Citibank, N.A. v Conti-Scheurer (decided April 17, 2019) – Evidence needed to prove (and disprove) compliance with RPAPL § 1304.
Real Property and Proceeding Law (“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.” Strict compliance with RPAPL § 1304 notice to the borrower or borrowers is a condition precedent to the commencement of a foreclosure action. Citimortgage, Inc. v Banks, 155 AD3d 936, 936-937 (2d Dept. 2017); HSBC Bank USA, N.A. v Ozcan, 154 AD3d 822, 825-826 (2d Dept. 2017); Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95 (2d Dept. 2011).
When contested, a plaintiff must demonstrate full compliance with the statute through admissible evidence and cannot proceed to judgment without doing so. Conversely, a defendant can dismiss a foreclosure action by proving that the bank failed to strictly adhere to RPAPL § 1304. Section 1304 is very specific as to the contents and method of serving of the 90-day notice. Additionally, banks must also comply with the state filing requirements of the notice pursuant to RPAPL § 1306.
On April 17, 2019, the Second Department addressed the evidence required to establish prima facie compliance with RPAPL § 1304. In Citibank, N.A. v. Conti-Scheurer, the Appellate Division reversed a Nassau County Supreme Court’s order granting plaintiff’s motion for summary judgment, finding that contrary to the lower court’s 2015 determination, the bank failed to establish compliance with RPAPL § 1304.
The Second Department found the bank’s documentary evidence to be deficient, that the bank’s affiant did not have personal knowledge of the purported 1304 mailing and that the bank’s agent failed to lay proper foundation of the alleged business records. The Court determined that “[s]ince 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 establish its strict compliance with RPAPL 1304.” Consequently, the Appellate Division ruled that the Supreme Court should have denied the bank’s application for summary judgment.
While the bank failed to prove compliance with § 1304, the defendant also fell short on her cross-motion of establishing, prima facie, that plaintiff did not strictly comply with the mailing requirements. The Second Department declared that “mere denial” of receipt of the RPAPL 1304 notice is insufficient to warrant dismissal for noncompliance of the statute. Here, the defendant “did not confirm that she still lived at the address shown on the notice… that she had been receiving other mail at that address… that she was never contacted by the United States Post Office about mail for which she was required to sign….” The Court concluded that “a simple denial of receipt, without more, is insufficient to establish prima facie entitlement to judgment as a matter of law dismissing the complaint for failure to comply with the requirements of RPAPL 1304.” Accordingly, if you’re making a motion to dismiss for failure to comply with RPAPL § 1304, your affidavit must state more than just a mere denial of the receipt of the notice.
Compliance with RPAPL § 1304 should not be taken lightly. I’ve had several cases delayed and/or dismissed based on banks’ deficient records. Though the defendant in Citibank, N.A. v. Conti-Scheurer fell short on her motion to dismiss, she is in a much better bargaining position for settlement purposes now that the bank’s summary judgment has been reversed on a 10-year-old foreclosure action.
Bank of New York Mellon v. Dushaun Gordon (decided March 27, 2019) – A Review of the Basic Rules of Evidence
In the wake of the financial crisis that began in 2008, New York State courts have experienced an unprecedented spike in foreclosure actions. The dramatic increase in foreclosure litigation has revealed many deficiencies in the banks’ record-keeping practices, the inadequacies in the prosecution of the matters, and the trial courts’ continuous misapplication of the most fundamental principles of law.
On March 27, 2019, the Second Judicial Department modified a decision made by the Nassau County Supreme Court with hopes of finally clarifying basic evidentiary law and eliminating many foreclosure disputes that make up the ever-increasing trial courts. In Bank of New York Mellon v. Dushaun Gordon, contrary to the lower court’s findings, the Second Department determined that the bank unequivocally failed to establish the defendant’s default under the loan documents. In other words, the bank couldn’t even prove that borrower/mortgagor stopped repayment on the loan.
Plaintiff’s affiant did not possess personal knowledge of the purported default and failed to make a prima facie showing through admissible business records. Plaintiff’s counsel tried to overcome these deficiencies by inexplicably attaching payment records to the attorney affirmation, which were carelessly considered by the lower court but adamantly rejected by the Appellate Division. Specifically, the Second Department found that “since the plaintiff failed to establish, prima facie, [defendant’s] default in the repayment of the subject loan through the submission of evidence in admissible form, the Supreme Court should have denied those branches of the plaintiff’s motion which were for summary judgment….”
Having worked for several bank firms where I represented numerous lenders and loan servicers, I know firsthand that banks have successfully prosecuted foreclosure actions despite blatant deficiencies in the records. While a motion for summary judgment cannot rest on inadmissible evidence, “a court should not examine the admissibility of evidence submitted in support of a motion for summary judgment unless the nonmoving party has specifically raised that issue in its opposition to the motion.” Rosenblatt v St. George Health & Racquetball Assoc.,LLC, 119 A.D.3d 45, 55 (2d Dept. 2014). Accordingly, it is absolutely imperative to contest the admissibility of a bank’s records when applicable. When you’re a party in an action, your claims are only as good as your proof.
Standing — Use it or Lose it!
A facially adequate foreclosure action only requires allegations regarding the existence of the mortgage, the unpaid note, and the obligor’s default. IndyMac Venture, LLC v Amus, 164 AD3d 883 (2d Dept. 2018). Thus, a bank in a foreclosure action is not required to prove that it is the owner of the loan, unless Standing is specifically raised as a defense.
On January 23, 2019, the Appellate Division, Second Judicial Department, made abundantly clear in US Bank National Association v. Kenyatta Nelson, et al., that the defense of lack of standing is indisputably waived unless it is timely interposed as an Affirmative Defense or asserted in a pre-Answer Motion to Dismiss. The Court affirmed that a defendant’s mere denial to a bank’s allegation of ownership of the mortgage loan documents does not effectively place Standing at issue.
As mortgage loans are often bought, sold, and securitized, issues may arise over which entity has the legal right to foreclose — resulting in legitimate questions of Standing.
Time to Answer a Complaint
A defendant sued in a civil action typically has 20-30 days after service is complete to respond to a Complaint. Governor Andrew Coumo signed legislation in 2016, which amongst other things, amended several provisions of the RPAPL and CPLR, including CPLR § 3408.
Effective December 20, 2016, a “defendant who appears at the settlement conference but who failed to file a timely answer… shall be presumed to have a reasonable excuse for the default and shall be permitted to serve and file an answer, without any substantive defenses deemed to have been waived within thirty days of initial appearance at the settlement conference. The default shall be deemed vacated upon service and filing of an answer.”
While the Summons may demand a response to the Complaint within 20-30 days after service, you may have several months before the deadline to interpose an Answer.