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PLAINTIFF BANK DID NOT SEND THE 90-DAY FORECLOSURE NOTICE IN A SEPARATE ENVELOPE AS REQUIRED BY RPAPL 1304; THEREFORE THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED AND DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff’s motion for summary judgment in this foreclosure action should not have been granted because the plaintiff did not sent the RPAPL 1304 notice in a separate envelope. Defendants’ motion for summary judgment should have been granted for the same reason:

… [T]he copies of the 90-day notice submitted by the plaintiff in support of its motion included additional notices not contemplated by RPAPL 1304(2). The plaintiff acknowledged that the envelopes it sent to the defendants, which contained the requisite RPAPL 1304 notice, also included a separate notice pertaining to the rights of a debtor in military service and a debtor in bankruptcy, among others. This Court recently determined, in Bank of America, N.A. v Kessler (202 AD3d 10), that RPAPL 1304(2) requires that the requisite notice under its provision be mailed in an envelope separate from any other notice. Since the plaintiff failed to demonstrate that the RPAPL 1304 notice was “served in an envelope that was separate from any other mailing or notice” … . …

… [A]s the defendants established their prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against them “by showing that the plaintiff failed to comply with RPAPL 1304 when it sent additional material in the same envelopes as the requisite notice under RPAPL 1304,” and as the plaintiff failed to raise a triable issue of fact in opposition, the Supreme Court should have granted the defendants’ cross motion for summary judgment dismissing the complaint insofar as asserted against them … . Wells Fargo Bank N.A. v Bedell, 2022 NY Slip Op 03413, Second Dept 5-25-22

Practice Point: If the bank doesn’t send the foreclosure notice required by RPAPL 1304 in a separate envelope, the defendants in the foreclosure action are entitled to summary judgment.

 

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ONLY AN EXPRESS ACKNOWLEDEMENT OF THE MORTGAGE DEBT PURSUANT TO GENERAL OBLIGATIONS LAW 17-105 COULD REVIVE OR TOLL THE STATUTE OF LIMITATIONS IN THIS FORECLOSURE ACTION; THE REFERENCES TO THE MORTGAGE DEBT IN FINANCIAL STATEMENTS AND TAX RETURNS PROVIDED TO THE MORTGAGOR BY THE MORTGAGEE WERE NOT ENOUGH (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Troutman, over an extensive two-judge dissent, determined that the statute of limitations on the underlying foreclosure action was not tolled based upon acknowledgments of the mortgage debt in financial statements and tax returns. Rather, pursuant to General Obligations Law 17-105, only and express promise to pay the debt would revive an otherwise expired statute of limitations:

The primary question presented by this appeal is which section of article 17 of the General Obligations Law governs the tolling or revival of the statute of limitations period in an action pursuant to Real Property Actions and Proceedings Law (RPAPL) § 1501 (4). RPAPL § 1501 (4) allows a party to cancel a mortgage where the limitations period for commencing a foreclosure action has expired. We hold that General Obligations Law section 17-105, not section 17-101, governs whether the statute of limitations has been tolled or revived in such an action. * * *

Under General Obligations Law § 17-105 (1), the Partnership’s (mortgagee’s) actions in this case could only toll or revive the statute of limitations for the Council (mortgagor) to bring a foreclosure action if the Partnership made an “express” “promise to pay the mortgage debt.” Accordingly, the Appellate Division correctly concluded that the Partnership’s delivery of its financial statements and tax returns to Council did not meet the requirements of section 17-105 (1) because they were not express promises to pay the mortgage debt (189 AD3d at 28).  Batavia Townhouses, Ltd. v Council of Churches Hous. Dev. Fund Co., Inc., 2022 NY Slip Op 03361, CtApp 5-24-22

Practice Point: Here references to the mortgage debt in financial statements and tax returns provided to the mortgagor by the mortgagee did not revive or toll the statute of limitations on the underlying foreclosure action. Pursuant to General Obligations Law 17-105, only an express acknowledgement of the mortgage would revive the action.

