T10 Funding v Chavez

[*1] T10 Funding v Chavez 2013 NY Slip Op 52051(U) Decided on December 4, 2013 Supreme Court, Westchester County Connolly, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 4, 2013
Supreme Court, Westchester County

T10 Funding, Plaintiff,

against

Laura Chavez, VIRGINIA NAVA, WELLS FARGO FINANCIAL CREDIT SERVICES NEW YORK, INC., and the CITY OF YONKERS, Defendants.



5980/2011



William Yurus, Esq.

Attorney for the plaintiff

25 Broadway

Pleasantville, NY 10570

By Fax 914-449-6743

Catherine M. Ridgeway, Esq.

Attorney for non-party Daniel C. Amicucci

700 White Plains Road, Suite 309

Scarsdale, NY 10583

By Fax 914-725-6160

Kenneth Bunting, Esq. (referee)

125 Dobbs Ferry Road

White Plains, NY 10607

By Fax 914-428-3039

Francesca E. Connolly, J.

The following documents were read in connection with non-party Daniel C. Amicucci's motion: [*2]

Amicucci's order to show cause, affirmation, affidavit, exhibits1-9

The plaintiff's affirmation in opposition, affirmation of referee

Kenneth L. Bunting, affidavit of Louis Zazzarino, exhibits10-19

Affirmation in reply20

Non-party Daniel C. Amicucci moves to set aside a foreclosure sale that occurred at the Westchester County Courthouse on June 24, 2013, in which certain real property located at 900 Midland Avenue, No.3-B, Yonkers, NY, was auctioned to the plaintiff. The foreclosure sale was the culmination of an action in which the plaintiff sought to foreclose on a tax lien. The judgment of foreclosure and sale, dated April 5, 2013, directs that the plaintiff was entitled to $3,680.63 plus interest from the proceeds of the sale, costs and disbursements totaling $2,037.50, and attorneys' fees in the sum of $3,900 plus interest (Amicucci Motion, Exhibit A).

Amicucci claims that, on the morning of the auction, he appeared at the courthouse prepared to bid on the property. The auctioneer was Kenneth L. Bunting, Esq., a referee appointed by this Court to conduct the auction. Also present was the plaintiff's principal, Louis Zazzarino. Amicucci avers that he has bid in the past at Westchester foreclosure sales. Prior to the sale in question, he had read the notice of sale published in the Journal News and the judgment of foreclosure and sale, and "[n]either document required bank checks payable only to the referee" (Amicucci Affidavit ¶ 3). The notice of sale states that the property is to be "[s]old subject to the terms of sale and filed judgment of foreclosure" and indicates that Bunting is the appointed referee (Amicucci Motion, Exhibit B). Amicucci brought two bank checks with him that were made payable to himself, which cumulatively totaled $70,000. Amicucci displayed the checks to the referee and was told that "double endorsed" checks would not constitute acceptable payment. Amicucci contends that the "terms of sale" dated June 24, 2013 were brought to the sale by Zazzarino (not the referee). The terms of sale state, in pertinent part: "The bid deposit check(s) must be directly payable to the referee. Double endorsed checks will not be accepted" (Amicucci Motion, Exhibit C). Although Amicucci "indicated that [he] would race to the bank and return in a matter of minutes" (Amicucci Affidavit ¶ 4), the property was auctioned to the plaintiff for the price of $10,000.

Amicucci makes several arguments in favor of setting aside the sale. He contends that Zazzarino brought the terms of sale to the auction and inserted the restriction on double endorsed checks in the terms of sale—without advanced notice—in an attempt to restrict bidding. Amicucci argues that the payment restriction would have been acceptable if it had been publicized in the notice of sale. According to a comparative market analysis obtained by Amicucci, the property is valued at $225,000-$249,000 (see Amicucci Motion, Exhibit D), and therefore, he argues that the sale of the property to the plaintiff for $10,000 shocks the conscience. Amicucci also argues that the notice of sale was defective because it did not list the plaintiff's attorney's contact information or any restrictions on bidding, as is done in other notices of sale he has attached as exhibits (see Amicucci Motion, Exhibit E). Finally, Amicucci argues that the plaintiff's conduct is so egregious that he should be prospectively banned from conducting foreclosure sales in Westchester County.

