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PLAINTIFF BANK DID NOT SUBMIT SUFFICIENT PROOF OF ITS STANDING TO BRING THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not submit sufficient proof of standing to bring the foreclosure action:

… [W]hile the plaintiff alleged that the note had been endorsed to it, the plaintiff failed to submit sufficient evidence to demonstrate that a copy of the note with the endorsement was attached to the complaint. The only copy of the complaint that appears in the record before us was submitted as an exhibit in support of Williams’s [defendant’s] motion, and the version of the note accompanying that copy of the complaint did not include the endorsement. The plaintiff’s attempt to establish standing through the submission of the affidavit of Morgan Battle Ames, a contract management coordinator for the plaintiff’s loan servicer, was also insufficient. Ames stated that she had “personal knowledge of the stated facts and circumstances and books and records maintained by [the loan servicer],” and that the “information in this affidavit is taken from [the loan servicer’s] business records,” which were “recorded by persons with personal knowledge of the information in the business record.” Since Ames failed to attest that she was personally familiar with the record-keeping practices and procedures of the entity that generated the subject business records, she failed to demonstrate … . HSBC Bank USA, N.A. v Williams, 2019 NY Slip Op 08554, Second Dept 11-27-19

 

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DEFICIENCIES IN THE BANK’S PROOF OF DEFAULT, STANDING AND THE AMOUNT OWED COULD NOT BE CURED BY SUBMITTING ADDITIONAL PROOF IN THE REPLY PAPERS IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not submit sufficient proof of defendants’ default, standing or the amount owed, and the deficiencies could not be cured by a second affidavit submitted in reply:

… [T]he plaintiff submitted the affidavit of its assistant vice president, Keith Weinkauf. As to the defendants’ alleged default, Weinkauf stated that the defendants “fail[ed] to make the full payment due on the [m]aturity [d]ate” of the note. On the issue of standing, Weinkauf averred that “[e]ffective March 31, 2016, Montauk Credit Union merged into Bethpage Federal Credit Union.” Further, with respect to the amount owed by the defendants, Weinkauf stated that the current unpaid principal balance due on the note was $58,165.61, plus interest, late charges, and fees. However, apart from producing a copy of the note itself, Weinkauf submitted no evidence in admissible form with his affidavit to establish the existence of a default, the plaintiff’s standing, or the calculation of the unpaid amount owed by the defendants … . Although the plaintiff later submitted, with its reply papers, a second affidavit from Weinkauf, along with supporting documentary evidence, to establish its standing, the plaintiff could not, under the circumstances presented, rely on the second affidavit to correct deficiencies inherent in the original one … . Bethpage Fed. Credit Union v Luzzi, 2019 NY Slip Op 08550, Second Dept, 11-27-19

 

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FEDERAL BANKRUPTCY STAY TOLLED THE STATUTE OF LIMITATIONS IN A FORECLOSURE ACTION COMMENCED BEFORE THE STAY WENT INTO EFFECT (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Garcia, over a three-judge dissent, determined an automatic bankruptcy stay tolls the statute of limitations where a party has a pending action at the time the stay was imposed:

New York law tolls the statute of limitations where “the commencement of an action has been stayed by a court or by statutory prohibition” (CPLR 204 [a]). Federal bankruptcy law automatically stays the commencement or continuation of any judicial proceedings against a debtor upon the filing of a bankruptcy petition (see 11 USC § 362 [a]). We must determine whether the bankruptcy stay qualifies as a “statutory prohibition” under CPLR 204 (a), and, if so, whether a party may later avail itself of the toll where, at the time the stay was imposed, that party had a pending action asserting the same claim. … [W]e answer yes to both questions … . * * *

CPLR 204 (a) provides, “[w]here the commencement of an action has been stayed by a court or by statutory prohibition, the duration of the stay is not a part of the time within which the action must be commenced.” The result here depends on our reading of the term “commencement.”

