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THE BANK DID NOT PROVE DEFENDANT’S DEFAULT IN THIS FORECLOSURE ACTION; THE AVERMENTS ABOUT DEFENDANT’S DEFAULT WERE BASED UPON THE AFFIANT’S REVIEW OF BUSINESS RECORDS; BECAUSE THE RECORDS WERE NOT ATTACHED, THE AFFIDAVIT WAS INADMISSIBLE HEARSAY (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined plaintiff bank did not prove defendant’s default because the relevant business records were not attached to the affidavit describing the default:

“Among other things, 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, the affidavit of Trey Cook, a document execution specialist for the plaintiff’s servicing agent, failed to provide proof of the defendant’s default in payment of the note in admissible form. Although Cook averred that he had personal knowledge of how the servicing agent’s business records were kept and maintained and that, based on his review of those business records, the defendant “failed to make the payment that was due for July 1, 2014 under the Loan Documents and . . . failed to make subsequent payments to bring the loan current,” the business records on which Cook relied were not annexed to his affidavit. Thus, Cook’s assertions regarding the defendant’s alleged default constituted inadmissible hearsay … . Deutsche Bank Trust Co. Ams. v Tagor, 2025 NY Slip Op 03040, Second Dept 5-21-25

Practice Point: An affidavit which avers facts drawn from the affiant’s review of business records is inadmissible hearsay if the records are not attached.

 

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THE BANK’S UNILATERAL ATTEMPT TO REVOKE THE ACCELERATION OF THE DEBT IS PRECLUDED BY THE FORECLOSURE ABUSE PROTECTION ACT (FAPA) WHICH APPLIES RETROACTIVELY TO THIS CASE; THE FORECLOSURE ACTION IS TIME-BARRED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined a letter from the bank in this foreclosure action purporting to revoke a prior acceleration of the debt did not stop the running of the six-year statute of limitations. The action was therefore time-barred. The Second Department noted that the Foreclosure Abuse Prevention Act (FAPA), effective December 30, 2022, applies retroactively to this case. The FAPA essentially provides that once the debt is accelerated the six-year statute of limitations keeps running despite any attempt to “unilaterally waive, postpone, cancel, toll, revive or reset the accrual” of the foreclosure action:

Applying FAPA here, the revocation letter did not de-accelerate the mortgage debt nor did it “revive or reset” the statute of limitations … . Since the plaintiff commenced this action more than six years after the initial acceleration of the mortgage debt, the defendants demonstrated their prima facie entitlement to summary judgment dismissing the complaint insofar as asserted against them as time-barred (see CPLR 213[4] …). US Bank Trust, N.A. v Horowitz, 2025 NY Slip Op 03095, Second Dept 5-21-25

Practice Point: Here the bank attempted to revoke a prior acceleration of the debt by sending defendants a “revocation letter.” The Foreclosure Abuse Prevention Act (FAPA), which applies retroactively to this case, rendered the attempted revocation a nullity. Therefore the letter did not stop the running of the six-year statute of limitations and the foreclosure action was time-barred.​

 

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THE AFFIDAVIT SUBMITTED TO DEMONSTRATE PLAINTIFF HAD POSSESSION OF THE NOTE PRIOR TO COMMENCING THE FORECLOSURE ACTION WAS HEARSAY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff did not demonstrate standing in this foreclosure action. The affidavit submitted to demonstrate plaintiff had possession of the note prior to commencing the action was hearsay:

… [T]he plaintiff relied on Harris’s affidavit to demonstrate that it had possession of the note prior to commencing this action. Harris averred, in relevant part, that the plaintiff received physical delivery of the original note on September 5, 2013. As the defendant correctly notes, Harris failed to attach any business record to her affidavit to demonstrate that fact or to aver that she had personal knowledge of the physical delivery of the note. Accordingly, Harris’s averment that the plaintiff had possession of the note prior to the commencement of this action was inadmissible hearsay and insufficient to establish, prima facie, the plaintiff’s standing … . Nationstar Mortage, LLC v Guarino, 2025 NY Slip Op 02925, Second Dept 5-14-25

Practice Point: Whoever submits an affidavit stating the plaintiff in a foreclosure action had possession of the note before the action was commenced must attach a probative business record or demonstrate personal knowledge of the delivery of the note, not the case here.

