U.S. Bank N.A. v Pia

[*1] U.S. Bank N.A. v Pia 2014 NY Slip Op 51298(U) Decided on August 26, 2014 Supreme Court, Putnam County Grossman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 26, 2014
Supreme Court, Putnam County

U.S. Bank National Association AS TRUSTEE UNDER POOLING AND SERVICING AGREEMENT DATED AS OF MARCH 1, 2006 ASSET BACKED SECURITIES CORPORATION HOME EQUITY LOAN TRUST, SERIES NC-2006- HE2 ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES NC 2006-HE2, Plaintiff,

against

Lisa Ann Pia AND XAVIER F. PIA, Defendants.



976/2007



Marco Cercone, Esq.

Rupp, Baas, Pfalzgraf,

Cunningham, & Coppola LLC

Attorneys for Plaintiff

1600 Liberty Building

Buffalo, New York 14202

Daniel A. Schlanger, Esq.

Schlanger & Schlanger, LLP

Attorneys for Defendants

343 Manville Road

Pleasantville, New York 10570
Victor G. Grossman, J.

On December 8, 2005, Defendant Lisa Ann Pia executed a Note and Mortgage in the amount of $372,000.00 secured by her property at 13 Lowell Road, Carmel, New York. On or about May 10, 2007, the instant foreclosure action was commenced. Defendants answered the Complaint, asserted counterclaims, and interposed a third-party action, as well as an Amended Answer on July 9, 2007, and a Second Amended Verified Answer on February 14, 2008, containing counterclaims and a third-party complaint. Plaintiff replied to the counterclaims. The gravamen of Defendants' allegations are that Plaintiff and Third-Party Defendants violated the Truth-in-Lending Act ("TILA"), Real Estate Settlement Procedures Act ("RESPA"), and various state laws, including General Business Law ("GBL") §349. They sought, inter alia, rescission of the loan and damages. In May 2009, Defendants moved for partial summary judgment, and Plaintiff moved for summary judgment on the foreclosure action and dismissal of Defendants' counterclaims. The motions were denied by Decision and Order dated May 15, 2009 as the Court (O'Rourke, J.) observed, "There are many issues which must be determined and cannot be resolved by summary judgment." The issues were heard in a "framed-issue" hearing before the Hon. Francis A. Nicolai in March 2011.

The Court, by Order entered October 19, 2011 (Nicolai, J.), determined that Defendants were entitled to rescission of the instant mortgage and to attorney's fees and costs, pursuant to the Truth in Lending Act. A Referee was appointed to determine the specific amounts to be paid to affect rescission of the loan. United States Bank Nat'l Assn v. Pia, 2011 NY Misc. LEXIS 4962 (N.Y.Sup. Ct. Oct. 7, 2011). Justice Nicolai's Decision was affirmed by the Appellate Division. U.S.Bank, N.A. v Pia, 106 AD3d 991 (2d Dept. 2013), and leave to appeal was denied by the Court of Appeals. 21 NY3d 1071 (2013).

By Order dated April 25, 2013, this Court adopted the Referee's Report and Recommendation, and directed Plaintiff to:

"1.Tender to the Defendants the sum of $37,472.91 with interest thereon at the statutory rate of 9% from October 9, 2011 to October 9, 2013;2.Terminate the existing Mortgage on the subject property by preparing a Release of Mortgage for Defendants to review;3.Deliver to Defendants a proposed new Mortgage for $ 196,277.09 payable by one payment of $37,472.91 and 267 monthly payments of $733.00 and one final payment of $566.09."[FN1]

No appeal was taken from this Order, and Plaintiff did not undertake any efforts to [*2]comply with the Order between April 25, 2013 and November 6, 2013. Pursuant to the Court's instructions on November 6, 2013, Defendants filed a proposed order giving Plaintiff a thirty-day opportunity to comply with the prior Orders of the Court. The Order was signed with minor modifications on December 9, 2013, and Plaintiff was served with the Order with Notice of Entry on December 24, 2013. The new Order, in salient terms, directed the same relief as the April 25, 2013 Order. No appeal was taken from the Order entered on December 24, 2013.

The October 19, 2011 Order awarded attorney's fees, but left the amount to be determined upon future application. This Court, by Justice Nicolai, awarded attorney's fees of $265,453.86 and costs of $12,252.52, by Decision entered on December 17, 2013, and served with Notice of Entry on December 26, 2013. The Decision was reduced to a money Judgment on January 6, 2014, and was served with Notice of Entry on January 13, 2014. No appeal was taken from that Judgment.

On January 14, 2014, Defendants served an Information Subpoena and Restraining Notice, pursuant to CPLR §§5224(a)(3) and 5222. Plaintiff's deadline to answer the Information Subpoena and comply with the Restraining Notice has passed, without compliance. No attempt was made to condition or quash the Information Subpoena and/or Restraining Notice until the instant Cross-Motion was filed on or about May 8, 2014.

