Nationstar Mortg., LLC v. Durane-Bolivard

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Docket Number

2018-05250

Attorney(S)

Holly C. Meyer, Bohemia, NY, for appellant. Davidson Fink LLP (McGlinchey Stafford, New York, NY [Brian S. McGrath and Mitra Paul Singh], of counsel), for respondent.

Judges

ALAN D. SCHEINKMAN, P.J.

Acts

Civil Practice Law And Rules — Appeals Generally — Scope of review

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Smart Summary

Factual and Procedural Background

The plaintiff, Nationstar Mortgage, LLC, commenced a mortgage foreclosure action against the defendant, Marie Durane-Bolivard. The defendant responded with an answer asserting multiple affirmative defenses, including lack of standing, failure to comply with RPAPL 1304 notice requirements, and failure to satisfy a condition precedent in the mortgage requiring a notice of default prior to acceleration. On September 13, 2016, the Supreme Court, Nassau County, granted summary judgment to the plaintiff on the complaint against the defendant, dismissed several of her affirmative defenses, and appointed a referee to compute the amount due. Subsequently, on February 28, 2018, the court entered an order and judgment of foreclosure and sale, confirming the referee's report and directing the sale of the property. The defendant appealed this order and judgment.

Legal Issues Presented

Whether the plaintiff complied with RPAPL 1304's notice requirements as a condition precedent to commencing the foreclosure action.
Whether the plaintiff complied with the mortgage's condition precedent requiring notice of default before acceleration.
Whether the plaintiff established standing to commence the foreclosure action.
Whether the Supreme Court properly confirmed the referee's report and entered a judgment of foreclosure and sale given the evidentiary foundation.

Arguments of the Parties

Respondent (Plaintiff) Arguments

The plaintiff demonstrated compliance with RPAPL 1304 by submitting evidence of mailing the required notice via both certified and first-class mail, supported by affidavits and mailing barcodes.
The plaintiff established compliance with the mortgage's condition precedent by showing service of the required default notice.
The plaintiff established standing by attaching a copy of the note, endorsed in blank, to the summons and complaint at the commencement of the action.

Appellant (Defendant) Arguments

The defendant contended that the plaintiff failed to meet the evidentiary requirements for RPAPL 1304 compliance and the mortgage's default notice condition.
The defendant challenged the admissibility and foundation of the evidence supporting the amount due as computed by the referee, asserting hearsay issues.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 106	RPAPL 1304 notice is a condition precedent to foreclosure; plaintiff bears burden to show compliance.	Used to establish the necessity of proper mailing and plaintiff’s burden of proof for RPAPL 1304 compliance.
Citibank, N.A. v Conti-Scheurer, 172 AD3d 17, 20-21	Proof of mailing may be established by affidavits or receipts evidencing certified and first-class mail.	Supported plaintiff’s submission of affidavits and mailing barcodes as prima facie evidence of compliance.
Flagstar Bank FSB v Mendoza, 139 AD3d 898, 900	Failure to raise triable issue of fact in opposition to plaintiff’s prima facie showing.	Confirmed defendant failed to raise a triable issue regarding RPAPL 1304 and mortgage notice compliance.
Nationstar Mtge LLC v LaPorte, 162 AD3d 784, 785-786	Standing established by attaching endorsed note to summons and complaint.	Supported plaintiff’s standing to commence foreclosure action.
Flagstar Bank FSB v Konig, 153 AD3d 790, 790-791	Referee’s report should be confirmed if findings are substantially supported and credibility resolved.	Outlined standard for confirming referee’s report, which was not met here due to evidentiary deficiencies.
Hypo Holdings, Inc. v Feuer, 68 AD3d 722, 722	Affidavits containing assertions based on business records must lay proper foundation to avoid hearsay.	Found plaintiff’s affidavit inadmissible hearsay due to lack of proper foundation.
Bank of N.Y. Mellon v Gordon, 171 AD3d 197, 208-210	Proper foundation requires personal knowledge of business practices and incorporation of records.	Applied to determine insufficiency of plaintiff’s affidavit foundation for business records on amount due.
Citimortgage, Inc. v Kidd, 148 AD3d 767, 768-769	Erroneous reliance on hearsay evidence in foreclosure proceedings is not harmless error.	Supported reversal due to improper admission of hearsay evidence in referee’s report.

Court's Reasoning and Analysis

The court first evaluated the plaintiff’s compliance with RPAPL 1304, emphasizing that proper service of the notice by registered or certified mail and first-class mail to the borrower's last known address is a condition precedent to foreclosure. The plaintiff met this burden by submitting affidavits describing mailing procedures and evidence of mailing, including envelopes with certified and first-class mail barcodes. The defendant failed to raise a triable issue of fact challenging this compliance.

Similarly, the plaintiff established compliance with the mortgage's condition precedent requiring a notice of default before acceleration, again unchallenged by the defendant with respect to triable issues.

