OPINION OF THE COURT
It is ordered that this motion (No. 001) by the plaintiff for, among other things, summary judgment, caption amendment and the appointment of a referee to compute, is granted in its entirety, and it is further ordered that the proposed order submitted by the plaintiff, as modified, is signed simultaneously herewith.
This foreclosure action was commenced by filing on November 22, 2013. The matter was reassigned to this part pursuant to Administrative Order No. 27-17, dated February 28, 2017, and submitted for decision on March 3, 2017. In essence, on February 10, 2003, Elayne Morga, borrowed $132,000 from the plaintiff’s prеdecessor-in-interest and executed a promissory note and mortgage. Since January 1, 2010, this defendant has failed to pay the monthly installments due and owing. Only the defendant, Elayne Morga, has answered in this action. In her answer, defendant alleged nine affirmative defenses.
In the moving papers, plaintiff addresses its burden of proof on this summary judgment motion and refutes the affirmative defenses of the answer. With regard to compliance with RPAPL 1304, plaintiff has established its prima facie burden with the submission of the affidavit of Jacob Rudd, sworn tо on June 8, 2016, the document executive specialist employed by Nation-star Mortgage LLC (Nationstar), the servicer of the loan for the plaintiff. He explained Nationstar’s practice and procedures as follows:
“I have personal knowledge of the facts contained in this Affidavit by virtue of my position at Nation-star, my familiarity with Nationstar’s processes and based upon my review and analysis of the relevant business records and other documents of Na-tionstar referenced and attached herein. While many of Nationstar’s processes are automated, the information manually entered by Nationstar employees relating to loans on those systems is based upon personal knowledge of the information and entered into the system at or near the time the knowledge was acquired. These computerized records are created and maintained in the regular course of its business as a loan servicer and Na-tionstar relies on the records in the ordinary course to conduct its business as a loаn servicer.”
The affidavit was based upon his personal knowledge of the business records maintained in the regular course of Nation-star’s business as a loan servicer and, as he swore to, Nation-star’s reliance on the loan servicing records in the ordinary course to conduct its business as a loan servicer. He explained that the pre-action 90-day notice was mailed to defendant by regular and certified mail on December 12, 2012. He also attached to his affidavit, not only copies of the 90-day nоtice, but the required proof of filing statement to the New York State Banking Department, pursuant to RPAPL 1306, which is offered as proof to the state agency that the mailing occurred on December 12, 2012, pursuant to the step one filing requirement. Therefore, plaintiff has satisfied its prima facie burden on this summary judgment motion (see HSBC Bank USA, N.A. v Espinal,
It was thus incumbent upon the answering defendant to submit proof sufficient to raise a genuine question of fact rebutting the plaintiff’s prima facie showing or in support of the affirmative defenses asserted in her answer or otherwise available to her (see Flagstar Bank v Bellafiore,
Notably, affirmative defenses predicated upon legal conclusions that are not substantiated with allegations of fact are subject to dismissal (see CPLR 3013, 3018 [b]; Katz v Miller,
In opposition, defendant raises only three claims, an un-pleaded challenge to the capacity of the plaintiff to utilize the courts of the State of New York, standing to commence the action (first and third affirmative defenses), and lack of compliance with the provisions of RPAPL 1304 against the 90-day notice (fourth affirmative defense). Therefore, the court dismisses the second, fifth, sixth, seventh, eighth and ninth affirmаtive defenses, as abandoned.
The court rejects the challenge to the claimed lack of capacity to sue, since it is not set forth as an affirmative defense in the answer and as such, is waived pursuant to CPLR 3211 (e). It is clear in the Second Department that capacity to sue and standing are distinct legal concepts (see Wells Fargo Bank Minn., N.A. v Mastropaolo,
The court rejects the first and third affirmative defenses (standing). One of the various methods that standing may be established is by due proof that the plaintiff or its custodial agent was in possession of the note prior to the commencement of the action. The production of such proof is sufficient to establish, prima facie, the plaintiffs possession of the requisite standing to prosecute its claims for foreclosure and sale (see Aurora Loan Servs., LLC v Taylor,
Here, plaintiff also demonstrated possession of the note prior to the commencement of the action (see Hudson City Sav. Bank v Genuth,
That leaves the challenges to the RPAPL 1304 pre-action 90-day notice (fоurth affirmative defense). In seeking to decipher the challenge, as set forth in the four-page paragraph 18 of the August 24, 2016 affirmation of Ivan E. Guerrero, Esq., it appears that the focus is on the need for an affidavit of service of the 90-day notice from someone with personal knowledge. This court rejects such a contention based upon Court of Appeals and Appellate Division determinations that discuss the business records exception to the hearsay rule (see CPLR 4518).
