Pedestrians walk past a branch office of Wells Fargo & Company Bank
Pedestrians walk past a branch office of Wells Fargo & Company Bank ()

A bank pressing a residential foreclosure case did not adequately demonstrate it had sent a default notice to the homeowners, a Brooklyn appellate court said, affirming the action’s dismissal.

“Unsubstantiated and conclusory statements” from a Wells Fargo vice president “failed to show that the required notice was mailed by first class mail or actually delivered to the notice address if sent by other means, as required by the mortgage agreement,” the Appellate Division, Second Department, said in Wells Fargo v. Eisler, 2013-05498.

The unsigned ruling upheld Staten Island Supreme Court Justice Thomas Aliotta’s December 2012 dismissal of the action without prejudice.

Justices Ruth Balkin, Thomas Dickerson, John Leventhal and Sheri Roman sat on the panel, hearing arguments March 24.

In the underlying case, George and Doris Eisler had a $254,000 mortgage on their home through Wells Fargo. The bank said the homeowners began defaulting on the payments in July 2009 and it sent the default notice in August 2009. The Eislers gave sworn statements saying they did not get the notice.

A provision in the mortgage said any notice from the lender “is considered given to me when mailed by first class mail or when actually delivered to my notice address if sent by other means.” The mortgage also said the lender can require immediate payment if a notice of default is sent and the default goes uncorrected.

After the bank filed the foreclosure action, the Eislers responded with affirmative defenses, one of which was that the bank failed to meet a condition precedent in the mortgage contract saying that a notice of default had to be provided to the Eislers.

The bank sought summary judgment, and the Eislers cross moved to dismiss the case.

The bank submitted an affidavit from a vice president of loan documentation, who said the notice had been mailed Aug. 16.

The afficavit said the vice president’s statement was based on personal knowledge of a review of bank records. Attached to the affidavit was a copy of the Eislers’ default notice.

Aliotta denied the bank’s motion while granting the Eislers’ motion. The judge said proof of the notice’s mailing was “legally insufficient to establish that the required notice was sent to both mortgagors by first class mail or actually delivered to the notice address if sent by other means.” Therefore, Aliotta said, the bank failed to make out a prima facie case for foreclosure.

Wells Fargo appealed. The bank argued that it sufficiently showed the notice had been sent and the Eislers “did not conclusively establish” that the notice had not been sent. “Rather, the Eislers only—and conclusorily, with no other evidentiary support—denied receipt of the default notice” the bank said, later adding that the Eislers’ “bald denial of receipt [was] legally irrelevant.”

The bank said the mortgage expressly stated that any notice was effective with mailing, not receipt. Moreover, it pointed to other Second Department rulings that it said stood for the proposition that mere denials of receiving default notices were insufficient.

The Eislers’ attorney, Robert E. Brown of Manhattan, countered that the bank’s affidavit “failed to provide even the most basic details of the purported mailing of the notice of default and did not contain any proof of mailing and said there was no proof of mailing.”

In its affirmance, the panel said the Eislers made a prima facie case that Wells Fargo did not satisfy the condition precedent of providing the default notice. The bank’s affidavit statements were “unsubstantiated and conclusory” while the Eislers’ affidavits indicated they did not get the notice, the panel found.

The panel said the bank challenged the Eisler’s claims using the same affidavit “which was insufficient to raise a triable issue of fact.”

In an interview, Brown, whose practice is primarily foreclosure defense, said questions about the mailing of default notices arose “on virtually every case I have.” When challenged on the lack of notice, he said lenders responded it was sufficient enough that they found the notice in their files.

With this ruling, Brown said, the panel was “making banks accountable, where if they move for summary judgment or oppose a motion to dismiss based on condition precedent, they have to provide more than a conclusory affidavit that it was sent.”

Other information has to be included, such as who sent the notice, when it was sent, and how, Brown noted.

Elizabeth Lynch, a senior staff attorney at MFY Legal Services, who was not involved in the litigation, said the ruling is “most likely a case we’ll cite.” She said the appellate panel explained the flaws in the lender’s evidence more than it usually does, or is required to do, in rulings that identify a deficiency in a foreclosure action.

The ruling “will be helpful to future litigants and judges. It helps inform us what the Second Department deems a failure to prove the case,” she said.

David Dunn, a partner at Hogan Lovells, and associates Leah Rabinowitz and Chava Brandriss appeared for Wells Fargo.

“We believe the decision was wrong,” a Wells Fargo spokesman said in an email. “We intend to ask the court to reconsider the ruling and ask permission to appeal.”