HSBC Bank USA, National Ass'n v. Ozcan
64 N.Y.S.3d 38
N.Y. App. Div.
2017
Check Treatment

HSBC Bank USA, National Association, as trustee for Nomura Asset-Backed Certificate Series, 2006-AF1, respondent, v Hasan Ozcan, also known as H. Ozcan, appellant, et al., defendants.

2015-06613

Appellate Division, Second Department

October 18, 2017

2017 NY Slip Op 07242

REINALDO E. RIVERA, J.P.; CHERYL E. CHAMBERS; JOSEPH J. MALTESE; BETSY BARROS, JJ.

Index No. 7131/12

Decided on October 18, 2017

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Harvey Sorid, Uniondale, NY (Melissa Montenes of counsel), for appellant.

Hogan Lovells US LLP, New York, NY (David Dunn, Chava Brandriss, and Suzanne Novak of counsel), for respondent.

DECISION & ORDER

In an action to foreclose a mortgage, the defendant Hasan Ozcan, also known as H. Ozcan, appeals, as limited by his brief, from so much of an order of the Supreme Court, Nassau County (Adams, J.), entered April 10, 2015, as granted those branches of the plaintiff‘s motion which were for summary judgment on the complaint insofar as asserted against him and for an order of reference, and denied his cross motion for summary judgment dismissing the complaint insofar as asserted against him.

ORDERED that the order is affirmed insofar as appealed from, with costs.

In June 2006, the defendant Hasan Ozcan, also known as H. Ozcan (hereinafter the defendant), purchased real property in Inwood, Nassau County. At or near the same time, the defendant executed a note in the sum of $497,000 in favor of Approved Funding Corp. (hereinafter the original lender), which was secured by a mortgage on the property. Subsequently, by an assignment of mortgage dated January 17, 2012, the mortgage was assigned to the plaintiff. In June 2012, the plaintiff commenced this action against the defendant, among others, to foreclose the mortgage. The plaintiff served the summons, complaint, and notice pursuant to RPAPL 1303 upon the defendant at his actual place of residence in Cedarhurst, Nassau County, which was listed on the deed transferring the Inwood property to him. The plaintiff also served the summons, complaint, and notice pursuant to RPAPL 1303 upon six individually named tenants, who resided in apartments at the Inwood property.

In July 2012, the defendant served an answer with affirmative defenses and a counterclaim. In an order dated December 4, 2012, the Supreme Court directed the plaintiff to proceed with the foreclosure action after the defendant failed to appear at a scheduled residential foreclosure conference.

Thereafter, the plaintiff moved, inter alia, for summary judgment on the complaint insofar as asserted against the defendant and for an order of reference, and the defendant cross-moved for summary judgment dismissing the complaint insofar as asserted against him. The Supreme Court granted the plaintiff‘s motion and denied the defendant‘s cross motion. The defendant appeals.

Where, as here, the issue of standing is raised by a defendant, a plaintiff must prove its standing in order to be entitled to relief (see ; ). A plaintiff has standing where it is either the holder or assignee of the underlying note at the time the action is commenced (see ; ; ). “Either a written assignment of the underlying note or the physical delivery of the note . . . is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident” (; see ; ).

Here, the plaintiff alleged in the complaint that it was the current holder of the note, and that the note was endorsed by the original lender and delivered to the plaintiff prior to the commencement of the action. In moving for summary judgment, the plaintiff established, prima facie, that it had standing by demonstrating that it had physical possession of the note prior to the commencement of the action, as evidenced by its attachment of the note, containing an endorsement in blank executed by the original lender, to the summons and complaint when the action was commenced (see ; ; ). Contrary to the defendant‘s contention, the plaintiff was not required to provide factual details of the delivery to establish how it came into possession of the note (see ; compare , with ). In opposition, the defendant failed to raise a triable issue of fact as to whether the plaintiff had standing.

Further, contrary to the view of our dissenting colleague, the Supreme Court properly determined that the plaintiff established, prima facie, its compliance with RPAPL 1304. At the outset, the plaintiff contends that RPAPL 1304 is inapplicable to this case insofar as the subject property was not the defendant‘s principal dwelling and, therefore, the mortgage loan was not a “home loan” for purposes of the statute.

