Citimortgage, Inc. v Gueye

[*1] Citimortgage, Inc. v Gueye 2016 NY Slip Op 50972(U) Decided on June 21, 2016 Supreme Court, New York County Bluth, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 21, 2016
Supreme Court, New York County

Citimortgage, Inc., Plaintiff,

against

Abdou Salam Gueye; Criminal Court of The City of New York; Criminal Court of The City of New York Midtown Community Court; New York City Environmental Control Board; New York City Parking Violations Bureau; New York City Transit Adjudication Bureau; New York State Department of Taxation and Finance; the Board of Managers of the 725 Riverside Condominium, Defendants.



103199/09



For Plaintiff:

Rosicki, Rosicki & Associates, PC (Batavia, NY)

For Defendant Board of Managers of the 725 Riverside Condominium:

Kagan, Lubic, Lepper, Finkelstein & Gold, LLP (New York, NY)
Arlene P. Bluth, J.

The motion by plaintiff CitiMortgage, Inc. for a judgment of foreclosure and sale is granted and plaintiff is ordered to settle order on notice.

The cross-motion by defendant Board of Managers of the 725 Riverside Condominium (725) to reduce/extinguish the amount of accrued interest that plaintiff can recover is granted. This foreclosure action has dragged on for over seven years despite the fact that the borrower has never appeared. Plaintiff has delayed this case throughout; in fact, plaintiff took over three years to file an RJI. Plaintiff offers no justification for its delay and expects to recover $98,472.23 in interest on a principal of $260,114.93. This substantial amount of interest has accumulated almost entirely due to plaintiff's failure to prosecute its case in a timely fashion. Although there are no time limits placed on a plaintiff prosecuting an unopposed mortgage foreclosure action, it is inappropriate to abuse the foreclosure process in order to make an extra hundred thousand dollars off the loan. By all accounts, seven years is certainly too long to justify plaintiff's recovery of all interest accrued during that time.

Background

This mortgage foreclosure action arises in connection with an apartment, Unit 7E, owned by defendant Gueye in a building located at 725 Riverside Drive, New York, NY. Plaintiff filed the instant matter on March 6, 2009 and allegedly served the summons and complaint on March 10, 2009. An RJI was not filed with the county clerk until December 27, 2012. Plaintiff claims that they complied with the requirements of CPLR 3408 by attending a settlement conference on July 17, 2013 and that defendant Gueye (the borrower) failed to appear.

Plaintiff's motion seeking a judgment of foreclosure and sale is not opposed. Defendant 725, which is owed common charges, brings a cross-motion seeking to reduce and/or extinguish the accrued interest.

In support of their motion, 725 claims that it is unconscionable for plaintiff to recover accrued interest from March 2009. 725 argues that plaintiff's seven year delay in prosecuting the foreclosure action should prevent plaintiff from recovering interest. 725 claims that the Court has the discretion to limit the accrued interest because a mortgage foreclosure case is an equitable action. 725 further claims that plaintiff's delay is inexcusable particularly because defendant Gueye failed to appear or answer. 725 further argues that plaintiff waited over a year to confirm the referee's report. 725 claims that this delay and the accumulated interest will likely prevent 725 from recovering its outstanding common charges after plaintiff takes its share.

725 filed a motion to reduce plaintiff's recovery of interest in 2014 and Justice Carol Huff denied this request without prejudice because it was not yet known whether the sale price of the condominium would be sufficient to cover 725's claim. 725 also alleges that it requested a referee's hearing, which plaintiff ignored. The referee instead signed his report without the hearing. 725 alleges that plaintiff only moved for a judgment of foreclosure and sale because the Court ordered it to on March 28, 2016.

725 acknowledges that it is the junior lien holder and second in priority to plaintiff, but argues that plaintiff's delay has prejudiced 725 by reducing the chances that it might recover the common charges it is owed (approximately $30,000 and growing).

In opposition to the cross-motion, plaintiff claims that there is no basis for such relief. Plaintiff claims that CPLR 5001(a) was not intended to control accrual of interest pursuant to contractual terms. Plaintiff further argues that while a foreclosure action is based in equity, it originates with a contract. Plaintiff argues that the mortgage does not contain a time period by which a foreclosure action must be commenced and/or completed. Plaintiff suggests that 725 should have commenced its own foreclosure action pursuant to Real Property Law § 339-aa.

Plaintiff claims that it spent nearly a year attempting to schedule a hearing in connection with the referee's report. Plaintiff acknowledges that the referee signed the report on March 30, 2015.

Discussion

"Although still uncommon, a consequence of delay to a foreclosing plaintiff is the possible loss of some interest recoupment. This is actually a very basic concept founded both upon statute and case law" (1 Bruce J. Bergman, Bergman on New York Mortgage Foreclosures § 2.20[3] [2015]). "CPLR 5001(a) provides that in an equitable action— and the mortgage foreclosure case fits the category: . . . interest and the rate and date from which it shall be computed shall be in the court's discretion.' Caselaw concurs and adds the qualification that resolution of the interest question is dependent upon the facts of each case" (id.).

