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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 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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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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PURCHASER OF A MARINA DEMONSTRATED THE PRIOR OWNER OBTAINED TITLE TO THE DISPUTED LAKE BOTTOM RIGHTS BY ADVERSE POSSESSION (THIRD DEPT).

The Third Department, reversing Supreme Court, determined plaintiff, the purchaser of a marina, had demonstrated the prior owner of the marina had obtained ownership of the disputed lake bottom rights by adverse possession:

… [P]laintiff submitted, among other things, the affidavit of Donald Duso Jr., the grandson of [the prior owner]  and a current mechanic for plaintiff, the affidavit of Michael Damp, a member of plaintiff, and an aerial map depicting, among other things, the location of the moorings and floating dock within the claimed area. According to Donald Duso, he personally assisted with the installation of approximately 20 moorings and anchors in the claimed area between the early 1970s and 2005 … . From 1970 to 1975, six moorings were initially installed in the claimed area, which were specifically placed to create the “outer bounds or perimeter of the mooring field.”…  As the marina’s business grew, additional moorings were installed such that, by 2005, there were approximately 20 active moorings available for rent, with all but three or four of the moorings located within the claimed area. Each year, the marina seasonally rented the moorings to boat owners between April and October (hereinafter the boating season) and only those who paid the requisite rental fee were permitted to access or use the moorings. Since the early 1980s, the 14 to 20 active moorings in the claimed area were regularly maintained during the boating season, mooring anchors, ropes and balls were repaired as necessary, and the mooring field was kept clear of debris. Although the nature of this lake bottom property makes it inherently impractical to erect an enclosure (see RPAPL former 522), the perimeter of the mooring field and, in turn, the location of the claimed area were easily discernible based upon the visibility of the mooring balls attached to each mooring anchor, and became even more apparent when boats were actively moored thereto. LS Mar., LLC v Acme of Saranac, LLC, 2019 NY Slip Op 05617, Third Dept 7-11-19

 

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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 GRANTED PLAINTIFF’S MOTION TO AMEND THE COMPLAINT, DESPITE THE PASSAGE OF SIX YEARS SINCE THE ACTION WAS COMMENCED, THE COURT DOES NOT EXAMINE THE MERITS OF THE PLEADING UNLESS THE LACK OF MERIT IS CLEAR AND FREE FROM DOUBT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion to amend its complaint, which originally stemmed from the alleged encroachment of defendant’s pipes (since removed), should have been granted, despite the passage of six years (during which a default judgment was vacated):

The Supreme Court should have granted that branch of the plaintiff’s cross motion which was for leave to amend the complaint. Permission to amend a pleading should be “freely given” (CPLR 3025[b] …), where the proposed amendment is neither palpably insufficient nor patently devoid of merit, and there is no evidence that the amendment would prejudice or surprise the opposing party … . Mere lateness is not a basis for denying an amendment; ” [i]t must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine'” … . The burden of establishing prejudice is on the party opposing the amendment … .

Here, notwithstanding the lengthy gap in time between the commencement of the action and the plaintiff’s cross motion for leave to amend the complaint, the defendant has made no showing that it was surprised by the new allegations or would be significantly prejudiced … . Moreover, some portion of that delay is attributable to the defendant’s effort to vacate its default and the parties’ subsequent motion practice and negotiations, and there is no contention that discovery has been concluded … .

Contrary to the defendant’s contentions, the proposed amendment is not palpably insufficient or patently devoid of merit. “No evidentiary showing of merit is required under CPLR 3025(b)'” … , and “a court shall not examine the legal sufficiency or merits of a pleading unless [the] insufficiency or lack of merit is clear and free from doubt” … . The allegations of the proposed amendment and the submissions in support of it adequately set forth the requisite elements for causes of action alleging private nuisance and trespass … . Krakovski v Stavros Assoc., LLC, 2019 NY Slip Op 05112, Second Dept 6-26-19

 

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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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PETITIONER IS NOT ENTITLED TO SURPLUS PROCEEDS AFTER A TAX FORECLOSURE SALE (FOURTH DEPT).

The Fourth Department determined petitioner was not entitled to the surplus proceeds after a tax foreclosure sale:

We reject petitioners’ contention that they have a right to the surplus proceeds of the foreclosure sale. As respondent correctly contends, petitioners’ application for surplus proceeds was improperly predicated upon provisions of RPAPL article 13 that apply to surplus monies arising from the sale of property in mortgage foreclosure proceedings (see e.g.RPAPL 1361 [1]). RPAPL article 13, entitled “Action to Foreclose a Mortgage,” does not apply to properties acquired by a tax district pursuant to an in rem foreclosure proceeding under RPTL article 11. Thus, petitioners’ reliance on RPAPL article 13 and cases involving mortgage foreclosures is misplaced … . …

Moreover, petitioners are not entitled to surplus proceeds under RPTL article 11. Contrary to petitioners’ assertion that RPTL article 11 is “silent” regarding any remaining interest that former property owners may have, such as entitlement to surplus proceeds upon the sale of the property following a default judgment of foreclosure, the statute provides that, when property owners neither redeem the property nor interpose an answer, the tax district is entitled to a deed conveying an estate in fee simple absolute and the property owners are “barred and forever foreclosed of all . . . right, title, interest, claim, lien or equity of redemption” that they may have had in the property (RPTL 1136 [3] …). Where the tax district obtains a valid default judgment of foreclosure, which is presumed here given that the default judgment is not subject to challenge on this appeal, the formr property owners are not “entitled to any compensation upon the resale of the property” … , and the tax district may “retain . . . the entire proceeds from [the re]sale” … . Matter of Hoge v Chautauqua County, 2019 NY Slip Op 04821, Fourth Dept 6-14-19

 

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