Judges： Martin
Filed Date： 10/29/2014
Status： Precedential
Modified Date： 11/10/2024
OPINION OF THE COURT
Plaintiff CitiMortgage, Inc. (plaintiff or Citi) moves this court for an order permitting plaintiff to voluntarily discontinue the instant action without prejudice. Defendant cross-moves for an order dismissing the action with prejudice, cancellation of the notice of pendency for failing to prosecute the action in good faith, and reimbursement of payments defendant made to plaintiff under the theory of unjust enrichment. The action was also referred to this Part pursuant to the directive of Referee Noreen Soto-Fier, Esq. dated June 28, 2013 for a hearing on bad faith (the directive).
Background
On or about March 26, 2008, the defendant borrower, Andre Sulton (defendant or borrower or Sulton), executed a note in
It is not clear when defendant initially defaulted on this obligation — but in late 2009, plaintiff and defendant apparently discussed foreclosure alternatives. Particularly, plaintiff offered a Home Affordable Modification Program trial period plan, with an effective date of January 1, 2010 (the HAMP trial), which defendant signed on December 20, 2009 (plaintiffs affirmation in opposition to defendant’s motion to dismiss and reply in support of plaintiffs motion to discontinue without prejudice dated Dec. 23, 2013 [hereinafter Link opp], exhibit D). Defendant alleges (and plaintiff does not dispute) that, in accordance with the agreement, defendant made seven payments in the amount of $2,775.50 beginning November 23, 2009 through April 27, 2010, totaling $ 19,468.5o.
Plaintiff then commenced this action on or about September 21, 2010. The verified complaint alleges that the defendant defaulted on the note by failing to pay a monthly payment due on February 1, 2010.
The case lay dormant for about IV2 years. Plaintiff filed a request for judicial intervention (RJI) on April 10, 2012, triggering an appearance in the Foreclosure Pre-Settlement Conference Part for screening on July 17, 2012. The first conference in the Foreclosure Settlement Conference Part (FSCP) took place on October 23, 2012.
The next conference was held on January 7, 2013. Defendant signed the second mod agreement the day before, on January 6, 2013, and advised plaintiff and the Referee at the conference that a notary public would not sign the acknowledgment section because it was on a separate page that was immediately after the page where the borrower signed. Defendant alleges that he requested an accounting of the previous HAMP trial payments at this conference because he did not see those payments reflected in the second mod agreement.
Defendant emailed counsel for plaintiff, Mr. Robert Link of Sweeney Gallo, about the second mod, and Mr. Link advised that the bank received the contract, but that it would have to be notarized (plaintiffs affirmation in support of CPLR 3408 compliance dated Nov. 18, 2013 [hereinafter Link 3408 affirmation], exhibit G). Defendant then had the agreement notarized on January 30, 2013 with the notary’s signature and stamp placed next to the borrower’s signature in an empty space on the same page; the following acknowledgment page was left unsigned. He sent it to Mr. Link by email dated January 31, 2013. Mr. Link replied on the same day,
Defendant appeared with counsel, Mr. Jorge Delgado, Esq. of the Law Office of Carl E. Person, at the next conference held March 1, 2013. Defendant claims that no accounting of the previous HAMP trial payments was given at that time. According to defendant, counsel for plaintiff allegedly represented that they would present the notarized agreement to Citi for its consideration, but could not guarantee that Citi would accept it. Additionally, Mr. Delgado, recounting his first conference in a letter, wrote that counsel appearing on behalf of Mr. Link’s office stated the borrower’s signature page was unacceptable; and then advised that this issue would be further investigated (Link 3408 affirmation, exhibit P). By contrast, Mr. Link’s attorney affirmation alleges he “very clearly asked Mr. Delgado whether the notary format, as previously described as problematic, needed to be changed to facilitate a settlement. In response, Mr. Delgado unequivocally stated the notary page was no longer an issue” (Link 3408 affirmation ¶ 21).
After the March 1, 2013 conference, the parties exchanged email correspondence about the status of the modification. On April 18, 2013, Mr. Delgado emailed Mr. Link asking whether the modification agreement is in place; and requested a
At the next conference on May 21, 2013, defendant claims that plaintiff, once more, did not provide an accounting of the previous payments. Defendant also claims that plaintiffs counsel allegedly stated it was still unable to confirm that Citi would accept the signature page as tendered. Plaintiff, however, alleges that counsel for Citi “appeared to explain that the properly signed and notarized Modification Agreement had not been received from the Defendant” (Link 3408 affirmation ¶ 29). Plaintiff also alleges that Mr. Delgado raised the separate-acknowledgment-page issue for the very first time (Link 3408 affirmation ¶ 30). The Referee’s directive stated that this conference was “adjourned to give plaintiff the opportunity to decide whether to accept the notarized signature without the acknowledgment or to re-draft the agreement” (directive at 2).
The next and final FSCP conference was held on June 28, 2013, at which time the Referee issued the directive, referring the matter to this IAS Part for a hearing on bad faith and appropriate sanctions, due to plaintiffs unexcused five-month delay in finalizing the modification. The directive stated, “At today’s conference, plaintiffs counsel indicated that her client has agreed to re-draft the document, but the draft is being reviewed by the Legal Department” (directive at 2). Mr. Link’s affirmation states that at this final FSCP conference, “Plaintiffs counsel appeared to explain that CitiMortgage was unable to change the format of their Modification Agreement to accommodate the Defendant” (Link 3408 affirmation ¶ 31). Mr. Link provided another version of that conference at oral argument, stating that, after the conference on May 21, 2013, he brought up the issue with his client, Citi, who was “unable to address that concern” in time before the next conference on June 28, 2013, apparently because “[i]t was a very difficult thing to do” within five weeks (tr at 11, line 20 through 12, line 16).
On July 3, 2013 defendant claims he received a revised second mod agreement, with the borrower’s signature line on the same page as the notary’s. While defendant was pleased to see the revised document, he alleges that he and his counsel were waiting for an accurate and legible accounting of what happened to his HAMP trial payments before the revised second mod could be signed.
Meanwhile, counsel for the parties were exchanging email correspondence: on July 3, 2013, Mr. Link emailed Mr. Delgado a document (not attached to the exhibit), which was supposed to be an accounting, showing $17,734.20 being held in an “unapplied funds account” (Link 3408 affirmation, exhibit P). Mr. Delgado replied that he was unable to tell how this document showed what Mr. Link claimed it showed; he also pointed out that Mr. Sulton paid $19,468.50 for the HAMP trial — leaving a difference of $1,734.48 still unaccounted for. The parties agreed to continue to try to work out a settlement, but Mr. Delgado reaffirmed that there will not be a settlement until the parties clearly understand what became of the defendant’s previous payments. Mr. Delgado also requested a written confirmation signed by Citi stating how the previous payments have been or will be applied (Link 3408 affirmation, exhibit P [Mr. Delgado’s emails dated July 5, 2013 at 3:41 p.m.; July 5, 2013 at 4:45 p.m.; Aug. 8, 2013]).
The record before the court indicates that, after Mr. Delgado’s email to Mr. Link dated August 8, 2013, again requesting an accounting and a written confirmation as to how the previous payments had been applied, on August 16, Mr. Link emailed Mr. Delgado asking, “were you able to work something out w/ your client. Again, I need to resolve this as soon as possible” (Link 3408 affirmation, exhibit P).
By letter dated August 20, 2013, Mr. Delgado explained defendant’s position in further detail and outlined the issues that required resolution between the parties before the second mod could be signed on their end. The letter, once more, requested an accounting of the mortgage since acceleration, with
Mr. Link responded to the letter by email on August 26, 2013, claiming that most of these issues were never brought up before. With respect to an accounting, Mr. Link claims that it had all “been previously provided and are memorialized in the loan agreement” and offered updated figures; he also indicated he would sign a stipulation that the previous HAMP trial payments would be applied to the principal balance, and did not understand why the figure changed to $33,679.70 from $19,468.50.