Plaintiff's Cross-Motion seeks to quash or modify the Information Subpoena and Restraining Notice on the grounds they are based on an interlocutory judgment, and are calculated to harass, annoy, intimidate, or otherwise put undue pressure on Plaintiff to comply with the Decision and Order of the Trial Court, which Plaintiff considers "unlawful", despite its affirmance by the Second Department and the denial of leave to appeal by the Court of Appeals. Plaintiff further seeks an Order, pursuant to CPLR §5016, disposing of all claims that remain outstanding, in order to pursue its appellate remedies. Thus, the Court is presented with three Orders and Judgment, which have neither been complied with, nor appealed from. Plaintiff asserts the ordered remedy is unlawful, and Defendants' assert they are entitled to enforcement of their Judgment and the Orders entered herein.

In view of the issues raised, the parties appeared for oral argument on June 6, 2014, and the Court reserved decision allowing for post-argument submissions.[FN2]

The Judgment awarding attorney's fees then due and owing has not been appealed. It is final and conclusive on that issue. The finality is strengthened by the Appellate Division's affirmance of Justice Nicolai's October 19, 2011 Order, which held attorney's fees were properly awarded. Moreover, the April 25, 2013 Order, confirming the Referee's Report and Recommendation, from which no appeal was taken, supports the award of attorney's fees. Plaintiff fails to offer any support for the claim that the Information Subpoena and Restraining Notices are calculated to harass, annoy, intimidate, or otherwise put undue pressure on Plaintiff. Instead, Plaintiff proposes Justice Nicolai's Order, affirmed by the Appellate Division, and the Order confirming the Report and Recommendation of the Referee, are "unlawful". In short, Plaintiff wants "another bite of the apple" by way of a further ruling from this Court that may be appealed.

Specifically, Plaintiff further seeks an Order "fully disposing of all outstanding claims or, in the alternative, issuing a scheduling order with respect to its remaining claims." Plaintiff asserts there are outstanding claims against it that have not been resolved, precluding the entry of final judgment (Cercone Affirmation ¶81). Plaintiff asserts Defendants' Third Counterclaim regarding alleged violations of GBL §349 remains unresolved (Cercone Affirmation ¶84), and the Court has not issued a final order or judgment disposing of all claims. As a result, as Plaintiff claims, its appellate remedies are limited because there is no "final determination" of the matter, as the determinations made herein are non-final. Plaintiff observes the denial of leave to appeal Justice Nicolai's October 19, 2011 Order was due to the fact that it was "not a final order", and further proceedings were undertaken.

However, a careful reading of the Record reveals the lack of any outstanding issues. Notably, when Justice Nicolai signed an Order, confirming the Referee's Report and Recommendations, the issue of attorney's fees and "any remaining claims are hereby severed and shall be addressed at a hearing," which he scheduled for June 7, 2013. To the extent that the hearing only addressed the issue of attorney's fees, the remaining issues, such as the third counterclaim (GBL §349) or third-party claims, were waived by Defendants. Defendants' failure to pursue the third counterclaim constitutes a default under CPLR §3215(a). Eller v. Eller, 116 AD2d 617 (2nd Dept. 1986). Plaintiff cannot rely on Defendants' default or waiver as a basis for further appellate relief. Certainly, Plaintiff cannot claim to be harmed by not having to defend a claim. Insofar as no further testimony was offered with respect to the Third Counterclaim, or the Third-Party action, those matters have been waived, and the Judgment entered on January 13, 2014, was, and is, the final Judgment in this matter. No appeal was taken from the Judgment; consequently, Plaintiff's Cross-Motion seeking an order disposing of all claims, or in the alternative, issuing a scheduling order, is denied.

Defendant's motion is granted. Plaintiff is in contempt for failing to comply with the Order Confirming the Referee's Report and Judgment of this Court awarding attorney's fees. The Decision, Order and Judgment of December 17, 2013, to the extent that it addressed two of the three counterclaims, also implicitly dismissed the third counterclaim under GBL §349 as having been waived by Defendants, or defaulted upon, when it was not pursued at the hearing. While the better practice would have been to recite the dismissal of the third counterclaim, the failure to do so is not fatal to the "finality" of the action. The finality of the Order and Judgment rests on the disposition of the causes of action between the parties, leaving nothing for future judicial action. Burke v. Crosson, 85 NY2d 10 (1995). The failure to appeal from the Decision, Order and Judgment entered on June 17, 2013 is not saved or excused by the entry of a separate judgment on the issue of attorney's fees from which no appeal was taken. Shah v. State, 212 AD2d 876 (3rd Dept. 1995). A final order may not be reviewed on appeal from a later judgment. Crystal v. Manes, 130 AD2d 979 (4th Dept. 1987); Matter of Burke v. Axelrod, 90 AD2d 577 (3d Dept. 1982). According to Professor Siegel, the term "final" "has usually been given a pragmatic interpretation meaning a judgment or order that puts an end to the case, or to a logically separable part of it, and leaves nothing else in respect of it to be decided" Siegel, New York Practice, 4th ed. §527, p. 900 (emphasis added).