In opposition, the plaintiff submits, among other things, an attorney's affirmation, the [*3]affirmation of referee Kenneth L. Bunting, Esq., and the affidavit of its principal, Zazzarino. Zazzarino avers that he is the sole proprietor of the plaintiff. He contends that Amicucci is actually a "savvy Municipal Tax Lien investor well schooled in the law" (Zazzarino Affidavit ¶ 3). Zazzarino claims that after Bunting told Amicucci that he would not accept his funds, Amicucci "stormed out of the courthouse doors without asking Referee Bunting for time to go to the bank and obtain proper funds" (Zazzarino Affidavit ¶ 4).

Bunting affirms that, at 9:00 a.m on the morning of the sale, only two people were present: the successful bidder and Amicucci. Bunting read the terms of sale out loud, as was his normal practice, and inquired as to whom would be bidding. He also asked the prospective bidders whether they would be making the downpayment with cash or certified funds. According to Bunting's affirmation: Mr. Amicucci informed me that he intended to bid at the sale but that he had neither cash nor certified funds payable to me as Referee. Instead, he showed me a series of checks which were drafted to his name or others' and indicated that he would be able to endorse them over.I informed Mr. Amicucci that I would not nor was I required to accept third party checks and that if he wanted time to obtain monies in the correct form I would give him the opportunity to do so. I inquired of what the "upset" bid would be were he to want to take advantage of the process so that he would be able to return with the funds in acceptable form.Rather than take advantage of my offer, Mr. Amicucci argued with me and then eventually left the lobby of the Courthouse, not indicating that he intended to take advantage of my offer or proposal to deal with the funding issue.

(Bunting Affirmation at 2 [paragraph numbers omitted]).

The plaintiff argues that the referee is in charge of controlling and conducting the sale, and that, "[i]nstead of taking advantage of Mr. Bunting's offer [to allow him to obtain funds in acceptable form] the Movant left the courthouse not indicating his intentions" (Yurus Affirmation ¶ 13). The plaintiff argues that the decision to require certified checks payable to the referee was Bunting's decision and that, as referee, Bunting retained the discretion to impose a condition of payment that was ministerial in nature. The plaintiff notes that there is an outstanding judgment against the property in the sum of $194, 501 (Plaintiff's Exhibit I), which the plaintiff, as successful bidder, remains subject to, and thus, the $10,000 price paid for the property at auction did not result in a windfall to the plaintiff.

DISCUSSION

Amicucci has produced a number of examples of foreclosure notices of sale that indicate [*4]restrictions on the form of payment by which the successful bidder may make the required deposit (see Amicucci Exhibit E).[FN1] These notices of sale produced by Amicucci also contain the name, address, and phone number of the foreclosure plaintiff's attorney. However, Amicucci has come forward with no legal authority in support of his position that payment restrictions or contact information for the plaintiff's attorney are essential components of a notice of sale. Indeed, RPAPL 231 (2), the statute governing the content and method of publication of a notice of sale, only requires that the notice of sale state "the time and place of the sale" and "a description of the property to be sold." No other information is mandated by this statute. Accordingly, the sufficiency, or lack thereof, of the notice of sale in this case does not constitute a legal ground to set aside the sale.

However, on the record before this Court, there are issues of fact with respect to whether irregularities in the sale itself prejudiced Amicucci such that the sale should be set aside on equitable grounds.

"[A] court, in the exercise of its equitable powers, has the discretion to set aside a judicial sale where fraud, collusion, mistake, or misconduct casts suspicion on the fairness of the sale" (Provident Sav. Bank, F.A. v Bordes, 244 AD2d 470 [2d Dept 1997]). This authority is statutory (see RPAPL 231 [6] [ "At any time within one year after the [foreclosure] sale, but not thereafter, the court, upon such terms as may be just, may set the sale aside for failure to comply with the provisions of this section as to the notice, time or manner of such sale if a substantial right of a party was prejudiced by the defect"]; see also CPLR 2003 ["At any time within one year after a sale made pursuant to a judgment or order, but not thereafter, the court, upon such terms as may be just, may set the sale aside for a failure to comply with the requirements of the civil practice law and rules as to the notice, time or manner of such sale, if a substantial right of a party was prejudiced by the defect."]).