“Finally, regardless of whether I can settle the cases, my foreclosure is defective and I need to discontinue the action and cancel the Lis Pendens. As your client prepared a pro se Answer, I need his signature to proceed with the discontinuance. If he does not consent to discontinue, I have no option but to file a motion to discontinue for the earliest possible return date” (Link 3408 affirmation, exhibit P).
Meanwhile, the following took place outside of the settlement negotiations between counsel: on August 13, 2013, defendant claims he received the original, problematic second mod agreement (with the borrower’s and notary’s signature lines on separate pages) from Citi. Mr. Delgado noted this in the August 20, 2013 letter (supra), and in plaintiffs response, Mr. Link stated that defendant should disregard that correspondence.
Then on or about August 14, defendant received an RJI in another, separate action, Chase Home Finance, LLC v Sulton (Sup Ct, Kangs County, King, J., index No. 21758/2010 [the Chase action]), which was filed on August 19, 2013. It was then that defendant claims he realized that this action concerns the same note and mortgage as in the Chase action. Chase Home Finance, LLC had filed its own notice of pendency, and summons and complaint on or about September 1, 2010, seeking to foreclose on the same lien, on the same premises.
Then defendant personally received a letter dated August 16, 2013 from Sweeney Gallo, with enclosed stipulations to discontinue the action and to cancel the notice of pendency. The letter states:
*638 “Dear Sir/Madam:
“With respect to the above-referenced foreclosure matter, you’re answering on behalf of the defendant, ANDRE SULTON and requested notice of discontinuance of the action.
“Kindly execute the enclosure and return the same to my attention as quickly as possible. We provide herewith a self-addressed, stamped envelope for your convenience.
“Please return as soon as possible as this matter is time sensitive” (Sulton aff, exhibit S).
The letter was signed by a paralegal, Aditya Bissoonauth. It is undisputed that defendant did not request a notice or stipulation to discontinue; nor that defendant was actually represented by counsel at that time.
After the directive was issued on the last FSCP conference date, June 28, 2013, the case was referred to this IAS Part 41 for a bad faith hearing and conference on August 13, 2013, which was adjourned to September 10, 2013. At this conference, plaintiff stated that it intended to discontinue the action and filed the instant motion the same day. Additionally, plaintiffs counsel represented to defendant’s counsel and the assistant law clerk that the correspondence sent to defendant, the original second mod on August 13, 2013 and the August 16, 2013 letter enclosing unsolicited stipulations to discontinue, were both inadvertent errors.
Defendant then made the instant cross motion to dismiss with prejudice, cancel the notice of pendency due to plaintiffs failure to prosecute the action in good faith, and for an order reimbursing defendant for the payments made towards the HAMP trial and the second mod trials in the amount of $33,679.70. Oral arguments on the motions were held with the hearing on bad faith on January 14, 2014.
Analysis
Plaintiffs Motion to Discontinue
A plaintiff may discontinue its action voluntarily upon stipulation by the parties or by order of the court (see CPLR 3217 [b]). Upon motion for such order, the decision as to whether to grant or deny the motion is within the sound discretion of the court, and should be granted absent special circumstances (Tucker v Tucker, 55 NY2d 378 [1982]; GMAC Mtge., LLC v Bisceglie, 109 AD3d 874 [2d Dept 2013]). “Particular prejudice
In cases where a plaintiff is not forthcoming with its reason(s) for discontinuing and the failure to state what the party will do thereafter (if/when it recommences), it can generally be inferred that there are ulterior motives involved and/or that a dismissal without prejudice would result in improper consequences. Consequently, it is more likely that a motion to discontinue will be denied under these circumstances (see Bisceglie, 109 AD3d at 875 [motion denied where plaintiff claimed it could not “move forward with the foreclosure ‘due to an issue with the default notification’, without specifying what the ‘issue’ is”]; Bank of Am., N.A. v Glickman, 43 Misc 3d 1206 [A], 2014 NY Slip Op 50509 [U], *3 [Sup Ct, Saratoga County 2014] [plaintiffs motion denied solely “based upon the plaintiffs failure to specify what, if any, action it intends to take concerning the mortgage and property”]; US Bank N.A. v Gioia, 42 Misc 3d 947, 951 [Sup Ct, Queens County 2013] [“The Bank has failed to provide a reason for discontinuance other than stating it would be in the interests of all parties”]; see also Tucker, 55 NY2d at 384 and n 2 [suggesting a conditional order upon the hypothetical scenario “in which the plaintiff is less open in disclosing the objective behind his or her motion to discontinue, or even affirmatively masks its ulterior purpose”]). Here, what Citi intends to do upon discontinuance is not known.
Plaintiffs counsel affirmed that the motion was being made as a “precautionary measure,” stating “It has been concluded that certain information, contained in an affidavit filed in this case, may not have been verified properly” (attorney affirmation of Robert Link, Esq. in support of plaintiffs motion to
The likelihood that plaintiff is seeking to avoid a potentially adverse outcome is made stronger with defendant’s arguments in opposition and in support of its cross motion to dismiss. Defendant argues that plaintiff lacks standing and that it cannot demonstrate that it held the note and mortgage at the time of commencement. This court is hard-pressed to disagree, as plaintiff has failed to rebut the argument with sufficient evidence demonstrating that it held the note on or before September 21, 2010. Plaintiff alleges that the “Original Note
Further, even if plaintiff had some sort of right to commence the action on or about September 21, 2010, it is possible that its interests would be subordinate to Chase’s, who filed its action and notice of pendency before plaintiff Citi (see Fleet Mtge. Corp. v Nieves, 272 AD2d 435 [2d Dept 2000]; cf. Household Fin. Realty Corp. of N.Y. v Emanuel, 2 AD3d 192 [1st Dept 2003]). An ACRIS property search shows that MERS assigned a mortgage to Chase on August 13, 2010, which was recorded on September 21, 2010; a few days later, MERS assigned a mortgage to Citi on September 8, 2010, which was recorded on September 29, 2010. While the court cannot make any determination on the record before it without Chase, it is possible that Citi had constructive notice of Chase’s interest, as Chase recorded its assignment first, and Citi had possible constructive notice of its foreclosure action by Chase’s filings made with the Kings County Clerk’s Office on September 1, 2010. The Chase action had been dormant for a few years, until an RJI was filed on August 19, 2013. Coincidentally, days later on August 26, 2013, Mr. Link elicited plaintiffs intention to discontinue the Citi action in his email to Mr. Delgado, as quoted, supra (Link 3408 affirmation, exhibit P [“my foreclosure is defective and I need to discontinue the action”]). Then plaintiffs counsel came to the conference in this IAS Part on September 10, 2013 and notified the court and the parties of its motion to discontinue. For the reasons stated above, plaintiffs motion is denied.
Defendant’s Cross Motion
At the outset, it must be noted that neither the defense of standing nor a claim for unjust enrichment is pleaded in defendant’s answer. The defense of standing is waived if not asserted in an answer or pre-answer motion to dismiss (Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239 [2d Dept 2007]). Therefore, at first glance, defendant cannot assert standing or the unjust enrichment claim unless he moves to amend his answer to include the defense of standing and a claim for unjust enrichment (CPLR 3025 [b]; see U.S. Bank, N.A. v Sharif, 89 AD3d 723 [2d Dept 2011]). However, “the court may grant any type of relief within its jurisdiction ap
In Thailer, upon a third-party defendant’s motion for summary judgment, dismissing the third-party complaint, “the court searched the record and determined that a release signed by the plaintiff might bar his action. The court adjourned the motion to afford all parties an opportunity to address this issue” (Thailer, 174 AD2d at 732). The Second Department stated that “[permission to amend pleadings should be freely given absent prejudice to the other side, and pleadings may be conformed to the proof at any time (see, CPLR 3025 [c])” (Thailer, 174 AD2d at 732 [citation omitted]). Thus, the trial court’s decision to sua sponte raise a defense that was not pleaded by the third-party defendant was proper, as “[t]he
Unjust Enrichment
In assessing a claim for unjust enrichment, “courts will look to see if a benefit has been conferred on the defendant under mistake of fact or law, if the benefit still remains with the defendant, if there has been otherwise a change of position by the defendant, and whether the defendant’s conduct was tortious or fraudulent” (Paramount Film Distrib. Corp. v State of New York, 30 NY2d 415, 421 [1972]). Defendant’s claim for unjust enrichment is essentially based on the argument that it is against equity and good conscience to permit Citi to keep the trial payments because it has not demonstrated standing to foreclose. In support, defendant alleges the following facts that satisfy the elements of his claim: the trial payments were made, as a result of mistake of fact or law, because plaintiff was not entitled to collect them; the benefit of those payments still remains with plaintiff Citi; Citi has changed its position as a result; and Citi fraudulently obtained those payments by misrepresenting a material fact — that it owned the note and mortgage — with the intent to deceive defendant Sulton into making those payments; defendant Sulton justifiably relied on such representations; and it caused him injury.
