Saxon Mtge. Servs., Inc. v Hamilton

[*1] Saxon Mtge. Servs., Inc. v Hamilton 2012 NY Slip Op 52309(U) Decided on December 12, 2012 Supreme Court, Queens County Siegal, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 12, 2012
Supreme Court, Queens County

Saxon Mortgage Services, Inc., Plaintiff,

against

Sandra Hamilton; William Hamilton; Brenda Hamilton New York City Environmental Control Board; NYC Department of Finance-Parking Violations Bureau Payment and Adjudication Center of Queens; "John Doe" and "Jane Doe" said names being fictitious, it being the intention of plaintiff to designate any and all occupants of the premises being foreclosed herein, Defendants.



13251/08

Bernice Daun Siegal, J.

The following papers numbered 1 to16 read on this motion for an order granting judgment of foreclosure and sale pursuant to RPAPL 1351 and defendants cross-motion to vacate the decision and order granting summary judgment and appointing a referee and to amend the answer. .

PAPERS

NUMBERED

Notice of Motion-Affidavits-Exhibits ...........1 - 4

Affirmation in Opposition and Notice of Cross-Motion .5 - 9

Reply Affirmation to Defendant's Opposition and Affirmation

in Opposition to Defendant's Cross Motion .10 - 12

Reply Affirmation to Plaintiff's Opposition ..13 - 15

Stipulation 16 [*2]

Upon the foregoing papers, it is hereby ordered that the motion to vacate and the motion for leave to amend are resolved as follows:

On August, 22, 2012, Kondaur Capital Corp. (hereinafter, "Kondaur"), the assignee of plaintiff Saxon Mortgage Services, Inc. (hereinafter, "Saxon"), withdrew its motion for judgment of foreclosure and sale; and this court converted defendant's cross-motion to a motion pursuant to CPLR §5015(a) to vacate the Decision and the Order based upon defendants' showing of reasonable excuse and meritorious defenses for the default and a motion for leave pursuant to CPLR §3025(a) to amend their answer to assert a counterclaim based upon violations of GBL §349.

Facts

This action was brought to foreclose a mortgage, held by Kondaur, the assignee of plaintiff Saxon, constituting a lien on real property located at 200-20 34th Avenue, Bayside, New York 11361 ("Premises"). William Hamilton resides at this property with his wife, Sandra Hamilton (hereinafter the "Hamiltons") and their three children, Brenda, Christopher, and Cynthia. The title of this property is held collectively by William, Sandra, and Brenda Hamilton.

The Hamiltons purchased the Premises in October 2004 for the purchase price of $460,000.00 with financing from Ameriquest for approximately $330,000.00 with a 9.9% adjustable rate which was refinanced in 2005. Due to many financial hardships, the Hamiltons contacted a lending service to discuss refinancing and were eventually contacted by Carl Rosen ("Rosen"), a mortgage broker with Windsor Financial Mortgage. Rosen recommended that the Hamiltons refinance their current mortgage, despite the Hamiltons limited income and Brenda must be included as a borrower despite the fact that Brenda was only earning $6,000 annually. The Hamiltons' also contend that Rosen assured them that the total monthly payments would be less than $3,100 per month but were actually $3,400 per month after taxes and insurance were included. On September 7, 2006, the Hamilton's paid off the 2004 mortgage and 2005 refinance from Ameriquest and re-financed a mortgage with Arlington Capital Mortgage Corp. (hereinafter, "Arlington) in the amount of $475,000.000 for a thirty year term bearing an interest rate of 7.875%. The mortgage papers and the recording of the mortgage show that William, Sandra, and Brenda Hamilton were listed as borrowers; meanwhile the loan application from Arlington lists only Brenda Hamilton as the borrower. On March 2, 2007, Arlington assigned the mortgage to GMAC Mortgage, LLC (hereinafter, "GMAC"). On June 16, 2008, GMAC assigned the mortgage to Saxon and on March 29, 2010, plaintiff Saxon assigned the mortgage to Kondaur.

Saxon commenced the within foreclosure action by filing a summons and complaint on May 28, 2008 and re-filed on May 24, 2011. The Hamiltons filed an answer with counterclaims based upon fraudulent inducement on or about July 22, 2008. In July 2010, Saxon filed a motion for summary judgment. This court made a memorandum decision, dated August 24, 2011, granting Saxon's summary judgment for defendants' failure to submit opposition to plaintiff's motion for summary judgment and failure to appear. On October 14, 2011, this court granted an order for summary judgment to Saxon in which a referee, David I. Levine, Esq. (hereinafter, "Levine"), was appointed. On March 5, 2011, in his report to compute, Levine computed the amount due to plaintiff to be $654,244.98, plus interest on the principal balance from December 17, 2011; this amount included the note and mortgage together with interest thereon from January 1, 2008 through December 16, 2011. In March 2012, plaintiff moved for a judgment of foreclosure, which plaintiff withdrew on August, 22, 2012. [*3]

Contentions

Defendants contend that the default judgment should be vacated because defendants can show both a reasonable excuse for failing to oppose plaintiff's motion for summary judgment and for failing to appear, and meritorious defenses to the foreclosure action. Defendants assert that its reasonable excuse is law office failure and that their meritorious defenses include lack of standing, fraudulent inducement, and violation of GBL §349. Defendants also contend that leave to amend their answer to asserting claims in violations of GBL §349 should be granted.