The issue presented here, cоncerning what constitutes compliance with the 90-day notice requirement of RPAPL 1304, has been the subject of ever-growing and often confusing litigation throughout the state. Therefore, the court will take the opportunity to carefully address the complex issues presented.
The defendant relies upon case law that speaks to the need for an affidavit of service evincing proper service of the RPAPL
Legislative History
A review of the statute, as adopted in 2008 (L 2008, ch 472, § 2, eff Sept. 1, 2008), reveals no such “implicit” legislative direction. The original enactment, in part, stated in section 1, “the lender or mortgage loan servicer shall give notice to thе borrower.” In pertinent part section 2 stated,
“[s]uch notice shall be sent by the lender or mortgage loan servicer to the borrower, by registered or certified mail and also by first-class mail to the last known address of the borrower, and if different, to the residence which is the subject of the mortgage. Notice is considered given as of the date it is mailed.”
The statute has undergone three revisions since 2008, with no significant changes to the language as set forth above, except to add “an assignee” as an additionаl party who is responsible for giving the 90-day notice under section 1 and to add to section 2, as of December 20, 2016, in pertinent part, the following: “[s]uch notice shall be sent by the lender, as-signee or mortgage loan servicer in a separate envelope from any other mailing or notice.”
A review of the entire legislative bill jacket for the enactment of RPAPL 1304 in 2008, that is, Laws of 2008, chapter 472, § 2, effective September 1, 2008 (2008 NY Senate Bill S8143-A), which contains numerous letters in support or in partial opposition, reveаls not a single reference to the need or recommendation for an affidavit of service or “proof of mailing by the post office.” Repeatedly, each letter or memorandum in support simply mentions that the notice is to be sent. For example, the new section will “require a notice be sent to home
When the legislature wanted to rely upon the filing of a proof of service, it did so in the very next section of the bill, section 3. As explained by the Farley memorandum, section 3 of the bill added a new CPLR рrovision, rule 3408, requiring a court “to schedule a settlement conference within 60 days of when the proof of service of the complaint is filed with the county clerk’s office” (Senate Introducer Mem in Support, Bill Jacket, L 2008, ch 472 at 7).
In discussing the pre-foreclosure notice, the Farley memorandum notes that “this bill would require lenders and mortgage loan servicers to provide a pre-foreclosure notice to borrowers with subprime loans at least 90 days before a legal action may be commencеd against the borrower” (Senate Introducer Mem in Support, Bill Jacket, L 2008, ch 472 at 10).
The Memorandum in Support from the Real Property Law section of the New York State Bar Association notes the following:
“Lenders and loan servicers argue that they already send out several notices before commencing legal action. The pre-foreclosure notice requirement should not then impose a material burden on lenders and servicers and by directing borrowers to counseling agencies, the pre-foreclosure notice mayhelp both the borrower and the lender to reach an early resolution” (Bill Jacket, L 2008, ch 472 at 27).
No mention is made anywhere in the Bill Jacket to the “submission of the proof of mailing by the post office,” nor is mention made as to the need for an affidavit of service. In fact, no mention is made as to “service,” just “shall give notice” or “shall be sent.” There is no service requirement, as with RPAPL 1303 (“shall be delivered with the summons and complaint”). In effect, the Pappas case, eight years after the enactmеnt of RPAPL 1304, engrafts a new requirement of a need for a “proof of mailing by the post office” (
Business Records Rule
The Pappas case does acknowledge that “mailing may be proven by documents meeting the requirements of the business records exception to the rule against hearsay under CPLR 4518” (
The Second Department holding in Viviane Etienne admitted that some of its prior holdings added a requirement to a plaintiff’s prima facie burden by stating that the plaintiff failed to demonstrate the admissibility of their billing records under the business records exception to the hearsay rule, and that such “constituted an anomaly, a jurisprudential drift from this Court’s well-established precedent” (
In fact, the dissent (Miller and Hall, JJ.) found that the “affidavit failed to demonstrate that he had any personal knowledge of the plaintiff’s record-keeping procedures and the affidavit was otherwise insufficient to lay a foundation for the admission of the Attending Physician Verifications under the business records exception to the rule against hearsay” (id. at 53 [citations omitted]). The Second Department in Viviane
The Court of Appeals noted that “[p]roof evincing the mailing must be presented in admissible form, including, where it is applicable, meeting the business records exception to the hearsay rule” (
The high court acknowlеdged the need to “submit proof of mailing through evidence in admissible form” and “[s]uch proof may include the verification of treatment form and/or an affidavit from a person or entity (1) with knowledge of the claim and how it was sent to the insurer or (2) who has relied upon the forms in the performance of their business” (
Therefore, the Court of Appeals did not simply rely upon the need for an affidavit from one with personal knowledge, where third-party records are relied upon in the performance of one’s business. That outcome is not new and is based upon the reliability of the records.
