Real Property Law

Mortgagee Had Standing to Foreclose

Deutsche Bank Trust Company Americas v. Vitellas

NYLJ 7/6/15, p. 19, col. 5

AppDiv, Second Dept.

Opinion by Cohen, J.)

In a mortgage foreclosure action, mortgagor appealed from Supreme Court's denial of its motion to dismiss the complaint. The Appellate Division affirmed, holding that mortgagee had standing to foreclose even if the note underlying the mortgage was assigned to mortgagee after the mortgagor's personal obligation on the note had been extinguished in bankruptcy.

In 2002, Vitellas executed a note to Lyons Mortgage Services for $560,000. To secure the note, Vitellas and his wife executed a mortgage on their home. In 2004, Vitellas filed for bankruptcy, listing the mortgage as a secured claim, and listing the mortgage servicer as a creditor. He obtained a bankruptcy discharge. Six years later, in 2010, Vitellas defaulted on his mortgage payments, and made no subsequent payments. In 2012, Deutsche Bank, claiming under an assignment dated in 2011, commenced this foreclosure action. Vitellas and his wife moved to dismiss, contending that Deutsche Bank lacked standing because the mortgage note was no longer a valid obligation at the time of the assignment, and Deutsche Bank could not establish standing without a valid note. Although Supreme Court initially granted the motion to dismiss, on reargument, Supreme Court reversed itself and denied the motion. Vitellas and his wife appealed.

In affirming, the Appellate Division held that Deutsche Bank had brought forth sufficient evidence to establish that the note had been assigned to it before Vitellas had obtained his 2004 bankruptcy discharge. But the court went on to hold that even if the assignment was executed after the discharge, the mortgage was not affected by the bankruptcy discharge. Although the bankruptcy might have extinguished the note for some purposes ' particularly the right to obtain a judgment against Vitellas on the note ' the bankruptcy did not extinguish the note for all purposes. In particular, if Deutsche Bank establishes that it was the holder of the note before commencement of this action, Deutsche Bank has standing to maintain the foreclosure action.

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Mortgagor's Fraud Claim Time-Barred

Williams-Guillaume v. Bank of America

NYLJ 7/31/15, p. 27, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an action by mortgagor for fraud and unjust enrichment, mortgagor appealed from Supreme Court's dismissal of the complaint as time-barred. The Appellate Division affirmed, holding that plaintiff-mortgagor could not avail herself of the discovery rule.

Mortgagor obtained a mortgage from County Home in February 2007. Bank of America later acquired Country Home, and the subject mortgage. In 2013, mortgagor applied to refinance her loan, and Bank of America denied the application because mortgagor's then-current income was lower than the income reported on the 2007 loan application. Mortgagor then investigated, and discovered that the 2007 application had allegedly been falsified to enable her to qualify for the mortgage loan. In December 2013, mortgagor, who had made all payments between 2007 and 2013, brought this action alleging fraud and unjust enrichment. Supreme Court granted mortgagee's motion to dismiss on statute of limitations grounds.

In affirming, the Appellate Division noted that both the fraud and unjust enrichment claims were governed by the six-year statute of limitations. The court rejected mortgagor's contention that because she had not discovered the fraud until 2013, she was entitled to rely on the two-year discovery rule of CPLR 213(8). The court held that with reasonable diligence, mortgagor could have discovered the fraud in 2007 because she had knowledge of facts ' her own income and her ability to afford the payment ' from which any fraud in the loan application could reasonably have been discovered. Finally, the court also dismissed mortgagor's claim of a violation of General Business Law section 349, noting that a three-year statute of limitations applies to such claims.

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Hearing To Determine Mortgagee's Good Faith

Onewest Bank, FSB v. Colace

NYLJ 7/31/15, p. 28, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In a mortgage foreclosure action, mortgagor appealed from Supreme Court's grant of summary judgment to mortgagee. The Appellate Division modified to deny the motion for summary judgment without prejudice to renewal, and remanded to Supreme Court for a hearing to determine whether mortgagee had met its statutory obligation to negotiate in good faith.

When mortgagor defaulted on her mortgage, mortgagee brought this foreclosure action. The parties subsequently participated in settlement conferences to see whether they could reach an agreement to prevent mortgagor from losing her home. At the second settlement conference, mortgagor's counsel questioned whether mortgagee was negotiating in good faith. Nevertheless, the action was transferred out of the settlement part without resolution of that issue, allegedly because mortgagor's counsel believed that the transfer was designed to resolve whether mortgagee was acting in good faith. Mortgagee then denied mortgagor's counsel's request to return the action to the settlement part, and mortgagee then moved for summary judgment. Supreme Court granted the motion, and mortgagor appealed.

In modifying, the Appellate Division held that it was premature for Supreme Court to entertain mortgagee's summary judgment motion. The court noted that during settlement conferences, motions are to be held in abeyance, and emphasized that mortgagor had presented evidence to support its position that mortgagee was not acting in good faith with respect to mortgagor's application for a loan modification. In particular, mortgagor presented evidence that mortgagee might have violated federal regulations pursuant to the Home Affordable Modification Program (HAMP). In light of the factual dispute about whether mortgagee was negotiating in good faith, the court remitted to Supreme Court for a hearing to resolve that issue before considering mortgagee's summary judgment motion. The court noted that if Supreme Court concluded that mortgagee had not negotiated in good faith, that court should order further participation in settlement conferences.

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Cooperation with Development Plans

Dreisinger v. Teglasi

NYLJ 7/23/15, p. 25, col. 1

AppDiv, First Dept.

(memorandum opinion).

In an action by landowner against neighbor for specific performance of an agreement to cooperate with development plans, neighbor appealed from Supreme Court's denial of his summary judgment motion. The Appellate Division reversed, holding that plaintiff landowner had not demonstrated any need for cooperation, so that defendant neighbor's actions could not have constituted a breach of the agreement.