 

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​ WHEN THE FAILURE TO PRESENT FACTS IN A PRIOR MOTION IS NOT JUSTIFIED, THE SECOND MOTION DOES NOT FIT THE CRITERIA FOR A MOTION TO RENEW OR AN ALLOWABLE SUCCESSIVE SUMMARY JUDGMENT MOTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s motion in this foreclosure action did not fit the criteria for a motion to renew or an allowable successive summary judgment motion. The judgment of foreclosure should not have been granted;

“When no reasonable justification is given for failing to present new facts on the prior motion, the Supreme Court lacks discretion to grant renewal” … . Here, the plaintiff failed to provide any justification for its failure to present the new evidence supporting its renewal 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” … . Wells Fargo Bank, N.A. v Osias, 2022 NY Slip Op 03275, Second Dept 5-18-22

Practice Point: Attempting to bring a second motion which includes “new” facts, without a reasonable justification for leaving them out of the first motion, does not fit the criteria for a motion to renew or an allowable successive summary judgment motion.

 

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IN THIS FORECLOSURE ACTION, THE RPAPL 1304 NOTICE DID NOT INCLUDE THE REQUIRED INFORMATION AND THE PROOF OF MAILING OF THE NOTICE WAS DEFICIENT; PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined proof of mailing of the RPAPL 1304 notice and failure to comply with the content-requirements for the RPAPL 1304 notice in this foreclosure action warranted denial of the plaintiff’s motion for summary judgment:

The respondent failed to establish the plaintiff’s strict compliance with RPAPL 1304. The respondent submitted an affidavit of Alfreda Johnson, a “Foreclosure Specialist” of Fay Servicing, LLC (hereinafter Fay), the plaintiff’s servicer. Johnson did not have personal knowledge of the purported mailing … . Furthermore, while Johnson averred that she was familiar with Fay’s mailing practices and procedures, the record indicates that the notices were not mailed by Fay. The record indicates that the notices were mailed by an entity known as “Seterus” … . Johnson does not address this fact at all, let alone demonstrate that she was familiar with Seterus’s mailing practices and procedures. Thus, the respondent failed to establish that the 90-day notices were properly mailed in strict compliance with RPAPL 1304 … .

Moreover, the content of the 90-day notices did not strictly comply with RPAPL 1304 … . Here, the 90-day notices omitted information that was required by RPAPL 1304 … . Prof-2014-S2 Legal Tit. Trust II v DeMarco, 2022 NY Slip Op 03263, Second Dept 5-18-22

Practice Point: Here, in this foreclosure action, not only was proof of mailing the RPAPL 1304 notice insufficient, but the notice did not include all the required information.

 

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ALTHOUGH A FORECLOSURE ACTION USUALLY ACCELERATES THE DEBT AND STARTS THE STATUTE OF LIMITATIONS CLOCK, HERE THE DEFENDANTS-BORROWERS DID NOT DEMONSTRATE THAT THE 2009 FORECLOSURE ACTION SOUGHT THE ENTIRE AMOUNT DUE (THE 2009 COMPLAINT WAS NOT SUBMITTED); THEREFORE THE DEFENDANTS DID NOT DEMONSTRATE THE INSTANT ACTION IS UNTIMELY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendants-borrowers in this foreclosure action did not demonstrate the debt was accelerated by the 2009 foreclosure action. Therefore the complaint in the instant action should not have been dismissed as untimely:

… [T]he defendants failed to demonstrate that the debt was validly accelerated by the commencement of the 2009 action. In support of their respective motions, the defendants submitted only the summons with notice from the 2009 action, which did contain a statement that BAC sought “payment of the full balance due,” and a printout of the WebCivil Supreme-Case Detail related to the instant action … . Since the defendants did not submit the complaint or the notice of pendency filed in the 2009 action, it cannot be determined whether those documents elected to accelerate the mortgage loan … . GSR Mtge. Loan Trust v Epstein, 2022 NY Slip Op 03232, Second Dept 5-18-22

Practice Point: To demonstrate that a prior foreclosure action accelerated the debt and thereby started the statute of limitations clock, proof that the prior action called for payment of the entire debt must be submitted. Here the defendants-borrowers did not submit the 2009 foreclosure complaint and therefore did not prove the debt was accelerated by the 2009 foreclosure action.

