NY Appellate Division's First Decision on RPAPL §1302-a
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Well! No sooner did I post that blog yesterday, Title Insurance and Foreclosures in 2022, and discovered that the law had already been tested through the appeals process. To be fair, that blog was based on something from March 2021 so it isn't super fresh. It was a very good article to jump off in the title insurance discussion, however.
The Appellate Division, Second Department interpreted the statute for the first time in November 2020, and the decision was thought to be favorable to servicers.
RPAPL 1302-a was enacted and became effective on December 23, 2019. The statute reads:
"Notwithstanding the provisions of [CPLR3211(e)], any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in [RPAPL 1304(6)(a)], shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss. A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant’s default” (RPAPL 1302-a)."
The first decision was in a case styled GMAC Mortgage, LLC v. Coombs, AD 2nd, 2017-08030. The Appellate Division interpreted RPAPL 1302-a looked at its impact on the standing defense in residential mortgage foreclosure actions and on the operation of the waiver provisions of CPLR 3211(e).
The defendant answered the foreclosure complaint, but did not raise the standing issue in the answer, but moved to dismiss the complaint because of lack of standing . The plaintiff opposed the defendant’s motion and requested summary judgment. The Supreme Court denied both motions. The plaintiff moved to reargue and, upon reargument, won its motion for summary judgment. The Supreme Court found that the defendant had waived standing as a defense by not asserting it in his answer. The defendant appealed.
A New York law firm that representing servicers in foreclosure has a very good discussion of the legal issues in the court's written decision. You can read it here.
After reading the law firm's analysis of the issues, I wondered what exactly the servicer/plaintiff had produced to demonstrate standing.
The opinion says:
Here, in support of its motion, inter alia, for summary judgment on the complaint insofar as asserted against the defendant, the plaintiff produced the mortgage, the unpaid note, and evidence of default. (Emphasis is Christine's) Since the issue of standing was raised for the first time in opposition to the plaintiff's motion for summary judgment, the plaintiff was entitled to submit evidence on that issue for the first time in its reply papers. The plaintiff's submissions demonstrated, prima facie, that it had physical possession of the note and mortgage prior to the commencement of this action. In opposition, the defendant failed to raise a triable issue of fact. The defendant did not dispute the evidence submitted by the plaintiff to establish that it had physical possession of the note and mortgage prior to the commencement of this action. Rather, the standing defense raised by the defendant related solely to the validity of certain assignments of the note and mortgage. "Since the plaintiff does not base its claim of standing on an assignment of the note, but on its purported physical possession thereof, the [defendant's] arguments as to the validity of the assignment of mortgage and the correction assignment of mortgage are irrelevant" and insufficient to raise a triable issue of fact in opposition to the plaintiff's prima facie showing ( Deutsche Bank Natl. Trust Co. v. Dennis, 181 A.D.3d 864, 869, 122 N.Y.S.3d 95 ; see Aurora Loan Servs., LLC v. Taylor, 25 N.Y.3d at 361–362, 12 N.Y.S.3d 612, 34 N.E.3d 363 ; Wells Fargo Bank, N.A. v. Davis, 181 A.D.3d 890, 892, 122 N.Y.S.3d 103 ). The defendant's remaining contentions are without merit.
In view of the foregoing, we agree with the Supreme Court's determination to grant leave to reargue and, upon reargument, grant the plaintiff's motion, inter alia, for summary judgment on the complaint insofar as asserted against the defendant. Accordingly, the order appealed from is affirmed."
Christine here: This case decision is instructive, and if the defendant had plead differently they might have won. Since defendant raised the issue of possession of the note and not based on the assignments of the deed of trust, the court said that those arguments were irrelevent.
Although it was thought to be a good decision for servicers, it provided a lot of clarity on how later defendants could perhaps correctly plead the standing issue.
The New York legislature could make amendments to the statute to clarify their intent after the court's interpretation.
For clarity's sake, I just want to point out a few more things about this opinion. This is just ONE decision, and it was the first interpretation of the statute. I am not going to undertake a serious case law analysis of what has happened since then because that's beyond the scope of this post.
Also, I'm not an attorney and there may be better arguments for the standing issue. Statutes are changed based on court interpretations, and eventually a strategy emerges for how to win cases. Sometimes you don't win on certain issues but you find another effective way to get a good outcome.
When I first got out of the Army, I went to work for an older lawyer, and whenever he used to turn down cases, he would tell the prospective clients that "the practice of law is an art and not a science and no two lawyers will do it the same way."
The practice of law is definitely an art, and it usually takes losing a few cases to find the way to win.
If you are interested in learning how to do case law research, you can use Google Scholar for free. Also, in 2020 I wrote a book for laypersons on how to do legal research, available on my publishing website here or on Amazon.
We'll probably see the standing issue come up in foreclosures in 2022 and going forward. The facts related to the pandemic might change how the law is interpreted by the courts.
Also, it's interesting that so much has been going on in the foreclosure space in New York!