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Wells Fargo Bank v. Yesmin
Factual and Procedural Background
The plaintiff, Wells Fargo Bank, N.A., commenced a mortgage foreclosure action against Hasina Yesmin and others. The plaintiff moved for summary judgment against the defendant, to strike her answer, and to appoint a referee to compute the amount due. This motion was granted. Subsequently, the plaintiff moved to confirm the referee's report and for a judgment of foreclosure and sale. The defendant opposed, arguing that she had not been served notice of a computation hearing and that the referee's report lacked admissible evidence. The Supreme Court of Queens County granted the plaintiff's motion, confirmed the referee's report, and entered a judgment of foreclosure and sale directing the sale of the property. The defendant appealed from this judgment.
Legal Issues Presented
- Whether the referee's report should be confirmed when it is based on inadmissible hearsay evidence lacking attached business records.
- Whether the computation of the amount due by the referee was proper without holding a hearing on notice to the defendant pursuant to CPLR 4313.
- Whether the striking of the defendant's answer constituted a waiver of her right to a hearing on the amount due.
Arguments of the Parties
Appellant's Arguments
- No notice of a computation hearing was served upon the defendant.
- The referee's report was unsupported by admissible evidence because the affidavit used did not include the underlying business records.
Respondent's Arguments
- The plaintiff contended that no hearing was required to confirm the referee's report due to the striking of the defendant's answer.
- The plaintiff argued that the referee's findings were sufficient to confirm the report and enter judgment of foreclosure and sale.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| HSBC Bank USA, N.A. v Cherestal, 178 AD3d 680, 682 | Referee's report confirmation standard: findings must be substantially supported and issues clearly defined. | Used to establish the general standard for confirming a referee's report. |
| U.S. Bank N.A. v Sheth, 177 AD3d 1018, 1020 | Same standard for confirmation of referee's report. | Supported the standard that referee’s report must be substantially supported by the record. |
| PennyMac Corp. v Khan, 178 AD3d 1064, 1066 | Proper foundation for admission of business records by affidavit of loan servicer’s employee. | Distinguished because in this case the affidavit lacked attached business records. |
| Nationstar Mtge. LLC v Durane-Bolivard, 175 AD3d 1308, 1311 | Hearsay rule prohibits reliance on unsupported assertions without underlying business records. | Court held that the referee’s report was improperly confirmed based on inadmissible hearsay. |
| Bank of N.Y. Mellon v Gordon, 171 AD3d 197, 208-209 | Requirement for admissible evidence to support referee’s findings. | Supported the court’s rejection of the referee’s report due to inadmissible evidence. |
| Citimortgage, Inc. v Kidd, 148 AD3d 767, 768-769 | Hearsay inadmissibility in referee’s report without business records. | Reinforced the inadmissibility of hearsay evidence in this context. |
| CPLR 4313; Excel Capital Group Corp. v 225 Ross St. Realty, Inc., 165 AD3d 1233, 1236 | Requirement of notice for hearings on computation of amount due. | Court held defendant was entitled to notice before computation hearing. |
| Aurora Loan Servs., LLC v Taylor, 114 AD3d 627, 629; affd 25 NY3d 355 | Right to notice and hearing before computation of amount due. | Applied to affirm defendant’s entitlement to notice and hearing. |
| 243 W 98th Condominium v Shapiro, 12 AD3d 591, 592 | Notice and hearing requirements for referees computing amounts due. | Further supported requirement of notice and hearing. |
| CPLR 4311; Shultis v Woodstock Land Dev. Assoc., 195 AD2d 677, 678 | Scope of referee’s powers and duties; requirement to comply with CPLR article 43 procedures including notice and hearing. | Court emphasized that absent specific order language, referee must comply with notice and hearing requirements. |
Court's Reasoning and Analysis
The court analyzed whether the referee's report was properly confirmed. It noted that a referee's report should be confirmed if findings are substantially supported and credibility issues resolved. However, the court found that the affidavit used to support the report was deficient because it did not include the underlying business records, rendering the assertions inadmissible hearsay. Consequently, the court held that the referee's report could not be confirmed on that basis.
Additionally, the court examined the procedural requirements for computing the amount due. It found that the referee should not have computed the amount without holding a hearing upon notice to the defendant, as required by CPLR 4313 and related precedent. The plaintiff failed to show any order language waiving the defendant's right to a hearing, and the striking of the defendant's answer did not constitute a waiver of this right. Therefore, the defendant was entitled to notice and a hearing before the computation.
Holding and Implications
The court reversed the 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 modified the prior order accordingly. The direct effect is that the foreclosure and sale judgment is vacated, requiring further proceedings consistent with proper evidentiary and procedural safeguards. No new precedent was established beyond the application of existing standards for admissibility of evidence and procedural rights to notice and hearing in foreclosure proceedings.
REINALDO E. RIVERA, J.P.
