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TWO VOLUNTARY DISCONTINUANCES OF TWO SUCCESSIVE FORECLOSURE ACTIONS TWICE REVOKED THE ACCELERATION OF THE DEBT RENDERING THE THIRD FORECLOSURE ACTION TIMELY (FIRST DEPT).

The First Department, reversing Supreme Court based upon the February, 2021 Court of Appeals ruling, determined two voluntary discontinuances of two successive foreclosure actions twice revoked the acceleration of the debt, rending the third foreclosure action timely:

… [O]n February 18, 2021, the Court of Appeals issued its decision in Freedom Mtge. Corp v Engel, — NY3d —, 2021 NY Slip Op 01090 (2021), holding, inter alia, that “where acceleration occurred by virtue of the filing of a complaint in a foreclosure action, the noteholder’s voluntary discontinuance of that action constitutes an affirmative act of revocation of that acceleration as a matter of law, absent an express, contemporaneous statement to the contrary by the noteholder” (Freedom Mtge., at *6). Thus, contrary to defendants’ argument, the September 2013 voluntary discontinuance of the 2009 first foreclosure action did constitute an “affirmative act,” within six years, thereby revoking the prior election to accelerate. A second foreclosure action was commenced in October 2013 and discontinued in September 2017. To the extent there is a question surrounding plaintiff’s reason for discontinuing the second foreclosure action and whether that reason constituted a “contemporaneous statement” that they were not seeking to de-accelerate the debt, it does not change the fact that the third foreclosure action is timely because it was commenced within six years of the date of acceleration, which was October 2013. U.S. Bank Trust, N.A. v Boktor, 2021 NY Slip Op 02124, First Dept 4-6-21

 

THE DEFAULT LETTER DID NOT DECLARE THE MORTGAGE DEBT IMMEDIATELY DUE AND PAYABLE; THEREFORE THE LETTER DID NOT ACCELERATE THE DEBT AND THE FORECLOSURE ACTION WAS NOT TIME-BARRED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the default letter did not accelerate the debt and, therefore, the foreclosure action was not time-barred:

The appealed case directly on point with the dispositive issue here is Vargas v Deutsche Bank [2021 NY Slip Op. 01090], in which the Court of Appeals set a clear standard for determining whether a default letter constitutes a “clear and unequivocal acceleration of a debt.” Applying the long-standing rule … “that a noteholder must effect an ‘unequivocal overt act’ to accomplish such a substantial change in the parties’ contractual relationship,” the Court, in Vargas, held that to constitute a “clear and unequivocal” acceleration of a debt, a default letter must demand from a noteholder an immediate repayment of the entire outstanding loan, and must not also refer to acceleration only as a future event, indicating the debt was not accelerated at the time the letter was written.

… The default letter notified plaintiff that the subject mortgage loan was in default as of September 1, 2010. The letter gave plaintiff 30 days to cure the default by payment of the amount due and owing, which was just over $9,000. It also stated: “Unless we receive full payment of all past-due amounts, we will accelerate the maturity of the loan, declare the obligation due and payable without further demand, and begin foreclosure proceedings.” Thus, as in Vargas, the default letter did not effectuate an unequivocal acceleration of the debt because it did not seek an immediate repayment of the entire balance outstanding on the loan, but rather “referred to acceleration only as a future event, indicating the debt was not accelerated at the time the letter was written.” Kirschenbaum v Wells Fargo Bank, N.A., 2021 NY Slip Op 02073, First Dept 4-1-21

Similar issue and result in Ditech Fin., LLC v Rector 70 LLC, 2021 NY Slip Op 02062, First Dept 4-1-21

 

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THE 2ND DEPARTMENT REVERSED THE AWARD OF SUMMARY JUDGMENT TO THE BANK BECAUSE ONE OF TWO BORROWERS WAS NOT NAMED IN THE RPAPL 1306 FILING; THIS RULING MAY NOT HOLD UP BECAUSE, ON MARCH 30, 2021, THE COURT OF APPEALS HELD ONLY ONE BORROWER NEED BE NAMED IN THE RPAPL 1306 FILING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank’s motion for summary judgment in this foreclosure action should not have been granted because an apparent borrower, Kosin, was not named in the bank’s electronic filing required by RPAPL 1306. [Note that the Court of Appeals, on March 30, 2021, held that the bank need only name one borrower in the RPAPL 1306 notice. That holding may or may not apply to this case, which has slightly different facts in that it was not certain Kosin was, in fact, a borrower. See CIT Bank N.A. v Schiffman, 2021 NY Slip Op 01933, CtApp 3-30-21.]:

… [T]he plaintiff’s noncompliance with RPAPL 1306 by establishing that the plaintiff only made an RPAPL 1306 filing with respect to [defendant borrower] Hollien, but did not make any such filing with respect to Kosin. In opposition, the plaintiff failed to raise a triable issue of fact as to its compliance with this necessary precondition to commencement of a foreclosure action … . Contrary to the plaintiff’s contention, it was still required to comply with RPAPL 1304 and 1306 with respect to Kosin because, although Kosin was not listed as a “borrower” on the note, he was defined as a “borrower” on the mortgage agreement. Since the mortgage agreement refers to Kosin as a “borrower” on both the first page and the signature page, Kosin is a “borrower” for purposes of RPAPL 1304 and 1306 … . Although there is some ambiguity in the language of the mortgage agreement, any ambiguities in the language of the document must be construed against the plaintiff, as the plaintiff is the party who supplied the document … . Federal Natl. Mtge. Assn. v Hollien, 2021 NY Slip Op 01963, Second Dept 3-31-21

 

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PLAINTIFF BANK PRESENTED INSUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304, THE BANK SHOULD NOT HAVE BEEN AWARDED SUMMARY JUDGMENT (SECOND DEPT).

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

[T]he plaintiff submitted the affidavit of April Simmons, an employee of the plaintiff’s loan servicer, Nationstar Mortgage, LLC (hereinafter Nationstar), along with copies of two 90-day notices addressed to the defendant. Simmons, however, did not state in her affidavit that she personally mailed these notices to the defendant, and she did not aver that she was familiar with the mailing practices and procedures of the entity which sent the notices … . Moreover, although the envelopes accompanying the 90-day notices state “First-Class Mail” and contain a bar code above a 20-digit number, the plaintiff failed to submit any receipt or corresponding document proving that the notices were actually sent by first-class and certified mail to the defendant more than 90 days prior to the commencement of the action … . U.S. Bank, N.A. v Zientek, 2021 NY Slip Op 02015, Second Dept 3-31-21

 

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THE BANK’S PROOF OF STANDING TO BRING THE FORECLOSURE ACTION WAS INSUFFICIENT (SECOND DEPT),

The Second Department determined the bank’s motion for summary judgment in this foreclosure action should have been denied because the proof the bank has standing was insufficient:

… [T]he plaintiff failed to establish, prima facie, that it had standing to commence this action. Although the plaintiff attached to the complaint copies of the note and an undated purported allonge endorsed in blank, the plaintiff did not demonstrate that the purported allonge, which was on a piece of paper completely separate from the note, was “so firmly affixed thereto as to become a part thereof,” as required by UCC 3-202(2) … . U.S. Bank, N.A. v Ainsley, 2021 NY Slip Op 02014, Second Dept 3-31-21

 

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THE ESTATE OF THE MORTGAGOR WAS NOT A NECESSARY PARTY IN THIS FORECLOSURE ACTION; THE PROPERTY WAS CONVEYED BEFORE HER DEATH AND THE COMPLAINT DOES NOT SEEK A DEFICIENCY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the estate of the mortgagor was not a necessary party in the foreclosure proceeding and the complaint should not have been dismissed on that ground:

The estate of the mortgagor was not a necessary party to this action, as it had no interest in the property at the time this action was commenced, inasmuch as the mortgagor conveyed the property that is subject to the mortgage to the defendant prior to her death, and the complaint does not seek a deficiency judgment against her estate … . U.S. Bank N.A. v Apelbaum, 2021 NY Slip Op 02008, Second Dept 3-31-21

 

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PLAINTIFF BANK PRESENTED INSUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304, THE BANK SHOULD NOT HAVE BEEN AWARDED SUMMARY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank did not demonstrate compliance RPAPL 1304 and therefore was not entitled to summary judgment:

… [T]he plaintiff submitted, inter alia, an affidavit of Tewana Sheriff, a foreclosure administrator for the plaintiff’s servicer who, based upon review of “business records maintained for the purpose of servicing plaintiff’s mortgage loans,” averred that the 90-day notice was sent via first-class and certified mail in accordance with RPAPL 1304. Sheriff did not refer to any specific records demonstrating compliance with RPAPL 1304, did not aver that she had personal knowledge of the subject mailings, and did not set forth personal knowledge of a standard office mailing procedure designed to ensure that items were properly addressed and mailed. Although the plaintiff submitted a signed certified mail receipt and United States Postal Service tracking information, those items do not refer to a 90-day notice, and a copy of the 90-day notice does not include a United States Postal Service tracking number corresponding with the certified mail receipt … . Moreover, the plaintiff failed to, inter alia, submit any proof of mailing the 90-day notice by first-class mail. Therefore, 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 defendants, to strike their answer, and for an order of reference … . Santander Bank, N.A. v Schaefer, 2021 NY Slip Op 02005, Second Dept 3-31-21

 

