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THE BANK’S FAILURE TO COMPLY WITH THE NOTICE-OF-FORECLOSURE REQUIREMENTS OF RPAPL 1304 CAN BE RAISED AT ANY TIME BEFORE THE JUDGMENT OF FORECLOSURE AND SALE (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined the bank’s failure to comply with the notice provisions of RPAPL 1304 can be raised as a defense at any time before the judgment of foreclosure and sale. Here the defense was raised in opposition to the bank’s motion to confirm the referee’s report:

… “[F]ailure to comply with RPAPL 1304 is a defense that may be raised at any time prior to the entry of judgment of foreclosure and sale” … and thus, the defendants properly raised it in opposition to the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale.

“Strict compliance with RPAPL 1304 notice to the borrower or borrowers is a condition precedent to the commencement of a foreclosure action” … . RPAPL 1304 requires that the notice be sent by registered or certified mail, and also by first-class mail, to the last known address of the borrower … .

… The affidavit of Brittany Wilson, an officer of Wells Fargo Bank, N.A. … , the servicing agent of the plaintiff, was insufficient to establish that the plaintiff complied with RPAPL 1304. While Wilson attested that she was familiar with Wells Fargo’s records and record-keeping practices and that the plaintiff complied with RPAPL 1304 by mailing the required notices, which were attached to her affidavit, she failed to attest that she personally mailed the notices or that she was familiar with the mailing practices and procedures of Wells Fargo. Therefore, the plaintiff “failed to establish proof of standard office practice and procedures designed to ensure that items are properly addressed and mailed” … . U.S. Bank N.A. v Valencia, 2023 NY Slip Op 04426, Second Dept 8-30-23

Practice Point: The bank’s failure to demonstrate compliance with the notice of foreclosure requirements of RPAPL 1304 can be raised at any time before the judgment of foreclosure and sale.

 

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A TITLE HOLDER WHO DID NOT SIGN THE NOTE BUT DID SIGN THE MORTGAGE IS ENTITLED TO THE RPAPL 1304 NOTICE OF FORECLOSURE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined a defendant (Courtney) who did not sign the note but did sign the mortgage was a “borrower” entitled to notice of the foreclosure pursuant to RPAPL 1304:

… [I]t is undisputed that the plaintiff failed to serve Courtney [defendant] with notice pursuant to RPAPL 1304, and, contrary to the plaintiff’s contention, he was entitled to such notice as a “borrower” within the meaning of that statute. Although Courtney did not sign the note, both of the defendants were title owners of the subject property and each executed the mortgage as a “borrower.” “Where, as here, a homeowner defendant is referred to as a ‘borrower’ in the mortgage instrument and, in that capacity, agrees to pay amounts due under the note, that defendant is a ‘borrower’ for the purposes of RPAPL 1304, notwithstanding . . . any ambiguity created by a provision in the mortgage instrument to the effect that parties who did not sign the underlying note are not personally obligated to pay the sums secured” … . Since Courtney “signed the mortgage as a ‘borrower’ and, in that capacity, agreed to pay the amounts due under the note, [he] was entitled to . . . notice pursuant to RPAPL 1304” … . Wells Fargo Bank N.A. v Carney, 2023 NY Slip Op 04231, Second Dept 8-9-23

Practice Point: A title owner who does not sign the note but signs the mortgage is a “borrower” entitled to notice of the foreclosure.

 

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IN THIS FORECLOSURE ACTION, A HEARING SHOULD HAVE BEEN HELD TO DETERMINE IF THE BANK HAD PERSONAL JURISDICTION OVER A DEFENDANT, THE BANK ESTABLISHED STANDING (NOTE AFFIXED TO THE COMPLAINT), THE BANK FAILED TO DEMONSTRATE COMPLIANCE WITH RPAPL 1303 AND 1304 (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined there was a question of fact whether a defendant was properly served, the bank demonstrated standing to foreclose by affixing the note to the complaint, and the bank failed to demonstrate compliance with RPAPL 1303 and 1304:

Ordinarily, a process server’s affidavit of service gives rise to a presumption of proper service … . However, “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” … . “If an issue regarding service turns upon a question of credibility, a hearing should be held to render a determination on this issue” * * *

