Opinion
36493/04.
Decided July 10, 2008.
Alicia Stillman, Esq., Cullen and Dykman LLP, Garden City NY, Plaintiff.
Robert E. Brown, PC, New York NY, Defendant.
Plaintiff Emigrant Mortgage Company, Inc. (EMIGRANT) moves for confirmation of the referee's report and a judgment of foreclosure and sale for the premises located at 1106 79th Street, Brooklyn, New York (Block 6266, Lot 8, County of Kings). It is uncontroverted that defendant Mollo failed to answer the summons and complaint in the instant action, which was filed with the Office of the Kings County Clerk on December 1, 2005. On March 23, 2006, I granted plaintiff's application, upon default of all defendants, for the appointment of a referee, Charles Capetanakis, Esq., to compute.
The order of reference was entered on March 28, 2006 and plaintiff's counsel served all defendants with a true copy of the entered order of reference on May 2, 2006. Referee Capetanakis issued his report, computing the amount owed to plaintiff, on June 12, 2007. The instant motion was filed with the Court on January 16, 2008, more than two years subsequent to the commencement of this action.
This motion was assigned to the February 6, 2008-calendar of the Foreclosure Motion Part. Defendant Mollo appeared with counsel and the motion was then referred to my Part. Counsel for plaintiff and counsel for defendant Mollo appeared before me on the instant motion. I reserved decision on May 9, 2008, after hearing oral argument.
Defendant Mollo alleges that she has an excusable default and a meritorious defense for her default. EMIGRANT's counsel is correct in asserting that Ms. Mollo is attempting to secure affirmative relief, without making a motion or cross-motion to that effect. However, even if the Court were to accept Ms. Mollo's proposed answer and counterclaim, she still has failed to provide both a reasonable excuse for her default and a meritorious defense to the instant foreclosure action. The Court grants plaintiff's motion for confirmation of the referee's report and a judgment of foreclosure and sale for the subject premises.
Background
The subject premises, 1106 79th Street, Brooklyn, New York, was acquired by defendant Mollo's parents, Nicholas Cirillo, Sr. and Gloria Cirillo, by deed, dated May 22, 1970, and recorded on June 16, 1970 at Reel 417, Page 740 of the City Register of the City of New York. Mr. and Mrs. Cirillo deeded the premises, while retaining a life estate, to their children, Nicholas Cirillo, Jr. and defendant Mollo, in a deed, dated October 1, 2001, and recorded on October 26, 2001 at Reel 5332, Page 2255 of the City Register of the City of New York. Subsequently, Ms. Mollo's brother deeded his interest in the premises to his sister, in a deed dated June 1, 2004, and recorded on July 16, 2004 at City Register File Number (CRFN) 2004000444781.
All recordings show that Ms. Mollo does not reside at the premises. She lives several blocks from the subject premises, at 1155 82nd Street. Ms. Mollo, on December 17, 2004, executed the subject mortgage and note with plaintiff EMIGRANT. She borrowed $165,000.00, pursuant to a thirty-year adjustable rate note and a mortgage to secure the loan. The interest for the first five years, until the change date, January 1, 2010, is 11.00%. The monthly payment for principal and interest for the first five years is $1,571.34. The note provided that the default interest rate would rise to 18.00% per annum. Defendant does not argue that she was coerced or forced into executing the note and mortgage. She and her counsel never explained why she didn't answer the summons and complaint, and defendant does not challenge plaintiff's service of the summons and complaint. It is unfortunate that defendant mortgaged her parent's residence at a sub-prime rate and then defaulted in her payments, starting with the June 1, 2005 payments.
Both plaintiff and defendant agree that Ms. Mollo and her counsel have been attempting since July 2007 to negotiate either a forbearance agreement or a loan modification. In ¶ 3 of her affidavit in opposition to the motion, Ms. Mollo alleges her excusable default:
I have been diligently working with the plaintiff, Emigrant . . . to negotiate a loan modification since at least July of 2007. I had been hopeful that I would be able to pay back the money that I owe Plaintiff, however we have been unable to reach an agreement. In July of 2007, I offered to pay Plaintiff $25,000.00 immediately and $15,000.00 a month until my account was current. My offer was unacceptable to Plaintiff. In January 2008, I offered to pay $45,000.00 immediately and $10,000 per month until all arrears are paid. Recently Plaintiff determined my second offer was unacceptable. Although, I have been negotiating in good faith, at this point, I have no choice but to oppose Plaintiff's motion for a default judgment.
