Commercial Division Blog
Posted: March 20, 2021 / Categories Commercial, Real Property
Plaintiff Not Granted Summary Judgment on Commercial Foreclosure Because of Lack of Admissible Evidence of Default
On February 26, 2021, Justice Knipel of the Kings County Commercial Division issued a decision in BK 38th Lender LLC v. 1351 Dekalb Condo Dev. LLC., 2021 NY Slip Op. 30639(U), denying a plaintiff summary judgment on a commercial lease foreclosure because of a lack of admissible evidence of a default, explaining:
Generally, to establish prima facie entitlement to judgement as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and admissible evidence of the borrower's default. Where a plaintiff establishes prima facie entitlement to judgment, the burden then shifts to the defendant to raise a triable issue of fact as to a bona fide defense to the action.
Here, although BK submitted copies of the Notes, Mortgages, guaranty and the forbearance agreement between S3 and the borrower, it has not established its prima facie entitlement to summary judgment and an order of reference because it has failed to submit admissible proof of the borrowers' default, as a matter of law. the Second Department has held that affidavit testimony regarding a borrower's default based on a review of business records is inadmissible hearsay and lacks probative value if the business records themselves are not produced. Dweck's affidavit testimony regarding the borrowers' default based on his review of unidentified business records is inadmissible because BK failed to produce the business records upon which Dweck's knowledge is based. In addition, Dweck relies on business records created by BK's predecessor, S3, including the forbearance agreement between S3 and the borrower, yet Dweck does not allege that he is personally familiar with S3's record-keeping practices and procedures, or that S3's records were incorporated into BK's records and routinely relied upon by BK in its business. Consequently, BK's motion for summary judgement, an order of reference and a default judgment are decided with leave to renew based on papers that provide a proper foundation.
(Internal citations omitted).
We frequently litigate disputes over the sale or leasing of commercial property. Contact Schlam Stone & Dolan partner John Lundin at firstname.lastname@example.org if you are involved in a dispute regarding a commercial real estate transaction.