In opposition, plaintiff contends that defendants neither established a reasonable excuse for the default nor established a meritorious defenses, failing to satisfying the two elements necessary to vacate a default judgment. Plaintiff also contends that since defendants are not entitled to vacatur of the default, defendants' application for leave to amend their answer is moot.

Defendants' motions are denied in its entirety as more fully set forth below.

Discussion

Vacate Default Judgment

The issue is whether the default judgment granting plaintiff summary judgment can be vacated. "A defendant seeking to vacate a default pursuant to CPLR 5015(a)(1) must demonstrate both a reasonable excuse for the default and a potentially meritorious defense to the action." (Clover M. Barrett. P.C. v. Gordon, 90 AD3d 973, 973 [2d Dep't 2011]; see also CPLR §5015(a)(1); Muir v. Coleman, 98 AD3d 569, 570 [2d Dep't 2012]; Lane v. Smith, 84 AD3d 746, 747 [2d Dep't 2011]; Star Industries, Inc. v. Innovative Beverages, Inc., 55 AD3d 903, 904 [2d Dep't 2008].) "The determination of what constitutes a reasonable excuse lies within the sound discretion of the Supreme Court." (Lane, 84 AD3d at 747—48; Maspeth Federal Savings and Loan Assn. v. McGown, 77 AD3d 889, 890 [2d Dep't 2010]; Star Industries, Inc., 55 AD3d at 904; Ennis v. Lema, 305 AD2d 632, 633 [2d Dep't 2003].)

A court acting in its discretion "may accept law office failure as an excuse." [Muir, 98 AD3d at 570; Star Industries, Inc., 55 AD3d at 904; Papandrea v. Acevedo, 54 AD3d 915, 916 [2d Dep't 2008]; Vasquez v. New York City Housing, 51 AD3d 781, 782 [2d Dep't 2008]; see also CPLR §2005.) "However, law office failure should not be excused . . . where allegations of law office failure are conclusory . . . [,] unsubstantiated", and uncorroborated. [Star Industries, Inc., 55 AD3d at 904—05]; see also Peterson v. Lysaght, Lysaght, & Kramer, P.C., 47 AD3d 783, 784 [2d Dep't 2008]; Gazetten Contracting, Inc. v. HCO, Inc., 45 AD3d 530, 530—31 [2d Dep't 2007]; Solomon v. Ramlall, 18 AD3d 461, 461 [2d Dep't 2005]; Wechsler v. First Unum Life Insurance, 295 AD2d 340, 341 [2d Dep't 2002].) Thus, "[w]here a party asserts law office failure, it must provide a detailed and credible explanation of the default'." (People's United Bank v. Latini Tuxedo Management, LLC, 95 AD3d 1285, 1286 [2d Dep't 2012] quoting Kohn v. Kohn, 86 AD3d 630, 630 [2d Dep't 2011]; see also Matter of Esposito, 57 AD3d 894, [2d Dep't 2008]; Gazetten Contracting, Inc., 45 AD3d at 530 [2d Dep't 2007].) In addition, law office failure is a sufficient reasonable excuse for a party's default where the "default resulted from documented law office failure." (Political Marketing, International, Inc. v. Jaliman, 67 AD3d 661, 661—62 [2d Dep't 2009].)

Here, defendants provide a detailed explanation of the law office failure, to wit William Hamilton's affirmation in opposition to plaintiff's motion for summary judgment dated April 29, 2011 was not filed. William Hamilton asserts in his affidavit that he assisted in preparing an affidavit in opposition to plaintiff's motion for summary judgment, which he reviewed and signed [*4]before a notary on April 29, 2011, and then forwarded the affidavit to Mr. Sherman, defendants' prior attorney; that, in late February 2012, Mr. Sherman advised him that defendants had received a notice of entry; that defendants sought new counsel and hired their current attorneys after Mr. Sherman's call; and that, based on the review of the court's file by defendants' new attorney, defendants found out that the opposition affirmation was apparently never submitted.

The court, having recalled the circumstances surrounding the submission of the subject motion for summary judgment conclude that the Hamiltons never willfully withheld opposition nor did they intend not to oppose the motion for summary judgment. The court attributes the Hamiltons' failure to oppose on the actions of their prior counsel. It is well settled that a court has inherent power, not limited by the provisions of CPLR 5015, to set aside a default judgment in the interests of justice. (Woodson v. Mendon Leasing Corp., 100 NY2d 62 [2003]; Adams v. Adams, 255 AD2d 535 [2nd Dept 1998][holding that the law-office failure of defendant's former attorney is grounds for vacatur].) Therefore, based on the court's understanding of the totality of the circumstances, including the conduct of defendants' prior counsel, the court finds defendants have a reasonable excuse for their default.

