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PLAINTIFF BANK’S PRIOR FORECLOSURE ACTION WAS DISMISSED FOR FAILURE TO DEMONSTRATE STANDING; RES JUDICATA DOES NOT PRECLUDE THE INSTANT FORECLOSURE ACTION BECAUSE THE PRIOR ACTION WAS NOT DISMISSED ON THE MERITS; COLLATERAL ESTOPPEL DOES NOT PRECLUDE THE INSTANT ACTION BECAUSE THE STANDING ISSUE IS NOT THE SAME (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the prior dismissal of plaintiff bank’s foreclosure action for failure to demonstrate standing did not, under the doctrines of res judicata or collateral estoppel, preclude the present action. The prior dismissal was not on the merits and the standing issue in the current procedure is not the same as in the prior proceeding:

Here, as the prior action was dismissed for lack of standing, without reaching the merits of the foreclosure claim itself, the defendants failed to demonstrate that “a judgment on the merits exists between the same parties involving the same subject matter” … . “To accord res judicata effect to the [judgment in the prior action] would bar a court from ever addressing the merits of plaintiff’s mortgage foreclosure claim, even if plaintiff became able to demonstrate its standing to sue, and there is nothing in the record to suggest . . . [that there are] exceptional circumstances or an unreasonable neglect to prosecute that would warrant such an extreme sanction” … . …

… [T]the defendants failed to demonstrate that the issue of whether the plaintiff has standing under the circumstances of this action was identical to the issue adjudicated in the prior action … . In the prior action, the plaintiff failed to establish that it had possession of the original endorsed note at the time that action was commenced, while in the present action, the issue is whether the plaintiff had possession of the original endorsed note at the time this action was commenced … . HSBC Bank USA, N.A. v Pantel, 2020 NY Slip Op 00109, Second Dept 1-8-20

 

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THE BANK DID NOT PROVE IT HAD STANDING TO BRING THE FORECLOSURE ACTION (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. Plaintiff bank did not submit sufficient proof of standing to bring the action:

Where, as here, a plaintiff’s standing to commence a foreclosure action is placed in issue by a defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief … . A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note … . Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident … . Here, the plaintiff failed to meet its burden to establish, prima facie, its entitlement to summary judgment because the affidavit submitted in support of the motion was insufficient to establish standing … . Deutsche Bank Natl. Trust Co. v Conrado, 2020 NY Slip Op 00103, Second Dept 1-8-20

 

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PLAINTIFFS’ ACTION ALLEGING BREACH OF AN ORAL CONTRACT REGARDING REPAYMENT OF A LOAN SECURED BY A NOTE AND MORTGAGE SHOULD HAVE BEEN DISMISSED AS BARRED BY THE STATUTE OF FRAUDS; THE FRAUD AND UNJUST ENRICHMENT CAUSES OF ACTION MUST BE DISMISSED AS DUPLICATIVE OF THE BREACH OF CONTRACT CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiffs’ action alleging breach of an alleged oral contract concerning the repayment of a loan secured by a note an mortgage should have been dismissed as barred by the statute of frauds. The fraud and unjust enrichment causes of action must also be dismissed as duplicative of the breach of contract cause of action:

The complaint alleged that contemporaneously with executing the note and mortgage, the plaintiffs and the defendant entered into an oral agreement providing, inter alia, that in exchange for assigning a contract to purchase certain real property to the defendant, the plaintiffs would be responsible for paying only the interest on the loan. The complaint, which asserted causes of action sounding in breach of contract, fraud, and unjust enrichment, sought, among other things, recovery of the settlement amount paid by the plaintiffs in the foreclosure action, less the amount of interest allegedly due pursuant to the oral agreement. The defendant moved pursuant to CPLR 3211(a) to dismiss the complaint. The Supreme Court denied the motion, and the defendant appeals.

Accepting the facts as alleged in the complaint as true, and according the plaintiffs the benefit of every possible inference, dismissal of the breach of contract cause of action should have been granted, since enforcement of the alleged oral agreement, ostensibly to modify the note and mortgage, is barred by the statute of frauds (see General Obligations Law §§ 5-703[1]; 5-1103 … ). Dismissal of the causes of action alleging fraud and unjust enrichment should also have been granted as they are duplicative of the unenforceable contractual cause of action and thus constitute an impermissible attempt to circumvent the statute of frauds … . Botanical Realty Assoc. Urban Renewal, LLC v Gluck, 2020 NY Slip Op 00099, Second Dept 1-8-20

 

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PLAINTIFF BANK DID NOT PRESENT SUFFICIENT EVIDENCE OF STANDING TO BRING THE FORECLOSURE ACTION; BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION 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. Plaintiff did not demonstrate it had standing to bring the action:

… [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 Melissa Gallio, the Vice President of Loan Documentation for the plaintiff. Gallio stated that her knowledge of this case was based upon her review of “the books and records” maintained by the plaintiff, and asserted that the plaintiff was “in possession of the Note and Mortgage” “[a]s of January 10, 2007.” However, Gallio’s assertions as to the contents of the records were inadmissible hearsay to the extent that the records she purported to describe were not submitted with her affidavit … . While 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 … . Wells Fargo Bank, N.A. v Springer, 2020 NY Slip Op 00176, Second Dept 1-8-20