Plaintiff argues that it is impossible for defendant to have been prohibited from “commencing” an action because a foreclosure action had been commenced prior to plaintiff’s bankruptcy filing. Application of plaintiff’s rule would be as follows: Because defendant filed the first foreclosure claim and defendant responded by filing a bankruptcy petition, invoking the automatic stay, commencement of that first action was not “stayed” under the statute and the toll is inapplicable. And when defendant filed a second foreclosure action, and plaintiff again responded by again filing a bankruptcy petition that invoked the automatic stay, “commencement” of that second action was not stayed, once again making the toll inapplicable … . * * *

Neither this Court nor the Legislature has restricted the term “commencement” to the first time a party files a complaint asserting a cause of action; instead the term may also include the commencement of subsequent actions asserting the same claim … . Lubonty v U.S. Bank Natl. Assn.., 2019 NY Slip Op 08520, CtApp 11-25-19

 

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A PERSON NOT NAMED ON THE NOTE AND MORTGAGE IS NOT ENTITLED TO RPAPL 1304 NOTICE OF THE FORECLOSURE ACTION, NOTWITHSTANDING CORRESPONDENCE REQUESTING THAT HE BE ADDED TO THE DOCUMENTS AS A BORROWER (THIRD DEPT).

The Third Department, reversing Supreme, determined that a person who was not named as a borrower on the note and mortgage was not entitled to notice of the foreclosure action pursuant to RPAPL 1304. The plaintiff mortgage company’s motion for summary judgment should have been granted:

The record contains correspondence that reveals that a representative from Monroe Title, the title insurer for PHH Mortgage, recognized that Robert Johnson, not Brad Johnson, was the party making all payments on the mortgage. …The record also contains two letters … , on Robert Johnson’s behalf, to PHH Mortgage representative …, wherein [the writer] requests that the mortgage be modified to list Robert Johnson as the borrower. However, despite these communications, the modification did not occur and Brad Johnson continued to be the sole signatory on both instruments. Inasmuch as it is evident from the record that Brad Johnson is the only individual listed as a borrower on all relevant documents, including the note and mortgage, Robert Johnson was not a borrower and was not entitled to RPAPL 1304 notices  … . Federal Natl. Mtge. Assn. v Johnson, 2019 NY Slip Op 08472. Third Dept 11-21-19

 

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JUDGE SHOULD NOT HAVE DENIED, SUA SPONTE, PLAINTIFF’S MOTION FOR A JUDGMENT OF FORECLOSURE ON A GROUND NOT RAISED BY ANY PARTY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the judge should not have, sua sponte, denied plaintiff’s motion for a judgment of foreclosure on a ground not raised by the parties:

… [T]he Supreme Court should not have denied its motion for a judgment of foreclosure and sale upon finding that DLJ [plaintiff] failed to show that the defendants were properly served. The defendants did not oppose DLJ’s motion on any ground, including lack of personal jurisdiction. Therefore, the court should not have, sua sponte, raised the issue of the propriety of service …

Moreover, DLJ demonstrated its entitlement to a judgment of foreclosure and sale by submitting evidence establishing the merits of its unopposed motion and the referee’s findings and report … . DLJ Mtge. Capital, Inc. v Ramnarine, 2019 NY Slip Op 08392, Second Dept 11-20-19

 

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THE DISCHARGE IN BANKRUPTCY DID NOT ACCELERATE THE DEBT AND THEREFORE DID NOT START THE STATUTE OF LIMITATIONS RUNNING; THE IN REM FORECLOSURE ACTION REMAINS VIABLE (FOURTH DEPT).

The Fourth Department, in a full-fledged opinion by Justice Carni, determined that the mortgage debt was not accelerated by a discharge in bankruptcy, therefore the statute of limitations was not triggered and an in rem foreclosure action remains viable:

… [O]nce a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt” … . “Where the acceleration . . . is made optional with the holder of the note and mortgage, some affirmative action must be taken evidencing the holder’s election to take advantage of the accelerating provision, and until such action has been taken the provision has no operation” … . Here, the mortgage provided plaintiff the option to accelerate the debt under certain circumstances, but did not state that the debt would be automatically accelerated if defendant obtained a discharge in bankruptcy.

We reject defendant’s contention that the discharge in bankruptcy automatically accelerated the debt and thus triggered the statute of limitations with respect to the entire debt … .