While this court may vacate defendants' default solely in the "interests of justice" this court will now address whether defendants established a meritorious defense to the within action.

Lack Of Standing

Defendants assert, as a meritorious defense, that plaintiff lacks standing to commence the within foreclosure action. "A defendant waives the defense of lack of standing unless it is raised in either the answer or in a pre-answer motion to dismiss the complaint." (Citibank, N.A. v. Swiatkowski, 98 AD3d 555, 555 [2nd Dept 2012] citing Fossella v. Dinkins, 66 NY2d 162 [1985].) Defendants' answer failed to raise a lack of standing. Accordingly, as the defendants did not make a pre-answer motion to dismiss the complaint, and did not raise lack of standing as an affirmative defense in their answer they waived their right to raise it in support of the within motion.

Fraudulent Inducement

Defendants also assert that they were fraudulently induced into obtaining the subject mortgage. "The elements of a cause of action sounding in fraudulent inducement are "representation of a material existing fact, falsity, scienter, deception and injury." (Dalessio v. Kressler, 6 AD3d 57, 61 [2nd Dept 2004] citing Channel Master Corp. v. Aluminum Limited Sales, Inc., 4 NY2d 403 [1958].) Defendants established a potentially meritorious cause of action in that they were fraudulently induced into entering into the mortgage transaction by the misrepresentations by Rosen, as noted earlier.

Plaintiff fails to refute defendants claims regarding Rosen's actions. Instead, plaintiff contends that defendants' claim for fraudulent inducement is barred under the doctrine of res judicata because the defendants raised fraudulent inducement as a defense in their answer. Plaintiff relies upon the decision in Citizens Bank of Appleton City, Mo. v C.L.R. Brooklyn Realty Corp., 5 AD3d 528 [2nd Dept 2004] wherein the Appellate Division, Second Department concluded that defendant's motion to vacate a judgment of foreclosure and sale was "barred by the doctrine of res judicata because the claims contained therein could have or should have been raised on the defendants' first motion, brought in 1995, to vacate the judgment of foreclosure and sale." (see also CLR Brooklyn Realty Corp. v. Shapiro, 39 AD3d 790 [2nd Dept 2007].) The Citizens decision is distinguishable from the within action. In Citizens, the court was dealing with a second motion to vacate a default. [*5]The first motion was originally brought in 1995 and then again in 2002. Here, there has been no prior motion practice by the defendants nor has this court made a determination on the merits regarding the defendants' fraudulent inducement claim.

Accordingly, defendants have established a potentially meritorious cause of action for fraudulent inducement.

GBL §349

Defendants also assert an affirmative defense under General Business Law §349. Defendants argue that the loan was originally made by Arlington to Hamilton to allow defendants to own their home under better financial terms. However, defendants contend that the loan was subsequently sold to Kandaur for the sole purpose of evicting the Hamiltons. Although the GBL §349 is "directed at wrongs against the consuming public it allows a private right of action by any person who has been injured by a violation of the section."(Citations Omitted) (see General Business Law § 349[h]; Emigrant Mortg. Co., Inc. v. Fitzpatrick, 95 AD3d 1169, 1171 [2nd Dept 2012].) "To assert a viable claim under General Business Law § 349(a), a [party]must plead that (1) the challenged conduct was consumer-oriented, (2) the conduct or statement was materially misleading, and (3) damages." (Lum v. New Century Mortg. Corp., 19 AD3d 558, 559 [2nd Dept 2005] citing Stutman v. Chemical Bank, 95 NY2d 24 [2000].) Hamiltons failed to proffer evidence sufficient to establish a meritorious defense as to whether the plaintiff made any materially misleading statements or committed any misconduct with respect to the subject loan. Kandaur purchased the loan that plaintiff admittedly has defaulted upon and Kandaur is simply enforcing its right to foreclose on said defaulted mortgage. Furthermore, "the fact that the plaintiff sought and received a loan that he allegedly could not afford does not mean that he can now proceed on a General Business Law] Section 349 claim against the party that made his purported mistake possible." (Hayrioglu v. Granite Capital Funding, LLC, 794 F. Supp. 2d 405, 413 [E.D.NY 2011]; Patterson v. Somerset Investors Corp., 96 AD3d 817 [2nd Dept 2012].)

In the within action, the plaintiff demonstrated that the terms of the subject mortgage loan were fully set forth in the loan documents, and that no deceptive act or practice occurred in this case.

Conclusion

For the reasons set forth above, defendants' motion pursuant to CPLR §5015(a) to vacate the Order and the Decision is granted. For the reasons set forth above, defendants' motion for leave pursuant to CPLR §3025(b) to amend their answer to assert a counterclaim sounding in violations of New York General Business Law §349 is deniedin its entirety.

The court notes that plaintiff's motion for a Judgment of Foreclosure was withdrawn pursuant to the parties stipulation dated August 22, 2012.

This constitutes the decision and order of this court.

Dated: December 12, 2012 ___________________________

Bernice D. Siegal, J. S. C. [*6]