JPMORGAN CHASE BANK, N.A. v. PEREIRA

63245/2014.

2017 NY Slip Op 50899(U)

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, Plaintiff, v. AIDA PEREIRA A/K/A AIDA PEREYRA; AIDALINA SERVONES; MADELINE SERVONES; BERNICE SERVONES, Defendants.

Supreme Court, Westchester County.


Attorney(s) appearing for the Case

Fein, Such & Crane, LLP, 1400 Old Country Road, Ste C103, Westbury, NY 11590, 516-394-6921, Attorneys for Plaintiff.

Robert F. Zerilli, Esq. , 20 South Broadway, Suite 901, Yonkers, NY 10701, 914-969-3700, Attorney for defendant Aida Pereyra.


WILLIAM J. GIACOMO, J.

Factual and Procedural Background

Plaintiff commenced this action to foreclose a mortgage with the filing of a summons, complaint, and notice of pendency on August 18, 2014. Defendant Aida Pereira joined issue with the service of her answer dated September 9, 2014.

Upon release from the mandatory foreclosure settlement conference part, plaintiff moved for summary judgment and an order of reference. Defendant cross-moved to compel plaintiff to comply with discovery demands and for summary judgment dismissing the complaint. In an order dated May 17, 2016, this Court granted plaintiff's motion for summary judgment and an order of reference and denied defendant's cross motion.

Subsequently, in response to a notice of computation from the referee, on September 29, 2016, defendant submitted written proposed objections to the proposed referee's report and requested a referee's hearing. Specifically, defendant objected to the following amounts: $34,215.93 for escrow/advances; $430.50 for Broker Price Opinions (BPO); and $738.70 for inspections. Defendant objected to the inspections and the BPOs on the basis that plaintiff is attempting to collect payment for twenty-eight separate inspections and four BPOs that defendant asserted all occurred on the same day.

Referee's Hearing

On November 16, 2016, a hearing was held before the referee. At the outset of the hearing, defendant's counsel indicated that defendant was not disputing principal or interest, just the amounts claimed for escrow advances, BPO, and inspections.

Jamar Harris testified on behalf of plaintiff. Mr. Harris was the default servicing officer for Caliber Home Loans, plaintiff's servicer since November 2014, and testified that he was familiar with the defendant's loan.

As to the inspections, Mr. Harris testified that there was a list of inspections provided to Caliber by the loan's prior servicer. However, Mr. Harris could not recall the identity of the prior servicer. He identified the list of inspections and the BPOs from the prior servicer and testified that he was familiar with the document. Based upon his review of the documents from the prior servicer, it was Mr. Harris' understanding that all the inspections occurred on different dates.

Plaintiff also submitted a document for admission into evidence entitled "Payment History". Mr. Harris testified that the document was made in the ordinary course of Caliber's business, it was the ordinary course of Caliber's business to create the document, the document was created at or near the event in question, and it was the recorder's job to create the document. Mr. Harris testified that the reason all of the BPOs and inspections had the same date is because it was the date the numbers were placed into Caliber's system.

Defense counsel objected to the admission into evidence of the records from the prior servicer on the grounds that the witness could not possibly be familiar with the prior servicer's record keeping practices if he was not familiar with who the prior servicer was. Defense counsel also objected to the admission of the Payment History document into evidence on the grounds that the payment history contained entries dating back to 2006 which were made by the prior servicer.

Plaintiff's counsel argued that the prior records were incorporated into Caliber's business records and Mr. Harris' familiarity with Caliber's business practices was sufficient grounds to admit the documents into evidence as a business record pursuant to CPLR 4518.

The referee issued a report of hearing and computation dated December 5, 2016. As to the defendant's objections, the referee found:

The records of prior loan servicer were made part of the business records of present loan service, Caliber Home Loans and witness from Caliber testified to "Boarding" procedures at Caliber to insure reliability of prior servicer's entries before assimilating those prior records into present business records of Caliber. Those charges of prior loan servicer for inspections and BPO are being allowed (HSBC Bank, USA, NA v Sage, 112 A.D.3d 1126 [3d Dept 2013]).

