Issue: Whether Justice Joseph J. Maltese of the Supreme Court of the State of New York, County of Richmond, abused his discretion in vacating a default judgment of foreclosure and sale. Answer: No, he did not.
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Supreme Court of the State of New York Appellate Division:Second Department BRIEF FOR DEFENDANT-RESPONDENT DICK BAILEY SERVICE (212) 608-7666 (718) 522-4363 (516) 222-2470 (914) 682-0848 Fax: (718) 522-4024 1-800-531-2028 Supreme Court, Richmond County, Index No. 102011/07 Appellate Division Case No. 2010-09133 TRIBECA LENDING CORPORATION, Plaintiff-Appellant, -against- ROSEMARY CORREA, Defendant-Respondent, -and- AIDA CORREA, CITY OF NEW YORK PARKING VIOLATIONS BUREAU, MARIA RUBIA and ANTONIO RUBIA, Defendants. TO BE ARGUED BY: NICHOLAS M. MOCCIA, ESQ. TIME REQUESTED: 15 MINUTES LAW OFFICES OF ROBERT E. BROWN, P.C. Attorneys for Defendant-Respondent 44 Wall Street, 12th Floor New York, New York 10005 (212) 766-9779 On the Brief: NICHOLAS M. MOCCIA ROBERT E. BROWN
Transcript
Supreme Court of the State of New York Appellate Division:Second Department
BRIEF FOR DEFENDANT-RESPONDENT
DICK BAILEY SERVICE (212) 608-7666 (718) 522-4363 (516) 222-2470 (914) 682-0848 Fax: (718) 522-4024 1-800-531-2028
Supreme Court, Richmond County, Index No. 102011/07
Appellate Division Case No.
2010-09133
TRIBECA LENDING CORPORATION, Plaintiff-Appellant,
-against-
ROSEMARY CORREA, Defendant-Respondent,
-and-
AIDA CORREA, CITY OF NEW YORK PARKING VIOLATIONS BUREAU, MARIA RUBIA and ANTONIO RUBIA,
Defendants.
TO BE ARGUED BY: NICHOLAS M. MOCCIA, ESQ. TIME REQUESTED: 15 MINUTES
LAW OFFICES OF ROBERT E. BROWN, P.C. Attorneys for Defendant-Respondent 44 Wall Street, 12th Floor New York, New York 10005 (212) 766-9779
On the Brief: NICHOLAS M. MOCCIA ROBERT E. BROWN
i
TABLE OF CONTENTS Page
COUNTER-STATEMENT OF THE QUESTION PRESENTED............................1 ARGUMENT .............................................................................................................3
I. JUSTICE MALTESE DID NOT ABUSE HIS DISCRETION, UNDER THE TOTALITY OF THE CIRCUMSTANCES AND IN THE FURTHERANCE OF JUSTICE, IN DETERMINING THAT THE DEFENDANT-RESPONDENT HAS AN “EXCUSABLE DEFAULT” FOR THE PURPOSE OF VACATING THE PLAINTIFF-APPELLANT’S JUDGMENT OF FORECLOSURE...............3 A. Plaintiff-Appellant misconstrues what constitutes an “excusable
default” within the meaning of CPLR 5015(a)(1)......................................3
i. Standard of Review.............................................................................4 ii. Justice Maltese did not abuse his discretion in finding that the
Defendant-Respondent had an “excusable default” within the meaning of CPLR 5015(a)(1) notwithstanding his finding that the Defendant-Respondent was personally served pursuant to CPLR 308(1).......................................................................................5
iii. Justice Maltese did not abuse his discretion in basing his finding of an excusable default on post-judgment events ..................7
iv. Justice Maltese did not abuse his discretion in finding that improper or ineffective counsel in the residential foreclosure context constitutes an excusable default within the meaning of 5015(a)(1) .........................................................................................10
B. Plaintiff-Appellant disregards the trial court’s inherent power to
grant relief from its own judgment for reasons not enumerated in CPLR 5015(a)...........................................................................................14
II. JUSTICE MALTESE DID NOT ABUSE HIS DISCRETION IN
DETERMINING THAT THE DEFENDANT-RESPONDENT HAD A MERITORIOUS DEFENSE FOR THE PURPOSE OF CPLR 5015(a) ...........................................................................................................16
I. Did the Honorable Joseph J. Maltese, J.S.C., (“Justice Maltese”) abuse his
discretion, under the totality of the circumstances and in the furtherance of
justice, in determining that Defendant-Respondent had an “excusable
default” within the meaning of CPLR 5015(a)(1) and in light of the inherent,
non-statutory power courts have to relieve parties of judgments entered on a
default? Answer: No. Justice Maltese did not abuse his discretion, under
the totality of the circumstances and in the furtherance of justice, in
determining that the Defendant-Respondent had an “excusable default”
within the meaning of CPLR 5015(a)(1). Moreover, the trial court in any
case has the inherent, non-statutory power to relieve the Defendant-
Respondent of the judgment of foreclosure entered on default even in the
absence of any specific grounds set forth in CPLR 5015(a)(1) since the
statute merely codifies some principal grounds and is not exhaustive of the
court’s power.