Defendant also argues that, based upon very similar allegations, the trial payments should be reimbursed as a remedy for failing to negotiate in good faith under CPLR 3408 (see defendant Andre Sulton’s mem of law for bad faith hearing, dismissal of plaintiffs complaint, equitable relief, and such other relief deemed fair and just by the court dated Nov. 18, 2013 by Carl E. Person [hereinafter defendant’s mem] at 16). The court assumes that, because defendant presents this alternative theory for recovery of the trial payments (which is appropriately discussed infra, in the CPLR 3408 good faith section), plaintiff appears to blend the two claims together, and cites to CPLR 3408 (h). Plaintiff also argues in opposition that the parties
CPLR 3408 (h) states “A party to a foreclosure action may not charge, impose, or otherwise require payment from the other party for any cost, including but not limited to attorneys’ fees, for appearance at or participation in the settlement conference.” As an initial matter, the court notes that plaintiff repeatedly argues that rule 3408 does not and should not apply to the instant action because the premises are not owner-occupied, yet here submits that it does apply in order to support its position on, and/or its general defense against, having to pay any costs or fees to defendant. Ultimately, however, to the extent that any portion plaintiffs response to defendant’s unjust enrichment claim is premised on rule 3408 (h), the court only notes that rule 3408 has nothing to do with a claim for unjust enrichment — thus rendering that portion of plaintiffs opposition inapplicable to the instant discussion.
It would make sense for the court to order the parties to adhere to section 2 (F) of the HAMP trial agreement. However, the court cannot say for certain that the parties have a contract with actual enforceable rights and obligations, even if plaintiff concedes as such.
To be sure, the Appellate Division has also held that, not only is a court prohibited from rewriting the loan documents “or impos[ing] contractual terms which were not agreed to by the parties” (US Bank N.A. v Sarmiento, 121 AD3d at 208; see Meyers, 108 AD3d 9), but banks, lenders, or servicers are not required or obligated to offer a borrower any loan modification or any specific, desirable terms and/or conditions (Lucido, 114 AD3d 714, 715-716 [2d Dept 2014], quoting Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638, 638 [1st Dept 2012]; llardo, 36 Misc 3d 359, 379-380). More to the point, however, is that courts cannot even hold lenders to their agreed-upon terms in a loan modification trial agreement or contract (see Flagstar Bank, FSB v Walker, 112 AD3d 885, 886 [2d Dept 2013] [trial court’s decision to stay proceedings and direct bank to reevaluate defendants’ loan under HAMP reversed where trial court’s hearing established that the loan was ineligible for HAMP]; Ilardo, 36 Misc 3d 359 [declining to adopt the reasoning of the trial court in Meyers,
If the trial agreements cannot be considered as enforceable contracts, a solution in equity may be possible; consequently, the defendant requests reimbursement of the trial payments under equitable principles. Even if the court considered defendant’s claim by conforming the pleading(s) to the proof presented (CPLR 3025 [c]), it cannot be said that all issues have been resolved in order for the court to be assured that defendant should be granted such relief. The court finds that defendant has not proved fraud, or more specifically, that plaintiff intended to deceive defendant. Defendant alleges that plaintiff made two false statements: one being an allegation in the complaint that plaintiff is the owner or holder of the note; the other was plaintiffs alleged statement that it would modify the loan, so long as defendant made the $33,679.70-worth of payments. Defendant further argues that plaintiff knew or should have known about the Chase action, such that it knowingly made these representations. However, it cannot be said that plaintiff knowingly made false representations with the intent to deceive defendant. It appears that the status of plaintiff as the noteholder was initially raised by Sulton’s requests to see the note, but did not appear to be considered by plaintiff as a pressing issue until Chase filed its RJI in August of 2013 — which is after defendant paid the HAMP trial and second mod trial payments (therefore, it cannot be said that plaintiff intended to deceive defendant into making those payments, before its authority to modify came into serious question). The falsity of the alleged statements is quite material to any determination that the court could make with respect to defendant’s claim. This is a fact, however, that cannot be decided without nonparty Chase, whom defendant interjects into the proceedings to refute plaintiffs allegation that it has the right to foreclose — an allegation which is central to the
Additionally, to the extent that the unjust enrichment claim is based upon the HAMP trial payments, the court finds that defendant’s claim cannot stand because defendant could not justifiably rely on one of the plaintiffs allegedly false statements — that the loan would be modified so long as defendant made the payments — because the defendant himself made a misrepresentation of fact when he signed the HAMP trial by stating that the property was occupied as the borrower’s principal dwelling.
The court therefore cannot make any sua sponte decision to add the counterclaim and grant defendant the relief it seeks under CPLR 3025 (c).
Dismissal with Prejudice Based on Standing
With respect to this branch of defendant’s cross motion, the court finds that defendant has proved the standing defense, such that defendant’s answer should be amended to include the defense to conform to the evidence presented herein. While the defense of standing is normally waived if not asserted (see Mastropaolo, 42 AD3d 239), there is nothing that prohibits defendant from moving to amend the answer under CPLR 3025 (b), especially where, as here, the defense is meritorious and there is no prejudice to the plaintiff (see Sharif, 89 AD3d at
Meritorious Defense
“A plaintiff has standing where it is both (1) the holder or assignee of the subject mortgage and (2) the holder or assignee of the underlying note, either by physical delivery or execution of a written assignment prior to the commencement of the action with the filing of the complaint” (Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 108 [2011]).
A mortgage assignment is incidental to the assignment of a note — i.e., a lien follows a debt. “By contrast, ‘a transfer of the mortgage without the debt is a nullity, and no interest is acquired by it’ ” (Bank of N.Y. v Silverberg, 86 AD3d 274, 280 [2011], quoting Merritt v Bartholick, 36 NY 44, 45 [1867]). Thus, the key issue is whether plaintiff could demonstrate that it held the note on or before September 21, 2010. Once this issue is raised, plaintiff has the burden of proving its standing (Silverberg, 86 AD3d at 279).
As discussed above, plaintiff was unable to show any merit to its action. Plaintiff alleges that the “Original Note was received on April 21, 2008, prior to the commencement of the action on September 21, 2010” (Link opp ¶ 20). As proof, plaintiff submits a party affidavit and a “Correspondence Log” that is supposed to show an entry that was made when the note was received, which is alleged to be April 21, 2008 (Sinner aff ¶¶ 6-8; Link opp, exhibit B), yet nothing in the papers demonstrates what plaintiff purports it to represent. Thus, the only “evidence” plaintiff has to submit is entirely insufficient to demonstrate standing (Weisblum, 85 AD3d at 109 [finding plaintiff lacked standing where “the affiant failed to give any factual detail of a physical delivery of (the note) prior to the commencement of the action”]). Additionally, plaintiff attempted to present the note to the court at the hearing, which, as stated, supra, does not establish its possession of the same three years prior {see tr at 16).
