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IN THIS FORECLOSURE DEFICIENCY-JUDGMENT CASE, THE FAIR VALUE OF THE PROPERTY WAS CONSIDERABLY HIGHER THAN THE LIQUIDATION VALUE USED BY THE COURT TO CALCULATE THE DEFICIENCY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the fair market value of the property in this foreclosure-deficiency-judgment proceeding was considerably greater than the liquidation valued used by the court:

“RPAPL 1371(2) permits the mortgagee in a mortgage foreclosure action to recover a deficiency judgment for the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher” … . “It is the lender who bears the initial burden of demonstrating, prima facie, the property’s fair market value as of the date of the auction sale” … . “When a lender moves to secure a deficiency judgment against a borrower, ‘the court . . . shall determine, upon affidavit or otherwise as it shall direct, the fair and reasonable market value of the mortgaged premises as of the date such premises were bid [o]n at auction or such nearest earlier date as there shall have been any market value thereof'” … .

Here, the record does not support a finding that the estimated liquidation value of $620,000 constituted the fair and reasonable market value of the property at the time of the foreclosure sale … . Rather, the record supports a determination that the higher estimated value of $1,060,000 presented by the plaintiff’s appraiser constituted the fair and reasonable market value of the property at the time of the foreclosure sale. Rhinebeck Bank v WA 319 Main, LLC, 2022 NY Slip Op 06507, Second Dept 11-16-22

Practice Point: Here the court should have used plaintiff’s appraiser’s determination of the fair market value of the foreclosed property to calculate the amount of the deficiency judgment pursuant to RPAPL 1371(2). The court used a much lower “liquidation value.”

 

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THE SUPERIOR COURT INFORMATION (SCI) DID NOT INCLUDE AN OFFENSE CHARGED IN THE FELONY COMPLAINT OR A LESSER INCLUDED OFFENSE; THE SCI WAS THEREFORE JURISDICTIONALLY DEFECTIVE; THE ERROR NEED NOT BE PRESERVED FOR APPEAL (SECOND DEPT).

​The Second Department, reversing defendant’s conviction and vacating the plea, determined the superior court information (SCI) was jurisdictionally defective because it did not include an offense charged in the felony complaint or a lesser included offense of an offense charged in the felony complaint:

The defendant was charged, by felony complaint, with one count of course of sexual conduct against a child in the first degree under Penal Law § 130.75(1)(b), and one count of endangering the welfare of a child under Penal Law § 260.10(1). He waived indictment by a grand jury and entered a plea of guilty under a superior court information to one count of course of sexual conduct against a child in the second degree under Penal Law § 130.80(1)(a). …

The single count in the superior court information was not an “offense for which the defendant [had been] held for action of a grand jury” (CPL 195.20), in that it was not an offense charged in the felony complaint or a lesser included offense of an offense charged in the felony complaint … . Thus, the superior court information was jurisdictionally defective. This defect survives the defendant’s failure to raise this claim in the Supreme Court, his plea of guilty, and his waiver of the right to appeal … . People v Mendoza, 2022 NY Slip Op 06499, Second Dept 11-16-22

Practice Point: A superior court information (SCI) which does not include an offense charged in the felony complaint or a lesser included offense is jurisdictionally defective and the error need not be preserved for appeal.

 

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WHETHER THE VILLAGE POLICE WERE ENTITLED TO ADDITIONAL COMPENSATION FOR WORK DURING THE EARLY DAYS OF THE COVID-19 PANDEMIC IS ARBITRABLE (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the issue whether the village police were entitled to additional compensation for work during the early days of the COVID-19 pandemic is arbitrable:

Where the relevant arbitration provision is broad, a court “should merely determine whether there is a reasonable relationship between the subject matter of the dispute and the general subject matter of the CBA [collective bargaining agreement]” … . If such a relationship exists, “the court should rule the matter arbitrable, and the arbitrator will then make a more exacting interpretation of the precise scope of the substantive provisions of the CBA, and whether the subject matter of the dispute fits within them” … .

