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By: Jeffrey M. Haber Letters of credit are designed to reduce risk in international trade by reallocating who bears the risk of nonpayment, and when. Instead of relying solely on a buyer’s willingness or ability to pay, the seller relies on the issuing bank’s independent obligation. Once a bank issues a letter of credit, it commits to pay the seller so long as the seller presents documents that comply with the credit’s terms, regardless of disputes in the underlying sales contract. This structure is critical in cross‑border transactions, where sellers may have limited visibility into a buyer’s financial condition and limited practical recourse if payment fails. Different legal systems, currency controls, political risks, and enforcement challenges can make post‑delivery collection slow, expensive, or uncertain. A letter of credit addresses those risks by inserting into a regulated financial institution, typically subject to international banking rules and reputational constraints, between the buyer and the seller. Functionally, the letter of credit converts commercial risk into documentary risk. The seller does not need to prove that goods were accepted or that the buyer is solvent; it needs only to prove, through specified documents, that it performed as agreed. Once conforming documents are presented, the bank’s duty to pay is meant to be automatic. For sellers, this provides confidence to ship goods across oceans and borders before payment is received. For buyers, it allows them to source goods internationally without prepaying, while assuring the seller that payment is backed by a bank’s balance sheet. For banks, the system works because the obligation is documentary and limited; banks do not guarantee performance of the underlying transaction, only compliance with the credit’s terms. The reliability of this system depends on a core principle: independence. The letter of credit is independent of the underlying sales contract. If banks could routinely withhold payment based on disputes between buyers and sellers, letters of credit would lose their value as risk‑reducing instruments. Trade finance relies on the expectation that a compliant presentation will lead to payment. Ultimately, letters of credit are meant to remove uncertainty from cross‑border trade. They operate almost unnoticed when honored, but when payment fails, the resulting disputes underscore the central role certainty plays in global commerce. The dispute between Olam Global Agri Pte. Ltd. (“Olam”), a Singapore‑based global agribusiness involved in trading food, ingredients, feed, and fiber worldwide, and Social Islami Bank Limited (“SIB”), a commercial bank incorporated in Bangladesh,[1] shows how that system can break down, and how difficult enforcement can become when banking systems are in transition. Olam Global Agri Pte. Ltd. v. Social Islami Bank Ltd., 2026 N.Y. Slip Op. 31674(U) (Sup. Ct., N.Y. County Apr. 17, 2026).[2] Olam Global Agri Pte. Ltd. v. Social Islami Bank Ltd. In June 2024, SIB issued an irrevocable letter of credit in Olam’s favor for approximately $1.06 million. The letter of credit was issued to secure payment for two shipments of cotton sold by Olam to a Bangladeshi buyer. According to Olam, it performed as contemplated under the letter of credit. The cotton was shipped, delivered, and cleared through Bangladeshi customs. Olam presented all required documents under the letter of credit. No discrepancies were raised. No objections were made. Under the terms of the letter of credit, payment became due in mid‑July 2024. Olam maintained that payment was not made. As a result, from July 2024 forward, Olam demanded payment, sending reminders and formal demands via SWIFT messages and written correspondence. According to Olam, SIB did not claim the documents were deficient, did not assert any contractual defense, and did not explain why payment had not been made. By December 2025, Olam’s U.S. counsel issued formal demand letters to SIB’s principal office. Olam’s Bangladeshi counsel also sent demands to SIB, to the bank’s court‑appointed administrator, and to the Bangladesh central bank. More than $1.06 million remained unpaid. At or about the same time, Bangladesh’s banking sector entered a period of regulatory restructuring. In May 2025, the government enacted the Bank Resolution Ordinance, 2025, authorizing the central bank to oversee asset and liability transfers involving several banks, including SIB. The restructuring was not a bankruptcy. There was no stay of claims, no moratorium on lawsuits, and no bar to creditors seeking judgments. Instead, the process was administrative and supervisory, designed to stabilize the financial system while transferring assets and liabilities into newly formed banking entities. Although SIB is a Bangladeshi bank, it maintains correspondent (“Nostro”) accounts at international banks with branches in New York, including Standard Chartered Bank and Mashreqbank psc. These accounts are used for U.S.‑dollar settlements and, according to Olam, are SIB’s only known assets in the United States. Concerned that any judgment might be difficult to collect, especially in light of the restructuring of the banking system in Bangladesh, Olam filed suit in New York state court. The company alleged breach of the letter of credit and sought a pre‑judgment attachment, asking the motion court to freeze funds in SIB’s New York correspondent accounts while the case proceeded. Governing Standards To obtain or confirm a pre‑judgment order of attachment under New York law, a plaintiff must meet several statutory requirements. Under CPLR 6212(a), the plaintiff must submit affidavits or other written evidence showing that: a valid cause of action exists, the plaintiff is likely to succeed on the merits, at least one statutory ground for attachment under CPLR 6201 applies, and the amount sought exceeds any counterclaims known to the plaintiff. Relevant to the motion before the motion court are CPLR 6201(1) and CPLR 6201(3). CPLR 6201(1) permits attachment when “the defendant is a non-domiciliary residing without the state, or is a foreign corporation not qualified to do business in the state.” CPLR 6201(1) “serves two independent purposes: (1) obtaining jurisdiction over a nonresident; and (2) providing adequate security for a potential judgment against a nonresident where there is an identifiable risk that the defendant will not be able to satisfy any such judgment.”[3] Notably, “ ‘the mere fact that [the] defendant is a non-domiciliary residing without the State of New York is not sufficient ground for granting an attachment.’ ”[4] A plaintiff seeking a pre-judgment attachment under 6201(1) must “present evidence that the[] defendants would conceal or convert any of their assets were it not for an attachment order, or that they would be unlikely to satisfy the potential judgment.”[5] CPLR 6201(3) provides for an attachment where “the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff’s favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts.” To satisfy CPLR 6201(3), the plaintiff must show that the defendant intended to defraud or frustrate the enforcement of any judgment against it.”[6] Factual allegations “raising a suspicion of an intent to defraud [are] not enough.”[7] “ ‘[F]raud is never presumed by a mere showing of the liquidation or disposal by a debtor of its business assets.’ ”[8] As discussed below, Olam sought a pre-judgment attachment order under CPLR 6201(1) and CPLR 6201(3). The motion court denied Olam’s application. The Motion Court’s Decision Addressing CPLR 6201(1), the motion court accepted that both parties were foreign entities and that neither entity was licensed to do business in New York.[9] But it found that Olam had not shown a concrete, identifiable risk that SIB would be unable or unwilling to satisfy a judgment. The motion court viewed the Bangladeshi restructuring as a government‑directed process, not evidence that SIB was hiding assets or acting with fraudulent intent.[10] The motion court found that plaintiff’s showing amounted to little more than speculation that defendant may “lack sufficient assets” to satisfy a potential judgment.[11] The motion court explained that “[t]here [was] no evidence that defendant [would] ‘choose to hide or otherwise dispose of [its] assets.’”[12] At most, concluded the motion court, plaintiff’s affidavits suggested that recovering assets may involve administrative or bureaucratic hurdles associated with “obtaining the assets as” converted funds, an insufficiency the First Department has squarely rejected.[13] As the motion court explained, attachment requires more than a showing that it would merely be “helpful.”[14] With respect to CPLR 6201(3), the motion court declined to issue a pre-judgment attachment, holding that plaintiff failed to “ ‘to show that defendant intended to defraud or frustrate the enforcement of any judgment against it.’ ”[15] The motion court found that “[p]laintiff’s submissions … [did] not raise even the suspicion of an intent to defraud.”[16] “Defendant’s failure to remit payment despite numerous demands and reminders [was] insufficient to show fraudulent intent,” explained the motion court.[17] Finally, the motion court had “concerns about whether plaintiff [could] establish quasi in rem jurisdiction over the defendant solely based on the ‘Nostro’ (correspondent) bank account(s) located in New York” – an issue that plaintiff did not address in its affidavits or memorandum of law.[18] The motion court found that plaintiff did not establish personal jurisdiction, finding that plaintiff contend only that “‘[j]urisdiction [was] proper . . . because Defendant [had] assets in Nostro [correspondent] bank accounts held by banks with branches in New York City.’”[19] The mere presence of correspondent bank accounts in New York, without a meaningful connection between those accounts and the underlying transaction, was not enough to justify freezing them, said the motion court.[20] As the motion court observed, New York was mentioned in the letter of credit only in a provision naming a branch of Standard Chartered Bank as the “Reimbursing Bank.”[21] Takeaway The motion court’s decision underscores a recurring principle of New York law: pre‑judgment attachment is an extraordinary remedy, not a collection shortcut, even when the defendant is a foreign bank and even when payment has not been made. At first glance, CPLR 6201(1) appears to offer a powerful tool. It permits attachment when a defendant is a non‑domiciliary or a foreign corporation not qualified to do business in New York. But Olam makes clear that foreign status alone is not enough. New York courts treat that statutory ground as necessary but not sufficient by itself. Attachment is justified only where there is a real, identifiable risk that the defendant will be unable or unwilling to satisfy a judgment absent court intervention. In practice, that means plaintiffs must do more than point to geography. The motion court emphasized that speculation does not meet the standard. Even where a defendant is undergoing a government‑supervised restructuring abroad, attachment will not issue unless there is evidence that the defendant is concealing assets, dissipating funds, or deliberately frustrating enforcement. Administrative complexity, bureaucratic delays, or uncertainty about how assets may ultimately be held do not substitute for proof of risk. As the Olam court observed, attachment cannot issue merely because it would be “helpful” or make eventual collection easier. Olam also reinforces the high bar under CPLR 6201(3). Allegations that a defendant failed to pay despite repeated demands may indicate a breach of contract, but, without more, do not demonstrate intent to defraud creditors or frustrate enforcement. Fraud is not presumed. Nor is intent inferred from silence, delay, or regulatory restructuring. Plaintiffs must show concrete conduct, demonstrating that the defendant is acting with the purpose of placing assets beyond the plaintiff’s reach. Absent such evidence, attachment is unavailable. Perhaps most significantly, the motion court highlighted a recurring personal jurisdiction pitfall in cross‑border finance cases: New York correspondent accounts are not a jurisdictional hook where the underlying dispute lacks meaningful New York contacts. Indeed, maintaining Nostro accounts in New York, even when they hold substantial funds, does not, by itself, create sufficient minimum contacts. Where those accounts bear no meaningful relationship to the underlying dispute, and where the transaction itself is foreign in all material respects, quasi in rem jurisdiction may fail altogether. In short, Olam reaffirms that pre‑judgment attachment is designed to prevent abusive asset flight, not to mitigate ordinary litigation risk. Plaintiffs seeking attachment must come with evidence, not assumptions; with facts, not suspicions. Where they cannot show intentional misconduct or a concrete enforcement risk, New York courts will decline to freeze assets. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm. ___________________________________ [1] SIB is not licensed to do business in New York and has no physical presence in the state, but, like many foreign banks, it maintains U.S.‑dollar correspondent accounts at international banks with New York branches. [2] The discussion of the facts is taken from the motion court’s decision and Olam’s papers in support of its motion for pre-judgment attachment. [3] Sylmark Holdings Ltd. v Silicone Zone Intern. Ltd., 5 Misc 3d 285, 301 (Sup. Ct., N.Y. County 2004), citing Elton Leather Corp. v. First Gen. Resources Co., 138 A.D.2d 132 (1st Dept. 1988); Cargill, Inc. v. Sabine Trading & Shipping Co., 756 F.2d 224 (2d Cir. 1985); General Textile Print. & Processing Corp. v. Expromtorg Intl. Corp., 862 F. Supp. 1070, 1073 (S.D.N.Y. 1994) (plaintiffs must show that defendants’ financial position, or past or present conduct, poses a real risk to the enforcement of a future judgment). [4] VisionChina Media Inc. v. Shareholder Representative Services, LLC, 109 A.D.3d 49, 61-62 (1st Dept. 2013) (internal citations omitted). [5] Id. at 301; see also Johnson v. Papagianni, 2026 WL 588705 at *7 (S.D.N.Y. Mar. 3, 2026) (“where, as here, an attachment is sought pursuant to § 6201(1), plaintiffs also ‘must show that the attachment is needed for jurisdictional or security purposes.’”). [6] Mitchell v. Fid. Borrowing LLC, 34 A.D.3d 366, 366-67 (1st Dept. 2006). [7] Id., citing Rosenthal v. Rochester Button Co., Inc., 148 A.D.2d 375, 376 (1st Dept. 1989). [8] Mitchell, 34 A.D.3d at 367, quoting Rosenthal, 148 A.D.2d at 376. [9] Slip Op. at *2. [10] Slip Op. at *3. [11] Id., citing VisionChina Media, 109 A.D.3d at 61–62. [12] Id., quoting id. [13] Id., quoting id. [14] Id. at *4, quoting id. at 61, quoting Founders Ins. Co. Ltd. v. Everest Natl. Ins. Co., 41 A.D.3d 350, 351 (1st Dept. 2007). [15] Id., quoting Mitchell, 34 A.D.3d at 366-67. [16] Id. [17] Id. [18] Id. at *5. “Quasi in rem jurisdiction requires an analysis of whether the ‘minimum contacts’ are present. When assessing ‘minimum contacts,’ the Court must consider ‘the nature and quality of the defendants’ contacts with the State,’ which must be such as to ‘make it reasonable and just ... to require the defendant to litigate the claim in the particular forum.’ Further, ‘when the property serving as the jurisdictional basis [here, the corresponding bank accounts located in New York] have no relationship to the cause of action and there are no other ties among the defendant, the forum and the litigation, quasi-in-rem jurisdiction will be lacking.’ ” Chaar v. Arab Bank P.L.C., 220 A.D.3d 479, 480 (1st Dept. 2023], quoting Banco Ambrosiano v. Artoc Bank & Trust, 62 N.Y.2d 65, 72 (1984) (citations omitted)). [19] Id. [20] Id., quoting Chaar, 220 A.D.3d at 480, quoting Licci v. Lebanese Canadian Bank, 673 F.3d 50, 65 (2d Cir. 2012). [21] Id.