The court also found that the plaintiff demonstrated standing through the attachment of the endorsed note to the summons and complaint, a recognized method to establish standing in foreclosure actions.

However, the court reversed the confirmation of the referee’s report and judgment of foreclosure and sale due to evidentiary deficiencies. The referee’s findings on the amount due relied on an affidavit that constituted inadmissible hearsay because the underlying business records were not provided, and the affidavit lacked the necessary foundation. The affiant did not have personal knowledge of the creation of the records nor demonstrated that the records were incorporated and routinely relied upon by the plaintiff. Given this lack of proper foundation, the court held that the error was not harmless and required a new computation of the amount due.

Holding and Implications

The court REVERSED the order and judgment of foreclosure and sale, DENIED the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale, and REMITTED the matter to the Supreme Court, Nassau County, for further proceedings consistent with the opinion. Specifically, the case was remanded for a new referee’s report computing the amount due with proper evidentiary foundation, followed by further proceedings and entry of an amended judgment.

This decision directly affects the parties by vacating the prior foreclosure sale order and requiring further evidentiary proceedings. The opinion does not establish new precedent beyond clarifying the evidentiary standards required to confirm a referee’s report in a foreclosure action.

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Nationstar Mortgage, LLC, respondent, v. Marie Durane-Boli

ALAN D. SCHEINKMAN, P.J.

JEFFREY A. COHEN JOSEPH J. MALTESE HECTOR D. LASALLE, JJ. (Index No. 6017/14)

Holly C. Meyer, Bohemia, NY, for appellant.

Davidson Fink LLP (McGlinchey Stafford, New York, NY [Brian S. McGrath and Mitra Paul Singh], of counsel), for respondent.

DECISION & ORDER

In an action to foreclose a mortgage, the defendant Marie Durane-Bolivard appeals from an order and judgment of foreclosure and sale (one paper) of the Supreme Court, Nassau County (Thomas A. Adams, J.), entered February 28, 2018. The order and judgment of foreclosure and sale, upon an order of the same court entered September 13, 2016, inter alia, granting those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against that defendant and dismissing her first, third, and fourth affirmative defenses, and to appoint a referee to compute the amount due to the plaintiff, granted the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale, confirmed the referee's report, and directed the sale of the subject property.

ORDERED that the order and judgment of foreclosure and sale is reversed, on the law, with costs, the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale is denied, the referee's report is rejected, and the matter is remitted to the Supreme Court, Nassau County, for further proceedings consistent herewith.

The plaintiff commenced this action against the defendant Marie Durane-Bolivard (hereinafter the defendant), among others, to foreclose a mortgage. The defendant interposed an answer in which she asserted various affirmative defenses, including lack of standing, failure to comply with RPAPL 1304, and failure to comply with a condition precedent set forth in the subject mortgage requiring that the plaintiff tender the defendant a notice of default prior to accelerating the mortgage. In an order entered September 13, 2016, the Supreme Court, inter alia, granted those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendant and dismissing her first, third, and fourth affirmative defenses, and to appoint a referee to compute the amount due to the plaintiff. In an order and judgment of foreclosure and sale entered February 28, 2018, the court granted the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale, confirmed the referee's report, and directed the sale of the subject property. The defendant appeals from the order and judgment of foreclosure and sale. The appeal from the order and judgment of foreclosure and sale brings up for review the order entered September 13, 2016 (see CPLR 5501[a][1]; Nationstar Mortgage, LLC v Durane-Bolivard, ___ AD3d ___ [Appellate Division Docket No. 2017-00437; decided herewith]).

"[P]roper 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" (Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 106). The statute requires that such 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]). "By requiring the lender or mortgage loan servicer to send the RPAPL 1304 notice by registered or certified mail and also by first-class mail, the Legislature implicitly provided the means for the plaintiff to demonstrate its compliance with the statute, i.e., by proof of the requisite mailing, which can be established with proof of the actual mailings, such as affidavits of mailing or domestic return receipts with attendant signatures, 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" (Citibank, N.A. v Conti-Scheurer, 172 AD3d 17, 20-21 [internal quotation marks omitted]; see Bank of Am., N.A. v Bittle, 168 AD3d 656, 658; Wells Fargo Bank, NA v Mandrin, 160 AD3d 1014, 1016).