… [T]he Village’s petition was grounded on its contention that the dispute in this case is not arbitrable because article V, § 4 of the CBA provides for additional compensation when the mayor of the Village declares “a holiday for Village employees due to an emergency,” and no such declaration was made by the mayor here. The petition further asserted that arbitration would be against public policy because the “members of the PBA are seeking to extract a benefit to which they clearly are not entitled and which is not contained in their contract.” These contentions are without merit, since the applicability of article V, § 4 of the CBA does not affect the arbitrability of the dispute, but only the merits of the dispute, and the merits are to be determined by the arbitrator and not by the courts … . Matter of Incorporated Vil. of Floral Park v Floral Park Police Benevolent Assn., 2022 NY Slip Op 06481, Second Dept 11-16-22

Practice Point: Whether a matter is arbitrable is separate and distinct from whether the dispute has merit, which is determined by the arbitrator.

 

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THE ADDITIONAL NOTICE REQUIREMENT IN CPLR 3215(G)(4) DOES NOT APPLY TO SERVICE UPON A LIMITED LIABILITY COMPANY, AS OPPOSED TO A CORPORATION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff was not required to comply with the additional notice requirement in CPLR 3215(g)(4) which does not apply to service upon a limited liability company (the defendant here), as opposed to corporations:

The court [in denying plaintiff’s motion for a default judgment] determined that the plaintiff had failed to comply with CPLR 3215(g)(4) and that the respondent had a reasonable excuse for failing to answer the complaint in that it had not been served with process. …

Contrary to the Supreme Court’s determination, the plaintiff was not required to demonstrate compliance with the additional notice requirement of CPLR 3215(g)(4) … . “By its express terms, the notice requirement is limited to situations where a default judgment is sought against a ‘domestic or authorized foreign corporation’ which has been served pursuant to Business Corporation Law § 306(b), and does not pertain to a limited liability company” … . Mitchell v Kingsbrook Jewish Med. Ctr., 2022 NY Slip Op 06477, Second Dept 11-16-22

Practice Point: The additional notice requirement for a default judgment pursuant to CPLR 3215(g)(4) does not apply to service on a limited liability company, as opposed to a corporation.

 

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ATTORNEY’S FEES AND EXPERT WITNESS FEES IN THIS MAINTENANCE-ARREARS ACTION SHOULD NOT HAVE BEEN AWARDED WITHOUT AN EVIDENTIARY HEARING (SECOND DEPT). ​

The Second Department, reversing (modifying) Supreme Court, determined that the award of attorney’s fees and expert witness fees to defendant-wife who sued for and was awarded maintenance arrears:

… Supreme Court erred in awarding attorneys’ fees and expert witness fees requested by the defendant without evaluating the defendant’s claims concerning the extent and value of those services at an evidentiary hearing … . Accordingly, the matter must be remitted to the Supreme Court, Westchester County, for a hearing on those issues and a new determination thereafter of those branches of the defendant’s motions which were for an award of attorneys’ fees and expert fees. Leung v Gose, 2022 NY Slip Op 06476, Second Dept 11-16-22

Practice Point: Here the wife was awarded maintenance arrears but the judge should have held an evidentiary hearing before awarding attorney’s fees and expert witness fees to the wife.

 

DEFENDANT CITY DEMONSTRATED IT DID NOT EXERCISE ANY SUPERVISORY CONTROL OVER THE MANNER OF PLAINTIFF’S WORK IN THIS LABOR LAW 200 ACTION; THEREFORE THE CITY’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing (modifying) Supreme Court, determined the city’s motion for summary judgment on the Labor Law 200 cause of action in this construction accident case should have been granted. The city did not exercise any control over the manner of plainitiff’s work:

“Labor Law § 200 is a codification of the common-law duty of property owners and general contractors to provide workers with a safe place to work” … . “Where, as here, the plaintiff’s injuries arise from the manner in which the work is performed, to be held liable under Labor Law § 200, ‘a defendant must have the authority to exercise supervision and control over the work'” … . Evidence of mere general supervisory authority to oversee the progress of the work, to inspect the work product, or to make aesthetic decisions is insufficient to impose liability under Labor Law § 200 … . Here, the City established, prima facie, that it did not exercise any supervision or control over the method or manner in which the plaintiff’s work was performed … . Jarnutowski v City of Long Beach, 2022 NY Slip Op 06474, Second Dept 11-16-22

Practice Point: In order to be liable under Labor Law 200, where the construction-related injury was caused by the manner in which the work was done, the defendant must exercise supervisory control over the work.

 

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THE BANK IN THIS FORECLOSURE ACTION FAILED TO LAY A FOUNDATION FOR THE BUSINESS RECORDS REQUIRED TO SHOW STANDING TO BRING THE ACTION AND DID NOT SUBMIT SUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE-OF-DEFAULT MAILING REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure did not demonstrate standing the bring the action and compliance with the notice-of-default mailing requirement of RPAPL 1304:

A plaintiff has standing to maintain a mortgage foreclosure action where it is the holder or assignee of the underlying note at the time the action is commenced … . Here, in support of its motion, the plaintiff submitted the affidavit of Shamona Marisa Truesdale, a vice president of loan documentation for Wells Fargo Bank, N.A. (hereinafter Wells Fargo), the plaintiff’s loan servicer. Truesdale stated that she was familiar with Wells Fargo’s records and record-keeping practices. She further stated that the plaintiff was in possession of the note on October 8, 2009, the date this action was commenced. Truesdale’s statement that the plaintiff had possession of the note at the time this action was commenced was inadmissible hearsay. Although Truesdale stated that she was familiar with the records and record-keeping practices of Wells Fargo, the plaintiff’s loan servicer, she failed to state that she was familiar with the records and record-keeping practices of the plaintiff itself. Thus, Truesdale failed to lay a proper foundation for the admission of any of the plaintiff’s business records … . * * *

The plaintiff can establish strict compliance with RPAPL 1304 by submitting domestic return receipts, proof of a standard office procedure designed to ensure that items are properly addressed and mailed, or an affidavit from someone with personal knowledge that the mailing of the RPAPL 1304 notice actually happened … .

Here, the plaintiff relied on the affidavit of Jack Whitmarsh, a vice president of loan documentation for Wells Fargo, who averred that, based on his review of Wells Fargo’s records, the required notice was sent by both certified mail and first-class mail. The plaintiff also submitted a copy of the RPAPL 1304 notice, which was sent to the defendants at the mortgaged premises, and which was stamped with a certified mailing number, as well as a printout of a record purportedly evidencing certified mailing of the notice. However, these documents were insufficient to prove the mailing of the notice by certified mail actually occurred … . Moreover, the plaintiff failed to submit any evidence that the notice was mailed by first-class mail … . Further, Whitmarsh did not aver that he had personal knowledge of the mailing and did not describe any standard office procedure designed to ensure that the notices are mailed … . HSBC Bank USA, N.A. v Gordon, 2022 NY Slip Op 06473, Second Dept 11-16-22

Practice Point: Here the bank apparently submitted the business records necessary to demonstrate the bank’s standing to bring the foreclosure action but the accompanying affidavit did not lay a proper foundation for admitting them. In addition the bank failed to demonstrate compliance with the notice-of-default mailing requirements of RPAPL 1304.