By: Jeffrey M. Haber Contracts are intended to bring certainty and clarity to commercial relationships, yet disputes often arise when written terms leave room for more than one reasonable interpretation. Under New York law, the question of ambiguity can determine whether a case is resolved on the face of the agreement or proceeds into litigation over extrinsic evidence and party intent. What one party views as a carefully drafted provision may, in hindsight, become the battleground for competing interpretations of the same words. New York courts take a text‑first approach to contracts, enforcing unambiguous language as written and declining to rewrite agreements under the guise of interpretation. But when contractual language is susceptible to multiple reasonable interpretations, the analysis shifts. Courts must decide whether ambiguity exists as a matter of law, and if so, whether outside evidence may be considered to determine the parties’ intent. In today’s article, we examine how New York courts apply these principles through two contrasting cases – one in which the court found contractual language to be ambiguous and permitted consideration of extrinsic evidence (Derkovitz v. Up State Tower Co., LLC, 2026 N.Y. Slip Op. 02562 (4th Dept. Apr. 24, 2026), and a second in which the court rejected claims of ambiguity and enforced the agreement as written (Cass v. Newell, 2026 N.Y. Slip Op. 02542 (4th Dept. Apr. 24, 2026). Together, these decisions illustrate how distinctions in wording, structure, and context can determine whether a dispute is resolved at the pleading stage or proceeds into discovery, underscoring why careful drafting remains the strongest defense against unintended interpretations. A Primer on Contract Interpretation “The elements of a cause of action for breach of contract are the existence of a contract, the plaintiff’s performance under the contract, the defendant's breach of that contract, and resulting damages.”[1] “It is well settled that ‘[t]he fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent.’”[2] Because the “best evidence of what the parties intend is what they say in their writing, . . . a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.”[3] A contract is unambiguous if the language it uses has “a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion.”[4] “Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity.”[5] The moving party has the burden of establishing that the contract is ambiguous, i.e., that “its construction of the [contract] is the only construction [that] can fairly be placed thereon.”[6] Derkovitz v. Up State Tower Co., LLC Plaintiffs entered into a lease agreement (“lease”) with defendant to permit defendant to place a cell tower (“Communications Facility”) on a designated portion of plaintiffs’ property (“Premises”). As relevant to the action, the lease provided that plaintiffs would pay “all real estate taxes and assessments on the Property on time” and that defendant would pay “all personal property taxes on the Communications Facility on time.” The lease defined “Property” by the metes and bounds of the real property owned by plaintiffs, while “Communications Facility” is defined as “a pole or tower, and . . . related equipment, cables, antennas, equipment shelters or cabinets and fencing and any other items [defendant] need[s] to successfully and securely use the Premises.” The lease provided that title to the Communications Facility would remain “personal to and be vested in [defendant]” and was described in the lease as defendant’s “personal property.” However, neither “real estate taxes and assessments” nor “personal property taxes” is defined in the lease. New York State does not impose personal property taxes. The central dispute in Derkovitz was whether, in agreeing to “pay all personal property taxes on the Communications Facility,” defendant agreed to pay the additional tax attributable to the Communications Facility or whether, in agreeing to pay “all real estate taxes and assessments on the Property,” plaintiffs agreed to pay that additional tax. The motion court denied plaintiffs’ motion for summary judgment on the complaint and granted defendant’s cross-motion for, inter alia, summary judgment dismissing the complaint. Plaintiffs appealed. The Appellate Division, Fourth Department, modified the order on the law by denying the cross-motion and reinstated the complaint. The Court held “that the lease provisions regarding the parties’ respective tax obligations [were] ambiguous as to which party [was] responsible for paying the additional tax attributable to the Communications Facility.”[7] The Court rejected defendant’s argument “that the only reasonable interpretation of the lease [was] that it impose[d] upon plaintiffs the responsibility for paying the additional tax related to the Communications Facility inasmuch as the plain language require[d] plaintiffs to pay real estate taxes and assessments, that defendant [was] obligated to pay only personal property taxes, and that there are no personal property taxes imposed in New York State.”[8] The Court concluded that plaintiffs “effectively contend[ed] that the only reasonable interpretation of the provision requiring defendant to pay personal property taxes [was] that defendant agreed to pay the additional tax attributable to the Communications Facility and that any other interpretation would render that requirement ‘meaningless or without force or effect.’”[9] Cass v. Newell Plaintiff commenced the action alleging, inter alia, the breach of an option agreement between him and one of the defendants (“defendant”). Defendants moved pursuant to CPLR 3211 (a) (1), (5), and (7) to dismiss the complaint and pursuant to CPLR 3212 for summary judgment dismissing the complaint. The motion court denied the motion to the extent that it sought dismissal of the first, second, and fourth causes of action. Defendants appealed from the order to the extent that it denied their motion. The Appellate Division, Fourth Department, reversed. Plaintiff and defendant each held a 50% interest in defendants, Chautauqua Lakeview, LLC and Lakeview Hotel, LLC (collectively, “LLCs”), which owned and operated a hotel. In January 2015, plaintiff assigned his interests in the LLCs to defendant. In February 2015, plaintiff and defendant entered into an option agreement. Pursuant to the agreement, plaintiff had “the exclusive right and option to purchase the” 50% interests in the LLCs that he had transferred to defendant. The agreement provided that the “option shall expire at midnight on December 31, 2020, or so long as [defendant] shall continue to own 100% of the interests in” the LLCs. The agreement further provided that, at the termination of the option, plaintiff “shall have the right to extend the option period for an additional period of five . . . years.” In November 2023, plaintiff notified defendant of his intent to exercise the option, and defendant responded through his counsel that the agreement was not enforceable. The Court “agree[d] with defendants that the fourth cause of action, alleging breach of contract, as well as the first and second causes of action, which the parties agree[d] depend[ed] on the breach of contract cause of action, must be dismissed pursuant to CPLR 3211 (a) (1).”[10] The Court found that the “the option agreement [was] not ambiguous,” and that defendants “did not breach it.”[11] The Court explained that plaintiff’s attempt to extend the agreement was untimely: “When plaintiff attempted to exercise the option in November 2023, it had already expired inasmuch as the December 31, 2020 deadline had passed, plaintiff never exercised his right to extend the option period, and defendant no longer owned 100% of the interests in the LLCs.”[12] The Court noted that since “plaintiff never sought to exercise the option before it expired at the end of 2020, it [was] immaterial that defendant had already transferred the assets of the LLCs and dissolved the LLCs prior to that time,” which “the option agreement did not prohibit defendant from” doing.[13] In fact, said the Court, “selling his interests in the LLCs …[was] specifically contemplated” by the agreement “inasmuch as it provided that the option would expire at the end of 2020 ‘or so long as’ defendant continued to own 100% of the interests in the LLCs.”[14] The Court “reject[ed] plaintiff’s contention—raised as an alternative ground for affirmance—that the option agreement was ambiguous and may be interpreted as giving him, in addition to the option, the ‘exclusive right’ to purchase back his interests in the LLCs, i.e., that he was the only person who could buy those interests.”[15] The Court explained that “[p]laintiff’s interpretation ‘rest[ed] on an impermissibly strain[ed reading] to find an ambiguity which otherwise might not be thought to exist.’”[16] Notably, the Court found that “under plaintiff’s interpretation [of the agreement], the option term and extension of term provisions would be meaningless.”[17] In fact, said the Court, “under plaintiff’s interpretation, the option agreement never expires, which would be absurd and commercially unreasonable.”[18] Takeaway Derkovitz and Cass reinforce the principle that contract ambiguity is not triggered by disagreement between the parties, but by the language of the agreement itself. Courts begin, and often end, with the text of the agreement. Where contract provisions, read in context, are reasonably susceptible to more than one interpretation, ambiguity exists, and extrinsic evidence may be considered to ascertain the parties’ intent. But where the language has a definite and precise meaning, courts will enforce the contract as written, even if one party later comes to regret the bargain it struck. The contrast between Derkovitz and Cass illustrates how even seemingly careful drafting can nevertheless result in disputes over the meaning of a contract. In Derkovitz, the lease attempted to allocate tax responsibility by distinguishing between “real estate taxes” and “personal property taxes,” yet failed to define either term, and did so in an environment where one category of tax did not exist. That disconnect created a genuine interpretive problem, making summary resolution inappropriate and opening the door to extrinsic evidence. Derkovitz underscores that an undefined term can introduce ambiguity even when the overall structure of the contract appears clear and unambiguous. By contrast, Cass demonstrates that not every disagreement over meaning gives rise to ambiguity. In Cass, plaintiff sought to convert an option agreement with clear temporal limits into an open‑ended exclusive purchase right. The Court rejected that effort, emphasizing that courts will not strain contractual language to create ambiguity, particularly where doing so would render other provisions meaningless or lead to commercially unreasonable results. Taken together, Derkovitz and Cass highlight two practical lessons. First, precision in drafting matters – the contract should say what the parties mean and mean what it says. Second, New York’s text‑first approach is both a sword and a shield: it protects parties from after‑the‑fact reinterpretation, but only if the drafting leaves no reasonable room for doubt. Careful attention to definitions, internal consistency, and real‑world application remains the most reliable way to ensure that a contract means what the parties intend. __________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm. ___________________________________ [1] Pearl St. Parking Assoc. LLC v. County of Erie, 207 A.D.3d 1029, 1031 (4th Dept. 2022) (internal quotation marks omitted). [2] Colella v. Colella, 129 A.D.3d 1650, 1651 (4th Dept. 2015), quoting Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002). [3] Greenfield, 98 N.Y.2d at 569; see also MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640, 645 (2009) (internal quotation marks omitted); Brad H. v. City of New York, 17 N.Y.3d 180, 185 (2011); W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 162-163 (1990). [4] Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355 (1978), rearg. Denied, 46 N.Y.2d 940 (1979); see Selective Ins. Co. of Am. v. County of Rensselaer, 26 N.Y.3d 649, 655 (2016). [5] Greenfield v. Philles Records, 98 N.Y.2d 562, 569-570 (2002); see Selective Ins. Co. of Am., 26 N.Y.3d at 655. [6] Kowalak v. Keystone Med. Servs. of N.Y., P.C., 197 A.D.3d 893, 894 (4th Dept. 2021) (internal quotation marks omitted). [7] Derkovitz, Slip Op. at *1. [8] Id. [9] Id., citing Nomura Home Equity Loan, Inc., Series 2006-FM2 v. Nomura Credit & Capital, Inc., 30 N.Y.3d 572, 581 (2017). [10] Cass, Slip Op. at *1. [11] Id. [12] Id., citing Olden Group, LLC v. 2890 Review Equity, LLC, 209 A.D.3d 748, 751-752 (2d Dept. 2022). [13] Id. [14] Id. [15] Id. [16] Id., quoting Uribe v. Merchants Bank of N.Y., 91 N.Y.2d 336, 341 (1998) (internal quotation marks omitted), and citing Albert Frassetto Enters. V. Hartford Fire Ins. Co., 144 A.D.3d 1556, 1558 (4th Dept. 2016). [17] Id., citing Two Guys from Harrison-N.Y. v. S.F.R. Realty Assoc., 63 N.Y.2d 396, 403 (1984). [18] Id., citing NCCMI, Inc. v. Bersin Props., LLC, 226 A.D.3d 88, 96 (1st Dept. 2024); Matter of El-Roh Realty Corp., 74 A.D.3d 1796, 1800 (4th Dept. 2010).

