Deutsche Bank National Trust Company v PF Holding, LLC
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Attorneys and Parties
Brief Summary
Mortgage foreclosure procedure and evidentiary proof of default on a summary judgment motion.
The Supreme Court, Kings County, effectively granted the lender summary judgment against RB East 13, LLC, issued an order of reference, 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 as to RB East 13, LLC, denied the lender's summary judgment and order of reference requests, denied confirmation of the referee's report and foreclosure judgment, dismissed the nonparty appeal by Rachel Basher, and dismissed separate appeals from intermediate orders because review was available on the appeal from the final judgment.
The lender failed to make a prima facie showing of default because its servicer's affiant relied on unidentified and unproduced records, making the proof inadmissible hearsay under CPLR 4518(a) [business records exception to the hearsay rule]. The lender also improperly raised a new default theory for the first time in reply, namely that Basher's transfer of the property violated the mortgage, depriving the appellant of a fair chance to respond.
Background
In November 2004, Rachel Basher executed a note for $484,500 secured by a mortgage on Brooklyn property. In August 2011, she transferred her interest in the property to RB East 13, LLC. In April 2012, Deutsche Bank National Trust Company began a foreclosure action. In February 2018, it filed and served a second supplemental summons and second amended complaint. Basher and RB East 13, LLC answered and asserted a counterclaim. In 2020, the action was discontinued against Basher. In August 2022, the lender moved for summary judgment against RB East 13, LLC and for an order of reference. RB East 13, LLC opposed, arguing the lender had not proven a payment default, and cross-moved for summary judgment dismissing the complaint. In reply, the lender argued for the first time that default also arose from Basher's transfer of the property without lender permission.
Lower Court Decision
The Supreme Court granted the lender's motion for summary judgment against RB East 13, LLC and for an order of reference in January 2023, appointed a referee, denied RB East 13, LLC's motion for leave to reargue in May 2023, and in December 2023 confirmed the referee's report and entered an order and judgment of foreclosure and sale.
Appellate Division Reversal
The Appellate Division held that the lender's proof of default was insufficient. The affidavit from Carrington Mortgage Services, LLC's employee stated that Basher failed to make the February 1, 2010 payment and subsequent payments, but the affiant neither identified nor attached the business records reviewed. Because the records themselves were not submitted, the affidavit was hearsay and could not establish default. The court further ruled that the lender's alternative theory based on an unauthorized transfer of the property was improperly raised for the first time in reply. Accordingly, the court reversed the foreclosure judgment as to RB East 13, LLC, denied the lender's dispositive motions, modified the intermediate orders accordingly, dismissed the appeal from the denial of reargument, and dismissed Basher's appeal from the foreclosure judgment under CPLR 5511 [limits appeals to aggrieved parties]. The court also noted that the issues from the intermediate orders were reviewable on appeal from the final judgment under CPLR 5501(a)(1) [permits review of prior nonfinal orders on appeal from a final judgment].
Legal Significance
The decision reinforces that a foreclosure plaintiff moving for summary judgment must submit admissible evidence of default, typically the note, mortgage, and competent proof of nonpayment. An affiant cannot simply summarize loan records without identifying and producing them. The case also confirms that a movant may not use reply papers to introduce an entirely new ground for relief. If the plaintiff fails to satisfy its initial burden, summary judgment must be denied regardless of the strength or weakness of the opposing papers.
In New York mortgage foreclosure litigation, lenders must prove default with actual admissible business records, not conclusory affidavit statements, and they cannot salvage a deficient motion by presenting a new default theory for the first time in reply.