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LAW OFFICE FAILURE DEEMED AN ADEQUATE EXCUSE, MOTION TO VACATE THE DEFAULT JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined that law office failure was an adequate excuse and appellants’ motion to vacate a default judgment should have been granted in this foreclosure action:

… [T]he appellants moved, among other things, pursuant to CPLR 2005 and 5015(a) to vacate their default … . …

“A motion to vacate a default is addressed to the sound discretion of the motion court” … . “In making that discretionary determination, the court should consider relevant factors, such as the extent of the delay, prejudice or lack of prejudice to the opposing party, whether there has been willfulness, and the strong public policy in favor of resolving cases on the merits” … .

Under the circumstances presented here, the appellants set forth a reasonable excuse for their failure to appear at the centralized motion part of the Supreme Court on the return date of the plaintiff’s motion based on evidence of law office failure. In an affirmation, the appellants’ attorney explained that upon receiving the plaintiff’s motion, he directed his office’s legal assistant to note the return date of the motion on the office calendar, but that the return date had not been noted on the calendar. In addition, the appellants demonstrated a potentially meritorious defense based upon the statute of limitations. Bank of N.Y. Mellon v Faragalla, 2019 NY Slip Op 05641, Second Dept 7-17-19

 

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DEED MADE UNDER FALSE PRETENSES IS VOID AB INITIO RENDERING THE RELATED MORTGAGE INVALID; THE LAW OF THE CASE DOCTRINE DOES NOT PRECLUDE RECONSIDERING A MATTER WHERE THERE IS NEW EVIDENCE (FIRST DEPT).

The First Department, reversing Supreme Court, in this foreclosure action, determined a deed made under false pretenses was void ab initio and therefore the related mortgage was invalid. The court noted that the law of the case doctrine does not prohibit it from reconsidering a matter where there is subsequent evidence affecting the prior determination:

It is undisputed that nonparty Rapsil Corporation conveyed the same property to two different recipients, first, defendant Rafael Pantoja (who obtained a mortgage from CitiMortgage), and, second, a bona fide entity that transferred it to the Salazar defendants. Although the deed that conveyed the property from Rapsil to Pantoja was unacknowledged, which ordinarily would render it only voidable, because Pantoja controlled Rapsil, the deed was made under false pretenses and was therefore void ab initio … . Accordingly, the CitiMortgage mortgage was invalid as well (Weiss v Phillips, 157 AD3d 1, 10 [1st Dept 2017]).

This determination is not inconsistent with our prior related decisions … . In any event, the law of the case doctrine does not limit our power to reconsider issues “where there are extraordinary circumstances, such as subsequent evidence affecting the prior determination” … . CitiMortgage, Inc. v Pantoja, 2019 NY Slip Op 05481, First Dept 7-9-19

 

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DEFENDANT IN THIS FORECLOSURE ACTION DID NOT ASSERT THE BANK LACKED STANDING IN HIS ANSWER AND DID NOT OPPOSE THE BANK’S MOTION FOR SUMMARY JUDGMENT, THE JUDGE SHOULD NOT HAVE, SUA SPONTE, RAISED THE STANDING ISSUE AND DENIED PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT ON THAT GROUND (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the judge should not have, sua sponte, denied plaintiff bank’s motion for summary judgment in this foreclosure action on the ground the bank did not establish standing. The bank need not affirmatively demonstrate standing absent the defendant’s assertion that the bank lacked standing. Here the defendant did not address the bank’s standing in his answer and did not oppose the motion for summary judgment:

… [A]s a general matter, a plaintiff need not establish its standing (i.e., that it held and/or owned the note at the time the action was commenced) as an essential element of the cause of action. Rather, it is only where the plaintiff’s standing is placed in issue by the defendant that the plaintiff must shoulder the additional burden of establishing its standing to commence the action, a burden satisfied by evidence that it was the holder or assignee of the underlying note at the time the action was commenced” … .

In the present case, the defendant did not raise the issue of standing by asserting lack of standing as an affirmative defense in his answer or moving to dismiss the complaint on that ground in a pre-answer motion to dismiss … . Inasmuch as the defendant “failed to . . . raise the issue, it was inappropriate for the Supreme Court to, sua sponte, do so on the defendant[‘s] behalf” … . The issue of standing was not properly before the Supreme Court … . Deutsche Bank Natl. Trust Co. v Matzen, 2019 NY Slip Op 05386, Second Dept 7-3-19

 

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PLAINTIFF BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE PROVISIONS OF RPAPL 1304 AND DID NOT SUBMIT ADMISSIBLE PROOF OF STANDING PURSUANT TO A MERGER, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that plaintiff bank in this foreclosure action did not demonstrate compliance with the notice requirements of Real Property Actions and Proceedings Law (RPAPL) 1304 and did not demonstrate it had standing, based upon a merger, to foreclose:

… [T]he plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1304  … . The plaintiff did not submit an affidavit of service or proof of mailing by the United States Postal Service evidencing that the plaintiff properly served the defendants pursuant to RPAPL 1304. Instead, the plaintiff relied upon the affidavit of its employee Lesa Duddey, a vice president of document control. In her affidavit, Duddey averred that her “review of records” maintained by the plaintiff “reveal[ed]” that the plaintiff sent 90-day notices by registered or certified mail and first class mail to each of the defendants, and she described a correspondence log that purportedly evidenced such mailings. “While mailing may be proved by documents meeting the requirements of the business records exception to the rule against hearsay” … , here, the plaintiff failed to submit a copy of the correspondence log in support of its motion. Consequently, the statements in Duddey’s affidavit regarding the correspondence log are inadmissible hearsay and lack probative value … . The plaintiff did not establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed … . The presence of 20-digit numbers on the copies of the 90-day notices submitted by the plaintiff, standing alone, did not suffice to establish, prima facie, proper mailing under RPAPL 1304 … .

… [W]e note that the plaintiff also failed to submit sufficient evidence in admissible form of ABN’s merger with the plaintiff to establish, prima facie, that the plaintiff was the holder of the note at the time of the commencement of the action … . CitiMortgage, Inc. v Osorio, 2019 NY Slip Op 05383, Second Dept 7-3-19

 

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SUPREME COURT SHOULD HAVE SUMMONED A NECESSARY PARTY WHICH WAS SUBJECT TO THE JURISDICTION OF THE COURT PURSUANT TO CPLR 1001; SUPREME COURT SHOULD HAVE GRANTED PLAINTIFF’S SECOND MOTION FOR AN EXTENSION OF TIME TO SERVE A DEFENDANT IN THE INTEREST OF JUSTICE, DESPITE THE EXPIRATION OF THE STATUTE OF LIMITATIONS AND LAW-OFFICE-FAILURE EXCUSE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank’s second motion to extend the time to serve defendant (Bandolos). after the statute of limitations had run, should have been granted. The court further held that Supreme Court should have summoned a necessary party (Mother of Pearl, the record owner) because the party was subject to the court’s jurisdiction:

The Supreme Court should have granted that branch of the plaintiff’s motion which was, in effect, for leave to join Mother of Pearl as a party to the action … . “A party may move for judgment dismissing one or more causes of action asserted against him [or her] on the ground that . . . the court should not proceed in the absence of a person who should be a party” (CPLR 3211[a][10]). However, CPLR 1001(b) provides that where the party “is subject to the jurisdiction of the court, the court shall order him [or her] summoned.” Mother of Pearl, as the record owner of the property, is a necessary party to this action (see CPLR 1001[a]; RPAPL 1311[1]) subject to the jurisdiction of the court. Consequently, the court should have ordered Mother of Pearl summoned, rather than granting that branch of the mortgagors’ cross motion which was pursuant to CPLR 3211(a)(10) to dismiss the complaint insofar as asserted against them … . …

Further, under the circumstances of this case, the Supreme Court should have granted that branch of the plaintiff’s motion which was pursuant to CPLR 306-b for leave to extend the time to serve the summons and complaint upon Kelly Bandalos by publication in the interest of justice … . While the action was timely commenced, the statute of limitations has since expired. Although the plaintiff’s only excuse for not serving Kelly Bandalos by publication is law office failure, it did make diligent efforts to serve her prior to the first extension of time to serve and the issuance of the order of publication. Further, Kelly Bandalos had actual notice of the action within 120 days of its commencement, she served and filed an answer, and there is no identifiable prejudice to her attributable to the delay in service … .  Deutsche Bank Natl. Trust Co. v Bandalos, 2019 NY Slip Op 05106, Second Dept 6-26-19

 

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DESPITE LOSS OF THE NOTE, THE BANK CAN DEMONSTRATE STANDING WITH A LOST NOTE AFFIDAVIT WHICH MEETS THE REQUIREMENTS OF UCC 3-803 (SECOND DEPT).

The Second Department determined plaintiff bank properly established standing in this foreclosure proceeding, despite the note having been lost, with a lost note affidavit which met the requirements of UCC 3-803:

… “[P]ursuant to UCC 3-804, the owner of a lost note may maintain an action upon due proof of [1] his [or her] ownership, [2] the facts which prevent his [or her] production of the instrument and [3] its terms'” … . Accordingly, we agree with the referee that, as long as the affidavit of lost note meets the requirements of UCC 3-804, a mortgagee may establish standing based on its possession of the note, even where the original note has been lost. Here, the parties stipulated that “the factual criteria for the application of § 3-804 ha[ve] been satisfied.” Moreover, while ownership of the note may be easier to establish where there is a valid assignment of the note and mortgage … , due proof of the plaintiff’s ownership may also be provided by an affidavit of lost note setting forth details such as who acquired possession of the note and “when the search for the note occurred, who conducted the search, the steps taken in the search for the note, or when or how the note was lost” … . Bank of N.Y. Mellon v Hardt, 2019 NY Slip Op 05100, Second Dept 6-27-29

 

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QUESTION OF FACT WHETHER THE DISCONTINUANCE OF A PRIOR FORECLOSURE ACTION DE-ACCELERATED THE MORTGAGE RENDERING THE INSTANT ACTION TIMELY (FIRST DEPT).

