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THE PROCESS SERVER WAS AWARE DEFENDANT IN THIS FORECLOSURE ACTION WAS IN THE MILITARY; THE “AFFIX AND MAIL” METHOD OF SERVICE DID NOT OBTAIN JURISDICTION OVER DEFENDANT (SECOND DEPT).

The Second Department determined personal jurisdiction was not obtained over defendant in this foreclosure action. The process server, who used the “affix and mail” method of service, was aware defendant was in the military:

After the hearing, the Supreme Court determined that the plaintiff had not established personal jurisdiction over the defendant. Service pursuant to CPLR 308(4), known as “affix and mail” service, “may be used only where service under CPLR 308(1) or 308(2) cannot be made with due diligence'” … . “While the precise manner in which due diligence is to be accomplished is not rigidly prescribed, the requirement that due diligence be exercised must be strictly observed, given the reduced likelihood that a summons served pursuant to [CPLR 308(4)] will be received”… . A mere showing of several attempts at service at either a defendant’s residence or place of business may not satisfy the “due diligence” requirement before resort to affix and mail service … . ” [D]ue diligence’ may be satisfied with a few visits on different occasions and at different times to the defendant’s residence or place of business when the defendant could reasonably be expected to be found at such location at those times” … . …

According to the affidavit of service and the process server’s in-house work order sheet, however, the process server knew that the defendant was in active military service. Since the process server was aware that the defendant was engaged in active military service at the time the process server attempted service at the address, the process server’s four attempts at service prior to resorting to affix-and-mail service were not made when the defendant “could reasonably be expected to be found at such location” … . Mid-Island Mtge. Corp. v Drapal, 2019 NY Slip Op 06488, Second Dept 9-11-19

 

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BANK’S PROOF OF DEFENDANT’S DEFAULT INSUFFICIENT AT BOTH THE SUMMARY JUDGMENT AND TRIAL STAGES IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department determined plaintiff bank was not entitled to summary judgment in this foreclosure action because it did not submit sufficient proof of defendant’s default. At trial Supreme Court properly held that plaintiff bank did not meet its prima facie burden because the proper foundation for the admission of business records was not provided:

… [P]laintiff failed to submit evidence establishing her default. Wilson [Wells Fargo vice president] failed to attach or incorporate any of Wells Fargo’s business records to her affidavit. Accordingly, her affidavit constituted inadmissible hearsay and lacked probative value … . …

“A proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker’s business practices and procedures” … . At the trial in this case, Wiggins [Wells Fargo loan verification officer] testified only that he had access to Wells Fargo’s computerized records. He did not testify that he was familiar with Wells Fargo’s practices in making those records, and he failed to state that he had any knowledge regarding the plaintiff’s records. Moreover, the plaintiff did not attempt to introduce any of the relevant records into evidence. Thus, Wiggins failed to establish an evidentiary basis for his statement that the subject loan was in default … . HSBC Bank USA, Natl. Assn. v Green, 2019 NY Slip Op 06482, Second Dept 9-11-19

 

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BANK DID NOT SUBMIT SUFFICIENT EVIDENCE OF ITS STANDING, ITS COMPLIANCE WITH CONDITIONS PRECEDENT IN THE MORTGAGE, OR ITS COMPLIANCE WITH THE NOTICE REQUIREMENTS OF THE RPAPL, THE BANK’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank was not entitled to summary judgment in this foreclosure action because it presented: (1) insufficient proof of standing; (2) insufficient proof of compliance with the notice provisions of the mortgage; and (3) insufficient proof of compliance with the RPAPL notice requirements:

… [T]he plaintiff failed to establish, prima facie, its standing because it did not show that it was a holder of the note at the time the action was commenced. The affidavits of Melissa Guillote and Myrna Moore, both vice presidents of loan documentation of the plaintiff’s loan servicer, nonparty Wells Fargo Bank, N.A. (hereinafter the loan servicer), that were submitted by the plaintiff in support of its motion, conflict as to whether the plaintiff or the loan servicer possessed the note on the date the action was commenced. Moreover, neither affidavit attaches any admissible document to show that the plaintiff possessed the note endorsed in blank prior to the commencement of this action (see CPLR 4518[a] …). The affidavits also fail to show that either Guillote or Moore possessed personal knowledge of whether the plaintiff possessed the note prior to commencement of the action. …

