Business records – affiant’s failure to assert familiarity with plaintiff’s record-keeping practices and procedures was fatal to plaintiff’s motion for summary judgment of foreclosure.

The Second Department reversed summary judgment of foreclosure to plaintiff and awarded defendant-borrower one bill of costs.

Defendant-borrower had executed a note in favor of Original Lender and a mortgage in favor of Mortgage Electronic Registration Systems, Inc. (MERS) acting as nominee for Original Lender.   Original Lender thereafter assigned the mortgage to plaintiff.   Plaintiff commenced this action alleging that defendant had defaulted on his loan payments.  After commencement of the action, plaintiff then assigned the mortgage to Subsequent Assignee, who continued the prosecution of this action under plaintiff’s name as plaintiff.

Defendant answered and asserted as an affirmative defense that plaintiff lacked standing to commence the action.  Plaintiff moved for summary judgment on the complaint and defendant cross-moved for leave to amend his answer to assert certain counterclaims.  Supreme Court granted plaintiff’s motion for summary judgment on the complaint and denied defendant’s cross motion to amend his answer.

Because defendant challenged plaintiff’s standing to commence the action, plaintiff was required to prove prima facie that it had standing in addition to proving prima facie the other elements of its action (to wit, the mortgage, the unpaid note, and defendant’s evidence of default).  To establish prima facie that plaintiff had standing, plaintiff had to demonstrate that it was the holder or assignee of the underlying note when the action is commenced by showing either a written assignment of or physical delivery of the note.

Here, plaintiff failed to establish prima facie that it had either a written assignment or physical delivery of the note.  Plaintiff submitted the affidavit of the assistant secretary of Subsequent Assignee who stated “pursuant to the business records of” plaintiff, plaintiff had physical possession of the note when it commenced the action.  But the assistant secretary of Subsequent Assignee failed to attest that she was personally familiar with the record-keeping practices and procedures of plaintiff.  So the assistant secretary’s assertions based on those records were inadmissible.

Plaintiff unsuccessfully attempted to cure the omission by submitting in reply the affidavit of its vice president, which could not be considered in reply.   And although plaintiff’s motion papers showed that MERS as nominee had assigned the note and mortgage to plaintiff before the action was commenced, plaintiff failed to establish the note had been delivered to MERS before MERS assigned it to plaintiff.   So because plaintiff failed to meet its prima facie burden, Supreme Court should have denied it summary judgment without regard to the sufficiency of defendant’s opposition papers.

But Supreme Court properly denied defendant’s cross motion for leave to amend his answer to assert counterclaims because the counterclaims were either patently devoid of merit or their belated addition would have prejudiced the plaintiff.  Defendant failed to offer a reasonable excuse for his nearly five-year delay in seeking to add them.

Aurora Loan Services, LLC v. Baritz, 2016 NY Slip Op 07154 (Nov. 2, 2016) http://nycourts.gov/reporter/3dseries/2016/2016_07154.htm.