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This opinion is uncorrected and subject to revision before

publication in the New York Reports.

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No. 84 

Flushing Savings Bank, FSB,

 Appellant,

 v.

Pierre Bitar, &c.,

 Respondent,

et al.,

 Defendants.

Laurel R. Kretzing, for appellant.

Respondent, pro se, precluded.

Mark H. Shawhan, for the Attorney General of the State

of New York, amicus curiae.

PIGOTT, J.:

Real Property Actions and Proceedings Law § 1371

delineates the steps a lender must take in a mortgage foreclosure

action before securing a deficiency judgment against a borrower

(RPAPL 1371 [1]-[4]). On this appeal, we examine not only the

sufficiency of the proof that a lender must submit in order to

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establish its entitlement to a deficiency judgment, but also what

actions a court must take in the event the lender fails to meet

its burden in the first instance. 

I.

Plaintiff Flushing Savings Bank, FSB (FSB) was the

owner and holder of a note secured by a mortgage on commercial

property in Brooklyn. Defendant Pierre Bitar, the mortgagor and

obligor on the note, defaulted under the terms of the note. FSB

commenced a mortgage foreclosure action against Bitar (and

others) in March 2010. Neither Bitar nor any of the other named 

defendants answered the complaint.1

 

Supreme Court appointed a referee to compute the amount

due FSB and conduct a sale of the property. The referee stated

in his December 13, 2010 report that FSB was owed $690,642.23. 

In March 2011, Supreme Court confirmed the referee's report,

granted FSB a judgment of foreclosure, awarded FSB $690,642.23

plus interest and fees, advances, costs and disbursements, and

directed that the property be sold at a public auction. Supreme

Court further ordered that should the proceeds of the sale be

insufficient to pay the amount due and owing to FSB, FSB could

recover the deficiency from Bitar in accordance with RPAPL 1371.

On August 11, 2011, the property was sold at auction to

FSB (the highest bidder) for $125,000. The referee delivered the

1 The New York State Attorney General has submitted an

amicus curiae brief in opposition to FSB's arguments on the

appeal to this Court.

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deed to FSB on September 13, 2011. According to the referee's

report of sale issued on that date, FSB was owed $793,724.75 at

the time of sale less FSB's $125,000 bid, leaving a deficiency of

$668,724.75. FSB retained a New York State licensed appraiser to

inspect the interior and exterior of the premises. The appraiser

concluded that the fair market value of the property as of the

date of sale was $475,000.

On November 23, 2011, FSB moved for an order confirming

the referee's report of sale and for a deficiency judgment

against Bitar in the amount of $318,724.75, representing the

outstanding amount of $793,724.75 less the alleged fair market

value of $475,000. In addition to its submission of the

referee's report, FSB proffered a four-paragraph affidavit from

its licensed appraiser, who stated that he was "well acquainted

with real estate values in [Kings] County" and that he had "made

a personal exterior and interior inspection of the premises . .

." As to the property's fair market value, the appraiser opined

that 

"[b]ased on said inspection and after

reviewing comparable sales, examination of

the neighborhood, market and general economic

trends, comparable rentals, expense data and

subject to the reasonable assumption that

there have not been substantial changes in

occupancy and condition, deponent is of the

opinion that the market value of the premises

as of August 11, 2011, was $475,000, which

valuation is consistent with the valuation of

the premises as of October 5, 2011, the date

of inspection." 

Bitar, although personally served with the motion papers, did not

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oppose FSB's motion. 

In March 2012, Supreme Court granted FSB's motion to

confirm the referee's report, but denied its motion for a

deficiency judgment, holding that the four-paragraph affidavit

from the appraiser was "conclusory" and lacked "any specific

information regarding how he reached his fair market value

determination." Supreme Court held that FSB failed to meet its

burden of establishing the fair market value of the premises. 

FSB unsuccessfully moved for renewal and reargument, with the

court holding that FSB failed to identify new facts that would

have changed the court's prior determination and also failed to

identify any facts or law that the court had overlooked. 

The Appellate Division affirmed, holding that "Supreme

Court was entitled to reject the opinion of [FSB's] appraiser as

without probative value in light of the lack of evidentiary

foundation set forth in his affidavit" (106 AD3d 690, 691 [2d

Dept 2013] [citations omitted]). We granted FSB leave to appeal. 

II.

FSB asserts that its appraiser's affidavit was

sufficient to establish the property's fair market value because

there was no conflicting evidence of market value presented to

Supreme Court and that, absent any opposition to FSB's

submission, Supreme Court should have accepted its appraiser's

valuation. We disagree. 

