The Second Department Denies Summary Judgment To Another Foreclosing Mortgagee Due To The Insufficiency Of Evidence Presented On The Motion

• Posted on: Dec 28 2017

A recent blog post entitled: “Appellate Division, Second Department Tells Foreclosing Residential Lender to ‘SHOW ME THE EVIDENCE,’” cautioned foreclosing mortgagees that evidence in admissible form must be submitted to the court to demonstrate compliance with the many statutory provisions that must be followed to ensure a successful foreclosure action.

The Second Department in U.S. Bank National Association v. Brody, decided on December 20, 2017, reiterates that foreclosing mortgagees must submit appropriate proof in admissible form in order to prevail on a summary judgment motion in a residential mortgage foreclosure action.

In the Brody complaint, the plaintiff alleged that it was the current holder of the note secured by the mortgage being foreclosed. Brody, in his answer, alleged that the plaintiff did not have standing to bring the subject foreclosure action.

The supreme court in Brody, inter alia, granted plaintiff’s motion for summary judgment, but the Second Department, “modified” the lower court’s decision by denying same. The Brody Court explained that a foreclosing mortgagee makes its prima facie case by the production of the note, the mortgage and evidence of default. The Court did note, however, that “when a defendant places standing in issue, the plaintiff must prove its standing in order to be entitled to relief.” (Citations omitted.) The Brody Court further recognized that standing is conferred on a plaintiff in a mortgage foreclosure action “when it is the holder or assignee of the underlying note at the time the action is commenced.” (Citations omitted.) A “holder,” according to the Brody Court, “is the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. (Citations and quotation marks omitted.)

While the Court found that the Brody plaintiff produced the note, mortgage and proof of default, it also found that standing to bring the action was not sufficiently established. Because the note was “endorsed in blank”, standing must be established “by demonstrating that the original note was physically delivered to it prior to the commencement of the action.” (Citations omitted.) Initially, plaintiff attempted to establish standing through the affidavit of an officer of the plaintiff’s servicing agent, merely stating that the plaintiff was in possession of the note. A subsequent affidavit of another officer of the plaintiff’s servicing agent asserted that: the servicing agent was appointed in 2014; and, that based on her familiarity with the servicing agent’s business records, plaintiff had possession of the note in 2006.

The Brody Court, however, found the servicing agents’ affidavits to be insufficient. First, the subsequent servicing agent’s affidavit “failed, among other things, to explain how a review of the business records of a servicing agent appointed in 2014 could prove that plaintiff had obtained physical possession of the note more than seven years earlier.” Thus, the Court concluded, neither affidavit provided “sufficient factual details to establish the physical delivery of the note to the plaintiff prior to the commencement of [the] action, nor the foundational knowledge required to admit such factual details under the business records exception to the hearsay rule.” (Citations omitted.) Thus, the Brody Court held that the plaintiff’s motion for summary judgment and for the appointment of a referee should have been denied “regardless of the sufficiency of Brody’s opposition papers.” (Citations omitted.)

TAKEAWAY

Presumably, the submission of more detailed affidavits from individuals with first-hand knowledge of the facts and circumstances surrounding plaintiff’s acquisition of the note and its possession of the note at the time the action as commenced, would have been sufficient to establish standing, defeat Brody’s affirmative defense and support the grant of summary judgment in favor of the foreclosing mortgagee. As a result of the failure of plaintiff’s proof, the parties may have to go through discovery and trial; which could be costly.

Courts continue to force parties to lay bare their proof if they expect to be granted summary judgment, notwithstanding the sufficiency of the opposition papers. In cases such as Brody, it is critical that the foreclosing mortgagee presents to the court in admissible form, all of the information necessary to justify the requested relief. Failure to do so can lead to otherwise costly and time-consuming litigation.

Tagged with: Banking Litigation, Mortgage Foreclosure, Real Estate Litigation, Residential Mortgage Foreclosure