Conditional Preclusion Bars Affidavit Opposition and Employment-Record Proof Defeats Apparent-Authority Fraud Defenses in Mortgage Foreclosure

1. Introduction

Bank of Am., N.A. v Sarwar (2026 NY Slip Op 02621) is a Second Department foreclosure decision affirming summary judgment for the lender after the borrower failed to complete a court-ordered deposition and attempted to oppose summary judgment with an affidavit advancing wide-ranging fraud and illegality theories.

Parties. Plaintiff-respondent: Bank of America, N.A. (“BANA”). Defendants-appellants: Muhammad Sarwar and Zubaida Sarwar. Muhammad executed a $657,305 note secured by a Suffolk County mortgage (signed by both defendants).

Core issues. The appeal centered on (i) the effect of a conditional preclusion order when the defendant did not complete his deposition and offered no adequate excuse, and (ii) whether the defendants’ “conspiracy/fraud/illegal activities” defenses and counterclaim could survive summary judgment under an apparent authority theory tied to two purported bank representatives (Shamveel Pasha and Peter Costa).

2. Summary of the Opinion

The Appellate Division affirmed the order granting BANA: (1) summary judgment on the foreclosure complaint against the Sarwars, (2) striking of the defendants’ first affirmative defense and twenty-third affirmative defense/third counterclaim, and (3) an order of reference.

The court held that the conditional preclusion order became absolute when Muhammad failed to complete his deposition; as a result, the Supreme Court properly declined to consider his opposition affidavit (including allegations tying the loan to fraud and illegal activity). On the merits, even considering the remaining opposition proof, the defendants failed to raise a triable issue that Pasha or Costa had apparent authority—or even meaningful involvement—in the residential mortgage transaction.

3. Analysis

A. Precedents Cited

1) Conditional preclusion orders and their consequences

  • Naiman v Fair Trade Acquisition Corp., 152 AD3d 779
    The court relied on Naiman for the rule that a conditional preclusion order sets a discovery deadline with a specified sanction, and that noncompliance triggers the sanction. The opinion quotes Naiman’s formulation that such an order “requires a party to provide certain discovery by a date certain, or face the sanctions specified in the order.”
  • Gibbs v St. Barnabas Hosp., 16 NY3d 74
    Gibbs supplies the controlling principle that if the deadline is missed, the conditional order “becomes absolute.” Gibbs is also cited for the standard to obtain relief from the preclusion’s effect: the noncompliant party must show a reasonable excuse and a potentially meritorious claim or defense. Applying Gibbs, the court emphasized the defendants’ failure to provide the “legitimate and necessary medical documentation” demanded by the prior order.
  • First London Commodity Options v Shearson Hayden Stone, 81 AD2d 518
    This authority supports the trial court’s refusal to consider evidence from a witness precluded due to discovery noncompliance. The Second Department cited it to validate the Supreme Court’s decision not to consider Muhammad’s affidavit opposing summary judgment once preclusion attached.
  • Ok Sun Chong v Scheelje, 2021 WL 1731982 [Sup Ct, Queens County], affd 218 AD3d 693
    Used similarly to First London Commodity Options: once preclusion is triggered, the court may disregard affidavits from the precluded party. The citation underscores that the refusal to consider the affidavit is not discretionary leniency but a normal enforcement of discovery sanctions.

2) Apparent authority doctrine

  • Utopia Home Care, Inc. v Revival Home Care, Inc., 176 AD3d 900
    Cited for the baseline proposition that a principal can be bound by an agent’s actions through apparent authority even absent actual authority. It also serves as a comparator for the court’s conclusion that the defendants’ proof did not raise a triable issue of apparent authority (or involvement).
  • New York Community Bank v Woodhaven Assoc., LLC, 137 AD3d 1231
    Reinforces the framework that apparent authority can bind the principal, but only where the required elements are met—ultimately setting the stage for the court’s focus on the principal’s manifestations rather than the alleged agent’s self-presentation.
  • Hallock v State of New York, 64 NY2d 224
    The opinion quotes Hallock for the essential element: apparent authority arises from the principal’s “words or conduct,” communicated to the third party, that create the reasonable belief of authority. This is central: the Sarwars’ showing focused on meetings and an email, but not on BANA’s own conduct holding Pasha or Costa out as authorized mortgage-loan agents.
  • Standard Funding Corp. v Lewitt, 89 NY2d 546
    Paired with Hallock to emphasize that apparent authority is rooted in the principal’s manifestations—not the purported agent’s assertions—tightening the evidentiary demands on defendants who seek to impute liability based on employee/agent conduct.
  • Heights Props. 1388, LLC v Make Realty Corp., 151 AD3d 825
    Cited as additional support for the same Hallock/Standard Funding articulation of apparent authority, reinforcing the doctrine’s consistency and the need for evidence of principal-driven appearances.

B. Legal Reasoning

1) Why Muhammad’s affidavit could be disregarded

The Supreme Court issued a conditional preclusion order directing Muhammad to complete his deposition within 30 days, explicitly noting that defendants had multiple opportunities to provide sufficient medical documentation to support claims that health issues prevented completion. Muhammad did not complete the deposition. Under Naiman v Fair Trade Acquisition Corp. and Gibbs v St. Barnabas Hosp., noncompliance made the conditional order absolute—precluding Muhammad from testifying at trial.

The Second Department treated the opposition affidavit as effectively barred testimony supporting the affirmative defenses/counterclaims that depended on Muhammad’s narrative. Because defendants offered no adequate medical documentation (and thus no “reasonable excuse” under Gibbs v St. Barnabas Hosp.), the court held the Supreme Court properly declined to consider the affidavit, citing First London Commodity Options v Shearson Hayden Stone and Ok Sun Chong v Scheelje.