 

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THE BANK’S PROOF OF DEFENDANT’S DEFAULT, MAILING OF THE NOTICE OF DEFAULT, AND COMPLIANCE WITH THE NOTICE REQUIREMENTS OF THE MORTGAGE IN THIS FORECLOSURE ACTION WAS INSUFFICIENT (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the bank’s proof of defendant’s default and mailing of the notice of default was insufficient in this foreclosure action:

… [T]he plaintiff failed to establish its prima facie entitlement to judgment as a matter of law, as it failed to submit evidence demonstrating the defendant’s default and that it complied with the notice of default provisions in the mortgage. In support of its motion, the plaintiff submitted an affidavit of Sonja Manderville, who averred that, in her position as a contract management coordinator of … the plaintiff’s loan servicer, she has access to and is familiar with the business records related to the mortgage loan at issue. She averred that the records “were made at or near the time of the Transactions documented thereby by a person with knowledge of the Transactions . . . and are maintained in the regular and usual course of business.” However, Manderville failed to aver to familiarity with the record-keeping practices and procedures of the entity that generated the records or establish that the records provided by the maker were incorporated into the recipient’s own records and routinely relied upon by the recipient in its own business … .

… Manderville failed to identify the records upon which she relied, and the plaintiff failed to submit copies of the records themselves. …

… Manderville’s assertions regarding the purported mailing of the notice of default were insufficient to establish a mailing … .Manderville failed to allege familiarity with the mailing practices and procedures of the third party that allegedly sent the notice of default in 2009 … . Since the plaintiff failed to provide evidence 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 that the notice of default was sent in accordance with the terms of the mortgage … . Deutsche Bank Natl. Trust Co. Ams. v Banu, 2022 NY Slip Op 03231, Second Dept 5-18-22

Practice Point: In this foreclosure action, the affidavit submitted by the bank to demonstrate defendant’s default and the mailing of the notice of default was deficient and the relevant business records were not submitted. These “foundational-affidavit” problems and the failure to submit the records referenced in the foundational affidavit have required reversal on appeal in literally hundreds cases over the last five or more years.

 

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THE BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE “SEPARATE ENVELOPE” RULE AND THEREFORE DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304; THE BANK’S SUMMARY JUDGMENT MOTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action failed to demonstrate the 90-day notice required by RPAPL 1304 was sent to the defendant in a separate envelope:

RPAPL 1304(2) also provides, in relevant part, that “[t]he notices required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice.”

The plaintiff failed to establish, prima facie, that it sent 90-day notices to the defendant “in a separate envelope from any other mailing or notice” … . Since the plaintiff failed to establish, prima facie, its strict compliance with RPAPL 1304, the Supreme Court should have denied those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against the defendant and dismissing his answer with affirmative defenses and for an order of reference, regardless of the sufficiency of the opposing papers … . Deutsche Bank Natl. Trust Co. v Bonal, 2022 NY Slip Op 03230, Second Dept 5-18-22

Practice Point: To warrant summary judgment in a foreclosure action, the bank must demonstrate that the RPAPL 1304 notice was sent to each borrower in a separate envelope which includes no other materials.