Defendant also argues that any interest Citi had would be subordinate to Chase’s interest, and extinguish by a foreclo
Defendant’s argument that if plaintiff did have standing it would be subordinate to Chase’s is compelling, particularly considering plaintiffs utter failure to meaningfully address the issue; but, once again, this court declines to make any such determination on that without nonparty Chase.
However, even without a resolution of that issue, the Chase action itself presents a different issue under Real Property Actions and Proceedings Law § 1301. RPAPL 1301 (3) provides that “[w]hile the action is pending ... no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.” Here, the Chase action was technically pending while plaintiff Citi commenced this action, in violation of RPAPL 1301 (3) (cf. McSorley v Spear, 13 AD3d 495 [2d Dept 2004]). Even if plaintiff Citi could be found to be a proper junior mortgagee, the strictures of RPAPL 1301 (3) are debt-specific, the purpose of which “is to shield the mortgagor from the expense and annoyance of two independent actions at the same time with reference to the same debt” (Central Trust Co. v Dann, 85 NY2d 767, 772 [1995], quoting Reichert v Stilwell, 172 NY 83, 88 [1902]). Thus, this foreclosure action cannot be maintained (see Central Trust Co., 85 NY2d 767 [differentiating between the preclusion of a junior mortgagee’s foreclosure action as opposed to an action at law on the note, which is not the case here]).
Prejudice to Plaintiff
Additionally, the court finds that plaintiff would not be prejudiced by the court’s amendment of defendant’s answer to
Accordingly, the court hereby amends defendant’s answer to conform to the proof presented (CPLR 3025 [c]), and finds that plaintiff is unable to demonstrate the requisite standing to maintain the action. The court grants that part of defendant’s motion for dismissal; however the dismissal is without prejudice on the condition that, if/when plaintiff Citi chooses to recommence this action, it must seek leave of the court and include in its application, inter alia, an accounting of the defendant’s loan and/or history of payments made, including proof demonstrating what became of the defendant’s trial loan modification payments. Further, to the extent that Citi has any ability to collect on the loan, all interest, default interest, attorneys’ fees, loan modification fees, late charges, and costs, as applicable, that have accrued from the date the first payment was made on the HAMP trial, November 23, 2009, up to the date of this order, is barred from collection or otherwise waived.
The remaining branch of defendant’s motion is to cancel the notice of pendency under CPLR 6514 (b) and (c). Upon motion, a court can order the cancellation of a notice of pendency “if the plaintiff has not commenced or prosecuted the action in good faith” (CPLR 6514 [b]). In this case, it cannot be said that “the plaintiff commenced this action in bad faith, or is using the notice of pendency for an ulterior purpose” (Lessard Architectural Group, Inc., P.C. v X & Y Dev. Group, LLC, 88 AD3d 768, 770 [2d Dept 2011], citing Reingold v Bowins, 34 AD3d 667, 668 [2d Dept 2006]). Even though the basis for plaintiffs action has come into question, it does not appear as though the Chase action was known at the time, or that this action was otherwise filed in bad faith. Because the action is being dismissed in this order, the notice of pendency shall be cancelled upon this dismissal (CPLR 6514 [a]).
Good Faith and Other Misconduct
In addition to the motions, the court requested the parties to submit briefs and reply briefs on the issue of the directive. The directive referred the instant matter for “a hearing on bad faith and consideration of the appropriate sanctions for plaintiffs failure to finalize the modification of this loan,” adding that “[p]laintiffs counsel has proffered no reasonable excuse for the 5-month delay in finalizing this modification.” As of the date of the Referee’s directive, June 28, 2013, the notarization and acknowledgment page appeared to be the only issue in the directive. Presumably, the threat of the bad faith hearing and determination of sanctions placed an impetus upon plaintiff to move forward, in some respect, with the second mod; and it reformatted the agreement and sent it to defendant a few days later on July 3, 2013. Though, the issue of those previous trial payments, and how they were to be applied, was a constant issue throughout conferencing. Additionally, when the matter was referred to this court, allegations of plaintiffs counsel’s professional misconduct arose during conferences; this will also be discussed, as the parties were given the opportunity to explain their respective positions by briefs and at oral argument. Further, the court takes this opportunity to point out numerous misrepresentations made in the papers by plaintiffs counsel, Mr. Link.
Failure to Negotiate in Good Faith
Conferences in the FSCP
Plaintiff alleges that, as an initial matter, CPLR 3408 does not protect the defendant, who is a landlord or real estate in
Mr. Link is correct that conferencing pursuant to CPLR 3408 is mandated for specific cases, the criteria of which are set forth in RPAPL 1304 (5) (a) (CPLR 3408 [a]). It is undisputed that the mortgaged premises are not, nor “will be occupied by the borrower as the borrower’s principal dwelling” (RPAPL 1304 [5] [a] [iii]); therefore the conference is not mandatory (see CPLR 3408 [a]; see e.g. One W. Bank, FSB v Greenhut, 36 Misc 3d 1205[A], 2012 NY Slip Op 51197[U], *3 [Sup Ct, Westchester County 2012]; Indy mac Fed. Bank FSB v Black, 22 Misc 3d 1115[A], 2009 NY Slip Op 50133[U] [Sup Ct, Rensselaer County 2009]).
There are plenty of cases that have addressed whether or not a borrower is entitled to a mandatory settlement conference because of the principal-dwelling requirement, as distinct from one’s residency (see e.g. Accredited Home Lenders, Inc. v Hughes, 22 Misc 3d 323, 325-327 [Sup Ct, Essex County 2008]; Black, 2009 NY Slip Op 50133 [U]; Greenhut, 2012 NY Slip Op 51197[U]). In these cases, “[a] foreclosure plaintiff bears the burden of showing that the loan subject to foreclosure does not meet these criteria and thus is exempt from a mandatory foreclosure settlement conference” (id. at *3). But these cases deal with mandatory conferences, i.e., statutorily-required. What, then, are the applicable laws and rules of conferencing when a residential mortgage foreclosure settlement conference is not required by statute, but otherwise “mandated by appearance, reference or request?” Such is the situation under part G of the Kings County Supreme Court Uniform Civil Term Rules (the “Foreclosure Settlement Part Rules” [hereinafter FSP]), where residential mortgage foreclosure settlement conferences are held for matters which do not strictly encompass cases solely falling under the “home loan” definition of RPAPL 1304 (5) (a). The Kings County FSP rules do not differentiate between conferences that are required by statute, or are otherwise “mandated by appearance, reference or request” (FSP rule 1). Therefore, this rule makes the instant action distinguishable
Even if conferencing was not statutorily-required, it was otherwise mandated under the FSP rules. The court finds defendant’s argument, that plaintiff submitted to the jurisdiction of the FSCP, is particularly compelling, given that plaintiff was the one who requested such conferencing. Plaintiff filed the RJI in this case, which stated that the property is “a one-to [-] four-family owner-occupied residential property,” specifically “asserting that the loan was a . . . home loan that CPLR 3408(a) addressed” (1st United Bank, 2013 NY Slip Op 51819 [U], *2, *4), and sought to have a conference by checking off the nature of this action as “Residential Mortgage Foreclosure Settlement Conference,” triggering an appearance in the FSCP. Further, plaintiff came to the FSCP conferences throughout 2013, and later claimed that it made an oral application to remove the matter to an IAS part at the first conference in 2012, which was allegedly denied. Mr. Link’s credibility diminished when he also asserted at oral argument, for the first time, that he asked the Referee (and defendant) to discontinue the action, which was also allegedly denied. With no proof, but only vague assertions regarding the putative application(s),
Moreover, the Referee did not act improvidently by adjourning the matter to continue to conference. Because the parties had been discussing settlement (namely, the second mod, which was offered to the defendant in Dec. 2012), it was also proper for the Referee to keep the matter in FSCP in accordance with another rule directing that control dates be given in the FSCP “coincident with the trial modification period,” when the parties have “agreed to a trial modification, whether under HAMP or otherwise” (FSP rule 7).
