civil Procedure, Evidence, Foreclosure

IN THIS FORECLOSURE ACTION, THE BANK’S FAILURE TO EXPLAIN WHY AN AFFIDAVIT DEMONSTRATING THE NOTICE OF DEFAULT WAS PROPERLY MAILED WAS NOT SUBMITTED WITH THE INITIAL MOTION FOR SUMMARY JUDGMENT PRECLUDED A MOTION FOR LEAVE TO RENEW (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion for leave to renew in this foreclosure action should not have been granted. Supreme Court initially denied the bank’s motion for summary judgment because the proof the notice of default was properly mailed was insufficient. The bank made a motion for leave to renew and submitted an affidavit which Supreme Court deemed sufficient. The Second Department held that the bank’s failure to explain why the affidavit wasn’t produced for the bank’s initial motion precluded renewal:

In support of that branch of its motion which was for leave to renew, the plaintiff submitted the affidavit of Alicia Hernandez, who averred that the required notice of default was mailed by first-class mail and that the address to which the notice of default was sent was the actual notice address. The only explanation offered by the plaintiff for its failure to submit the Hernandez affidavit on its prior motion was that it reasonably believed that the evidentiary submission it had made on the prior motion was sufficient to establish its prima facie case. This contention is devoid of merit. “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” … . In the instant matter, the plaintiff failed to demonstrate any valid reason why the Hernandez affidavit could not have been submitted on its prior motion. Since the Hernandez affidavit was submitted without demonstrating a reasonable justification for failing to submit it on the prior motion, renewal should have been denied … . JPMorgan Chase Bank N.A. v EY Bay Ridge, LLC, 2023 NY Slip Op 00311, Second Dept 1-25-23

Practice Point: Here in this foreclosure action, the bank’s failure to explain why proof of proper mailing of the notice of default was not presented in the initial summary judgment motion required the denial of the bank’s motion for leave to renew.

January 25, 2023

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

PLAINTIFF BANK DID NOT DEMONSTRATE THE NOTICE OF FORECLOSURE WAS MAILED IN ACCORDANCE WITH RPAPL 1304; THE BANK’S MOTION FOR SUMMARY JUDGMENT SHOULDN’T HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff bank in this foreclosure action did not demonstrate the notice of foreclosure was mailed in accordance with the requirements of RPAPL 1304:

… [T]he plaintiff relied on the affidavit of Brown, an employee of Nationstar, the plaintiff’s loan servicer, who stated that the plaintiff had mailed the RPAPL 1304 notice in accordance with the plaintiff’s practices and procedures. However, Brown then stated that her conclusion was based on her review of Nationstar’s file, and on Nationstar’s mailing practices and procedures. Thus, Brown’s affidavit failed to eliminate triable issues of fact as to who actually mailed the RPAPL 1304 notice, and the plaintiff failed to establish, prima facie, that it complied with RPAPL 1304 … . Wells Fargo Bank, N.A. v Matsuoka, 2023 NY Slip Op 00230, Second Dept 1-18-23

Practice Point: In a foreclosure action, if the bank doesn’t prove who mailed the notice of foreclosure as required by RPAPL 1304 the bank’s motion for summary judgment should not be granted.

January 18, 2023

Civil Procedure, Foreclosure, Judges

TO DEPRIVE A PLAINTIFF OF THE SIX-MONTH RECOMMENCEMENT BENEFIT OF CPLR 205(A) THERE MUST HAVE BEEN A PATTERN OF NEGLECT, NOT, AS HERE, A SINGLE INSTANCE OF NEGLECT (PLAINTIFF WAS NOT READY FOR TRIAL); THERE WAS A DISSENT (FIRST DEPT).

The First Department, reversing Supreme Court, over a dissent, determined that dismissal for failure to prosecute requires more than one instance of neglect (here plaintiff was not ready to proceed on the trial date). Rather, a pattern of neglect must be shown in order to deprive plaintiff of the six-month recommencement benefit of CPLR 205(a):

While the prior action was dismissed due to plaintiff’s unreadiness to go forward with the trial as scheduled on December 16, 2022 … , the … trial court, in dismissing the case, did not set forth on the record any additional instances of neglect by the plaintiff that could “demonstrate a general pattern of delay in proceeding with the litigation” (CPLR 205[a] …), as opposed to one particular lapse, namely, the lack of readiness on the trial date. The court’s statement that the case had been “languishing since 2010” does not suffice, inasmuch as it fails to specify any “specific conduct . . . demonstrat[ing] a general pattern of delay” (CPLR 205[a] …). As this Court has recently held, a “general pattern of delay” must comprise more than one instance of dilatory conduct … . U.S. Bank Natl. Assn. v Fox, 2023 NY Slip Op 00046, First Dept 1-5-23

Practice Point: A plaintiff will not be deprived of the six-month recommencement benefit of CPLR 205(a) unless there has been more than a single instance of neglect (here plaintiff was not ready for trial). In addition, the judge must, in the order dismissing the action, set forth the facts demonstrating a pattern of neglect before the plaintiff will be prohibited from recommencing the action.

January 5, 2023

Civil Procedure, Foreclosure

DEFENDANTS IN THIS FORECLOSURE ACTION WERE ENTITLED TO A HEARING PURSUANT TO CPLR 3408 RE: WHETHER THE BANK ENGAGED IN SETTLEMENT NEGOTIATIONS IN GOOD FAITH (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants in this foreclosure action were entitled to a hearing on whether plaintiff bank engaged in settlement negotiations in good faith:

… Supreme Court should have granted the defendants’ cross motion for a hearing to determine whether the plaintiff negotiated in good faith pursuant to CPLR 3408(f). CPLR 3408 requires the parties in a residential foreclosure action to attend settlement conferences at an early stage of the litigation, at which they must “negotiate in good faith to reach a mutually agreeable resolution” … . … [T]he circumstances surrounding its servicer’s handling of the first two loan modification applications are “relevant in the overall context of the parties’ relationship and the negotiations between them,” and thus, are relevant to the good faith inquiry … . …[D]efendants submitted evidence that the plaintiff “engaged in dilatory conduct by making piecemeal document requests, providing contradictory information, and repeatedly requesting documents which had already been provided”… . Investors Bank v Brooks, 2022 NY Slip Op 07224, Second Dept 12-21-22

Practice Point: Defendants submitted evidence the bank in this foreclosure action did not engage in settlement negotiations pursuant to CPLR 3408 in good faith. Supreme Court should have held a hearing.

December 21, 2022