No Need for Personal Knowledge
It is well settled that a loan servicer may testify as to payment defaults and other matters relevant to a foreclosing plaintiffs prima facie case on records it maintains in the regular course of business (see Pennymac Holdings, LLC v Tomanelli,
These results are predicated upon CPLR 4518 (a) which does not require a person to have personal knowledge of each of the facts asserted in the affidavit of merit put before the court as evidence of the plaintiff’s standing or its compliance with notice requirements and/or the defendant’s default in payment.
As noted by the Court of Appeals in Viviane Etienne (25 NY3d at 508), “[c]ertain affidavits and documents submitted in support of a motion for summary judgment may be deemed admissible where those documents meet the requiremеnts of the business records exception to the rule against hearsay under CPLR 4518” (citations omitted). In fact, in Citigroup v Kopelowitz (
“There is no requirement that a plaintiff in a foreclosure action rely on any particular set of business records to establish a prima facie case, so long as the plaintiff satisfies the admissibility requirements of CPLR 4518 (a), and the records themselves actually evince the facts for which they are relied upon” (id. at 1015 [citations omitted]).
The records relied upon in Citigroup v Kopelowitz, “themselves actually evinced the facts underlying the appellants’ default” (id.).
“As with other hearsay exceptions, the business records exception grew out of considerations of necessity and trustworthiness—the necessity for alternatives to permit large and small businesses to prove debts by their records of account, and the unusual degree of trustworthiness and reliability of such records owing to the fact that they were kept regularly, systematically, routinely and contemporaneously” (People v Kennedy 68 NY2d 569 , 579-580 [1986], citing 5 Wigmore, Evidence §§ 1421, 1422, 1546 [Chadbourn rev 1974], and Note, Business Records Rule: Repeated Target of Legal Reform, 36 Brooklyn L Rev 241).
“The еlement of unusual reliability is supplied by systematic checking, by regularity and continuity which produce habits of precision, by actual experience of business in relying upon them, or by a duty to make an accurate record as part of a continuing job or occupation” {id., citing McCormick, Evidence § 306 [Cleary 3d ed]).
“The essence of the business records exception to the hearsay rule is that records systematically made for the conduct of a business as a business are inherently highly trustworthy because they are routine reflections of day-to-dаy operations and because the entrant’s obligation is to have them truthful and accurate for purposes of the conduct of the enterprise” {id., citing Williams v Alexander,309 NY 283 , 286 [1955]).
These concepts constitute the foundational elements of CPLR 4518 (a), as the statute requires
“that the record be made in the regular course of business—essentially, that it reflect a routine, regularly conducted business activity, and that it be needed and relied on in the performance of functions of the business; second, that it be the regular course of such business to make the record (a double requirement of regularity)—essentially, that the record be made pursuant to established procedures for the routine, habitual, systematic making of such a record; and third, that the record be made at or about the time of the event being recorded . . . [so] that recollection be fairly accurate and the habit or routine of making the entries assured” {id. at 579-580; see also One Step Up, Ltd. v Webster Bus. Credit Corp.,87 AD3d 1 [1st Dept 2011]).
