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PLAINTIFF BANK IN THIS FORECLOSURE ACTION DID NOT DEMONSTRATE THE FIVE HOUSING COUNSELING AGENCIES LISTED IN THE RPAPL 1304 WERE DESIGNATED BY THE NYS DIVISION OF HOUSING AND COMMUNITY RENEWAL (DHCR) AND THEREFORE DID NOT DEMONSTRATE STRICT COMPLIANCE WITH RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined the five housing counseling agencies listed on the 90-day notice were designated by the NYS Division of Housing and Community Renewal (DHCR) at the time the notice was sent:

“It is the plaintiff’s burden, on its motion for summary judgment, to demonstrate its strict compliance with the applicable provisions of RPAPL 1304” … . As relevant here, RPAPL 1304(2) … required that the 90-day notice sent to the borrower “contain a list of at least five housing counseling agencies as designated by the division of housing and community renewal, that serve the region where the borrower resides,” and that the lists of designated agencies published on the websites of the New York State Department of Financial Services (hereinafter DFS) and the DHCR be used by the lender, assignee, or mortgage loan servicer to meet these requirements … .

… [P]laintiff failed to establish … its strict compliance with RPAPL 1304(2), as it failed to demonstrate that the five entities listed on the 90-day notices sent to the defendant were designated by the DHCR as of when the notices were sent … . Bank of N.Y. Mellon v Maldonado, 2022 NY Slip Op 05974, Second Dept 10-26-22

Practice Point: If the bank in a foreclosure action does not demonstrate strict compliance with the notice requirements in RPAPL 1304 it is not entitled to summary judgment. At time of this action, RPAPL 1304 required that five housing counseling agencies be listed in the RPAPL 1304 notice and that the agencies be designated by the Division of Housing and Community Renewal (DHCR). Here the bank didn’t demonstrate the five agencies were so designated so its motion for summary judgment shouldn’t have been granted.

 

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THE BUSINESS RECORDS UPON WHICH THE CALCULATIONS IN THE REFEREE’S REPORT WERE BASED WERE NOT SUBMITTED; 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 business records upon which the referee’s calculations were based were not submitted:

Supreme Court erred in granting the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale. “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” … . Although the plaintiff contends that the referee’s report was supported by the affidavit of an employee of its loan servicer, the plaintiff did not submit the business records upon which that employee purportedly relied in computing the total amount due on the mortgage. Consequently, the referee’s findings in that regard were not substantially supported by the record … . Bank of N.Y. Mellon v Conforti, 2022 NY Slip Op 05973, Second Dept 10-26-22

Practice Point: Here the calculations in the referee’s report were based upon business records which were not submitted. Therefore the report was not supported by the record and should not have been confirmed.

 

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DEFENDANT WAIVED THE LACK-OF-PERSONAL-JURISDICTION DEFENSE BY COUNSEL’S FILING A NOTICE OF APPEARANCE WITHOUT RAISING THE JURISDICTION OBJECTION (SECOND DEPT).

​The Second Department, reversing Supreme Court, determined the defendant waived a lack-of-personal-jurisdiction defense by counsel’s filing a notice of appearance without raising the jurisdictional objection:

“‘By statute, a party may appear in an action by attorney (CPLR 321), and such an appearance constitutes an appearance by the party for purposes of conferring jurisdiction'” … . Here, the defendant appeared in the action by its counsel’s filing of the notice of appearance … , and neither the defendant nor its attorney moved to dismiss the complaint for lack of personal jurisdiction at that time or asserted lack of personal jurisdiction in a responsive pleading. Thus, the defendant waived any objection based on lack of personal jurisdiction by failing to move to dismiss the complaint on this ground at the time its counsel filed a notice of appearance in the action or to serve an answer which raised this jurisdictional objection … . Capital One N.A. v Ezkor, 2022 NY Slip Op 05829, Second Dept 10-19-22

Similar issue and result in: HSBC Bank USA N.A. v Mohammed, 2022 NY Slip Op 05843, Second Dept 10-19-22

Practice Point: Counsel’s filing a notice of appearance without raising a lack-of-personal-jurisdiction objection waives the objection.