CPLR 3408 (f)’s Obligation to Negotiate in Good Faith
Finding that the case was properly before the Referee in the FSCP, the court must now consider whether the obligation of the parties to “negotiate in good faith to reach a mutually agreeable resolution” (CPLR 3408 [f] [hereinafter the good faith requirement or obligation]) extends to both statutory and otherwise-mandated conferences. In light of the fact that the rules of this court allow it to conduct mandatory as well as requested or referred settlement conferences in the FSCP, the court finds that the good faith requirement of CPLR 3408 (f) should apply to all conferences held in the FSCP, and not any differently to residential mortgage foreclosure settlement conferences, generally. Thus, even if the conferences held in the FSCP were not mandatory in this case under CPLR 3408 (a), the court finds that “[o]nce the parties agreed to participate in the scheduled settlement conferences, [plaintiff was] obligated to deal ‘honestly, fairly and openly’ with [defendant]” under CPLR 3408 (f) (U.S. Bank, N.A. v Shinaba, 40 Misc 3d 1239[A], 2013 NY Slip Op 51484[U], *12 [Sup Ct, Bronx County 2013]).
This determination is supported by an inference in the statutory language of CPLR 3408: it first defines the type of cases
Applying the good faith requirement to all residential mortgage foreclosure settlement conferences held in the FSCP would not upset or conflict with the scope or purpose of the conferences, which is to put a borrower and his/her lender at the table to discuss settlement and “the relative rights and obligations of the parties under the mortgage loan documents” (Astoria Fed. Sav. & Loan Assn, v Rigano, 36 Misc 3d 630, 632-633 [Sup Ct, Westchester County 2012] [emphasis omitted]). Having conferences also “brings both parties to court, identifies the issues, and coordinates access to the growing array of services and resources being made available to homeowners [,] [which] would significantly assist the courts in disposing of these cases more expeditiously and effectively” (NY St Bar Assn, President’s Committee on Access to Justice, Mem in Support, Bill Jacket, L 2008, ch 472 at 23 [quoting testimony of Chief Administrative Judge Ann Pfau]).
Additionally, the purpose of the good faith requirement itself would not be undermined if it applied to all conferences in the FSCP. According to legislative history, “[t]he purpose of the good faith requirement is to ensure that both plaintiff and defendant are prepared to participate in a meaningful effort at the settlement conference to reach resolution” (Sarmiento, 121 AD3d at 200, quoting Governor’s Program Bill Mem No. 46R, Bill Jacket, L 2009, ch 507 [alterations omitted]). One court further elaborated on its purpose, stating that it “was imposed to prevent one party to a mortgage contract from behaving in a
It is true that the goal of CPLR 3408, and other laws created or amended by the subprime residential loan and foreclosure laws (L 2008, ch 472), was to keep homeowners in their homes, and does not appear to protect owners of investment properties and second homes (see Hughes, 22 Misc 3d at 325-327; see generally Hon. Mark C. Dillon, The Newly-Enacted CPLR 3408 for Easing the Mortgage Foreclosure Crisis: Very Good Steps, But Not Legislatively Perfect, 30 Pace L Rev 855, 856 [2010]). However, as noted above, the purpose of the good faith requirement is not dwelling-specific; whereas the purpose of the mandatory conferences in CPLR 3408 is clearly established through subdivision (a), confining its mandate to cases fitting within limited criteria, including owner-occupied situations. In the cases where FSCP conferences are otherwise mandated, especially here, where it was requested and sought after, the obligation should apply as if it were a mandatory conference, solely because it is a residential mortgage foreclosure settlement conference that is being held within the FSCP (cf. HSBC Bank USA v McKenna, 37 Misc 3d 885, 889 [Sup Ct, Kings County 2012]).
To be sure, the alternative to imposing the “good faith” requirement, leaves only the common-law standard of “bad faith” — which requires “a showing of gross disregard of, or conscious or knowing indifference to, another’s rights” (Sarmiento, 121 AD3d at 202-204). The Appellate Division, Second Depart
In making this determination, the court limits its holding to all conferences being held in the FSCP. Any interpretation that creates a distinction between statutorily-required and otherwise-mandated conferences held in the FSCP is, not only substantively undesirable, but impractical and likely more burdensome for “an already-overburdened judiciary” (see Hon. Mark C. Dillon at 887; see also Bank of Am,., N.A. v Maharaj, 29 Misc 3d 1202[A], 2010 NY Slip Op 51665[U], *2 [Sup Ct, Suffolk County 2010]). Otherwise the courts would have referees, and other judges and hearing officers, imposing different standards of conduct on the parties in cases where, as here, the parties submitted themselves to the FSCP and were properly before the Referee.
The court’s holding to apply the good faith obligation to the FSCP conferences is made in line with the reasoning of existing case law where the good faith requirement has been, in fact, extended and broadened beyond the mandatory conference. For example, in Wells Fargo Bank, N.A. v Meyers, the Appellate Division, Second Department upheld the trial court’s determination that there was a violation of the obligation by examining, inter alia, the parties’ conduct that occurred outside of the mandatory conference, including pre-commencement conduct (108 AD3d 9). By focusing on the negotiations themselves, a determination on good faith takes into account the conduct of the parties before and after the actual mandatory
The court also does not see a reason why, then, the good faith requirement should not continue to extend to any given case when the settlement negotiations continue upon transfer or referral to an IAS part. Such extension may help provide some consistency between the various ways different judges handle foreclosure settlement conferences, at least with respect to the required standard of conduct (see Hon. Mark C. Dillon at 887 [“Each judge throughout the state may handle the conferences differently: either in chambers or in open court, on motion days or in special session, personally or through a law secretary, with or without meaningful negotiation”]).
For the foregoing reasons, the court finds that the good faith requirement of CPLR 3408 (f) should apply to all residential foreclosure settlement conferences held in the FSCP, whether mandatory or otherwise mandated under the Bangs County FSP rules, particularly where, as here, plaintiffs actions brought the matter to the FSCP. Thus, once the parties agreed to participating in the settlement conferences in the FSCP, both parties were obligated to negotiate in good faith (see Shinaba, 2013 NY Slip Op 51484[U], *12).
Good Faith Determination
The Appellate Division recently held in US Bank N.A. v Sarmiento that the “issue of whether a party failed to negotiate in ‘good faith’ . . . should be determined by considering whether the totality of the circumstances demonstrates that the party’s conduct did not constitute a meaningful effort at reaching a
“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, or, conversely, where a defendant fails to provide requested financial information or provides incomplete or misleading financial information, such conduct could constitute the failure to negotiate in good faith to reach a mutually agreeable resolution” (id.).
Additionally, the courts have also found a failure to negotiate in good faith for unsubstantiated and unexplained charges, misrepresentations of fact (Meyers, 108 AD3d 9; Wells Fargo Bank, N.A. v Ruggiero, 39 Misc 3d 1233[A], 2013 NY Slip Op 50871[U] [Sup Ct, Kings County 2013]; Butler, 2013 NY Slip Op 51050 [U] [Sup Ct, Kings County 2013]), refusal to honor agreements (Meyers, 108 AD3d 9; Ruggiero, 2013 NY Slip Op 50871 [U]), and a plaintiffs blatant refusal to consider any alternatives except foreclosure (IndyMac Bank F.S.B. v Yano-Horoski, 26 Misc 3d 717, 718 [Sup Ct, Suffolk County 2009], revd on other grounds 78 AD3d 895 [2d Dept 2010]). Notably, in a case similar to the one sub judice, the court in US Bank N.A. v Gioia held that, just by moving to discontinue the action without completing the conferences and while a loan modification was still on the table, constituted a violation of the obligation to negotiate in good faith (42 Misc 3d 947). The Appellate Division has also made clear that a lender’s refusal to make an offer with the exact terms and conditions as desired by a borrower does not constitute a violation of the good faith requirement (Lucido, 114 AD3d 714, 715; Van Dyke, 101 AD3d 638).