 

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PARTY WHICH PURCHASED THE PROPERTY AFTER FORECLOSURE WAS COMMENCED WAS ENTITLED TO INTERVENE IN THE FORECLOSURE PROCEEDINGS BUT DID NOT HAVE STANDING TO ALLEGE PLAINTIFF BANK DID NOT COMPLY WITH NOTICE REQUIREMENTS; THE ESTATE OF THE ORIGINAL BORROWER IS NOT A NECESSARY PARTY (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the party (appellant) which purchased the property after foreclosure was commenced should have been allowed to intervene in the foreclosure proceedings. The Second Department further determined the estate of the original borrower was not a necessary party, the appellant did not have standing to allege plaintiff bank’s noncompliance with the notice requirements of Real Property Actions and Proceedings Law (RPAPL) 1304 and plaintiff’s failure to serve a notice of default:

On September 10, 2015, the plaintiff commenced this action to foreclose a mortgage on premises owned by the defendant Shawn A. Carrington. Carrington failed to answer the complaint. On March 23, 2016, Carrington sold the premises to the appellant 1698 Management Corp. …

The appellant was entitled to intervene as of right pursuant to CPLR 1012(a) since it established that the representation of its interest by the parties would be inadequate, that the action involved the disposition of title to real property, and that it would be bound and adversely affected by a judgment of foreclosure and sale … . Contrary to the court’s determination, the appellant was not limited to continuing the action in Carrington’s name pursuant to CPLR 1018. The fact that the appellant obtained its interest in the premises after the action was commenced and the notice of pendency was filed does not definitively bar intervention … , nor does the fact that Carrington defaulted in answering the complaint … . Furthermore, under the circumstances of this case, the appellant’s motion, made less than five months after it purchased the premises, and before an order of reference was issued, was timely … . US Bank N.A. v Carrington, 2020 NY Slip Op 00173, Second Dept 1-8-20

 

PLAINTIFF BANK’S ATTEMPT TO DE-ACCELERATE THE MORTGAGE JUST BEFORE THE STATUTE OF LIMITATIONS RAN WAS PROPERLY REJECTED (THIRD DEPT).

The Third Department, affirming the dismissal of the foreclosure action, held that the plaintiff bank’s attempt to de-accelerate the mortgage just before the statute of limitations ran was properly rejected:

As stated by the [2nd] Department, “acceleration notices must be clear and unambiguous to be valid and enforceable, . . . [and] de-acceleration notices must also be clear and unambiguous to be valid and enforceable” (Milone v US Bank N.A., 164 AD3d 145, 153 [2018] … ). Notably, in Milone, the Court cautioned against pretextual de-acceleration letters issued to avoid an impending statute of limitations. … [T]he [2nd] Department reasoned in Milone that “a de-acceleration letter is not pretextual if . . . it contains an express demand for monthly payments on the note, or, in the absence of such express demand, it is accompanied by copies of monthly invoices transmitted to the homeowner for installment payments” or other comparable evidence … .

… [P]laintiff’s purported de-acceleration letter was issued on the eve of the expiration of the statute of limitations. Although the letter expressly “reinstates the [l]oan as an installment loan,” it does not demand the resumption of monthly payments or provide monthly invoices for payment due. Instead, the letter specifies that defendant remained in default for failing to make the required monthly installment payments since November 1, 2008 and offers to discuss “a variety of homeowner’s assistance programs.” Not to be overlooked is that the March 2, 2016 letter was followed by two June 13, 2016 letters providing 30 days to cure the default by making a payment due of $101,831, as well as a 90-day notice required under RPAPL 1304 — a condition precedent to initiating a foreclosure action. In our view, this proffer does not constitute a valid de-acceleration, as plaintiff simply put defendant on notice of its obligation to cure an eight-year default and then promptly embarked on the notices required to initiate a second foreclosure action. It follows that plaintiff’s second action was properly dismissed as untimely. Wells Fargo Bank, N.A. v Portu, 2020 NY Slip Op 00025, Third Dept 1-2-20

 

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PLAINTIFF FAILED TO PROVE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff’s (PennyMac’s) motion for summary judgment in this foreclosure action should not have been granted. Plaintiff did not present sufficient proof of compliance with the notice requirements of RPAPL 1304:

… [A]lthough Somarriba and Carras-Gomez “stated in [their] affidavit[s] that the RPAPL 1304 notices were mailed by certified and regular first-class mail, and attached copies of those notices, the plaintiff failed to attach, as exhibits to the motion, any documents to prove that the mailing actually happened” … . Instead, the plaintiff submitted a certificate of bulk mailing, which did not identify any particular mailing, and two internal reports generated by the plaintiff, which appear to demonstrate that some unidentified pieces of mail were sent to the borrower’s address … . Additionally, no foundation was laid for the admission of these business records, as neither Somarriba nor Carras-Gomez attested that they had personal knowledge of the plaintiff’s business practices and procedures, or that the plaintiff’s records were incorporated into PennyMac’s own records or routinely relied upon by PennyMac in its business … . Finally, the plaintiff failed, alternatively, to provide proof of actual mailing of the RPAPL 1304 notice, to provide 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” … . Neither Somarriba nor Carras-Gomez averred that they had personal knowledge of any such standard office mailing procedure of the plaintiff. PennyMac Corp. v Khan, 2019 NY Slip Op 09278, Second Dept 12-24-19