Notably, the decision references an order appointing the son (Aqil) as Muhammad’s guardian and defense counsel’s email stating Muhammad consented. The court did not treat guardianship as a substitute for compliance or as an evidentiary foundation excusing the failure; the decisive omission remained the lack of medical documentation and the incomplete deposition after repeated opportunities.

2) Why the fraud/illegal-activity defenses failed on the merits (apparent authority)

The defendants’ theory—stated in sweeping terms—was that they were “victims of a conspiracy” and that bank representatives had notice of illegal activity, thereby invalidating or undermining the foreclosure claim. Their factual hook was that a nonparty (Ali Naderi) introduced Muhammad to Pasha (at Starbucks), and Costa was present at the closing; defendants implied those individuals (as BANA-associated actors) facilitated the loan without due diligence for illicit purposes.

BANA’s motion proof, through a vice president affidavit (Ryan Dansby) grounded in business records familiarity, targeted the agency link: it asserted (i) no record connection between Pasha and the loan or defendants, despite Pasha’s employment with a BANA subsidiary (Merrill Lynch Wealth Management), and (ii) Costa’s job role and territory were commercial-banking oriented, outside consumer residential mortgage authority and outside New York, making it implausible that he was an authorized actor in this transaction. Employment printouts supported these assertions.

Applying the apparent authority doctrine as articulated in Hallock v State of New York and Standard Funding Corp. v Lewitt, the court required evidence of BANA’s own words or conduct communicated to defendants that reasonably conveyed Pasha or Costa had authority to act on BANA’s behalf in a residential mortgage origination/approval. The defendants’ proof—Aqil’s deposition describing a Starbucks meeting without concrete testimony about what Pasha did to obtain approval, plus an email from Costa’s personal address referencing funds to be deposited in a Chase account without mentioning a mortgage—did not supply (a) principal manifestations by BANA, or (b) a non-speculative connection between these individuals and the loan approval process.

The court therefore concluded the defendants failed to raise a triable issue of fact on apparent authority (or even involvement), citing Utopia Home Care, Inc. v Revival Home Care, Inc.. With the agency bridge missing, the fraud/illegality defenses and counterclaim lacked evidentiary support sufficient to defeat summary judgment.

3) Foreclosure elements and procedural posture

The Supreme Court also noted that a prior order had already found BANA made a prima facie showing as owner/holder of the loan documents, default, and uncured default. This appeal did not turn on novel foreclosure-element doctrine; it turned on (i) the enforceability of discovery sanctions and (ii) the insufficiency of the defendants’ agency-based opposition.

C. Impact

1) Discovery compliance as a gatekeeper to substantive defenses

The decision reinforces that in foreclosure litigation, defendants cannot rely on affidavit narratives to resist summary judgment if a conditional preclusion order has become absolute. Courts may—and here, must—treat such affidavits as barred testimony absent a showing satisfying Gibbs v St. Barnabas Hosp. (reasonable excuse and potentially meritorious defense). Practically, litigants must document medical or other claimed impediments with specificity and timeliness; repeated noncompliance can eliminate the ability to present critical factual defenses.

2) Apparent authority defenses require principal-based proof, not suspicion

The opinion underscores the evidentiary rigor of apparent authority. Meetings in informal settings and ambiguous communications are insufficient unless tied to the principal’s manifestations of authority. Employment status alone (or association with an affiliated entity) does not establish authority over a specific consumer mortgage transaction. Lenders can effectively defeat such defenses by producing competent record-based proof delineating roles, responsibilities, and lack of loan involvement.

3) Narrowing of “conspiracy/illegality” defenses without concrete transaction evidence

While the defendants alleged serious misconduct (including references to terrorism financing), the court’s approach reflects a common judicial stance: extraordinary allegations require admissible, transaction-specific proof connecting the lender (through authorized agents or principal conduct) to the alleged wrongdoing. Unsupported or procedurally barred allegations will not create a triable issue.

4. Complex Concepts Simplified

  • Conditional order of preclusion: A court order that gives a party one last chance to comply with discovery by a deadline and warns that a specific penalty will automatically apply if they do not. Here, the penalty was that Muhammad could not testify.
  • “Becomes absolute”: Once the deadline passes without compliance, the sanction is triggered automatically; the court treats it as final unless the party later meets the strict standard for relief (reasonable excuse + potentially meritorious case).
  • Summary judgment: A ruling without trial when the moving party shows there is no real factual dispute that requires a jury or judge to hear testimony.
  • Prima facie case in foreclosure: Typically proof that the plaintiff has the note/mortgage (standing/ownership as required), the borrower defaulted, and the default remains uncured.
  • Order of reference: In New York foreclosure practice, an order appointing a referee to compute amounts due (and sometimes other issues) once liability is established.
  • Actual authority vs. apparent authority: Actual authority means the agent truly has permission from the principal. Apparent authority can bind the principal even without actual permission, but only when the principal’s own communications or conduct reasonably lead the third party to believe the agent is authorized.
  • Triable issue of fact: A genuine, material factual dispute that requires trial—more than speculation, conclusory claims, or inadmissible proof.

5. Conclusion

Bank of Am., N.A. v Sarwar crystallizes two practical rules in foreclosure litigation: (1) failure to comply with a conditional preclusion order—without documented, legally sufficient excuse—can strip a defendant of the ability to oppose summary judgment through affidavit testimony; and (2) apparent authority defenses require evidence of the lender-principal’s own manifestations of authority and a concrete link between the purported agents and the mortgage transaction, not merely informal meetings, ambiguous emails, or generalized allegations of wrongdoing.