The plaintiff also failed to establish, prima facie, that it complied with the conditions precedent contained in sections 15 and 22 of the mortgage, which provide that required notice to the defendants is considered given when it is mailed by first class mail or when it is actually delivered to the defendants’ notice address if sent by any other means … . …

The plaintiff also failed to show, prima facie, that it strictly complied with RPAPL 1304. Proper service of the RPAPL 1304 notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action … . The plaintiff did not submit an affidavit of service or proof of mailing by the post office demonstrating that it properly served the defendants as prescribed by the statute … . HSBC Bank USA, Natl. Assn. v Dubose, 2019 NY Slip Op 06481, Second Dept 9-11-19

 

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THE CONDITIONAL ORDER OF DISMISSAL WAS NOT AUTHORIZED BECAUSE ISSUE HAD NOT BEEN JOINED AT THE TIME THE ORDER WAS MADE; THE BANK’S MOTION TO VACATE THE CONDITIONAL ORDER IN THIS FORECLOSURE ACTION SHOULD HAVE BEEN GRANTED; AN UNAUTHORIZED SUPPLEMENTAL RECORD ON APPEAL TO WHICH THE PARTIES STIPULATED WAS NOT CONSIDERED (SECOND DEPT).

The Second Department determined the conditional order upon which dismissal of the complaint was based was not authorized because issue had not been joined at the time the order was made. Therefore the bank’s motion to vacate the conditional order in this foreclosure action should have been granted. However, because of the two year delay in moving to vacate the order, the bank is not entitled to interest, late charges, fees, costs and attorney’s fees incurred after the date of the 2014 conditional order. An unauthorized supplemental record on appeal, which was stipulated to by the parties, contained material that was not in the record and was not considered by the Second Department:

A pleading cannot be dismissed pursuant to CPLR 3216(a) “unless a written demand is served upon the party against whom such relief is sought’ in accordance with the statutory requirements, along with a statement that the default by the party upon whom such notice is served in complying with such demand within said ninety day period will serve as a basis for a motion by the party serving said demand for dismissal as against him for unreasonably neglecting to proceed'” … . While a conditional order of dismissal may have “the same effect as a valid 90-day notice pursuant to CPLR 3216” … , the conditional order here was defective in that it did not state that the plaintiff’s failure to comply with the notice will serve as a basis for a motion by the court to dismiss the complaint for failure to prosecute … . Additionally, it appears that the complaint was ministerially dismissed, without a motion, and without the entry of any formal order by the court dismissing the complaint … . U.S. Bank Natl. Assn. v Spence, 2019 NY Slip Op 06529, Second Dept 9-11-19

 

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THE 2008 FORECLOSURE ACTION WAS DISMISSED BECAUSE THE BANK DID NOT HAVE STANDING; THEREFORE THE DEBT WAS NOT ACCELERATED IN 2008 AND THE STATUTE OF LIMITATIONS FOR FORECLOSURE DID NOT START RUNNING; PLAINTIFF’S ACTION TO CANCEL AND DISCHARGE THE MORTGAGE PROPERLY DISMISSED (SECOND DEPT).

The Second Department determined plaintiff’s action to cancel and discharge a mortgage on the ground the statute of limitations for a foreclosure action had expired was properly dismissed. Although the bank had attempted to foreclose in 2008, that action was dismissed for lack of standing. Therefore the debt was not accelerated by the 2008 foreclosure proceedings:

Pursuant to RPAPL 1501(4), a person having an estate or an interest in real property subject to a mortgage can seek to cancel and discharge that encumbrance where the period allowed by the applicable statute of limitations for the commencement of an action to foreclose the mortgage has expired, provided that the mortgagee or its successor was not in possession of the subject real property at the time the action to cancel and discharge the mortgage was commenced … . An action to foreclose a mortgage is governed by a six-year statute of limitations (see CPLR 213[4]). “[E]ven if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt” … . However, “an acceleration of a mortgaged debt, by either written notice or the commencement of an action, is only valid if the party making the acceleration had standing at that time to do so”  … .

