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IN A FORECLOSURE ACTION A DISMISSAL FOR LACK OF STANDING IS NOT A DISMISSAL ON THE MERITS RE: RES JUDICATA; A SECOND DISCONTINUANCE WHICH IS NOT ON NOTICE IS NOT A DISCONTINUANCE WITH PREJUDICE RE: CPLR 3217 (C) (SECOND DEPT).

The Second Department noted that a foreclosure action dismissed for lack of standing is not a dismissal on the merits. The court further noted that a second discontinuance is not with prejudice, i.e., on the merits, unless it is on notice:

“‘Under the doctrine of res judicata, a final disposition on the merits bars litigation between the same parties of all other claims arising out of the same transaction or out of the same or related facts, even if based upon a different theory involving materially different elements of proof'” … . However, “a dismissal premised on lack of standing is not a dismissal on the merits for res judicata purposes” … .. Here, the instant action was not barred by the doctrine of res judicata because the 2014 action was dismissed for, inter alia, lack of standing, and that does not qualify as a dismissal on the merits for res judicata purposes … .

CPLR 3217(c) provides that “[u]nless otherwise stated in the notice, stipulation or order of discontinuance, the discontinuance is without prejudice, except that a discontinuance by means of notice operates as an adjudication on the merits if the party has once before discontinued by any method an action based on or including the same cause of action.” The dismissal of the second action after a previous discontinuance only operates as an adjudication on the merits if that second discontinuance is achieved by means of notice … . Here, after the 2010 action was discontinued by means of notice, the 2014 action was dismissed after the defendant’s motion to dismiss was granted. Since the 2014 action was not discontinued by means of notice, CPLR 3217(c) is inapplicable to this instant action. US Bank Trust, N.A. v Loring, 2021 NY Slip Op 02559, Second Dept 4-28-21

 

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DEFENDANT’S ALLEGATION HE DID NOT RECEIVE THE BANK’S LETTER DE-ACCELERATING THE DEBT WAS NOT SUFFICIENT TO SUPPORT HIS MOTION FOR SUMMARY JUDGMENT DISMISSING THE FORECLOSURE ACTION AS TIME-BARRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendant’s claim  he did not receive plaintiff-bank’s letter de-accelerating the debt (thereby stopping the running of the six-year statute of limitations) was not sufficient to warrant dismissal of the complaint as time-barred:

The filing of the summons and complaint in the 2009 action constituted a valid election by the plaintiff to accelerate the maturity of the entire mortgage debt … . This established that the mortgage debt was accelerated in February 2009, and that, without more, the applicable six-year statute of limitations had expired by the time the plaintiff commenced the instant action in March 2016 … .

In opposition, however, the plaintiff produced the January 2015 letter of de-acceleration and alleged that it had been sent to the defendant. Although the defendant claimed that he had never received the letter and had no knowledge of it, the mere denial of receipt was not sufficient to satisfy his burden on his cross motion for summary judgment of establishing that the plaintiff or its loan servicer did not properly send the notice to him … . HSBC Bank USA, N.A. v Hochstrasser, 2021 NY Slip Op 02380, Second Dept 4-21-21

 

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PLAINTIFF BANK DID NOT DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION; THE REQUIRED BUSINESS RECORDS WERE NOT SUBMITTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank failed to demonstrate standing to bring the foreclosure action with admissible evidence:

Although the plaintiff can establish standing by attaching the blank-endorsed note to the complaint when commencing the action … here, the record demonstrates that the plaintiff only attached the mortgage to the complaint. Moreover, although Wallace [representing the plaintiff bank’s loan servicer] stated in her affidavit, based on her review of certain business records, that the plaintiff or its agent had possession of the note prior to commencement, the affidavit was insufficient to establish standing because the records themselves were not submitted by the plaintiff … . Deutsche Bank Natl. Trust Co. v Szal, 2021 NY Slip Op 02274, Second Dept 4-14-21

 

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THE BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304; THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank did not demonstrate compliance with the notice requirements of RPAPL 1304:

… [T]he affidavit of Lori Spisak, an “authorized signer” of the plaintiff, submitted in support of the plaintiff’s motion, was insufficient to establish that the RPAPL 1304 notice was properly mailed, because Spisak did not have personal knowledge of the mailing, and her affidavit did not contain proof of the plaintiff’s standard office mailing procedure at the time the RPAPL 1304 notice allegedly was sent. The plaintiff also did not provide any independent proof of actual mailing. Moreover, the plaintiff failed to demonstrate that the RPAPL 1304 notice it allegedly sent was in at least fourteen-point type. Capital One, N.A. v Liman, 2021 NY Slip Op 02270, Second Dept 4-14-21

 

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THE INSTANT FORECLOSURE ACTION WAS PRECLUDED BY A PRIOR FORECLOSURE ACTION WHICH HAD NOT BEEN DISCONTINUED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the instant foreclosure action was precluded by a prior action which had not been discontinued:

In May 2014, JPMorgan commenced an action to foreclose the consolidated mortgage (hereinafter the prior action). In August 2014, JPMorgan assigned the consolidated mortgage to Bayview Loan Servicing, LLC (hereinafter the plaintiff). In August 2016, the plaintiff commenced this action to foreclose the subject mortgage. …

RPAPL 1301(3) provides that “[w]hile [an] action is pending . . . , no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.” “The object of the statute is to shield the mortgagor from the expense and annoyance of two independent actions at the same time with reference to the same debt” … . Here, since the plaintiff commenced the instant action without leave of the court in which the prior action was brought, and there is no basis in the record to determine that JPMorgan discontinued or effectively abandoned the prior action, dismissal is warranted under RPAPL 1301(3) … . Bayview Loan Servicing, LLC v Starr-Klein, 2021 NY Slip Op 02269, Second Dept 4-14-21

 

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A PROPER FOUNDATION FOR THE BUSINESS RECORDS NECESSARY TO DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION WAS NOT LAID; THE BANK’S SUMMARY JUDGMENT MOTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not law a proper foundation for the business records required to demonstrate standing to bring the foreclosure action:

… [T]he plaintiff submitted … the affidavit of Kathleen Manly, an assistant vice present of Residential Credit Solutions, Inc. … , the plaintiff’s loan servicer. While Manly averred … that she was familiar with Residential’s records and record-keeping practices, and that she had reviewed the records of the prior loan servicer, Bank of America, N.A. … , she did not state that she was familiar with the records or record-keeping practices of Bank of America or that Bank of America’s records were incorporated into Residential’s records and routinely relied upon by Residential in its own business. Thus, she failed to lay a foundation for the admissibility of the records she relied upon to support her claim that the plaintiff possessed the original note prior to the commencement of this action … . Bank of N.Y. Mellon v Penso, 2021 NY Slip Op 02268, Second Dept 4-14-21

 

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THE REFEREE’S REPORT IN THIS FORECLOSURE ACTION WAS BASED UPON INADMISSIBLE HEARSAY AND SHOULD NOT HAVE BEEN CONFIRMED BY SUPREME COURT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report in this foreclosure action should not have been confirmed because the report was based upon inadmissible hearsay:

“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, the affidavit of an employee of the plaintiff’s loan servicer, submitted for the purpose of establishing the amount due and owing under the subject mortgage loan, constituted inadmissible hearsay and lacked probative value because the affiant did not produce any of the business records she purportedly relied upon in making her calculations … . Under the circumstances, the referee’s findings with respect to the total amount due upon the mortgage were not substantially supported by the record … . Bank of N.Y. Mellon v Davis, 2021 NY Slip Op 02267, Second Dept 4-14-21

 

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THE BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank did not demonstrate compliance with the notice requirements of RPAPL 1304:

… [T]he plaintiff failed to establish, prima facie, its strict compliance with RPAPL 1304. In support of its motion, the plaintiff submitted the affidavit of Mahilet Ayalew, a vice president of loan documentation of Wells Fargo Bank, N.A., the plaintiff’s servicer. Ayalew stated in the affidavit that 90-day notices were sent to the defendant on February 1, 2013, by regular and certified mail “in full compliance” with RPAPL 1304. The plaintiff additionally submitted copies of 90-day notices and indicia of mailing by certified mail, but not first-class mail. Ayalew’s affidavit was insufficient to establish that the notices were actually mailed since Ayalew did not aver that she had personal knowledge of the mailing or that she was familiar with the servicer’s standard office mailing practices and procedures … . HSBC Bank USA, N.A. v Cardona, 2021 NY Slip Op 02138, Second Dept 4-7-21