In this case, the basis for the Referee’s referral is based upon its finding that the plaintiff had no excuse for its five-month delay in finalizing the modification. The court does not, however, accept plaintiffs argument that, because that is the only issue noted in the directive, that is the only issue for the court’s consideration in making this determination (see Meyers, 108 AD3d at 17). At the onset of negotiations between plaintiff and defendant, which occurred sometime in late 2009, the court finds that, if plaintiff knew the premises to not be owner-occupied, plaintiff provides no reason for offering defendant a HAMP loan modification, which requires that the borrower oc
Aside from that, plaintiff claimed that it was allowed to send defendant that HAMP trial agreement and collect payments pursuant to HAMP Supplemental Directive 09-01. Specifically, plaintiff alleges it was “directed by the government to have the Borrower begin making trial payments before an underwriter could verify the account for eligibility” (affirmation in reply to defendant’s brief alleging bad faith pursuant to CPLR 3408 by Mr. Link dated Dec. 19, 2013 [hereinafter Link 3408 reply affirmation] ¶ 27). This is incorrect and misleading for two reasons: (1) the section quoted by plaintiff in its papers actually states that a servicer can send the borrower a HAMP trial plan before verifying eligibility and income, only upon some “recent verbal financial information,” which is not stated here; and (2) the government did not “direct” servicers to do this, as the section goes on to state that, alternatively, borrowers can submit all of their financial information and, upon eligibility, a HAMP trial plan could be sent to the borrower (Link 3408 reply affirmation, exhibit F at 5). Moreover, these very same HAMP rules state,
“If the servicer determines that the borrower does not meet the underwriting and eligibility standards of the HAMP after the borrower has submitted a signed Trial Period Plan to the servicer, the servicer should promptly communicate that determination to the borrower in writing and consider the borrower for another foreclosure prevention alternative” (Link 3408 reply affirmation, exhibit F at 15).
Here, assuming that plaintiff did not know the premises were not owner-occupied (which has not been alleged), it is unclear when exactly plaintiff found out, but was likely sometime be
Also, sometime during the nine months while the HAMP modification was pending, defendant received a letter dated May 21, 2010 stating that his loan is in default (even though he had been making modified payments through Apr. of 2010).
The story of this case, so far, is that plaintiff offered defendant a HAMP trial and allegedly knew it was not owner-occupied; claimed original default on the loan in May 2010 while the loan modification was pending, then denied the HAMP modification in September, and then, shortly thereafter, filed a complaint that states that defendant failed to make his monthly installment on the loan due February 1, 2010
Moving forward, the first issue that arose during conferences in the FSCP concerned the acknowledgment page of the second mod. On January 7, 2013, defendant (appearing pro se at the time) went to the conference, and explained to the Referee and counsel for plaintiff that a notary public would not acknowledge his signature because the acknowledgment was not on the same page as his signature. It is unclear how the parties left off, exactly, with respect to this issue and Mr. Link’s affirmation does not provide any version from plaintiff of what happened at this conference. It may not be relevant because, thereafter, defendant had a notary public acknowledge the signature on the same page as defendant’s signature, and then emailed it to Mr. Link. Mr. Link told defendant that he did not think his client would accept the agreement as sent by defendant and then sent defendant a “fresh” agreement, stating that the separate acknowledgment page would have to be signed. Although, at the hearing, Mr. Link stated that, upon receiving defendant’s email on January 25, 2013, he looked into it by “verifying with Executive Law Section 306,” advised the client of the situation, and then stated that “[n]othing could be done” (tr at 9, lines 13-25). Mr. Link, however, did not elaborate on whether
By the time the next conference occurs on March 1st, Mr. Link claims that he already knew that nothing could be done about the borrower’s signature page and the acknowledgment page. Mr. Link alleges in plaintiffs papers that he asked defendant’s counsel whether the agreement needed to be changed in order to facilitate a settlement, to which defendant’s counsel stated that the “notary page was no longer an issue.” Defendant Sulton claims that, at this conference, plaintiffs counsel stated it would take the signed and notarized agreement under consideration. This is reiterated in Mr. Delgado’s letter which stated that counsel appearing on behalf of Sweeney Gallo stated the borrower’s signature page was unacceptable, and then advised that this issue would be further investigated. The parties’ versions of what occurred at the March 1st conference are not necessarily inconsistent with each other’s, but do not have a logical explanation. If Mr. Link had already looked into the issue, and determined that nothing could be done, then it is unclear (1) why both defendant and defendant’s counsel claim that plaintiff stated, for the first time, that it would look into whether it could accept the agreement as it was signed and notarized by defendant; and (2) why Mr. Link would ask Mr. Delgado whether the notary format needed to be changed to facilitate a settlement. Moreover, it is unclear how Mr. Link could affirm that he specifically spoke to Mr. Delgado in person at that conference; whereas Mr. Delgado emailed Mr. Link afterward, on April 18, 2013, introducing himself, and also stated in a letter to Mr. Link dated August 20, 2013 that “during the March conference, counsel appearing on behalf of your office advised that [the agreement was unacceptable]” (emphasis added). Additionally, the aforementioned email correspondence in April between Mr. Delgado and Mr. Link,
The outcome of the following conference on May 21st is clearer, as the Referee stated in the directive that “[a]fter a
Eventually, defendant received a revised agreement on July 3, 2013. Yet on August 12, 2013, defendant received the original, problematic version of the same agreement, creating a bit of confusion.
Of course, a lender or servicer is not obligated to offer a modification on the specific terms and conditions that are desired by the defendant (Lucido, 114 AD3d at 715); however, this minor formatting issue hindered the modification process for at least five months. All plaintiff had to do was look into the matter, and advise the defendant and the Referee of the client’s determination. Instead, plaintiffs counsel provided inconsistent, confusing, and potentially misleading information, with all of its various accounts of what occurred. This issue is not something that should have taken six months to resolve.
Additionally, defendant requested an accurate and legible accounting of what became of the previous HAMP trial payments, and clarification as to how the second mod payments were to be applied. Defendant, individually, sent QWRs to both plaintiff and plaintiffs counsel, on October 23, 2012 and on February 20, 2013, and plaintiff did not rebut those allegations or even attempt to create an excuse for not responding — thus, these requests for information to which he was entitled went
Since the Referee issued the directive, plaintiff ended up reformatting its agreement and sent a revised agreement to defendant on July 3, 2013. The defendant was pleased with this, yet also had other issues that it wanted to discuss with plaintiffs counsel before it could agree to signing the modification. These included a plethora of issues, some of which were mentioned throughout conferencing, and some of which were brought up for the first time around August 2013. It is not unreasonable for defendant to try to negotiate with plaintiff — defendant’s counsel was trying to make the best deal for its client. Again, as noted above, plaintiff does not have to accept these demands or offer any specific proposal. However, even
The court finds that the relatively short delay in figuring out the minor acknowledgment-page issue would not, by itself, constitute a lack of good faith. But this delay was accompanied by conflicting and/or inconclusive information from various representatives of Sweeney Gallo. Neither would be the inability to clearly show what became of defendant’s previous HAMP trial payments or how the second mod payments were to be applied because it appears as though plaintiff, in fact, responded numerous times to defendant’s requests — yet the problem was that none of the responses were legible or accurate. Indeed, this court could not make sense of any of the evidence presented that attempted to show an accounting of defendant’s previous payments. More positively, plaintiff then stated it would sign a stipulation to resolve the issue. However, when viewed under a totality of the circumstances, the aforementioned conduct in conjunction with the motion to discontinue certainly demonstrates a failure to negotiate in good faith, as the plaintiff ceased making any “meaningful effort” towards settlement (see Governor’s Program Bill Mem No. 46R, Bill Jacket, L 2009, ch 507 at 11; Sarmiento, 121 AD3d at 203). The most significant factor that underlies this determination is plaintiffs filing of the motion to discontinue in the midst of conferencing. In doing so, plaintiff effectively made clear its unwillingness to “reach a mutually agreeable resolution,” which demonstrates a lack of good faith (Gioia, 42 Misc 3d 947, 952 [denying plaintiffs motion to discontinue the action and finding the motion constituted a lack of good faith]).