II. Did Justice Maltese abuse his discretion in determining that the Defendant-
Respondent made a prima facie showing that it had meritorious defenses
warranting a vacatur of the Plaintiff-Appellant’s judgment of foreclosure?
Answer: No. Justice Maltese did not abuse his discretion in finding a
meritorious defense even in the absence of “admissible evidence”, since a
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lesser showing, namely a prima facie showing, is sufficient to satisfy the
“meritorious defense” requirement of CPLR 5015(a)(1).
3
ARGUMENT
I. JUSTICE MALTESE DID NOT ABUSE HIS DISCRETION, UNDER THE TOTALITY OF THE CIRCUMSTANCES AND IN THE FURTHERANCE OF JUSTICE, IN DETERMINING THAT THE DEFENDANT-RESPONDENT HAS AN “EXCUSABLE DEFAULT” FOR THE PURPOSE OF VACATING THE PLAINTIFF-APPELLANT’S JUDGMENT OF FORECLOSURE
A. Plaintiff-Appellant misconstrues what constitutes an “excusable
default” within the meaning of CPLR 5015(a)(1)
CPLR 5015(a)(1) states in pertinent part:
(a) On motion. The court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person with such notice as the court may direct, upon the ground of:
1. excusable default, if such motion is made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party, or, if the moving party has entered the judgment or order, within one year after such entry;
The Plaintiff-Appellant misconstrues the application of CPLR 5015(a) in the
following manner:
1. that the trial court can “err” with regard to matters of judicial
discretion such as a finding of an excusable default or a meritorious
defense for the purposes of vacating a default judgment pursuant to
CPLR 5015(a);
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2. that it is an abuse of discretion for the trial court to make a finding of
an excusable default where the Defendant-Respondent was personally
served pursuant to 308(1);
3. that it is an abuse of discretion for the trial court to base its finding of
an excusable default on post-judgment of foreclosure events;
4. that it is an abuse of discretion for the trial court to base its finding of
an excusable default on repeated instances of ineffective and improper
legal counseling in the residential foreclosure context when such
instances are reflected in the record and based on the trial court’s
findings of fact rather than the “mere allegations” of the Defendant-
Respondent.
i. Standard of Review
It is worth highlighting that the Plaintiff-Appellant misconstrues the standard
of review upon which this appeal ought to be based. The Plaintiff-Appellant
repeatedly—and inappropriately—poses the question presented as whether the trial
court “erred in its determination”. The standard of review is an “abuse of
discretion” standard, since a motion to be relieved of a default in answering is
addressed to the sound discretion of the court, and so discussion as to whether the
trial court “erred” is misplaced. Moreover, the exercise of such discretion
5
generally should not be disturbed if there is support in the record therefor. See
Mondrone v Lakeview Auto Sales & Serv., 170 A.D.2d 586 (2d Dep’t 1991); see
also Gleissner v. Singh, 264 A.D.2d 811 (2d Dep’t 1999).