Discussion

Plaintiff now moves for a judgment of foreclosure and sale and to confirm the referee's report. Among other things, plaintiff submits the referee's oath and the referee's report of amount due finding that, after the hearing, $342,904.38 is due plaintiff for principal and interest, late charges, taxes and advances as of August 4, 2016.

The report of a referee should be confirmed whenever the findings are substantially supported by the record, and the referee has clearly defined the issues and resolved matters of credibility (see Citimortgage, Inc. v Kidd, 148 A.D.3d 767 [2d Dept 2017]; Matter of Cincotta, 139 A.D.3d 1058 [2d Dept 2016]; Hudson v Smith, 127 A.D.3d 816 [2d Dept 2015]). The referee's findings and recommendations are advisory only and have no binding effect on the court, which remains the ultimate arbiter of the dispute (see Citimortgage, Inc. v Kidd, 148 AD3d at 768).

Defendant argues that plaintiff's motion should be denied as the referee's report is not supported by admissible evidence. Defendant contends that at the hearing, some of the records relied upon by plaintiff in asserting the amount due were transferred from a prior servicer and that plaintiff's witness was unaware of the practices and procedures of the prior servicer in making and maintaining such records. Accordingly, defendant argues that the referee's findings are not substantially supported by the record.

The business records exception to the hearsay rule, promulgated in CPLR 4518 (a), provides that "[a]ny writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter" (CPLR 4518 [a]). The basis of the business records exception to the hearsay rule is the trustworthiness of the document (see Hochhauser v Elec. Ins. Co., 46 A.D.3d 174, 179 [2d Dept 2007]).

"[N]ot only must the entrant be under a business duty to record the event, but the informant must be under a contemporaneous business duty to report the occurrence to the entrant as well. The reason underlying the business records exception fails and, hence, the statement is inadmissible hearsay if any of the participants in the chain is acting outside the scope of a business duty (internal citations omitted)" (In re Leon R.R., 48 N.Y.2d 117, 122-123 [1979]).

To support her argument that the records of the prior loan servicer were improperly relied upon by the plaintiff and the referee in computing the amount due, defendant relies upon Arch Bay Holdings, LLC v Albanese, 146 A.D.3d 849 (2d Dept 2017). In Arch Bay, a mortgage foreclosure action, the Court held that plaintiff's motion for summary judgment and to appoint a referee to compute the amount due was improperly granted as the plaintiff failed to establish that it had standing. In attempting to demonstrate standing, the plaintiff submitted an affidavit of the assistant vice president of its assignee's loan servicer. The affiant attested that based upon her review of the loan servicer's business records, the note was in plaintiff's physical possession when the action was commenced. The Court held that the plaintiff failed to demonstrate the admissibility of the records relied upon under the business records exception to the hearsay rule (see CPLR 4518[a]), since the witness did not attest that she was personally familiar with the record-keeping practices and procedures of the original plaintiff that commenced the foreclosure action (see also Bank of NY v Willis, 150 A.D.3d 652 [2d Dept 2017] [holding that the plaintiff failed to establish its standing by failing to demonstrate that the records were admissible under CPLR 4518 (a). Plaintiff relied upon an affidavit of its current servicer stating that based upon her review of the servicer's business records, plaintiff had physical possession of the note at the time the action was commenced. The Court held that because the affiant did not attest that she was personally familiar with the plaintiff's recordkeeping practices and procedures, the plaintiff failed to demonstrate that the records were admissible]; HSBC Mtge. Servs., Inc. v Royal, 142 A.D.3d 952 [2d Dept 2016] [holding that plaintiff failed to establish the admissibility of records under CPLR 4518 (a). Plaintiff's affiant, who was employed by the loan servicer to plaintiff's successor in interest, did not allege that he was personally familiar with the plaintiff's record keeping practices and procedures. Thus, plaintiff failed to lay a proper foundation for the admission of records concerning the appellant's payment history and the assertions based on these records were inadmissible]).

