NetBank v Vaughan

[*1] NetBank v Vaughan 2007 NY Slip Op 51197(U) [15 Misc 3d 1147(A)] Decided on June 13, 2007 Supreme Court, Kings County Schack, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 13, 2007
Supreme Court, Kings County

NetBank, as successor by merger in interest to Resource Mortgage Bancshares Group, Inc., Plaintiff,

against

Vita Vaughan a/k/a Vita Vaughn, Golan Developers, Inc., et. al., Defendants.



16433/06



Appearances:

Plaintiff

Gerald Roth, Esq.

Stein & Sheidlower, LLP

Carle Place, NY

Defendants

No Defendant(s) to report because Judge Schack wrote on this issue sua sponte when an judgment was presented before him for signature.

Arthur M. Schack, J.

Plaintiff's motion for a judgment of foreclosure and sale for the premises located at 27 Chester Court, Brooklyn, New York (Block 5026, Lot 171, County of Kings) is denied with prejudice. Plaintiff NetBank, as successor by merger in interest to

Resource Mortgage Bancshares Group, Inc. (NetBank), lacks standing to bring this matter before the Court because the mortgage was satisfied before the instant motion was presented to the Court. Plaintiff's counsel, Gerald Roth, Esq., a member of the firm of Stein and Sheidlower, L.L.P., and Stein & Sheidlower, L.L.P., will be given an opportunity to be heard as to why this Court should not sanction them for making a "frivolous motion," pursuant to 22 NYCRR §130-1.1.

Background

Defendant Vaughan borrowed $110,000.00 from Intercounty Mortgage, Inc.

(Intercounty) on October 8, 1996. I checked the Automated City Register Information System (ACRIS) website of the Office of the City Register, New York City Department of Finance and verified that the Vaughan Mortgage with Intercounty was recorded on November 18, 1996, at Reel 3833, Page 1852 of the Kings County City Register, and re-recorded on September 15, 2000, at Reel 4965, Page 639 of the Kings County City Register. Intercounty assigned the [*2]mortgage on September 15, 2000 to Resource Bancshares Mortgage Group, Inc. (RBMG). Subsequently, RBMG was merged into NetBank.

Plaintiff NetBank commenced the instant foreclosure action with the filing of the summons, complaint, and notice of pendency with the Kings County Clerk on May 30, 2006. The complaint alleges that defendant Vaughan failed to make payments under the note and mortgage, commencing with her March 1, 2006 payment.

On November 16, 2006, I signed an order of reference to ascertain and compute the amount due plaintiff in the instant matter. The order was duly entered in the Office of the Kings County Clerk on November 17, 2006. The Referee prepared a report, dated January 2, 2007, finding that $39,055.68 was due to the plaintiff as of September 30, 2006.

Sherry Stinson, a Vice-President of NetBank, executed an affidavit of merit to confirm the Referee's Report, on January 10, 2007. Gerald Roth, Esq., a member of the firm of Stein & Sheidlower, L.L.P., executed an affirmation of in support of the motion for a judgment of foreclosure and sale on January 12, 2007. Subsequently, plaintiff's counsel, on January 16, 2007 filed the proposed judgment of foreclosure and sale in Part 72, the special part for ex-parte applications in Civil Term, Kings County Supreme Court. Part 72 forwarded the instant motion for a judgment of foreclosure and sale, with all its exhibits, affidavits, affirmations and attachments, to me on April 25, 2007.

My ACRIS examination disclosed that while the motion for the proposed judgment of foreclosure and sale was pending in Part 72, for review by court clerks, plaintiff NetBank executed a satisfaction of the Vaughan mortgage on March 20, 2007. For the plaintiff to execute a satisfaction, the mortgage had to have been paid off for a period of time prior to March 20, 2007. The Vaughan mortgage satisfaction was recorded on April 3, 2007, at 9:08 A.M., in the Office of the City Register, with City Register File Number (CRFN) 2007000168784.

Plaintiff's counsel never notified the Court that the instant mortgage was satisfied. On June 6, 2007, I requisitioned the official court file for this action from the Kings County Clerk. My examination of the official court file showed that plaintiff' s counsel failed to file a motion to discontinue the instant action. Further, I checked on June 6, 2007 the website of the Kings County Clerk's Office, which showed that the last document presented for filing in this action was the proposed order for judgment and foreclosure, on January 16, 2007. The Court is gravely concerned that not only it expended scarce resources on an action that should have been discontinued, but it could have entered a judgment in error, which could damage the credit rating of Ms. Vaughan and cause Ms. Vaughn untold hours to correct an error caused by the failure of plaintiff's counsel to have exercised due diligence.

