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PLAINTIFF DID NOT HAVE AN EXCUSE FOR FAILING TO MOVE FOR A DEFAULT JUDGMENT FOR FOUR YEARS; THE ACTION WAS DISMISSED AS ABANDONED WITH NO NEED TO CONSIDER WHETHER THE ACTION WAS MERITORIOUS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s failure to timely seek a default judgment in this foreclosure action required the action to be dismissed as abandoned. Plaintiff’s failure to offer an adequate excuse mandated dismissal without considering whether plaintiff had a meritorious action:

… [T]he Supreme Court should have granted that branch of the defendant’s cross motion which was pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against her as abandoned. CPLR 3215(c) provides, inter alia, that “[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, . . . unless sufficient cause is shown why the complaint should not be dismissed.” “To establish sufficient cause,’ the party opposing dismissal must demonstrate that it had a reasonable excuse for the delay in taking proceedings for entry of a default judgment and that it has a potentially meritorious action” … .

Here, the plaintiff provided no explanation for the almost four-year delay after the defendant defaulted in 2011 before it filed a request for judicial intervention in February 2015 requesting a residential mortgage foreclosure settlement conference. Under such circumstances, the Supreme Court should have found that the plaintiff had not demonstrated a reasonable excuse for its delay in seeking a default judgment … . Since the plaintiff failed to proffer a reasonable excuse, this Court need not consider whether the plaintiff demonstrated a potentially meritorious action … . Flushing Bank v Sabi, 2020 NY Slip Op 02461, Second Dept 4-29-20

 

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A STIPULATION OF DISCONTINUANCE OF THE 2008 FORECLOSURE ACTION DID NOT MENTION DE-ACCELERATION OF THE DEBT OR THE ACCEPTANCE OF FUTURE INSTALLMENT PAYMENTS; THEREFORE THE DEBT WAS NOT DE-ACCELERATED AND THE SUBSEQUENT FORECLOSURE ACTION WAS TIME-BARRED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that a stipulation of a discontinuance of the 2008 foreclosure action did not de-accelerate the debt. The foreclosure action was therefore time-barred:

An action to foreclose a mortgage is subject to a six-year statute of limitations (see CPLR 213[4]). With respect to a mortgage 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 … . “A lender may revoke its election to accelerate the mortgage, but it must do so by an affirmative act of revocation occurring during the six-year statute of limitations period subsequent to the initiation of the prior foreclosure action” … . * * *

Contrary to the plaintiff’s contention, Bank of New York’s execution of the stipulation of discontinuance of the 2008 action did not, by itself, constitute an affirmative act revoking acceleration … . Notably, the stipulation was silent on the issue of acceleration and did not otherwise indicate that the plaintiff would accept installment payments … . Moreover, a notice of de-acceleration must be “clear and unambiguous to be valid and enforceable” … . Here, the notices of intent and 90-day notices which were sent prior to commencement of this action were completely silent as to de-acceleration. Bank of N.Y. Mellon v Yacoob, 2020 NY Slip Op 02451, Second Dept 4-29-20

 

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THE APPEAL WAS RENDERED MOOT BY DEFENDANT’S TRANSFER OF THE PROPERTY AFTER SUPREME COURT RULED DEFENDANT HAD TITLE TO THE PROPERTY (THIRD DEPT).

The Third Department dismissed the appeal as moot. Property which had been validly foreclosed by defendant was transferred to a third party. Plaintiff had brought an action pursuant to Real Property Actions and Proceedings Law (RPAPL) Article 15 to determine its rights to a portion of the foreclosed property. Supreme Court granted defendant’s motion for summary judgment on its counterclaim for strict foreclosure (RPAPL 1352) and plaintiff appealed. The appeal was deemed moot and dismissed because defendant had a right to transfer the property after Supreme Court’s ruling:

[T]he jurisdiction of this Court extends only to live controversies and, as such, an appeal will be considered moot unless an adjudication of the merits will result in immediate and practical consequences to the parties” … . “Since the ability to transfer clear title is a natural incident of [property] ownership, it follows that when a complaint involving title to or the right to possess and enjoy real property has been dismissed on the merits and there is no outstanding notice of pendency or stay, the property owner has a right to transfer or otherwise dispose of the property unrestricted by the dismissed claim” … . “‘[A] purchaser’s actual knowledge of litigation and a pending appeal is not legally significant and[,] absent a validly recorded notice of pendency, an owner has the ability to transfer clear title'” … .

