The borrower owned improved real property in the form of a student housing complex. The borrower leased the property to an industrial development agency (the “agency”), and then the agency leased it back to the borrower. The original lender provided a loan to the borrower shortly after and consolidated some pre-existing promissory notes that the borrower had executed. The borrower and the agency executed several agreements in favor of the original lender to secure repayment of the notes. Those agreements created a first-priority mortgage lien on the property in favor of the original lender. The borrower and the original lender also executed a loan agreement, and the defendant guarantors executed a guaranty in favor of the original lender. The original lender created the first loan assignment to a mortgage corporation and executed several security instruments and assignments in its favor, including the loan agreement and the guaranty. The lender had also been the owner and holder of the mortgage, the note, and the other loan documents since the mortgage corporation had securitized and assigned the loan to the lender. The note required that all loan interest and/or principal be paid by the borrower on the maturity date, but the borrower did not pay, so it became an event of default. The maturity default caused the loan to be transferred from the mortgage corporation to a division of the plaintiff bank, which was then authorized to pursue all remedies available under the loan, including foreclosure on the property. The borrower then made several payments to the lender, but they were all insufficient to satisfy the loan indebtedness. Accepting these insufficient payments did not constitute a waiver by the lender of any amounts that required prompt payment or the exercise of remedies. The lender filed a motion for summary judgment to recover all indebtedness, including taxes, insurance premiums, and interest.
In U.S. Bank N.A. v. Chenango Place LLC, Case No. 3:23-cv-928 (MAD/ML), 2025 WL 71662, 2025 U.S. Dist. LEXIS 4847 (N.D.N.Y. Jan. 10, 2025) (opinion not yet released for publication), the court granted the lender’s motions for summary and default judgment. New York state law required three elements to sustain a foreclosure claim: “(1) the proof of the existence of an obligation secured by a mortgage; (2) a default on that obligation by the debtor; and (3) notice to the debtor of that default.” Gustavia Home, LLC v. Hoyer, 362 F. Supp. 3d 71, 79 (E.D.N.Y. 2019). Once that evidence is submitted, the plaintiff would have “demonstrated a prima facia case of entitlement to judgment.” Gustavia Home, LLC v. Bent, 321 F. Supp. 3d 409, 414-15 (E.D.N.Y. 2018). Then, “the burden shifts to the defendant to raise a triable issue of fact, including with respect to any alleged defenses or counterclaims.” Id. The court held that the lender submitted evidence establishing their prima facia case of entitlement to judgment, as evidenced by the loan documents. New York law also requires that “there must be some proof in the form of an affidavit of a person with knowledge, or a complaint verified by a person with knowledge” regarding the proof of debt. Bent, 321 F. Supp. 3d at 415. The lender did this by offering a declaration from an asset manager with the mortgage loan servicer based on their personal knowledge and from reviewing the lender’s business records. The declaration and exhibits established that the borrower was in default and failed to fix it, further corroborating the lender’s amounts requested. Despite the borrower not having submitted an opposition to the lender’s motion, other than a general denial that cannot defeat summary judgment, the court examined defenses that could have been raised. The only potential defense was that the lender had waived their right to payments when it accepted payments following the maturity date. However, that must be evidenced by a “clear manifestation of intent” to waive by the lender, which the borrower had not established. Globecon Grp., LLC v. Hartford Fire Ins. Co., 434 F.3d 165, 176 (2d Cir. 2006). The court granted the lender’s motion for summary judgment in the foreclosure proceeding because the borrower did not provide evidence of waivers or raise any affirmative defenses. The court also awarded reasonable attorney’s fees for the summary judgment. To succeed on a default judgment, the plaintiff must show the entry of a default evidenced by a notation on the record followed by the entry of a default judgment. The court found that the borrower complied with all default procedural requirements, including submitting an application with the clerk of the court in compliance with the rules. Despite being properly served, it also found that the agency failed to defend against the action. The court concluded that by the agency failing to answer or oppose the default judgment, it is deemed to have admitted to the borrower’s allegations in the complaint. Accordingly, the court granted the borrower’s motion for default judgment against the agency.
By Nura Elhentaty: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]