| PHH Mtge. Corp. v Davis |
| 2013 NY Slip Op 07792 [111 AD3d 1110] |
| November 21, 2013 |
| Appellate Division, Third Department |
| PHH Mortgage Corporation, Appellant, v Henry E.Davis et al., Respondents, et al., Defendants. (And a Third-PartyAction.) |
—[*1] Mickelle Olawoye, Aurora, Illinois (Joseph D. Giannetti of Horigan, Horigan &Lombardo, PC, Amsterdam, of counsel), for Henry E. Davis and others,respondents.
McCarthy, J. Appeal from an order of the Supreme Court (R. Sise, J.), entered March30, 2012 in Saratoga County, which, among other things, denied plaintiff's motion for,among other things, summary judgment against certain defendants.
In May 2006, defendants Alexander Ronda and Nichole T. Ronda, a husband andwife then living in Florida, entered into a contract to purchase a home in SaratogaCounty. Apparently on a referral from their realtor, they received a call from third-partydefendant Jason Zapotocki, an employee of third-party defendant Home FundingFinders, Inc. (hereinafter HFF), who subsequently assisted them in obtaining financingfor the purchase of the home. Upon Zapotocki's suggestion, Nichole Ronda asked herstepfather, defendant Henry E. Davis, to cosign the loan documents and had Davisexecute a power of attorney appointing her as his agent. Nichole Ronda sent Davis'financial information to Zapotocki to enable him to prepare a Uniform Residential LoanApplication (hereinafter URLA). According to Nichole Ronda, the financial informationshe supplied was accurate, but the information reported on the URLA was false. Basedon the type of loan, no verification of this information was needed.[*2]
Nevertheless, in June 2006, Nichole Rondaexecuted, as Davis' power of attorney, a URLA that named Davis as the sole borrower.She similarly executed a promissory note and mortgage, in Davis' name alone, as hispower of attorney. In August 2006, Davis conveyed the property by warranty deed to theRondas. In 2009, based on the lack of mortgage payments since June 2008, plaintiffcommenced this foreclosure action against, among others, Nichole Ronda, AlexanderRonda and Davis (hereinafter collectively referred to as defendants).
Defendants answered, asserting affirmative defenses and counterclaims. Plaintiffmoved for, among other things, summary judgment against defendants and a defaultjudgment against defendant Chase Bank USA, NA, and to amend the caption to removedefendants John Doe No.1 through John Doe No.10. Defendants cross-moved to, amongother things, strike plaintiff's motion. They also commenced a third-party action againstHFF and Zapotocki. Supreme Court, among other things, denied plaintiff's motion in itsentirety. Plaintiff appeals.
Supreme Court erred in denying plaintiff's motion for summary judgment againstdefendants. Plaintiff, as mortgagee, established its entitlement to summary judgment inthis foreclosure action by submitting the mortgage and unpaid note, along with evidenceof default in payments,[FN1]which then shifted the burden to defendants to demonstrate by competent and admissibleproof that a defense existed so as to raise a question of fact (see Charter One Bank, FSB vLeone, 45 AD3d 958, 958-959 [2007]; HSBC Bank USA v Merrill, 37 AD3d 899, 900 [2007],lv dismissed 8 NY3d 967 [2007]; LaSalle Bank N.A. v Kosarovich, 31AD3d 904, 905 [2006]). Davis was the only mortgagor and the only person named in thenote, so he is the only person from whom plaintiff is seeking to collect any money owedon the note. The Rondas, while not liable for the loan under the note, are still properparties to this foreclosure action—they are subject to the mortgage lien and mayhave their rights in the property cut off due to a default on the mortgage—becausethey are the titled owners of the property and took title with both record and actual noticeof the mortgage (see Real Property Law § 291; Tibby v Fletcher, 13 AD3d877, 879 [2004]; Matter of Jenkins v Stephenson, 293 AD2d 612, 614[2002]).[FN2]
Even viewing the evidence in a light most favorable to defendants (see Vega v Restani Constr.Corp., 18 NY3d 499, 503 [2012]), none of their asserted defenses raises atriable issue of fact. As to the defense of unconscionability, the terms of the note andmortgage are not so unreasonably favorable to plaintiff that "no reasonable andcompetent person would accept" them, or "so inequitable as to shock the conscience" (Rodriguez v Rodriguez, 11AD3d 768, 769 [2004]; see LaSalle Bank N.A. v Kosarovich, 31 AD3d at906). Defendants also contend that the application process and formation of the note andmortgage were "rife with confusion, misinformation and blatant lies," implying that thisresulted in "an absence of meaningful choice" (Matter of State of New York v AvcoFin. Serv. of N.Y., 50 NY2d 383, 389 [1980] [internal quotation marks and citationomitted]). The asserted confusion and lies, however, flowed from HFF and Zapotocki,not plaintiff. We reject defendants' conclusory allegations that Zapotocki was acting asplaintiff's agent, as that assertion is entirely unsupported by the record (see HomeSav. Bank v Schorr Bros. Dev. Corp., 213 AD2d 512, 513 [1995]; LaGreco vPafundi, 181 AD2d 660, 661 [1992]).[FN3]Thus, defendants have not shown any question of fact on their unconscionability defense.