By: Jonathan H. Freiberger On numerous occasions, this Blog has addressed issues related to RPAPL 1304. See, e.g., [here] and [here]. By way of brief background as discussed in prior articles, RPAPL 1304 requires that at least ninety days before commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes), a lender must: send written notice to the borrower by certified and regular mail that the loan is in default; provide a list of approved housing agencies that offer free or low-cost counseling; and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter. One purpose of RPAPL 1304 is to enable defaulted borrowers to “benefit from the information provided in the notice and the 90–day period during which the parties could attempt to work out the default without imminent threat of a foreclosure action, in an effort to further the ultimate goal of reducing the number of foreclosures”. CIT Bank N.A. v. Schiffman, 36 N.Y.3d 550, 555 (2021) (citation and internal quotation marks omitted). The failure of a lender to comply with RPAPL 1304 will result in the dismissal of a foreclosure complaint. See, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543 (1st Dept. 2018). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd Dept. 2020) (citations omitted); see also Nationstar Mortgage, LLC v. Owens, 247 A.D.3d 1204, *3 (2nd Dept. 2026). When failure to comply with RPAPL 1304 is raised as an affirmative defense, the foreclosing lender must demonstrate its compliance with the statute as part of its prima facie case. Bank of America, N.A. v. Wheatly, 158 A.D.3d 736, 737 (2nd Dept. 2018) (citations omitted); see also Wells Fargo Bank, N.A. v. Cascarano, 208 A.D.3d 729, 730 (2nd Dept. 2022). In Wells Fargo Bank, N.A. v. Davidson, 202 A.D.3d 880 (2nd Dep’t 2022), in reversing a judgment of foreclosure and sale and granting summary judgment to the borrowers, the Court stated that “[c]ontrary to the [lender’s] contention, the [borrowers] did not waive their contention that the [lender] failed to comply with RPAPL 1304 as a defense based on noncompliance with RPAPL 1304 may be raised at any time prior to the entry of a judgment of foreclosure and sale.” Davidson, 202 A.D.3d at 882 (citations, internal quotation marks and brackets omitted); see also U.S. Bank Nat. Ass’n v. Zakarin, 208 A.D.3d 1275, 1277 (2nd Dept. 2022). Standing is also an issue often litigated in foreclosure actions.[1] Generally speaking, “[s]tanding involves a determination of whether the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution. Graziano,v. County of Albany, 3 N.Y.3d 475, 479 (2004) (citations, internal quotation marks and brackets omitted). Put another way, “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request.” Caprer v. Nussbaum, 36 A.D.3d 176, 182 (2nd Dept. 2006). The issue of standing is frequently litigated in foreclosure actions because of the frequency with which notes and mortgages are sold, assigned or otherwise transferred. As a result of these transfers, the foreclosing plaintiff frequently does not have the necessary documentation to demonstrate that it is the holder of the note. Thus, litigation often relates to the foreclosing mortgagee’s standing to commence a foreclosure action. Sometimes, however, standing issues relate to the mortgagor’ ability to assert a claim or raise an argument – as is the case in Nationstar Mortgage LLC v. Vassi, the subject of today’s article. As an added bonus, Nationstar also involves RPAPL 1304. For the most part, the facts in Nationstar are routine. The lender commenced a mortgage foreclosure action in 2012. In July of 2017, the motion court issued an order granting lender’s unopposed motion for summary judgment. In January of 2025, the borrower transferred his interest in the subject property to a distressed property buyer (the “Transferee”). After three prior unsuccessful attempts, the lender filed a fourth motion to confirm the referee’s report and for a judgment of foreclosure and sale. In opposition to the lenders motion, the borrower (who no longer owned the subject property) argued that the Lender failed to comply with RPAPL 1304. The borrower also cross-moved for an order tolling interest.[2] In opposition to the borrower’s arguments related to non-compliance with RPAPL 1304, the lender argued that the borrower lacked standing to raise such issues because he no longer owned the subject property. The motion court agreed, noting that, as a result of the transfer, the borrower’s argument was “‘entirely defective’”. On appeal, the First Department held that “the [motion] court erroneously held that [the borrower] was divested of standing to challenge [lender]'s fourth motion and raise the defense of [lender]'s noncompliance with RPAPL 1304. Nevertheless, we affirm on the merits.” As to standing, the Court stated that “[n]otwithstanding [borrower]'s transfer of his interest in the mortgaged property to [the Transferee], [borrower] retained his standing to challenge the judgment of foreclosure and sale because he remains a defendant in the foreclosure action and is potentially liable for a deficiency judgment.” (Footnote omitted.) Indeed, the Court in Nationstar was moved by the following facts: the lender did not waive its right to seek a deficiency judgment under RPAPL 1371 against borrower; the lender sought a deficiency judgment against the borrower in its complaint; the judgment of foreclosure and sale provided for a deficiency judgment; and, because the subject property had not yet been sold, “a deficiency judgment remains a possibility given that a plaintiff has 90 days from the sale of the property to make a motion for a deficiency judgment before losing that right (see RPAPL 1371 [2], [3]).” The Court also noted that it “is well settled that a defendant lacks standing to defend the action where it transfers the mortgaged property to a third party during the foreclosure action and the plaintiff waives its right to a deficiency judgment.” (Citations omitted; emphasis in original.) Further, because the borrower “is subject to a potential deficiency judgment and is a debtor on the underlying mortgage, he has an interest in defending the action notwithstanding that he transferred the mortgaged property to [the Transferee] and as a result, no longer has the right to redeem the property.”[3] While the Court concluded that the borrower has standing to defend the action, it concluded that the borrower’s RPAPL 1304 arguments failed on the merits because the evidence established compliance with the font size and mailing requirements. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This BLOG has written on standing in mortgage foreclosure actions. See, e.g., [here] and [here]. [2] This BLOG has written on the tolling of interest in mortgage foreclosure actions. See, e.g., [here]. [3] This BLOG has previously addressed redemption rights. See, e.g., [here].

