Opinion
159616/14
07-15-2015
Mary Margaret Butler, Plaintiff v. US Bank National Association as Legal Trustee for TRUMAN 2013 SC4 TITLE TRUST, Defendants
For the Plaintiff: Rubin Jay Ginsberg, Esq. Levin & Glasser, P.C. 420 Lexington Avenue Suite 2818 New York, N.Y. 10170 212-867-3636 For the Defendant: John J. Ricciardi, Esq. Gross Polowy, LLC 900 Merchants Concourse Suite 412 Westbury, N.Y. 11590 716-204-1700
For the Plaintiff:
Rubin Jay Ginsberg, Esq.
Levin & Glasser, P.C.
420 Lexington Avenue
Suite 2818
New York, N.Y. 10170
212-867-3636
For the Defendant:
John J. Ricciardi, Esq.
Gross Polowy, LLC
900 Merchants Concourse
Suite 412
Westbury, N.Y. 11590
716-204-1700
Nancy M. Bannon, J.
In this action for permanent injunctive relief, the plaintiff moves, pursuant to CPLR 6301 and 6311, for a preliminary injunction staying the prosecution of a holdover proceeding pending in the Civil Court, New York County, pending final adjudication of the plaintiff's claims in this action. This Court granted the plaintiff's application for a temporary restraining order, staying the Civil Court proceeding pending the hearing and determination of the instant motion. For the reasons set forth below, the plaintiff's motion is granted.
The plaintiff is the proprietary lessee and sole shareholder of a cooperative apartment located at 52 West 74th Street, Apt. 6, New York, NY 10023 (the "apartment") for 15 years prior to the commencement of this action. As borrower, the plaintiff executed a note and security agreement in the amount of $735,000, naming non-party Wells Fargo Bank, N.A. ("Wells Fargo") as lender and pledged her stock and proprietary lease as security for the note. Wells Fargo assigned the note to the defendant on March 26, 2014, prior to the non-judicial foreclosure of the apartment on April 16, 2014, wherein the defendant was the highest bidder at the sale. The defendant thereafter commenced a holdover proceeding seeking possession of the apartment, entitled U.S. Bank, N.A., as Legal Trustee for Truman 2013 SC4 Title Trust v Butler, Index No. 69418/2014, in the Civil Court, New York County in June 2014. The plaintiff commenced this action (1) to stay the holdover proceeding and (2) reinstate the note and compel the defendant to accept payment from the plaintiff of all non-accelerated sums in arrears on the note. The plaintiff now moves for an order staying the holdover proceeding and enjoining the defendant from taking any other action to cause the cancellation of the plaintiff's proprietary lease or shares on the grounds that the defendant failed to comply with all statutory notice requirements prior to the non-judicial foreclosure. The defendant, noting the amount of non-accelerated sums in arrears is $145,980.57, opposes the motion on the grounds that it complied with all notice requirements under Uniform Commercial Code ("UCC") § 9-611 and requests that the plaintiff be required to post an undertaking prior to the granting of any preliminary injunction pursuant to CPLR 6312(b).
II. Discussion
The applicable law is well settled. A party is entitled to a preliminary injunction upon a showing of (1) likelihood of success on the merits, (2) irreparable injury absent the granting of preliminary injunctive relief, and (3) a balancing of the equities in the movant's favor. See Nobu Next Door, LLC v Fine Arts Housing, Inc., 4 NY3d 839 (2005); Coinmach Corp. v Alley Pond Owners Corp., 25 AD3d 642 (2nd Dept. 2006). "The purpose of a preliminary injunction is to maintain the status quo and prevent the dissipation of property that could render a judgment ineffectual." Ying Fung Moy v Hohi Umeki, 10 AD3d at 604 (2nd Dept. 2004); see Trump on the Ocean, LLC v Ash, 81 AD3d 713 (2nd Dept. 2011); lv app dism, 17 NY3d 875 (2011); Masjid Usman, Inc. v Beech 140, LLC, 68 AD3d 942 (2nd Dept. 2009). Here, the plaintiff has made the requisite showing for a preliminary injunction.
