Emigrant Funding Corp. v Runcie

[*1] Emigrant Funding Corp. v Runcie 2009 NY Slip Op 50110(U) [22 Misc 3d 1113(A)] Decided on January 22, 2009 Supreme Court, Kings County Lewis, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through February 5, 2009; it will not be published in the printed Official Reports.

Decided on January 22, 2009
Supreme Court, Kings County

Emigrant Funding Corp., Plaintiff,

against

Jarret W. Runcie, et al., Defendant.



37188/07



Plaintiff Attorney:William M. Rifkin, Esq.

Belking Burden Wenig & Goldman

Defendant AttorneyJarrett W Runcie Pro se

Yvonne Lewis, J.

Plaintiff, Emigrant Funding Corporation (Emigrant), moves for an order granting summary judgment in its favor with respect to the complaint, and granting its prayer for an order appointing a receiver. The cross movant, defendant Jarret W. Runcie (Runcie) wants an order, pursuant to CPLR 3212, granting summary judgment dismissing the complaint or, alternatively, granting leave to amend his answer pursuant to CPLR 3025 (b). Upon due consideration, it is the decision of the Court that, 1. the motions by Emigrant are denied, except to dismiss the counterclaims interposed by Muncie and to permit the substitution of named tenants at the premises as defendants herein, and the cross motion by Runcie is granted only to the extent of permitting said defendant to serve an amended answer without counterclaims.

In its complaint in this mortgage foreclosure action, Emigrant alleges that on August 10, 2006, Runcie executed a mortgage in which he promised to pay to Emigrant the principal sum of $265,000, in installments, until the indebtedness was paid in full; but, that Emigrant has not been paid the monthly payment of interest and principal that became due on July 1, 2007 and each successive month thereafter. In support of its summary judgment, Emigrant submits the affidavit of Joel Marcano, the Assistant Treasurer of Emigrant Mortgage Company, Inc., its mortgage servicing agent, in which he explains that, as of the date of the loan closing, there were more than ninety violations against the mortgaged premises and, therefore, pursuant to the mortgage, Emigrant placed $50,000 of the loan proceeds into an escrow fund which money was to be released to Runcie upon his submission to Emigrant of documentary evidence that he had cured all of the violations. Mr. Marcano avers that the violations have not been cured and that Runcie defaulted in making his regular mortgage payments in January 2007. Emigrant argues that Runcie's pro se answer and counterclaims raise no material issues of fact, and that the mortgage provides that the mortgagor (Runcie) waived any right to assert a counterclaim in any [*2]action brought by Emigrant.[FN1]

Emigrant points out that Runcie's sole affirmative defense is his claim that he was unaware that the default interest rate was 24% per annum. In a companion motion, Emigrant explains that the subject premises is a six-family residence and that, pursuant to paragraph "29" of the mortgage, a receiver should be appointed to collect the rents for its benefit during the pendency of the foreclosure action.

In his cross motion, Runcie (who is now represented by counsel) asserts that he corrected the violations at the premises and notified Emigrant that the work had been done, but it refused to verify his compliance by inspecting the work for which he submited printouts from the New York City Department of Buildings to support his contention that there are no longer any violations at the premises. He faults Emigrant for failing to mention that a "Escrow Holdback Agreement" (the Agreement) was signed at the loan closing, which agreement concerned the retention of escrow money by Emigrant. According to Runcie, the Agreement refers to an annexed list of violations that he was obliged to correct, but he neither received a copy of the list nor did Emigrant provide one to this court. Since Runcie has allegedly cleared all of the violations that existed as of the closing date, he argues that he was not in default of the Agreement and Emigrant could not have used his alleged default to increase the mortgage interest rate from 10% to 24%. Runcie further argues that he had no problem making the monthly mortgage payments as they became due until Emigrant improperly increased the interest rate in January 2007. He points out that he tried to make payments which reflected the 10% interest rate, but Emigrant rejected such payments because they were allegedly less than what Emigrant was demanding. Given Runcie's charge that Emigrant "wrongfully raised the interest rate" based upon his alleged failure to cure building violations and that it subsequently "manufactur[ed] yet another artificial and false ground for claiming a default" (the payment by Runcie of less than the amount due), he argues that summary judgment in favor of plaintiff is unwarranted, as is its request for the appointment of a receiver. He also contends that the complaint should be dismissed because he "did not default in performing any act he was required to perform under the terms of the promissory note, the mortgage or any other related document." Runcie adds, albeit briefly, a request that he be allowed to amend his answer to include additional or further defenses.[FN2] [*3]