Contrary to the defendant's contention, the plaintiff demonstrated its prima facie entitlement to judgment as a matter of law on the issue of compliance with RPAPL 1304 by submitting evidence that it mailed the RPAPL 1304 notice to the defendant at her last known address by both certified and first-class mail. The plaintiff submitted an affidavit of a person employed by the plaintiff as a document execution specialist, who described the procedure by which the RPAPL 1304 notice was mailed to the defendant by both certified and first-class mail. The plaintiff also submitted, inter alia, a copy of an envelope addressed to the defendant bearing a certified mail 20-digit barcode, and a copy of an envelope bearing a first-class mail 10-digit barcode, along with copies of the RPAPL 1304 notices sent to the defendant (see Nationstar Mtge., LLC v LaPorte, 162 AD3d 784, 786; HSBC Bank USA, N.A. v Ozcan, 154 AD3d 822, 827). In opposition, the defendant failed to raise a triable issue of fact (see Flagstar Bank, FSB v Mendoza, 139 AD3d 898, 900). The plaintiff also established, prima facie, that it complied with section 22 of the mortgage, which required service of a specified default notice as a condition precedent to acceleration of the loan, and the defendant failed to raise a triable issue of fact in opposition (see HSBC Bank USA, N.A. v Ozcan, 154 AD3d at 827; OneWest Bank, FSB v Simpson, 148 AD3d 920, 922; Grogg v South Rd. Assoc., L.P., 74 AD3d 1021, 1022).

The plaintiff further established, prima facie, its standing to commence the action, as evidenced by its attachment of a copy of the note, endorsed in blank, to the summons and complaint at the time the action was commenced (see Nationstar Mtge., LLC v LaPorte, 162 AD3d at 785; US Bank N.A. v Coppola, 156 AD3d 934, 934; Deutsche Bank Natl. Trust Co. v Carlin, 152 AD3d 491, 492; Wells Fargo Bank, N.A. v Thomas, 150 AD3d 1312, 1313; U.S. Bank N.A. v Saravanan, 146 AD3d 1010, 1011; JPMorgan Chase Bank, N.A. v Weinberger, 142 AD3d 643, 645). In opposition, the defendant failed to raise a triable issue of fact.

The defendant does not otherwise dispute the plaintiff's entitlement to summary judgment on the complaint insofar as asserted against the defendant. Accordingly, we agree with the Supreme Court's determination to grant those branches of the plaintiff's motion which were for summary judgment on the complaint insofar as asserted against the defendant and dismissing her first, third, and fourth affirmative defenses, and for the appointment of a referee to compute the amount due to the plaintiff.

However, the Supreme Court should have denied the plaintiff's subsequent motion to confirm the referee's report and for a judgment of foreclosure and sale.

"The report of a referee should be confirmed whenever the findings are substantially supported by the record, and the referee has clearly defined the issues and resolved matters of credibility" (Flagstar Bank, F.S.B. v Konig, 153 AD3d 790, 790-791; see JNG Constr., Ltd. v Roussopoulos, 170 AD3d 1136; Thomas v Thomas, 21 AD3d 949, 949). The referee's findings and recommendations are advisory only and have no binding effect on the court, which remains the ultimate arbiter of the dispute (see Shultis v Woodstock Land Dev. Assoc., 195 AD2d 677, 678).

Here, with respect to the amount due to the plaintiff, the referee based his findings on an affidavit of Theresa Robertson, an employee of the plaintiff, who averred, based on her review of the plaintiff's business records, that the defendant defaulted by failing to make the payment due on May 1, 2010, and "all subsequent payments." However, as the defendant correctly contends, Robertson's assertions in that regard constituted inadmissible hearsay (see Hypo Holdings, Inc. v Feuer, 68 AD3d 722, 722), since the records themselves were not provided to the referee (see Bank of N.Y. Mellon v Gordon, 171 AD3d 197, 208-209; Citimortgage, Inc. v Kidd, 148 AD3d 767, 768-769). Moreover, even if the records had been provided, " [a] proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker's business practices and procedures'" (Federal Natl. Mtge. Assn. v Marlin, 168 AD3d 679, 681, quoting Citibank, N.A. v Cabrera, 130 AD3d 861, 861). Nothing in Robertson's affidavit, in which she averred that the plaintiff received the original note on May 13, 2013, indicated that the plaintiff was the maker of the records relating to the defendant's alleged initial default in May 2010 and her alleged failure to make payments for some period of time thereafter. Robertson also did not aver that the records provided by the maker were incorporated into the plaintiff's records and routinely relied upon by the plaintiff in its own business (see Bank of N.Y. Mellon v Gordon, 171 AD3d at 209-210). Therefore, the plaintiff failed to lay a proper foundation for the business records on which Robertson relied with respect to the amount due to the plaintiff. Contrary to the plaintiff's contention, under the circumstances presented, the Supreme Court's error in relying on the hearsay evidence was not harmless (see Citimortgage, Inc. v Kidd, 148 AD3d at 768-769; cf. 33-37 Farrington, LLC v Global Universal Group, Ltd., 165 AD3d 1018, 1020; Barracato v Camp Bauman Buses, 217 AD2d 677, 678).

Accordingly, we reverse the order and judgment of foreclosure and sale, deny the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale, and remit the matter to the Supreme Court, Nassau County, for a new report computing the amount due to the plaintiff in accordance herewith, followed by further proceedings in accordance with CPLR 4403 and the entry of an appropriate amended judgment thereafter.

SCHEINKMAN, P.J., COHEN, MALTESE and LASALLE, JJ., concur. ENTER:

Aprilanne Agostino

Clerk of the Court