| Wells Fargo Bank v Hodge |
| 2012 NY Slip Op 01246 [92 AD3d 775] |
| February 14, 2012 |
| Appellate Division, Second Department |
| Wells Fargo Bank, Appellant, v Lucina Hodge et al.,Defendants, and Joseph Callender, Respondent. |
—[*1] Lynn Armentrout, New York, N.Y., for respondent.
In an action to foreclose a mortgage, the plaintiff appeals, as limited by its brief, from somuch of an order of the Supreme Court, Kings County (Schmidt, J.), dated July 27, 2010, as,upon a referee's report dated February 1, 2010, made after a hearing, granted the motion of thedefendant Joseph Callender, inter alia, to vacate a judgment of foreclosure and sale, entered uponthat defendant's default in answering or appearing.
Ordered that the order is affirmed insofar as appealed from, with costs.
A court has inherent power to vacate a judgment entered upon default "for sufficient reasonand in the interests of substantial justice" (Woodson v Mendon Leasing Corp., 100 NY2d62, 68 [2003]; see Mother of Alayon, 86 AD3d 644 [2011]). Under the circumstances ofthis case, the Supreme Court properly exercised its inherent power to relieve the defendantJoseph Callender (hereinafter the defendant) of his default based on evidence demonstrating thathe was the victim of a scheme to defraud, in which he was induced to sign documents conveyinghis home to a "straw" buyer.
The plaintiff's contention that the Supreme Court erred in granting the equitable relief ofvacatur of the judgment of foreclosure and sale at issue because the movant had unclean hands iswithout merit. The doctrine of unclean hands is used only to bar the grant of equitable relief to aparty who is "guilty of immoral, unconscionable conduct and even then only 'when the conductrelied on is directly related to the subject matter in litigation and the party seeking to invoke thedoctrine was injured by such conduct (Green v. Le Beau, 281 App. Div. 836; 2 Pomeroyon Equity Jurisprudence [5th ed.], § 399, p. 99)' (Weiss v. Mayflower DoughnutCorp., 1 NY2d 310, 316; see 32 Boston U. L. Rev. 66 et seq.)" (NationalDistillers & Chem. Corp. v Seyopp Corp., 17 NY2d 12, 15-16 [1966]; see Gilpin v Oswego Bldrs., Inc., 87AD3d 1396, 1399 [2011]; Columbov Columbo, 50 AD3d 617, 619 [2008]). "It is a well-settled exception to the [un]cleanhands doctrine that one who, although at fault, is not equally at fault, will not be denied equitablerelief (see, Miseveth v Pribishuk, 85 NYS2d 595)" (Dillon v Dean, 158 AD2d579, 580 [1990]).
Here, the evidence presented at the hearing held before the referee supports the [*2]Supreme Court's finding that while the defendant cannot claim to becompletely blameless, he was less culpable in the fraudulent transaction than the plaintiff'sassignor. Further, the plaintiff's assignor also was significantly more sophisticated than thedefendant. We therefore decline to find that the defendant was barred from seeking vacatur of thejudgment of foreclosure and sale by the doctrine of unclean hands (see Janke v Janke, 47AD2d 445, 450 [1975], affd 39 NY2d 786 [1976]).
Furthermore, the plaintiff failed to establish that it was a bona fide encumbrancer for value,as the record indicates that the circumstances under which its assignor conveyed the mortgage inquestion were such that a reasonably prudent lender would have made inquiries about the truenature of the transaction (see Thomas vLaSalle Bank N.A., 79 AD3d 1015, 1017 [2010]; Mathurin v Lost & Found Recovery, LLC, 65 AD3d 617, 618-619[2009]).
Accordingly, the Supreme Court properly granted the defendant's motion, inter alia, to vacatethe judgment of foreclosure and sale. Mastro, A.P.J., Angiolillo, Eng and Cohen, JJ., concur.