Opinion
18703/04.
Decided March 14, 2005.
In this foreclosure action, plaintiff's motion for summary judgment is denied. Defendants have raised triable issues of fact with respect to allegations of unconscionable and oppressive conduct of plaintiff, including: plaintiff's fraud in inducing defendants to sign a contract of sale, note and mortgage; bad faith on the part of plaintiff; and, plaintiff's material misrepresentations to defendants. Further, equitable estoppel might prevent plaintiff from foreclosing on the mortgage.
Summary Judgment Standard
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. See Zuckerman v. City of New York, 49 NY2d 557, 562 (1980); Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 (1957). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers. Matter of Redemption Church of Christ v. Williams, 84 AD2d 648, 649 (3rd Dept 1981); Greenberg v. Manlon Realty, 43 AD2d 968, 969 (2nd Dept 1974); Winegrad v. New York University Medical Center, 64 NY2d 851 (1985).
CPLR § 3212 (b) requires that for a court to grant summary judgment the court must determine if the movant's papers justify holding as a matter of law, "that the cause of action or defense has no merit." The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant. Marine Midland Bank, N.A. v. Dino Artie's Automatic Transmission Co., 168 AD2d 610 (2nd Dept 1990). Summary judgment shall be granted only when there are no issues of material fact and the evidence requires the court to direct judgment in favor of the movant as a matter of law. Friends of Animals, Inc., v. Associated Fur Mfrs., 46 NY2d 1065 (1979).
In moving for summary judgment in a mortgage foreclosure proceeding, the mortgagee establishes "its prima facie entitlement to judgment against the defendants . . . by submitting the mortgage, the unpaid note, and evidence of the mortgagors' default." Fleet National Bank v. Olasov, 2005 NY Slip Op 01667 (2nd Dept 2005). The burden then shifts "to the mortgagors to raise a triable issue of fact." Fleet National Bank v. Olasov. See Winegrad v. New York University Medical Center; EMC Mtge. Corp. v. Riverdale Assoc., 291 AD2d 370 (2nd Dept 2002); Coppa v. Fabozzi, 5 AD3d 718 (2nd Dept 2004).
Discussion
Defendants purchased the premises at 262 Saratoga Avenue, Brooklyn, New York from a corporation, 275-275 Realty Corp., owned by plaintiff, without the services of an attorney [exhibit G of affirmation in opposition — New York State Real Property Transfer Form showing that defendant's did not have an attorney at closing]. 275-275 Realty Corp., had an attorney [exhibit A of affirmation in opposition — § 19 of contract of sale]. Further, the contract of sale for the property did not contain a mortgage contingency clause, which would have allowed defendant purchasers to receive a refund of their down payment if they were rejected for a mortgage after making a "good faith effort" to obtain adequate financing. Additionally, the contract of sale, in § 22, had a liquidated damages clause, which allowed the seller corporation to retain defendants' $10,050 down payment "if purchasers default under this contract within the allotted contract period."
According to the affidavit of defendant Rosa Bernitt, "plaintiff . . . assured us that we would not require an attorney and that he would arrange everything, including financing, so that we could purchase our first home" [paragraph 4]. In paragraph 11 of her affidavit, defendant Bernitt states that plaintiff, at the closing, informed defendants that they qualified for a $279,000 mortgage, but:
for us to purchase our home and not loose [sic] our down payment we would have to secure a mortgage from the plaintiff for the balance. At the closing this was the first time this was ever mentioned to us. This second mortgage given by Plaintiff, Abraham Malik, is the mortgage which is currently being foreclosed on. We signed the mortgage under duress and after being threatened that if we did not due [sic] so we would loose [sic] our down payment.
This second mortgage and note, which defendants allege they were induced to sign to save their down payment was for interest only with a "balloon" payment [exhibit A of motion] for the $22,000 balance after one year. In paragraph 22 of her affidavit, defendant Bernitt claims that she and her husband, operating without counsel, had no understanding of their rights when agreeing to and signing the "balloon" mortgage and note at the closing.