ii. Justice Maltese did not abuse his discretion in finding that the
Defendant-Respondent had an “excusable default” within the meaning of CPLR 5015(a)(1) notwithstanding his finding that the Defendant-Respondent was personally served pursuant to CPLR 308(1)
In the first instance, the Plaintiff-Appellant seems to suggest that the because
Justice Maltese held that the Defendant-Respondent was served pursuant to CPLR
308(1), and because the Defendant-Respondent’s first attempt to appear was after
the Judgment of Foreclosure was rendered, Justice abused his discretion in finding
that the Defendant-Respondent had an “excusable default” within the meaning of
CPLR 5015(a). See Brief for Plaintiff-Appellant at pp. 17-18. The Appellant-
Plaintiff cites no authority for the proposition that it is an abuse of discretion for a
trial court to find an excusable default where there is a finding of service pursuant
to CPLR 308(1) because no such authority exists.
The Plaintiff-Appellant’s contention that service pursuant to CPLR 308(1)
precludes the possibility of an excusable default is clearly belied by the statutory
scheme set in place by the CPLR for vacating default judgments. A litigant may
seek to vacate a default judgment pursuant to CPLR 317 “upon a finding of the
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court that he did not personally receive notice of the summons in time to defend
and has a meritorious defense.” Accordingly, a lesser showing is required for a
vacatur pursuant to CPLR 317, because of the litigant’s failure to “personally
receive notice of the summons”—i.e. failure to be personally served pursuant to
CPLR 308(1). See Larman v Russel, 240 A.D.2d 473 (2d Dep’t 1997) (Appellants
were entitled, under CPLR 317, to vacatur of their default where they proved that
they were not personally served pursuant to CPLR 308(1) and that they had a
meritorious defense). Where, in contrast, a litigant is personally served pursuant to
CPLR 308(1), a litigant cannot rely of CPLR 317 for a vacatur of a default
judgment, but instead must resort to CPLR 5015(a), which requires an additional
showing as, for instance, an “excusable default” in the case of CPLR 5015(a)(1).
Nevertheless, CPLR 5015(a)(1) is available to any litigant who demonstrates an
excusable default and a meritorious defendant regardless of the means of service.
fact that the Perellie case does not pertain to a foreclosure action, it is noteworthy
that there is no discussion whatsoever of an “excusable default” being limited to a
“reasonable excuse for a default in appearance prior to entry of judgment”. In
Perellie, this Court noted that the Defendants “failed to offer any excuse” and,
moreover, did not have a meritorious defense. Instead, this Court notes:
The determination of what constitutes a reasonable excuse for a default “lies within the sound discretion of the trial court” (De Vito v. Marine Midland Bank, 100 AD2d 530, 531; Vernon v. Nassau County Med. Center, 102 AD2d 852; CPLR 2005, 3012 [d]).
See Perellie, 108 A.D.2d at 904. No qualification as to the substance of a
reasonable excuse is made, nor is any procedural benchmark set as to when the
events constituting the reasonable excuse must take place. Contrary to the
Plaintiff-Appellant’s contention that the “reasonable excuse” must pertain to pre-
judgment events or activity, there is wide-spread authority that courts do indeed
consider post-judgment events or activity. For instance, in Bekker v. Fleischman,
35 A.D.3d 334, 825 N.Y.S.2d 270 (2d Dep’t 2006), this Court not only noted that
the defendant failed to submit any excuse for his failure to respond to the
plaintiff’s motion for a default judgment, which pertains to activity prior to the
entry of a judgment, but this Court also took into consideration the defendant’s
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“lengthy delay in moving to vacate the order granting the plaintiff’s motion”,
which pertains to activity (or inactivity, as the case may be) subsequent to the
rendering of a judgment. See also the more recently decided Alterbaum v.
2011), which also takes into consideration the lengthy delay between the granting
of a default judgment and the defendant’s motion to vacate. In these cases, the
events contemplated include post-judgment events, not exclusively pre-judgment
events.
Accordingly, Justice Maltese did not abuse his discretion by considering
post-judgment events in order to make a finding of an excusable default pursuant
to CPLR 5015(a)(1), and the Plaintiff-Appellant can cite no authority indicating
that such would be an abuse of discretion. It is, however, an abuse of discretion
for a court to vacate pursuant to CPLR 5015(a)(1) where no excuse or meritorious
defense is offered by the litigant. In the instant matter, this is clearly not the case.