By: Jonathan H. Freiberger This Blog has frequently written about numerous different issues regarding residential mortgage foreclosure. One recurring issue relates to the evidentiary proof necessary for the lender to satisfy its prima facie foreclosure case and/or to demonstrate its standing to commence its foreclosure action (when the borrower raises standing as a defense). [Eds. Note: such issues have been discussed in this Blog, inter alia, [here] and [here].] In order to “establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and evidence of default.” M&T Bank v. Barter, 186 A.D.3d 698, 700 (2nd Dep’t 2020) (citations omitted). However, where “a plaintiff’s standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief.” Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973-74 (2nd Dep’t 2014) (citation and internal quotation marks omitted). A lender establishes standing in a foreclosure action “by demonstrating that, when the action was commenced, it was either the holder or the assignee of the underlying note.” U.S. Bank National Association v. Seeley, 177 A.D.3d 933, 935 (2nd Dep’t 2019) (citations omitted). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the underlying mortgage passes with the debt as an inseparable incident.” Dyer Trust 2021-1 v. Global World Realty, Inc., 140 A.D.3d 827, 828 (2ND Dep’t 2016) (citations omitted). As the Court of Appeals explained in Aurora Loan Services, LLC. V. Taylor, 25 N.Y.3d 355 (2015): … it is not necessary to have possession of the mortgage at the time the action is commenced. This conclusion follows from the fact that the note, and not the mortgage, is the dispositive instrument that conveys standing to foreclose under New York law. In the current case, the note was transferred to Aurora before the commencement of the foreclosure action—that is what matters. A transfer in full of the obligation automatically transfers the mortgage as well unless the parties agree that the transferor is to retain the mortgage. Any disparity between the holder of the note and the mortgagee of record does not stand as a bar to a foreclosure action because the mortgage is not the dispositive document of title as to the mortgage loan; the holder of the note is deemed the owner of the underlying mortgage loan with standing to foreclose. Aurora, 25 N.Y.3d at 361 - 362 (citations, internal quotation marks and brackets omitted). Whether the lender satisfied the evidentiary requirements of proving standing was one of the issues decided on March 23, 2022, by the Appellate Division, Second Department, in Wells Fargo Bank, N.A. v. Farfan. The borrower in Farfan borrowed $300,000 and secured his repayment obligation with a mortgage on property in Queens County. In 2007, the lender commenced a foreclosure action upon the borrower’s default. In his answer, borrower, among other things, asserted as a defense that the lender lacked standing to foreclose. The lender’s motion for, inter alia, summary judgment on its complaint, striking the borrower’s answer and for an order of reference was granted by supreme court in 2018. A judgment of foreclosure and sale was entered in 2020 (the “Judgment”). On the borrower’s appeal, the Second Department reversed the Judgment and denied the lender’s motion for summary judgment on the complaint, to strike the borrower’s answer and for an order of reference. After discussing the legal issues discussed below, the Court addressed the sufficiency of the lender’s proof of standing and stated: Here, in support of its motion, the [lender] submitted an affidavit of Teri L. Townsend, who averred that, in her position as vice president of loan documentation for the [lender], she had access to and was familiar with the business records related to the mortgage loan at issue. She averred that the records were maintained in the ordinary course of business, and were "made at or near the time of the occurrence of the matters recorded by persons with personal knowledge of the information in the business record, or from information transmitted by persons with personal knowledge." Townsend further averred that, based on her review of the [lender]'s "correspondence with the custodian regarding this loan, LaSalle Bank National Association, as prior custodian, was in possession of the original Note on October 24, 2007, the date the Complaint was filed." However, Townsend failed to specify which entity generated the subject correspondence, and, to the extent the correspondence was not generated by the [lender], failed to state that she was familiar with the record-keeping practices and procedures of the entity that generated the correspondence, or that the correspondence was incorporated into the [lender]’s own records and routinely relied upon by the [lender] in its own business. The Court further found that the lender’s proof would have still been inadequate even if it laid a “proper foundation for the admissibility of the unspecified correspondence she relied on” because “Townsend failed to identify the records upon which she relied in making the statements, and the [lender] failed to submit copies of the records themselves” noting that “[i]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted.” (Citations, internal quotation marks and brackets omitted.) Finally (as is relevant to this article), the Court found that the lender failed to establish two additional facts critical to the lender’s standing claim: While the plaintiff's submissions established a chain of assignments of mortgage ending with the plaintiff's alleged predecessor in interest, Norwest Mortgage, Inc., the last assignment in the chain does not indicate that the subject note was assigned together with the subject mortgage. Further, the plaintiff failed to submit evidence to establish that its immediate predecessor by merger, Wells Fargo Home Mortgage, Inc., was formerly known as Norwest Mortgage, Inc., as indicated in the caption on the complaint in this action, or whether Wells Fargo Home Mortgage, Inc., merged with Norwest Mortgage, Inc., as Townsend averred. Thus, the plaintiff also failed to establish its standing as assignee of the note prior to commencement. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jonathan H. Freiberger In order to prosecute a lawsuit, the plaintiff must have standing to do so. "Standing involves a determination of whether the party seeking relief has a sufficiently cognizable stake in the outcome so as to cast the dispute in a form traditionally capable of judicial resolution." Graziano,v. County of Albany, 3 N.Y.3d 475, 479 (2004) (citations, internal quotation marks and brackets omitted). Put another way, “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request.” Caprer v. Nussbaum, 36 A.D.3d 176, 182 (2nd Dep’t 2006). Accordingly, the question of whether a plaintiff has standing is “is a threshold determination, resting in part on policy considerations, that a person should be allowed access to the courts to adjudicate the merits of a particular dispute that satisfies the other justiciability criteria.” Caprer, 36 A.D.3d at 182 (Citations omitted). “‘Injury-in-fact has become the touchstone’ and requires ‘an actual legal stake in the matter being adjudicated.’” Big Apple Consulting USA, Inc. v. Belmont Partners, LLC, 20 Misc. 3d 1144(A) (Sup. Ct. Nassau Co. 2008) (quoting Soc. Of Plastics Indus. Inc. v. County of Suffolk, 77 N.Y.2d 761, 772 (1991)). The Carper Court noted that the “Court of Appeals has defined the standard by which standing is measured, explaining that a plaintiff, in order to have standing in a particular dispute, must demonstrate an injury in fact that falls within the relevant zone of interests sought to be protected by law”. Caprer, 36 A.D.3d at 183 (citing Matter of Fritz v. Huntington Hosp., 39 N.Y.2d 339, 346 (1976). The issue of standing is a frequently litigated issue in mortgage foreclosure actions.[1] This is so because of the frequency with which notes and mortgages are sold, assigned or otherwise transferred. As a result of these transfers, the foreclosing plaintiff frequently does not have the necessary documentation to demonstrate that it is the holder of the note. Because of these “paperwork” issues, borrowers frequently raise the standing defense to put foreclosing lenders to their proof on the standing issue. We have previously noted that in order to “establish prima facie entitlement to judgment as a matter of law in an action to foreclose a mortgage, a plaintiff must produce the mortgage, the unpaid note, and evidence of default.” M&T Bank v. Barter, 186 A.D.3d 698, 700 (2nd Dep’t 2020) (citations omitted). However, where “a plaintiff’s standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief.” Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973-74 (2nd Dep’t 2014) (citation and internal quotation marks omitted). A lender establishes standing in a foreclosure action “by demonstrating that, when the action was commenced, it was either the holder or the assignee of the underlying note.” U.S. Bank National Association v. Seeley, 177 A.D.3d 933, 935 (2nd Dep’t 2019) (citations omitted). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the underlying mortgage passes with the debt as an inseparable incident.” Dyer Trust 2021-1 v. Global World Realty, Inc., 140 A.D.3d 827, 828 (2nd Dep’t 2016) (citations omitted). While it may seem counterintuitive in the context of a mortgage foreclosure action, the operative document necessary to confer standing is not the mortgage but the promissory note and the “transfer of the full obligation [under the note] automatically transfers the mortgage as well unless the parties agree that the transferor is to retain the mortgage.” Aurora Loan Services, LLC. V. Taylor, 25 N.Y.3d 355, 361-62 (2015).[2] Traditionally, in all actions, the defense of standing was waived if not raised by the defendant in an answer or pre-answer motion to dismiss. See, e.g., Wells Fargo Bank Minnesota, Nat. Ass’n v. Mastropaolo, 42 A.D.3d 239, 242-43 (2nd Dep’t 2007). However, RPAPL 1302-a, which became effective in December of 2019, and changed that rule in the context of certain mortgage foreclosure actions, provides: Notwithstanding the provisions of subdivision (e) of rule thirty-two hundred eleven of the civil practice law and rules, any objection or defense based on the plaintiff's lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss. A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant's default. [Hyperlinks added.] On April 17, 2024, the Appellate Division, Second Department, in Citibank, N.A. v. Boyce, addressed the issue of the waiver of a standing defense. The lender in Boyce commenced a foreclosure action and the borrower defaulted. Thereafter, an order of reference was entered. Protracted litigation ensued due to the borrower’s attempt to vacate the default, which included an appeal. The default, however, was not vacated because the borrower failed to demonstrate a reasonable excuse for her default. The borrower interposed similar opposition to the lender’s motion for a judgment of foreclosure and sale, but the opposition was similarly “rejected”. In March of 2020, several months after the effective date of RPAPL 1302-a, the borrower moved pursuant to that statute for a determination of the lender’s standing. Plaintiff opposed the motion on the ground that the borrower failed to vacate her default. The motion court granted the motion to the extent of directing a hearing on the standing issue. The lender then moved for leave to renew its opposition to the borrower’s RPAPL 1302-a motion. The motion court granted the motion and, upon renewal, denied the borrower’s motion. On the borrower’s appeal, the Second Department affirmed finding that RPAPL 1302-a does not apply to defaulting defendants. In so doing the Court stated: “A motion for leave to renew is the appropriate vehicle for seeking relief from a prior order based on a change in the law, including a clarification of decisional law" (Sharan v Christiana Trust, 219 AD3d 1549, 1551 [internal quotation marks omitted]; see CPLR 2221[e][2]). Pursuant to RPAPL 1302-a, which became effective in December 2019, notwithstanding the provisions of CPLR 3211(e), "any objection or defense based on the plaintiff's lack of standing in a foreclosure proceeding related to a home loan . . . shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss" (see Citimortgage, Inc. v Rogers, 203 AD3d 1125, 1126). However, RPAPL 1302-a does not apply to a defaulting defendant (see U.S. Bank N.A. v Goldberger, 211 AD3d 1077, 1078; Ditech Fin., LLC v Howell, 201 AD3d 786, 788; see also Wells Fargo Bank, N.A. v Davis, 216 AD3d 704, 706). Accordingly, the Supreme Court properly granted the plaintiff's motion for leave to renew and, upon renewal, denied the defendants' motion. [Hyperlinks added.] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Eds. Note: this BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. At this point, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issues that may be of interest you. [2] Eds. Note: this BLOG has addressed standing issues, including a lender’s required proof when the standing issue is raised, here, here and here.

By: Jonathan H. Freiberger This BLOG has written extensively on a wide variety of issues in the area of mortgage foreclosure.[1] While we have not written about RPAPL 1304 in a while it has been the subject of numerous articles in the past.[2] By way of brief background, and as has been previously discussed, the Second Department has stated that an “RPAPL 1304 notice is a notice pursuant to the Home Equity Theft Prevention Act (Real Property Law § 265-a), the underlying purpose of which is to afford greater protections to homeowners confronted with foreclosure.” Wells Fargo Bank, N.A. v. Yapkowitz, 199 A.D.3d 126, 131 (2nd Dep’t 2021) (some citations and internal quotation marks omitted; hyperlink added). The Yapkowitz Court continued, noting that “RPAPL 1304 requires that at least 90 days before a lender, an assignee, or a mortgage loan servicer commences an action to foreclose the mortgage on a home loan as defined in the statute, such lender, assignee, or mortgage loan servicer must give notice to the borrower.” Id. (citations and internal quotation marks omitted). The failure of the “lender, assignee or mortgage loan servicer” to comply with RPAPL § 1304 will result in the dismissal of a foreclosure complaint (see, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543, 544 (1st Dep’t 2018)) when the issue is raised by the borrower (see, e.g., One West Bank, FSB v. Rosenberg, 189 A.D.3d 1600, 1602-3 (2nd Dep’t 2020) (citation omitted)). A foreclosing lender must be in “strict compliance” with the requirements of RPAPL 1304. U.S. Bank Nat. Ass’n v. 22-23 Brookhaven, Inc., 219 A.D.3d 657, 664 (2nd Dep’t 2023). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd7 Dep’t 2020) (citations omitted). Moreover, lender has the burden of establishing compliance with RPAPL 1304. BAC Home Loans Servicing, L.P. v. Chertov, 165 A.D.3d 1214, 1215 (2nd Dep’t 2018) (citations omitted). In order to demonstrate compliance with requisite mailing of notices, Plaintiff must submit “proof of the actual mailings, such as affidavits of mailing or domestic return receipts with attendant signatures, or proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by someone with personal knowledge of the procedure.” Wilmington Trust, N.A. v. Meyerhoeffer, 219 A.D.3d 549, 551 (2nd Dep’t 2023) (citations and internal quotation marks omitted); see also Ditech Servicing, LLC v. McFadden, 217 A.D.3d 923, 926 (2nd Dep’t 2023). Further, “[e]vidence of an established and regularly followed office procedure may give rise to a rebuttable presumption that such a notification was mailed to and received by the intended recipient.” Wilmington Trust, 219 A.D.3d. at 552 (citations, internal quotation marks and brackets omitted). “In order for the presumption to arise, the office practice must be geared so as to ensure the likelihood that the notice is always properly addressed and mailed.” Id. (citations, internal quotation marks, ellipses and brackets omitted). In Wilmington Trust, the Court found the affidavit from the servicer’s employee to be insufficient because it “failed to specifically describe the procedures in place designed to ensure that … notices were properly addressed and mailed….” Id. On August 3, 2025, the Appellate Division, Second Department, decided Wilmington Savings Fund Society, FSB v. Blum, a case involving the sufficiency of proof submitted on lender’s motion for summary judgment.[3] The lender in Wilmington Savings commenced an action to foreclose a mortgage and, subsequently, moved for summary judgment. The motion was denied because material issues of fact existed as to whether the lender complied with RPAPL 1304. There were questions as to the sufficiency of the business records submitted by the lender in its effort to establish compliance with RPAPL 1304.[4] In affirming the motion court’s denial of the lender’s motion,[5] the Court stated: Here, the plaintiff relies on a contemporaneous affidavit of mailing of Michael Buscemi, among other things, to demonstrate its compliance with RPAPL 1304. Buscemi averred, in relevant part, that he sent copies of the subject 90-day notice to the defendant at the subject property via certified and first-class mail. However, Buscemi failed to aver to his employer, and the plaintiff failed to demonstrate, that Buscemi was somehow affiliated with the plaintiff's counsel or otherwise authorized to send the 90-day notice on behalf of the plaintiff. The notices were sent in envelopes with a return address in California for the plaintiff. Accordingly, the Supreme Court properly determined that the plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1304. Because the lender failed to meet its burden of demonstrating compliance with RPAPL 1304, as opposed to the borrower demonstrating that the RPAPL 1304 notices were not served or were improperly served, the Court denied the motion for summary judgment, as opposed to dismissing the action. In so doing, the Court noted that “[s]ince the plaintiff failed to satisfy its prima facie burden with respect to its strict compliance with RPAPL 1304, those branches of its motion which were for summary judgment on the complaint insofar as asserted against the defendant and for an order of reference were properly denied regardless of the sufficiency of the defendant's opposition papers.” (Citation omitted.) Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure, or other commercial litigation, issue that may be of interest you. [2] This BLOG has written numerous articles addressing RPAPL 1304. To find such articles, please see the BLOG tile on our website and type “1304” into the “search” bar. [3] Editor’s Note: in the preparation of this article, the records of the underlying action available on the NYSCEF website were reviewed and relied upon. [4] This BLOG has written numerous articles addressing business records as proof in mortgage foreclosure actions. To find such articles, please see the BLOG tile on our website and type “1304 business records” or “foreclosure business records” into the “search” bar. [5] In the order from which the appeal was taken, the motion court noted that “the affidavit of service relating to the RPAPL 1304 Notice is made by “Michael Buscemi” who does not state for whom he is employed, but the affidavit appears to be notarized in Nassau County, however the envelope that the RPAPL 1304 Notice was mailed in bears a return address located in Seal Beach, California.