Frivolousness Conduct — Rules of the Chief Administrator of the Courts (22 NYCRR) § 130-1.1
Pursuant to the Rules of the Chief Administrator of the Courts, a court may award costs or impose sanctions against an attorney or party, or both, for frivolous conduct. The rule provides what conduct is frivolous, and what the court shall consider in making such a determination:
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.
“. . .In determining whether the conduct undertaken was frivolous, the court shall consider, among other issues the circumstances under which the conduct took place, including the time available for investigating the legal or factual basis of the conduct, and whether or not the conduct was continued when its lack of legal or factual basis was apparent, should have been apparent, or was*669 brought to the attention of counsel or the party”
(Rules of Chief Admin of Cts [22 NYCRR] § 130-1.1 [c]).
Plaintiff has made numerous material misrepresentations to the court and has asserted arguments that are completely without merit. For example, plaintiff claims that neither defendant nor his counsel ever “articulated to Plaintiffs counsel at any point during the Settlement Conference Process any concerns regarding the status of previously received HAMP trial payments” (Link opp ¶ 44). Mr. Link went on to allege that when defendant “finally vocalized his concern regarding the status of HAMP trial payments,” he “promptly” provided it in an email on August 1, 2013 (Link opp ¶ 47). However, the issue of the trial modification payments was brought up multiple times prior to August 1, 2013.
Additionally, Mr. Link presents conflicting accounts of what occurred at the conferences. The court is particularly concerned with the last conference, where the Referee stated plaintiffs counsel advised an agreement was being reviewed by its legal department. Even after the directive was issued on June 28, 2013, Mr. Link’s versions were starkly different and he continued, through his papers and at the hearing on these issues, to intentionally make misrepresentations of fact to this court (see U.S. Bank N.A. v Gonzalez, 99 AD3d 694, 695 [2d Dept 2012]).
With respect to the Chase action, Mr. Link’s position, that the mortgage assignment is a “nullity” or “nothing,” is completely unsubstantiated. The court finds it troubling that plaintiff had a considerable amount of “time available for investigating the legal [and] factual basis” (Rules of Chief Admin of Cts [22 NYCRR] § 130-1.1 [c]), yet submits affirmations
Finally, this court finds Mr. Link’s consistent representation that Sweeney Gallo could communicate with Mr. Sulton individually because he filed a pro se answer is simply not credible. This contention has absolutely no legal basis and it is repeated again and again. As discussed below, such continual assertion may aggravate the court’s finding on the violation of professional misconduct.
Ultimately, however, this court declines to direct a hearing to discuss the foregoing examples (which would be necessary before making any award or imposing any sanctions [Walker v Weinstock, 213 AD2d 631 (2d Dept 1995), citing 22 NYCRR 130-1.1 (a), (d)]). Rather, this decision is clearly indicative of the court’s displeasure with counsel’s behavior, which is behavior that is specifically prohibited by law as stated above.
Violation of the Rules of Professional Conduct
Rule 4.2 (a) of the Rules of Professional Conduct (22 NYCRR 1200.0) states that “a lawyer shall not communicate or cause another to communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the prior consent of the other lawyer or is authorized to do so by law.” By sending the “requested” (but actually unsolicited) stipulations to discontinue the action and cancel the notice of pendency to defendant Sulton, knowing that he was represented by counsel, plaintiffs counsel violated this rule. While the counselor appearing for Sweeney Gallo at the conference on September 10, 2013 claimed it was an inadvertent error, Mr. Link argued otherwise. Having a full opportunity to explain or refute the claim of misconduct, Mr. Link alleges that he had numerous discussions with defendant’s counsel, Mr. Delgado, about “Plaintiffs intent to discontinue, the Motion, and how it was to be served”; he goes on to affirm that “the parties agreed that service was proper upon the Defendant, as he filed a pro se Answer. There was never any discussion of alleged improper contact with the Defendant” (Link surreply ¶ 4). In support of his allegation that the discontinuance was discussed, Mr. Link submits an email dated September 9, 2013, when he sent the
Additionally, Mr. Link appears to fault defendant’s counsel for his behavior, stating that defendant’s counsel “fail[ed] to correct the official court record or notify counsel of their complaint” and claims that it “underscores the manufactured and phony nature of their grievance” (Link surreply ¶ 7). Mr. Link cannot claim that the “official court record” is the reason why correspondence was sent to defendant, individually, rather than counsel. Not only did defendant’s counsel file a notice of appearance with the Kings County Clerk’s Office on March 4, 2013, and apparently served the same via email to Mr. Link on April 24, 2013 (Link opp, exhibit L), but Mr. Link submits voluminous exhibits demonstrating his correspondence with defendant’s counsel and uses their statements and allegations in support of his position. Defendant was undoubtedly represented — however, Mr. Link appears to believe, still, that no violation of any professional rule of conduct occurred. It is clear that Mr. Link specifically acknowledged what occurred, yet he appears unwilling to take any responsibility for the nature of this troubling violation. And even though the communication was from a paralegal, Mr. Link’s surreply to the allegation of misconduct serves to confirm that he and Sweeney Gallo are, in fact, in violation of the Rules of Professional Conduct as he knew of the correspondence and ratified it (Rules of Professional Conduct [22 NYCRR 1200.0] rule 5.3 [b] [1]).
In conclusion, plaintiff has no reasonable excuse or defense for violating rule 4.2 (a) of the Rules of Professional Conduct, in conjunction with rule 5.3 (22 NYCRR 1200.0). Similarly, the court declines to conduct a hearing on the imposition of sanctions for violating this rule and would rather let this decision serve as a warning to plaintiffs counsel that such conduct, which runs afoul to the canon of professional ethics, by which this court holds firm, will not be tolerated.
Conclusion
Plaintiffs motion to discontinue the action is denied. Defendant’s cross motion is granted in part to the extent that the action is dismissed; dismissal shall be without prejudice on the
. This total includes the $20 “service fee” plaintiff charged on the payments made on March 26, 2010 and April 27, 2010 (aff of Andre Sulton dated Nov. 15, 2013 [hereinafter Sulton aff] ¶ 3).
. The complaint, although verified, is not dispositive as evidence of the date of default because it is verified by counsel who may not have personal knowledge of the facts (see Indig v Finkelstein, 23 NY2d 728 [1968]; Finnegan v Sheahan, 269 AD2d 491 [2d Dept 2000]; Mullins v DiLorenzo, 199 AD2d 218 [1st Dept 1993]). Additionally, this alleged date of default conflicts with the party affidavit submitted with plaintiffs opposition to defendant’s
. Shortly before the first conference and beginning around October 1, 2012, defendant began receiving letters from CitiBank stating that the bank could no longer service his account. Defendant received eight of these letters, which were allegedly never explained to him. While not entirely clear, it is unlikely that CitiBank’s closing of defendant’s accounts is relevant to the instant loan or this CitiMortgage foreclosure action.
. However, in an email from Mr. Link to Mr. Delgado dated August 1, 2013, Mr. Link acknowledges that conferencing in the FSCP may be proper, stating: “Additionally, the matter was held in the Settlement Conference Part over my objection and pursuant to the Kangs County Foreclosure rules which expand the scope of CPLR 3408 to investment properties” (plaintiffs affirmation in support of CPLR 3408 compliance dated Nov. 18, 2013, exhibit P).
. The court notes that since the instant bad faith determination and motions were fully submitted to the court on January 14, 2014, a consent to change attorneys dated January 11, 2014 was filed in the Kings County Clerk’s Office on February 21, 2014, substituting Akerman LLP instead of Sweeney Gallo. For purposes of this decision, any and all references to plaintiffs “counsel” is intended to refer to Sweeney Gallo.