Whether there is a reasonable excuse for a default is a discretionary, sui generis
determination to be made by the court based on all relevant factors, including the
extent of the delay, whether there has been prejudice to the opposing party,
whether there has been willfulness, and the strong public policy in favor of
resolving cases on the merits. See Harcztark v. Drive Variety, Inc. 21 A.D.3d
876, 877, 2005 N.Y. Slip Op. 06584 (2d Dep’t 2005); see also Orwell Bldg. Corp.
10
v Bessaha, 5 A.D.3d 573 (2d Dep’t 2004). These are the very factors that Justice
Maltese took into consideration in rendering his decision to vacate the judgment
of foreclosure and sale here at issue.
iv. Justice Maltese did not abuse his discretion in finding that improper
or ineffective counsel in the residential foreclosure context constitutes an excusable default within the meaning of 5015(a)(1)
The basis for the trial court’s vacatur of the Plaintiff-Appellant’s default
judgment is, in part, a finding that “Rosemary Correa was not properly counseled
to her detriment.” See R. at 13. Justice Maltese’s finding is not based on “bare
allegations”, but finds ample support in the record. Justice Maltese acknowledges
that “while bare allegations of incompetence on the part of prior counsel are
insufficient to establish an excusable default under CPLR 5015(a), the record
supports a finding that the Defendant was ineffectively served by counsel.” See
R. at 13-14.
Firstly, counsel for Plaintiff-Appellant falsely asserts that the Defendant-
Respondent intentionally defaulted in appearing in the foreclosure action for two
(2) years. See Plaintiff-Appellant’s brief at p. 21. Plaintiff-Appellant claims that
the Defendant-Respondent was personally served the summons and complaint on
June 13, 2007. The Defendant-Respondent first appeared on March 17, 2008,
when Craig A. Fine, Esq., filed an Emergency Order to Show Cause to stay the
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Plaintiff-Appellant’s first foreclosure sale scheduled for March 18, 2008. See R.
at 180-187. Accordingly, only ten (10) months had elapsed from the date of
service of the summons and complaint to the Defendant-Respondent’s first
appearance. In what appears to be an outrageous display of gamesmanship,
counsel for the Plaintiff-Appellant apparently starts to measure the time for
appearing from the date of the Defendant-Respondent’s purported default in
payment of the mortgage, not from the date of service of the summons and
complaint on June 13, 2007.
On March 17, 2008, Craig A. Fine, Esq., filed an Emergency Order to
Show Cause to stay the Plaintiff-Appellant’s first foreclosure sale scheduled for
March 18, 2008. See R. at 180-187. The purpose of this Emergency Order to
Show Cause was to give the Defendant-Respondent an opportunity to refinance
the mortgage here at issue with a new mortgage approved by HCI Mortgage. See
R. at 186. It is noteworthy that Mr. Fine neglected—to the Defendant-
Respondent’s detriment—to pray for a vacatur of the default judgment and an
opportunity to serve an answer/counterclaim on the Plaintiff-Appellant. In this
regard, Justice Maltese opines as follows:
But [Craig A. Fine, Esq.] took no steps to file an answer or interpose any defense on her behalf. While it is not specifically argued by the defendant, it is clear from the record that Rosemary Correa was not properly counseled to her detriment.
12
(Emphasis supplied); see R at 13. Plaintiff-Appellant speculates, without any
basis in the record, that Mr. Fine neglected to ask for these additional items of
relief because doing so would be frivolous and sanctionable. See Plaintiff-
Appellant’s Brief at 33. It is noteworthy that Mr. Fine inexplicably withdrew the
Emergency Order to Show Cause two months later on May 14, 2008 (see R. at
188), notwithstanding the fact that Mr. Fine failed to assist the Defendant-
Respondent in refinancing her mortgage, or otherwise find a satisfactory exit
strategy for the Defendant-Respondent to the foreclosure action. Indeed, Mr. Fine
undertook the representation of the Defendant-Respondent for a mere two
months, from March 14, 2008, to May 14, 2008, and did not bother to make an
application to be relieved as counsel after he withdrew the Emergency Order to
Show Cause. He just stopped actively representing the Defendant-Respondent
after May 14, 2008.
