Deutsche Bank National Trust Company v AG2 Equities, Inc.
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Attorneys and Parties
Brief Summary
Mortgage foreclosure and proof of the amount due in support of a referee's report and judgment of foreclosure and sale.
The Supreme Court, Kings County, granted the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale, confirmed the referee's findings, and directed the sale of the Brooklyn property.
The Appellate Division reversed the order and judgment of foreclosure and sale insofar as appealed from and denied the branches of the plaintiff's motion seeking confirmation of the referee's report and a judgment of foreclosure and sale.
The referee's amount-due findings rested on a loan servicer employee's affidavit that relied on business records the plaintiff did not submit. Because the underlying records were unidentified and unproduced, the affidavit was inadmissible hearsay and did not substantially support the referee's computations.
Background
In December 2015, Deutsche Bank National Trust Company commenced a mortgage foreclosure action against Valerie Samuels and others concerning Brooklyn real property. Samuels did not timely appear or answer. The plaintiff then moved for leave to enter a default judgment against Samuels and for an order of reference. While that motion was pending, Samuels transferred title to the property in July 2017 to AA Kodosh Holding, LLC (Kodosh), and the deed was recorded on July 20, 2017. By order dated February 28, 2018, the Supreme Court granted the plaintiff's requested relief, including leave to enter a default judgment and an order of reference. In August 2023, the plaintiff moved to confirm the referee's report and for a judgment of foreclosure and sale. Kodosh opposed that motion.
Lower Court Decision
The Supreme Court, Kings County, in an order and judgment of foreclosure and sale dated May 8, 2024, granted the plaintiff's motion insofar as it sought confirmation of the referee's report and a judgment of foreclosure and sale, confirmed the referee's report, and directed that the property be sold.
Appellate Division Reversal
The Appellate Division, Second Department, reversed insofar as appealed from, with costs, and denied the plaintiff's motion branches seeking to confirm the referee's report and obtain a judgment of foreclosure and sale. The court held that although a referee's report may be confirmed when substantially supported by the record, the amount-due calculations here were based on inadmissible hearsay because the plaintiff failed to submit the business records on which the loan servicer's employee relied.
Legal Significance
This decision reinforces that in New York foreclosure practice, a lender must submit the underlying business records supporting a loan servicer affidavit used to establish the amount due. A referee's computations cannot be confirmed where they depend on unidentified or unproduced records, because such proof lacks probative value and will not support a judgment of foreclosure and sale.
A foreclosure plaintiff cannot secure confirmation of a referee's report or a foreclosure sale judgment based solely on a servicer affidavit summarizing debt figures; the underlying business records must be produced to make the amount-due proof admissible and reliable.