PARTY FAILS TO COMPLY WITH DISCOVERY ORDERS

If the credibility of court orders and the integrity of our judicial system are to be maintained, a litigant cannot ignore court orders with impunity.

HSBC Bank USA, N.A. v Branker 2019 NY Slip Op 08555 Decided on November 27, 2019 Appellate Division, Second Department:

"In March 2013, the plaintiff commenced this action against, among others, the defendant Vista Holding, LLC (hereinafter the defendant). The defendant interposed an answer asserting various affirmative defenses. In January 2014, the plaintiff, moved, inter alia, for summary judgment on the complaint insofar as asserted against the defendant. In an order dated June 4, 2014, the Supreme Court summarily denied the plaintiff's motion. The plaintiff filed a notice of appeal from the June 4, 2014, order, but then failed to perfect the appeal, resulting in its dismissal. In October 2014, the plaintiff moved for leave to reargue its motion for summary judgment. In an order dated March 11, 2015, the court granted reargument and, upon reargument, adhered to its prior determination. The plaintiff filed a notice of appeal from the March 11, 2015, order, but then withdrew the appeal.

In a notice for discovery and inspection dated September 17, 2015, the defendant sought certain documents from the plaintiff. The plaintiff objected to the requests on the grounds, inter alia, that the documents sought were not relevant. In a compliance conference order dated November 4, 2015, the plaintiff was directed to fully respond to the defendant's September 17, 2015, discovery request. The order expressly found that the plaintiff's response had been inadequate and the plaintiff was required to produce the documents requested, and the order further warned that unjustified noncompliance with its terms may result in the imposition of sanctions.

The plaintiff moved by notice dated May 17, 2016, for leave to renew its prior motion for reargument of its motion for summary judgment. While that motion was pending, in a compliance conference order dated May 23, 2016, the plaintiff was directed to comply with the November 4, 2015, order and the defendant's September 17, 2015, discovery request within 45 days. [*2]The May 23, 2016, order warned that the unjustified failure to comply with its terms "will result in the striking of a pleading" (emphasis in original). Notwithstanding the plaintiff's prior objections to the requested discovery, the compliance conference order was entered on the parties' consent. The order reflects, following the warning that pleadings would be stricken in the event of a failure to comply with the order, the signature of the Judicial Hearing Officer, as well as the signatures of the parties' attorneys. The order thus reflects the explicit agreement and consent of the plaintiff's attorneys to the terms of the order.

By notice dated July 25, 2016, the defendant cross-moved pursuant to CPLR 3126 to strike the complaint based on the plaintiff's failure to comply with the two prior orders directing the plaintiff to respond to the defendant's discovery request and produce the requested documents. In an affirmation of good faith pursuant to 22 NYCRR 202.7, the defendant's attorney affirmed that he had made a good faith effort to resolve the outstanding discovery issues with the plaintiff's attorney, but the plaintiff still had not produced the requested documents. He averred that he had sent a letter to the plaintiff's counsel on November 11, 2015, asking the plaintiff to comply with the November 4, 2015, order to produce the requested documents. The defendant's attorney further averred that on May 31, 2016, he spoke with the plaintiff's attorney and confirmed that the defendant sought production of the documents identified in the defendant's September 17, 2015, discovery request, which had not been produced by the plaintiff despite the November 4, 2015, and May 23, 2016, orders. In the good faith affirmation, the defendant's attorney further stated that, following the May 31, 2016, conversation, the plaintiff had failed to provide the subject documents and, instead, had interposed an objection to the discovery demand. In an affirmation in support of the cross motion, the defendant's attorney elaborated that he had received a letter dated June 9, 2016, from the plaintiff's attorney, which maintained the objection to the discovery demand and to which was attached two documents that were not responsive to the discovery request.