The defendant argues that this issue was not raised in the Supreme Court, and has been improperly raised for the first time on appeal. However, the specific contention that this mortgage loan was not a “home loan” for purposes of RPAPL 1304 may be reached because it involves a question of law that is apparent on the face of this record and could not have been avoided by the court if it had been brought to its attention (see ; ; see also ). Our dissenting colleague relies upon ) to conclude that this specific contention is not reviewable on this appeal. However, is distinguishable because, in that case, the defendant‘s entire contention that the plaintiff failed to demonstrate its compliance with the notice requirements of RPAPL 1304 was raised for the first time on appeal (see ). Here, the issue of the plaintiff‘s compliance with RPAPL 1304 was squarely before the court.

Turning to the merits of the “home loan” issue, the record shows that the subject property is a multi-unit apartment building with several tenants, the defendant did not reside at the property at the time he signed the mortgage or at the time the action was commenced, and the deed transferring the property to the defendant was a commercial property deed. The defendant does not refute that this was a commercial property and that he lived elsewhere. Thus, the record reflects that this was not a “home loan” subject to the notice requirements of RPAPL 1304 (see RPAPL 1304[5]; cf. ; ; ).

Furthermore, even if the subject loan was a “home loan” within the meaning of RPAPL 1304, the plaintiff submitted evidence sufficient to establish, prima facie, that it mailed the RPAPL 1304 notice in compliance with the statute.

In 2006, the Legislature passed the first provisions of the Home Equity Theft Prevention Act (Real Property Law § 265-a; hereinafter HETPA), which included various amendments and additions to the Real Property Actions and Proceedings Law (see generally ). RPAPL 1304, entitled “Required prior notices,” was first added in 2008 as a legislative response to the subprime lending crisis and the epidemic of foreclosures at that time (L 2008, ch 472, § 2). RPAPL 1304(1) provides, in pertinent part, that at least 90 days before a lender or a mortgage loan servicer commences a legal action against the borrower, the lender or mortgage loan servicer shall give notice to the borrower. The statute sets forth the requirements for the contents of the notice (see RPAPL 1304[1]), and provides that the notice must be sent to the borrower by registered or certified mail, and by first-class mail, to the last known address of the borrower and, if different, the residence that is the subject of the mortgage (see RPAPL 1304[2]).

Although not jurisdictional, proper service of RPAPL 1304 notice on the borrower or borrowers is a condition precedent to the commencement of a residential foreclosure action, and the plaintiff has the burden of establishing satisfaction of this condition (see ; ; ; ; ). Although an affidavit of service may be a preferable method for a plaintiff to prove that it mailed the RPAPL 1304 notices in accordance with the statute (cf. ), that is not the only method by which a residential foreclosure plaintiff may establish that it properly mailed the required notice (see e.g. ). As this Court has previously observed, “[t]here 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” (; cf. ). Thus, mailing may be proved by any number of documents meeting the requirements of the business records exception to the hearsay rule under CPLR 4518 (see ; ).

Here, in support of its motion for summary judgment, the plaintiff submitted an affidavit from Andrea Kruse, a vice president for loan documentation at “Wells Fargo Bank, N.A. d/b/a America‘s Servicing Company” (hereinafter Wells Fargo), the loan servicer for the plaintiff. Kruse explained that Wells Fargo had the authority to service the loan and to act as document custodian for the plaintiff pursuant to a pooling and servicing agreement dated October 1, 2006 (hereinafter the PSA), excerpts of which were attached to her affidavit. Kruse stated that, in addition to being “fully familiar with the facts and circumstances of [this] foreclosure action,” she “reviewed the books and records contemporaneously created, and regularly maintained and utilized by Wells Fargo in the ordinary course of its business as servicer and custodian for the [plaintiff] pursuant to the PSA, and for this loan in particular,” and that the regular practice of Wells Fargo was to “make and maintain such records, and to rely upon them in the course of its business as servicer and custodian for the [plaintiff].” Kruse further stated, “I make this affidavit based upon my personal knowledge and review of these regularly made and maintained business records.”

After reciting the details of the defendant‘s default in his mortgage payments, Kruse stated that, while acting as the plaintiff‘s loan servicer, Wells Fargo mailed a notice of default to the defendant at the subject property in Inwood and his residence in Cedarhurst. Similarly, on October 16, 2011, Wells Fargo mailed the defendant a 90-day notice pursuant to RPAPL 1304 at both the Inwood property and the defendant‘s residence in Cedarhurst, “by both certified and regular mail.” Kruse explained that “[p]ursuant to Wells Fargo‘s regular practice at the time, the copy with the twenty-digit barcode was mailed to Defendants by certified mail, and the copy with the ten-digit barcode was mailed to Defendants by first-class mail.” She further confirmed that the plaintiff filed the RPAPL 1304 notices with the superintendent of banks within three business days of mailing them, as required by RPAPL 1306. Attached to Kruse‘s affidavit were copies of the 90-day notices dated October 16, 2011, which were addressed to the defendant at the Inwood property and at his actual residence in Cedarhurst, as well as the “Proof of Filing Statement” from the New York State Banking Department (later consolidated with the New York State Insurance Department to form the New York State Department of Financial Services).