By: Jonathan H. Freiberger On numerous occasions, this Blog has addressed issues related to RPAPL 1304. [Eds. Note: to view this Blog’s prior articles on RPAPL 1304, kindly type “RPAPL 1304” in the search box of the Blog Tile on Freiberger Haber LLP’s website.] By way of brief background as discussed in prior articles, RPAPL 1304 requires that at least ninety days before commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes), a lender must: send written notice to the borrower by certified and regular mail that the loan is in default; provide a list of approved housing agencies that offer free or low-cost counseling; and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter. One purpose of RPAPL 1304 is to enable defaulted borrowers to “benefit from the information provided in the notice and the 90–day period during which the parties could attempt to work out the default without imminent threat of a foreclosure action, in an effort to further the ultimate goal of reducing the number of foreclosures”. CIT Bank N.A. v. Schiffman, 36 N.Y.3d 550, 555 (2021) (citation and internal quotation marks omitted). The failure of a lender to comply with RPAPL 1304 will result in the dismissal of a foreclosure complaint. See, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543 (1st Dep’t 2018). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd Dep’t 2020) (citations omitted). When failure to comply with RPAPL 1304 is raised as an affirmative defense, the foreclosing lender must demonstrate its compliance with the statute as part of its prima facie case. Bank of America, N.A. v. Wheatly, 158 A.D.3d 736, 737 (2nd Dep’t 2018) (citations omitted). However, a “defense based on noncompliance with RPAPL 1304 may be raised at any time during the action.” Nationstar Mortgage, LLC v. Matles, 185 A.D.3d 703, 706 (2nd Dep’t 2020) (citations and internal quotation marks omitted). In Wells Fargo Bank, N.A. v. Davidson, 202 A.D.3d 880 (2nd Dep’t 2022), in reversing a judgment of foreclosure and sale and granting summary judgment to the borrowers, the Court stated that “[c]ontrary to the [lender’s] contention, the [borrowers] did not waive their contention that the [lender] failed to comply with RPAPL 1304 as a defense based on noncompliance with RPAPL 1304 may be raised at any time prior to the entry of a judgment of foreclosure and sale.” Davidson, 202 A.D.3d at 882 (citations, internal quotation marks and brackets omitted); see also U.S. Bank Nat. Ass’n v. Zakarin, 208 A.D.3d 1275, 1277 (2nd Dep’t 2022). Because RPAPL 1304 notices must be sent to all “borrowers,” knowing who the “borrowers” are is of critical importance. While one might think that the status of borrower is limited to the person executing the promissory note, such is not always the case. Frequently, real property is jointly owned. If one joint owner of real property borrows money from a lender and jointly owned real property is used to secure that repayment obligation, the lender will almost always require all owners to execute the related mortgage. In such cases, all owners are generally listed as “borrowers” on the mortgage even though they did not borrow money from the lender and, accordingly, have no repayment obligations under the promissory note. Nonetheless, non-obligors under the promissory note are deemed to be “borrowers” for the purposes of RPAPL 1304. See, e.g. HSBC Bank USA v. DiBenedetti, 205 A.D.3d 687, 689 (2nd Dep’t 2022); Deutsche Bank Nat. Trust Co. v. Weininger, 206 A.D.3d 882, 883 (2nd Dep’t 2022). This rule was reinforced on June 20, 2024, by the Second Department in Deutsche Bank Nat’l Trust Co. v. Cincu. Michael Cincu (“Michael”) borrowed money from the plaintiff lender. The loan was secured by a mortgage on property owned by Michael and Edith Cincu (“Edith”). As a result of a default, the lender commenced a foreclosure action. The lender’s subsequent motion for summary judgment was granted and, thereafter, the appointed referee issued a report as to the amounts due. Edith opposed the lender’s motion to confirm the referee’s report and cross-moved for leave to renew her opposition to the lender’s summary judgment motion. The motion court granted the lender’s motion and denied Edith’s cross-motion. Edith appealed. The Second Department reversed finding that the motion court erred in denying Edith’s cross-motion to renew. The Court pointed out that motions to renew “shall be based upon new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination” (CPLR 2221[e][2]). (Additional citation omitted). The Court then stated that clarifications of decisional law are “a sufficient change in the law to support renewal.” (Citations and internal quotation marks omitted.) The Court found that Bank of N.Y. Melon v. Forman, 176 A.D.3d 663 (2nd Dep’t 2019), clarified the law on who is considered a “borrower,” by determining that an individual identified as a “borrower” on the mortgage, although not an obligor on the related promissory, is deemed to be a borrower for RPAPL 1304 notice purposes. Since Forman was decided after the Cincu motion court granted summary judgment to the lender, Edith was entitled to renewal under CPLR 2221. In so holding, the Court stated: Here, although [Edith] did not execute the underlying note, she was identified as a borrower both on the first page of the mortgage agreement and beneath her signature on the mortgage agreement. Though the [lender] contends that a separate provision of the mortgage agreement indicates that [Edith] is not obligated to pay the amounts due under the note, [she] is nonetheless a borrower entitled to notice pursuant to RPAPL 1304. The record is, therefore, sufficient to establish that [Edith] is a borrower for purposes of RPAPL 1304, and it is undisputed that the [lender] failed to serve [Edith] with the requisite RPAPL 1304 notice. [Edith] thus established a change in the law that would change the [motion court’s] prior determination of that branch of the [lender’s] motion which was for summary judgment on the complaint insofar as asserted against [Edith]. The Supreme Court should have denied the [lender’s] motion, inter alia, to confirm the referee's report and for a judgment of foreclosure and sale inasmuch as it was predicated on the July 16, 2019 order granting that branch of the [lender’s] motion which was for summary judgment on the complaint insofar as asserted against [Edith]. Moreover, the court should have awarded summary judgment to [Edith] dismissing the complaint insofar as asserted against her. [Edith] established her prima facie entitlement to judgment as a matter of law since it is undisputed that the [lender] failed to serve [Edith] with the requisite RPAPL 1304 notice and [Edith] submitted an affidavit stating that she did not receive the RPAPL 1304 notice. In opposition, the [lender] failed to raise a triable issue of fact. [Citations omitted.] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice.