“[E]ven after the debtor’s personal obligations have been extinguished [by chapter 7 discharge], the mortgage holder still retains a right to payment in the form of its right to the proceeds from the sale of the debtor’s property,” and a bankruptcy proceeding does not “impair [the mortgage holder’s] right to commence an action against [the debtor] in rem to seek payment from the proceeds of a foreclosure sale” … . … [C]hapter 7 discharge removes the “mode of enforc[ement]” against the debtor in personam, but the obligation otherwise remains intact and does not impact an action in rem … . Wilmington Sav. Fund Socy., FSB v Fernandez, 2019 NY Slip Op 08290, Fourth Dept 11-15-19

 

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THE BANK DID NOT PRESENT SUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE OF DEFAULT PROVISIONS OF THE MORTGAGE; THE BANK NEED NOT AFFIRMATIVELY ADDRESS COMPLIANCE WITH RPAPL 1304 NOTICE REQUIREMENTS IF THE ISSUE IS NOT RAISED IN THE ANSWER; REPLY PAPERS CAN PRESENT EVIDENCE FOR THE FIRST TIME IN RESPONSE TO ISSUES FIRST RAISED IN OPPOSITION TO PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT; BUT REPLY PAPERS MAY NOT PRESENT, FOR THE FIRST TIME, EVIDENCE ADDRESSING AN ISSUE RAISED IN THE DEFENDANT’S ANSWER (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff bank (Aurora) did not provide sufficient proof of providing notice of default to defendants. The Second Department noted that the bank need not affirmatively prove compliance with the notice requirements of RPAPL 1304 because the issue was not raised in defendant’s answer. The court also noted that evidence submitted in reply papers addressing matters raised for the first time in opposition to plaintiff’s motion for summary judgment can be considered, but evidence submitted for the first time in reply papers addressing issues which were raised in the answer should not be considered:

In support of its motion, Aurora submitted two affidavits. The first affidavit was from Laura McCann, Vice President of Aurora, the loan servicer responsible for sending the notices of default. The second affidavit was from A.J. Loll, Vice President of Nationstar Mortgage, LLC, the current plaintiff and loan servicer. While McCann attested that Aurora was responsible for “providing notices pursuant to the terms of the note and mortgage evidencing the mortgage loan at issue, and specifically for providing notices such as the notice required under Section 22 of the mortgage,” nowhere in her affidavit did she attest to the actual mailing or delivery of those notices. As to the second affidavit, while Loll attested, inter alia, that “[t]he servicing records show that a 30-day letter was mailed to [the] defendants . . . … , which letter advised Defendants of their default,” and attached a purportedly “true copy” of the 30-day letter as Exhibit I, the affidavit did not contain a statement that the 30-day notice was sent in a manner according with the terms of the mortgage, i.e., “mailed by first class mail or . . . actually delivered to [borrower’s] notice address if sent by other means.” Moreover, Loll’s affidavit “did not contain a statement that [Loll] was familiar with [Aurora’s] mailing practices and procedures,” so as to establish “proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed” … . While Loll claimed that servicing records show that a 30-day letter was mailed to the defendants, she did not identify what those records are and did not authenticate them as business records and attach them to her affidavit … . Nationstar Mtge., LLC v Tamargo, 2019 NY Slip Op 08197, Second Dept 11-13-19

 

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THE UCC CRITERIA FOR PROOF OF POSSESSION OF A LOST NOTE WERE NOT MET; PLAINTIFF BANK THEREFORE DID NOT DEMONSTRATE IT HAD STANDING TO BRING THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not demonstrate it had standing to bring the foreclosure action. The UCC’s requirements for demonstrating ownership of a lost note were not met:

… [T]he affidavit of possession of the original note, sworn to by a vice president of loan documentation for the plaintiff, does not contain any details of delivery of the note, except for the claim that it was delivered to the plaintiff sometime after its execution, and that the plaintiff “had possession of the Promissory Note on or before … the date that this action was commenced.” The lost note affidavit of another vice president of loan documentation employed by the plaintiff stated vaguely, and in a conclusory manner, that the note was “inadvertently lost, misplaced or destroyed,” that the plaintiff had not “pledged, assigned, transferred, hypothecated or otherwise disposed of the note,” and that the plaintiff had made “a diligent and extensive search of its records in a good faith effort to discover the lost note in accordance with its procedures for locating the lost note.” The lost note affidavit did not provide any facts as to when the search for the note occurred, who conducted the search, or when or how the note was lost … . Thus, it “failed to sufficiently establish the plaintiff’s ownership of the note” … .

