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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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ALTHOUGH PLAINTIFF BANK IN THIS FORECLOSURE ACTION DID NOT HAVE A JUSTIFIABLE EXCUSE FOR FAILING TO COMPLY WITH THE 90-DAY DEMAND TO FILE A NOTE OF ISSUE PURSUANT TO CPLR 3216, THE COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the complaint in this foreclosure action should not have been dismissed pursuant to CPLR 3216, even though plaintiff’s excuse for failure to comply with the 90-day demand to file a note of issue was not justifiable:

Because there was no compliance with the 90-day demand, the party seeking to avoid dismissal had to demonstrate a “justifiable excuse for the delay and a good and meritorious cause of action” … . The opposition to defendant’s motion advanced only a conclusory and unsubstantiated claim of law office failure by plaintiff’s prior counsel as the justifiable excuse. Although the failure to detail and substantiate a claim of law office failure would justify dismissal of the complaint … , even when presented with an unjustifiable excuse, a court still retains some residual discretion to refuse dismissal of a complaint as a penalty under CPLR 3216 … .

… [S]ome of the delay in this case was not attributable to plaintiff. Taking into account that CPLR 3216 is “extremely forgiving of litigation delay” … , as well as the public policy of resolving disputes on the merits … , defendant’s motion, under the particular circumstances of this case, should have been denied to the extent that it sought dismissal of the complaint, and plaintiff’s cross motion should have been granted to the extent that it sought an extension of time to file the note of issue … . Chase Home Fin., LLC v Shoumatoff, 2021 NY Slip Op 01537, Third Dept 3-18-21

 

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THE DEFAULT LETTER, WHICH INDICATED THE MORTGAGE DEBT WOULD BE ACCELERATED AT A SPECIFIC FUTURE DATE IF THE DEFAULT WERE NOT CURED, DID NOT ACCELERATE THE DEBT; THEREFORE THE STATUTE OF LIMITATIONS DID NOT START RUNNING AND THE FORECLOSURE ACTION WAS TIMELY (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the mortgage debt was not accelerated by a letter indicating the debt would be accelerated on a specific future date if the arears were not paid:

… [T]he issue is whether the May 2008 default letter was an acceleration event that triggered the statute of limitations. We hold that is was not. Thus, the second action, commenced in October 2014, was timely. To that end, the May 2008 letter provided that, if the default was not cured “on or before June 10, 2008, the mortgage payments will be accelerated with the full amount remaining accelerated and becoming due and payable in full, and foreclosure proceedings will be initiated at that time.” Since this letter was “‘merely an expression of future intent that fell short of an actual acceleration,’ which could ‘be changed in the interim'” … , it did not accelerate the debt … . “[T]he letter did not seek immediate payment of the entire, outstanding loan, but referred to acceleration only as a future event, indicating the debt was not accelerated at the time the letter was written” … . Further, the May 2008 letter specifically discussed other non-acceleration options for defendant, including a repayment plan or loan modification, which plaintiff, as the holder of the note, should be able to do “without running the risk of being deemed to have taken the drastic step of accelerating the loan” … . Thus, the statute of limitations was not triggered until the debt was accelerated by the commencement of the first action in February 2009 … , rendering the commencement of the second action, in October 2014, timely as it was within the six-year statute of limitations …  . GMAT Legal Tit. Trust 2014-1, Us Bank Natl. Assn. v Wood, 2021 NY Slip Op 01455, Third Dept 3-11-21

 

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THE BANK’S FAILURE TO REJECT THE LATE ANSWER WITHIN 15 DAYS WAIVED THE LATE SERVICE AND DEFAULT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank waived its objection to a late answer by not timely rejecting it within 15 days. Therefore the default was also waived:

The defendant failed to timely appear or answer the complaint. … On April 30, 2018, the defendant served an answer with counterclaims. Seventeen days later, on May 17, 2018, the plaintiff served a notice of rejection in which it rejected the answer as untimely. …

Pursuant to CPLR 2101(f), “[t]he party on whom a paper is served shall be deemed to have waived objection to any defect in form unless, within fifteen days after the receipt thereof, the party on whom the paper is served returns the paper to the party serving it with a statement of particular objections” … . Here, the plaintiff’s undisputed failure to reject the defendant’s answer within the fifteen-day statutory time frame constituted a waiver of the late service and the default … . U.S. Bank N.A. v Lopez, 2021 NY Slip Op 01440, Second Dept 3-10-21