Under RPAPL 1371, a lender is entitled to move for a

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deficiency judgment against the borrower so long as the motion is

brought on notice to the borrower "within ninety days after the

date of the consummation of the sale by the delivery of the

proper deed of conveyance to the purchaser . . ." (RPAPL 1371

[2]). The deficiency judgment represents "the difference between

the amount of indebtedness on the mortgage and either the auction

price at the foreclosure sale or the fair market value of the

property, whichever is higher" (BTC Mtge. Invs. Trust 1997-SI v

Altamont Farms, 284 AD2d 849, 849-850 [3d Dept 2001] [citations

omitted]). It is the lender who bears the initial burden of

demonstrating, prima facie, the property's fair market value as

of the date of the auction sale (see National Bank of N. Am. v

Systems Home Improvement, 69 AD2d 557, 562 [2d Dept 1979], affd

for reasons stated below 50 NY2d 814 [1980]; see also Eastern

Sav. Bank, FSB v Brown, 112 AD3d 668, 670 [2d Dept 2013]; BTC

Mtge. Invs. Trust 1997-SI, 284 AD2d at 850; Marine Midland Bank v

Harrigan Enters., 118 AD2d 1035, 1037 [3d Dept 1986]). 

We agree with Supreme Court that FSB failed to meet its

initial burden of establishing the fair market value of the

property. The appraiser's four-paragraph affidavit consisted of

two paragraphs that briefly covered the appraiser's experience

and qualifications. The remaining paragraphs set forth the

address of the property and the date the appraiser conducted the

inspection, and contained conclusory references to "comparable

sales" and an examination of "the neighborhood, market and

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general economic trends, comparable rentals [and] expense data." 

Although the appraiser opined that the property had a fair market

value of $475,000, that opinion was unsupported by any detailed

analysis of the data and valuation criteria he utilized in

reaching his valuation. Nor did the appraiser affix to his

affidavit any evidence substantiating his opinion, which would

have assisted the court in reaching a determination as to the

property's fair market value. Moreover, although the appraiser

claimed to have examined the interior and exterior of the

building, he made no attempt to describe the building's condition

or what his inspection of the property revealed. Simply put, the

appraiser's affidavit consisted of little more than conclusory

assertions of fair market value, and, therefore, Supreme Court

properly refused to accept the appraiser's valuation. 

Contrary to FSB's contention, it is of no moment that

Bitar failed to submit any evidence in opposition to the motion. 

FSB had the initial burden of establishing fair market value

through the submission of sufficient proof that would have

permitted the court to render a determination as to the

property's fair market value. Absent such proof, Supreme Court

had no basis to award FSB a deficiency judgment, notwithstanding

the fact that FSB's submission was unrebutted. 

III.

FSB next contends that, once Supreme Court determined

that the appraiser's affidavit was insufficient to meet FSB's

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burden, it should not have denied the motion, but rather, should

have directed FSB to submit additional proof or taken additional

steps in order to make a fair market value determination. We

agree. 

RPAPL 1371 (2) directs that, when a lender makes a

motion for a deficiency judgment, 

"the court, whether or not the respondent

appears, shall determine, upon affidavit or

otherwise as it shall direct, the fair and

reasonable market value of the mortgaged

premises as of the date such premises were

bid in at auction or such nearest earlier

date as there shall have been any market

value thereof and shall make an order

directing the entry of a deficiency judgment"

(emphases supplied). 

This provision is a directive that a court must determine the

mortgaged property's "fair and reasonable market value" when a

motion for a deficiency judgment is made. As such, when the

court deems the lender's proof insufficient in the first

instance, it must give the lender an additional opportunity to

submit sufficient proof, so as to enable the court to make a

proper fair market value determination.2 

Here, FSB failed to meet its burden in the initial

application. However, rather than denying the deficiency

judgment motion outright, Supreme Court should have permitted FSB

2 We express no opinion as to what steps a court may take in

the event the lender, having been given an additional opportunity

to submit the necessary and relevant proof, nonetheless submits

inadequate proof in the second instance. 

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to submit additional proof establishing fair market value (see

e.g. Eastern Sav. Bank, FSB, 112 AD3d at 671 [remitting the

matter to Supreme Court for further proceedings, with said

proceedings including the lender's submission "of proof in

admissible form describing the subject premises and comparable

sales and market data"]; see also UFP Atlantic Div., LLC v Route

299 Retail Ctr., LLC, 2014 WL 2986864, *3-*4, 2014 US Dist LEXIS

89927, *10-*11 [ND NY July 2, 2014] [staying motion for

deficiency judgment and directing holder of mortgage note to

submit evidence establishing fair market value of the property

within 30 days of the order, and ordering dismissal of the motion

for deficiency judgment if note holder failed to submit such

evidence]). 

It is, of course, within the court's discretion to

elucidate the type of proof it requires so it can render a proper

determination as to fair market value. The court may also order

a hearing if it deems one necessary. In proceedings that are

governed by section 1371, the court is in the best position to

determine the type of proof that will allow it to comply with the

directives of that section. Lenders seeking deficiency

judgments, however, must always strive to provide the court with

all the necessary information in their first application. 

Accordingly, the order of the Appellate Division should

be modified, without costs, by remitting to Supreme Court for

further proceedings in accordance with this opinion, and, as so

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modified, affirmed. 

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* * * * * * * * * * * * * * * * *

Order modified, without costs, by remitting to Supreme Court,

Kings County, for further proceedings in accordance with the

opinion herein and, as so modified, affirmed. Opinion by Judge

Pigott. Chief Judge Lippman and Judges Read, Rivera, AbdusSalaam, Stein and Fahey concur.

Decided June 4, 2015

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