Discussion.

It is clear that plaintiff NetBank lacked standing to sue since March 20, 2007,

when it executed the satisfaction of the mortgage. The Court, in Campaign v Barba , 23 AD3d 327 (2d Dept 2005), instructed that "[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and the mortgage note, ownership of the mortgage, and the defendant's default in payment." The mortgage ceased to exist on March 20, 2007. In the satisfaction, it states that NetBank "does hereby certify that a certain Mortgage described below [the instant mortgage] is PAID, and does hereby consent that the same be discharged of record [Emphasis added]." See Household Finance Realty Corp. of [*3]New York v Wynn, 19 AD3d 545 (2d Dept 2005); Sears Mortgage Corp. v Yahhobi, 19 AD3d 402 (2d Dept 2005); Ocwen Federal Bank FSB v Miller, 18 AD3d 527 (2d Dept 2005); U.S. Bank Trust Nat. Ass'n Trustee v Butti, 16 AD3d 408 (2d Dept 2005); First Union Mortgage Corp. v Fern, 298 AD2d 490 (2d Dept 2002); Village Bank v Wild Oaks, Holding, Inc., 196 AD2d 812 (2d Dept 1993).

The Court of Appeals, in Saratoga County Chamber of Commerce, Inc. v Pataki,

100 NY2d 801, 812 (2003), cert denied 540 US 1017 (2003), declared that "[s]tanding to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress."

In Caprer v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that "[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant's request." If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. Stark v Goldberg, 297 AD2d 203 (1st Dept 2002).

The failure of Gerald Roth, Esq. and Stein & Sheidlower, L.L.P. to discontinue this action since March 20, 2007 appears to be "frivolous." 22 NYCRR § 130-1.1 (a) states that "the Court, in its discretion may impose financial sanctions upon any party or attorney in a civil action or proceeding who engages in frivolous conduct as defined in this Part, which shall be payable as provided in section 130-1.3 of this Subpart." Further, it states in 22 NYCRR § 130-1.1 (2), that "sanctions may be imposed upon any attorney appearing in the action or upon a partnership, firm or corporation with which the attorney is associated."

22 NYCRR § 130-1.1(c) states that:

For purposes of this part, conduct is frivolous if:

(1) it is completely without merit in law and cannot be supported

by a reasonable argument for an extension, modification or

reversal of existing law;

(2) it is undertaken primarily to delay or prolong the resolution of

the litigation, or to harass or maliciously injure another; or

(3) it asserts material factual statements that are false.

It is clear that since March 20, 2007 the instant motion for a judgment of foreclosure and sale "is completely without merit in law" and "asserts material factual statements that are false."

Several years before the drafting and implementation of the Part 130 Rules for

costs and sanctions, the Court of Appeals in A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 6 (1986) observed that "frivolous litigation is so serious a problem affecting the

proper administration of justice, the courts may proscribe such conduct and impose sanctions in this exercise of their rule-making powers, in the absence of legislation to the contrary (see NY Const, art VI, § 30, Judiciary Law § 211 [1] [b] )."

Part 130 Rules were subsequently created, effective January 1, 1989, to give the

courts an additional remedy to deal with frivolous conduct. These stand beside Appellate Division disciplinary case law against attorneys for abuse of process or malicious prosecution. The Court, in Gordon v Marrone, 202 AD2d 104, 110 (2d Dept 1994), lv denied 84 NY2d 813 (1995), instructed that: [*4]

Conduct is frivolous and can be sanctioned under the court rule if

"it is completely without merit . . . and cannot be supported by a

reasonable argument for an extension, modification or reversal of

existing law; or . . . it is undertaken primarily to delay or prolong

the resolution of the litigation, or to harass or maliciously injure

another" (22 NYCRR 130-1.1[c] [1], [2] . . . ).

In Levy v Carol Management Corporation, 260 AD2d 27, 33 (1st Dept 1999),

the Court stated that in determining if sanctions are appropriate the Court must look at the broad pattern of conduct by the offending attorneys or parties. Further, "22 NYCRR

130-1.1 allows us to exercise our discretion to impose costs and sanctions on an errant party . . ." The Levy Court held, at 34, that "[s]anctions are retributive, in that they punish past conduct. They also are goal oriented, in that they are useful in deterring future frivolous conduct not only by the particular parties, but also by the Bar at large."