Rather than speculate about what Justice Maltese might have found
regarding the motivations of Mr. Fine, the more appropriate question is whether
Justice Maltese, in finding that Mr. Fine inadequately counseled the Defendant-
Respondent, abused his discretion by finding an excusable default on that basis.
Again, his finding is not based on “bare allegations”, but is grounded in
documentary evidence contained in the record as well as findings of fact made by
Justice Maltese after having dealt with Mr. Fine directly and observing the course
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of action (or lack thereof) that he took on behalf of the Defendant-Respondent.
See R. at 13-14.
Next, the Plaintiff-Appellant argues that Justice Maltese “misconstrued the
law” by finding that the Defendant-Respondent’s reliance on a non-attorney,
acting as an attorney before the Court, constituted a reasonable excuse for a
default. The Plaintiff-Appellant troublingly asserts without authority:
The law provides that defendants may act pro-se and may seek the assistance of attorneys and non-attorneys in doing so. There is nothing fundamentally wrong with that unless the IAS Court [sic]1 found that a non-attorney was acting before the court as an attorney. It did not make such a determination.
See Plaintiff-Appellant’s Brief at 36-37.
To the contrary, Justice Maltese did in fact make such a determination. He
noted that a licensed realtor, Herricson Torres, assisted the Defendant-Respondent
in preparing the second Order to Show Cause, filed February 9, 2009. See R. at
164-174. In this regard Justice Maltese in the strongest of terms held that “Mr.
Torres’ actions are the very definition of the unauthorized practice of law.” See R.
at 14 (Emphasis supplied).
Again the question arises, did Justice Maltese abuse his discretion under the
totality of the circumstances and in the interest of justice in finding that the
1 The Plaintiff-Appellant repeatedly refers to the trial court as an IAS Court. The Supreme Court, Richmond County, does not participate in the IAS system, but refers to its trial and motion parts as “DCM Parts”.
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Defendant-Respondent’s reliance on Torres’ “expertise” contributed, in part, to a
finding of an excusable default. The answer to that question is necessarily “no”.
Justice Maltese did not abuse his discretion, especially when one considers this
particular incident from the context of a larger, macro perspective. Specifically,
Justice Maltese cites “the rampant economic opportunism of a growing industry
that preys on those least able to support it.” See R. at 14. Early in his decision,
Justice Maltese observes:
While the public only begins to learn of the causes of the current rampant foreclosure filings, the courts have already begun to see a cadre of unscrupulous individuals promising foreclosure cure-alls that prey upon those already approaching an economic rock bottom.
See R at 12.
Accordingly, based on the totality of the circumstance and in the interest of
justice, Justice Maltese did not abuse his discretion in finding that Defendant-
Respondent’s ill-advised dealing with Herricson Torres—whose actions are the
very definition of the unauthorized practice of law—contributed to an excusable
default.
B. Plaintiff-Appellant disregards the trial court’s inherent power to grant relief from its own judgment for reasons not enumerated in CPLR 5015(a)
It is well-settled that a trial court possesses statutory and inherent power to
grant relief from its own judgment. See Woodson v. Mendon Leasing Corp., 100
N.Y.2d 62, 68, 790 N.E.2d 1156, 1160, 760 N.Y.S.2d 727, 731 (2003); see also the
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often cited Ladd v. Stevenson, 112 N.Y. 325, 332, 19 N.E. 842 (1889). In
Woodson, the Court of Appeal opines as follows:
Under CPLR 5015(a), a court is empowered to vacate a default judgment for several reasons, including excusable neglect; newly-discovered evidence; fraud, misrepresentation or other misconduct by an adverse party; lack of jurisdiction; or upon the reversal, modification or vacatur of a prior order. These categories represent a codification of the principal grounds upon which courts have traditionally vacated default judgments as part of their “inherent discretionary power” (see Siegel, PRACTICE COMMENTARIES, MCKINNEY'S CONS. LAWS OF N.Y., Book 7B, CPLR C5015:11, at 476 [1992]). It thus follows that section 5015(a) does not provide an exhaustive list as to when a default judgment may be vacated. Indeed, the drafters of that provision intended that courts retain and exercise their inherent discretionary power in situations that warranted vacatur but which the drafters could not easily foresee (see id.; 3d PRELIMINARY REPORT OF ADVISORY COMM. ON PRACTICE AND PROCEDURE, 1959 N.Y. Legis Doc. No. 17, at 204);
See Woodson, 100 N.Y.2d at 68; (Emphasis supplied).
