199 A.D.3d 48
N.Y. App. Div.2021Background:
- In 2006 Wu and Sing executed a mortgage and note (original lender: Approved Funding Corp.); Citibank acquired the note after alleged default.
- Citibank commenced a 2016 judicial foreclosure in Queens County; the complaint did not seek a deficiency judgment.
- Defendants answered, asserting standing and licensing defenses, including that Citibank failed to allege it was licensed as a "debt collection agency" under NYC Admin. Code § 20-490.
- Citibank moved for summary judgment, to strike the answer, and for an order of reference; defendants cross-moved to dismiss under CPLR 3211(a)(7) (failure to plead licensing) and for summary judgment on standing, RPAPL 1303 noncompliance, and lack of default.
- Supreme Court granted plaintiff relief and appointed a referee; the Appellate Division addressed (1) whether the city licensing statute applied to a foreclosing noteholder and (2) whether Citibank met its prima facie evidentiary burdens for summary judgment.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff must be licensed under NYC Admin. Code §20‑490 to prosecute a judicial mortgage foreclosure | Licensing statute does not apply to a noteholder enforcing its security interest in land | Foreclosing post‑acquisition noteholder is a "debt collection agency" or debt buyer and must be licensed | Court: No license required; foreclosure to enforce a lien is not the regulated "debt collection agency" activity the Council intended |
| Whether complaint should be dismissed under CPLR 3211(a)(7) for failure to allege licensing | Complaint need not plead a debt‑collection license; dismissal not warranted on that ground | Failure to plead licensing requires dismissal | Court: Complaint not subject to dismissal for failure to allege a license |
| Whether plaintiff met prima facie proof for summary judgment (standing, RPAPL 1303 compliance, default) | Attached endorsed note establishes standing; affidavits of service satisfy RPAPL 1303; servicer affidavit shows default | Defendants dispute standing, RPAPL 1303 service, and default | Court: Standing and RPAPL 1303 satisfied prima facie; plaintiff failed to prove default—servicer affidavit relied on unidentified business records and lacked admissible proof, so summary judgment should have been denied |
Key Cases Cited
- Jamaica Sav. Bank v. M.S. Inv. Co., 274 N.Y. 215 (holds foreclosure enforces lien, not a personal action for debt)
- Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029 (FDCPA interpretation: security‑interest enforcement is distinct from ordinary debt collection)
- Eric M. Berman, P.C. v. City of New York, 25 N.Y.3d 684 (discusses NYC licensing amendment expanding definition to include debt buyers)
- Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (interpreting federal debt‑collector definition re: purchasers of debt)
- U.S. Bank N.A. v. Rowe, 194 A.D.3d 978 (endorsed note attached to pleading supports prima facie standing)
- HSBC Bank USA, N.A. v. Bhatti, 186 A.D.3d 817 (plaintiff must submit admissible evidence of default to meet prima facie burden)
- Federal Natl. Mtge. Assn. v. Brottman, 173 A.D.3d 1139 (loan‑servicer affidavit relying on unidentified records is inadmissible hearsay and insufficient)