The First Department determined there was a question of fact whether the discontinuance of a prior foreclosure action de-accelerated the mortgage. If the mortgage was not de-accelerated the instant action would be time-barred:

Acceleration only takes place when the holder of the note and mortgage takes “affirmative action . . . evidencing the holder’s election” to do so … . This may be accomplished in the form of a notice to the borrower … . Affirmative action can also occur when the first foreclosure action is commenced … . The prior foreclosure action sought the accelerated mortgage amount.

There is an issue of fact in this particular case regarding whether plaintiff’s discontinuance of the prior foreclosure action de-accelerated the mortgage … . We note that neither the motion seeking discontinuance or the order entered granting that relief provided that the mortgage was de-accelerated or that plaintiff would now be accepting installment payments from the defendant … . U.S. Bank N.A. v Charles, 2019 NY Slip Op 04997, First Dept 6-20-19

 

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PROOF OF REAL PROPERTY ACTIONS AND PROCEEDINGS LAW (RPAPL) 13O4 NOTICE TO THE DEFENDANT 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 proof compliance with the Real Property Actions and Proceedings Law (RPAPL) 1304 notice requirements was insufficient:

“[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” … .The statute requires that such notice must 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 imposing these specific mailing requirements, ” 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, although Swayze [plaintiff’s vice president] stated in her affidavit that the RPAPL 1304 notice was mailed to Saab [defendant] on May 8, 2013, this assertion falls short of constituting admissible evidence sufficient to demonstrate prima facie that the notice was actually mailed in the manner required by the statute. Swayze did not claim that she personally mailed the notice to Saab. Further, she did not aver that she was familiar with the plaintiff’s mailing practices and procedures, and, therefore, did not establish the existence of a standard office practice and procedure designed to ensure that items are properly addressed and mailed … . Central Mtge. Co. v Canas, 2019 NY Slip Op 04909, Second Dept 6-19-19

 

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PLAINTIFF BANK NOT ENTITLED TO SUMMARY JUDGMENT BECAUSE IT FAILED TO DEMONSTRATE COMPLIANCE WITH RPAPL 1304, A CONDITION PRECEDENT; DEFENDANT NOT ENTITLED TO SUMMARY JUDGMENT BECAUSE HE DID NOT DEMONSTRATE THE BANK FAILED TO COMPLY WITH RPAPL 1304 (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined plaintiff bank should not have been awarded summary judgment because it did not demonstrate compliance with RPAPL 1304, but defendant was not entitled to summary judgment on that ground because defendant did not demonstrate RPAPL 1304 was not complied with:

… [T]he evidence submitted in support of the motion failed to establish, prima facie, that the plaintiff strictly complied with RPAPL 1304 … . Compliance with RPAPL 1304 and 1306 is a condition precedent to the commencement of a foreclosure action …

However, contrary to Nathan’s contention, he was not entitled to summary judgment dismissing the complaint insofar as asserted against him on the ground that the plaintiff failed to comply with the notice requirements of RPAPL 1304, since he failed to present sufficient evidence to demonstrate, prima facie, that the condition precedent was not fulfilled … . Nathan’s affidavit, in which he made a bare denial of receipt of the RPAPL 1304 notice, was improperly submitted for the first time in reply … . Nathan also failed to establish his prima facie entitlement to summary judgment dismissing the complaint insofar as asserted against him on the ground that the plaintiff failed to comply with RPAPL 1306. U.S. Bank, N.A. v Nathan, 2019 NY Slip Op 04989, Second Dept 6-19-19

 

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FAILURE TO COMPLY WITH RPAPL 1304 NOTICE REQUIREMENTS IN A FORECLOSURE ACTION IS NOT A JURISDICTIONAL DEFECT; BECAUSE THE ISSUE WAS NOT RAISED BY DEFENDANT, PLAINTIFF BANK NEED NOT DEMONSTRATE COMPLIANCE TO BE ENTITLED TO A DEFAULT JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, noted that the failure to comply with Real Property Actions and Proceedings Law (RPAPL) 1304 is not a jurisdictional defect. Therefore, because that issue was not raised by the defendant, the bank need not prove compliance in a motion for a default judgment:

… [T]he plaintiff’s unopposed renewed motion for a default judgment was facially adequate pursuant to CPLR 3215(f), and therefore, should have been granted … . Contrary to the Supreme Court’s determination, the plaintiff was not required to demonstrate its compliance with RPAPL 1304, since the failure to comply with RPAPL 1304 is not a jurisdictional defect, and that defense was never raised by the borrowers, who failed to appear or answer the complaint … . Moreover, the plaintiff established its entitlement to an order of reference (see RPAPL 1321 …). U.S. Bank Trust, N.A. v Green, 2019 NY Slip Op 04988, Second Dept 6-19-19

 

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