HSBC Bank USA, N.A. v. Mohassib

mortgage encumbering certain real property located in Brooklyn (hereinafter the property). In March 2013, HSBC Mortgage assigned the mortgage to HSBC Bank USA, N.A. (hereinafter HSBC Bank). Thereafter, in September 2013, HSBC Mortgage moved, inter alia, for summary judgment on the complaint insofar as asserted against the borrowers and for an order of reference. In an order dated October 14, 2013, the Supreme Court granted the motion, referred the matter to a referee to compute the amount due on a note, and amended the caption to substitute HSBC Bank as the plaintiff. In January 2014, the borrowers conveyed title to the property to Hubbard. In April 2016, HSBC Bank moved to confirm a referee's report and for a judgment of foreclosure and sale. Hubbard moved, among other things, for leave to intervene in this action. In May 2017, the Supreme Court granted that branch of Hubbard's motion. In an order dated June 21, 2017, the court denied HSBC Bank's motion. In February 2018, the mortgage was assigned to Selene Finance LP (hereinafter Selene). Subsequently, HSBC Bank moved to confirm the referee's report, for a judgment of foreclosure and sale, and for leave to amend the caption to substitute Selene as the plaintiff. In an order dated January 6, 2020, the court, inter alia, denied those branches of HSBC Bank's motion which were for a judgment of foreclosure and sale and for leave to amend the caption to substitute Selene as the plaintiff, without prejudice to renewal upon proper papers. In March 2021, Selene assigned the mortgage to SLS. In February 2024, SLS moved to confirm the referee's report, for a judgment of foreclosure and sale, and for leave to amend the caption to substitute itself as the plaintiff. Hubbard opposed the motion and made an application to toll the accrual of interest on the mortgage loan. In an order dated May 22, 2024, the Supreme Court granted SLS's motion and, in effect, denied Hubbard's application. In an order and judgment of foreclosure and sale also dated May 22, 2024, the court granted the same relief to SLS, confirmed the referee's report, directed the sale of the property, and amended the caption to substitute SLS as the plaintiff. Hubbard appeals.

The Supreme Court providently exercised its discretion in granting that branch of SLS's motion which was for leave to amend the caption to substitute itself as the plaintiff. Leave to amend a caption to substitute an assignee for the plaintiff may properly be granted upon evidence that the mortgage and underlying debt were assigned to the assignee (see CPLR 1018; Austin 26 Dental Group, PLLC v Sino Northeast Metals [U.S.A.], Inc., 230 AD3d 545, 548). Here, SLS submitted an assignment of mortgage dated March 25, 2021, pursuant to which Selene assigned the mortgage, together with the note, to SLS (see Austin 26 Dental Group, PLLC v Sino Northeast Metals [U.S.A.], Inc., 230 AD3d at 548; Brighton BK, LLC v Kurbatsky, 131 AD3d 1000, 1001).

Contrary to Hubbard's contention, the referee's failure to hold a hearing on notice did not warrant the denial of those branches of SLS's motion which were to confirm the referee's report and for a judgment of foreclosure and sale. As long as a defendant is not prejudiced by the inability to submit evidence directly to the referee, a referee's failure to notify a defendant and hold a hearing is not, by itself, a basis to reverse a judgment of foreclosure and sale and remit a matter for a hearing and a new determination of amounts owed (see HSBC Bank, USA, N.A. v Santella, 243 AD3d 897, [*2]899; Bank of Am., N.A. v ABC Realty Holdings, Inc., 241 AD3d 615, 616). Here, Hubbard was not prejudiced by the referee's failure to hold a hearing since, in opposing SLS's motion, it had an opportunity to raise questions and submit evidence directly to the Supreme Court (see Bank of Am., N.A. v ABC Realty Holdings, Inc., 241 AD3d at 616-617; LFC Acquisition 3, LLC v Encino Homes Corp., 227 AD3d 1060, 1062).

Nevertheless, the Supreme Court should have denied those branches of SLS's motion which were 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 (see HSBC Bank, USA, N.A. v Santella, 243 AD3d at 899; Citimortgage, Inc. v Hassanin, 242 AD3d 1169, 1171). Here, the referee computed the amount due to SLS based upon an affidavit of an employee of SLS and certain business records. In the affidavit, the affiant set forth the amounts due and owing on the mortgage loan based upon his review of the records. Contrary to SLS's contention, a review of records maintained in the normal course of business does not vest an affiant with personal knowledge (see Nationstar Mtge., LLC v Lewis, 238 AD3d 777, 778). The affiant also failed to establish a proper foundation for the admission of all of the business records that he relied upon (see CPLR 4518[a]). A portion of the records attached to the affidavit indicated that they were created by entities other than SLS. As a general rule, the mere filing of papers received from other entities, even if they are retained in the regular course of business, is insufficient to qualify the documents as business records (see PS Funding, Inc. v 1641 Park Place, LLC, 239 AD3d 681, 682). Such records may be admitted into evidence if the recipient can establish personal knowledge of the maker's business practices and procedures or establish that the records provided by the maker were incorporated into the recipient's own records and routinely relied upon by the recipient in its own business (see U.S. Bank N.A. v Winnie Realty Group, LLC, 237 AD3d 871, 873; Bank of N.Y. Mellon v Gordon, 171 AD3d 197, 209). Since, here, the affiant failed to attest to his personal knowledge of the record-keeping practices of the other entities or failed to assert that the documents that he attached to his affidavit were incorporated into SLS's records and routinely relied upon by SLS in its business, the affiant's affidavit did not provide a proper foundation for the admission of those business records (see LNV Corp. v Almberg, 246 AD3d 896, 900-901). Therefore, the referee's report was not substantially supported by the record (see Nationstar Mtge., LLC v Lewis, 238 AD3d at 779). Moreover, the Supreme Court improvidently exercised its discretion in, in effect, denying Hubbard's application to toll the accrual of interest on the mortgage loan. A foreclosure action is equitable in nature and triggers the equitable powers of the court (see HSBC Bank, USA, N.A. v Santella, 243 AD3d at 900). In an action of an equitable nature, the recovery of interest is within the court's discretion (see CPLR 5001[a]). The exercise of that discretion will be governed by the particular facts in each case, including any wrongful conduct by either party (see HSBC Bank, USA, N.A. v Santella, 243 AD3d at 900). Further, a tolling and cancellation of interest also may be warranted where there is an unexplained delay in the prosecution of a mortgage foreclosure action (see id.; Wells Fargo Bank, N.A. v Doran, 244 AD3d 1275, 1278), even when the unexplained delay is caused by a plaintiff's predecessor in interest (see Wells Fargo Bank, N.A. v Daniel, 231 AD3d 899, 901-902). Here, SLS failed to explain periods of unreasonable delay in prosecuting this action. Under the circumstances of this case, we exercise our discretion to toll the accrual of interest on the mortgage loan for the periods from March 2012 to March 2013, March 2015 to April 2016, and January 2023 to February 2024 (see Wells Fargo Bank, N.A. v Doran, 244 AD3d at 1278).

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Hubbard's remaining contention is improperly raised for the first time on appeal (see U.S. Bank N.A. v 18 Wilkshire Circle, LLC, 233 AD3d 910, 913).

IANNACCI, J.P., WOOTEN, VENTURA and OTTLEY, JJ., concur.

ENTER:

Darrell M. Joseph Clerk of the Court

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