Plaintiff fails to offer any viable, or cognizable, excuse for its failure to comply with the Judgment awarding attorney's fees and disbursements. The delays and excuses offered by Plaintiff's counsel, based on their recent entry into the matter, are far from persuasive. This is especially true when Plaintiff's counsel claims, at oral argument, that he "had teams of people [*3]looking at pulling the servicing agreement," and his firm began its review in February 2014, but did not substitute into the matter until April 4, 2014 (Didone Affidavit ¶80, 84). The explanations offered focus on the enforcement, compliance with, or challenge to the Order Confirming the Referee's Report, and fail to address the issue of the Judgment awarding attorney's fees. Interest is accruing on the Judgment awarding attorney's fees, costs, and disbursements, but compliance is inexcusably outstanding. The Court is concerned that Plaintiff's pattern of delay, failure to comply, failure to seek relief, and general inertia is designed to evade the remedies to which Defendants are entitled.

Plaintiff's request to quash Defendants' Information Subpoena is denied. Plaintiff fails to identify any reason for supporting a Protective Order. Plaintiff's contention — that "Defendants' efforts to enforce an interlocutory judgment before the entire matter is brought to finality is premature" — is erroneous. The award of attorney's fees, which is the basis of the Judgment, occurred after a full opportunity to be heard to litigate the matter. No appeal was taken. Defendants may pursue all enforcement remedies available to them until the Judgment is satisfied. The award of attorney's fees is derived from violations of TILA. The alleged "unlawful order" (Order Confirming Referee's Report) is an attempt to remedy the situation which, regardless of whether it had been properly and timely challenged, would not affect Defendants' rights to recover legal fees for the underlying violation. The Court will reserve decision on the issue of further sanctions, additional attorneys' fees and orders of commitment as available remedies. Kahn v. Enbar, 2011 NY Slip Op. 31192(U) (Sup. Ct., NY Co., April 26, 2011); 1319 Third Avenue Realty Corp. v. Chauteaubriant Restaurant Development Co., LLC, 57 AD3d 340 (1st Dept. 2008); Lipstick, Ltd. v. Grupo Tribasa, S.A., de C.V., 304 AD2d 482 (1st Dept. 2003).

Plaintiff further claims it cannot be held in contempt for refusing to comply with the Order Confirming the Referee's Report, because the Order is "unlawful" in that it would force Plaintiff to violate one federal law by complying with another, and it may suffer tax consequences as a result. This claim is rejected. First, no appeal was taken from the Order, nor was any motion made to reargue it. Second, Plaintiff assumed certain risks when it acquired the loan, and it cannot evade or avoid the risks by attempting to insulate itself from liability at Defendants' expense. Third, the claim made by present counsel, that former counsel "dropped the ball" (Cercone, oral argument, pp. 23), is not a basis for relief. Fourth, TILA violations are subject to equitable remedies, and it cannot be said the equitable remedy here was "unlawful". Berkely Federal Bank and Trust, FSB, v. Siegel, 247 AD2d, supra at 499; 15 U.S.C. §1635(b). Fifth, Plaintiff has failed to comply with, or appeal from, three separate Orders and a Judgment of this Court. Sixth, Plaintiff's late submission of a March 20, 2014 letter from Ocwen Loan Servicing to Credit Suisse (Didone Affidavit, July 17, 2014, Exhibit B) contains an acknowledgment that "Repurchase is required under Section 2.03(a) due to a breach of the warranties made by the Seller that render Loan 70651414 to borrower Lisa Ann Pia unenforceable". The letter also contains the acknowledgment "there is some case law precedent for this [remedy] procedure which ultimately is an equitable remedy" . Plaintiff cannot escape responsibility for the loan it acquired. Public policy neither provides for shifting the burden of Plaintiff's violation of TILA to Defendants, nor does it allow for Plaintiff to claim it is somehow insulated or protected from the obligation to correct the violation they acquired.

Under these circumstances, contempt is not only an appropriate remedy, but also a necessary one. Should Plaintiff fail to fully comply with the Information Subpoena and [*4]Restraining Notice within thirty (30) days of service of this Decision and Order with Notice of Entry, Defendants may apply to this Court for further relief. In the interim, Defendants may pursue any and all enforcement and contempt remedies they deem appropriate, including additional attorney's fees. Further, Plaintiff shall pay all attorney's fees which have been reduced to Judgment entered on January 6, 2014, with interest thereon, and shall pay a statutory fine of $250.00.

The foregoing constitutes the Decision and Order of the Court.

Dated:Carmel, New York

__________________________________

HON. VICTOR G. GROSSMAN, J.S.C.

Footnotes

Footnote 1:TILA (15 U.S.C.§1601 et. seq.) provides for equitable remedies such as those outlined in Referee's Report. Berkeley Federal Bank & Trust, FSB v. Siegel, 247 AD2d 498 (2nd Dept. 1998). In light of specific statutory authority providing for rescission, an equitable doctrine, upon a TILA violation (15 U.S.C. 1635[b]), it cannot be said the remedy is unlawful.

Footnote 2: The Court has received post-Argument submissions from both parties. To the extent the submission contains descriptions of conversations between counsel, such items will not be considered; the purpose of the post-Argument submission was intended to address the issues raised at oral argument.