Most recently, in Deutsche Bank Natl. Trust Co. v Carlin (___ AD3d ___, 2017 NY App. Div. LEXIS 5258 [2d Dept July 5, 2017]), while determining whether the required notices were mailed to defendant, the Second Department held that plaintiff failed to demonstrate the admissibility of the records. The plaintiff relied upon an affidavit of an assistant secretary of its current loan servicer who averred that servicing records showed that the notices were mailed to the defendant. Attached to the affidavit were copies of the notices which were purportedly sent by the prior loan servicer. The Court held that the employee of the current loan servicer, did not aver that he was personally familiar with the record keeping practices and procedures of the prior loan servicer. Thus, the Court found that the affidavit failed to lay a proper foundation for admission of records concerning service of the required notices, and the assertions based on the records were inadmissible (see also CitiMortgage, Inc. v Pappas, 147 A.D.3d 900 [2d Dept 2017] [finding that the mailing of the notice pursuant to RPAPL 1304 was not proven by documents meeting the requirements of CPLR 4518. The affidavit submitted by plaintiff was not sufficient to demonstrate the notices were sent. The affiant did not aver that he was familiar with the plaintiff's mailing practices and procedures]).1

Here, the records relied upon by the plaintiff at the hearing, and by the referee in his computation, were transferred to Caliber, the current servicer, from the prior servicer. Caliber became the plaintiff's servicer in November 2014. The Payment History document, which was admitted into evidence, contained entries dating back to 2006; entries admittedly made by the prior servicer. Mr. Harris, the default servicing officer for Caliber, was unable to testify as to the practices and procedures of the prior servicer in making and maintaining the records. In fact, Mr. Harris was unable to state the identity of the prior servicer.

In Citimortgage v Kidd (148 A.D.3d 767), the Second Department held that the referee's report was based upon inadequately supported findings and should have been rejected. The Court found that the referee's findings with respect to the total amount due upon the mortgage were not substantially supported by the record inasmuch as the computation was premised upon unproduced business records.

In the instant case, although the referee's computations were based upon business records which were produced by the plaintiff at the hearing, the business records were not admissible pursuant to CPLR 4518 (a) as the plaintiff failed to lay the proper foundation. Thus, the referee's report is based upon inadequately supported findings.

The mere filing of papers received from other entities, even if they are retained in the regular course of business, is insufficient to qualify the documents as business records, because the documents are not made in the regular course of business of the recipient, who is in no position to provide the necessary foundation testimony (Lodato v. Greyhawk N. Am., LLC, 39 A.D.3d 494, 495 [2d Dept 2007] citing People v Cratsley, 86 N.Y.2d 81, 90 [1995]).2 In order for a proper foundation to be established by a recipient of records who does not have personal knowledge of the maker's business practices and procedures, there must be a showing that the recipient either incorporated the records into its own records or relied upon the records in its day-to-day operations (see Matter of Carothers v GEICO Indem. Co., 79 A.D.3d 864, 864-865 [2d Dept 2010] citing People v A & S DiSalvo, Co., 284 A.D.2d 547 [2d Dept 2001];3 Plymouth Rock Fuel Corp. v Leucadia, Inc., 117 A.D.2d 727 [2d Dept 1986]).

Unlike People v Cratsley (86 N.Y.2d 81) or People v A & S DiSalvo, Co. (284 A.D.2d 547), the testimony of Mr. Harris did not establish that he had knowledge of the business practices of the prior servicer. Therefore, he was unable to testify that the records were made in the regular course of business and that it was the regular course of business to prepare such records.

Moreover, Mr. Harris' testimony did not establish that the documents from the prior servicer were incorporated into Caliber's records or relied upon by Caliber in its regular course of business (see also Lodato v Greyhawk N. Am., LLC, 39 A.D.3d 494 [2d Dept 2007). Although at the hearing plaintiff's attorney argued that the documents from the unknown prior servicer were incorporated into Caliber's records, the testimony of Mr. Harris merely established that the records were filed by Caliber and failed to meet the requirements of CPLR 4518 (a).

Accordingly, the plaintiff's motion for a judgment of foreclosure and sale is DENIED without prejudice and the matter is remitted to the referee for a new hearing and report computing the amount due to the plaintiff in accordance herewith (c.f. Board of Trustees of Maha Lakshmi Mandir, Inc. v Dubey, 56 A.D.3d 504 [2d Dept 2008] [holding that the record supported the referee's findings including the determination that certain records offered by the plaintiff were not admissible under the business records exception to the hearsay rule]).

