By Nicholas M. Moccia, Esq., and Kate Cavallaro
Law Offices of Robert E. Brown, P.C.
Law Offices of Robert E. Brown, P.C.
This post is the first of a series of many which will attempt to explore some of developments of in New York foreclosure jurisprudence in response to the foreclosure crisis. In this first post, we will attempt to make a modest start by reviewing the following three decision rendered by Justice Arthur Schack of Kings County in 2008.
The common theme in these three cases is the Court’s denial, sua sponte, of the foreclosure plaintiff’s application for an order of reference on default. In brief, a foreclosure plaintiff’s application for an order of reference is a preliminary step to obtaining a judgment of foreclosure and sale. Specifically, the plaintiff asks the court to appoint a “referee” for the purpose of, among other things, computing the exact among owed by the foreclosure defendant/borrower.
In the above-listed cases, Justice Schack denied each of the plaintiffs’ applications for an order of reference due to the failure to comply with CPLR 3215(f). In each of these cases, the defendants neglected to answer or contest the foreclosure action, and so the plaintiffs were attempting to obtain judgments of foreclosure and sale on default pursuant to CPLR 3215. The proof need on an application for a default judgment is governed by CPLR 3215(f), whose requirements are three:
1. proof of summons service including a complaint;
2. proof of the claim, including the amount due;
3. proof of the defendant’s default in answering
Specifically, it is the foreclosure plaintiff’s failure to comply with the second requirement that is here at issue. The second requirement, proof of the claim itself, is usually satisfied by the submission of an “affidavit of merit” from the plaintiff or a representative of the plaintiff with first-hand knowledge of the relevant information underlying the claim. The foreclosure complaint itself may also satisfy this requirement if the complaint was verified by an individual with the requisite knowledge. An affidavit from an attorney, or a complaint verified by an attorney is generally unacceptable for this purpose. In the foreclosure context, an affidavit is usually supplied by a “vice president”, “authorized signatory”, “foreclosure technician” or some other dubiously titled “officer” of the foreclosing plaintiff.
Justice Schack has rightfully made practice of denying applications for orders of reference in situations where, to put it simply, he needs “more answers.” Justice Schack has been asking the tough questions that like, for instance, “Why, in the midst of the country’s mortgage crisis is Deutsche Bank purchasing non performing loans? And who’s been signing these affidavits of merit?” Justice Schack notes that the affidavits of merit are scarcely ever by an actually officer of the plaintiff or someone with a valid power of attorney from the plaintiff. See, e.g., Deutsche Bank National v. Auguste. In Deutsche Bank National v. Harris, Schack denied Deutsche Bank’s application for an order of reference due to his suspicions about particular employee, who has claimed at various times to be the Vice President of Deutsche Bank and Vice President of IndyMac. In cases where supporting affidavits were executed by persons who appear to have possible conflict of interest, even assuming arguendo their positions are legitimate, Justice Schack has ordered affidavits outlining the employment history of certain individuals for the proceeding three years. Again, in Deutsche Bank National v. Harris, Schack was perplexed to discover that IndyMac, MERs and plaintiff Deutsche bank all appeared to share the same office space. In Countrywide Home Loans v. Persaud, Schack ordered an explanation as to why Countrywide would purchase a nonperforming loan from MERS. To be sure, it is not at all uncommon to have nonperforming loan assigned inexplicably to different financial institutions on the eve of foreclosure.
While it is true that these cases were denied without prejudice, the plaintiffs were still required to cure these procedural defects to the satisfaction of the Court. Bottom line: foreclosure defendants, and the practitioners representing them, should carefully scrutinize affidavits of merit in order to ensure that they do indeed have merit.