 

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THE ACCELERATION OF THE MORTGAGE DEBT UPON FILING A PRIOR FORECLOSURE ACTION WAS A NULLITY BECAUSE THE ACTION WAS DISMISSED FOR LACK OF STANDING; THE INSTANT ACTION IS THEREFORE TIMELY BUT ONLY WITH RESPECT TO THE INSTALLMENT PAYMENTS DUE DURING THE SIX YEARS PRIOR TO THE FILING OF THE INSTANT ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the prior foreclosure action which was dismissed for lack of standing did not accelerate the debt. Therefore the instant action is timely but only as to the installment payments due during the six years before the action was brought:

The instant action is the third mortgage foreclosure action commenced with respect to this loan. The first mortgage foreclosure action was commenced in or about July 2010, and was dismissed in December 2012, for lack of standing. A second mortgage foreclosure action was commenced on or about January 23, 2015, and was dismissed due to a mistake in the caption of the action. The instant action was thereafter commenced in October 2016 … . …

A mortgage foreclosure action is governed by a six-year statute of limitations (see CPLR 213[4]). Where a mortgage is payable in installments, separate causes of action accrue for each installment that is not paid, and the statute of limitations begins to run on the date each installment becomes due … . Once a mortgage debt is accelerated, however, the statute of limitations begins to run on the entire debt … .

The first action to foreclose the mortgage, which purportedly accelerated the mortgage debt, was initiated in or about July 2010. However, that action was dismissed for lack of standing, and therefore, the alleged acceleration was a nullity … . Accordingly, the instant action is timely, but only with respect to those installments that accrued within six years of the date of commencement of the instant action … . Therefore, the plaintiff’s recovery may not include any installments that became due more than six years prior to the commencement of the action, and the amount due must be recalculated to reflect that fact. Deutsche Bank Natl. Trust Co. v Limtcher, 2021 NY Slip Op 02134,  Second Dept 4-7-21

 

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PLAINTIFF BANK, AT TRIAL, FAILED TO DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 IN THIS FORECLOSURE ACTION; PLAINTIFF’S VERDICT REVERSED (SECOND DEPT).

The Second Department, reversing the plaintiff’s verdict in this foreclosure action, determined the plaintiff bank did not demonstrate (at trial) that it complied with the notice requirements of RPAPL 1304:

“‘In reviewing a determination . . . after a nonjury trial, this Court’s power is as broad as that of the trial court, and this Court may render the judgment it finds warranted by the facts, taking into account that, in a close case, the trial court had the advantage of seeing and hearing the witnesses'” … . At the nonjury trial, the plaintiff relied upon the testimony of its sole witness, who testified as to the standard office mailing procedure of the plaintiff’s prior and present loan servicer, but did not and could not attest to the practices and procedures of Walz Group, a third-party entity that was hired to undertake the requisite service of the notices on the defendants in accordance with the requirements of the mortgage agreement and RPAPL 1304. The plaintiff’s witness expressly testified that she did not have familiarity with Walz Group’s mailing practices “outside of their communications with” the loan servicer. In addition, the witness attested that she never mailed anything through Walz Group, was never employed by Walz Group, and was never trained by Walz Group in their procedures for mailing notices. Further, she testified that she could not say if Walz Group mailed the notices by first-class mail.

Thus, since the plaintiff’s sole witness did not have “knowledge of the mailing practices of the entity which sent the notice[s]” … , and the business records that were submitted in evidence failed to show that the requisite first-class mailings of the RPAPL 1304 notices or the notices of default were actually made to the defendants or that the default notices were actually delivered to their “notice address,” the plaintiff failed to establish its strict compliance with RPAPL 1304 … . Deutsche Bank Natl. Trust Co. v Bucicchia, 2021 NY Slip Op 02132, Second Dept 4-7-21

 

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