 

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THE JUDGMENT OF FORECLOSURE AND SALE WAS REVERSED ON APPEAL; THE DEFENDANT IN THE FORECLOSURE ACTION DID NOT SEEK A STAY PENDING APPEAL; THE FACT THAT THE NOTICE OF PENDENCY, FILED BY THE BANK AT THE OUTSET OF THE FORECLOSURE PROCEEDINGS, WAS STILL IN EFFECT AT THE TIME OF THE FORECLOSURE SALE DID NOT AFFECT THE TRANSFER OF TITLE TO A GOOD FAITH PURCHASER AT THE FORECLOSURE SALE (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Brathwaite Nelson, determined the defendant in the foreclosure action, Yesmin, upon reversal of the judgment of foreclosure and sale on appeal, was not entitled to cancel and discharge the referee’s deed transferring title to a good faith purchaser of the foreclosed property. It is significant here that the defendant in the foreclosure action did not seek a stay pending appeal. The notice of pendency, filed by the bank in the foreclosure action, which was still in effect at the time of the foreclosure sale, did not affect the title acquired by the good faith purchaser:

This appeal raises the question of what effect an extant notice of pendency has on the title to real property acquired by a third party from a judicial foreclosure sale when the judgment of foreclosure and sale is reversed on the appeal of a defendant to the foreclosure action. For the reasons that follow, we hold that a notice of pendency that was unexpired at the time of the foreclosure sale has no effect on the title acquired by a good faith purchaser for value from a sale conducted pursuant to the judgment of foreclosure and sale. * * *

Once a judgment is entered, the need to obtain a stay pending appeal in order to protect the right to restitution of the property is shared equally by a defendant or a plaintiff against whom the judgment is entered. Where a judgment has been entered against a plaintiff, “the plaintiff’s right to impair the marketability of the property during the pendency of an appeal [is conditioned] upon the issuance of a discretionary CPLR 5519(c) stay” … . Thus, regardless of whether the judgment is issued in favor of a defendant or the plaintiff, once a judgment is entered, a stay is necessary to protect the property, and in the absence of a stay, the winning party is free to transfer the property as it sees fit. * * *

Since [the good faith purchaser of the foreclosed property] established that it is “a purchaser in good faith and for value” whose title would be affected by restitution of Yesmin’s property rights lost by the judgment of foreclosure and sale, Yesmin may not seek restitution by canceling the referee’s deed and, instead, is limited to monetary relief against the plaintiff to the foreclosure action (CPLR 5523 …). Yesmin v Aliobaba, LLC, 2025 NY Slip Op 02964, Second Dept 5-14-25

Practice Point: If the defendant in a foreclosure action which is appealed does not seek a stay pending appeal, the reversal on appeal does not affect title transferred to a good faith purchaser at the foreclosure sale.

 

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THE AFFIANT DID NOT DEMONSTRATE PERSONAL KNOWLEDGE OF THE MAILING PROCEDURES AND DID NOT LAY A FOUNDATION FOR THE ATTACHED BUSINESS RECORDS; THEREFORE THE BANK IN THIS FORECLOSURE ACTION DID NOT PROVE THE RPAPL 1304 NOTICE WAS PROPERLY MAILED, A CONDITION PRECEDENT FOR FORECLOSURE (SECOND DEPT). ​

The Second Department, reversing the judgment of foreclosure, determined the plaintiff did not prove the mailing of the RPAPL 1304 notice of foreclosure, a condition precedent for foreclosure. The affidavit did not demonstrate the affiant had personal knowledge of the relevant mailing procedures and did not provide an adequate foundation for relevant business records:

… [T]he affidavits submitted in support of Bank of America’s second motion … for summary judgment on the complaint … did not establish the affiants’ personal knowledge of the standard office mailing procedures of LenderLive, the third-party vendor that apparently sent the RPAPL 1304 notices on behalf of Bank of America … . The affidavits also “failed to address the nature of [Bank of America’s] relationship with LenderLive and whether LenderLive’s records were incorporated into [Bank of America’s] own records or routinely relied upon in its business” … . Bank of America thus “failed to lay a foundation for the admission of the transaction report generated by LenderLive” … .. Accordingly, Bank of America failed to establish its strict compliance with RPAPL 1304 … . Therefore, the Supreme Court should have denied those branches of Bank of America’s second motion which were for summary judgment on the complaint insofar as asserted against the defendant and for an order of reference. U.S. Bank N.A. v Bravo, 2025 NY Slip Op 02953, Second Dept 5-14-25

Same issues and result in Wells Fargo Bank, N.A. v Murray, 2025 NY Slip Op 02960, Second Dept 5-14-25

Practice Point: Any affidavit submitted by the bank in a foreclosure action to prove the mailing of the RPAPL 1304 notice of foreclosure must demonstrate the affiant’s personal knowledge of the mailing procedures and must lay a foundation for the admissibility of any business records relied upon to prove proper mailing.