Since the plaintiff failed to demonstrate its ownership of the lost note (see UCC 3-804), or that it had standing, “as the lawful holder or assignee of the subject note on the date it commenced this action, to commence the action … . Wells Fargo Bank, N.A. v Meisels, 2019 NY Slip Op 08243, Second Dept 11-13-19

 

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BANK DID NOT SUBMIT SUFFICIENT PROOF OF DEFENDANT’S DEFAULT OR COMPLIANCE WITH RPAPL 1304 NOTICE REQUIREMENTS; 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 (Chase’s) motion for summary judgment in this foreclosure action should not have been granted, The court held: (1) the conclusory affidavit submitted by the bank  to prove defendant’s default had no probative value, the business record itself should have been provided; (2) compliance with the mailing provisions of RPAPL 1304 was not proven by the bank; (3) failure to comply with the notice provisions of RPAPL 1304 can be raised as a defense at any time; and (4) by not raising the failure to provide the notice required by the mortgage in the answer or a motion to amend the answer, the defendant waived that defense:

Here, the affidavit of Mimoza Petreska, a vice president of Chase, submitted in support of Chase’s motion, inter alia, for summary judgment on the complaint insofar as asserted against the defendant, was insufficient to establish the defendant’s default in payment under the note … . The only business record annexed to Petreska’s affidavit with regard to the default was a copy of the notice of default dated May 15, 2012, which merely stated, in conclusory fashion, that the defendant’s loan was in default. Conclusory affidavits lacking a factual basis are without evidentiary value … . Moreover, “[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” … . JPMorgan Chase Bank, N.A. v Akanda, 2019 NY Slip Op 08180, Second Dept 11-13-19

 

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DEFENDANT IN THIS FORECLOSURE ACTION PRESENTED SUFFICIENT EVIDENCE REBUTTING THE PROCESS SERVER’S AFFIDAVIT TO WARRANT A HEARING ON WHETHER SHE WAS PROPERLY SERVED WITH THE SUMMONS AND COMPLAINT (SECOND DEPT).

The Second Department, reversing Supreme Court, over an extensive concurring memorandum, determined that defendant made a sufficient showing to warrant a hearing on whether she was served with the summons and complaint in this foreclosure action:

Although the defendant did not deny having actual notice of the action, “[w]hen the requirements for service of process have not been met, it is irrelevant that defendant may have actually received the documents” … . “Service is only effective . . . when it is made pursuant to the appropriate method authorized by the CPLR. Actual notice alone will not sustain the service or subject a person to the court’s jurisdiction [when there has not been compliance with] prescribed conditions of service” … . * * *

The defendant rebutted the process server’s affidavit of service through her specific and detailed affidavit, in which she averred that “[t]he [a]ffidavit of service falsely states that a copy of the Summons and Complaint was affixed to my door.” The defendant’s affidavit set out in great detail that the defendant was at home each time that the process server purportedly attempted service, as she was recuperating from a kidney transplant. The defendant averred that April 3, 2009, which happened to be her birthday, was a Friday, and that as an observant Jew she did not leave her home. The defendant submitted a Sabbath calendar printout showing that the sun did not set until 8:04 p.m. on April 4, 2009, approximately one hour after the process server purportedly affixed the summons and complaint to her door. The defendant averred that she never heard anyone knock at her door or ring her doorbell and that, despite various medical problems, she has no issues with her hearing. The defendant averred that her daughter came to pick her up for dinner at 8:30 p.m. on April 4, 2009, and that upon leaving her home, she did not see any documents affixed to her door. The foregoing detailed averments were sufficient to rebut the process server’s affidavit and to warrant a hearing on the issue of whether service was properly made … . HSBC Bank USA, N.A. v Assouline, 2019 NY Slip Op 07891, Second Dept 11-6-19

 

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