. The court notes that, strangely, Mr. Link’s response appears to have been sent at 2:27 p.m., a time before defendant emailed him, which appears to be 2:31 p.m. (Link 3408 affirmation, exhibit H).
. Even though Mr. Link submits that he, personally, spoke to Mr. Delgado at this conference, and appears to recite a specific statement from Mr. Delgado at that conference, the court is unsure whether Mr. Link did, in fact, personally appear as he insinuates. Mr. Delgado’s letter dated August 20, 2013 which outlined a number of hurdles to the settlement, recounted that counsel appeared on behalf of Mr. Link’s office. Additionally, plaintiff submitted email correspondence from April 18, 2013 (after the Mar. 1st conference) whereby Mr. Delgado introduced himself to Mr. Link, and Mr. Link responded that he was “glad that [they were] finally in contact” (Link 3408 affirmation, exhibit K).
. The amount of $19,468.50 constitutes the total of HAMP trial payments; where as the $33,679.70 constitutes the total amount of payments made for the HAMP trial as well as the second mod.
. According to an Automated City Register Information System (ACRIS) search, MERS assigned a mortgage to Chase on August 13, 2010, which was recorded on September 21, 2010. MERS also assigned a mortgage to Citi on September 8, 2010, which was recorded on September 29, 2010.
. However, during the hearing, Mr. Link stated, without definitively-representing, that he “imaginéis] [Citi] would [recommence], because they have a valid lien, and they’re not getting paid” (tr at 17, lines 17-19).
. Indeed, plaintiff has not submitted a party affidavit, attesting to the accuracy and merits of its claims, in accordance with form B of Administrative Order of the Chief Administrative Judge of the Courts dated March 2, 2011 (AO/431/11); nor the CPLR 2106 attorney affirmation, form A of the same, which, in this case, would be required if/when plaintiff moves for an order of reference.
. However, the court ruled at the hearing plaintiff could submit additional papers for the limited purpose of addressing defendant’s allegation that Mr. Link and/or Sweeney Gallo violated the Rules of Professional Conduct (22 NYCRR 1200.0) rule 4.2 (a), which was raised in defendant’s reply papers (discussed infra). Plaintiff later submitted plaintiffs surreply to defendant’s motion to dismiss with prejudice dated January 22, 2014 (hereinafter Link surreply).
. Plaintiffs CPLR 3408 (h) argument in opposition does not nearly address the premise behind defendant’s argument. Plaintiff seems to jump the initial step of determining whether plaintiffs conduct, as alleged by defendant, constitutes a lack of good faith and, instead, argues that the sanction would be inappropriate, claiming that a “refund” of trial payments “contradicts the legislative intent and express language of the CPLR 3408” (Link opp ¶ 57). Even if this court had established that plaintiffs conduct, as alleged by defendant, constitutes a lack of good faith, plaintiffs argument that subdivision (h) prohibits reimbursement of the trial payments is entirely frivolous and without any support. The Appellate Division, Second Department has specifically held that a court can fashion its own remedies, including monetary sanctions (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9 [2d Dept 2013], citing Deutsche Bank Trust Co. of Am. v Davis, 32 Misc 3d 1210[A], 2011 NY Slip Op 51238[U] [Sup Ct, Kings County 2011]). Thus, CPLR 3408 (h) has not been discussed or cited as a bar to impose monetary remedies for violating rule 3408 (see Meyers, 108 AD3d 9, citing Bank of Am., N.A. v Lucido, 35 Misc 3d 1211 [A], 2012 NY Slip Op 50655[U] [Sup Ct, Suffolk County 2012] [court imposed exemplary damages], revd 114 AD3d 714,
. Plaintiff does not refer to the second mod agreement as a contract. In any event, the second mod, even if it were a contract, does not speak to what
. The Emergency Economic Stabilization Act of 2008 (12 USC §§ 5201-5261) provided the authorization to the Department of Treasury to promulgate HAMP, as discussed by the court in Davis (see Davis, 116 AD3d at 822).
. Wells Fargo Bank, N.A. v Meyers, 30 Misc 3d 697 (Sup Ct, Suffolk County 2010), revd 108 AD3d 9 (2d Dept 2013).
. The court finds that a motion to consolidate would be most appropriate, but neither party has moved for such relief and the court is unable to do that sua sponte (see Tirado v Miller, 75 AD3d 153, 159 [2d Dept 2010], citing Lazich v Vittoria & Parker, 196 AD2d 526, 530 [2d Dept 1993]).
. The court notes that, from the record before it, the first instance evidencing Mr. Link’s alleged “objection” was in an email from Mr. Link to Mr. Delgado dated August 1, 2013 — which is only after the matter was referred for a bad faith hearing (see n 4, supra [“Additionally, the matter was held in the Settlement Conference part over my objection and pursuant to the Kangs County Foreclosure rules which expand the scope of CPLR 3408 to investment properties”]).
. At the hearing in chambers on January 14, 2014, Mr. Link asserted that he would “prefer to have a hearing where [he could] cross-examine witnesses . . . maybe even call the referee to see if her account of what happened in the settlement conference part jives with my account and the documentary evidence that’s been annexed to my bad faith affidavit” (tr at 19, lines 6-13). The court denies this putative request for a further hearing, and notes that the hearing date was agreed upon by all parties and the court approximately two months earlier, which was sufficient time for Mr. Link to have made such requests — not while the hearing is already in progress.
. The same reasoning cannot be applied to the good faith requirement under the Uniform Rules for Trial Courts (22 NYCRR) § 202.12-a (c) (4). The language of that statute states that the entire section only applies to actions “in which the defendant is a resident of the property subject to foreclosure” (Uniform Rules for Trial Cts [22 NYCRR] § 202.12-a [a]). Even though the property is not the borrower’s principal dwelling (RPAPL 1304 [5] [a] [iii]), it is unlikely that defendant could be considered as a “resident” of the property.
. In discussing plaintiffs possible waiver of the CPLR 3408 (f) requirement, the court in HSBC Bank USA v McKenna opined that “[t]here is nothing about the failure to seek an exemption from a conference, or about participation in settlement conference proceedings, that evinces an intent to subject oneself to an enforceable obligation to act in ‘good faith’ where the obligation would not otherwise exist” (37 Misc 3d 885, 898 [Sup Ct, Kings County 2012, Battaglia, J.]). While the point is well-reasoned (but not authoritative), this court clearly finds that such obligation would otherwise exist, if not for the place of the borrower’s primary dwelling, due to the fact that the settlement conferences are otherwise mandated — and were in fact requested in this case.
. The complaint is not verified by plaintiff (see n 2, supra).
. The court notes that only plaintiff submitted email correspondence, but defendant has not objected to the emails, nor claimed that the evidence presented would be misleading without further, follow-up email communications.
. Defendant also argues that the trial payments should be reimbursed as the remedy for plaintiffs failure to negotiate in good faith, which is alleged as follows: (1) plaintiff engaged in settlement conferences, commenced a foreclosure action and is, three years later, unable to substantiate its allegations with evidence in admissible form; and (2) plaintiff represented that, so long as defendant made the trial modification payments, his loan would be modified — even though plaintiff lacked the legal capacity to modify the loan (see defendant’s mem at 16). Defendant’s argument is premised upon one, massive alleged misrepresentation of fact: that plaintiff had the authority to modify defendant’s loan. While misrepresentations of fact may be considered as a factor in failing to negotiate in good faith (see Meyers, 108 AD3d 9;
. Mr. Link’s email on August 1, 2013 appears to be in response to an email from Mr. Delgado on July 5, 2013, discussing the issue, which does not suggest that such response was “promptly made.”
. It is very strange that Chase would do nothing about this issue regarding Citi — as it is possible that Chase would have a significant interest in declaring its priority and/or possibly adding Citi as a necessary, interested party to its own action (see RPAPL 1311).