Here, Supreme Court canceled plaintiff’s notice of pendency and this Court denied his motion for a stay pending appeal. Therefore, defendants had the right to transfer the property when they did, and the purchaser obtained clear title despite its knowledge of the pending appeals. Govel v Trustco Bank, 2020 NY Slip Op 02306, Third Dept 4-16-20

 

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MOTION TO VOLUNTARILY DISCONTINUE THE FORECLOSURE ACTION WAS PROPERLY GRANTED WITHOUT PREJUDICE (THIRD DEPT).

he Third Department determined plaintiff’s motion to voluntarily discontinue the foreclosure action (CPLR 3217(b)) was properly granted without prejudice. The litigation was still in the early stages and, although defendant had interposed a counterclaim, defendant did not move for a default judgment within a year and thereby abandoned the counterclaim:

Although this action had been pending for approximately three years at the time of the motion, the litigation itself remained in its early stages. In addition, the record confirms that defendant never sought default nor moved to compel discovery. Furthermore, the parties had not yet participated in the mandatory settlement conference (see CPLR 3408). Indeed, determination of plaintiff’s motion was the first occasion where Supreme Court was called upon to intervene in this action. Although defendant alleged that she would sustain prejudice if her discovery went unanswered, Supreme Court correctly determined that there was no evidence of prejudice to defendant or other improper consequences flowing from the discontinuance, as the parties can engage in necessary discovery in a subsequent foreclosure action … . …

… [T]he interposition of a counterclaim in and of itself is not dispositive with respect to the discontinuance. The discontinuance must work a particular prejudice against a defendant. Here, defendant is not prejudiced, as she will be able to assert her counterclaim in a subsequent foreclosure action. Although defendant argues that “one’s home is an interest that is unquantifiable,” she will be able to continue to reside in the mortgaged premises pending another action and will have the same rights available to her as were in the discontinued action … . Green Tree Servicing LLC v Shiow Fei Ju, 2020 NY Slip Op 02307, Third Dept 4-16-20

 

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PLAINTIFF BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 AND DID NOT PRESENT NON-HEARSAY EVIDENCE OF STANDING IN THIS FORECLOSURE ACTION, CRITERIA EXPLAINED IN SOME DETAIL (SECOND DEPT).

The Second Department, in an extensive decision explaining the relevant issues and analysis in some depth, determined plaintiff bank did not demonstrate compliance with the notice requirements of Real Property Actions and Proceedings Law (RPAPL) 1304  did not demonstrate standing to bring the foreclosure action:

… [T]he plaintiff failed to submit an affidavit of mailing or proof of mailing by the United States Postal Service evidencing that it properly mailed notice to the defendant pursuant to RPAPL 1304. Instead, the plaintiff relied on an affidavit of Rashad Blanchard, who was employed as a loan analyst by the parent company of the plaintiff’s loan servicer, and copies of the purported notices. The plaintiff submitted only one letter that purported to constitute the statutorily required 90-day notice of default … . Although the letter contained the statement “sent via certified mail,” with a 20-digit number below it, no receipt or corresponding document issued by the United States Postal Service was submitted proving that the letter was actually sent by certified mail more than 90 days prior to commencement of the action. The plaintiff also failed to submit any documentary evidence that notice was sent by first-class mail. Further, Blanchard did not aver that the notice was sent in the manner required pursuant to RPAPL 1304, i.e., by certified mail and first-class mail. Moreover, since he did not aver that he personally mailed the notice, or that he was familiar with the mailing practices and procedures of American Home Mortgage Servicing, Inc., the entity that purportedly sent the notices, he did not establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed … . * * *

[Vice President] Reyes’s affidavit failed to establish a sufficient foundation for the admission of a business record pursuant to CPLR 4518(a) because, although he recited that the records upon which he relied were “regularly maintained by [the plaintiff] in the ordinary course of its business,” he “did not indicate that they were made by their author (or authors, whoever they might be) pursuant to an established procedure for the routine, habitual, systematic making of records that would qualify them as trustworthy accounts,” or that they “were the records regularly relied on in the business” … . Reyes also failed to indicate “that the record [was] made at or about the time of the event being recorded—essentially, that recollection [was] fairly accurate and the habit or routine of making the entries assured” … . …

… .[T]o the extent that Reyes’s purported knowledge of the date the plaintiff received the original note was based upon his review of unidentified business records maintained by the plaintiff, “[his] affidavit constituted inadmissible hearsay and lacked probative value” … . Deutsche Bank Natl. Trust Co. v Dennis, 2020 NY Slip Op 02039, Second Dept 3-25-20

 

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THE REFEREE’S FAILURE TO PROVIDE NOTICE AND A HEARING TO THE DEFENDANT DID NOT REQUIRE REVERSAL OF THE JUDGMENT OF FORECLOSURE (SECOND DEPT).

The Second Department determined the referee’s failure to provide notice and a hearing to the defendant in this foreclosure action did not require reversal of the judgment of foreclosure:

It is undisputed that the referee failed to provide notice to the defendant pursuant to CPLR 4313, or to hold a hearing on the issues addressed in the referee’s report. However, as long as a defendant is not prejudiced by the inability to submit evidence directly to the referee, a referee’s failure to notify a defendant and hold a hearing is not, by itself, a basis to reverse a judgment of foreclosure and sale and remit the matter for a hearing and a new determination of amounts owed … . Where, as here, a defendant had an opportunity to raise questions and submit evidence directly to the Supreme Court, which evidence could be considered by the court in determining whether to confirm the referee’s report, the defendant is not prejudiced by any error in failing to hold a hearing … . Bank of N.Y. Mellon v Viola, 2020 NY Slip Op 01895, Second Dept 3-18-20

 

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DEFENDANT’S PARTICIPATION IN A SETTLEMENT CONFERENCE DID NOT WAIVE HIS RIGHT TO SEEK DISMISSAL OF THE FORECLOSURE ACTION AS ABANDONED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the defendant in this foreclosure action did not waive his right to seek dismissal of the complaint by participating in a settlement conference. The plaintiff bank had abandoned the action:

CPLR 3215(c) states that “if [a] plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned…upon its own initiative or on motion.” The language of CPLR 3215(c) is not discretionary, and a claim for which a default judgment is not sought within the requisite one-year period will be deemed abandoned … . Notwithstanding, a claim will not be deemed abandoned if the party seeking a default judgment provides sufficient cause as to why the complaint should not be dismissed (CPLR 3215[c]). Here, plaintiff waited almost three years to seek a default judgment, and it failed to provide sufficient cause as to why the complaint should not be dismissed. As such, plaintiff’s complaint is dismissed as abandoned.

Plaintiff’s argument that defendant waived his right to seek dismissal pursuant to 3215(c) because he participated in the settlement conferences is equally unavailing. Although a party may waive it rights under CPLR 3215(c) “by serving an answer or taking any other steps which may be viewed as a formal or informal appearance”…,  defendant’s participation in settlement conferences did not constitute either a formal or an informal  appearance “since [he] did not actively litigate the action before the Supreme Court or participate in the action on the merits” … . Wells Fargo Bank, N.A. v Martinez, 2020 NY Slip Op 01693, First Dept 3-12-20

 

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THE REFEREE’S FINDINGS WERE BASED UPON INADMISSIBLE HEARSAY, JUDGMENT OF FORECLOSURE REVERSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s findings in this foreclosure action were 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, contrary to the plaintiff’s contention, the affidavit of its document execution specialist, 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 he purportedly relied upon in making his 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 … . Nationstar Mtge., LLC v Cavallaro, 2020 NY Slip Op 01624, Second Dept 3-11-20