It is clear that the enumerated grounds in CPLR 5015(a) are not intended to
be comprehensive or exclusive since a trial court possesses inherent, discretionary
power to vacate its own judgment for sufficient reason and in the interests of
substantial justice. The provisions of the CPLR were not intended in any way to
limit this inherent power. Delagi v. Delagi, 34 A.D.2d 1005, 313 N.Y.S.2d 265
(2d Dept’ 1970).
In Delagi, this Court holds with reference to CPLR 5015(a) as follows:
16
The inherent power of the court to relieve a party from the operation of a judgment in the interests of substantial justice has been continually recognized in this State over the past hundred years and the provisions of the CPLR were not intended in any way to limit this power. ‘In all these cases, rules and precedents are of little value as guides to the exercise of judicial discretion. * * * exceptional cases continually arise in which the development of truth and the promotion of substantial justice will furnish sufficient ground for granting new trials, although they do not come within any former precedent, and consequently not within the operation of any principle or rule established for the guidance of the court, in the exercise of its discretion’.
Delagi v. Delagi, 34 A.D.2d at 1007; (Citations omitted)(Emphasis supplied).
Not surprisingly, the Plaintiff-Appellant conveniently ignores the trial
court’s inherent power to vacate its own judgments. Nevertheless, the trial court is
justified in exercising its inherent power in the instant matter in light of the
rampant economic opportunism that the trial court has directly observed in the
residential foreclosure context. Indeed, Justice Maltese makes reference to this at
length in his Decision and Order.
II. JUSTICE MALTESE DID NOT ABUSE HIS DISCRETION IN
DETERMINING THAT THE DEFENDANT-RESPONDENT HAD A MERITORIOUS DEFENSE FOR THE PURPOSE OF CPLR 5015(a)
Again, the Plaintiff-Appellant ignores the appropriate standard of review by
arguing that Justice Maltese “erred” in his determination that the Defendant-
Respondent proffered a meritorious defense sufficient to satisfy the requirements
17
of CPLR 5015(a). The standard or review, as noted above, for the purposes of this
appeal is “abuse of discretion”, not error in determination. While the Plaintiff-
Appellant correctly observes that a determination of what constitutes a reasonable
excuse and meritorious defense is within the sound discretion of the court (Anamdi
v. Anugo, 229 A.D. 408, 644 N.Y.2d 804 (2d Dep’t 1996)), the Plaintiff-Appellant
inappositely argues that the meritorious defense proffered by the Defendant-
Respondent was “inadmissible hearsay”, and therefore insufficient to meet the
threshold to establish that the Defendant-Respondent had a meritorious defense.
Accordingly, the Plaintiff-Appellant contends, without authority, that Justice
Maltese “erred” in his determination by basing his finding of a meritorious defense
on “inadmissible hearsay”.
In order to satisfy the meritorious defense requirement of CPLR 5015(a), a
litigant need not satisfy the rules of evidence concerning admissibility used at trial,
or satisfy any burden of proof. See Anamdi v. Anugo, 229 A.D.2d 408, 409 (2d
Dep’t 1996). Indeed, the litigant need not prove anything; rather, it is sufficient for
a litigant to set forth facts sufficient to establish that such a claim is meritorious—
i.e. to make a prima facie showing. See id. at 409. Accordingly, any discussion of
“inadmissible hearsay” is misplaced and irrelevant.