Defendants have no valid defense of equitable estoppel as they failed to present anyevidence that they "prejudicially changed their position in reliance upon" an assurance byplaintiff (Connecticut Natl. Bank v Peach Lake Plaza, 204 AD2d 909, 910[1994]). Assuming, without deciding, that the defense of unclean hands is applicable to amortgage foreclosure action (compare Jo Ann Homes at Bellmore v Dworetz, 25NY2d 112, 122 [1969], withBank of Smithtown v 264 W. 124 LLC, 105 AD3d 468, 469 [2013], Golden Eagle Capital Corp. vParamount Mgt. Corp., 88 AD3d 646, 648 [2011], Connecticut Natl. Bank vPeach Lake Plaza, 204 AD2d at 910-911, Blueberry Invs. Co. v Ilana Realty,184 AD2d 906, 907-908 [1992]), defendants failed to present evidence of "immoral orunconscionable" conduct by plaintiff, or that any such conduct was directly related to orcaused the default in payments, to support such a defense (Connecticut Natl. Bank vPeach Lake Plaza, 204 AD2d at 910-911; see Bank of Smithtown v 264 W. 124LLC, 105 AD3d at 469; Blueberry Invs. Co. v Ilana Realty, 184 AD2d at907). We again note that we reject defendants' unsupported assertions that Zapotocki wasplaintiff's agent or that his acts can be attributed to plaintiff.
The fraud defense and counterclaim also fail because they are based on allegedmisstatements or actions by Zapotocki, not plaintiff, and the record is devoid of anyevidence that would tend to establish that plaintiff was aware of or assisted Zapotocki inany alleged wrongdoing (seeGjonaj v Sines, 69 AD3d 1188, 1190 [2010]; see also Pidwell v Duvall, 28AD3d 829, 832 [2006]; compare Goldson v Walker, 65 AD3d 1084, 1085 [2009]).The counterclaim alleging commercial bad faith must be dismissed for a similar reason,as the record lacks proof that plaintiff itself acted dishonestly or became a participant in afraudulent scheme (see LPPMtge., Ltd. v Card Corp., 17 AD3d 103, 104 [2005], lv denied 6 NY3d702 [2005]; see also Prudential-Bache Sec. v Citibank, 73 NY2d 263, 275-276[1989]; Peck v Chase Manhattan Bank, 190 AD2d 547, 548-549 [1993]).Defendants' remaining defenses and counterclaim are not viable under the circumstanceshere.
Plaintiff seeks to sever or dismiss the third-party action (see CPLR 1010).Although this issue is raised for the first time on appeal, the third-party action was notcommenced until after plaintiff's motion was submitted. Accordingly, we deny therequest without prejudice to plaintiff making such a motion before Supreme Court.
Although Chase Bank did not submit an answer, plaintiff is not entitled to a defaultjudgment. Instead, we dismiss the complaint against Chase Bank as abandoned becauseplaintiff did not seek a default judgment against that defendant within one year after thedefault or show sufficient cause for the delay (see CPLR 3215 [c]; Van Hoesen v Dolen, 94AD3d 1264, 1267-[*3]1268 [2012], lvdenied 19 NY3d 809 [2012]). As plaintiff demonstrated that it had not discoveredany unknown parties who had an interest in the subject property, Supreme Court shouldhave granted the portion of plaintiff's motion that sought to amend the caption to deletethe John Doe defendants (see CPLR 1024; Flagstar Bank v Bellafiore, 94 AD3d 1044, 1046 [2012];US Bank, N.A. v Boyce, 93AD3d 782, 783 [2012]).
Stein, J.P., Spain and Garry, JJ., concur. Ordered that the order is modified, on thelaw, with costs to plaintiff, by reversing so much thereof as denied plaintiff's motion (1)for summary judgment against defendants Nichole T. Ronda, Alexander Ronda andHenry E. Davis and (2) to amend the caption to delete the John Doe defendants; motiongranted to that extent and complaint dismissed as abandoned against defendant ChaseBank USA, NA; and, as so modified, affirmed.
Footnote 1: Along with an affidavitfrom one of plaintiff's officers averring that no mortgage payments were received afterJune 2008 and that defendants were notified of the default, plaintiff submitteddefendants' answer in which they admitted that they did not make any payments after thatdate.
Footnote 2: The Rondas had recordnotice because the mortgage was recorded prior to their deed from Davis. Nichole Rondahad actual notice because she signed the mortgage as power of attorney for Davis.
Footnote 3: At oral argument,defendants' counsel acknowledged that there was nothing in the record to show thatZapotocki was an agent for plaintiff.