Wells Fargo Bank, N.A. v Persaud

[*1] Wells Fargo Bank, N.A. v Persaud 2017 NY Slip Op 50359(U) Decided on January 17, 2017 Supreme Court, Queens County Elliot, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 17, 2017
Supreme Court, Queens County

Wells Fargo Bank, N.A., Plaintiff(s),

against

Annerude Persaud, et al., Defendant(s).



1624/2014



Counsel for plaintiff: Gross Polowy, LLC, 1775 Wehrle Drive, Suite 100, Williamsville, NY 14221

Counsel for defendant: Petroff Ahsmen LLP, 1795 Coney Island Ave, 3rd Floor, Brooklyn, NY 11230
David Elliot, J.

In this action to foreclose a mortgage, plaintiff moves for an order, inter alia, granting it a final judgment of foreclosure and sale and extinguishing defendant New York City Environmental Control Board's (ECB) interest in the subject premises. Defendants Annerude Persaud and Bissoondai Persaud (defendants) cross-move for an order, in effect, vacating their default in opposing plaintiff's prior motion for summary judgment, dismissing plaintiff's complaint for failure to comply with RPAPL § 1304, finding that plaintiff acted in bad faith or, in the alternative, holding a hearing to determine same, tolling the interest due on the mortgage, and awarding counsel fees. Initially, the court notes that, by stipulation dated December 28, 2016, the parties agreed that plaintiff would accept defendants' reply as having been timely submitted, despite the fact that it was received post-submission of the motion. Given the stipulation, the court will consider the reply together with the remaining papers as though same had been submitted on the final submission date together with the other papers.

Plaintiff commenced this action to foreclose a mortgage on January 31, 2014. Defendant Bissoondai Persaud, as a self-represented litigant, submitted a verified answer; however, same was rejected as untimely. The parties then agreed to extend the time for defendant Bissoondai Persaud to answer the complaint. Both defendants submitted their verified answer (as self-represented litigants, with the assistance of Queens Legal Services) dated April 22, 2014. Two [*2]Residential Foreclosure Conferences were held and, by order dated June 18, 2014, plaintiff was advised to proceed due to the inability to reach a settlement, as "defendants had a prior modification and their current income will not support an affordable payment" (CA-R Cimino, now a Civil Court Judge).

On or about July 30, 2015, plaintiff moved for an order, inter alia, granting it summary judgment against defendants and appointing a referee to compute. The motion was initially made returnable on August 24, 2015; it was then adjourned to October 19, 2015, on which date it was marked submitted without opposition in the Centralized Motion Part. The motion was granted without opposition — except for plaintiff's prayer for relief pursuant to its second cause of action regarding a prior and adverse lien held by the ECB — by memorandum decision dated October 27, 2015. Plaintiff was then directed to submit an order in accordance with the decision. Said order was signed on January 8, 2016 and served upon defendants on February 29, 2016. Plaintiff now moves for an order, inter alia, granting it a final judgment of foreclosure and sale. In support, plaintiff submits the oath and report of Referee Craig Zim, Esq., wherein he computed that the amount due to plaintiff is $529,082.63, as of June 26, 2015, and determined that the premises should be sold in one parcel.

That branch of plaintiff's renewed motion for an order, inter alia, declaring invalid and extinguishing the ECB's interest in the mortgaged premises is granted without opposition. Plaintiff submits the title policy, which indicates that the subject loan is insured without exception to the ECB's liens, which would suggest that these liens were paid off and should have been satisfied of record. That, coupled with the fact that the ECB has defaulted in either appearing or answering these allegations, warrant the granting of the relief being sought by plaintiff.

Defendants, now by counsel, have cross-moved to, in effect, vacate their default in opposing plaintiff's motion for summary judgment, among other things. In order to vacate their default in opposing plaintiff's motion, defendants must demonstrate both a reasonable excuse for having done so and a potentially meritorious opposition to said motion (CPLR 5015 [a] [1]; see M & T Bank v Morris, 138 AD3d 939 [2d Dept 2016]; JP Morgan Mtge. Acquisition Corp. v Hayles, 113 AD3d 821 [2d Dept 2014]; 1158 Props., LLC v 1158 McDonald, LLC, 104 AD3d 658 [2d Dept 2013]; HSBC Bank USA N.A. v Wider, 101 AD3d 683 [2d Dept 2012]).

In support, counsel states that, at the time of the filing of the summary judgment motion, defendants were pro se litigants (noting that Queens Legal Services merely assisted them with the drafting of their answer and appeared on their behalf only in connection with the Residential Foreclosure Conferences); that defendants appeared in connection with the summary judgment motion to defend themselves on the merits; and that they were unaware that a documented response was necessary but did not willfully default in responding. Counsel also cites the fact that the motion was only recently granted and, as such, plaintiff would suffer little to no prejudice. Defendants submit affidavits to that effect.

