188 A.D.3d 770
N.Y. App. Div.2020Background
- Plaintiff obtained a judgment of foreclosure and sale against defendant Christopher Rolf; referee calculated total due at $2,286,777.52 and a deficiency based on the auction price.
- Property sold at public auction on July 7, 2017 for $1,223,794.32; referee initially computed a deficiency of $1,062,983.20 (difference from sale price).
- Plaintiff moved to confirm the referee’s report of sale and for leave to enter a deficiency judgment (seeking roughly $970,016.80 plus interest); defendant opposed, arguing improper service on his counsel.
- Supreme Court (Suffolk County) granted the branches to confirm the sale and for leave to enter a deficiency judgment, but limited the deficiency to $316,777.52 (difference between total due and fair market value); defendant appealed.
- Defendant also argued that the plaintiff’s filing and service of IRS Form 1099‑C (Cancellation of Debt) (reporting ~$372,030.24) waived or estopped the bank from seeking a deficiency judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether notice of the motion to confirm the referee's report had to be served on defendant's counsel | RPAPL 1371(2) permits service on either the party or the party's attorney; plaintiff served the party as authorized | Motion was a nullity because papers were not served on defendant's counsel per CPLR 2103(b) | Court: RPAPL 1371(2) controls; service on the party was sufficient — no CPLR 2103(b) requirement blocked the motion |
| Whether service by affixation and mail under CPLR 308(4) satisfied the personal‑service requirement of RPAPL 1371(2) | Process server made multiple personal attempts, affixed papers to door, mailed copy — constituted prima facie due diligence and substantial compliance | Defendant denied receiving buzzer attempts, argued server affidavit unreliable and defendant’s disability made intercom contact impossible | Court: Affidavit showed four attempts and verification; defendant received partial papers; prima facie proof and timely actual notice satisfied due diligence and CPLR 308(4) — no hearing required |
| Whether evidence of alleged process‑server misconduct required a hearing to test validity of service | Plaintiff relied on process‑server affidavit and defendant’s partial receipt of papers to show substantial compliance | Defendant pointed to server misconduct allegations to rebut affidavit and challenge service | Court: Allegations insufficient to overcome presumption from server's affidavit; substantial compliance established; no hearing necessary |
| Whether filing Form 1099‑C (Cancellation of Debt) barred or equitably estopped plaintiff from obtaining a deficiency judgment | Filing is a reporting obligation under the IRC and does not effectuate debt discharge or bar collection; plaintiff’s Form 1099‑C reflected an IRS reporting event tied to foreclosure sale | Filing constitutes prima facie evidence of intent to discharge debt and creates tax consequences that should estop creditor from later collecting | Court: Form 1099‑C is a reporting mechanism, not proof of discharge; creditor may still seek deficiency; defendant did not show he reported the amount or suffered inequitable harm — estoppel fails |
Key Cases Cited
- Citibank v. Demadet, 243 A.D.2d 532 (A.D.2d) (CPLR 308(4) is permissible personal service method for RPAPL 1371(2) notices)
- Aurora Loan Servs., LLC v. Gaines, 104 A.D.3d 885 (A.D.2d) (standard for showing due diligence under CPLR 308(4))
- Bank of Am., N.A. v. Batson, 176 A.D.3d 771 (A.D.2d) (on case‑by‑case application of CPLR 308(4) and due diligence)
- Taron Partners, LLC v. McCormick, 173 A.D.3d 927 (A.D.2d) (process server affidavit can establish prima facie due diligence and proper affixation/mail)
- Deutsche Bank Natl. Trust Co. v. Yurowitz, 181 A.D.3d 646 (A.D.2d) (process‑server affidavit creates presumption of proper service; defendant must rebut with specific sworn denial)
- Sarasota, Inc. v. Homestead Acres at Greenport, 249 A.D.2d 290 (A.D.2d) (timely actual notice and substantial compliance with RPAPL 1371(2) suffice)
- F.D.I.C. v. Cashion, 720 F.3d 169 (4th Cir.) (Form 1099‑C is a reporting obligation and does not alone effectuate discharge or preclude later collection)