NEW YORK, Jan 12 (Reuters) - A process server working for a once-prolific foreclosure law firm in upstate New York broke the law by failing to keep any record of papers served in a 2008 foreclosure case, a Long Island judge has ruled, giving defense attorneys a new angle to explore in foreclosure cases as they seek to buy time for their financially beleaguered clients to modify or refinance their mortgages.

Gary Cardi, a former police officer contracted by A&J Process Service -- which has offices on the same floor in the same building as the foreclosure firm Steven J. Baum PC -- admitted in Nassau County court last October that he didn't have any record of serving foreclosure papers on Soledad Murillo in 2008. In fact, he told state Supreme Court Justice F. Dana Winslow during an October hearing, he hasn't kept records of any of the "thousands" of cases he served over the last six years.

An attorney for the Baum firm, Victor Spinelli, representing foreclosing bank U.S. Bank NA, told Winslow that he thought the failure to keep tabs on service wasn't a reason to overturn a foreclosure judgment against Murillo under New York law.

But Winslow disagreed. Not only was Cardi required to keep some record of his attempts to serve Murillo, Winslow ruled, but his failure to do so violated New York General Business Law Article 8, which defines and outlines the duties for process servers -- including, Winslow said, the need to keep "legible" records of service.

"The duty to keep comprehensive records may have been unnoticed, or underestimated, by litigants and the courts," Winslow wrote in a ruling dated Dec. 22. "Past practice, however, cannot be the motivating force for future conduct and determinations.

"The need, particularly in this economic environment and under these telling circumstances, for valid and reliable proof of service, mandates the rejection of 'trust me,' and the adoption of 'show me,'" Winslow wrote.

'THIS WILL BECOME THE TOOL'

Steven Baum, the founder of Baum PC, announced last November that he was closing his firm, shortly after government-backed mortgage giants Fannie Mae and Freddie Mac barred loan servicers from referring new cases to his firm in the wake of federal and state investigations into the firm's alleged foreclosure abuses.

In a statement, Baum told Reuters that his firm used A&J in addition to other vendors to serve foreclosure papers.

"I believe the judge erred in failing to recognize that records do not have to be kept for more than two years from date of service, either by the process server or their employer," Baum said -- meaning that Cardi's duty to keep tabs on the alleged service to Murillo would have ended on April 5, 2010.

Traverse hearings -- which are held to determine whether parties were properly served -- are still a relative rarity in foreclosure cases, said Rebecca Grammatico, an attorney at the Empire Justice Center who works on foreclosure issues.

But defense attorneys in foreclosure cases may find a useful new approach in the wake of Winslow's ruling, Grammatico said.

"Time is frequently the thing you really need," she said. "This will, for many petitioners across the state, become the tool."

It is possible that other defendants who were served by Cardi or another server who failed to keep records could use Winslow's ruling as a way to get judgments against them vacated, Grammatico added.

But Murillo was lucky in that her employer kept detailed logs of her daily movements, so she could produce something to cut through the "he said, she said" typical of traverse hearings, said Michael Witugow, senior staff attorney at Nassau Law Services Committee Inc.

Murillo also had the benefit of having her case heard by Winslow, whom Witugow described as the "rare judge out here willing to address issues" of possible foreclosure abuse by banks such as inaccuracies, incompleteness and outright fraud.

'DIRECTION OF FAIRNESS'

Generally, process service is well-documented, particularly in foreclosure cases, according to Lawrence Yellon, president of the National Association of Professional Process Servers, who is based out of Nassau County.

Yellon called Cardi's case "very unusual," given the stringent regulations governing process service within New York City and state.

"The people who specialize in foreclosure service really know their business," Yellon said. "If you can serve foreclosure in New York state, you can serve anything."

But Winslow's ruling underscores the frustration Grammatico says she has heard some judges express about practices once assumed to be common -- and legal -- in foreclosure prosecutions.

"That's why we have issues with standing or robo-signing -- for so long, that's just the way it was done," Grammatico said.

"But now people dedicated to this work are coming up with these new strategies to approach these foreclosure cases. I believe the pendulum is finally swinging in the direction of fairness."

(Reporting by Jessica Dye)

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