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Adam Leitman Bailey, P.C. Wins Summary Judgment for the Lender’s Assignee in a Highly Contested Lost Note Foreclosure Proceeding

In Liev LLC v. Jones, et al., a highly contested foreclosure proceeding and case of first impression, Adam Leitman Bailey, P.C. won a motion for summary judgment and an order of reference in favor of the plaintiff, who was an assignee of an already lost note, defeating twenty affirmative defenses and a counterclaim asserted by the borrower in his answer.

The borrower purchased this property from two individuals, as joint tenants with rights of survivorship in trust for the then deed owner. In opposition to the plaintiff’s motion, the borrower argued that the mortgage is void ab initio because the original mortgagees acted as trustees for the owner of the premises, who did not authorize the transfer of the premises to the borrower.

In reply, Adam Leitman Bailey, P.C. successfully and creatively argued that, since the borrower accepted the benefit under the note and mortgage (generating rental income) and also made seventeen payments on the note without objection, the borrower, as a matter of law, ratified the note and waived any right to repudiate his obligations thereunder.

The borrower further asserted both a lack of standing (arguing that the plaintiff cannot prove ownership of a note that was lost prior to the plaintiff purchasing it) and the alleged failure to establish the terms of the lost note or the existence of the lost note (arguing that the plaintiff cannot attest to the terms of a note that the plaintiff never had or reviewed).

Using UCC 3-804 combined with the NY General Business Law, Adam Leitman Bailey, P.C. successfully argued that the plaintiff established both its standing and the terms and existence of the lost note through submission of Lost Note Affidavits (prepared by Adam Leitman Bailey, P.C. when the plaintiff purchased the lost note in anticipation of this very argument), a copy of the mortgage (that expressly delineated all terms of the lost note), an allonge to the plaintiff (executed prior to commencement of the action), and a copy of the purchase and sale agreement for the lost note to the plaintiff.

Adam Leitman Bailey, P.C. did this by arguing that “notwithstanding [the] failure to produce the original promissory note[], the [holder] could still recover pursuant to UCC 3–804, which deals with lost, destroyed or stolen instruments and requires the requesting party to prove ownership of the note[], the circumstances of the loss and [its] terms.” Marrazzo v. Piccolo, 163 A.D.2d 369, 558 N.Y.S.2d 103 (App. Div. 2d Dept. 1990).

To that end, Adam Leitman Bailey, P.C. argued that, per New York General Business Law § 394-a(1), the facts preventing the production of a note can be demonstrated “by parol or other secondary evidence,” which is generally submitted in the form of an affidavit confirming the loss of the note and explaining all reasonable efforts made to locate the lost note. And then Adam Leitman Bailey, P.C. not only produced lost note affidavits from the sellers of the lost note but also tracked down the closing attorney from the original closing on the note and mortgage and produced a lost note affidavit from him as well.

Finally, the borrower also argued that his obligation to pay was subject to a condition precedent, to wit, compliance with a mortgage rider.

In reply, Adam Leitman Bailey, P.C. successfully established that the borrower’s obligation to pay was not conditioned upon any of the terms of the mortgage rider, which involved separate and specific conditions requiring payment in full of the entire principal balance of the loan, and that, regardless, the terms of the mortgage rider no longer applied to the loan, as the party to whom the terms applied assigned its interest in the note and mortgage to the plaintiff.

Persuaded by Adam Leitman Bailey, P.C.’s arguments, in a decision and order dated July 25, 2017, the Honorable Noach Dear, J.S.C. granted the plaintiff’s motion for summary judgment in its entirety for all reasons discussed herein and appointed a Referee for the action to proceed.

Jackie Halpern Weinstein, Esq. and another attorney of the Foreclosure Group at Adam Leitman Bailey, P.C. won this motion for the plaintiff.

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