The plaintiff responded to the defendant's cross motion in an attorney affirmation, submitted by an attorney different from the attorney who signed the compliance conference order, in which it was asserted that the plaintiff "maintains that its discovery objections were sufficient," but that the plaintiff had provided the two additional documents in an effort to resolve the dispute. While the plaintiff's counsel argued that the discovery sought by the defendant was irrelevant and speculated that it was unlikely that further responses would produce any additional material, the plaintiff's counsel did not dispute that her firm had, on behalf of the plaintiff, consented to providing the discovery that she was now opposing. This discrepancy was noted in the reply affirmation of the defendant's counsel, who stated that the plaintiff was objecting to discovery demands even though the plaintiff had waived its objections "when its attorney executed the Compliance Conference Order directing plaintiff to produce the documents which plaintiff refuses to produce."

In the order appealed from, dated November 30, 2016, the Supreme Court granted the defendant's cross motion pursuant to CPLR 3126 to strike the complaint and denied the plaintiff's motion for leave to renew its prior motion. The plaintiff appeals from so much of the order as granted the defendant's cross motion. It argues that the Supreme Court should have denied the cross motion because the defendant's attorney's affirmation of good faith was insufficient, the plaintiff made good-faith efforts to comply with the discovery demands, and the discovery sought was not material and necessary. We affirm the order insofar as appealed from.

We begin our analysis with two observations regarding the course that the plaintiff has charted for itself in this action.

First, the plaintiff voluntarily relinquished two opportunities to obtain appellate review of the denials of its efforts to obtain summary judgment. The plaintiff noticed an appeal from the denial of its motion for summary judgment and then failed to perfect the appeal, leading to its dismissal. The plaintiff, having succeeded in obtaining reargument of its summary judgment motion, gained the opportunity to appeal the Supreme Court's adherence to its prior determination to deny summary judgment, but the plaintiff proceeded to withdraw the appeal. Consequently, we can express no opinion on the merits of those putative appeals.

Second, while the plaintiff timely interposed objections to the defendant's discovery demands, the plaintiff voluntarily abandoned those objections when it entered into the compliance conference order in which it agreed to comply with the discovery demands notwithstanding its prior objections. It is axiomatic that a party who consents to an order cannot be considered aggrieved by it (see Matter of Harry Y., 62 AD3d 892). While there may be at least potential merit to the plaintiff's contentions that the defendant's discovery demands were overbroad, the plaintiff now cannot be heard to complain about having to comply with discovery demands which it affirmatively consented to with knowledge that unjustified noncompliance would render its pleading subject to dismissal.

Although actions should be resolved on the merits when possible (see Cruzatti v St. Mary's Hosp., 193 AD2d 579, 580), a court may strike "pleadings or parts thereof" (CPLR 3126[3]) as a sanction against a party who "refuses to obey an order for disclosure or wilfully fails to disclose information which the court finds ought to have been disclosed" (CPLR 3126). "The willful or contumacious character of a party's conduct can be inferred from the party's repeated failure to respond to demands or to comply with discovery orders, and the absence of any reasonable excuse for these failures" (Smookler v Dicerbo, 166 AD3d 838, 839; see Montemurro v Memorial Sloan-Kettering Cancer Ctr., 94 AD3d 1066; Tos v Jackson Hgts. Care Ctr., LLC, 91 AD3d 943, 943-944). The nature and degree of the sanction to be imposed on a motion pursuant to CPLR 3126 is a matter of discretion with the motion court (see Merrill Lynch, Pierce, Fenner & Smith, Inc. v Global Strat Inc., 22 NY3d 877, 880; Those Certain Underwriters at Lloyds, London v Occidental Gems, Inc., 11 NY3d 843, 845; Sepulveda v 101 Woodruff Ave. Owner, LLC, 166 AD3d 835, 836; Silberstein v Maimonides Med. Ctr., 109 AD3d 812, 814). "[W]hen a party fails to comply with a court order and frustrates the disclosure scheme set forth in the CPLR, it is well within the Trial Judge's discretion to dismiss the complaint" (Kihl v Pfeffer, 94 NY2d 118, 122; see Zletz v Wetanson, 67 NY2d 711, 713).