Here, the parties have offered two entirely different factual accounts as to the circumstances surrounding the foreclosure sale at issue. Amicucci claims that, when he learned that the referee would not accept double endorsed checks, he offered to "race to the bank and return in a matter of minutes" (see Amicucci Affidavit ¶ 4). Bunting and Zazzarino claim that Amiccuci left the courthouse without indicating that he would return (see Bunting Affidavit ¶ 9; Zazzarino Affidavit ¶ 4).

Referees appointed to conduct judicial sales are vested with discretion to address unforeseen circumstances that may arise in the context of the sale (see Glenville & 110 Corp. v Tortora, 137 AD2d 654, 655 [2d Dept 1988]). Where there is confusion as to the form of acceptable payment, courts have held that denying a bidder a brief recess to obtain the proper form of payment constitutes an improvident exercise of the referee's discretion (see United States Trust Co. v Simon, 228 AD2d 580, 580 [2d Dept 1996] ["The Supreme Court properly exercised its discretion in setting aside the [*5]foreclosure sale based on the Referee's misunderstanding as to his authority to accept uncertified funds as a down payment"]; Glenville & 110 Corp. v Tortora, 137 AD2d at 655 ["By accepting an uncertified deposit check, after a short adjournment, with assurances of the buyer's financial wherewithal, the Referee exercised his discretion to consummate the foreclosure sale so as to best protect the rights of the mortgagees while simultaneously ensuring a successful completion of the sale"]; Tupper Lake National Bank v Chimney Rock, Inc., 32 AD2d 588, 588-589 [3d Dept 1969] [where the referee refused to accept a check with a guaranteed endorsement and further refused to permit the high bidder to make a "brief journey" to obtain $600 in cash, the court held that the referee's actions were "arbitrary and unreasonable and . . . an improvident exercise of discretion]; see also Ulster Savings Bank v Bash, 114 AD2d 500 [2d Dept 1985] ["the Referee's actions, although not fraudulent, cast an aura of unfairness over the conduct of the sale and, therefore, we exercise our discretion to set it aside"]).

Moreover, courts have looked to the judgment of foreclosure and sale itself to determine whether there is a restriction on the form of deposit (see Spanakos v Bianco, 159 AD2d 261, 262 [1st Dept 1990] [declining to set aside sale where "the very terms of the interlocutory judgment specified that the sale was to be for cash"]), such that bidders would have notice of such terms. Here, the judgment of foreclosure and sale contained no such restriction. Additionally, although the notice of sale in this case may not have been technically deficient, Amiccuci has presented evidence that it is the custom and practice in Westchester County for such notice to state the form of acceptable payment. Thus, upon learning of the terms of sale at the time of the auction, which is all that is required (see Weil v Cerrato, 129 Misc 2d 1105 [Supreme Court, Westchester County 1985] ["the terms of the sale were in fact made known at the sale, which is all that the statute requires"]), Amicucci's claim that he requested an opportunity to obtain the proper funds—countered by Bunting's and Zazzarino's claims that he did not—raise an issue of fact as to whether Amicucci was or should have been afforded a reasonable opportunity to obtain payment in acceptable form.

It is noted that the affidavits of Bunting and Zazzarino fail to address Amicucci's contention that the restriction on double-endorsed checks was inserted into the terms of sale by the plaintiff and that the plaintiff or his attorney in fact drafted the terms of sale in a manner designed to discourage bidding.

