Federal National Mortgage Association v Ayoola
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Attorneys and Parties
Brief Summary
Mortgage foreclosure standing and proof requirements, including compliance with Real Property Actions and Proceedings Law (RPAPL) 1304 [pre-foreclosure notice requirement for certain home loans] and whether a foreclosing plaintiff proved it held the note when the action began.
The Supreme Court, Kings County, granted the plaintiff leave to renew its earlier summary judgment motion after an initial denial without prejudice, found the plaintiff's new affidavits sufficient to show compliance with RPAPL 1304, granted summary judgment and an order of reference, and later confirmed the referee's report and entered a judgment of foreclosure and sale.
The Appellate Division reversed the order and judgment of foreclosure and sale insofar as appealed from, denied the branches of the plaintiff's motion seeking confirmation of the referee's report and a judgment of foreclosure and sale, denied the plaintiff's motion for leave to renew its prior motion for summary judgment and an order of reference, and modified the May 10, 2018 order accordingly.
Although the plaintiff did not need to show a reasonable justification for submitting new affidavits because the earlier motion had been denied without prejudice, it still failed to establish standing prima facie. The servicing agent's affiant did not submit the business records supporting her claim that the note had been physically delivered before commencement and did not show personal knowledge of possession, making her statements inadmissible hearsay with no probative value.
Background
In December 2013, the plaintiff commenced an action to foreclose a consolidated mortgage on Brooklyn property against Kehinde Ayoola and others. Ayoola answered. The plaintiff later moved for summary judgment and an order of reference, but the Supreme Court denied that motion without prejudice because the plaintiff had not shown compliance with RPAPL 1304 [pre-foreclosure notice requirement for certain home loans]. The plaintiff then moved for leave to renew and submitted two new affidavits. The Supreme Court granted renewal, vacated its earlier determination, and granted the plaintiff's prior motion. Afterward, the plaintiff moved to confirm the referee's report and for a judgment of foreclosure and sale, which the court granted. Ayoola appealed. Although Ayoola's earlier appeal from the May 10, 2018 order had been deemed dismissed under 22 NYCRR 1250.10(a) [rule deeming an appeal dismissed for failure to timely perfect], the Appellate Division exercised its discretion to review the issues on the appeal from the foreclosure judgment.
Lower Court Decision
The lower court concluded that the plaintiff's newly submitted affidavits cured the earlier defect concerning RPAPL 1304 and warranted renewal. Upon renewal, it granted summary judgment on the complaint and an order of reference, and later confirmed the referee's report and directed the sale of the property through a judgment of foreclosure and sale.
Appellate Division Reversal
The Appellate Division held that renewal was not barred merely because the plaintiff had not offered a reason for failing to submit the new affidavits earlier, since the prior denial was without prejudice. However, the court found that the plaintiff failed to prove standing at commencement. The affidavit from Teresa Swayze, an assistant vice president of the plaintiff's servicing agent, asserted that the note had been physically delivered before suit and attached a copy of the note with an allonge endorsed in blank, but she did not provide the business records supporting that assertion and did not establish personal knowledge. Because those statements were hearsay and lacked probative value, the plaintiff failed to make a prima facie showing of standing, so summary judgment and the later foreclosure judgment could not stand.
Legal Significance
This decision reinforces that in New York mortgage foreclosure actions, a plaintiff must prove standing with admissible evidence showing it was the holder or assignee of the note when the action was commenced. An affidavit from a loan servicer employee is insufficient if it relies on unproduced business records or fails to establish personal knowledge. The case also clarifies that when a prior motion was denied without prejudice, a movant seeking renewal need not necessarily provide a reasonable justification for submitting new proof, but the renewed motion still must satisfy the plaintiff's prima facie burden.
A foreclosure plaintiff may renew a previously denied motion after a without-prejudice denial, but it still cannot obtain summary judgment or a foreclosure sale judgment unless it proves standing with competent evidence, not hearsay assertions about note possession.