"While plaintiff would ordinarily be entitled to an award of interest on the principal due under the mortgage note through the date of the Referee's computation of the amount owing to satisfy the mortgage lien, it would, under the unusual circumstances presented in this foreclosure action, be unconscionable to hold defendants responsible for plaintiff's lengthy delay in obtaining the judgment of foreclosure and sale" (Yagamo Acquisitions v Baco Dev. 102 St., 278 AD2d 134, 134, 718 NYS2d 325 [lst Dept 2000] [holding that where plaintiff obtained a referee's report and waited five months to move to confirm it, it was unconscionable to award default interest to plaintiff during delay]).

New York courts have tolled interest in foreclosure actions where plaintiffs have failed to negotiate in good faith with borrowers at settlement conferences pursuant to CPLR 3408 (see U.S. Bank, Natl. Assn. v Smith, 123 AD3d 914, 916-17, 999 NYS2d 468 [2d Dept 2014]; U.S. Bank, Natl. Assn. v Giola, 42 Misc 3d 947, 982 NYS2d 699 [Sup Ct, Queens County 2013]).

One court has observed that "an inordinate delay attributable to a foreclosing plaintiff may result in the loss of interest or penalties due under the terms of the borrower's loan" (Bank of America v Brooks, 43 Misc 3d 1234(A), 993 NYS2d 643(Table) [Sup Ct, Westchester County 2014] [denying a motion by a condominium board to compel plaintiff to pay common charges in a foreclosure action where it took plaintiff over four years to schedule a settlement conference after filing the case]).

Plaintiff filed this action in 2009; even though defendant Gueye defaulted, plaintiff waited over three years to file an RJI (December 27, 2012). This practice, of filing a foreclosure action and waiting years to file an RJI, is known as shadow docketing (see Pete Brush, NY Shadow Docket' Law Shifts Onus To Foreclosure Lawyers, Law360, Aug. 1, 2013 available at http://www.law360.com/articles/461946/ny-shadow-docket-law-shifts-onus-to-foreclosure-lawyers; see generally CPLR 3012-b; CPLR 3408). Although there is no deadline to file an RJI, the failure to file it in a timely manner is particularly concerning in a mortgage foreclosure action because without an RJI, a settlement conference will not be scheduled in the residential mortgage foreclosure part and a judge will not be assigned to the case. Meanwhile, plaintiff accumulates substantial interest while the case remains dormant.[FN1]

Plaintiff offers no reason or excuse for doing nothing during the three years before it filed an RJI. Plaintiff does not assert that it was negotiating with defendant Gueye about a loan modification or pursuing another type of settlement. In fact, defendant Gueye never answered. Under these circumstances, the only logical reason to refrain from filing an RJI for 1,392 days is to drive up the amount of interest that plaintiff could recover.

Once plaintiff filed an RJI, plaintiff claims that defendant Gueye failed to show up for a settlement conference scheduled for July 17, 2013. A review of the Supreme Court Records On-Line Library (SCROLL) indicates that there were four conferences scheduled in the mortgage foreclosure part between February 26, 2013 and July 17, 2013. The conference dated July 17, 2013 indicates a default. Plaintiff then waited a year before filing its motion for an order appointing a referee to compute on July 17, 2014. This motion was unopposed and Justice Huff filed her decision granting the motion on February 25, 2015. The referee's report was signed on March 30, 2015.

Plaintiff took no action until appearing at a conference before this Court on March 28, 2016. At that conference, counsel for 725 requested that the Court order plaintiff to move the case forward. Plaintiff agreed to file a motion for a judgment of foreclosure and sale within 60 days. Somehow, after waiting for years, plaintiff was able to file the instant motion within a week after the March 28, 2016 conference. Plaintiff provides no reason for waiting from March 30, 2015 until April 5, 2016 to file for a judgment of foreclosure and sale.

The record in this matter evidences a plaintiff unconcerned with prosecuting its case. Whether this inaction was due to a desire to accrue substantial interest on a valuable property or for more benign reasons, the fact is that plaintiff has spent over seven years prosecuting a case which had no opposition. Plaintiff provides no evidence that the borrower opposed any of plaintiff's motions, that the borrower sought a settlement or even that the borrower ever communicated at all with the plaintiff in seven years. In fact, plaintiff is unable to provide a single reason or excuse for its delay. Plaintiff would have this Court allow it to delay as long as plaintiff wishes while collecting the accumulated interest as the case sits on the court's docket.