In opposition to the cross motion (and in further support of its motions), Emigrant maintains that Runcie has not submitted "any probative evidence that he has cured and has removed all 93 violations . . . [or] that he has the funds to cure his monetary defaults." Emigrant also characterizes the proposed amended answer as containing "meritless and unsubstantiated affirmative defenses and counterclaims." Emigrant futher asserts that Runcie does not reside at the subject premises and, thus, Real Property Law § 254-b is inapplicable and that Runcie has not articulated any deceptive practice by Emigrant that could constitute a violation of General Business Law § 349. In a separate reply affirmation, Emigrant notes that a "Violation Correction Certificate," dated October 11, 2007, issued by the New York City Department of Housing Preservation and Development indicated that four violations remained as of that date and, therefore, Runcie violated the Escrow Holdback Agreement by failing to cure all violations by February 10, 2007.

In a supplemental affirmation, Runcie repeats his assertions that Emigrant wrongfully declared a default and that its arguments are based upon the "single flawed premise" that he defaulted. With respect to his proposed affirmative defenses, which he asserts are "reasonable and have merit," Runcie contends, in particular, that Emigrant's failure to release the escrow money to him after he corrected the violations was a "deceptive practice." He also challenges Emigrant's allegation that he does not reside at the subject property.

Emigrant has met its initial burden of establishing its entitlement to a judgment of foreclosure (and, concomitantly, to the appointment of a receiver) as a matter of law by producing the mortgage, the unpaid note and evidence of default (see U.S. Bank Trust N.A. Trustee v Butti, 16 AD3d 408 [2005]; Republic Natl. Bank of NY v O'Kane, 308 AD2d 482 [2003]). However, in opposition, Runcie has raised triable issues of fact with respect to whether he complied with the Escrow Holdback Agreement and whether Emigrant subsequently (and incorrectly) calculated the amount of the mortgage payments based upon that default (see Popular Financial Services, LLC v Williams, 50 AD3d 660 [2008]. Accordingly, the motion by Emigrant for the appointment of a receiver and that branch of its companion motion which seeks summary judgment in its favor with respect to the complaint is denied, as is that branch of the cross motion which seeks dismissal of the complaint.

With respect to the counterclaims originally interposed by Runcie in his pro se answer, the Court notes that paragraph "32" of the subject mortgage provides that the mortgagor "waives the right to assert a counterclaim in any action or proceeding brought against it by [the] Mortgagee . . . arising out of or in any way connected with this Mortgage." Therefore, Runcie's counterclaims are stricken. Moreover, Emigrant's request to delete defendants "John Doe" and "Mary Doe" as parties herein and to substitute ten named tenants at the premises as defendants is granted without opposition.

Although leave to amend should be freely given (see CPLR 3025 [b]), a motion for leave to amend should be denied if the substance of the proposed pleading lacks merit (see ICC Bridgeport Ltd. Partnership v Primrose Development Corp., 221 AD2d 417, 418 [1995]). To the extent that the proposed amended answer includes counterclaims, they may not be asserted in this action in light of paragraph "32" of the subject mortgage. Nevertheless, because Runcie's [*4]proposed affirmative defenses have not prejudiced or surprised Emigrant, nor are they patently devoid of merit (see Pellegrini v Richmond County Ambulance Serv., Inc., 48 AD3d 436 [2008]), he may serve an amended answer which includes such defenses. If Emigrant wishes to test the merits of the proposed defenses, it may later move for summary judgment upon a proper showing (see Lucido v Mancuso, 49 AD3d 220, 229 [2008]).

The foregoing constitutes the decision and order this court..

E N T E R,

________________________

Yvonne Lewis J. S. C. Footnotes

Footnote 1:Nevertheless, Runcie asserts three counterclaims to the effect that Emigrant "returned my payments," "use[d] the money escrowed in terms not agreed to by defendant" and "refused to communicate with defendant."

Footnote 2:In his proposed amended answer, Runcie asserts six affirmative defenses and four corresponding counterclaims; namely, that Emigrant wrongfully declared a default, violated Real Property Law § 254-b by wrongfully assessing late charges, failed to give him notice of default as required by the mortgage, failed to comply with all conditions precedent to acceleration, and violated General Business Law § 349. As a sixth affirmative defense and counterclaim, Runcie seeks an injunction barring Emigrant from the prosecution of this action.