After the referee's hearing on remand, the plaintiff shall move for a judgment of foreclosure and sale within thirty days after the issuance of a new referee's report computing the amount due to the plaintiff.4

FootNotes


1. To establish a defendant homeowner's default, however, the Second Department has held that an affidavit from the loan servicer, attesting to the default based upon the loan servicer's records kept in the regular course of the loan servicer's business, is sufficient to demonstrate admissibility under CPLR 4518 (see Wells Fargo Bank, NA v Thomas, ___ AD3d ___, 2017 NY App. Div. LEXIS 4250 [2d Dept May 31, 2017] [holding that the plaintiff established its prima facie entitlement to judgment as a matter of law by submitting the mortgage, the note, and the affidavit of a vice president of its loan servicer, attesting to the default in payment. The Court held that the appellants' contention that the affidavit constituted inadmissible hearsay because she did not have personal knowledge of the plaintiff's record-keeping practices and procedures was without merit]; Citigroup v Kopelowitz, 147 A.D.3d 1014 [2d Dept 2017] [holding that the affidavit of plaintiff's loan servicer, attesting to the appellant's default based upon his review of payment records kept in the regular course of the loan servicer's business, was sufficient proof of default. The Court held that the business records relied upon satisfied the admissibility requirements of CPLR 4518 (a), and the records themselves actually evinced the facts underlying the appellants' default]).
2. A IQ test report prepared by a psychologist was found to be admissible in People v Cratsley (86 N.Y.2d 81, 88-92 [1995]), through the testimony of an employee of the recipient of the report. The report was prepared as part of an evaluation of a patient to be admitted into a workshop for developmentally disabled adults. The witness, an employee of the workshop, testified that she recognized the report as an initial evaluation prepared in accordance with her employer's requirements. The witness worked with these reports as part of her regular course of business, and they were relied on in the regular course of her employer's business. While the psychologist was not an employee of the workshop, he was also not "a complete outsider". Although the witness could not relate the psychologist's specific recordmaking practices, she was able to state that the report conformed with the statutory and regulatory requirements with which she was familiar. Coupled with her testimony that no one was accepted into the workshop without such a report, and that the reports were routinely relied on by her employer in making determinations regarding its clients, the Court found that the evidence was sufficient to establish that the report, prepared at the time the examination was conducted, was made in the regular course of business and that it was the regular course of business to prepare such reports.
3. In DiSalvo, the defendant was a Westchester County garbage hauling company which transported public and private garbage to a burn plant. The evidence adduced at trial established that for a period of time, while defendant was under contract to remove and dump garbage for the Town of Ossining, its drivers commingled the Town's garbage with private garbage from commercial customers. The Court held that, contrary to the defendants' contentions, the "dump tickets" generated by the plant, as well as the electronic transmission of the identical data printed out in the Westchester County Department of Environmental Facilities, were properly admitted into evidence as business records. Those records were the sole sources of billing information on which Westchester County allocated waste-disposal costs among its municipalities. The trial evidence established that the dump tickets and computer print-out reflected the weight of the garbage defendant delivered to the plant as well as the Town's account to which defendant's drivers indicated the deliveries should be charged. The plant's employees entered all relevant information into its computer, which in turn generated the dump tickets and the print-out. The Court found that a proper foundation was established for the admission of the dump tickets through the testimony of a witness for Westchester County even though the County did not create the records. The dump tickets were routinely relied upon by the County in making its invoicing determinations.
4. The fee of the referee to conduct a new hearing is to be paid by the plaintiff and is not to be added to the amount due under the mortgage.

Comment

1000 Characters Remaining

Leagle.com reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

User Comments

Listed below are the cases that are cited in this Featured Case. Click the citation to see the full text of the cited case. Citations are also linked in the body of the Featured Case.

Cited Cases

  • No Cases Found

Listed below are those cases in which this Featured Case is cited. Click on the case name to see the full text of the citing case.

Citing Cases