Contrary to the plaintiff's contention, the Supreme Court did not improvidently exercise its discretion in granting the defendant's cross motion to strike the complaint. The willful or contumacious character of the plaintiff's conduct could be properly inferred from the repeated failures to comply with the court's orders directing the plaintiff to respond to the defendant's discovery request, the plaintiff's consent to produce the requested documents, and the plaintiff's lack of an adequate explanation for the failure to comply (see Smookler v Dicerbo, 166 AD3d at 839-840; Montemurro v Memorial Sloan-Kettering Cancer Ctr., 94 AD3d 1066; Tos v Jackson Hgts. Care Ctr., LLC, 91 AD3d at 944). In opposition to the defendant's cross motion, the plaintiff did not assert that it had even attempted to locate the subject documents. Instead, the plaintiff's counsel offered only her speculation that it was highly unlikely that additional documents would have been produced.

The plaintiff's contention that the requested documents were not material and necessary is unavailing. The plaintiff did not pursue appeals from the June 4, 2014, and March 11, 2015, orders, which determined that further documentation was necessary. The plaintiff was then directed to disclose the subject documents in two court orders, the second of which was entered on the plaintiff's consent, and which contained a warning in bold font that the failure to comply with the terms of the order "will result in the striking of a pleading." The plaintiff did not seek to be relieved of its consent to this order; in its opposition to the defendant's cross motion, the plaintiff argued that the subject discovery should not be provided, completely ignoring the plaintiff's consent to provide that very discovery.

"If the credibility of court orders and the integrity of our judicial system are to be maintained, a litigant cannot ignore court orders with impunity" (Kihl v Pfeffer, 94 NY2d at 123; see Gibbs v St. Barnabas Hosp., 16 NY3d 74, 81). "[C]ompliance with a disclosure order requires both a timely response and one that evinces a good-faith effort to address the requests meaningfully" (Kihl v Pfeffer, 94 NY2d at 123; see CDR Créances S.A.S. v Cohen, 23 NY3d 307, 318). This is particularly true where the discovery at issue was consented to. If the plaintiff believed that the requested documents were not material and necessary, it should have pursued its appeals of the Supreme Court's prior orders. Instead, it consented to an order directing it to produce the requested [*3]documents with a warning that the pleadings would be stricken upon failure to comply with the order.

Under these unique circumstances, we cannot say that the Supreme Court's determination to strike the pleadings was an improvident exercise of discretion (see CDR Créances S.A.S. v Cohen, 23 NY3d at 318; Kihl v Pfeffer, 94 NY2d at 123; Smookler v Dicerbo, 166 AD3d 838, 839).

Also contrary to the plaintiff's contention, the cross motion was not deficient on the ground that the defendant did not comply with 22 NYCRR 202.7. The cross motion was supported by the affirmation of the attorney for the defendant, which contained an adequate statement explaining his good-faith efforts to resolve the issues raised by the motion (see 22 NYCRR 202.7; Maliah-Dupass v Dupass, 166 AD3d 873, 874; Giordano v Giordano, 140 AD3d 699, 700)."

MORTGAGE FORECLOSURE - A SUCCESSFUL STANDING DEFENSE

HSBC Bank USA, N.A. v Williams, 2019 NY Slip Op 08554, Decided on November 27, 2019, Appellate Division, Second Department:

"On December 21, 2004, the defendant Kirk Williams executed a note in the amount of $399,000 in favor of Fremont Investment & Loan (hereinafter Fremont) and a mortgage in favor of Mortgage Electronic Registration Systems, Inc., as nominee for Fremont. Williams defaulted on the note by failing to make the payment due on April 1, 2009. On November 2, 2009, the plaintiff commenced this action to foreclose the mortgage. On March 23, 2010, and June 18, 2010, respectively, the plaintiff obtained an order of reference and a judgment of foreclosure and sale, on [*2]default. On October 13, 2010, the order of reference and the judgment of foreclosure and sale were vacated. On November 9, 2010, Williams served an amended answer dated October 27, 2010, in which he generally denied the allegations of the complaint and asserted six affirmative defenses, including lack of standing.