 

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A PROPER FOUNDATION WAS NOT PROVIDED FOR THE ADMISSIBILITY OF SOME BUSINESS RECORDS RELIED ON BY THE REFEREE IN THIS FORECLOSURE ACTION; THE MOTION TO CONFIRM THE REFEREE’S REPORT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the motion to confirm the referee’s report in this foreclosure action should have been denied. A proper foundation had not been provided for the admissibility of some of the business records relied upon by the referee:

Generally, the report of a referee should be confirmed whenever the findings are substantially supported by the record … . Here, the referee computed the amount due to the plaintiff based upon the affidavit of an employee of the plaintiff and certain business records. Although the affiant purported to have personal knowledge of the amounts due and owing on the loan, she averred that this was based upon her review of the plaintiff’s records. “[A] review of records maintained in the normal course of business does not vest an affiant with personal knowledge” … . The affiant also failed to establish a proper foundation for the admission of all of the business records relied upon (see CPLR 4518[a]). “A proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker’s business practices and procedures” … . Here, the referee’s findings with respect to the total amount due on the note were premised upon a payment history beginning in 2009. The plaintiff, however, did not acquire the note until 2013. The plaintiff’s affiant failed to establish a proper foundation for the admission of the records from 2009 to 2013 … , and, therefore, the referee’s report was not substantially supported by the record. Nationstar Mtge., LLC v Lewis, 2025 NY Slip Op 02789, Second Dept 5-7-25

Practice Point: Reversals in foreclosure proceedings often stem from the failure to provide a proper foundation for the admissibility of business records relied upon by the parties and/or the referee.​

 

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THE DISMISSAL OF A FORELCOSURE ACTION ON THE GROUND THE BANK FAILED TO COMPLY WITH THE NOTICE OF DEFAULT PROVISIONS IN RPAPL 1304 IS NOT AN EXPRESS JUDICIAL DETERMINATION THAT THE ACTION DID NOT VALIDLY ACCELERATE THE DEBT; THEREFORE, HERE, THE 2013 FORECLOSURE ACTION IS TIME-BARRED PURSUANT TO THE FORECLOSURE ABUSE PREVENTION ACT (FAPA) (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the foreclosure action was time-barred. The bank’s argument that the the foreclosure complaint filed in 2013 did not accelerate the debt was rejected. The 2013 action was dismissed in 2018 because the bank did not comply with the notice of default requirement in Real Property Actions and Proceedings Law (RPAPL) 1304. That dismissal did not constitute an express judicial finding that the debt had not been validly accelerated when the 2013 complaint was filed:

Deutsche Bank’s argument that the complaint in the 2013 action did not constitute a valid acceleration of the debt is precluded by the Foreclosure Abuse Prevention Act (hereinafter FAPA) … . FAPA amended CPLR 213(4) to provide that in an action pursuant to RPAPL 1501(4) to cancel and discharge of record a mortgage, “a defendant shall be estopped from asserting that the period allowed by the applicable statute of limitation for the commencement of an action upon the instrument has not expired because the instrument was not validly accelerated prior to, or by way of commencement of a prior action, unless the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated” … . Here, the Supreme Court directed dismissal of the complaint in the 2013 action upon a determination that Deutsche Bank failed to establish … its strict compliance with RPAPL 1304. The mailing of a RPAPL 1304 notice, while a condition precedent to commencing a foreclosure action, is not a precondition for acceleration of the debt … , and thus, the 2013 action was not dismissed upon an expressed judicial determination that the debt was not validly accelerated. Brennan v Deutsche Bank Trust Co. Ams., 2025 NY Slip Op 02308, Second Dept 4-23-25

Practice Point: A foreclosure action is time-barred six years after the debt was accelerated by the filing of the complaint, unless there is an express judicial determination that the filing of the complaint did not accelerate the debt. A dismissal of the foreclosure action based upon the bank’s failure to comply with the RPAPL 1304 notice of default requirements is not an express judicial determination that the foreclosure complaint did not validly accelerate the debt. Therefore, in this case, the 2013 foreclosure action, which was dismissed in 2018 for failure to comply with RPAPL 1304, is time-barred.

 

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THE NOTE WAS ENDORSED IN BLANK REQUIRING PLAINTIFF TO DEMONSTRATE POSSESSION OF THE NOTE AT THE TIME THE FORECLOSURE ACTION WAS COMMENCED; FAILURE TO DEMONSTRATE POSSESSION CONSTITUTED A FAILURE TO DEMONSTRATE STANDING TO FORECLOSE (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the plaintiff mortgage company did not demonstrate standing to foreclose. The note was endorsed in blank, meaning that it was payable to any bearer of the instrument. Therefore the plaintiff was required to show possession of the note at the time the action was commenced. The evidence submitted was insufficient:

Despite being the originator of the note, the record fails to demonstrate whether plaintiff reacquired the note prior to commencement of this action in order to satisfy its moving burden. Plaintiff’s reliance on JP Morgan Chase Bank, N.A. v Venture (148 AD3d 1269, 1270-1271 [3d Dept 2017]) is misplaced. Although the type of indorsement was not identified in the decision that was handed down, we take judicial notice of the record filed in that matter and confirm that the note annexed to the complaint in Venture contained a special indorsement payable to only plaintiff … . This is materially different than here, where the note was indorsed in blank, meaning it was payable to any bearer of the instrument (see UCC 1-201 [b] [21] [B]), therefore requiring plaintiff to perform the additional step of proving possession at the time of commencement … . Neither the moving attorney affirmation nor the affidavit of merit for the loan servicer/attorney-in-fact are sufficient to do so. We further reject plaintiff’s contention that the complaint was sufficient to establish possession of the note at commencement, as the complaint contained conflicting allegations and was unverified, and therefore it lacked the evidentiary value to support such claim … . United Wholesale Mtge., LLC v Smith, 2025 NY Slip Op 02117, Third Dept 4-10-25

Practice Point: Consult this decision for some insight into the proof required to demonstrate a note, endorsed in blank, was possessed by the plaintiff at the time the foreclosure action was commenced. If the defendant raises plaintiff’s lack of standing as an issue, the plaintiff must prove possession at commencement in order to proceed.​

 

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HERE THE “BORROWER” SIGNED THE MORTGAGE AGREEMENT AND THEN CONVEYED A TWO-THIRDS INTEREST IN THE PROPERTY TO TWO “OWNERS” WHO DID NOT SIGN THE MORTGAGE AGREEMENT; THE BANK SOUGHT TO RECOVER THE COSTS OF MAINTAINING THE ALLEGEDLY ABANDONED PROPERTY UNDER “QUASI CONTRACT” THEORIES; THE QUASI-CONTRACT CAUSES OF ACTION WERE DISMISSED BECAUSE THE MORTGAGE AGREEMENT WAS DEEMED TO COVER THE “BORROWER” AND THE NONSIGNATORY “OWNERS” (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Landicino, determined the bank’s (mortgagee’s) counterclaims for unjust enrichment, quantum meruit, an equitable lien and an equitable mortgage should have been dismissed. The bank was seeking reimbursement for costs associated with maintaining the mortgaged property which had allegedly been abandoned. Essentially, the Second Department held that the existence of the mortgage agreement, a contract, precluded recovery on the equitable theories, even though two of the three parties did not sign the mortgage agreement:

On September 6, 2005, the defendant Gladys Villa (hereinafter the borrower) executed a note that was secured by a mortgage on residential property located in Ossining (hereinafter the property). By bargain and sale deed dated March 8, 2006, the borrower retained a one-third interest in the premises for herself and conveyed the remaining interest to the plaintiffs, Miguel Auquilla and Hilda Guzman (hereinafter together the owners), as tenants in common. The borrower and the owners allegedly defaulted on their obligations under the note and the mortgage by failing to make the monthly payments due in December 2009, and thereafter. * * *

The mortgagee’s theory that the mortgage agreement does not govern the dispute since it was executed by the borrower and not by the owners is a novel one in this Court, but is ultimately unpersuasive. Although this Court has not explicitly recognized such a rule in this context, we now hold that there can be no quasi contract claim by a mortgagee against a third-party nonsignatory owner of property encumbered by a mortgage, the terms of which covers the subject matter of the dispute. Auquilla v Villa, 2025 NY Slip Op 02053, Second Dept 4-9-25

Practice Point: Where there is a contract which binds both signatories and third-party nonsignatories, quasi-contractual theories of recovery are not available.

 

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WHERE IT HAS BEEN MORE THAN A YEAR SINCE DEFENDANT FAILED TO ANSWER THE COMPLAINT, THE DEFENDANT IS ENTITLED TO NOTICE BEFORE ENTRY OF A DEFAULT JUDGMENT; HERE THE FAILURE TO GIVE DEFENDANT NOTICE RENDERED THE DEFAULT JUDGMENT A NULLITY (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined it had been more than a year since defendant Callahan had failed to answer the complaint and, therefore, Callahan was entitled to notice before a default judgment could be entered. No notice was given:

“Pursuant to CPLR 3215(g)(1), ‘whenever application [for judgment by default] is made to the court or to the clerk, any defendant who has appeared is entitled to at least five days’ notice of the time and place of the application, and if more than one year has elapsed since the default any defendant who has not appeared is entitled to the same notice unless the court orders otherwise'” … . “[T]he failure to provide a defendant who has appeared in an action with the notice required by CPLR 3215(g)(1), like the failure to provide proper notice of other kinds of motions, is a jurisdictional defect that deprives the court of the authority to entertain a motion for leave to enter a default judgment” … . As such, “‘the failure to provide a defendant with proper notice of a motion renders the resulting order and judgment entered upon that order nullities'” … . Flagstar Bank, FSB v Powers, 2025 NY Slip Op 01610, Second Dept 3-19-25

Practice Point: Where it has been more than a year since defendant failed to answer a complaint, the defendant is entitled to notice before entry of a default judgment. Failure to provide notice renders the judgment a nullity.

 

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