 

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PLAINTIFF IN THIS STRICT FORECLOSURE ACTION SHOULD HAVE BEEN ALLOWED TO AMEND THE COMPLAINT TO ADD A CAUSE OF ACTION FOR REFORECLOSURE UNDER RPAPL 1503; REFORECLOSURE IS AN OPTION WHEN THE ORIGINAL FORECLOSURE MAY BE VOID OR VOIDABLE AS AGAINST ANY PERSON (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to amend the complaint in this strict foreclosure action to add a cause of action for reforeclosure under RPAPL 1503:

Section 1503 of the Real Property Actions and Proceedings Law establishes an action in reforeclosure where an original foreclosure judgment, sale, or conveyance may be void or voidable as against any person. The statute grants a purchaser the right to maintain an action “to determine the right of any person to set aside such judgment, sale or conveyance or to enforce an equity of redemption or to recover possession of the property, or the right of any junior mortgagee to foreclose a mortgage” (id.). “Such action may be maintained even though an action against the defendant to foreclose the mortgage under which the judgment, sale or conveyance was made, or to extinguish a right of redemption, would be barred by the statutes of limitation” … . Bank of N.Y. v Karistina Enters., LLC, 2022 NY Slip Op 05828, Second Dept 10-19-22

Practice Point: Reforeclosure under RPAPL 1503 may be available when the original mortgage is void or voidable as against any person.

 

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THE BANK IN THIS FORECLOSURE ACTION DID NOT DEMONSTRATE IT WAS THE HOLDER OF THE NOTE AND DID NOT DEMONSTRATE POSSESSION OF THE NOTE AT THE TIME THE ACTION WAS BROUGHT BECAUSE THE NOTE ITSELF WAS NOT ATTACHED TO THE LOAN SERVICER’S AFFIDAVIT; THE BANK’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff bank should not have been awarded summary judgment in this foreclosure action because it did not demonstrate standing to foreclose:

… [T]here was no evidence that the plaintiff is the assignee of the note, and a triable issue of fact exists as to whether the plaintiff was the holder of the note at the time this action was commenced. A promissory note is a negotiable instrument within the meaning of the Uniform Commercial Code (see UCC 3-104[2][d] …) “holder” is “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession” (UCC 1-201[b] [21][A] …). In the present case, there is a triable issue of fact as to whether the note was properly specially endorsed by an allonge “so firmly affixed thereto as to become a part thereof” when it came into the possession of the plaintiff (UCC 3-202[2] …).

Further, the affidavit of Verdooren [loan servicer employee] and the accompanying business records were insufficient to establish the plaintiff’s standing … . Although the foundation for the admission of a business record may be provided by the testimony of the custodian, “it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” ( … see CPLR 4518[a]). Here, although Verdooren stated that Wells Fargo had possession of the note on the plaintiff’s behalf at the time the action was commenced, the documents attached to Verdooren’s affidavit failed to establish this fact. Bank of N.Y. Mellon Trust Co., N.A. v Andersen, 2022 NY Slip Op 05827, Second Dept 10-19-22

Practice Point: If the defendant raises the lack-of-standing defense in a foreclosure action, the bank must demonstrate the plaintiff was the assignee of the note and the note was in its possession when the action was brought. Here the plaintiff did not show the note was properly endorsed by an attached allonge when it came into plaintiff’s possession and the note was not attached to the loan servicer’s affidavit, rendering the affidavit hearsay.

 

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THE AFFIDAVIT SUBMITTED BY THE BANK IN THIS FORECLOSURE ACTION DID NOT PRESENT SUFFICIENT EVIDENCE TO DEMONSTRATE COMPLIANCE WITH THE NOTICE OF DEFAULT PROVISIONS OF RPAPL 1304 (SECOND DEPT). ​

The Second Department, reversing Supreme Court, in this foreclosure action, determined plaintiff bank did not not submit sufficient proof of compliance with the notice-of-default provisions of RPAPL 1304. Among other deficiencies, the documents necessary to prove the notice was mailed were not attached to the affidavit stating the mailing requirements were met:

… [P]laintiff failed to establish, prima facie, that it complied with RPAPL 1304. Although Crystal Jean McClelland, a vice president of loan documentation for the plaintiff, stated in her affidavit that the RPAPL 1304 notices were mailed by certified and regular first-class mail, and attached copies of those notices, the plaintiff failed to attach, as exhibits to the motion, any documents to prove that the mailing actually happened. The plaintiff failed to provide any documentation from the United States Post Office demonstrating that the notice was sent by registered or certified mail. Further, while McClelland attested that she was familiar with the business records maintained by the plaintiff, had personal knowledge of the operation of and the circumstances surrounding the preparation, maintenance, distribution, and retrieval of records in the plaintiff’s record-keeping system, and had knowledge of how the plaintiff drafted, generated, triggered, sent, and stored letters in the servicing process, she did not present proof of a standard office mailing procedure by the plaintiff designed to ensure that items are properly addressed and mailed. 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 establish its strict compliance with RPAPL 1304 … . Wells Fargo Bank, N.A. v Kowalski, 2022 NY Slip Op 05887, Second Dept 10-19-22

Practice Point: Another example of what the banks get wrong when trying to prove strict compliance with the foreclosure notice-of-default provisions of RPAPL 1304 at the summary judgment stage.

 

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IN THIS REVERSE MORTGAGE FORECLOSURE ACTION, DEFENDANT WAS NAMED AS A BORROWER IN THE MORTGAGE (WHICH SHE SIGNED) BUT NOT IN THE NOTE; THE NOTE AND MORTGAGE MUST BE READ AS A SINGLE AGREEMENT, RAISING A QUESTION OF FACT WHETHER DEFENDANT WAS A “SURVIVING BORROWER” THEREBY PRECLUDING FORECLOSURE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant raised a question of fact in this reverse-mortgage foreclosure action. The mortgage allowed foreclosure upon the death of a borrower (Goldman) as long as the property is not occupied by a “surviving borrower.” Although the defendant was not named as a borrower in the note, she was names as a borrower in the mortgage, which she signed:

… [T]he defendant raised a triable issue of fact as to whether she was a “surviving Borrower” under the note and mortgage, which would preclude the plaintiff from requiring payment in full upon Goldman’s death … . Although the defendant was not named as a borrower in the note, she signed the mortgage in which she was named as a borrower. “Generally, the rule is that separate contracts relating to the same subject matter and executed simultaneously by the same parties may be construed as one agreement” … . Here, the note and mortgage, construed together, were ambiguous as to whether the defendant was intended to be a borrower … . Where, as here, contract language is “reasonably susceptible of more than one interpretation, . . . extrinsic or parol evidence may be . . . permitted to determine the parties’ intent as to the meaning of that language” …  Here, the extrinsic evidence submitted by the parties raised a triable issue of fact as to whether the defendant was a borrower under the subject loan. Although Goldman, and not the defendant, was named as the borrower on various documents, including the loan application, both Goldman and the defendant signed a copy of a Truth-in-Lending Act disclosure. Moreover, in her affidavit, the defendant averred that when she and Goldman applied for the reverse mortgage, they were “assured that when [Goldman] passed away, that I would get the house and that I could continue to live there.” Nationstar Mtge., LLC v Hoar, 2022 NY Slip Op 05853, Second Dept 10-19-22

Practice Point: Here the mortgage and the note must be read as a single agreement. The fact that defendant was named in the mortgage, which she signed, but not named in the note, raised a question of fact whether she was a “surviving borrower,” precluding the reverse-mortgage foreclosure.

 

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THE JUDGE SHOULD HAVE GRANTED DEFENDANTS’ ATTORNEY’S REQUEST FOR AN INTERPRETER; A NEW HEARING TO DETERMINE THE VALIDITY OF SERVICE OF PROCESS IN THIS FORECLOSURE ACTION WAS REQUIRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendants’ attorney’s request for an interpreter should have been granted. Defendant Rowshan claimed she was never served in this foreclosure action and she testified at the hearing on the validity of the service of process:

Pursuant to 22 NYCRR 217.1(a), “[i]n all civil . . . cases, when a court determines that a party . . . is unable to understand and communicate in English to the extent that he or she cannot meaningfully participate in the court proceedings, the clerk of the court or another designated administrative officer shall schedule an interpreter . . . from an approved list maintained by the Office of Court Administration.” “‘The determination whether a court-appointed interpreter is necessary lies within the sound discretion of the trial court, which is in the best position to make the fact-intensive inquiries necessary to determine whether there exists a language barrier'” so as to require an interpreter … .

