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BANK’S POSSESSION OF THE NOTES CONSOLIDATED BY A CONSOLIDATION, EXTENSION AND MODIFICATION AGREEMENT (CEMA) CONFERRED STANDING TO BRING THE FORECLOSURE ACTION, POSSESSION OF THE ORIGINAL NOTES WAS NOT REQUIRED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Tom, over a two-justice dissent. determined that defendants’ excuse for their default and their argument plaintiff bank (Wells Fargo) did not have standing were properly rejected by Supreme Court. The two dissenting justices agreed with defendants’ arguments. Defendants alleged in their motion to vacate the default that their attorney received the summary judgment motion, filed for bankruptcy and never responded to the motion. On the standing issue defendants argued that possession of the original 2005 and 2008 notes issued by a nonparty, not the subsequent Consolidation, Extension and Modification Agreement (CEMA) note, which consolidated the 2005 and 2008 notes, was required to confer standing:

… [T]he CEMA makes clear that the consolidated note superseded the original notes and is the operative document in this case. As did the plaintiff in Weiss v Phillips (157 AD3d 1 [1st Dept 2017]), Wells Fargo seeks foreclosure based on the CEMA and consolidated note. As we held the plaintiff did in Weiss, Wells Fargo established its entitlement to relief by submitting the CEMA, consolidated note, unchallenged evidence that it is the holder of the consolidated note, and nonpayment of the loan by the borrowers. As we also held in Weiss, “In this case, because of the CEMA, standing is not an issue” and any absence of the underlying notes in this action is likewise accounted for by the CEMA … . In other words, “there is no legitimate question that [Wells Fargo] is the party entitled to enforce under the [consolidated] note, as evinced by . . . the CEMA” … . Wells Fargo Bank N.A. v Ho-Shing, 2019 NY Slip Op 00080, First Dept 1-8-19

 

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PLAINTIFF BANK WAS PROPERLY ALLOWED TO RECOMMENCE THE FORECLOSURE ACTION AFTER IT WAS DISMISSED AS ABANDONED PURSUANT TO CPLR 3215, HOWEVER PLAINTIFF DID NOT DEMONSTRATE IT HAD STANDING AND ITS SUMMARY JUDGMENT MOTION SHOULD NOT HAVE BEEN GRANTED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined that plaintiff bank did not demonstrate it had standing to bring this foreclosure action. Therefore plaintiff’s summary judgment motion should not have been granted. The court noted that Supreme Court properly allowed plaintiff an additional six months to commence another action (CPLR 205 (a))  after the first was dismissed as abandoned pursuant to CPLR 3215 (c):

… [P]laintiff failed to demonstrate that it has standing as the assignee of the mortgage from MERS. By its express terms, the initial written assignment from MERS only assigns the mortgage, not the note, and no proof was submitted establishing that MERS was ever conferred with the requisite authority to assign the note… . Moreover, contrary to Supreme Court’s holding, this Court has held that merely attaching the note with a blank indorsement to the complaint is not sufficient for plaintiff to meet its prima facie burden on the issue of standing or to prove plaintiff’s possessory interest in the note; proof of actual possession is required … ….

Plaintiff similarly failed to establish its standing by demonstrating that it had physical possession of the note at the time of the commencement of the action. In support of its motion for summary judgment, plaintiff submitted, among other things, a copy of its complaint, the mortgage, the unpaid note (indorsed in blank), the relevant assignments of the mortgage and proof of defendants’ default. Plaintiff also tendered the affidavit of the authorized officer for Caliber Home Loans, Inc., the mortgage loan servicing agent and attorney-in-fact for plaintiff … . The affidavit of the authorized officer indicates the source of her knowledge to be her “review of the electronic records of Caliber Home Loans, Inc.” regarding defendants’ delinquent account, which includes, among other things, “electronic images of the note and electronic records maintained by Caliber Home Loans, Inc.” Other than alleging that she reviewed these electronic records, the authorized officer’s affidavit fails to provide any indication that she actually examined the original note, nor did it provide any details with regard to whether plaintiff ever obtained possession thereof and, if so, how and when it came into its possession … . Moreover, the complaint is equivocal and alleges in the alternative that plaintiff is “the current owner and holder of the subject mortgage and note, or has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the subject mortgage and note.” Such language is insufficient to establish that plaintiff had physical possession of the note at the time it commenced this action … . U.S. Bank Trust, N.A. v Moomey-Stevens, 2019 NY Slip Op 00016, Third Dept 1-3-19