By: Jeffrey M. Haber Under New York law, fraud claims are not duplicative of breach of contract claims when they are based on misrepresentations of present fact collateral to the contract, even if they seek the same damages. Applying that rule, the Appellate Division, First Department held in Metropolitan Partners Group Admin., LLC v. Nerney , 2026 N.Y. Slip Op. 02340 (1st Dept. Apr. 16, 2026), that plaintiff adequately pleaded both fraud and breach of contract claims arising from a $16 million secured loan to Schweizer RSG, LLC. Metropolitan alleged that the individual defendants overstated inventory values to induce the loan, then concealed defaults through accounting manipulation, asset diversion, and obstruction of enforcement efforts. The Court found the breach of contract claims sufficient because defendants allegedly acted in bad faith to interfere with Metropolitan’s rights, and held that the fraud claims, centered on inflated inventory representations, were independent of contractual performance obligations. Accordingly, the Court held that both claims could proceed side‑by‑side at the pleading stage. [1] In 2022, Metropolitan Partners Group Administration, LLC and its affiliated funds (“Metropolitan”) agreed to provide secured financing to Schweizer RSG, LLC (“Schweizer”), a helicopter manufacturer then controlled by its Chairman and CEO. Metropolitan extended a $20 million credit facility, with $16 million funded at closing, based primarily on alleged representations that Schweizer’s inventory, pledged as collateral, was worth more than $56 million. In connection with the loan, defendants provided inventory schedules and valuation materials during due diligence. Metropolitan alleged these materials were materially false. Metropolitan claimed that the inventory lists and valuations presented to Metropolitan to support the loan included non-existent parts. Also, in connection with the loan, the individual defendants executed personal “Validity Guarantees.” These guarantees provided Metropolitan with full recourse if the guarantors acted in bad faith to impair Metropolitan’s rights as a lender, and indemnification for losses arising from fraud, misappropriation, or unauthorized use of collateral. Shortly after the loan was funded in August 2022, Schweizer allegedly began violating financial covenants, including liquidity and EBITDA requirements. Metropolitan alleged that rather than disclose Schweizer’s true financial condition, the individual defendants engaged in a series of accounting manipulations designed to conceal defaults and avoid foreclosure. These included directing accountants to recognize deposits for incomplete helicopter sales as current revenue and recording expected payments long before cash was actually received. Metropolitan further alleged that, while the loan was outstanding, the individual defendants diverted Schweizer funds and assets to a network of affiliated companies controlled by Schweizer’s CEO. According to Metropolitan, Schweizer and the RSG entities shared facilities, personnel, accounting systems, and banking access, enabling the improper transfer of cash and inventory away from Schweizer in violation of the loan documents. Relying on the allegedly false financial information, Metropolitan entered into multiple forbearance agreements in 2023 and 2024, temporarily refraining from exercising its contractual remedies. Eventually, third‑party advisors and appraisers reportedly determined that Schweizer’s inventory values were materially overstated – information that Metropolitan claimed was never disclosed during the forbearance negotiations. In early 2025, Metropolitan claimed that it had uncovered the alleged schemes and commenced litigation. It also exercised its contractual right to appoint a receiver over Schweizer. By that time, Schweizer reportedly lacked cash to meet payroll, had commingled assets with affiliates, and had sold inventory for short‑term liquidity, further impairing Metropolitan’s collateral. Metropolitan asserted claims for breach of contract against the individual defendants, alleging bad-faith interference with its rights under the guarantees. It also asserted fraud claims, contending the loan was induced by false inventory representations and prolonged by intentional financial misstatements designed to delay enforcement. Defendants moved to dismiss. The motion court denied the motion. The First Department unanimously affirmed. The Court held that “Plaintiffs sufficiently stated a cause of action for breach of contract against [the individual defendants] by alleging that those defendants breached valid guaranties that they gave to plaintiffs.” [2]  The Court explained that the allegations were sufficient to state breach of contract claims because, as pleaded, the individual defendants engaged in conduct prohibited by their guaranties. [3] The Court noted that the full‑recourse provisions guaranteed against any bad‑faith acts that hindered or interfered with Metropolitan’s enforcement rights, and that plaintiffs alleged such interference through deliberate obfuscation of Schweizer’s books and records, providing false passwords to delay the receiver’s access to financial systems, and preparing materially inaccurate spreadsheets intended to mislead the lender. [4]  The Court also found that plaintiffs adequately pleaded breaches of the indemnity guarantees by alleging that the individual defendants misappropriated or transferred collateral and willfully disposed of collateral after default. [5]  The Court concluded that these allegations described conduct expressly covered by the guarantees and, therefore, sufficiently supported the breach of contract claims. [6] The Court also held that the “fraud claims against [the individual defendant] and the RSG defendants were also sufficiently particular to satisfy CPLR 3016(b).” [7]  The Court found that the “bulk of plaintiffs’ fraud claims rel[ied] on specific allegations that defendants misrepresented the value of Schweizer’s inventory in February 2022 to induce plaintiffs to make the loan.” [8]   The Court further held that the fraud claims “were not duplicative to the breach of contract claims.” [9] Courts apply the duplication doctrine when a plaintiff alleges a breach of contract claim and a fraud claim that arise from the same facts and circumstances. In that regard, a fraud claim will be deemed duplicative of a contract claim when the fraud claim arises from the same facts, seeks the same damages, and does not allege a breach of any duty collateral to or independent of the parties’ agreements. [10]  Moreover, “[a] fraud-based claim [will be deemed to be] duplicative of a breach of contract claim when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract.” [11]  Finally, “a plaintiff may maintain a fraud cause of action in the alternative to a breach of contract claim where the ‘fraud cause of action was collateral to the . . . contract . . . regardless of whether the causes of action sought the same damages.’” [12]   The Court held that the fraud claims were not duplicative of the breach of contract claims because they were based on misrepresentations of present facts that were collateral to the parties’ contracts, not on a mere failure to perform contractual obligations. Specifically, the breach of contract claims arose from post‑loan conduct, including bad faith interference with Metropolitan’s enforcement rights and misappropriation of collateral, allegedly violating the guaranties’ full‑recourse and indemnity provisions. By contrast, the fraud claims centered primarily on pre‑closing misrepresentations, particularly allegations that defendants knowingly inflated the value of Schweizer’s inventory in February 2022 to induce Metropolitan to make the loan. Accordingly, the Court concluded that “plaintiffs [would] be permitted to pursue their fraud claims in addition to their breach of contract claims at this early stage of the litigation.” [13] Takeaway Metropolitan Partners  offers a clear illustration of how New York courts distinguish fraud claims from breach of contract claims when both arise out of the same transaction. Although defendants often argue that fraud claims impermissibly duplicate contract claims, the Court emphasized that duplication turns on the duty breached and the conduct alleged, not on whether the claims arise from the same facts or seek similar relief. The breach of contract claims in Metropolitan Partners were rooted in the guarantees themselves. The individual defendants allegedly violated express contractual provisions, particularly the full‑recourse clauses barring bad‑faith interference with enforcement rights and the indemnity clauses covering losses from misappropriation or unauthorized collateral transfers. These claims focused on post‑closing misconduct, including obstructing access to records, misleading a court‑appointed receiver, and diverting assets after default. In other words, the claimed wrongs constituted failures to comply with obligations defendants expressly undertook by contract. The fraud claims rested primarily on alleged misrepresentations of present fact, most notably inflated inventory values, made before the loan closed to induce Metropolitan to extend credit and, later, to delay enforcement. The Court found that statements about existing inventory were not promises of future performance; they were factual assertions external to the contract itself. Because misrepresentations of present fact are collateral to contractual promises, they implicate an independent legal duty and may support a fraud claim notwithstanding the existence of comprehensive contractual agreements ( i.e. , where the parties later reduce their relationship to detailed written agreements). Notably, the Court rejected duplication arguments even though the fraud and contract claims sought similar damages. [14]  Overlapping remedies did not doom the fraud claims because the alleged fraud concerned inducement and concealment, while the contract claims addressed interference with contractual rights and misuse of collateral. As the Court explained, duplication analysis depends on whether the fraud is collateral to the contract, not on whether the same relief is ultimately at stake. _________________________________ Jeffrey M. Haber  is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice. Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm. _________________________________ [1] The factual discussion of the case comes from the parties’ briefs on appeal. [2] Slip Op. at *1. [3] Id. [4] Id. [5] Id. [6] Id. [7] Id.  at *2. Under CPLR 3016(b), the circumstances constituting fraud must be stated with sufficient detail “to permit a reasonable inference of the alleged conduct.” Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 491 (2008) (citation omitted). Conclusory allegations will not suffice. Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559-60 (2009). [8] Id. [9] Id. [10] Havell Capital Enhanced Mun. Income Fund, L.P. v. Citibank, N.A. , 84 A.D.3d 588, 589 (1st Dept. 2011). See also   GoSmile, Inc. v Levine ,  81 A.D.3d 77 , 81 (1st Dept. 2010),  lv. dismissed ,   17 N.Y.3d 782 (2011). [11] Manas v. VMS Assoc., LLC , 53 A.D.3d 451, 453 (1st Dept. 2008); see also Cronos Group Ltd. v. XComIP, LLC , 156 A.D.3d 54, 64-65 (1st Dept. 2017); HSH Nordbank AG v. UBS AG , 95 A.D.3d 185, 206 (1st Dept. 2012); Metropolitan Life Ins. Co. v. Noble Lowndes Intl. , 192 A.D.2d 83, 88 (1st Dept. 1993). [12] Slip Op. at *2 (quoting Scarola Zubatov Schaffzin PLLC v. Dynamic Credit Partners, LLC ,  210 A.D.3d 605 , 607 (1st Dept. 2022) and citing Shear Enters., LLC v. Cohen ,  189 A.D.3d 423 , 424 (1st Dept. 2020)). [13] Slip Op. at *2. [14] In the First Department, it is not uncommon for the Court to dismiss fraud claims as duplicative of contract claims where the damages overlap.

By: Jonathan H. Freiberger The end result of the long and drawn-out mortgage foreclosure process in New York is the foreclosure sale – a public auction at which the foreclosed property is sold to the highest bidder. A question frequently asked by borrowers during the foreclosure process is: “Is there anything I can do to keep my house.” Although there are many answers to that question, the one relevant to todays article is: “You can exercise your equity of redemption.” The United States Supreme Court has stated that: It is also an established doctrine that an equity of redemption is inseparably connected with a mortgage; that is to say, so long as the instrument is one of security, the borrower has in a court of equity a right to redeem the property upon payment of the loan. This right cannot be waived or abandoned by any stipulation of the parties made at the time, even if embodied in the mortgage. This is a doctrine from which a court of equity never deviates. Its maintenance is deemed essential to the protection of the debtor, who, under pressing necessities, will often submit to ruinous conditions, expecting or hoping to be able to repay the loan at its maturity, and thus prevent the conditions from being enforced and the property sacrificed. Peugh v. Davis , 96 U.S. 332, 337 (1877). Relying on, inter alia, Peugh , the New York Court of Appeals has also recognized that the equity of redemption is a protective right that cannot be waived. Hughes v. Harlam , 166 N.Y. 427, 432 (1901). The right to redeem the equity of redemption can be exercised “at any time before an actual sale under a judgment of foreclosure.” Belsid Holding Corp. v. Dahm , 12 A.D.2d 91, 92 (2nd Dept. 1960); see also Deutsche Bank Co. of Ca., N.A. v. DePalo , 38 A.D.3d 490, 490 (2nd Dept. 2007). To exercise the equity of redemption one need only tender the “full sum due”. Wilmington Sav. Fund Society, FSB v. Thomas , 226 A.D.3d 1064, 1067 (2nd Dept. 2024); see also Virkler v. V.S. Virkler & Son, Inc. , 196 A.D.3d 1127, 1129 (4th Dept. 2021). The equity of redemption is extinguished by the foreclosure sale. Deutsche Bank , 38 A.D.3d at 490. This is so even if the referee’s deed has not yet been transferred to the purchaser at the sale. Bank of New York v. Ortiz , 30 A.D.3d 551, 551 (2nd Dept. 2006). Against this backdrop, we discuss Shorehaven Homeowners Assn., Inc. v. Campbell , a case decided on April 14, 2026, by the Appellate Division, First Department. [1] While Shorehaven involves the foreclosure of a homeowner’s association lien, the same principles apply. The plaintiff in Shorehaven, a homeowner’s association, commenced an action to foreclose a lien for, inter alia , unpaid common charges. In 2024, the motion court “issued an order for final judgment of foreclosure and sale and a money judgment in the amount of $40,484.59, together with interest, current common charges, special assessments and late charges.” After the defendant made two payments to the plaintiff, in lieu of bringing the foreclosure to sale pursuant to the judgment of foreclosure, the parties executed an agreement by which the plaintiff agreed to stay proceedings while the defendant made monthly payments for two years to satisfy the remainder of her outstanding obligations. The agreement, however, did not address legal fees and costs, which were otherwise recuperable under the HOA’s bylaws. Further, the HOA Bylaws were not incorporated into the parties’ agreement. While the defendant made an alleged technical default in her payment obligations under the agreement, she was ahead of schedule in her payments and ultimately paid her entire obligation twenty-two months early. Nonetheless, the plaintiff added legal fees and costs to the amounts due under the agreement and resumed the foreclosure process by advertising the sale of the property due to the alleged default. The defendant moved to stay the sale, to obtain a determination that she did not owe attorney’s fees and costs and that her obligations to the plaintiff were satisfied. The motion court found that the defendant did not owe attorney’s fees and costs and directed that the notice of pendency filed by the plaintiff be cancelled. The Plaintiff appealed. The First Department affirmed and concluded that the defendant “effectively cured [her] initial default by paying off the entire sum owed under the agreement nearly two years ahead of schedule.” The Court found that the defendant effectively exercised her right of redemption and stated: The Court of Appeals has made clear that "[t]he equity of redemption, which long predates the RPAPL, allows property owners to redeem their property by tendering the full sum at any point before the property is actually sold at a foreclosure sale . . . An unconditional tender of the full amount due is all that is required (citations omitted)" ( see NYCTL 1999-1 Trust v 573 Jackson Ave. Realty Corp. , 13 NY3d 573, 579 [2009], cert denied 561 US 1006 [2010] [internal citations omitted]), and that is exactly what [the defendant] did. Accordingly, plaintiff's acceptance of the full amount of arrears without objection waived any right to continue the foreclosure sale. [Hyperlink added.]  [2] Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Some of the facts recited herein, which are abridged for editorial purposes, were taken from the appellate record available on the Court’s NYSCEF system. [2] The Court also determined that the motion court was within its discretion to disallow the plaintiff’s claim for attorney’s fees and costs.