Here, the record reflects that Rowshan was unable to meaningfully participate in the hearing due to her limited capacity to understand and communicate in English … . In multiple instances throughout her testimony, Rowshan’s testimony was not responsive to the questions posed to her, Rowshan did not know the meaning of simple words, and she made confusing statements demonstrating her limitations in understanding English. * * *

Since the Supreme Court determined, after the hearing, that Rowshan’s testimony was lacking in credibility due to “contradictions, misstatements and inconsistencies,” the record reflects that the denial of the defendants’ application for an interpreter may have influenced the court’s determination. HSBC Bank USA, N.A. v Parvez, 2022 NY Slip Op 05683, Second Dept 10-12-22

Practice Point: Here the judge’s failure to grant defendants’ attorney’s request for an interpreter required reversal and a new hearing. The defendant’s testimony revealed her limited understanding of English and the court’s ruling was based upon a determination of her credibility.

 

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AN ORDER DISMISSING AN ACTION DOES NOT CONCLUDE THE ACTION WHICH CAN ONLY BE ACCOMPLISHED BY FINAL JUDGMENT ENTERED BY THE CLERK; HERE, ALTHOUGH THE ACTION HAD BEEN DISMISSED BY AN ORDER, ABSENT A JUDGMENT THE ACTION REMAINED VIABLE AND THE COURT SHOULD HAVE CONSIDERED PLAINTIFF’S POST-DISMISSAL MOTION ON THE MERITS (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Dillon, determined: (1) an order dismissing an action does not terminate the action which can only be accomplished by a judgment; and (2) here, although the action had been dismissed, the action was still viable in the absence of a judgment and plaintiff’s motion for the appointment of a receiver should have been considered on the merits:

… [A]n order of dismissal is not the same as a judgment under CPLR 5011. CPLR 5011 is routinely utilized by practitioners and courts without controversy, as its mechanics are well-understood and not particularly complicated. A judgment is a paper that reflects the resolution of an action or proceeding … . A judgment may be either interlocutory or final. It “shall refer to, and state the result of, the verdict or decision, or recite the default upon which it is based” (CPLR 5011 …). A judgment is entered by the clerk at the conclusion of an action or proceeding (see CPLR 5016[a]). An action is not actually concluded until a final judgment is entered … . HSBC Bank USA, N.A. v Rubin, 2022 NY Slip Op 05682, Second Dept 10-12-22

Practice Point: An order dismissing an action does not conclude the action. Only a final judgment entered by the clerk terminates an action. Here there was an order dismissing the action but no judgment had been entered. Therefore, plaintiff’s post-dismissal motion should have been considered on the merits.

 

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THE AFFIDAVITS SUBMITTED BY PLAINTIFF BANK IN THIS FORECLOSURE ACTION FAILED TO DEMONSTRATE DEFENDANTS’ DEFAULT AND PLAINTIFF’S COMPLIANCE WITH THE NOTICE-OF-DEFAULT PROVISIONS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff-bank in this foreclosure action did not present sufficient proof of defendants’ default and plaintiff’s compliance with the notice-of-default requirements of RPAPL 1304:

… [T]he plaintiff failed to establish, prima facie, the defendants’ default in payment by submitting the affidavit of Brian Nwabaka, an employee of its loan servicer, Bayview Loan Servicing, LLC (hereinafter Bayview). Nwabaka averred that, based upon his review of unspecified business records, the defendants defaulted in making monthly payments in October 2008. However, Nwabaka did not aver that he had personal knowledge of the defendants’ alleged default in payment. Moreover, Nwabaka failed to identify which records he relied on to assert a default in payment, and the notice of default annexed to Nwabaka’s affidavit was insufficient to establish the alleged default in payment … .

… [T]he plaintiff submitted, inter alia, the affidavits of Nwabaka and Rosalind Carroll, document coordinator for Bayview, each of whom averred that the 90-day notices were sent by certified and first-class mail. However, neither Nwabaka nor Carroll attached any documents showing proof of mailing by first-class mail, nor did they aver that they had personal knowledge of the purported mailings or were familiar with the mailing practices and procedures of Bayview … . Although Nwabaka attested to his familiarity with the mailing practices and procedures of Countrywide Home Loan, the prior loan servicer, he did not aver to familiarity with the mailing practices and procedures of Bayview, which purportedly sent the 90-day notices. Bank of N.Y. Mellon v Mannino, 2022 NY Slip Op 05675, Second Dept 10-12-22

Practice Point: Yet again the affidavits offered by plaintiff-bank in a foreclosure action were not sufficient to demonstrate defendants’ default or plaintiff’s compliance with the notice-of-default requirements of RPAPL 1304.

 

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