 

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THE PLAINTIFF IN THIS FORECLOSURE ACTION DID NOT DEMONSTRATE THE INTEREST CALCULATION WAS DONE USING THE METHOD REQUIRED BY THE NOTE AND THE RELEVANT BUSINESS RECORDS WERE NOT SUBMITTED; THE REFEREE’S 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. There was no evidence the interest calculation was done in the manner required by the note and the relevant business records were not submitted:

… Supreme Court should have denied the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale because the plaintiff failed to present evidence that the interest on the loan was calculated using the method set forth in the note, and the referee’s computations, including the amount due and owing and payments for taxes, insurance, and other advances, were premised upon unproduced business records … . Bank of N.Y. Mellon v Singh, 2022 NY Slip Op 03221, Second Dept 5-18-22

Practice Point: In a foreclosure action, the interest must be calculated using the method required by the note, and any relevant business records must be produced in order to warrant confirmation of the referee’s report.

 

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THE NOTICE SENT TO THE BORROWERS IN 2012 WAS NOT SUFFICIENT TO ACCELERATE THE MORTGAGE DEBT; THEREFORE THE FORECLOSURE COMPLAINT WAS PROPERLY DISMISSED (SECOND DEPT). ​

The Second Department determined the notice sent to the defendants was not sufficient to accelerate the mortgage debt and, therefore, the debt had not been accelerated at the time this foreclosure action was brought: Supreme Court properly dismissed the foreclosure complaint:

\… [T]he defendants’ submissions in support of that branch of their cross motion which was for summary judgment dismissing the complaint demonstrated that the loan matured in 2038 and that the defendants had not commenced a prior foreclosure action. The defendants also submitted a copy of the 2012 notice, which did not demand the entire outstanding balance on the loan, but, as the Supreme Court found, only demanded the amount due as of that date. Notably, the 2012 notice stated that if the plaintiffs were unable to pay the arrears, there were “various options that may be available . . . to prevent a foreclosure sale of [the] property” such as a repayment plan, loan modification, sale of the property, or deeding the property to the noteholder. Thus, the 2012 notice did not set forth the defendants’ clear and unequivocal election to accelerate the debt, but instead, was a letter discussing acceleration as a possible future event … . Accordingly, the defendants established, prima facie, that the consolidated mortgage had not been accelerated at the time the plaintiffs commenced this action.

In opposition, the plaintiffs failed to raise a triable issue of fact. Contrary to the plaintiffs’ contention, the plain meaning of the word “may” as it appears in paragraph 22 of the consolidated mortgage renders that provision optional, and “[w]here, as here, the acceleration of the maturity of a mortgage debt is made optional with the holder of the note and mortgage, ‘some affirmative action must be taken evidencing the holder’s election to take advantage of the accelerating provision, and until such action has been taken the provision has no operation'” … . Knox v Countrywide Home Loans, Inc., 2022 NY Slip Op 03107, Second Dept 5-11-22

Practice Point: Here the notice sent by the bank to the borrowers in 2012 did not unambiguously accelerate the debt within the meaning of the mortgage document. Therefore the foreclosure complaint was properly dismissed.

 

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THE BANK DID NOT RAISE A QUESTION OF FACT ABOUT WHETHER IT VIOLATED THE SEPARATE-ENVELOPE RULE IN THIS FORECLOSURE ACTION; THE BANK’S SUMMARY JUDGMENT MOTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the defendants demonstrated the bank in this foreclosure action did not demonstrate compliance with the notice requirements of RPAPL 1304, which requires the notice of foreclosure be mailed in a separate envelope which includes nothing else:

… [T]he defendants established that the plaintiff failed to strictly comply with RPAPL 1304, on the ground that additional information was included in the same envelope as the 90-day notice required by RPAPL 1304 … . The plaintiff failed to raise a triable issue of fact in opposition. HSBC Bank USA, N.A. v Hibbert, 2022 NY Slip Op 03102. Second Dept 5-11-22

Practice Point: RPAL 1304 is violated if the bank in a foreclosure action mailed the notice of foreclosure to the borrower(s) in an envelope which included other materials along with the notice.

 

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