By: Jonathan H. Freiberger In today’s BLOG we will discuss Tri-Rail Designers & Builders, Inc. v. Concrete Superstructures, Inc. , a case decided on November 12, 2025, by the Appellate Division, Second Department. In Tri-Rail , the Court decided a “question which has not been directly addressed” in the Second Department involving the impact of non-compliance with the Servicemembers Civil Relief Act (f/k/a the Soldiers’ and Sailors’ Civil Relief Act) (the “Act”) on obtaining a default judgment. The plaintiff in Tri-Rail  was a general contractor hired for a construction project that entered into a written contract with a concrete subcontractor. The subcontractor did not complete the project and was sued, along with its president, by the general contractor. The defendants failed to appear, and the general contractor moved for, and was granted, a default judgment. The following year, the defendants moved, pursuant to CPLR 5015(a) , to vacate the default judgment based on the general contractor’s admitted failure to support its motion with a non-military affidavit as to the subcontractor’s president. The subcontractor argued that the general contractor’s omission warranted the requested vacatur. The subcontractor’s president was personally served with process and never claimed to be in the active military. The defendants appealed from the motion court’s denial of the motion. The Second Department affirmed. The Court recognized that to succeed on a motion for leave to enter a default judgment, the plaintiff must demonstrate: “(1) service of process upon the defendant, (2) the failure of the defendant to appear or answer the complaint, and (3) the merits of the plaintiff’s cause of action.” In addition, “a motion for leave to enter a default judgment must be supported by what has been colloquially termed a “non-military affidavit,” which “is derived from federal law” not the CPLR. The Court noted that “the purpose of the Soldiers’ and Sailors’ Civil Relief Act is to prevent default judgments from being entered against members of the armed services in circumstances where they might be unable to appear and defend themselves.” (Citations, internal quotation marks and brackets omitted.) As stated by the Court, non-military affidavits must be based on an investigation and supported by specific facts. Further, the investigation must be conducted after the default, and not simply after the commencement of the action. [1]   In framing the relevant issue on appeal and in articulating its holding, the Court stated: It is clear that a non-military affidavit is counted amongst the proof required for a movant to meet its burden on a motion for leave to enter a default judgment. A movant's failure to provide a non-military affidavit is sufficient to warrant denial of such a motion in the first instance. However, the instant appeal presents a more nuanced question: where a default judgment was improperly entered in the absence of a non-military affidavit, is a defendant entitled to vacatur of the default judgment as of right? We hold that the failure to provide a non-military affidavit does not automatically warrant vacatur of an otherwise validly entered default judgment. [Citations omitted.] In reaching its conclusion, the Court analyzed the statutory text of the Act, which limits the ability to vacate default judgments to applications “made ‘by or on behalf of the servicemember.’” Accordingly, the remedies afforded by the Act are not available to everyone. Thus, the Court held that “a movant's failure to provide a non-military affidavit does not entitle a defendant to vacatur of an otherwise validly entered default judgment as of right. Where, as here, the defaulting party has made no assertion of being on active military duty at the time of his or her default, he or she falls outside of the protection afforded by the Act.” The Court explained that: where, as here, a default judgment was improperly entered, in order to be afforded the protection of the Act, a defendant seeking vacatur must establish as part of their initial burden that this remedy is sought "by or on behalf of the servicemember." To hold otherwise and to grant any defendant the right to challenge a default judgment would permit civilians to take advantage of those protections that were specifically afforded to our servicemembers and would belie the purpose of the Act. What was intended by the legislature as a shield should not be used permissively as a sword. The Court stressed that its holding does not alter a plaintiff’s burden on an application for leave to enter a default judgment. Such a movant is still required to provide a non-military affidavit and the failure to provide one warrants denial of the application. According to the Court, the issue decided was never addressed previously in the Second Department but is consistent with decisions from other New York courts. Simply stated, because the president never purported to be in the active military, the defendants failed to establish that he “is entitled to the protections of the Act and, therefore, the general contractor’s failure to “support its motion with a non-military affidavit was a mere irregularity and does not warrant vacatur of the defendants' default…." Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] Typically, inquiries are made to the Department of Defense Manpower Data Center , which provides a statement indicating whether an individual is on active military service.

By:  Jeffrey M. Haber In Sire Spirits, LLC v. Beam Suntory, Inc. , 2025 N.Y. Slip Op. 06297 (1st Dept. Nov. 18, 2025), the Appellate Division, First Department affirmed the denial of a motion to amend a complaint seeking damages for “diminution of enterprise value” due to the alleged fraud. Under CPLR 3025(b), leave to amend is freely given unless the amendment is prejudicial or patently meritless. However, New York’s fraud damages rule limits recovery to out-of-pocket losses—the actual pecuniary loss caused by the fraud—not speculative gains or lost profits. As discussed below, Sire’s proposed amendment effectively sought unrealized profits by reframing them as diminished business value, violating the out-of-pocket damages rule. The Court held that such damages were legally insufficient and barred as a matter of law, emphasizing that fraud claims cannot include potential earnings or enterprise valuation. Applicable Rules of The Road Amended Pleadings CPLR 3025(b)  provides, in pertinent part, that “[a] party may amend his [or her] pleading … at any time by leave of court or by stipulation of all parties.” [1]  Importantly, CPLR 3025(b) provides that “[l]eave [to amend] shall be freely given.…” Thus, “unless the proposed amendment would unfairly prejudice or surprise the opposing party, or is palpably insufficient or patently devoid of merit,” the motion for leave to amend should be granted. [2]   Prejudice may be found where “the nonmoving party has been hindered in the preparation of its case or has been prevented from taking some measure in support of its position.” [3]  “Prejudice is more than the mere exposure of the party to greater liability” as “there must be some indication that the party has been hindered in the preparation of the party’s case or has been prevented from taking some measure in support of its position.” [4]  The burden of demonstrating prejudice or surprise “falls upon the party opposing the motion.” [5]  Conclusory statements of prejudice cannot defeat a motion to amend a pleading. [6]   An amendment will not cause surprise when the causes of action alleged in the amended pleading are based on the facts and circumstances already pleaded or already known by the non-moving party. [7]  For this reason, new theories of liability pertaining to the facts and circumstances already in controversy will not bar a motion to amend. [8]   Delay in-and-of-itself is not enough to defeat a motion for leave to amend. For this reason, “[m]ere lateness is not a barrier” to amendment, absent prejudice. [9]  “It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine.” [10]  As the Court of Appeals recognized, “absent prejudice, courts are free to permit amendment even after trial.” [11]  Thus, where a case has not proceeded to meaningful discovery, the amendment of a pleading will not prejudice a defendant. [12]  Moreover, the mere passage of time, without “consequential” prejudice, separate and apart from the delay, is insufficient to defeat a motion for leave to amend. [13]  Even unexcused lateness, without prejudice, will not bar amendment. [14]   “The determination whether to grant leave to amend a pleading is within the court’s discretion, and the exercise of that discretion will not lightly be disturbed.” [15]  Thus, “[a] party opposing leave to amend ‘must overcome a heavy presumption of validity in favor of [permitting amendment].’” [16]   Fraud Damages To allege a cause of action based on fraud, plaintiffs must assert “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury. [17]  To withstand a motion to dismiss, plaintiffs must satisfy each element of the claim. Generally, plaintiffs are allowed to recover only their out-of-pocket damages – that is, the actual pecuniary loss sustained as the direct result of the alleged fraud. [18]  Under the out-of-pocket damages rule, plaintiffs may recover what they lost because of the fraud, not what they might have gained had there been no fraud. [19]  In other words, plaintiffs cannot recover the profits that would have been realized in the absence of the fraud. For that reason, plaintiffs cannot recover damages for fraud based on the loss of a contractual bargain, “the extent, and, indeed the very existence of which is completely undeterminable and speculative.” [20] To determine whether the plaintiff sustained out-of-pocket losses, courts employ a two-part test. [21]  First, the plaintiff must show the actual value of the consideration it received. [22]  Second, the plaintiff must prove that the defendant’s fraudulent inducement directly caused the plaintiff to agree to deliver consideration that was greater than the value of the received consideration. [23]  The difference between the value of the received consideration and the delivered consideration constitutes the plaintiff’s out-of-pocket damages. [24] Sire Spirits, LLC v. Beam Suntory, Inc. [Eds. Note: The factual background comes from the briefing on appeal.] Sire brought the action in 2023, against defendants for, among other claims, fraud. Initially, Sire sought “all monetary losses” due to the fraud, punitive damages, attorneys’ fees, and costs. The motion court dismissed the requests for punitive damages, attorneys’ fees, and costs with prejudice. The First Department affirmed. [25] As fact discovery was approaching its conclusion, Sire informed defendants, through an expert witness disclosure, that it intended to seek damages for “[l]loss of sales and profits and disruption of business growth.” In response, Defendants Beam Suntory Inc. and Jim Beam Brands Co. (collectively, “Beam”) sought leave to file an early summary judgment motion, explaining that damages based on lost profits, lost opportunities, and the like were not permitted under New York’s “out-of-pocket” damages rule. Looking to avoid unnecessary motion practice, the motion court urged the parties to stipulate that with respect to the fraud claims, Sire was limited to out-of-pocket damages. Thereafter, Sire stipulated that “lost profits” and “lost business opportunities” damages were not available on its fraud claims. Sire moved to amend its complaint. Sire proposed adding two paragraphs to its complaint, alleging that the fraud “fundamentally disrupted” Sire’s business and caused Sire’s business’s value “to be diminished” by “millions of dollars.” Sire also sought to add a request for damages based on the “diminution” of its “enterprise value.” Beam opposed the motion, arguing that damages based on estimates of what revenues Sire might have earned but for the fraud violated New York law – e.g. , damages that plaintiffs alleging fraud cannot recover under the out-of-pocket rule. [26]   The motion court denied the motion, holding, in part: plaintiffs attempt to repackage barred lost profits damages by relabeling it “diminution of value” does not pass muster. Whatever plaintiff calls these damages, they are still based on the potential value the company could have realized absent the defendants’ alleged misconduct. As the court has previously held in this matter, fraud claims are limited to recovery of the actual pecuniary loss. One cannot recover for potential lost earnings on a fraud theory. [27] Sire appealed. The First Department unanimously affirmed. The Court held that “Plaintiffs’ proposed amendment to the