 

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THE BANK’S MOTION TO RESTORE THE 2009 FORECLOSURE ACTION WHICH HAD BEEN ADMINISTRATIVELY, BUT NOT FORMALLY, DISMISSED SHOULD HAVE BEEN GRANTED; THE BANK HAD PREVIOUSLY STATED ITS INTENTION TO DISCONTINUE THE 2009 FORECLOSURE BUT THE MOTION TO RESTORE WAS NOT PRECLUDED BY THE JUDICIAL ESTOPPEL DOCTRINE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank should have been allowed to restore a 2009 foreclosure action which had been administratively, but not formally, dismissed. The court noted that the bank’s prior statement of its intention to discontinue the 2009 action did not trigger the judicial estoppel doctrine:

While, in an effort to successfully prosecute the 2015 foreclosure action, the Bank represented that it would seek to discontinue the 2009 action, it is not judicially estopped from changing its position. ” [A] party who assumes a certain position in a prior legal proceeding and secures a favorable judgment therein is precluded from assuming a contrary position in another action simply because his or her interests have changed'” … . The Bank did not obtain a favorable judgment in the 2015 foreclosure action.

The Supreme Court should have granted that branch of the Bank’s motion which was to restore the 2009 action to the active calendar. The 2009 action was never formally dismissed, as the marking-off procedures of CPLR 3404 do not apply to pre-note of issue actions such as this one … . Since the 2009 action could not properly be marked off pursuant to CPLR 3404, the Bank was not required to move to restore within any specified time frame and was not obligated to demonstrate a reasonable excuse and a potentially meritorious claim … . Further, there was neither a 90-day notice pursuant to CPLR 3216 … , nor an order dismissing the complaint pursuant to 22 NYCRR 202.27 … . Finally, [defendant] does not contend that the 2009 action was dismissed pursuant to CPLR 3215(c). Deutsche Bank Natl. Trust Co. v Gambino, 2020 NY Slip Op 01476, Second Dept 3-4-20

 

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MOTION TO DISCONTINUE STATE FORECLOSURE ACTION WHILE FORECLOSURE WAS PURSUED IN FEDERAL COURT SHOULD HAVE BEEN GRANTED WITHOUT PREJUDICE BECAUSE THERE WAS NO SHOWING OF PREJUDICE ON THE PART OF DEFENDANT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to discontinue the foreclosure action should not have been granted with prejudice because there was no showing of prejudice on the part of the defendant (Jach):

… [T]he plaintiff commenced this action … seeking to foreclose the subject mortgage. After interposing an answer, in which he alleged lack of standing as an affirmative defense, Jach moved for summary judgment dismissing the complaint insofar as asserted against him, and the plaintiff cross-moved, inter alia, for summary judgment on the complaint. The Supreme Court referred the action to a referee to hear and report on the issue of standing. After conducting a hearing, the referee issued a report finding, in effect, that the plaintiff had failed to establish its standing for purposes of its cross motion for summary judgment on the complaint.

… [W]ith this action still pending and the referee’s report not yet confirmed, the plaintiff commenced an action in federal court seeking to foreclose the subject mortgage. Subsequently, … the plaintiff moved before the Supreme Court, among other things, for leave to discontinue the action without prejudice, which Jach opposed.

In the order appealed from, the Supreme Court, inter alia, in effect, upon granting that branch of the plaintiff’s motion which was for leave to discontinue the action, did so with prejudice. The plaintiff appeals.

The Supreme Court, in granting that branch of the plaintiff’s motion which was for leave to discontinue the action, should have done so without prejudice. Pursuant to CPLR 3217(b), “an action shall not be discontinued by a party asserting a claim except upon order of the court and upon terms and conditions, as the court deems proper.” As a general rule, “a plaintiff should be permitted to discontinue an action without prejudice unless the defendant would be prejudiced thereby” … . Here, there was no evidence that Jach would be prejudiced by a discontinuance … . Onewest Bank, FSB v Jach, 2020 NY Slip Op 01357, Second Dept 2-26-20

 

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