Instead of providing a reason for its delay, plaintiff suggests that 725 would have recovered the outstanding common charges if it had started its own foreclosure action. Implicit in this suggestion is that 725 should have sprung into action because 725 should have known that plaintiff was asleep at the wheel and incapable of pursuing a case against a defaulting borrower. However, this alternative route presents 725, a small condominium, with an expensive and difficult choice. If 725 started its own action to recover its relatively small amount of common charges, it would not transform 725 into the senior lien holder (see Real Property Law § 339-z).

At any time, plaintiff could arise from its deep slumber and complete the mortgage foreclosure action, which, as stated above, is uncontested. By then, 725 would have expended legal fees in pursuit of case now rendered moot by plaintiff's foreclosure case. Or, if plaintiff did nothing and 725 completed its own foreclosure action, 725 would have to hope that there would be surplus money left over after plaintiff, the senior lien holder, recovers first. Essentially, plaintiff suggests that 725 bear all the expenses of the plaintiff's case with the hope that 725 might recover some of its outstanding common charges.

The record in this case compels the Court to reduce the amount of interest that plaintiff can recover. To be clear, the Court does not seek to amend or rewrite the terms of the underlying mortgage in the instant action. Nor does the Court seek to change 725's status as a junior lien holder. Instead, the Court merely recognizes that plaintiff's extensive and unexplained delays are unacceptable.

The Court does not endeavor to identify what constitutes a reasonable time to complete an unopposed mortgage foreclosure action. Certainly, plaintiffs face a wide array of challenges in [*2]moving these cases forward. But this case has now dragged on for 2,664 days. It took plaintiff 2,580 days from the date the case was filed until it brought the instant motion. Throughout this action plaintiff has encountered no opposition and has not engaged in any settlement or loan modification discussions. In fact, plaintiff failed to provide any reason whatsoever for the delays in this matter. And, it only took 1 day after the Court told plaintiff to pay attention for plaintiff to draft the instant motion, which it filed within a week.

Summary

Interest will be reduced as follows:

1. Plaintiff shall not recover for interest from three months after it started the case (June 6, 2009) until the day it filed the RJI (December 27, 2012). The Court recognizes that after filing the action a plaintiff must wait for defendants to answer and so plaintiff is entitled to interest for the first three months. However, plaintiff has provided no reason for why it held the case in limbo for more than three years before filing the RJI, and so plaintiff will not be allowed to collect interest for those 1,301 days.

2. Plaintiff shall recover interest from December 27, 2012 until the last scheduled settlement conference (July 17, 2013), as this time can be considered delay due to the court system. This amounts to 202 days.

3. Plaintiff shall not recover interest from July 17, 2013 until the date it filed a motion for an order directing a referee to compute (July 17, 2014). This amounts to 365 days. Plaintiff acknowledges that defendant Gueye did not show up for the settlement conferences and plaintiff provides no reason why it needed a year to file the motion.

4. Plaintiff shall recover interest from the date it filed the motion until the date of the referee's report, as this could be attributed to the referee's delay (it could also be attributed to plaintiff's delay in providing the referee with necessary information, but the Court will give plaintiff the benefit of the doubt). This amounts to 256 days (July 17, 2014 until March 30, 2015).

5. Plaintiff shall not recover interest from March 30, 2015 until the date that the judgment is entered.

725 claims, and plaintiff does not dispute, that accrued interest and penalties from March 1, 2009 to March 29, 2016 amounts to $98,472.23 on a principal of $260,114.93. As indicated above, plaintiff is entitled to recover interest that accrued for 658 days (approximately 25.5% of the time between March 1, 2009 and March 29, 2016). Based on that percentage, plaintiff is entitled to recover $25,110.42 (25.5% of $98,472.23).

If plaintiff fails to move expeditiously in connection with the sale, 725 may move to reduce interest gained after judgment is entered.

Accordingly, it is hereby

ORDERED that plaintiff's motion for a judgment of foreclosure and sale is granted and plaintiff is directed to settle this order on notice; and it is further

ORDERED that 725's cross-motion to reduce or extinguish plaintiff's accrued interest is granted to the extent that plaintiff may only recover $25,110.42 for interest accumulated until the judgment is entered.

This is the Decision and Order of the Court.

Dated: June 21, 2016

New York, New York

HON. ARLENE P. BLUTH, JSC Footnotes

Footnote 1:The kindest explanation for the failure to file an RJI or otherwise prosecute the case is that plaintiff's attorney was overwhelmed and/or lacked basic case management skills. The more nefarious explanation is that this was a purposeful delay designed to drive up interest while the property's value appreciated. Because plaintiff cannot make any additional money after the sale of the property, the only way to increase the amount of its recovery is to delay moving the case forward while accumulating more interest. Left unchecked, plaintiff would be free to recover more and more interest assuming the property's value appreciates. In the current New York real estate market, that's a safe bet.