The Court, in Kernisan, M.D. v Taylor, 171 AD2d 869 (2d Dept 1991), noted that the intent of the Part 130 Rules "is to prevent the waste of judicial resources and to deter vexatious litigation and dilatory or malicious litigation tactics (cf. Minister, Elders & Deacons of Refm. Prot. Church of City of New York v 198 Broadway, 76 NY2d 411; see Steiner v Bonhamer, 146 Misc 2d 10) [Emphasis added]." Since March 20, 2007, the instant action is "a waste of judicial resources." This conduct, as noted in Levy, must be deterred. In Weinstock v Weinstock, 253 AD2d 873 (2d Dept 1998), the Court ordered the maximum sanction of $10,000.00 for an attorney who pursued an appeal "completely without merit," and holding, at 87, that "[w]e therefore award the maximum authorized

amount as a sanction for this conduct (see, 22 NYCRR 13-1) calling to mind that frivolous litigation causes a substantial waste of judicial resources to the detriment of those litigants who come to the Court with real grievances [Emphasis added]." Citing Weinstock, the Appellate Division, Second Department, in Bernadette Panzella, P.C. v De Santis, 36 AD3d 734 (2d Dept 2007), affirmed a Supreme Court, Richmond County $2,500.00 sanction, at 736, as "appropriate in view of the plaintiff's waste of judicial resources [Emphasis added]."

In Navin v Mosquera, 30 AD3d 883 (3d Dept 2006), the Court instructed that when considering if specific conduct is sanctionable as frivolous, "courts are required to

examine whether or not the conduct was continued when its lack of legal or factual basis was apparent [or] should have been apparent' (22 NYCRR 130-1.1 [c])." In Sakow ex rel. Columbia Bagel, Inc. v Columbia Bagel, Inc., 6 Misc 3d 939, 943 (Sup Ct, New York County 2004), the Court held that "[i]n assessing whether to award sanctions, the Court must consider whether the attorney adhered to the standards of a reasonable attorney (Principe v Assay Partners, 154 Misc 2d 702 [Sup Ct, NY County 1992])." In the instant action, plaintiff's attorney is responsible for keeping track of whether the mortgage was satisfied. The Sakow Court held further, at 943, that "[a]n attorney cannot safely delegate all duties to others."

This Court will examine the conduct of plaintiff's counsel, in a hearing, pursuant to 22 NYCRR § 130-1.1, to determine if plaintiff's counsel engaged in frivolous conduct, and to allow plaintiff's counsel a reasonable opportunity to be heard. See Mascia v Maresco, 39 AD3d 504 (2d Dept 2007); Yan v Klein, 35 AD3d 729 (2d Dept 2006); Greene v Doral Conference Center Associates, 18 AD3d 429 (2d Dept 2005); Kucker v Kaminsky & Rich, 7 AD3d 39 (2d Dept [*5]2004).

Conclusion

Accordingly, it is

ORDERED that the motion of plaintiff NetBank, as successor by merger in interest to Resource Mortgage Bancshares Group, Inc., for a judgment of foreclosure and sale for the premises located at 27 Chester Court, Brooklyn, New York (Block 5026, Lot 171, County of Kings), is denied with prejudice; and it is further

ORDERED that it appearing that Gerald Roth, Esq. and Stein & Sheidlower,

L.L.P. engaged in "frivolous conduct," as defined in the Rules of the Chief Administrator, 22 NYCRR § 130-1 (c), and that pursuant to the Rules of the Chief Administrator, 22 NYCRR § 130.1.1 (d), "[a]n award of costs or the imposition of sanctions may be

made . . . upon the court's own initiative, after a reasonable opportunity to be heard," this

Court will conduct a hearing affording Mr. Roth and Stein & Sheidlower, L.L.P. "a reasonable opportunity to be heard," before me in Part 27, on Friday, August 3, 2007, at 2:15 P.M., in Room 479, 360 Adams Street, Brooklyn, NY 11201; and it is further

ORDERED, that Ronald D. Bratt, Esq., my Principal Law Clerk, is directed to serve this order by first-class mail, upon Gerald Roth, Esq., and Stein & Sheidlower, L.L.P., One Old Country Road, Suite 113, Carle Place, New York 11514.

This constitutes the Decision and Order of the Court.

ENTER

___________________________

HON. ARTHUR M. SCHACKJ. S. C.