In opposition to the cross motion, plaintiff's counsel states that, on the contrary, an attorney appeared on defendants' behalf on the initial return date of plaintiff's motion for summary judgment, and said attorney requested an adjournment, which was granted, with opposition to be served by September 28, 2015. Counsel then submits a copy of email communications between her office and the attorney who appeared on defendants' behalf in [*3]connection with the motion. The attorney, Steven Cohen, Esq., indicated, among other things, that he had already put in an appearance in court (in response to plaintiff's request for a Notice of Appearance), requested that the motion be withdrawn, and acknowledged that opposition papers were to be submitted in response to the motion. Plaintiff's counsel argues that defendants were clearly represented by counsel during this period, were provided an adjournment to put in a response, and did not do so, nor was there an appearance on the final return date. In any event, plaintiff avers that, even if defendants were pro se litigants, ignorance of the law or court procedures do not constitute a reasonable excuse for a failure to answer or otherwise appear. In reply, defense counsel reiterates that there was no intent to default, and the attorney did not formally appear on their behalf.

The court finds that defendants have failed to establish a reasonable excuse for having failed to submit opposition to plaintiff's summary judgment motion. Defendants' statements regarding their pro se status are belied by the email communications between the office of plaintiff's counsel and Mr. Cohen, who appeared on defendants' behalf, acknowledged that written opposition to the motion was required (see e.g. Antoine v Bee, 26 AD3d 306 [2d Dept 2006]), and declared that his written emails were his notice to plaintiff of his appearance in this matter. Defendants, in reply to this demonstration, have failed to offer any evidence to rebut the fact that they appear to have hired counsel to, not only adjourn, but to oppose, the summary judgment motion. Defense counsel's reliance, in reply, on an 1899 case (Paine Lbr. Co. v Galbraith, 38 AD 68 [2d Dept]) is misplaced, as the Court therein held that one attorney's appearance for purposes of obtaining an extension of time for the defendants to serve an answer did not amount to a formal appearance such that would require the formal substitution of another attorney who then later appears for those defendants.[FN1]

In any event, assuming, arguendo, defendants rely upon their status as pro se litigants to establish that they were unaware of the need to submit written opposition to plaintiff's motion, ignorance of the law and/or court processes do not constitute reasonable excuses (see Chase Home Fin., LLC v Minott, 115 AD3d 634 [2d Dept 2014]; U.S. Bank N.A. v Slavinski, 78 AD3d 1167 [2d Dept 2010]). This is especially so considering that the face of the Notice of Motion specifically advises that answering papers and notice of cross motion, if any, must be served upon plaintiff's counsel, in accordance with CPLR 2214 (b) (see Minott, 115 AD3d at 634-635 [defendant's excuse that she did not know she needed to answer was not reasonable, particularly in light of the fact that the face of the summons contained specific statutory language warning her to respond by serving an answer or risk the lost of her home]).

Since defendants have failed to establish a reasonable excuse for the default, the court need not consider whether they proffered a potentially meritorious opposition to plaintiff's prior motion for summary judgment (see Morris, 138 AD3d at 940).

To that end, the branch of defendants' cross motion for an order which specifically seeks dismissal based upon plaintiff's alleged noncompliance with RPAPL § 1304 must be denied. [*4]That issue was litigated and decided against defendants and is barred from reconsideration pursuant to law of the case (see Wells Fargo Bank Minnesota, Natl. Assn. v Perez, 70 AD3d 817 [2d Dept 2010]; see also 28 NY Jur 2d Courts and Judges § 237). While defendants argue that the RPAPL § 1304 defense may be raised at any time during litigation, defendants provide no authority to establish that it may be raised after summary judgment has already been awarded (see generally PHH Mtge. Corp. v Celestin, 130 AD3d 703 [2d Dept 2015]).