Finally, there are questions of fact as to whether the price paid by the plaintiff was so drastically low as to shock the conscience. "[I]t is well settled that mere inadequacy of price . . . does not furnish sufficient grounds for vacating a sale" (Guardian Loan Co. v Early, 47 NY2d 515, 521 [1979]). However, "only where the price is so low as to shock the conscience of the court will the sale be vacated" (Glenville & 110 Corp. v Tortora, 137 AD2d 654, 655 [2d Dept 1988], citing Polish Nat'l Alliance v White Eagle Hall Co., 98 AD2d 400, 407-408 [2d Dept 1983]).

Here, Amicucci has produced proof that the property is worth $225,000. The $10,000 paid by the plaintiff, approximately 4% of the value of the property, would appear to be so disproportionate as to shock one's conscious (see Polish Nat'l Alliance v White Eagle Hall Co., 98 AD2d at 408 ["foreclosure sales at prices below 10% of value have consistently been held [*6]unconscionably low in this State"]; Alben Affiliates v Astoria Terminal, Inc., 34 Misc 2d 246, 248 [Supreme Court Queens County 1985] ["The bid accepted by the Referee for $ 24,000 is grossly inadequate . . . in view of the fact that the credible evidence herein indicates that the value of the property is approximately $350,000 to $400,000"]). The plaintiff contends that the property is actually worth much less, claiming that the title is burdened by a judgment in the amount of $194,501. However, the plaintiff has failed to submit proof of that judgment, or that the entire balance of that judgment remains outstanding. Rather, the plaintiff has submitted a mere Clerk's office printout (Plaintiff's Exhibit I). Additionally, RPAPL 231 (4) requires that "terms of the sale shall be made known at the sale, and if the property or any part thereof is to be sold subject to the right of dower, charge or lien, that fact shall be declared at the time of the sale" (emphasis added). However, the terms of sale in this case do not list this alleged judgment as one that the property is being sold subject to (see Plaintiff's Exhibit C [final page]). Thus, the plaintiff's assertion that the sale price was not unconscionable simply raises more questions than it answers.

Where the papers submitted on a motion to set aside a foreclosure sale raise questions of fact regarding the circumstances and fairness of the sale, the proper course is to conduct an evidentiary hearing (see Polish Nat'l Alliance v White Eagle Hall Co., 98 AD2d at 411 ["we reverse the order insofar as appealed from and remit the matter to Special Term for a hearing concerning the terms of the bid assignment and for a further determination as to the validity of the sale based on the findings derived from that hearing"]). Accordingly, the parties are referred to the Settlement Conference Part for a hearing on the branch of Amicucci's motion which seeks to set aside the sale.

Finally, this Court has no authority, within the context of this foreclosure action, to address the branch of Amicucci's motion which seeks to permanently enjoin the plaintiff or its principal from participating in future foreclosure sales (see e.g. Matter of Island Point, Inc. v Board of Assessors, 60 AD3d 1061, 1062 [2d Dept 2009]). Therefore, that branch of his motion is denied without a hearing.

Based upon the foregoing, it is hereby

ORDERED that the branch of non-party Daniel C. Amicucci's motion which seeks to set aside the subject foreclosure sale is referred for a hearing in accordance with this decision and order; and it is further,

ORDERED that the branch of non-party Daniel C. Amicucci's motion which seeks to enjoin the plaintiff or its principal from participating in foreclosure sales in Westchester County is denied; and it is further,

ORDERED that the parties are directed to appear in the Settlement Conference Part on January 16, 2014, at 9:30 a.m., in Courtroom 1600 of the Westchester County Courthouse at 111 Dr. Martin Luther King, Jr., Boulevard, White Plains, New York 10601, to schedule a hearing in accordance with this decision and order; and it is further [*7]

ORDERED that all other relief requested and not decided herein is denied.

This constitutes the decision and order of the Court.

Dated: White Plains, New York

December 4, 2013

HON. FRANCESCA E. CONNOLLY, J.S.C. Footnotes

Footnote 1: For example, one notice of sale states: "The ten percent (10%) deposit required of the successful bidder must be paid either by certified or bank check or money order payable to [the referee]" (see Amicucci Exhibit E). The notice of sale for the sale at issue in this case contains no similar language restricting the form of payment.