 

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THE BORROWER’S APPLICATION FOR A LOAN MODIFICATION DID NOT RELIEVE THE BANK OF THE RPAPL 1304 NOTICE REQUIREMENTS IN THIS FORECLOSURE ACTION; THE BANK DID NOT PROVIDE SUFFICIENT PROOF OF THE MAILING OF THE NOTICE (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined (1) the bank was still required to provide the RPAPL1304 notice despite the application for a loan modification, and (2) the proof of mailing the notice was insufficient. The court noted that proof of mailing submitted for the first time in reply cannot be considered as part of the bank’s prima facie case:

When the instant action was commenced, RPAPL 1304(3) provided: “The ninety day period specified in the notice[ ] contained in [RPAPL 1304(1)] shall not apply, or shall cease to apply, if the borrower has filed [an application for the adjustment of debts of the borrower or an order for relief from the payment of debts], or if the borrower no longer occupies the residence as the borrower’s principal dwelling” … . A loan modification was not an adjustment of debts within the meaning of the version of RPAPL 1304(3) then in effect and, in any event, a lender was relieved only from the requirement to provide notice within the “ninety day period” (RPAPL 1304[3]), not from the requirement to provide the notice specified in RPAPL 1304(1) … . …

US Bank failed to establish, prima facie, that it complied with RPAPL 1304. Although Ubinas stated in her affidavit that the RPAPL 1304 notices were mailed by certified and regular first-class mail, and attached copies of those notices, of an envelope addressed to the defendant bearing a certified mail 20-digit barcode, and of an envelope bearing a first-class mail postage stamp, US Bank failed to attach, as exhibits to the motion, any documents to prove that the mailing actually occurred. There is no copy of any United States Post Office document indicating that the notice was sent by registered or certified mail as required by the statute. Further, while Ubinas attested that she had personal knowledge of the record-making practices of Ocwen, and that the 90-day notice was sent in compliance with RPAPL 1304, she did not attest to knowledge of the mailing practices of the Law Offices of McCabe, Weisberg, and Conway, P.C., the entity that allegedly sent the notices to the defendant on behalf of Ocwen. On appeal, US Bank relies upon the signed certified mail return receipt submitted in reply. The moving party, however, cannot meet its prima facie burden by submitting evidence for the first time in reply … . U.S. Bank N.A. v Hammer, 2021 NY Slip Op 01439, Second Dept 3-10-21

 

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IN THIS FORECLOSURE ACTION, THE JUDGE SHOULD HAVE FIRST DETERMINED WHETHER ANY DISTRIBUTEES OF THE DECEASED MORTGAGORS WERE NECESSARY PARTIES [RPAPL 1311 (1)] AND, IF SO, SUMMON THEM PURSUANT TO CPLR 1001 [b]; THE MOTION TO DISMISS FOR FAILURE TO JOIN NECESSARY PARTIES SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined there were questions of fact whether any distributees of the deceased mortgagors were necessary parties in this foreclosure action. The motion to dismiss for failure to join necessary parties should not have been granted. The court should have determined whether joinder of any parties was required and then summon them pursuant to CPLR 1001 [b]:

Pursuant to RPAPL 1311(1), “necessary defendants” in a mortgage foreclosure action include, among others, “[e]very person having an estate or interest in possession, or otherwise, in the property as tenant in fee, for life, by the curtesy, or for years, and every person entitled to the reversion, remainder, or inheritance of the real property, or of any interest therein or undivided share thereof, after the determination of a particular estate therein.”

“In certain circumstances, the estate of the mortgagor is not a necessary party to a mortgage foreclosure action” … . In particular, “where a mortgagor/property owner dies intestate and the mortgagee does not seek a deficiency judgment, generally a foreclosure action may be commenced directly against the distributees,” in whom title to the real property automatically vests … .

Here, the plaintiff did not seek a deficiency judgment. However, questions of fact existed, which should have been resolved by the Supreme Court, as to whether any distributees of the deceased mortgagors, other than the defendants herein, retained an interest in the property such that they were necessary parties to the foreclosure action. Further, to the extent that there were such necessary parties to the action, dismissal of the complaint was not the proper remedy; rather, the property remedy in such instance is to direct the joinder of those parties (see CPLR 1001[b] … . NRZ Pass-Through Trust IV v Tarantola, 2021 NY Slip Op 01423, Second Dept 3-10-21

 

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