In ¶ 4 of her affidavit in opposition to the motion, Ms. Mollo alleges her meritorious defense: At the closing, I never received any of the loan documents relating to the mortgage and note at issue here, nor did I receive two Notices of the Right to Cancel. Therefore, it is my understanding, that I have the right to cancel the loan transaction which is the subject of this foreclosure action. If I cancel, a court will need to determine if the cancellation is effective. If a court determines that the cancellation is effective, the mortgage will be void and I will not have to pay any finance charges pursuant to 15 USCA § 1635 (a) and (b) and Regulation Z at 12 CFR § 226.23. If I can not modify my current loan with the Plaintiff, I wish to cancel the mortgage.
Defendant and her counsel never addressed why defendant failed to answer the summons and complaint, served on December 5, 2005. More than one and one-half years later, in July 2007, Ms. Mollo then commenced negotiations with EMIGRANT. What was Ms. Mollo doing from December 2005 to July 2007 to save her parent's home? If nothing else, this decision and order is a reminder to borrowers in a foreclosure action that they need to come to Court and attempt to resolve their financial problems with their lender in a timely manner.
Discussion
As stated by plaintiff's counsel, in ¶ 13 of her January 9, 2008 affirmation of regularity, "[a]ll the proceedings in this action have been regular in accordance with the rules and practices of this Court." The summons and complaint, and the notice of pendency were filed with the Kings County Clerk on December 1, 2005, after defendant Mollo defaulted in her mortgage payments. All of the necessary defendants were served the summons and complaint, and none answered or appeared. The complaint has not been amended. All of the necessary defendants are of full age and sound mind, and none are in the military. More than thirty days have elapsed since service of process. The whole amount secured by the mortgage is due and payable. The notice of entry of the appointment of Referee Capentanakis was properly served on all defendants. Referee Capetanakis computed the amount due plaintiff and submitted his oath and report.
CPLR Rule 5015 (a) allows a party to be relieved of an 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." Plaintiff served, on May 2, 2006, the notice of entry with a signed copy of the order of reference [exhibit E of motion] upon all defendants. Previously, plaintiff had timely served the summons and complaint, in December 2005. Defendant Mollo is now attempting to vacate her default more than two years after being served the summons and complaint, and approximately twenty-one months after being served the notice of entry of the order of reference. That alone is enough to deny her attempt to vacate her default.
However, in the interest of deciding whether to vacate Defendant Mollo's default on the merits, the Court finds that her excuse of attempting to negotiate a loan modification with plaintiff more than eighteen months after her default is not a reasonable excuse to vacate her default. Further, her claims, with respect to alleged violations of the Federal Truth in Lending Act [TILA] ( 15 USC § 1601, et seq) and Federal "Regulation Z" ( 12 CFR § 226.1 et seq), issued by the Board of Governors of the Federal Reserve System to implement the Federal Truth in Lending Act, lack merit.
"A defendant seeking to vacate a default under this provision [CPLR rule 5015 (a)] must demonstrate a reasonable excuse for its delay in appearing and answering the complaint and a meritorious defense to this action." ( Eugene Di Lorenzo, Inc. v A. C. Dutton Lumber Co., Inc. 67 NY2d 138, 141). ( See Mora v Scarpitta, ___AD3d ___, 2008 NY Slip Op 05660 [2d Dept June 17, 2008]; Montague v Rivera , 50 AD3d 656 [2d Dept 2008]; Miller v Ateres Shlomo, LLC, 49AD3d 612 [2d Dept 2008]; Hodges v Sidial , 48 AD3d 633 [2d Dept 2008]; Benjamin Nurse v Figeroux Associates, 47 AD3d 778 [2d Dept 2008]; Savino v "ABC Corp." , 44 AD3d 1026 [2d Dept 2007]; Fladell v American Red Magen David for Israel , 44 AD3d 897 [2d Dept 2007]; Segovia v Delcon Const. Corp. , 43 AD3d 1143 , 1144 [2d Dept 2007]).