In Corsi v Town of Bedford (
“While ‘the mere filing of papers received from other entitiеs, even if they are retained in the regular course of business, is insufficient to qualify the documents as business records’ (People v Cratsley,86 NY2d 81 , 90 [1995] [internal quotation marks and citation omitted]), such records are nonetheless admissible ‘if the recipient can establish personal knowledge of the maker’s business practices and procedures, or that the records provided by the maker were incorporated into the recipient’s own records or routinely relied upon by the recipient in its business’ ” (Deutsche Bank Natl. Trust Co. v Monica,131 AD3d 737 , 739 [2015], supra [emphasis added], quoting State of New York v 158th St. & Riverside Dr. Hous. Co., Inc.,100 AD3d 1293 , 1296 [2012], supra', see also People v DiSalvo,284 AD2d 547 , 548 [2d Dept 2001] [“The dump tickets and print-out were routinely relied upon by the County in making its invoicing determinatiоns”]; Matter of Carothers v GEICO Indem. Co.,79 AD3d 864 , 864-865 [2d Dept 2010] [“although a proper foundation can be established by a recipient of records who does not have personal knowledge of the maker’s business practices and procedures, there must still be a showing that the recipient either incorporated the records into its own records or relied upon the records in its day-to-day operations”]).
Here, as stated in the affidavit of Jacob Rudd, “Nationstar relies on the [computer] records in the ordinary course to conduct its business as a loan servicer.” Therefore, plaintiff relied upon the records in its regular course of business and such reliability is key to its admissibility (see Corsi v Town of Bedford,
The records of a predecessor loan servicer or owner cannot be deemed to be “а complete outsider” to the enterprise of loan servicing, of the very same loan. Mortgage loan services are licensed and regulated under Banking Law § 590 (1) (h), (i); and (5) (d) (“Mortgage loan servicers shall engage in the business of servicing mortgage loans in conformity with the provisions of this chapter, such rules and regulations as may be promulgated by the superintendent thereunder and all applicable federal laws and the rules and regulations promulgated thereunder”).
The state regulations put in place as рart of the Mortgage Lending Reform Law of 2008 (L 2008, ch 472), set forth at 3 NYCRR part 419, addresses the business practices of a mortgage loan servicer, the obligations of servicers in their communications, transactions and general dealings with borrowers, and imposes certain recordkeeping and reporting requirements in order to enable the Superintendent of Finan
As recognized by the case law which authorizes the records of a predecessor-in-interest lender or servicer to be used as to matters relevant to a foreclosing plaintiffs prima facie case, the predecessor-in-interest was acting under a business duty to communicate accurately the assurance of accuracy that underlies the business records exception. Here, the records relied upon by the subsequent servicer in the course of its business possess the indicia of reliability or inherent trustworthiness necessary to allow them into evidence under the business records exception to the hearsay rule, particularly where, as here, “the records themselves actually evince the facts for which they are relied upon” (Citigroup v Kopelowitz,
As noted in People v Kennedy (
In light of all of the above, it appears that portions of the Pappas holding, contrary to the Memorandum in Support from the Real Property Law section of the New York State Bar Association which addressed the 2008 legislation that enacted RPAPL 1304, do “impose a material burden on lenders and ser-vicers” (Bill Jacket, L 2008, ch 472 at 27) and “constitute[d] an anomaly, a jurisprudential drift from this Court’s well-established precedent” (Viviane Etienne,
It is the court which must determine the threshold requirement for admissibility (see People v Kennedy, 68 NY2d at 576). Thereforе, this court holds that the records relied upon, in the affidavit of Jacob Rudd, are admissible pursuant to the business records rule. Rejected as unmeritorious is defense
In such a case, a presumption of receipt arises (see Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co.,
Plaintiff has demonstrated that it strictly complied with the notice requirements of RPAPL 1304 (see 40 BP, LLC v Katatikarn; JP Morgan Chase Bank, N.A. v Schott,
Therefore, the court grants plaintiff’s motion in its entirety and simultaneously signs the proposed order, as modified.
Notes
. When the appellate court did review the legislative history of RPAPL 1304 in Aurora Loan Servs., LLC v Weisblum (
. Two relevant principles of statutory construction must be considered. The first of such principles is that “ ‘a court cannot amend a statute by inserting words that are not there, nor will a court read into a statute a provision which the Legislature did not see fit to enact’ ” (Matter of Chemical Specialties Mfrs. Assn. v Jorling,
. This court does not dispute the fact that an affidavit of service or even “proof of mailing by the post office” is an appropriate means of establishing proof of mailing, just that such is not legislatively mandated by RPAPL 1304.
. In fact, in 40 BP, LLC v Katatikam (