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PLAINTIFF’S FORECLOSURE ACTION SHOULD NOT HAVE BEEN DISMISSED, SUA SPONTE, AS ABANDONED PURSUANT TO 22 NYCRR 202.48; THE 60-DAY TIME LIMIT ONLY APPLIES TO THE DIRECTION TO SUBMIT A JUDGMENT “ON NOTICE” (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the court should not have dismissed plaintiff’s foreclosure action, sua sponte, as abandoned pursuant to 22 NYCRR 202.48. Supreme Court, after plaintiff’s unopposed motion for a judgment of foreclosure and sale, directed the plaintiff to “submit judgment.” When plaintiff submitted a proposed judgment for signature, Supreme Court dismissed the action because the proposed judgment was not submitted within 60 days. The 60-day time limit only applies when a party is directed to submit the judgment “on notice:”

Pursuant to 22 NYCRR 202.48, an order or judgment which is directed to be settled or submitted on notice must be submitted for signature within 60 days after the signing and filing of the decision directing that the order or judgment be settled or submitted. A party who fails to submit the order or judgment within the 60-day time period will be deemed to have abandoned the action or motion, absent good cause shown … . In this case, when the Supreme Court initially granted the plaintiff’s motion, inter alia, for a judgment of foreclosure and sale, it did not direct that the proposed judgment had to be settled or submitted on notice. 22 NYCRR 202.48 does not apply where, as here, the court merely directs a party to submit an order or judgment without expressly directing that the order or judgment be submitted on notice … . James B. Nutter & Co. v McLaughlin, 2020 NY Slip Op 07178, Second Dept 12-2-20

 

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THE BANK DID NOT DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank (Wilmington) did not demonstrate defendants’ default in this foreclosure action and the bank’s motion for summary judgment should not have been granted:

Wilmington failed to establish, prima facie, its entitlement to judgment as a matter of law, as it failed to submit evidence demonstrating the defendants’ default in payment … . In support of the motion, Wilmington submitted … copies of the note and the mortgage, and the affidavit of Angela Farmer, a vice president of Rushmore Loan Management Services, LLC (hereinafter Rushmore), the servicer of the loan. Based on her review of business records in the possession of Rushmore, including records created by Ditech [the original plaintiff, note was transferred to Wilmington], Farmer averred that the defendants defaulted in payment in June 2013. While Farmer established that she was familiar with Ditech’s recordkeeping practices and procedures, no payment records were proffered with the motion. The only business records annexed and incorporated in the affidavit with regard to the default were two notices of default both dated October 24, 2013 … . “‘[W]hile a witness may read into the record from the contents of a document which has been admitted into evidence, a witness’s description of a document not admitted into evidence is hearsay'” … . “[I]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . Wilmington Sav. Fund, FSB v Peters, 020 NY Slip Op 07248, Second Dept 12-2-20

 

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THE BANK’S DOCUMENTARY EVIDENCE DID NOT DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department determined plaintiff bank did not demonstrate standing to bring the foreclosure action and the bank’s motion for summary judgment was properly denied:

“Although the foundation for admission of a business record usually is provided by the testimony of the custodian, the author or some other witness familiar with the practices and procedures of the particular business, it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . “‘[E]vidence of the contents of business records is admissible only where the records themselves are introduced'” … . Without submission of the business records, a witness’s testimony as to the contents of the records is inadmissible hearsay (see CPLR 4518[a] … ). Here, Herberg’s [bank’s vice president’s] assertion, in effect, that the plaintiff was the holder of the note when it commenced the action appears to be based upon unproduced business records or upon confirmation of information from some other unproduced source, and is therefore not probative on the issue of the plaintiff’s standing … . Wells Fargo Bank, N.A. v Atedgi, 2020 NY Slip Op 07247, Second Dept 12-2-20

 

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THE BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE PROVISIONS OF RPAPL 1304 OR THE MORTGAGE AND DID NOT DEMONSTRATE STANDING TO BRING THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s motion for summary judgment in this foreclosure action should not have been granted. The bank failed to demonstrate compliance with the notice requirements of RPAPL 1304, the notice of default requirements of the mortgage, and standing to bring the action. Evidence submitted in reply papers should not have been considered:

… [T]he plaintiff submitted the affidavit of DiMario Abrams, a vice president for the plaintiff’s loan servicer, as well as copies of the notices and the envelopes in which the notices were allegedly mailed. Abrams did not purport to have personal knowledge of the actual mailing of the notices pursuant to RPAPL 1304, he did not purport to have personal knowledge of the mailing procedures utilized by the plaintiff’s loan servicer, and he did not lay a proper foundation under the business records exception to the hearsay rule with respect to the notices and envelopes attached to his affidavit … . * * *

The plaintiff submitted a lost note affidavit prepared by Dereje D. Badada, a vice president for its loan servicer. According to that affidavit, the note had “been inadvertently lost, misplaced or destroyed,” and the loan servicer had “not pledged, assigned, transferred, hypothecated or otherwise disposed of the note.” There was no allegation in the lost note affidavit that the note had ever been delivered or assigned to the plaintiff, nor were there any details regarding when or how the note was lost, who searched for the note, or when they searched for the note. Therefore, the lost note affidavit did not establish the plaintiff’s ownership of the note or the facts preventing it from producing the note (see UCC 3-804 …). U.S. Bank N.A. v Kohanov, 2020 NY Slip Op 07242, Second Dept 12-2-20

 

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THE FAILURE TO RAISE THE LACK OF STANDING DEFENSE IN A FORECLOSURE ACTION CAN BE REMEDIED BY A MOTION TO AMEND THE ANSWER AND BY RAISING THE DEFENSE IN OPPOSITION TO A MOTION FOR SUMMARY JUDGMENT (SECOND DEPT).