Although the contract of sale is silent, defendants acted under the impression that the two-family house they were purchasing would be delivered vacant and they would be able to live in the downstairs apartment while repairing the upstairs apartment for an eventual income generating tenant [paragraph 5 of Bernitt affidavit]. After the closing defendants discovered that the keys given to them for the premises did not work [paragraph 12 of Bernitt affidavit]. After finally getting into the premises, defendants discovered an employee of plaintiff, David Clarke, living in the upstairs apartment [paragraphs 14 and 15 of Bernitt affidavit]. Plaintiff then agreed to pay defendants rent for Mr. Clarke of $800 per month while the apartment was being repaired, and then $1,200 per month [exhibit B of affirmation in opposition]. In paragraph 16 of her affidavit, defendant Bernitt denies receiving any rent for Mr. Clarke from plaintiff. In addition, two women were found living in the first floor apartment, with a lease signed by plaintiff, prior to the closing [paragraph 18 of Bernitt affidavit]. Defendants were unable to live in the premises, paying rent for their old apartment [paragraph 19 of Bernitt affidavit], and had to bring a holdover proceeding in the Housing Part of Civil Court to ultimately evict Mr. Clarke [paragraph 20 of Bernitt affidavit and exhibits D and E of affirmation in opposition].
Looking at the evidence in the light most favorable to the non-movant defendants it appears that defendants have demonstrated that they might have been fraudulently induced into signing the contract of sale and the second mortgage, and were possibly the victims of bad faith and misrepresentations by plaintiff.
The Court of Appeals, in Nassau Trust Company v. Montrose Concrete Products Corp., 56 NY2d 175, 182 (1982), held that to defeat a summary judgment motion in a foreclosure action "it is proper for the court to look beyond the defendant's answer and deny summary judgment if facts are alleged in opposition to the motion which, if true, constitute a meritorious defense." Further, in Ferlazzo v. Riley, 278 NY 289, 292 (1938), the Court of Appeals held that:
a mortgagor is bound by the terms of his contract as made and cannot be relieved from his default, if one exists, in the absence of waiver by the mortgagee, or estoppel, or bad faith, fraud, oppressive or unconscionable conduct on the latter's part. Malcolm v. Allen, 49 NY 448; Graf v. Hope Building Corp., 254 NY 1.
See Kitain v. Windley, 283 AD2d 463 (2nd Dept 2001); M T Mortgage Corporation v. Alleyne, 7 AD3d 761 (2nd Dept 2004).
In the instant case, this Court has the impression that equitable estoppel applies. The defendants relied upon plaintiff's representations that they didn't need an attorney and plaintiff would take care of the financing. Defendants appear to have been financially injured and prejudiced by: having to enter into a second mortgage with plaintiff to protect their down payment; continuing to pay rent on their old apartment without being able to move into the premises; and, incurring expenses and lost time in evicting plaintiff's employee, Mr. Clarke.
Nassau Trust Company v. Montrose, at 184, states:
An estoppel "'rests upon the word or deed of one party upon which another rightfully relies and so relying changes his position to his injury'" (Triple Cities Constr. Co. v. Maryland Cas. Co., 4 NY2d 443, 448, Lynn v. Lynn, 302 NY 193, 205, Metropolitan Life Ins. Co. v. Childs Co., 230 NY 285 292). It is imposed by law in the interest of fairness to prevent the enforcement of rights which would work fraud or injustice upon the person against whom enforcement is sought and who, in justifiable reliance upon the opposing party's words or conduct, has been misled into acting upon the belief that such enforcement would not be sought (White v. La Due Fitch, 303 NY 122, 128).
Fundamental fairness requires a full hearing of the facts in the instant matter to determine if defendants have defenses to their mortgage default based upon equitable estoppel and plaintiff's alleged unconscionable and oppressive conduct, which includes plaintiff's: possible fraud in inducing defendants to sign a contract of sale, note and mortgage; possible bad faith; and, possible material misrepresentations to defendants.
Conclusion
For the above cited reasons, plaintiff's motion for summary judgment is denied.
Defendants may amend their answer, to conform to the facts presented in their affirmation in opposition, within 30 days of the entry of this decision.
This constitutes the decision and order of the court.