Summary Judgment of Foreclosure Denied Because of Lack of Admissible Evidence of Payment Default

On May 7, 2021, Justice Knipel of the Kings County Commercial Division issued a decision in Majestic Crown NY LLC v. Archstone Acquisition Partners LLC, 2021 NY Slip Op. 31627(U), denying summary judgment on a foreclosure claim because of a lack of admissible evidence of a payment default, explaining:

Generally, to establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the 1nortgage, the unpaid note, and admissible evidence of default. Where the issue of standing is raised by a defendant, a plaintiff must also establish its standing as part of its prima facie case. When 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.

Although Majestic submitted copies of the note, mortgage and the guaranty, it has not established its prima facie entitlement to summary judgment and an order of reference because it failed to submit admissible proof of Archstone's payment 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. Cohen's affidavit testimony regarding Archstone's payment default based on his review of unidentified business records is inadmissible because Majestic failed to produce the business records upon which Cohen's knowledge is based. Consequently, Majestic's motion for summary judgment, an order of reference and a default judgment are denied 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 jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.