On June 18, 2015, Williams filed and served a "Demand for Resumption of Prosecution of Action and For Note of Issue." When the plaintiff failed to comply, Williams moved pursuant to CPLR 3216 to dismiss the complaint insofar as asserted against him. The plaintiff opposed the motion and cross-moved, inter alia, for summary judgment on the complaint insofar as asserted against Williams, to strike his affirmative defenses, and for an order of reference. The plaintiff asserted that it had a justifiable excuse for not proceeding with the action and a potentially meritorious cause of action. The Supreme Court, among other things, denied Williams's motion and granted those branches of the plaintiff's cross motion. Williams appeals.

Where, as here, a plaintiff has been served with a 90-day demand pursuant to CPLR 3216(b)(3), that plaintiff must comply with the demand by filing a note of issue or by moving, before the default date, either to vacate the demand or to extend the 90-day period (see Deutsche Bank Natl. Trust Co. v Inga, 156 AD3d 760). The plaintiff here failed to do either within the 90-day period. Therefore, in order to excuse the default, the plaintiff was obliged to demonstrate a justifiable excuse for its failure to take timely action in response to the 90-day demand, as well as a potentially meritorious cause of action (see Baczkowski v Collins Constr. Co., 89 NY2d 499; Bischoff v Hoffman, 112 AD3d 659). CPLR 3216 is "extremely forgiving" (Baczkowski v Collins Constr. Co., 89 NY2d at 503), "in that it never requires, but merely authorizes, the Supreme Court to dismiss a plaintiff's action based on the plaintiff's unreasonable neglect to proceed" (Davis v Goodsell, 6 AD3d 382, 384; see Angamarca v 47-51 Bridge St. Prop., LLC, 167 AD3d 559; Deutsche Bank Natl. Trust Co. v Inga, 156 AD3d at 761).

Here, the plaintiff demonstrated the existence of a justifiable excuse for the delay and a potentially meritorious cause of action. Furthermore, there was no evidence of its intent to abandon the action (see generally Angamarca v 47-51 Bridge St. Prop., LLC, 167 AD3d at 559; Vera v New York El. & Elec. Corp., 150 AD3d 927; Altman v Donnenfeld, 119 AD3d 828). Under the circumstances of this case, the Supreme Court providently exercised its discretion in denying Williams's motion pursuant to CPLR 3216 to dismiss the complaint insofar as asserted against him.

In moving for summary judgment, a plaintiff in a mortgage foreclosure action establishes its prima facie entitlement to judgment as a matter of law by producing the mortgage, the unpaid note, and evidence of the default (see James B. Nutter & Co. v Feintuch, 164 AD3d 485, 486; Onewest Bank, N.A. v Mahoney, 154 AD3d 770, 771; Deutsche Bank Trust Co. Ams. v Garrison, 147 AD3d 725, 726). In addition, where, as here, a plaintiff's standing to commence the foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief (see Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d 683, 684; Wells Fargo Bank, N.A. v Arias, 121 AD3d 973, 974).

"A plaintiff establishes its standing in a mortgage foreclosure action by demonstrating that, when the action was commenced, it was either the holder or assignee of the underlying note" (Dyer Trust 2012-1 v Global World Realty, Inc., 140 AD3d 827, 828; see Aurora Loan Servs., LLC v Taylor, 25 NY3d 355, 360-362; Flagstar Bank, FSB v Mendoza, 139 AD3d 898, 899). "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 mortgage passes with the debt as an inseparable incident" (Dyer Trust 2012-1 v Global World Realty, Inc., 140 AD3d at 828; see Aurora Loan Servs., LLC v Taylor, 25 NY3d at 361-362; U.S. Bank, N.A. v Collymore, 68 AD3d 752, 754). The plaintiff may establish that it was the holder of the note at the time the action was commenced by submitting proof that a copy of the note, including an allonge containing an endorsement in blank, was among the various exhibits annexed to the complaint (see UCC 1-201[b][21]; Bank of Am., N.A. v Tobin, 168 AD3d 661; CitiMortgage, Inc. v McKenzie, 161 AD3d 1040, 1041).