UCC article 9, part 6, governs non-judicial foreclosures on cooperative apartment loans. See UCC § 9-601, et seq.; LI Equity Network, LLC v Village in the Woods Owners Corp., 79 AD3d 26 (2nd Dept. 2010). According to UCC § 9-611(f), where a loan is secured by a residential cooperative interest, a secured party must send to the debtor at least 90 days prior to the auction of the cooperative interest a pre-disposition notice, designed to protect the homeowner, inform them of the default, and warn them that they could be in danger of losing their home. The notice must adhere to certain typeface requirements and contain specific information regarding the resources available to assist the debtor in curing the default. See UCC § 9-611(f). For the same purpose of providing protection to homeowners prior to a foreclosure, judicial foreclosures under the RPAPL similarly require a 90-day notice (see RPAPL § 1304), which is well settled to be a condition precedent to the commencement of a judicial foreclosure action. See Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909 (2nd Dept. 2013); Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95 (2nd Dept. 2011). As "[s]imilar statutes enacted for the purpose of avoiding similar evils and affording similar remedies should have uniformity of application and of construction" (Matthews v Matthews, 240 NY 28 [1925]), this reasoning applies with equal force to the 90-day notice requirement of UCC § 9-611(f). Indeed, it has been held that compliance with the 90-day notice requirement of UCC § 9- 611(f) is a condition precedent to a non-judicial foreclosure of a cooperative apartment. See Waithe v Citigroup, Inc., 42 Misc 3d 1205(A) (Sup Ct Kings Co., 2013); Millien v Citigroup Inc., 37 Misc 3d 1229(A) (Sup Ct Kings Co., 2013); Stern-Obstfeld v Bank of America, 30 Misc 3d 901 (Sup Ct NY Co., 2011). Accordingly, the defendant here was required to comply with the notice requirement of UCC § 9-611(f) prior to proceeding with the non-judicial foreclosure of the plaintiff's shares and proprietary lease. However, the defendant failed to establish any such compliance.
While the plaintiff does not dispute that she was in default under the security agreement and note, she maintains that the defendant failed to comply with the notice requirements of UCC § 9-611 and, thus, the non-judicial foreclosure and sale of the apartment is invalid. In opposition, the defendant submits only copies of a demand letter, notice of sale and affidavit of service, and proof of publication, contending that these documents show compliance with the statutory notice requirements. However, the demand letter, dated March 13, 2014, does not contain the language or typeface required by UCC § 9-611(f) and was dated only 34 days before the scheduled auction on April 16, 2014. According to the affidavit of service, the undated notice of sale was served on the plaintiff by first class mail on the same day as the scheduled auction. Further, the notice of auction published in the New York Law Journal on three successive weeks in June 2013, advertised the sale as being scheduled for July 2, 2013, nearly one year before the sale. Thus, the defendant, in its opposition, fails to show its compliance with the 90-day notice required by UCC § 9-611(f), a condition precedent to the non-judicial foreclosure of the cooperative apartment. See Waithe v Citigroup, Inc., supra; Millien v Citigroup Inc., supra; Stern-Obstfeld v Bank of America, supra; see also Aurora Loan Servs., LLC v Weisblum, supra. Although in its sur-reply, the defendant submits a copy of a 90-day notice containing the language required by UCC § 9-611(f), the notice is dated February 13, 2011, over three years prior to the foreclosure and sale. Moreover, the defendant does not submit any proof establishing that the plaintiff was ever served with that notice. In this regard, the court notes that, while the parties agreed to the submission of sur-reply papers on this motion, no agreement was made to accept further proof in reply and, indeed, reliance upon evidence submitted for the first tme in reply is generally prohibited. See Marcum, LLP v Silva, 117 AD3d 919 (2nd Dept. 2014); L'Aquila Realty, LLC v Jalyng Food Corp., 103 AD3d 692 (2nd Dept. 2013).
The proof submitted by the defendant is thus insufficient to serve as a predicate for the non-judicial foreclosure of the subject apartment. Furthermore, as non-compliance with RPAPL § 1304 "cannot be deemed a minor irregularity which can be overlooked" (Aurora Loan Servs., LLC v Weisblum, supra at 108), similarly, here, the defendant's failure to comply with UCC § 9-611 cannot be disregarded. The defendant fails to provide any persuasive authority to conclude otherwise, i.e. that the notices it sent satisfy the statutory notice requirement. Accordingly, the plaintiff has demonstrated a likelihood of success on the merits.