With respect to what constitutes a reasonable excuse, "[t]he determination of what constitutes a reasonable excuse for a default lies within the sound discretion of the trial court." ( Gambardella v Ortov Lighting, Inc. 278 AD2d 494, 495 [2d Dept 2000]). ( See Hodges v Sidial, supra; Benjamin Nurse v Figeroux Associates, supra; Savino v "ABC Corp., supra; Fladell v American Red Magen David for Israel, supra; Segovia v Delcon Const. Corp., supra.). While Ms. Mollo is free to negotiate a loan modification with plaintiff, her commencement of negotiations with EMIGRANT is not by itself a reasonable excuse for her default. The Court is troubled that Ms. Mollo never explained why she waited from her initial default in December 2005 to begin negotiations with EMIGRANT in July 2007.
Further, even if her she had a reasonable excuse for her default, Ms. Mollo claims that TILA and Regulation Z were violated are plainly erroneous. TILA does not apply to the instant case. Defendant's loan application with EMIGRANT [exhibit B of reply] shows that the purpose of her loan was "investment." She checked the box for "investment" in answering the question of what "the property will be," instead of checking "primary residence" or "secondary residence." The HUD-1 settlement statement, [exhibit D of reply], executed on December 17, 2004 by Ms. Mollo, clearly showed that Ms. Mollo resides at 1158 82nd Street, while the note and mortgage were for the property at 1106 79th Street. TILA, at 15 USC § 1603 (1), states that it does not apply to "transactions involving extensions of credit primarily for business, commercial, or agricultural purposes." "Defendant's . . . contention that plaintiff did not comply with the disclosure requirements of the Truth in Lending Act is without merit. The loan forms on their face state that the loans were for business purposes. Credit transactions for business purposes are exempt from the Truth in Lending Act disclosure requirements (see US Code, tit. 15, § 1603, subd. [1]; 12 CFR 226.3 [a]." ( State Bank of Albany v Roarke, 91 AD2d 1093, 1094 [3d Dept 1983]).
Ms. Mollo's claim that she can rescind the loan because she didn't receive a notice of the right to cancel at the closing is unavailing. TILA and Regulation Z apply to security interest in the mortgagor's principal dwelling, not another property, even if occupied by defendant's parents. Regulation Z, at 12 CFR § 226.15, states:
(a) Consumer's right to rescind.
(1) (I) Except as provided in paragraph (a) (1) (ii) of this section, in a credit plan in which a security interest is or will be retained or acquired in a consumer's principal dwelling , each consumer whose ownership interest is or will be subject to the security interest shall have the right to rescind. [ Emphasis added ].
( See Scott v Long Island Sav. Bank, F.S.B., 937 F2d 738 [2d Cir 1991]; Aschoff v Osmond State Bank, 760 F2d 201, 202 [8th Cir 1985]; First Nat. Bank v Felt, 368 NW2d 588 [Sup Ct South Dakota 1985]; Fleming v Federal Land Bank of Columbia, 167 Ga App 326, 328, 306 SE 332, 333.
Further, both the executed copies of Ms. Mollo's TILA Disclosure Statement [exhibit C of reply] and the HUD-1 settlement statement [exhibit D of reply] show that she received these documents when she attended the December 17, 2004 closing. Above Ms. Mollo's signature on the HUD-1 settlement statement, it states, "I further certify that I have received a copy of the HUD-1 Settlement Statement."
Lastly, even if EMIGRANT failed to provide Ms. Mollo with loan documents and a notice of her right of recision, the statute of limitations expired on December 17, 2007, prior to Ms. Mollo preparing the instant opposition papers and claiming the right of recision. TILA, at 15 USC § 1635 (f), provides:
(f) Time limit for exercise of right An obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor . [ Emphasis added ]
The three-year statute of limitations for the exercise of a TILA recision claim begins to run in New York from the time that the borrower signed the loan commitment. ( Transit Management LLC v Watson Industries, Inc. , 23 AD3d 1152 [4th Dept 2005]; Murphy v Empire of America, 746 F2d 931, 934 [2d Cir 1984]; Gramatan Home Investors Corp. v Mack, 70 AD2d 288 [3d Dept 1979] , lv dismissed 49 NY2d 901). Ms. Mollo executed the instant loan commitment [exhibit E of reply] on December 17, 2004 at the closing.
Conclusion
Accordingly, it is
ORDERED that the motion of plaintiff Emigrant Mortgage Company, Inc. to confirm the June 12, 2007-report of Referee Charles Capetanakis, Esq., and to grant a judgment of foreclosure and sale for the premises located at 1106 79th Street, Brooklyn, New York (Block 6266, Lot 8, County of Kings) is granted.
This constitutes the Decision and Order of the Court