In support of its cross motion, the plaintiff failed to meet its prima facie burden of establishing that it had standing to commence this action. Initially, while the plaintiff alleged that the note had been endorsed to it, the plaintiff failed to submit sufficient evidence to demonstrate that a copy of the note with the endorsement was attached to the complaint. The only copy of the complaint that appears in the record before us was submitted as an exhibit in support of Williams's motion, and the version of the note accompanying that copy of the complaint did not include the endorsement. The plaintiff's attempt to establish standing through the submission of the affidavit of Morgan Battle Ames, a contract management coordinator for the plaintiff's loan servicer, was also insufficient. Ames stated that she had "personal knowledge of the stated facts and circumstances and books and records maintained by [the loan servicer]," and that the "information in this affidavit is taken from [the loan servicer's] business records," which were "recorded by persons with personal knowledge of the information in the business record." Since Ames failed to attest that she was personally familiar with the record-keeping practices and procedures of the entity that generated the subject business records, she failed to demonstrate that the records relied upon in her affidavit were admissible under the business records exception to the hearsay rule (see CPLR 4518[a]; Federal Natl. Mtge. Assn. v Marlin, 168 AD3d 679, 681; HSBC Mtge. Servs., Inc. v Royal, 142 AD3d 952, 954; Deutsche Bank Natl. Trust Co. v Brewton, 142 AD3d at 685).

Since the plaintiff's cross motion was based on evidence that was not in admissible form (see Federal Natl. Mtge. Assn. v Marlin, 168 AD3d at 681; HSBC Mtge. Servs., Inc. v Royal, 142 AD3d at 954), the Supreme Court should have denied those branches of the cross motion which were for summary judgment on the complaint insofar as asserted against Williams, to strike his affirmative defenses, and for an order of reference, regardless of the sufficiency of the evidence submitted by Williams in opposition (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853)."

MORTGAGE FORECLOSURE - DEFECTIVE CONDITIONAL ADMINISTRATIVE DISMISSAL NOT FINAL

Nationwide Capital Group, Inc. v Weiss, 2019 NY Slip Op 01781, Decided on March 13, 2019, Appellate Division, Second Department:

"The plaintiff commenced this action to foreclose a mortgage in 2008. On March 20, 2014, the Supreme Court entered a conditional order of dismissal dismissing the action pursuant to CPLR 3216 and directing the County Clerk to cancel the notice of pendency "unless plaintiff files a note of issue or otherwise proceeds by motion for entry of judgment within 90 days from the date hereof." The plaintiff failed to comply with the order, and it appears that the action was administratively dismissed thereafter without further notice to the parties.

In February 2016, the plaintiff moved, inter alia, to vacate the conditional order of dismissal and, in effect, to restore the action to the active calendar. The defendants Chaim Weiss, Ephraim Goldberg, and Estie Goldberg (hereinafter collectively the defendants) cross-moved, inter alia, to confirm the dismissal of the action. By order dated May 12, 2016, the Supreme Court, among other things, granted those branches of the plaintiff's motion which were to vacate the conditional order of dismissal and, in effect, to restore the action to the active calendar, and denied that branch of the defendants' cross motion which was to confirm the dismissal of the action. The defendants appeal.