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WHERE THE BANK ATTEMPTS TO DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIRMENTS OF RPAPL 1304 WITH PROOF OF THE STANDARD OFFICE MAILING PROCEDURE, A DEFENDANT BORROWER MAY REBUT THE PRESUMPTION OF PROPER MAILING AND RECEIPT WITH PROOF OF A MATERIAL DEVIATION FROM THE BANK’S MAILING PROCEDURE; WHERE THERE ARE MULTIPLE BORROWERS, THE BANK NEED ONLY NAME ONE IN THE ELECTRONIC FILING REQUIRED BY RPAPL 1306 (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge DiFiore, over a concurring opinion, answering two certified questions from the Second Circuit, determined: (1) where, in an action for foreclosure, the bank attempts to demonstrate compliance with the mailing and notice requirements of RPAPL 1304 with proof of the standard office mailing procedure, a defendant borrower can rebut the presumption of proper mailing and receipt with proof of a material deviation from the bank’s mailing procedure; and (2) where there are multiple borrowers, the bank need only provide information about one borrower in the bank’s electronic filing required by RPAL 1306. Here the defendants alleged there was a material deviation from the bank’s mailing procedure because the bank averred the envelopes for the RPAPL 1304 notice are “created upon default,” but the notices were dated almost a year after the initial payment default. The Court of Appeals expressed no opinion whether the “nearly one-year gap” was a material deviation from the bank’s mailing procedure such that the presumption of proper mailing and receipt was rebutted. The court noted the borrowers’ claim they never received the notice is not, standing alone, sufficient to rebut the presumption:

What is necessary to rebut the presumption that a RPAPL 1304 notice was mailed will depend, in part, on the nature of the practices detailed in the affidavit. Moreover, contextual considerations may also factor into the analysis. For example, here, [the bank] points out that residential notes and mortgages are negotiable instruments that often change hands at various points during their duration, which may impact the timing of the creation and mailing of RPAPL 1304 notices—a contextual factor a court could consider in assessing whether a purported deviation from routine procedure was material. We reject defendants’ argument that a single deviation from any aspect of the routine office procedure necessarily rebuts the presumption of mailing. Such a standard would undermine the purpose of the presumption because, in practice, it would require entities to retain actual proof of mailing for every document that could be potentially relevant in a future lawsuit. CIT Bank N.A. v Schiffman, 2021 NY Slip Op 01933, CtApp 3-30-21

 

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THE ORDER DISMISSING THE COMPLAINT FOR FAILURE TO SEEK A DEFAULT JUDGMENT WITHIN ONE YEAR DID NOT INLCUDE SPECIFIC FINDINGS OF A PATTERN OF DELAY; THEREFORE THE “FAILURE TO PROSECUTE” EXCEPTION IN CPLR 205 (A) DID NOT APPLY; PLAINTIFF’S ACTION BROUGHT WITHIN SIX MONTHS OF DISMISSAL WAS NOT TIME-BARRED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the complaint was timely pursuant to the six-month extension afforded by CPLR 205 (a).  The dismissal of the complaint did not include any specific findings of a general pattern of delay. Therefore the six-month extension was not precluded:

In 2018, Supreme Court granted defendant’s motion pursuant to CPLR 3215(c) to dismiss the complaint in the prior, 2010 foreclosure action for plaintiff’s failure to seek a default judgment within one year of defendant’s default. The dismissal order did not include any findings of specific conduct demonstrating a general pattern of delay in proceeding with the litigation, as required to preclude the application of CPLR 205(a) for failure to prosecute … . Under the circumstances, the court should not have granted defendant’s motion to dismiss the complaint in the present action as time-barred, as this action was timely brought within six months after the motion court dismissed plaintiff’s first foreclosure action … . U.S. Bank N.A. v Kim, 2021 NY Slip Op 01876, First Dept 3-25-21

 

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SUPREME COURT SHOULD NOT HAVE CONFIRMED THE REFEREE’S REPORT; THE REPORT WAS BASED UPON BUSINESS RECORDS WHIDH WERE NOT PRODUCED OR IDENTIFIED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report should not have been confirmed because it was based on business records which were not produced:

… Supreme Court should have denied Wilmington’s motion to confirm the referee’s report and for a judgment of foreclosure and sale. “[T]he referee’s findings with respect to the total amount due upon the mortgage were not substantially supported by the record inasmuch as the computation was premised upon unproduced business records” … . “Moreover, the referee’s report also failed to identify the documents or other sources upon which the referee based his finding that the mortgaged premises should be sold in one parcel, and failed to answer the court’s specific question of whether the mortgaged premises could be sold in parcels” … . Thus, in confirming the report, the court should not have relied on the referee’s inadequately supported findings … . Wilmington Sav. Fund Socy., FSB v Mehraban, 2021 NY Slip Op 01802, Second Dept, 3-24-21

 

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