The plaintiff established, prima facie, that it had standing to commence this action by submitting in support of its motion a copy of the note, endorsed in blank, that was annexed to the certificate of merit filed with the summons and complaint at the time the action was commenced … . Where, as here, the note is affixed to the complaint, “‘it is unnecessary to give factual details of the delivery in order to establish that possession was obtained prior to a particular date'” * * *

… [T]he plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1303  … . RPAPL 1303 requires that the party foreclosing a mortgage on residential property deliver, along with the summons and complaint, a notice titled “Notice to Tenants of Buildings in Foreclosure” to any tenant of the property by certified mail, if the identity of the tenant is known to the foreclosing party … . * * *

… [T]he affiant did not state that he had personal knowledge of the purported mailings, and the documents that he relied upon to affirm that the mailings took place failed to establish that the RPAPL 1304 notices were actually mailed … by both certified and first-class mail. Since the plaintiff “failed to provide proof of the actual mailing, 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,” the plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1304 … . U.S Bank N.A. v 22-33 Brookhaven, Inc., 2023 NY Slip Op 04228, Second Dept 8-9-23

Practice Point: Here a defendant raised a question of fact whether he was properly served, requiring a hearing.

Practice Point: In this foreclosure action the bank established standing by affixing the note to the complaint.

Practice Point: The bank’s failure to strictly comply with RPAPL 1303 or 1304 precludes summary judgment.

 

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MAILING THE NOTICE OF FORECLOSURE TO BOTH BORROWERS IN THE SAME ENVELOPE IS A VIOLATION OF RPAPL 1304 REQUIRING DENIAL OF THE BANK’S SUMMARY JUDGMENT MOTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s motion for summary judgment in this foreclosure action should not have been granted. The bank mailed the notice of foreclosure to both borrowers in the same envelope, a violation of RPAPL 1304:

… [T]he defendants are both borrowers for purposes of RPAPL 1304 and, thus, were each entitled to RPAPL 1304 notice … . Although both defendants were entitled to RPAPL 1304 notice, the plaintiff failed to establish that it sent a 90-day notice individually addressed to each defendant in separate envelopes, as required by the statute … . Rather, as the plaintiff concedes, the notices were mailed in a single envelope jointly to both defendants. Since the plaintiff failed to establish, prima facie, its strict compliance with RPAPL 1304, the Supreme Court should have denied those branches of its motion which were for summary judgment … . Deutsche Bank Natl. Trust Co. v Hennessy, 2023 NY Slip Op 03907, Second Dept 7-23-26

Practice Point: If the bank in a foreclosure action does not demonstrate strict compliance with the notice requirements of RPAPL 1304, it is not entitled to summary judgment. Here the bank violated RPALP 1304 by sending the notice of foreclosure to both borrowers in the same envelope.

 

 

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DEFENDANT DID NOT PROVE THE EXISTENCE OF A PRESCRIPTIVE EASEMENT OVER PLAINTIFF’S LAND; PLAINTIFF DID NOT PROVE THE DAMAGES ELEMENT OF TRESPASS (THIRD DEPT).

The Third Department, reversing (modifying) Supreme Court, determined the requirements for a prescriptive easement over plaintiff’s property were not met and plaintiff did not prove the damages element of the trespass action. Plaintiff, however, was entitled to nominal damages for trespass:

… [O]ur independent review of the trial evidence reflects that defendant did not establish that the adverse use of the road continued for the requisite 10-year period. It follows that defendant’s counterclaim for a prescriptive easement must be dismissed and that, in the absence of that easement, [defendant] committed a trespass when he entered upon plaintiff’s property in 2004 … . * * *

… [P]laintiff failed to meet her burden of proving “[t]he lesser of the diminution in value of the property or the cost to repair” that would be the ordinary measure of damages for a trespass … or, for that matter, the loss of a specific number of trees for purposes of RPAPL 861 … . She was accordingly not entitled to an award of actual damages. Nevertheless, because “nominal damages can be presumed in an action for trespass to real property,” dismissal of her trespass claim was not warranted upon that basis … . Mastbeth v Shiel, 2023 NY Slip Op 03895, Third Dept 7-20-23

Practice Point: Here defendant did not prove 10 years of hostile use of plaintiff’s property and therefore did not demonstrate a prescriptive easement. Plaintiff did not prove the damages element of trespass and therefore was entitled only to nominal damages.