prayer for relief in its pleading, which sought recovery based on profits not realized as a result of the alleged fraud, violated the out-of-pocket damages rule.” [28]  The Court explained that “Plaintiffs fail[ed] to explain how expert discovery would have availed them, because the [motion] court ruled as a matter of law based on plaintiffs’ own characterization of their damages.” [29]  “Accordingly,” said the Court, “the proposed amendment was palpably insufficient, and the [motion] court properly denied it.” [30] Takeaway Sire  serves as a reminder to practitioners and litigants that leave to amend may be freely given but within reason. Under CPLR 3025(b), courts generally grant leave to amend pleadings unless the amendment causes unfair prejudice or is palpably insufficient or patently devoid of merit. In Sire , the Court determined that the proposed amendment was patently devoid of merit because Sire could not recover “diminution in value” damages under the out-of-pocket damages rule. _______________________________________ Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1] This Blog examined motions to amend under CPLR 3025(b) on numerous occasions, including: Amended Pleadings Under CPLR 3025(b) ; The Court of Appeals Makes a Ruling on “the Proper Scope of the Trial Court’s Discretion to Grant Leave to Amend a Complaint Under CPLR 3025(b)” ; and Defendant Barred From Adding a Counterclaim for Fraud Because the Claim Was Deemed Patently Devoid of Merit . [2] Cirillo v. Lang , 206 A.D.3d 611, 612 (2d Dept. 2022) (citations omitted). See also Greene v. Esplanade Venture P’ship , 36 N.Y.3d 513, 526 (2021); Matter of Chustckie , 203 A.D.3d 820, 822 (2d Dept. 2022); Toiny, LLC v. Rahim , 214 A.D.3d 1023, 1024 (2d Dept. 2023) (citations omitted). [3] Cirillo , 206 A.D.3d at 612 (citation, internal quotation marks, and brackets omitted). [4] Kimso Apartments, LLC v. Gandhi , 24 N.Y.3d 403, 411 (2014) (citations, internal quotation marks and brackets omitted). [5] Toiny , 214 A.D.3d at 1024 (citation and internal quotation marks omitted); see also   Kimso , 24 N.Y.3d at 411 (citations). [6] See Petion v. New York City Health & Hosps. Corp. , 175 A.D.3d 519, 520 (2d Dept. 2019). [7] See , e.g. , Bamira v. Greenberg , 256 A.D.2d 237, 239 (1st Dept. 1998). [8] See , e.g. , Harding v. Filancia , 144 A.D.2d 538, 540 (2d Dept. 1988); Matter of Smith , 104 A.D.2d 445, 448 (2d Dept. 1984). [9] Edenwald Contr. Co. v. City of New York , 60 N.Y.2d 957, 959 (1983); see also Granieri v. Ryder Truck Rental, Inc. , 112 A.D.2d 189, 190 (2d Dept. 1985); Matter of Chustckie , 203 A.D.3d at 822. [10] Shields v. Darpoh , 207 A.D.3d 586, 587 (2d Dept. 2022) (internal quotation marks and citations omitted). [11] Kimso , 24 N.Y.3d at 411 (citations omitted). [12] Janssen v. Inc. Vill. of Rockville Ctr. , 59 A.D.3d 15, 24 (2d Dept. 2008); see also Seda v. New York City Housing Auth. , 181 A.D.2d 469, 470 (1st Dept. 1992); 558 Seventh Ave Corp. v. Times Sq. Photo, Inc. , No. 653090/2020, 2023 WL 360630, at *1 (Sup. Ct., N.Y. County Jan. 18, 2023). [13] Granieri , 112 A.D.2d at 190. [14] See   Holchendler v. We Transp., Inc. , 292 A.D.2d 568, 569 (2d Dept. 2002); Hilltop Nyack Corp. v. TRMI Holdings Inc. , 275 A.D.2d 440, 441 (2d Dept. 2000). [15] AFBT-II, LLC v. Country Vill. on Mooney Pond, Inc. , 21 A.D.3d 972, 972 (2d Dept. 2005) (citations omitted). [16] McGhee v. Odell , 96 A.D.3d 449, 450 (1st Dept. 2012) (quoting Otis Elevator Co. v. 1166 Ave. of Americas Condo. , 166 A.D.2d 307, 307 (1st Dept. 1990)). [17] Lama Holding Co. v. Smith Barney , 88 N.Y.2d 413, 421 (1996) (citations omitted). [18] This Blog wrote about the out-of-pocket rule on numerous occasions, including: Out-of-pocket Fraud Damages: Proof Required to Determine the Value of Restricted Securities ; Out-Of-Pocket Damages, Intent to Deceive and The Business Judgment Rule ; First Department Affirms Dismissal of Fraud Claim Because Damages Alleged Were Speculative ; and Damages in a Holder Claim Found to Be Too Speculative For Recovery . [19] Connaughton v. Chipotle Mexican Grill, Inc. , 29 N.Y.3d 137, 142-43 (2017) (quoting, Lama, supra ) (internal quotations omitted)). [20] Id . [21] Kumiva Grp., LLC v. Garda USA Inc. , 146 A.D.3d 504, 506 (1st Dept. 2017). [22] Id . [23] Id. [24] Id. [25] Sire Spirits, LLC v. Beam Suntory, Inc. , 227 A.D.3d 630, 632 (1st Dept. 2024). [26] Sapienza v. Becker & Poliakoff , 173 A.D.3d 640 (1st Dept. 2019) (quotation marks and brackets omitted). [27] Connaughton , 29 N.Y.3d at 142-43; see also Rondeau v. Houston , 224 A.D.3d 616, 617 (1st Dept. 2024). [28] Slip Op. at *1. [29] Id. [30] Id.

By: Jonathan H. Freiberger On October 31, 2025, the Supreme Court, Kings County, decided loanDepot.com LLC v. Ortner , a case addressing the meaning of the “taking proceedings” requirement of CPLR 3215(c) . [1]  By way of brief background, when a defendant defaults in appearing in an action, [2]  CPLR 3215(c) requires that the plaintiff act promptly to secure a default judgment. As previously discussed in prior BLOG articles, CPLR 3215(c) provides, in pertinent part, that: If the plaintiff fails to take proceedings for the entry of judgment  within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed…. (Emphasis added.) Courts have held that the language of CPLR 3215(c) is mandatory in the first instance unless plaintiff demonstrates “sufficient cause” for the failure to timely “take proceedings for the entry of [a default] judgment]”. See, e.g., US Bank v. Onuoha , 162 A.D.3d 1094, 1095 (2 nd  Dep’t 2018); Wells Fargo Bank v. Cafasso , 158 A.D.3d 848, 849 (2 nd Dep’t 2018). A default judgment need not be obtained within one year, as long as proceedings to obtain a default judgment have been initiated. See   Bank of America v. Lucido , 163 A.D.3d 614, 615 (2 nd  Dep’t 2018); see also Bank of America, N.A. v. Bhola , 219 A.D.3d 430, 432 (2 nd  Dep’t 2023); Mort. Electronic Registration Systems, Inc. v. McVicar , 203 A.D.3d 915, 916 – 17 (2 nd Dep’t 2022). Numerous cases have addressed the issue of the meaning of “taking proceedings” and this BLOG has addressed this issue in “ ‘Initiating Proceedings’ Under CPLR 3215(c) Revisited” and “Second Department Finds that Requesting Foreclosure Settlement Conference Satisfies Requirement for ‘Taking Proceedings’ Under CPLR 3215(c)”. In the latter article, we discussed the Second Department’s decision in U.S. Bank N.A. v. Jerriho-Cadogan , 224 A.D.3d 788 (2 nd  Dep’t 2024), in which the Court, following its decision in Citimortgage, Inc v. Zaibak , 188 A.D.3d 982 (2 nd  Dep’t 2020), held that filing a settlement conference RJI satisfied the “taking proceedings” requirement. loanDepot is a mortgage foreclosure action [3]  in which the court was presented with “a question of statutory construction with significant consequences for foreclosure litigation in New York: whether the filing of a request for judicial intervention for purposes of convening a mandatory settlement conference-an act required before a defendant is in default-constitutes the ‘taking of proceedings for the entry of judgment after the default’ within the meaning of CPLR 3215(c).” Disagreeing with the Second Department’s decision in Zaibak and its progeny, the loanDepot court determined it did not. The loanDepot  Court noted that pursuant to “ 22 NYCRR 202.12-a(b)(l) , the Request for Judicial Intervention ("RJI") for a settlement conference must be filed ‘at the same time as proof of service’; and under CPLR 3408(a)(1) , proof of service must be filed within twenty days of service.’” (Emphasis in original.) Thus, the court concluded, that in “every foreclosure action subject to CPLR 3408 settlement conferences … the RJI must be filed before the defendant's time to answer has expired-before a default can occur as a matter of law.” For a variety of reasons (each of which the court found sufficient to warrant a departure from Zaibak ), the court concluded that a settlement conference RJI does not constitute “taking proceedings.” [4] First, the court concluded that Zaibak  conflicted with the legislative and regulatory scheme because of the timing issues previously mentioned. Simply stated, in foreclosure actions settlement conference RJIs, generally, are required to be filed before a default occurs. Accordingly, “ Zaibak inverts CPLR 3215(c) by treating a pre-default filing as compliance with a post-default statutory mandate.” (Emphasis in original.) Thus, CPLR 3215(c) and 3408 cannot be harmonized under Zaibak.  However, “[t]his statutory tension disappears once CPLR 3215(c) is construed the way every Department of the Appellate Division (including the Second Department, save for the aberrant Zaibak line of cases) has already construed it: the phrase ‘take proceedings’ means a motion for judicial relief directed toward the entry of a default judgment, not the ministerial filing of an RJI.” Second, Zaibak  is “irreconcilable” with the express language of CPLR 3125(d)  -- which relates to multi-defendant situations in which a defendant answers and another defendant defaults -- and requires the plaintiff to make “‘an application to the court’ ‘within one year of the default’ before a default can be taken against the nonappearing party.” Thus, the “statutory text leaves no doubt that the Legislature required a judicial application - not a ministerial filing such as an RJI - to qualify as the taking of proceedings.’"  (Internal brackets omitted.) Third, the loanDepot  court noted that the statutory purpose of CPLR 3215 (c), which was drafted decades before the foreclosure conference RJI requirement, was the entry of judgment. The purpose of the settlement conference was loss mitigation. Thus: a settlement-conference RJI cannot constitute "tak[ing] proceedings for the entry of judgment" within the meaning of CPLR 3215(c) for a fundamental threshold reason: when CPLR 3215(c) was enacted in 1962 …, the Legislature had not yet created-nor even contemplated-the mandatory settlement conference procedure codified decades later in 22 NYCRR 202.12-a. A later-adopted court rule cannot possibly retroactively redefine a statutory term (and the intent of the legislature in enacting it) that predates it. The Legislature designed CPLR 3215(c) to require post-default prosecutorial action for the entry of a judgment, not a ministerial administrative filing created years later for a wholly different purpose. Fourth, the ministerial steps involved with the filing of an RJI “do not seek adjudication” and, therefore, “are not ‘proceedings’ for judgment.” The filing of the RJI is “a predicate to negotiation-not adjudication” and CPLR 3215(c), “calls for proceedings for the entry of judgment,” which implicates “the court's authority to determine rights or grant judicial relief.” Fifth, the court noted that of CPLR 3215(c) “reflects a legislative judgment that dormant claims should not be kept alive indefinitely and that plaintiffs bear the responsibility to prosecute their actions diligently,” and provides for mandatory dismissal if violated. “Because the statute's purpose is to compel diligence in prosecuting actions to judgment, with the attendant benefit of clearing court backlogs, its effect necessarily evaporates if courts begin carving out judicial exceptions based on sympathetic facts, administrative filings, or post- default settlement procedures.” Finally, the court spent significant time analyzing why “ Zaibak  and its progeny are not precedentially dispositive under stare decisis  [and concluded that] Zaibak neither raised nor considered the specific questions presented here.” Ultimately, the court concluded that dismissal of the action was mandatory because the plaintiff failed to move for a default judgment within a year of defendant’s default and the filing of an RJI did not satisfy the “taking proceedings” requirement of CPLR 3215. Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP. This article is for informational purposes and is not intended to be and should not be taken as legal advice. [1]  This BLOG has written numerous articles addressing CPLR 3215(c). To find such articles, please see the BLOG tile on our website and type “CPLR 3215(c)” into the “search” box. [2]  This BLOG has previously addressed issues related to a defendant’s appearance in an action. See, e.g. , [ here ], [ here ], [ here ] and [ here ]. [3]  This BLOG has written dozens of articles addressing numerous aspects of residential mortgage foreclosure. To find such articles, please see the BLOG tile on our website and search for any foreclosure or other commercial litigation issue that may be of interest to you. [4]  The loanDepot court provides a thoughtful and detailed analysis of each of the bases of its decision, and we will briefly summarize each one.