| U.S. Bank N.A. v McCrory |
| 2016 NY Slip Op 02495 [137 AD3d 1517] |
| March 31, 2016 |
| Appellate Division, Third Department |
[*1]
| U.S. Bank National Association, as Trustee for RASC2005-EMX4, Appellant, v Kristine H. McCrory, Respondent, et al.,Defendants. |
Hogan Lovells US LLP, New York City (Chava Brandriss of counsel), forappellant.
Legal Services of Central New York, Inc., Syracuse (Reta Raymond of counsel), forrespondent.
Lynch, J. Appeal from an order of the Supreme Court (Campbell, J.), entered April 4,2014 in Cortland County, which sua sponte dismissed the complaint.
In 2005, defendants Kristine H. McCrory and Michael P. McCrory (hereinaftercollectively referred to as defendants) executed a note in favor of M & T MortgageCorporation, secured by a mortgage on real property located in Cortland County. Thenote included an allonge payable to the order of plaintiff. For recording purposes, themortgage names Mortgage Electronic Registration Systems, Inc. as nominee andmortgagee.
Mortgage Electronic assigned the mortgage to plaintiff in November 2008, and theparties entered into a loan modification agreement at that time capitalizing arrears intothe principal balance. When defendants defaulted on the modified loan in 2010, plaintiffcommenced a foreclosure action. That action, however, was dismissed without prejudicein April 2011, after Supreme Court determined that plaintiff failed to act in good faiththrough a series of eight settlement conferences (see CPLR 3408 [f]; 22 NYCRR202.12-a [c] [4]). The court further directed plaintiff to attach a copy of the dismissalorder to the pleadings in any subsequent foreclosure action. In November 2013, plaintiffcommenced the instant foreclosure action, through new counsel, but failed to referenceand attach the previous order as directed by [*2]SupremeCourt. Kristine McCrory responded with a letter to the court that she was pursuing ashort sale. A settlement conference was held on April 3, 2014, at which plaintiff'scounsel advised Supreme Court that he was unaware of the court's previous order andthat he was not authorized to dispose of the case without consulting plaintiff. That sameday, the court sua sponte dismissed the complaint, with prejudice, finding that plaintiffcontinued to act in bad faith. Plaintiff appeals.[FN*]
We reverse. In a residential foreclosure action, the parties are obligated to participatein good faith in the settlement conference mandated under CPLR 3408 and 22 NYCRR202.12-a, and the court is authorized to impose an appropriate sanction for a party'sfailure to comply (see US BankN.A. v Sarmiento, 121 AD3d 187, 207 [2014]). Since the April 2011 order wasnot appealed, Supreme Court's determination to dismiss the initial foreclosure action isnot at issue here, and the court acted well within its equity powers in directing plaintiff toattach the dismissal order to any new action—in this way assuring that anyassigned judge would be informed of the case history (see generally Norwest Bank Minn.,NA v E.M.V. Realty Corp., 94 AD3d 835, 836 [2012], lv dismissed 19NY3d 1085 [2012]). Given that background, it is understandable that Supreme Courtreacted to plaintiff's failure to comply with the earlier directive. That said, a party must beplaced on notice and given an opportunity to be heard as a matter of due process beforethe court imposes a sanction (see Bank of N.Y. v Castillo, 120 AD3d 598, 600-601[2014]; Bank of Am., N.A. vLucido, 114 AD3d 714, 715 [2014]; Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 22[2013]). There is no indication in this record that the court provided such notice.Moreover, the circumstances presented are not so extraordinary as to warrant the severepenalty of a dismissal of the complaint with prejudice (see U.S. Bank N.A. v Polanco,126 AD3d 883, 885 [2015]; Bank of N.Y. v Castillo, 120 AD3d at 601).This is particularly so since plaintiff was represented by new counsel and had previouslyentered into a loan modification agreement after defendants missed certain payments in2008. We also note that Supreme Court's reliance on 22 NYCRR 202.26 (e) as authorityfor the dismissal was misplaced, for that rule concerning settlement authority applies topretrial conferences after the filing of a note of issue, not a CPLR 3408 settlementconference. Accordingly, the complaint is reinstated and the matter remitted to SupremeCourt for further proceedings.
Peters, P.J., McCarthy and Egan Jr., JJ., concur. Ordered that the order is reversed,on the law, with costs, and complaint reinstated. [Prior Case History: 43 Misc 3d1232 (A), 2014 NY Slip Op 50911 (U).]
Footnote *:Plaintiff properlyappealed the order as of right since the court dismissed the complaint with prejudice,which constitutes a final judgment of the action (see CPLR 5701 [a] [1]).