Contrary to the view of our dissenting colleague, we find that the plaintiff‘s submissions demonstrated, prima facie, that it complied with the mailing requirements of RPAPL 1304 (see ; ; ; ; see also ; cf. ), and the defendant failed to raise a triable issue of fact regarding the plaintiff‘s compliance with the notice requirements of RPAPL 1304.

The plaintiff also established, prima facie, that it complied with section 22 of the mortgage, which required service of a specified default notice as a condition precedent to acceleration of the loan, and the defendant failed to raise a triable issue of fact in opposition (cf. ; ).

Further, contrary to the defendant‘s contention, the plaintiff established, prima facie, that it provided notice in compliance with RPAPL 1303 by submitting the process server‘s affidavit of service on the defendant, in which the process server stated that he served the summons and complaint, along with a “1303 NOTICE - Help for Homeowners in Foreclosure in bold fourteen-point type and printed on colored paper, and the title of the notice printed in twenty-point type in compliance with RPAPL Sect 1303” (see RPAPL 1303; ; cf. ). In opposition, the defendant failed to raise a triable issue of fact (cf. ).

We note that, in addition to disagreeing with our determination that the plaintiff demonstrated its compliance with the notice requirements of RPAPL 1304, our dissenting colleague concludes that the defendant, on his cross motion, established his prima facie entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against him by submitting his own affidavit denying receipt of the RPAPL 1304 notice. However, the defendant failed to do so because his mere denial of receipt was insufficient to establish his prima facie entitlement to judgment as a matter of law (see ; cf. ; ; ).

Accordingly, the Supreme Court properly granted those branches of the plaintiff‘s motion which were for summary judgment on the complaint insofar as asserted against the defendant and for an order of reference and denied the defendant‘s cross motion.

RIVERA, J.P., CHAMBERS, and MALTESE, JJ., concur.

BARROS, J., dissents, and votes to reverse the order insofar as appealed from, on the law, with costs, deny those branches of the plaintiff‘s motion which were for summary judgment on the complaint insofar as asserted against the defendant Hasan Ozcan, also known as H. Ozcan, and grant that defendant‘s cross motion for summary judgment dismissing the complaint insofar as asserted against him, with the following memorandum:

The plaintiff improperly raises for the first time on appeal its contention that compliance with RPAPL 1304 was not required because the subject mortgage loan was not a “home loan” within the meaning of the statute (RPAPL 1304[6]). Thus, the contention is not properly before this Court (see ; ; ). Further, this contention does not fall within the exception permitting review of pure questions of law appearing on the face of the record which could not have been avoided if raised at the proper juncture (see ; see also ; ). Contrary to the majority‘s determination, for this exception to the preservation requirement to apply, it is not enough that the unpreserved issue merely involve a question of law, but, rather, the unpreserved issue must be one of pure law, that is, it must not raise any issues of fact (see [“pure question of law“]; [“Although the doctrine of preservation generally precludes appellate review of matters that are raised for the first time on appeal, it is well settled that pure questions of law or statutory interpretation may be considered because their resolution does not hinge on the record evidence“], affd 1 NY3d 424; [“In light of the numerous factual issues . . . , the critical issue at bar is not purely one of law, and thus it may not be raised for the first time on appeal“]). As illustrated by the majority‘s decision, the issue of whether the subject mortgage loan constitutes a “home loan” within the meaning of RPAPL 1304 involves questions of fact, including whether the mortgaged property was “used or occupied, or intended to be used or occupied wholly or partly, as the home or residence of one or more persons and which is or will be occupied by the borrower as the borrower‘s principal dwelling” (RPAPL 1304[6][a][iii]). Had the plaintiff properly raised this contention in the Supreme Court, the defendant Hasan Ozcan, also known as H. Ozcan (hereinafter the defendant), would have had the opportunity to submit evidence in opposition rebutting the plaintiff‘s contention now improperly raised for the first time on appeal (see ; [“Since such an argument potentially presents factual issues that [the defendant] was prevented from addressing by the plaintiff‘s failure to raise the argument before the Supreme Court, we decline to address the argument for the first time on appeal“]).