 

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MORTGAGE COMPANY’S PROOF OF STANDING AND MAILING OF RPAPL 1304 NOTICE INSUFFICIENT IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not provide sufficient evidence of standing and mailing of the RPAPL 1304 notice in this foreclosure proceeding:

… [T]he plaintiff failed to meet its prima facie burden of establishing that it had standing to commence this action. In support of its motion, the plaintiff relied on the affidavit of its Document Execution Specialist, Jerrell Menyweather, who attested that the plaintiff received physical delivery of the original note on July 6, 2007, and was in possession and the holder of the note, prior to commencement of the action … . While Menyweather attested that his knowledge was based on business records maintained by the plaintiff, he failed to annex the business records that he referred to in his affidavit. Thus, his affidavit constituted inadmissible hearsay and lacked probative value on this issue of the plaintiff’s standing … .

… [T]he plaintiff failed to establish, prima facie, that it complied with RPAPL 1304. Although Menyweather stated in the affidavit that the RPAPL 1304 notices were sent to certain of the defendants via certified and first-class mail, the plaintiff failed to provide any documents to prove that the mailing actually took place. Moreover, “[w]hile mailing may be proved by documents meeting the requirements of the business records exception to the rule against hearsay,” Menyweather “did not make the requisite showing that he was familiar with the plaintiff’s mailing practices and procedures, and therefore did not establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed” … . Nationstar Mtge., LLC v Jean-Baptiste, 2019 NY Slip Op 09011, Second Dept 12-18-19

 

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PLAINTIFF BANK IN THIS FORECLOSURE ACTION DID NOT DEMONSTRATE THE NOTICE REQUIREMENTS OF RPAPL 1304 DID NOT APPLY AND DID NOT PRESENT SUFFICIENT EVIDENCE OF THE MAILING OF THE NOTICE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not demonstrate the notice requirements of RPAPL 1304 did not apply and did not demonstrate compliance with RPAPL 1304 in this foreclosure action. The bank did not show that the underlying loan was not a “home loan,” and the proof of mailing of the notice was insufficient:

… [T]he plaintiff failed to show, prima facie, that the RPAPL 1304 90-day notice requirement was inapplicable because the loan was not a “home loan” … .​

RPAPL 1304 requires the 90-day notice to be sent by registered or certified mail, and also by first-class mail, to the last known address of the borrower (see RPAPL 1304[2]). “By requiring the lender or mortgage loan servicer to send the RPAPL 1304 notice by registered or certified mail and also by first-class mail, the Legislature implicitly provided the means for the plaintiff to demonstrate its compliance with the statute, i.e., by proof of the requisite mailing, which can be 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'” … .

Here, the plaintiff failed to provide proof of the actual mailing, or proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by an individual with personal knowledge of that procedure. U.S. Bank Trust, N.A. v Sadique, 2019 NY Slip Op 09054, Second Dept 12-18-19

 

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NEW YORK COURTS DO NOT HAVE THE AUTHORITY TO ENJOIN A TENNESSEE MORTGAGE FORECLOSURE ACTION (FIRST DEPT).

The First Department, reversing Supreme Court, determined New York did not have the authority to decide issues affecting title to real property in another state, here Tennessee:

Plaintiff financed its purchase of the property in 2007 with a note secured by a deed of trust. In 2015, plaintiff and defendant trustee entered into a loan modification agreement (LMA) that, inter alia, bifurcated the original loan and allowed Note B to be forgiven if a subsequent sale or refinancing was insufficient to pay the principal and interest thereon. The LMA is governed by Tennessee law but requires plaintiff to submit to the jurisdiction of the courts of this State. It does not similarly require defendant-appellants to submit to the jurisdiction of this State.

Defendant trustee advertised a nonjudicial foreclosure sale (Tenn Code Ann 35-5-101) based on plaintiff’s apparent failure to pay the entire amount due upon maturity, and its failure to cause all rents to be deposited into a lockbox. Plaintiff sued, alleging, among other things, breach of the LMA provision prohibiting the trustee from unreasonably withholding consent to refinancing.

“[T]he courts of one State may not decide issues directly affecting title to real property located in another State” … . Although a court with personal jurisdiction over the parties may adjudicate their rights with respect to foreign realty … , plaintiffs cite no authority allowing an out-of-state foreclosure sale to be enjoined … . Contrary to plaintiff’s argument, its one-sided agreement to submit to personal jurisdiction in New York does not confer upon the New York courts a contractual right to enjoin an out-of-state foreclosure sale. Clark Tower, LLC v Wells Fargo Bank, N.A., 2019 NY Slip Op 08975, First Dept 12-17-19

 

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