In the instant matter, Justice Maltese cites but one of many meritorious
defenses asserted by Defendant-Respondent. See R. at 15. In addition to
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violations of the New York State Banking Law §6, the Defendant-Respondent also
alleges facts sufficient to establish the following meritorious defenses: (a) lack of
standing and capacity (see Affirmation of Robert Brown at R. 233-234, ¶14-17);
(b) defective notice of sale (see Affirmation of Robert Brown at R. 235, ¶18); and
(c) Plaintiff waived its acceleration of the mortgage debt by accepting payment
from the Defendant-Respondent after the foreclosure action was commenced (see
Affirmation of Robert Brown at R. 237, ¶22-23; see also Affidavit of Rosemary
Correa at R. 241, ¶8).
Accordingly, the Plaintiff-Appellant cannot reasonably argue that Justice
Maltese abused his discretion in making a finding that the Defendant-Respondent
had a meritorious defense. The meritorious defense grounded in the Plaintiff-
Appellant’s violation of New York Bank Law §6 cited by Justice Maltese is but
one of many meritorious defenses asserted by the Defendant-Respondent. Thus, he
did not abuse his discretion in making a finding of a meritorious defense,
notwithstanding the Plaintiff-Appellant’s insistence that Defendant-Respondent
meet a burden of proof appropriate for trial, rather than a motion to vacate a default
judgment.
CONCLUSION
The Plaintiff-Appellant repeatedly and incorrectly asserts that Justice
Maltese “erred in determining” that the Defendant-Respondent had an excusable
19
default and a meritorious defense for the purpose of CPLR 5015(a)(1). The
standard of review is “abuse of discretion”, and based on the foregoing it is clear
that Justice Maltese did not abuse his discretion in finding an excusable default and
a meritorious defense when considered under the totality of the circumstances and
in the interest of justice. Moreover, the trial court in any case has the inherent
power to vacate its own judgments in appropriate circumstances.
The Plaintiff-Appellant, Tribeca Lending Corporation, repeatedly bewails
how it has been “incredibly prejudiced” by the trial court’s “improvident exercise
of discretion” and the “dilatory” tactics of the Defendant-Respondent; however, the
Plaintiff-Appellant cannot truly show any prejudice beyond being delayed in
recovering the amount it claims to be owed. In the meantime, interest, at a rate of
12.99% (see Affidavit of Debt, R. at 86; see also Affidavit of Rosemary Correa, R.
at 240), is still accruing on the principal, additional interest is being charged on
arrearages, outlays for property tax and insurance and other costs are being
recapitalized into the principal balance—all, ultimately, at the expense of the
Defendant-Respondent, not the Plaintiff-Appellant.
It is also worth noting that the Defendant-Respondent has owned the
premises, from which the foreclosure action arises, for almost 20 years. She is not
a real estate speculator, who was unable to “flip” her latest investment property
because the real estate bubble burst; rather, she met with economic hardship due to
20
the economic downturn. See Hardship Letter of Rosemary Correa, R. at 172. The
Defendant-Respondent shares her home, with her mother, a 72 year old woman, a
47 year old mentally challenged adult, her husband and three daughters. R. at 172.
It is evident that the Defendant-Respondent has made numerous attempts to save
her home by way of refinance and loan modification, but has been misled by ill-
intentioned individuals. R. at 172. Again, the Defendant-Respondent will
ultimately be responsible for the debt claimed by the Plaintiff-Appellant—a debt
with interest that is still accruing at an exorbitant rate of 12.99%. Accordingly, the
prejudice that will be suffered by the Defendant-Respondent is substantial in the
event she loses her home without ever having an opportunity to defend the
foreclosure—especially, in light of the public policy which favors the resolution of
cases on the merits. See Harris v. City of New York, 30 A.D.3d 461, 817 N.Y.S.2d
99 (2d Dep’t 2006).