 

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THE “NOTICE OF INTENT TO FORECLOSE” FELL SHORT OF AN ACCELERATION OF THE MORTGAGE DEBT AND DID NOT TRIGGER THE STATUTE OF LIMITATIONS FOR THE FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s motion pursuant to RPAPL 1501(4) to cancel and discharge a mortgage should not have been granted. The ground for the motion was the claim the statute of limitations for a foreclosure action had run. But the Second Department determined the “Notice of Intent to Foreclose” did not accelerate the mortgage. Therefore the statute of limitations had not begun to run:

“‘The law is well settled that, even 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'” … . Acceleration occurs, inter alia, by the commencement of a foreclosure action wherein the holder of the note elects in the complaint to call due the entire amount secured by the mortgage, or through an unequivocal acceleration notice transmitted to the borrower … . A notice of acceleration of a debt must be clear and unequivocal, and to constitute such clear and unequivocal acceleration of a debt, the notice must demand an immediate payment of the entire outstanding loan and not refer to acceleration only as a future event … .

Here, the plaintiff failed to establish her prima facie entitlement to judgment on the complaint as a matter of law. The language in a 2008 “Notice of Intent to Foreclose,” that the mortgage debt would be accelerated if the borrower did not pay the arrears as set forth in the notice by September 19, 2008, was merely an expression of future intent that fell short of an actual acceleration … . Sansone v North Shore Invs. Realty Group, LLC, 2023 NY Slip Op 03876, Second Dept 7-19-23

Practice Point: Where the mortgage debt is paid in installments, the debt must be accelerated to start the statute of limitations for a foreclosure action. Here the “Notice of Intent to Foreclose” was a statement of future intention which did not accelerate the debt.

 

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THE RIGHT TO SEEK DISMISSAL OF THE FORECLOSURE ACTION PURSUANT TO CPLR 3215 (C) BASED ON PLAINTIFF BANK’S FAILURE TO SEEK A DEFAULT JUDGMENT WITHIN A YEAR WAS WAIVED BY DEFENDANT’S THREE-YEAR DELAY IN BRINGING THE MOTION TO DISMISS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant, by waiting three years, waived the seek dismissal of the foreclosure action based on plaintiff bank’s failure to move for a default judgment within one year:

“A ‘defendant may waive the right to seek dismissal pursuant to [CPLR 3215(c)] by his or her conduct'” … . Here, the defendant did not move pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against him until nearly three years after the defendant’s attorney filed a notice of appearance on his behalf. Under these circumstances, the defendant waived his right to seek dismissal pursuant to CPLR 3215(c) by his active participation in the litigation … . Moreover, the defendant never sought to vacate his default in answering the complaint. Thus, he was precluded from raising his proffered defenses of the plaintiff’s failure to comply with RPAPL 1304 … . Bank of Am., N.A. v Carapella, 2023 NY Slip Op 03844, Second Dept 7-19-23

Practice Point: The right to dismiss an action based on plaintiff’s failure to move for a default judgment within a year of the default (CPLR 3215(c) can be waived by defendant’s participation in the action. Here defendant did not move to dismiss pursuant to CPLR 3215(c) until three years after defendant’s attorney filed a notice of appearance.

 

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ALTHOUGH DEFENDANT IN THIS FORECLOSURE ACTION DID NOT ASSERT THE AFFIRMATIVE DEFENSES OF LACK OF STANDING AND LACK OF PERSONAL JURISDICTION IN THE ANSWER, THE DEFENSES WERE NOT WAIVED AND THE MOTION TO AMEND THE ANSWER SHOULD HAVE BEEN GRANTED; EVEN THOUGH THE STATUTE PROVIDING THAT THE LACK OF STANDING DEFENSE WAS NOT WAIVED WAS NOT ENACTED AT THE TIME THE MOTION WAS DECIDED, THE APPELLATE COURT CAN APPLY THE LAW AS IT EXISTS AT THE TIME OF THE APPELLATE DECISION (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined the defendant’s failure to assert the plaintiff’s lack of standing and lack of personal jurisdiction in the answer did not waive those affirmative defenses, Defendant’s motion to amend the answer should have been granted. The court noted that even though RPAPL 1302-a, which provides that the failure to assert plaintiff’s lack of standing in the answer does not waive the defense, had not been enacted at the time the motion below was decided, the statute can be applied on appeal:

RPAPL 1302-a … provides that, notwithstanding the provisions of CPLR 3211(e), “any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in [RPAPL 1304(6)(a)], shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss.” “‘The general rule holds that an appellate court must apply the law as it exists at the time of its decision'” … . Accordingly, RPAPL 1302-a may be considered in connection with the present appeal, even though that statute had not been enacted at the time the relevant orders in this action were decided by the Supreme Court … .

… Although the defendant did not assert lack of personal jurisdiction in her answer and thereby waived this defense under CPLR 3211(e), such a defense can nevertheless be interposed in an answer amended by leave of court pursuant to CPLR 3025(b) … . Deutsche Bank Natl. Trust Co. v Groder, 2023 NY Slip Op 03768, Second Dept 7-12-23

Practice Point: Although defendant in this foreclosure action did not assert the affirmative defenses of lack of standing and lack of personal jurisdiction in the answer, the defenses were not waived and defendant should have been allowed to amend the answer accordingly.

Practice Point: An appellate court can apply the law as it exists at the time of the appellate decision, even where, as here, the relevant statute had not been enacted when the lower court issued its decision.

 

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ALTHOUGH THE STATUTE OF LIMITATIONS STARTED RUNNING WHEN THE FORECLOSURE ACTION WAS FIRST BROUGHT, THE SUBSEQUENT LOAN MODIFICATION AGREEMENT, ENTERED WHILE THE FORECLOSURE ACTION WAS STILL PENDING, STARTED THE STATUTE OF LIMITATIONS RUNNING ANEW (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that, although the six-year statute of limitations for the original foreclosure action had run, the loan modification agreement, which was entered after the foreclosure action was started and while it was still pending, restarted the statute of limitations:

RPAPL 1501(4) provides, in pertinent part, that “[w]here the period allowed by the applicable statute of limitation for the commencement of an action to foreclose a mortgage . . . has expired, any person having an estate or interest in the real property subject to such encumbrance may maintain an action . . . to secure the cancellation and discharge of record of such encumbrance.” Pursuant to General Obligations Law § 17-105, however, “a promise to pay the mortgage debt, if made after the accrual of a right of action to foreclose the mortgage . . . by the express terms of a writing signed by the party to be charged is effective . . . to make the time limited for commencement of the action run from the date of the . . . promise”… .  14 Fillm Corp. v Mid-Island Mtge. Corp., 2023 NY Slip Op 03759, Second Dept 7-12-23

Practice Point: Even if a foreclosure had been filed, starting the running of the statute of limitations, a loan modification agreement entered while the the foreclosure action was pending starts the running of the statute of limitations all over again.

 

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THE PROOF THE FORECLOSURE NOTICE WAS MAILED IN ACCORDANCE WITH RPAPL 1304 WAS INSUFFICIENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the mortgage company in this foreclosure action did not demonstrate compliance the the notice requirements of RPAPL 1304:

… [T]he copy of the notice contains no indication that it was sent by registered or certified mail, or by first-class mail … . Nor is there “[a] copy of any United States Post Office document indicating that the notice was sent by registered or certified mail as required by the statute” … . … [The affiant] did not attest to having any personal knowledge of, or familiarity with, [the company’s] actual standard mailing procedures during the relevant time period, which were designed to ensure that items are properly addressed and mailed … . Accordingly, [the affiant’s] assertion in his affidavit that the RPAPL 1304 notice was sent to the defendant on March 14, 2013, at the address of the mortgaged premises, “by registered or certified and first-class mail,” was unsubstantiated and conclusory … . Ditech Servicing, LLC v McFadden, 2023 NY Slip Op 03452, Second Dept 6-28-23

Practice Point: Yet another instance of the failure to prove the notice of foreclosure was mailed in accordance with RPAPL 1304.

 

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