 

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MOTION TO VACATE DEFAULT JUDGMENT OF FORECLOSURE WAS SUPPORTED BY A SWORN DENIAL OF SERVICE AND SPECIFIC FACTS WHICH REBUTTED THE PRESUMPTION OF PROPER SERVICE, MATTER SENT BACK FOR A HEARING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that defendant’s motion to vacate his default in this foreclosure action should not have been denied without a hearing to determine whether he was served. Defendant’s motion was supported by a sworn denial of service and specific facts, which was sufficient to rebut the presumption of proper service:

“Ordinarily, a process server’s affidavit of service establishes a prima facie case as to the method of service and, therefore, gives rise to a presumption of proper service” … . To be entitled to vacatur of a default judgment under CPLR 5015(a)(4), a defendant must overcome the presumption raised by the process server’s affidavit of service … . “Although bare and unsubstantiated denials are insufficient to rebut the presumption of service, a sworn denial of service containing specific facts generally rebuts the presumption of proper service established by the affidavit of service and necessitates a hearing” … . A determination as to whether service was properly made pursuant to CPLR 308(1), as here, turns on issues of credibility, which should be determined by a hearing … . Federal Natl. Mtge. Assn. v Alverado, 2018 NY Slip Op 08918, Second Dept 12-26-18

 

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PLAINTIFF BANK DID NOT DEMONSTRATE STANDING TO FORECLOSE ON THE REVERSE MORTGAGE WITH EVIDENCE ADMISSIBLE UNDER THE BUSINESS RECORDS EXCEPTION TO THE HEARSAY RULE (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined that plaintiff bank did not demonstrate standing to foreclose on the reverse mortgage. The evidence submitted did not meet the requirements of the business records exception to the hearsay rule:

… [T]he plaintiff submitted, among other things, the affidavit of Stephen Craycroft, an assistant secretary of Nationstar Mortgage, LLC, who attested that the plaintiff was in possession of the note at the time of the commencement of this action. However, the plaintiff failed to demonstrate the admissibility of the records relied upon by Craycroft under the business records exception to the hearsay rule (see CPLR 4518[a]), since Craycroft did not clearly attest that he was personally familiar with the plaintiff’s record-keeping practices and procedures … . Inasmuch as the plaintiff’s cross motion was based on evidence that was not in admissible form, the plaintiff failed to establish its prima facie entitlement to judgment as a matter of law … .

Contrary to the plaintiff’s contention, the copy of the note annexed to the summons and complaint was insufficient to demonstrate, prima facie, its standing to commence the action, since the note bore a specific endorsement to an entity other than the plaintiff … . Nationstar HECM Acquisition Trust 2015-2 v Andrews, 2018 NY Slip Op 08944, Second Dept 12-26-18

 

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DEFENDANT’S ALLEGATION THAT SHE DOES NOT LIVE AT THE ADDRESS WHERE HER BROTHER WAS SERVED IN THIS FORECLOSURE ACTION NECESSITATED A TRAVERSE HEARING (FIRST DEPT).

The First Department, reversing Supreme Court, found that a traverse hearing should have been held to determine whether defendant was properly served with the summons, complaint and Real Property Actions and Proceedings Law (RPAPL) 1303 notice:

In this foreclosure matter commenced in 2009, plaintiff’s affidavit of service indicated that service of the summons, complaint and RPAPL 1303 notice was effectuated upon defendant Nicola McCallum pursuant to CPLR 308(2) by serving an individual, who allegedly identified himself as her brother, at her “dwelling place,” and mailing the same documents to that address.