Defendants also cross-move for an order finding that plaintiff failed to negotiate in good faith pursuant to CPLR 3408, thereby barring it from collecting interest and fees in this action. CPLR 3408 (f) provides that "[b]oth the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible" (see also Wells Fargo Bank, N.A. v Miller, 136 AD3d 1024 [2d Dept 2016]; LaSalle Bank, N.A. v Dono, 135 AD3d 827 [2d Dept 2016]; Onewest Bank, FSB v Colace, 130 AD3d 994 [2d Dept 2015]). The statute was enacted in response to the 2008 mortgage crisis which "requires only that the parties enter into and conduct negotiations in good faith" (U.S. Bank N.A., 121 AD3d 187 [2d Dept 2014]; see Deutsche Bank Nat. Trust Co. v Twersky, 135 AD3d 895 [2d Dept 2016]), its purpose to ensure that both plaintiff and defendant be "prepared to participate in a meaningful effort at the settlement conference to reach resolution" (Sarmiento, 121 AD3d at 200, quoting 2009 Governor's Program Bill Mem., Bill Jacket, L. 2009, ch. 507 at 11; see Miller, 136 AD3d at 1025; Dono, 135 AD3d at 828; U.S. Bank N.A. v Smith, 123 AD3d 914 [2d Dept 2014]). The court must look at the totality of the circumstances to determine whether plaintiff's conduct did not constitute such a meaningful effort, which includes circumstances where "a plaintiff fails to expeditiously review submitted financial information, sends inconsistent and contradictory communications, and denies requests for a loan modification without adequate grounds" (Sarmiento, 121 AD3d at 204; see Miller, 136 AD3d at 1025). Though the statute does not provide a remedy for a CPLR 3408 (f) violation, courts have held that an abatement of interest, counsel fees, costs, and disbursements constitutes an appropriate sanction (see Dono, 135 AD3d at 829; Smith, 123 AD3d at 917).

In support of their cross motion, defense counsel states that defendants received a loan modification in 2011. When they suffered a sharp decease in their income and upon the death of defendant Annerude Persaud's father, they defaulted on their payment obligations. In 2014, when defendant Annerude Persaud obtained new employment, defendants "started submitting loan modification applications . . . without success." Their last attempt was in April 2016, which was rejected and, since that time, plaintiff has refused to review them for any loan modification options despite defendants' consistent attempts. Defendants attach their affidavits to that effect, as well as a copy of a letter from Wells Fargo Home Mortgage, dated September 26, 2016, that states the following, in part:

"We're responding to your recent request for mortgage assistance. At this time, we are unable to move forward with an evaluation of your current situation."We have reviewed this mortgage account in the past. Based on that review and the recent information you have provided to us, we have determined there has not been a sufficient enough change in your circumstances for us to conduct another review."

Defense counsel cites to 12 CFR § 1024.41 (c) (1), entitled Evaluation of Loss Mitigation Applications, Complete Loss Mitigation Application, which provides, in part, the following:

"If a servicer receives a complete loss mitigation application more than 37 days before a foreclosure sale, then, within 30 days of receiving a borrower's complete loss mitigation application, a servicer shall: "i. Evaluate the borrower for all loss mitigation options available to the borrower; and"ii. Provide the borrower with a notice in writing stating the servicer's determination of which loss mitigation options, if any, it will offer to the borrower on behalf of the owner or assignee of the mortgage loan."

Thus, defense counsel states that plaintiff's latest refusal to evaluate defendants for a loan modification constitutes a failure to negotiate in good faith. In opposition, plaintiff states that there is no basis for a finding of a violation of CPLR 3408, particularly in light of the fact that the case was released from the Foreclosure Conference Part without any such finding, wherein the referee determined that defendants' current income would not support an affordable payment. Plaintiff's counsel states that, thereafter, defendants were indeed reviewed for a loan modification but were denied by letter dated July 24, 2015 because an affordable payment could not be created. Defendants were again denied by letter dated January 13, 2016 based upon insufficient income. Counsel also cites to § 1024.41 (i) of the Regulations which states that "[a] servicer is only required to comply with the requirements of this section for a single complete loss mitigation application for a borrower's mortgage loan account." Counsel states that defendants have been twice reviewed for a loan modification, and that defense counsel's interpretation of the Regulations would improperly "result in countless reviews that would keep the foreclosure action in the state of limbo for the indefinite future." Counsel further states that plaintiff cannot be forced into entering into a modification agreement.

In reply, defense counsel avers that plaintiff's attorney has misinterpreted § 1024.41 (i), and that, based upon a reading of the official interpretation per the Supplement to the section, it can be "deduce[d] that the underlying purpose for 12 CFR §1024.41(i) is to prohibit an incoming servicer on a mortgage loan from requesting duplicative documents when the prior servicer has already received a complete loss mitigation application from the borrower," and it is not "a justification for Plaintiff to completely refuse to review Defendants for any home retention options." The Supplement to § 1024.41 (i) states: "A transferee servicer is required to comply with the requirements of § 1024.41 regardless of whether a borrower received an evaluation of a complete loss mitigation application from a transferor servicer." It further states:

"A transferee servicer must obtain documents and information submitted by a borrower in connection with a loss mitigation application during a servicing transfer . . . . A servicer that obtains the servicing of a mortgage loan for which an evaluation of a complete loss mitigation option is in process should continue the evaluation to the extent practicable. . . . [A] transferee servicer must consider documents and information received from a transferor servicer that constitute a complete loss mitigation application for the transferee [*5]servicer to have been received by the transferee servicer as of the date such documents and information were provided to the transferor servicer."