"CPLR 3216 permits a court, on its own initiative, to dismiss an action for want of prosecution where certain conditions precedent have been complied with" (BankUnited v Kheyfets, 150 AD3d 948, 949; see CPLR 3216; Deutsche Bank Natl. Trust Co. v Bastelli, 164 AD3d 748). [*2]Pursuant to CPLR 3216(b), an action cannot be dismissed pursuant to CPLR 3216(a) "unless a written demand is served upon the party against whom such relief is sought' in accordance with the statutory requirements, along with a statement that the default by the party upon whom such notice is served in complying with such demand within said ninety day period will serve as a basis for a motion by the party serving said demand for dismissal as against him for unreasonably neglecting to proceed'" (Cadichon v Facelle, 18 NY3d 230, 235, quoting CPLR 3216[b][3]; see Deutsche Bank Natl. Trust Co. v Cotton, 147 AD3d 1020, 1021). While a conditional order of dismissal may have "the same effect as a valid 90-day notice pursuant to CPLR 3216" (Byers v Winthrop Univ. Hosp., 100 AD3d 817, 818; see Griffith v Wray, 109 AD3d 512, 513), the conditional order here was defective in that it did not state that the plaintiff's failure to comply with the notice will serve as a basis for a motion by the court to dismiss the action for failure to prosecute (CPLR 3216[b][3]; see Deutsche Bank Natl. Trust Co. v Cotton, 147 AD3d at 1021). Further, the Supreme Court thereafter should not have administratively dismissed the action without further notice to the parties (see Cadichon v Facelle, 18 NY3d at 235-236; Deutsche Bank Natl. Trust Co. v Cotton, 147 AD3d at 1021)."

WHEN SEEKING AN ORDER OF PRECLUSION - CPLR 3216 (3)

As noted in an earlier publication: "The CPLR 3126(3) motion to strike a pleading is premised upon establishing a willful failure to disclose; obviously, a movant’s regular and documented efforts to coax compliance must found the motion. Opposition to a CPLR 3126 motion is often premised upon a misunderstanding regarding disclosure obligations, arguing that violation of an order to disclose, or violation of a conditional order of preclusion, must serve as a predicate for a 3126 motion."

These issues were raised in Cannon v 111 Fulton St. Condominium, Inc., 2018 NY Slip Op 04523, Decided on June 20, 2018 Appellate Division, Second Department:

"When a litigant fails to comply with the terms of a conditional order of preclusion, the terms of that order become absolute (see Lee v Arellano, 18 AD3d 620, 621). However, the burden of establishing noncompliance rests with the party seeking preclusion (see Goodman, Rackower & Agiato v Lieberman, 260 AD2d 599, 600; see also Deer Park Assoc. v Town of Babylon, 121 AD3d 738, 740). Because the remedy of preclusion is the functional equivalent of striking a party's pleading (see Goodman, Rackower & Agiato v Lieberman, 260 AD2d at 600), it may not be granted where the party can demonstrate a justifiable excuse and a potentially meritorious cause of action or defense (see Vera v New York El. & Elec. Corp., 150 AD3d 927, 928).

Here, the so-ordered stipulation did not set a time, date, or place for the plaintiff's deposition, instead stating merely that the plaintiff's deposition was to be held "on or before" March 16, 2015, "at a time and location to be agreed upon." In light of this, the defendants' minimal assertion that the plaintiff failed to appear, which relied on the hearsay assertion of an unnamed employee of defense counsel, was insufficient to demonstrate that the plaintiff willfully and contumaciously violated the so-ordered stipulation (see Yong Soon Oh v Hua Jin, 124 AD3d 639, 641; Deer Park Assoc. v Town of Babylon, 121 AD3d at 740; Vaccaro v Weinstein, 117 AD3d 1033, 1034; Orgel v Stewart Tit. Ins. Co., 91 AD3d 922, 923). Similarly, the defendants did not allege in [*3]their motion that the plaintiff had failed to provide the outstanding written discovery that was included in the so-ordered stipulation. Therefore, since the defendants failed to demonstrate that the plaintiff knew when and where to appear for her deposition, there was no evidence of ongoing willful or contumacious conduct (see PNC Bank, N.A. v Campbell, 142 AD3d 1148, 1149). Accordingly, we disagree with the Supreme Court's determination to grant that branch of the defendant's motion which was to preclude the plaintiff from offering evidence at trial."