The Second Department, in a comprehensive opinion by Justice Miller, explained the relationship between the waiver provisions in  CPLR 3211 (e) and Real Property Actions and Proceedings Law (RPAPL) 1302-a in foreclosure proceedings. The opinion includes a detailed discussion of when defenses are waived by the failure to include them in the answer and when and how such omissions can be remedied by a motion to amend or in a summary judgment motion. The opinion is much too detailed to be summarized here and should be consulted as authoritative on these issues. The narrow issue addressed by the opinion is the effect of failing to raise the defense of a lack of standing in the answer to a foreclosure complaint:

… [W]e now reaffirm that a waiver of the defense of standing pursuant to CPLR 3211(e) should be given the same force and effect as a waiver of the affirmative defenses specifically enumerated in CPLR 3211(a)(3) and (5) … . Accordingly, a waiver of the affirmative defense of standing pursuant to CPLR 3211(e) may be retracted through the amendment of a pleading pursuant to CPLR 3025 … . Case law from this Court should not be read to hold otherwise … . * * *

Where applicable, RPAPL 1302-a places the defense of standing on a footing comparable with the other defenses that are exempt from the waiver provisions of CPLR 3211(e), to wit, those defenses listed in subdivisions CPLR 3211(a)(2), (7), and (10), which may be raised by motion “at any time” … , or by amendment to a pleading, “if one is permitted” (CPLR 3211[e]; see CPL 3025[b]). Even where the defense of standing is omitted from a defendant’s answer in violation of CPLR 3018(b), the defense may be raised for the first time in opposition to a plaintiff’s motion for summary judgment … . GMAC Mtge., LLC v Coombs, 2020 NY Slip Op 07039, Second Dept 11-25-20

 

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SUPREME COURT PROPERLY DENIED PLAINTIFF BANK’S MOTION TO EXTEND THE TIME TO SERVE DEFENDANT IN THIS FORECLOSURE ACTION, TWO-JUSTICE DISSENT (THIRD DEPT).

The Third Department, over a two-justice dissent, determined Supreme Court properly denied plaintiff bank’s motion to extend the time to serve defendant in the interest of justice:

… [A] court may, in the interest of justice, extend the time in which a plaintiff may effectuate proper service upon a defendant (see CPLR 306-b) … . Whether to grant an extension of time for service in the interest of justice is a discretionary determination, requiring the trial court to engage in “a careful judicial analysis of the factual setting of the case” and balance competing interests … . The trial court’s determination is guided by various factors and circumstances that may be taken into consideration, including the plaintiff’s diligence (or lack thereof), the expiration of the statute of limitations, whether the underlying cause of action is meritorious, the length in delay of service, whether the plaintiff promptly sought the extension of time and any prejudice that may be borne by the defendant … . This Court should not disturb the trial court’s discretionary determination unless such determination constitutes an abuse of discretion … . …

The statute of limitations had expired prior to plaintiff making its extension motion — a factor that weighs in favor of granting the extension motion. However, plaintiff engaged in a pattern of dilatory conduct throughout the action’s pendency over nearly a decade. Indeed, it took plaintiff roughly three years after commencing the action to file a request for judicial intervention and the case was administratively closed by Supreme Court on at least one occasion. Additionally, despite having been made aware of the service issue in April 2016, plaintiff did not ultimately move for an extension to serve the complaint until November 2018, roughly 2½ years later. Further, as Supreme Court recognized, the mortgage contains a significant error, which raises real concerns as to plaintiff’s ability to prevail upon the merits. In our view, Supreme Court weighed the appropriate factors and reasonably concluded that they did not militate in favor of plaintiff … . JPMorgan Chase Bank N.A. v Kelleher, 2020 NY Slip Op 06990, Third Dept 11-25-20

 

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PLAINTIFFS SOUGHT TO FORECLOSE ON LOANS TO THE BORROWERS WHO THEN STARTED BANKRUPTCY PROCEEDINGS; PLAINTIFFS THEN SUED DEFENDANTS, WHO ARE NOT PARTIES TO THE FORECLOSURE/BANKRUPTCY ACTIONS, FOR TORTIOUS INTERFERENCE WITH THE LOAN AGREEMENTS; THE TORTIOUS INTERFERENCE WITH CONTRACT ACTIONS ARE NOT PREEMPTED BY FEDERAL BANKRUPTCY LAW (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Stein, over a three-judge dissent, determined the tortious interference with contract claims, against defendants who are not parties in the foreclosure/bankruptcy proceedings, were not preempted by federal law. Plaintiff sought to foreclose on a loan and the borrowers commenced bankruptcy proceedings. Plaintiff then sued defendants, who are not parties to the foreclosure, alleging tortious interference with the loan agreements. The opinion focuses on the law of preemption:

It is not disputed that valid contracts existed between plaintiff and the borrowers. Plaintiff’s claims arising out of the borrowers’ breach of those contracts as asserted against the borrowers were resolved by the bankruptcy proceeding. Here, plaintiff alleges that defendants knew of the relevant contractual terms and deliberately induced the borrowers’ violations of those terms prior to the bankruptcy proceedings. In other words, plaintiff’s allegations state a claim for tortious interference with contract, and the remedy for that tort will not affect the debtor’s estate. As such, these claims will not encroach upon the province of the bankruptcy court. Stated simply, plaintiff’s claims “do[] not require the adjudication of rights and duties of creditors and debtors under the Bankruptcy Code” … . Sutton 58 Assoc. LLC v Pilevsky, 2020 NY Slip Op 06939, Ct App 11-24-20

 

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PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 WAS INSUFFICIENT; 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’s motion for summary judgment in this foreclosure action should not have been granted. The proof of the notice required by RPAPL 1304 was insufficient:

Notice must be sent both “by registered or certified mail and also by first-class mail” (RPAPL 1304[2]). “‘[P]roper service of RPAPL 1304 notice on the borrower or borrowers is a condition precedent to the commencement of a foreclosure action, and the plaintiff has the burden of establishing satisfaction of this condition” … . “Proof of the requisite mailing is established with proof of the actual mailings, such as affidavits of mailing or domestic return receipts with attendant signatures, 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 submit an affidavit from a witness who attested to having personal knowledge of either the actual mailing or “a standard office mailing procedure designed to ensure that items are properly addressed and mailed” … . Moreover, the records submitted with the plaintiff’s motion did not establish as a matter of law that the requisite RPAPL 1304 mailings were completed. A copy of a letter and envelope addressed to the defendant, each bearing a 20-digit number, was insufficient to eliminate all triable issues of fact as to whether the certified mailing actually occurred … . Moreover, the plaintiff failed to submit any evidence substantiating the assertions that a second copy of the notice was mailed to the defendant by regular first-class mail, as required by the statute … . Deutsche Bank Natl. Trust Co. v Feeney, 2020 NY Slip Op 06753, Second Dept 11-18-20

Similar issues and result in JPMorgan Chase Bank, N.A. v Gold, 2020 NY Slip Op 06765, Second Dept 11-18-20

 

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THE DISCONTINUANCE OF THE 2008 FORECLOSURE ACTION DID NOT DE-ACCELERATE THE DEBT SO THE STATUTE OF LIMITATIONS KEPT RUNNING, RENDERING THE INSTANT ACTION UNTIMELY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the foreclosure action should have been dismissed as untimely. The debt was accelerated with the first foreclosure action was commenced in 2008, starting the running of the six-year statute of limitations. The discontinuing of the that action did not revoke the acceleration:

“[A] lender’s mere act of discontinuing an action, without more, does not constitute, in and of itself, an affirmative act revoking an earlier acceleration of the debt” … .

None of the other facts relied upon by the plaintiff establish that the 2008 acceleration of the loan balance was affirmatively revoked. “[D]e-acceleration notices must . . . be clear and unambiguous to be valid and enforceable” … . While the plaintiff points to the fact that the defendant purportedly received billing statements after the first action was discontinued and that the second complaint alleged a different date of default, these facts do not establish that a clear and unambiguous notice of revocation of the acceleration was given to the defendant. Wells Fargo Bank, N.A. v Islam, 2020 NY Slip Op 06823, Second Dept 11-18-20

 

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THE BANK’S EVIDENCE OF STANDING TO BRING THE FORECLOSURE ACTION WAS NOT SUPPORTED BY THE RECORDS ALLEGEDLY REVIEWED BY THE AFFIANT; THEREFORE THE EVIDENCE WAS HEARSAY AND THE BANK’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (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 the evidence of standing to bring the action was deficient:

… [T]he plaintiff failed to meet its prima facie burden of establishing that it had standing to commence the action. In support of its motion, the plaintiff relied on the affidavit of Elizabeth Gonzales, an employee of the loan servicer. Gonzales averred that the plaintiff had been in possession of the note, which was endorsed in blank, since July 1, 2007, prior to the commencement of the action. Gonzales indicated that she had personal knowledge of the assertions set forth in her affidavit based upon, inter alia, her review of various business records. However, since the plaintiff failed to attach the business records upon which Gonzales relied in her affidavit, her assertions based upon those records constituted inadmissible hearsay … . Moreover, the plaintiff did not attach a copy of the note to the complaint when commencing the action … . Deutsche Bank Natl. Trust Co. v Gulati, 2020 NY Slip Op 06754, Second Dept 11-18-20

Similar issues and result in JPMorgan Chase Bank, N.A. v Tumelty, 2020 NY Slip Op 06766, Second Dept 11-18-20

 

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