Here, the evidence submitted in support of the defendants’ motion, including the order dated December 13, 2011, demonstrated that while CitiGroup purported to accelerate the mortgage debt in the complaint served in the action to foreclose the mortgage in January 2008, that acceleration was a nullity, inasmuch as CitiGroup lacked standing to commence that foreclosure action … . Therefore, the plaintiff’s allegation in this action that the statute of limitations to enforce the mortgage had expired was not a fact at all, and it can be said that no significant dispute exists regarding it … . Q & O Estates Corp. v US Bank Trust Nat’l Assoc., 2019 NY Slip Op 06524, Second Dept 9-11-19

 

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PLAINTIFF DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE OF DEFAULT PROVISION OF THE MORTGAGE; PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the plaintiff did not demonstrate compliance with the notice of default provision in the mortgage. Therefore, the plaintiff’s motion for summary judgment in this foreclosure action should not have been granted:

… [T]he plaintiff failed to establish, prima facie, that it complied with the condition precedent contained in section 22 of the mortgage agreement regarding the notice of default. The plaintiff’s submissions did not establish that the notice was sent by first class mail or actually delivered to the notice address if sent by other means, as required by the terms of the mortgage agreement … . PNMAC Mtge. Opportunity Fund Invs., LLC v Torres, 2019 NY Slip Op 06523, Second Dept 9-11-19

 

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MORTGAGE WAS NOT ACCELERATED UNTIL THE FORECLOSURE ACTION WAS COMMENCED IN OCTOBER 2016; ACTION FOR THE INSTALLMENT PAYMENTS MISSED DURING THE SIX YEARS PRIOR TO OCTOBER 2016 IS TIMELY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the mortgage was not accelerated until the foreclosure action was commenced in October, 2016. Therefore the action was not time-barred, except for the mortgages payments due but not paid more than six years prior to October 2016 (missed payments prior to October 2010):

… [C]ontrary to the defendant’s contention, he did not establish that the complaint should be dismissed on statute of limitations grounds through the notices sent to the defendant in February 2009 and May 2009, as those notices did not accelerate the mortgage. The notices indicated that acceleration was a possible future event, but did not constitute an exercise of the mortgage’s acceleration clause … . Rather, the mortgage was only accelerated in October 2016, when the plaintiff served the foreclosure complaint on the defendant seeking immediate payment of the balance of the principal indebtedness. Thus, the Supreme Court should not have granted dismissal of the complaint in its entirety as time-barred. Specifically, the defendant failed to show that the causes of action in the complaint, insofar as they relate to unpaid mortgage installments which accrued within the six-year period immediately preceding the plaintiff’s October 2016 commencement of this foreclosure action, to wit, the unpaid installments which accrued on or after October 6, 2010, were time-barred … .

However, where, as here, the mortgage was payable in installments, there are “separate causes of action for each installment accrued, and the Statute of Limitations [begins] to run, on the date each installment [becomes] due” … . Therefore, since the plaintiff alleged that the defendant made his last payment on mortgage in January 2009 and this action was not commenced until October 6, 2016, the defendant established that any unpaid installments of the mortgage which accrued before the six-year period prior to the plaintiff’s commencement of this mortgage foreclosure action, to wit, unpaid installments from January 2009 through October 5, 2010, are time-barred … . Ditech Fin., LLC v Reiss, 2019 NY Slip Op 06208, Second Dept 8-21-19

 

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THERE WERE NO GROUNDS TO DISTURB THE FACTUAL FINDINGS MADE BY THE JUDGE IN THIS BENCH TRIAL OF A FORECLOSURE ACTION, TWO DISSENTERS ARGUED THE FINDINGS WERE AGAINST THE WEIGHT OF THE EVIDENCE (FIRST DEPT).

The First Department, over a two-justice dissent, determined that the evidence at the bench trial in this foreclosure proceeding supported the judge’s conclusion that plaintiff bank was not the cause of defendant’s inability to obtain financing to payoff the mortgage pursuant to a settlement agreement. The dissenters argued the trial judge’s findings were against the weight of the evidence, primarily because the judge found defendant’s testimony to be “honest and accurate.” The key issue in the appeal was whether there were sufficient grounds to disturb the  judge’s factual findings:

… [W]e perceive no basis on which to disturb the trial court’s determination. As articulated by the Court of Appeals, the standard of review on an appeal from a decision based on findings of fact, resting in large measure on determinations of the credibility of witnesses, made by the court after a bench trial, is as follows:

“[T]he decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence, especially when the findings of fact rest in large measure on considerations relating to the credibility of witnesses” (Thoreson v Penthouse Intl., 80 NY2d 490, 495 [1992] …).