In response, defendant averred that she was never served with the summons and complaint, that she does not reside at the address where service was made, and that her primary residence has always been at the property that is the subject of this foreclosure action.

“While a proper affidavit of a process server attesting to personal delivery upon a defendant constitutes prima facie evidence of proper service, a sworn non-conclusory denial of service by a defendant is sufficient to dispute the veracity or content of the affidavit, requiring a traverse hearing”… . The competing averments concerning plaintiff’s residence at the time of service raise a factual issue concerning whether the service address was her “dwelling place or usual place of abode” at the time of service (CPLR 308[2]) warranting a traverse hearing concerning whether defendant was properly served with the summons, complaint and RPAPL 1303 notice … . Nationstar Mtge. LLC v McCallum, 2018 NY Slip Op 08755, First Dept 12-20-18

 

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NOTICE OF APPEARANCE FILED BY DEFENDANT’S ATTORNEY WAIVED ANY SUBSEQUENT OBJECTION TO PERSONAL JURISDICTION IN THIS FORECLOSURE ACTION, ISSUE HEARD ON APPEAL ALTHOUGH NOT RAISED BELOW (SECOND DEPT).

The Second Department, reversing Supreme Court on a ground not raised below, determined that defendant’s attorney’s notice of appearance waived any objection to personal jurisdiction over defendant:

“The filing of a notice of appearance in an action by a party’s counsel serves as a waiver of any objection to personal jurisdiction in the absence of either the service of an answer which raises a jurisdictional objection, or a motion to dismiss pursuant to CPLR 3211(a)(8) for lack of personal jurisdiction” … . Here, in November 2014, the defendant’s attorney appeared in the action on her behalf by filing a notice of appearance dated October 31, 2014, and did not move to dismiss the complaint on the ground of lack of personal jurisdiction at that time, or assert lack of personal jurisdiction in a responsive pleading… . The defendant did not move to dismiss the complaint until September 2015, 10 months after filing a notice of appearance. Under those circumstances, the defendant waived any claim that the Supreme Court lacked personal jurisdiction over her in this action … .

Although the plaintiff raises this issue for the first time on appeal, it involves a question of law that appears on the face of the record, and could not have been avoided if brought to the attention of the Supreme Court … . Deutsche Bank Natl. Trust Co. v Vu, 2018 NY Slip Op 08629, Second Dept 12-19-18

 

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CROSS-MOTION TO EXTEND THE TIME FOR SERVICE OF PROCESS PURSUANT TO CPLR 306-b IN THIS FORECLOSURE ACTION PROPERLY GRANTED, THE JUDGMENT OF FORECLOSURE HAD BEEN VACATED BECAUSE DEFENDANT WAS NOT PROPERLY SERVED INITIALLY (SECOND DEPT).

The Second Department, modifying Supreme Court, determined the judgment of foreclosure should have been vacated because defendant was not served and therefore the court did not acquire personal jurisdiction. However, plaintiff’s timely cross-motion to extend the time for service pursuant to CPLR 306-b was properly granted:

“If service is not made upon a defendant within the time provided in [CPLR 306-b], the court, upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service” … . Good cause requires the plaintiff to demonstrate, as a threshold matter, “reasonably diligent efforts” in attempting to effect service … . In deciding whether, in the interest of justice, to grant an extension of time to serve a summons and complaint, “the court may consider diligence, or lack thereof, along with any other relevant factor in making its determination, including expiration of the Statute of Limitations, the [potentially] meritorious nature of the cause of action, the length of delay in service, the promptness of a plaintiff’s request for the extension of time, and prejudice to defendant” … . “A determination of whether to grant the extension in the interest of justice is generally within the discretion of the motion court” … . Bank United, FSB v Verbitsky, 2018 NY Slip Op 08623, Second Dept 12-19-18