LEONARD B. AUSTIN SYLVIA O. HINDS-RADIX LINDA CHRISTOPHER, JJ. (Index No. 21406/09)
Biolsi Law Group, P.C., New York, NY (Steven Alexander Biolsi of counsel), for appellant.
Shapiro, DiCaro & Barak, LLC, Rochester, NY (Austin T. Shufelt and Alex Cameron of counsel), for respondent.
DECISION & ORDER
In an action to foreclose a mortgage, the defendant Hasina Yesmin appeals from a judgment of foreclosure and sale of the Supreme Court, Queens County (Kevin J. Kerrigan, J.), entered February 21, 2017. The judgment of foreclosure and sale, upon an order of the same court entered October 3, 2016, granting the plaintiff's motion to confirm a referee's report and for a judgment of foreclosure and sale, inter alia, confirmed the referee's report and directed the sale of the subject property.
ORDERED that the judgment of foreclosure and sale is reversed, on the law, with costs, those branches of the plaintiff's motion which were to confirm the referee's report and for a judgment of foreclosure and sale are denied, and the order entered October 3, 2016, is modified accordingly.
The plaintiff commenced this action to foreclose a mortgage against, among others, the defendant Hasina Yesmin (hereinafter the defendant). The plaintiff moved, inter alia, for summary judgment on the complaint insofar as asserted against the defendant, to strike the defendant's answer, and to appoint a referee to compute the amount due, and that motion was granted. Thereafter, the plaintiff moved to confirm the referee's report and for a judgment of foreclosure and sale. The defendant opposed the motion, arguing, among other things, that no notice of a computation hearing had been served upon her, and that the referee's report was not supported by admissible evidence. The Supreme Court granted the plaintiff's motion and entered a judgment of foreclosure and sale which, inter alia, confirmed the referee's report and directed the sale of the subject property. The defendant appeals from the 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" (HSBC Bank USA, N.A. v Cherestal, 178 AD3d 680, 682 [internal quotation marks omitted]; see U.S. Bank N.A. v Sheth, 177 AD3d 1018, 1020). Here, with respect to the amount due to the plaintiff, the referee based his findings on the affidavit of Nicholas J. Raab, an employee of Specialized Loan Servicing, LLC, the plaintiff's loan servicing agent for the subject loan. While Raab provided a proper foundation for the admission of business records made by a prior servicer (cf. PennyMac Corp. v Khan, 178 AD3d 1064, 1066), he failed to attach the business records themselves to his affidavit. Accordingly, Raab's assertions regarding the date of the defendant's default in making her mortgage payments, the total sum due to the plaintiff, which included the amount of accrued interest calculated from the date of default, and amounts purportedly paid in an escrow advance and for property preservation, without the business records themselves, constituted inadmissible hearsay (see Nationstar Mtge., LLC v Durane-Bolivard, 175 AD3d 1308, 1311; Bank of N.Y. Mellon v Gordon, 171 AD3d 197, 208-209; Citimortgage, Inc. v Kidd, 148 AD3d 767, 768-769). The Supreme Court should not have relied upon such hearsay to confirm the referee's report (see Nationstar Mtge., LLC v Durane-Bolivard, 175 AD3d at 1311).
Further, the referee should not have computed the amount due to the plaintiff without holding a hearing on notice to the defendant (see CPLR 4313; Excel Capital Group Corp. v 225 Ross St. Realty, Inc., 165 AD3d 1233, 1236; Aurora Loan Servs., LLC v Taylor, 114 AD3d 627, 629, affd 25 NY3d 355; 243 W. 98th Condominium v Shapiro, 12 AD3d 591, 592). "While [the] Supreme Court has the authority to engage a Referee to compute and report the amount due under a mortgage (see, RPAPL 1321[1]), and can, in its order of reference, define the scope of the reference and delineate the Referee's powers and duties thereunder (CPLR 4311), absent any specified restrictions the Referee has those powers and duties delineated in CPLR article 43 and also must comply with the procedures specified therein (see, Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 4311, at 364). One of the specified procedures is the conducting of a hearing (CPLR 4320[a]), upon notice (CPLR 4313)" (Shultis v Woodstock Land Dev. Assoc., 195 AD2d 677, 678). Contrary to the plaintiff's contention, there was no language in the order of reference indicating that a hearing was unnecessary. Nor has the plaintiff cited any case law or statute in support of its theory that, upon the striking of the defendant's answer, the defendant's right to a hearing was waived, as it would be for a defendant who had defaulted in answering a complaint. Accordingly, the defendant was entitled to notice pursuant to CPLR 4313 (see Aurora Loan Servs., LLC v Taylor, 114 AD3d at 629).
RIVERA, J.P., AUSTIN, HINDS-RADIX and CHRISTOPHER, JJ., concur. ENTER:
Aprilanne Agostino
Clerk of the Court
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