The plaintiff has further demonstrated that she would suffer irreparable injury if a preliminary injunction is not granted and she loses her proprietary lease and shares. The plaintiff has resided at the premises for over ten years. Further, any dispossession of the plaintiff and further sale of the property would render ineffectual any judgment the plaintiff were to obtain in this action, as the plaintiff ultimately seeks reinstatement of the note. See Winchester Global Trust Co. Ltd. v Donovan, 58 AD3d 833 (2nd Dept. 2009). In so finding, the court recognizes the "State's public policy against the forfeiture of leases." Village Ctr. for Care v Sligo Realty and Serv. Corp., 95 AD3d 219 (1st Dept. 2012); see Sharp v Norwood, 223 AD2d 6 (1st Dept. 1996) lv app granted, 231 AD2d 974 (1st Dept. 1996) aff'd 89 NY2d 1068 (1997), rearg denied 90 NY2d 889 (1997).
The plaintiff also demonstrated the balancing of equities in her favor. The defendant does not refute the plaintiff's assertion that she was unaware of the default until approximately June 2014. Although the plaintiff now acknowledges the default, she states in her affidavit that she was led to believe that the balance of the note had been paid off years ago based on the representations of her husband, who had taken over control of the plaintiff's finances when he moved in with her after their marriage in 2003. According to the plaintiff, the husband, who was under federal indictment on wire fraud and securities fraud charges at the time this action was commenced, had showed her emails which reflected satisfaction of the loan and which were purportedly written by Wells Fargo's counsel. In June 2014, when the plaintiff sought to post bond for her husband and use the apartment as collateral, she learned through representatives of the defendant that, in fact, the loan had, not been satisfied, and that the emails were not authentic. Thus, the proof submitted indicates that the plaintiff did not occasion the default but would be the one to suffer harm should the injunction not be granted since, in the absence of an injunction the holdover proceeding, wherein the defendant seeks to obtain possession of the apartment, will resume. The harm to the plaintiff in not granting the injunction and allowing the defendant to continue with the holdover proceeding far outweighs any harm that may come to the defendant in allowing the plaintiff to continue residing in the apartment afer posting an undertaking representing the non-accelerated arrears. See McLaughlin, Piven, Vogel, Inc. v W.J. Nolan and Co., 114 AD2d 165 (2nd Dept. 1986), app denied, 67 NY2d 606 (1986).
The defendant requests that the plaintiff post a bond as a condition of any injunction pursuant to CPLR 6312(b), and that the amount be fixed at $145,980.57. The plaintiff does not dispute the requirement of posting an undertaking, and has represented that she is willing and financially able to do so. Accordingly, the plaintiff shall post an undertaking pursuant to CPLR 6312(b), which is fixed in the amount of $145,980.57, representing the sum necessary to reinstate the loan, pending the final determination of this action or a further order in regard to the bond.
III. Conclusion
For these reasons, the plaintiff's motion seeking preliminary injunctive relief is granted upon the posting of the undertaking, as set forth above.
Accordingly, and upon the foregoing papers, it is
ORDERED that the plaintiff's motion for a preliminary injunction is granted and, pending final determination of this action, the defendant is hereby enjoined and restrained from the further prosecution of the summary holdover proceeding, entitled U.S. Bank, N.A., as Legal Trustee for Truman 2013 SC4 Title Trust v Butler, Index No. 69418/2014, pending in the Civil Court, New York County, and it is further,
ORDERED that the plaintiff shall post an undertaking in the sum of $145,980.57 within 30 days of service of a copy of this order with notice of entry, pending the final determination of this action or a further order in regard to the bond, conditioned that the plaintiff, if it is finally determined that she was not entitled to an injunction, will pay to the defendant all damages and costs which may be sustained by reason of this injunction, and it is further,
ORDERED that the parties shall appear for a preliminary conference on September 3, 2015, at 9:30 a.m.
This constitutes the Decision and Order of the court. Dated: July 15, 2015_______________________, JSC