 

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BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE PROVISIONS OF REAL PROPERTY ACTIONS AND PROCEEDINGS LAW (RPAPL) 1304, 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 defendant was properly served with notice pursuant to Real Property Actions and Proceedings Law (RPAPL) 1304 was insufficient. The bank’s motion for summary judgment should not have been granted:

… [T]he bank failed to submit an affidavit of service, or proof of mailing by the post office, evincing that it properly served the defendant pursuant to RPAPL 1304. Contrary to the Supreme Court’s conclusion, the affidavit of the employee of the plaintiff’s successor in interest failed to establish that the notices were sent to the defendant in the manner required by RPAPL 1304. The affiant did not aver that she was familiar with the mailing practices and procedures of the entity that allegedly sent the RPAPL 1304 notice. Accordingly, her affidavit did not establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed … . Nor was the affidavit of the employee of the plaintiff’s successor in interest sufficient to lay a foundation for the admission of business records to establish a proper mailing. The affiant did not state that the records of the entity that allegedly sent the RPAPL 1304 notice had been incorporated into the records of the plaintiff’s successor in interest and were routinely relied upon by the successor in interest in its business … . Aurora Loan Servs., LLC v Vrionedes, 2018 NY Slip Op 08622, Second Dept 12-19-18

 

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LOST NOTE AFFIDAVIT INSUFFICIENT BECAUSE UCC REQUIREMENTS NOT MET, PROOF OF RPAPL 1304 NOTICE INSUFFICIENT, PROOF OF COMPLIANCE WITH NOTICE CONDITION OF THE MORTGAGE INSUFFICIENT, SUPREME COURT SHOULD NOT HAVE GRANTED THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE PROCEEDING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that plaintiff’s motion for summary judgment in this foreclosure action should not have been granted for three reasons: (1) the lost note affidavit was insufficient pursuant to the requirements of the Uniform Commercial Code (UCC); (2) the proof of compliance with the notice requirements of Real Property Actions and Proceedings Law (RPAPL) 1304 was not sufficient; and (3) the plaintiff did not show it had complied the notice condition of the mortgage (a condition precedent ro foreclosure):

Pursuant 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” (UCC 3-804). The party seeking to enforce a lost instrument is required to “account for its absence” … .

Here, although 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 establish the facts that prevent the production of the original note … . …

… [T]he 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 proof of a standard office mailing procedure and provided no independent proof of the actual mailing … . …

… [T]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 … . The affidavit of a representative of the plaintiff’s loan servicer claiming that notice of default was sent to the defendant …  was conclusory and unsubstantiated and … was insufficient to prove that the notice was sent in accordance with the terms of the mortgage … . U.S. Bank N.A. v Cope, 2018 NY Slip Op 08709, Second Dept 12-19-18

 

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QUESTIONS OF FACT ABOUT WHETHER PLAINTIFF HAS STANDING IN THIS FORECLOSURE ACTION AND WHETHER THE RPAPL 1304 NOTICE WAS SERVED, PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (FIRST DEPT)

The First Department, reversing Supreme Court, determined plaintiff’s motion for summary judgment in this foreclosure action should not have been granted. There exist questions of fact on whether plaintiff has standing and whether the RPAPL 1304 notice was served:

The borrower raised a meritorious standing defense based on questions as to the sufficiency of the content of the conclusory lost note affidavit, which does not state that a thorough and diligent search was made based on a review of the business records or anything else, does not state that any search was made or by whom, and does nothing to indicate when approximately the note was lost … .

The borrower also raised a plausible notice defense regarding plaintiff’s service of the requisite 90-day notice under RPAPL 1304 … . AS Helios LLC v Chauhan, 2018 NY Slip Op 08565, First Dept 12-13-18

 

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