Supreme Court’s rejection of defendant’s claim — a claim based on testimony not only lacking support in the contemporaneous documentary evidence, but inconsistent with that evidence — more than passes muster under this highly deferential standard. Security Pac. Natl. Bank v Evans, 2019 NY Slip Op 06138, First Dept 8-13-19

 

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MOTION TO QUASH SUBPOENA ISSUED TO ATTORNEY WHO REPRESENTED THE ORIGINAL BORROWERS AGAINST PROPERTY SUBJECT TO FORECLOSURE PROCEEDINGS SHOULD NOT HAVE BEEN QUASHED, CIVIL CONTEMPT ACTION AGAINST THE ATTORNEY SHOULD NOT HAVE BEEN DISMISSED, CRITERIA FOR BOTH TYPES OF PROCEEDINGS EXPLAINED (SECOND DEPT).

The Second Department determined the subpoona issued by the current owners of property subject to a foreclosure action (the Frankels) to the attorney (Satran) who represented the parties who initially took out the loan (the Confinos) should not have been quashed, the action for civil contempt against the attorney should not have been dismissed, and attorney-client privilege could only be asserted at a subsequent deposition:

“A party or nonparty moving to quash a subpoena has the initial burden of establishing either that the requested disclosure is utterly irrelevant to the action or that the futility of the process to uncover anything legitimate is inevitable or obvious'” … . ” Should the [movant] meet this burden, the subpoenaing party must then establish that the discovery sought is material and necessary to the prosecution or defense of [the] action'” … .

Here, Satran failed to meet his initial burden of demonstrating either that the requested disclosure was “utterly irrelevant” to the action or that the “futility of the process to uncover anything legitimate is inevitable or obvious” … . * * *

Additionally, the Supreme Court should have granted the Frankels’ motion to hold Satran in civil contempt for failure to comply with the subpoena by failing to appear for a deposition. “To prevail on a motion to hold another in civil contempt, the moving party must prove by clear and convincing evidence (1) that a lawful order of the court, clearly expressing an unequivocal mandate, was in effect, (2) that the order was disobeyed and the party disobeying the order had knowledge of its terms, and (3) that the movant was prejudiced by the offending conduct'” … . ” To satisfy the prejudice element, it is sufficient to allege and prove that the contemnor’s actions were calculated to or actually did defeat, impair, impede, or prejudice the rights or remedies of a party'” … .

Here, it was undisputed that Satran failed to comply with the subpoena by failing to appear for a deposition and that he had knowledge of the terms of the subpoena. Moreover, the Frankels demonstrated that Satran’s conduct prejudiced their right under CPLR 3101(a)(4) to obtain all information relevant and necessary to their defense of the present action and their cross claims against the Confinos … . Wells Fargo Bank, N.A. v Confino, 2019 NY Slip Op 06114, Second Dept 8-7-19

 

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BANK DID NOT SUBMIT SUFFICIENT PROOF OF A LOST NOTE AND COMPLIANCE WITH NOTICE REQUIREMENTS IN THIS FORECLOSURE ACTION; SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, modifying Supreme Court, determined the bank, inter alia,  did not demonstrate compliance with the RPAPL 1304 notice provisions and failed to submit sufficient proof of a lost note in this foreclosure action:

… [A]lthough the plaintiff came forward with evidence establishing that the note was assigned to it and establishing the note’s terms, the affidavit of lost note submitted in support of its motion failed to establish the facts that prevent the production of the original note (see UCC 3-804 …). Additionally, we note that Riley’s out-of-state affidavit lacked a certificate of conformity as required by CPLR 2309(c), although such defect by itself would not be fatal to the plaintiff’s motion … .

Further, the evidence submitted in support of the plaintiff’s motion failed to establish, prima facie, that the plaintiff strictly complied with RPAPL 1304. Proper service of the RPAPL 1304 notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action … . The plaintiff failed to submit an affidavit of service or any proof of mailing by the post office demonstrating that it properly served the defendant pursuant to the terms of the statute … . Contrary to the plaintiff’s contention, the affidavit of a representative of its loan servicer was insufficient to establish that the notice was sent to the defendant in the manner required by RPAPL 1304, as the representative did not provide evidence of a standard office mailing procedure and provided no independent evidence of the actual mailing … .

Likewise, the plaintiff failed to establish, prima facie, that it complied with the condition precedent contained in the mortgage requiring it to give notice of default prior to demanding payment in full … . U.S. Bank N.A. v Cope, 2019 NY Slip Op 06111, Second Dept 8-7-19

 

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