 

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THE BANK IN THIS FORECLOSURE ACTION FAILED TO DEMONSTRATE COMPLIANCE WITH THE NOTICE-OF-DEFAULT MAILING REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not demonstrate compliance with the notice-of-default mailing requirements of RPAPL 1304:

“RPAPL 1304(1) provides that, ‘at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower . . . , including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower.’ The statute further provides the required content for the notice and provides that the 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]). “Proper 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” … .  …

… [T]he plaintiff failed to demonstrate, prima facie, that it strictly complied with the mailing requirements of RPAPL 1304. The affidavit of Daniel Delpesche, a contract management coordinator for the plaintiff’s attorney-in-fact, Ocwen Loan Servicing, LLC …, did not make the requisite showing that Delpesche was familiar with Ocwen’s mailing practices and procedures, and “therefore did not establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed” … . HSBC Bank USA, N.A. v Martin, 2022 NY Slip Op 06471, Second Dept 11-16-22

Practice Point: If the affidavit submitted by the bank in a foreclosure action to prove the notice of default was mailed in accordance with RPAPL 1304 does not state that affiant is familiar with the relevant entity’s mailing procedures the bank’s motion for summary judgment must be denied.​

 

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FAILURE TO SUBMIT THE BUSINESS RECORDS NECESSARY TO DEMONSTRATE DEFENDANTS’ DEFAULT IN THIS FORECLOSURE ACTION REQUIRED DENIAL OF THE BANK’S SUMMARY JUDGMENT MOTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s failure to submit the business records necessary to establish the defendants’ default in this foreclosure action precluded summary judgment in favor of the bank:

In support of the motion, the plaintiff submitted an affidavit from Helen Fraser, a vice president of document control of CitiMorgage, Inc. (hereinafter CitiMortgage), the plaintiff’s loan servicer. Fraser stated that she was familiar with the records and record-keeping practices of both CitiMortgage and the plaintiff. Fraser stated that the defendants “have defaulted under the terms and conditions of the above stated Note by failing to make the July 12, 2016 payment and all successive payments thereafter.” She did not attach any business records to her affidavit. * * *

… [I]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . Here, Fraser’s assertion in her affidavit regarding the defendants’ default, without attaching the business records upon which she relied in making that assertion, constituted inadmissible hearsay … . Citibank, N.A. v Potente, 2022 NY Slip Op 06464, Second Dept 11-16-22

Similar issues and result in Wells Fargo Bank, N.A. v Pane, 2022 NY Slip Op 06516, Second Dept 11-16-22

Practice Point: Yet again: An affidavit which is not supported by the attachment of the business records referenced in the affidavit is considered hearsay which cannot be the basis for summary judgment in favor of the bank in a foreclosure action.

 

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ABSENT FRAUD, COLLUSION OR A MALICIOUS OR TORTIOUS ACT, DEFENDANT ATTORNEYS COULD NOT BE LIABLE FOR ACTING WITHIN THE SCOPE OF THEIR AUTHORITY AS AGENTS OF THE CLIENTS AND ALLEGEDLY ADVISING THEIR CLIENTS TO BREACH A CONTRACT WITH PLAINTIFFS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendant attorneys (Jin Hu defendants) could not be liable to third parties (plaintiffs) for allegedly advising their clients (DeVito defendants) to breach a real estate purchase contract:

… “[I]nasmuch as the relationship created between an attorney and his client is that of principal and agent, an attorney is not liable for inducing his [or her] principal to breach a contract with a third person, at least where he [or she] is acting on behalf of his principal within the scope of his [or her] authority” … . “Absent a showing of fraud or collusion, or of a malicious or tortious act, an attorney is not liable to third parties for purported injuries caused by services performed on behalf of a client or advice offered to that client” … .

Here, the allegations in the complaint regarding the conduct of the Jin Hu defendants were impermissibly vague and conclusory … . Additionally, the complaint failed to sufficiently allege that the Jin Hu defendants acted outside the scope of their authority as counsel for the DeVito defendants or engaged in any conduct that could make them liable to the plaintiffs … . Asamblea De Iglesias Christianas, Inc. v DeVito, 2022 NY Slip Op 06456, Second Dept 11-16-22

Practice Point: Absent fraud, collusion of a malicious of tortios act, an attorney, as the agent for the principal (the client) acting within the scope of the attorney’s authority, cannot be liable to the plaintiff for advising the client to breach a contract with the plaintiff.

 

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