While the Plaintiff-Appellant is to a certain extent correct that “obligations
must not be undermined by judicial sympathy” (see the oft-cited Graf v. Hope
Building, 254 N.Y. 1, 4, 171 N.E. 884, (1930)), there is also a strong public policy
to keep homeowners in their homes to the extent that this is possible. Indeed, it is
ironic that the Plaintiff-Appellant should cite Graf v. Hope Building in support of
its position, since this case is most famous not so much for the majority’s opinion
21
(which is admittedly still good law), but for the dissent of Justice Cardozo wherein
he opines in relevant part:
There is no undeviating principle that equity shall enforce the covenants of a mortgage, unmoved by an appeal ad misericordiam, however urgent or affecting. The development of the jurisdiction of the chancery is lined with historic monuments that point another course. Equity declines to treat a mortgage upon realty as a conveyance subject to a condition, but views it as a lien irrespective of its form. Trimm v. Marsh, 54 N. Y. 599, 13 Am. Rep. 623. Equity declines to give effect to a covenant, however formal, whereby in the making of a mortgage, the mortgagor abjures and surrenders the privilege of redemption. Mooney v. Byrne, 163 N. Y. 86, 93, 57 N. E. 163. Equity declines in the same spirit, to give effect to a covenant, improvident in its terms, for the sale of an inheritance, but compels the buyer to exhibit an involuntary charity if he is found to have taken advantage of the necessities of the seller. Pomeroy, Eq. Jur. vol. 2, § 953. Equity declines to give effect to a covenant for liquidated damages if it is so unconscionable in amount as to be equivalent in its substance to a provision for a penalty. Kothe v. R. C. Taylor Trust, 280 U. S. 224, 50 S. Ct. 142, 74 L. Ed. 382. One could give many illustrations of the traditional and unchallenged exercise of a like dispensing power. It runs through the whole rubric of accident and mistake. Equity follows the law, but not slavishly nor always. Hedges v. Dixon County, 150 U. S. 182, 192, 14 S. Ct. 71, 37 L. Ed. 1044. If it did, there could never be occasion for the enforcement of equitable doctrine. 13 Halsbury, Laws of England, p. 68.
See Graf v. Hope Bldg. Corp. 254 N.Y. at 8 (1930). The spirit of Justice
Cardozo’s Depression Era dissent is strongly reflected in contemporary policy, and
is concretely manifested in the tremendous resources that the State of New York
has invested in the mandatory foreclosure settlement conferences and in providing
22
free legal services for those facing foreclosure who cannot afford attorneys.2
Justice Arthur M. Schack of Kings County has offered a succinct, contemporary
iteration of this policy concern as follows:
If you are going to take away someone’s house, everything should be legal and correct … I don’t want to put a family on the street unless it’s legitimate.
See Michael Powell, “A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style,”
New York Times (August 30, 2009). Clearly, this policy concern is grounded not
merely on some warm and fuzzy sentimentality for “unsophisticated” homeowners,
but has immense practical import, both for the individual homeowner and for the
community. Moreover, judicial cognizance of such policy concerns is a proper
object of consideration in the exercise of judicial discretion—all the more so when,
as here, the trial court is sitting in equity.
In addition to the rightful concern of the equities of the individual case and
the judicial preference for resolving a case on the merits, it is common knowledge
that home vacancies due to foreclosures are having a destabilizing effect on
communities. Spill-over effects include increased inventories of abandoned or
vacant properties, demolitions, building code violations, prolonged situations of
2 See R. at 14, n. 8, in Justice Maltese’s Decision and Order wherein he references hearings held by Chief Judge Lippman regarding the availability of aid to provide civil legal services for those facing foreclosure.
lawns, accumulated debris) and additional policing in neighborhoods with vacant
homes.
Accordingly, Justice Maltese’s decision is not the idiosyncratic product of
judicial activism, but is reminiscent of the policy concern that finds one of its
earliest and most famous articulations in the Cardozo dissent in Graf. The trial
courts are vested with the discretion to, inter alia, vacate their own judgments so
that the trial courts have the flexibility to consider such policy concerns in a
manner that would not otherwise be possible if they were, in every instance,
limited by the mechanical severity of a checklist of bright line rules.
Accordingly, the Defendant-Respondent respectfully requests, in the interest
of justice, that this Court affirm the Decision and Order of the trial court signed by
the Honorable Joseph J. Maltese, J.S.C., on August 3, 2010, as a proper exercise of
judicial discretion.
Dated: New York, New York June 3, 2011. Law Offices of Robert E. Brown, P.C. By: Nicholas M. Moccia 44 Wall Street, 12th Floor New York, New York 10005 (212) 766-9779
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