Further, the plaintiff failed to submit evidence sufficient to establish, prima facie, compliance with the statutory provisions of RPAPL 1304. “[P]roper service of RPAPL 1304 notice on the borrower . . . is a condition precedent to the commencement of a foreclosure action, and the plaintiff has the burden of establishing satisfaction with this condition” (). The statute requires the lender or mortgage loan servicer to send the RPAPL 1304 notice to the borrower “by registered or certified mail and also by first-class mail” (RPAPL 1304[2]). With both registered and certified mail, the United States Postal Service (hereinafter USPS) provides the sender with a mailing receipt as proof of mailing at the time of mailing and, upon request, an electronic record of the date and time of delivery or attempted delivery (see Mailing Standards of the United States Postal Service Domestic Mail Manual, https://pe.usps.com/DMM300). With first-class mail, the USPS, upon request and payment of a fee, provides the sender with a certificate of mailing as evidence of mailing (id.). Therefore, by requiring the lender or mortgage loan servicer to send the RPAPL 1304 notice by registered or certified mail and also by first-class mail, the Legislature provided the means for the plaintiff to demonstrate its compliance with the statute, i.e., by submitting the proof of mailing issued by the USPS (see ).

In the absence of such postal proof, the plaintiff may also prove its compliance with RPAPL 1304 by submission of documents meeting the requirements of the business records exception to the rule against hearsay under CPLR 4518 (see ; see also ; Lindsay v Pasternack Tilker Ziegler Walsh Stanton & Romano LLP, 129 AD3d 790, 793). In this regard, the plaintiff must submit, inter alia, “proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed” (; see ; Lindsay v Pasternack Tilker Ziegler Walsh Stanton & Romano LLP, 129 AD3d at 793; ).

In support of its motion, the plaintiff failed to submit an affidavit of service or any proof of mailing issued by the USPS demonstrating that it properly served the defendant in accordance with RPAPL 1304 (see ; ). Contrary to the majority‘s conclusion, the affidavit of Andrea Kruse, a vice president for loan documentation of the loan servicer, which referenced barcode numbers appearing on copies of the RPAPL 1304 notices, was insufficient to establish that the notices were sent to the defendant in the manner required by RPAPL 1304, as Kruse did not establish proof of a standard office mailing procedure and provided no independent proof of the actual mailing (see ; ; ; cf. ). While Kruse referred to the loan servicer‘s “practice at the time” of mailing a copy of the notice with the 20-digit barcode to the defendants by certified mail, and the copy of the notice with the 10-digit barcode to the defendants by first-class mail, she did not explain, inter alia, whether the barcode was assigned before or after the mailing, such that an inference may be drawn that, by reason of the appearance of the barcode on the notices, the items were actually mailed. More significantly, she provided no information regarding the loan servicer‘s mailing procedures. Her mere reference to a “practice at the time” is not “proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed” (; see Lindsay v Pasternack Tilker Ziegler Walsh Stanton & Romano LLP, 129 AD3d at 793; ).

Since the plaintiff failed to establish, prima facie, that it strictly complied with RPAPL 1304, the Supreme Court should have denied those branches of the plaintiff‘s motion which were for summary judgment on the complaint insofar as asserted against the defendant and for an order of reference (see ; ; ; ; ; ).

On his cross motion, the defendant established his entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against him by submitting his own affidavit denying receipt of the RPAPL 1304 notices (see [the defendants established their prima facie entitlement to summary judgment dismissing the complaint by relying upon the plaintiff‘s “same evidence, further supported by their personal affidavits” attesting that they did not receive RPAPL 1304 notice in accordance with the statute]). For the reasons stated above, the plaintiff did not rebut the defendant‘s affidavit by raising a triable issue of fact as to whether it properly mailed the RPAPL 1304 notices and, thus, the defendant‘s cross motion should have been granted (see ).

Accordingly, I vote to reverse the order insofar as appealed from, deny those branches of the plaintiff‘s motion which were for summary judgment on the complaint insofar as asserted against the defendant, and grant the defendant‘s cross motion for summary judgment dismissing the complaint insofar as asserted against him.

ENTER:

Aprilanne Agostino

Clerk of the Court