A review of the totality of the circumstances does not support the conclusion that plaintiff's conduct did not constitute a meaningful effort at reaching a resolution, or that a hearing is warranted on that issue (see Miller, 136 AD3d at 1025; Aurora Loan Servs., LLC v Chirinkin, 135 AD3d 676 [2d Dept 2016]; Bank of NY v Castillo, 120 AD3d 598 [2d Dept 2014]). It appears, rather, that plaintiff has negotiated in good faith regarding defendants' home retention options, to wit: there was a successful loan modification prior to this action; defendants were advised, pre-commencement, of their loss mitigation options; two foreclosure settlement conferences were conducted, where a referee ultimately determined that defendants' income could not support an affordable payment, and no finding was made thereat as to plaintiff's absence of good faith; plaintiff placed the foreclosure proceedings on hold several times for purposes of loss mitigation review; and plaintiff twice reviewed defendants for a loan modification, despite the fact that federal regulations only required that plaintiff evaluate defendants' complete loss mitigation application for all loss mitigation options once (12 CFR § 1024.41 [i]). As such, the court finds that plaintiff did not violate federal regulations and further established that it negotiated in good faith.

As far as defense counsel's interpretation of the official interpretation of this section located in the Supplement thereto, same is unpersuasive. Here, there has only been one servicer. A reading of the Supplement, in conjunction with the section itself, reveals that the intent of paragraph (i) was to provide guidance to servicers that each must individually comply with the requirements of § 1024.41. In other words, transferee servicers are not to be afforded the benefit of paragraph (i). As the interpretation explains, the transferee servicer is required to comply with § 1024.41 irrespective of whether a borrower already received an evaluation from a transferor servicer. It would appear, thus, that the interpretation of the regulation seeks to prevent a transferee servicer from claiming that it need not evaluate a borrower (what would ordinarily amount to) a second time simply because a prior servicer did so.[FN2]

The court is not holding, ipso facto, that one servicer need only evaluate the borrower once for loss mitigation options and has no obligation to do so again; it may be possible that a change in circumstances would warrant a second (or third, et cetera), review, and that a failure to do so may amount to a lack of good faith (see e.g. Flagstar Bank, FSB v Walker, 112 AD3d 885 [2d Dept 2013] [plaintiff therein already established that defendants' loan was ineligible for modification under HAMP, and it was error for the Supreme Court to order a re-evaluation for modification; instead, court simply should have made a determination as to whether plaintiff [*6]acted in good faith]), said failure to be considered with other circumstances, as case law provides. However, the facts of this case do not support a finding of lack of good faith based upon plaintiff's failure to evaluate defendants' for loss mitigation for a third time, given plaintiff's explanation that defendants have not demonstrated a sufficient change in their circumstances.[FN3] Defendants have failed to submit any evidence which would suggest otherwise (i.e., that it would have been appropriate to consider a third loan modification application since it would not have been essentially duplicative of the prior one submitted and denied).

Based upon the above discussion, defendants are not entitled to a tolling of interest or an award of fees pursuant to 22 NYCRR § 130-1.1.

Defendants have otherwise failed to demonstrate that plaintiff is not entitled to the relief requested in its motion.

Accordingly, defendants' cross motion is denied. Plaintiff's motion is granted.

Submit Judgment of Foreclosure and Sale. Provide therein the award of counsel fees in the amount of $4,825.00.

J.S.C. Footnotes

Footnote 1:It would appear that Galbraith, rather, provides the authority for accepting current counsel's appearance on defendants' behalf, by way of their cross motion, without first having obtained and presented a Consent to Change Attorney from Mr. Cohen, as required by CPLR § 321 (b) (1).

Footnote 2:Section 1024.41 (c) (2) (ii), entitled Incomplete Loss Mitigation Application Evaluation, Reasonable time, may be instructive. It states, in relevant part, that a servicer may consider an incomplete loss mitigation application, under certain circumstances, but warns that "[a]ny such evaluation and offer is not subject to the requirements of this section and shall not constitute an evaluation of a single complete loss mitigation application for purposes of paragraph (i) of this section." This lends credence to the interpretation of paragraph (i) as it relates to this case; to wit: that plaintiff did not violate the regulation pursuant to paragraph (c) (1) for failing to evaluate defendants for loss mitigation for a third time.

Footnote 3:As the Sarmiento Court explains (121 AD3d at 203), the purpose of CPLR 3408 is to provide additional protections and foreclosure prevention opportunities for homeowners at risk of losing their homes. Defendants' failed to show that their final application demonstrated some change in circumstance that may have made it possible for a "mutually agreeable resolution" (CPLR 3408 [f]).