In 2003, landowner and neighbor acquired adjacent parcels from a common owner. Neighbor's lot was improved with a house and landowner's parcel was vacant. Before the closing, landowner and neighbor entered into a contract requiring landowner to convey the rear portion of his lot to neighbor, and requiring neighbor to forward no objection to landowner's plans for construction on his lot. The parties also agreed to cooperate fully and to execute any documents and to take any action necessary to give full force and effect to the contract's basic terms. In 2005, landowner asked neighbor to sign papers relating to construction on landowner's parcel. Neighbor asked for the plans, but landowner refused to provide them. The dispute escalated, with landowner refusing to provide plans and neighbor refusing to sign documents provided by landowner. In 2010, landowner brought this action for specific performance. Supreme Court denied neighbor's motion for summary judgment dismissing the complaint, and neighbor appealed.

In reversing, the Appellate Division acknowledged that neighbor created an affirmative obligation on neighbor's part to consent when required to develop landowner's parcel. But the court emphasized that landowner had not demonstrated that he was ever required to obtain neighbor's consent for any proposed development. Landowner had not demonstrated that he had ever submitted an application to any governmental agency, or that any plans he prepared complied with applicable laws and regulations. As a result, he could not show that neighbor had refused to provide any consent necessary to give effect to the contract's terms. Neighbor did not, therefore, breach the agreement, and was entitled to summary judgment.

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Mortgagee Had Standing to Foreclose

Deutsche Bank Trust Company Americas v. Vitellas

NYLJ 7/6/15, p. 19, col. 5

AppDiv, Second Dept.

Opinion by Cohen, J.)

In a mortgage foreclosure action, mortgagor appealed from Supreme Court's denial of its motion to dismiss the complaint. The Appellate Division affirmed, holding that mortgagee had standing to foreclose even if the note underlying the mortgage was assigned to mortgagee after the mortgagor's personal obligation on the note had been extinguished in bankruptcy.

In 2002, Vitellas executed a note to Lyons Mortgage Services for $560,000. To secure the note, Vitellas and his wife executed a mortgage on their home. In 2004, Vitellas filed for bankruptcy, listing the mortgage as a secured claim, and listing the mortgage servicer as a creditor. He obtained a bankruptcy discharge. Six years later, in 2010, Vitellas defaulted on his mortgage payments, and made no subsequent payments. In 2012, Deutsche Bank, claiming under an assignment dated in 2011, commenced this foreclosure action. Vitellas and his wife moved to dismiss, contending that Deutsche Bank lacked standing because the mortgage note was no longer a valid obligation at the time of the assignment, and Deutsche Bank could not establish standing without a valid note. Although Supreme Court initially granted the motion to dismiss, on reargument, Supreme Court reversed itself and denied the motion. Vitellas and his wife appealed.

In affirming, the Appellate Division held that Deutsche Bank had brought forth sufficient evidence to establish that the note had been assigned to it before Vitellas had obtained his 2004 bankruptcy discharge. But the court went on to hold that even if the assignment was executed after the discharge, the mortgage was not affected by the bankruptcy discharge. Although the bankruptcy might have extinguished the note for some purposes ' particularly the right to obtain a judgment against Vitellas on the note ' the bankruptcy did not extinguish the note for all purposes. In particular, if Deutsche Bank establishes that it was the holder of the note before commencement of this action, Deutsche Bank has standing to maintain the foreclosure action.

'

Mortgagor's Fraud Claim Time-Barred

Williams-Guillaume v. Bank of America

NYLJ 7/31/15, p. 27, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an action by mortgagor for fraud and unjust enrichment, mortgagor appealed from Supreme Court's dismissal of the complaint as time-barred. The Appellate Division affirmed, holding that plaintiff-mortgagor could not avail herself of the discovery rule.

Mortgagor obtained a mortgage from County Home in February 2007. Bank of America later acquired Country Home, and the subject mortgage. In 2013, mortgagor applied to refinance her loan, and Bank of America denied the application because mortgagor's then-current income was lower than the income reported on the 2007 loan application. Mortgagor then investigated, and discovered that the 2007 application had allegedly been falsified to enable her to qualify for the mortgage loan. In December 2013, mortgagor, who had made all payments between 2007 and 2013, brought this action alleging fraud and unjust enrichment. Supreme Court granted mortgagee's motion to dismiss on statute of limitations grounds.

In affirming, the Appellate Division noted that both the fraud and unjust enrichment claims were governed by the six-year statute of limitations. The court rejected mortgagor's contention that because she had not discovered the fraud until 2013, she was entitled to rely on the two-year discovery rule of CPLR 213(8). The court held that with reasonable diligence, mortgagor could have discovered the fraud in 2007 because she had knowledge of facts ' her own income and her ability to afford the payment ' from which any fraud in the loan application could reasonably have been discovered. Finally, the court also dismissed mortgagor's claim of a violation of General Business Law section 349, noting that a three-year statute of limitations applies to such claims.

'

Hearing To Determine Mortgagee's Good Faith

Onewest Bank, FSB v. Colace

NYLJ 7/31/15, p. 28, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In a mortgage foreclosure action, mortgagor appealed from Supreme Court's grant of summary judgment to mortgagee. The Appellate Division modified to deny the motion for summary judgment without prejudice to renewal, and remanded to Supreme Court for a hearing to determine whether mortgagee had met its statutory obligation to negotiate in good faith.

When mortgagor defaulted on her mortgage, mortgagee brought this foreclosure action. The parties subsequently participated in settlement conferences to see whether they could reach an agreement to prevent mortgagor from losing her home. At the second settlement conference, mortgagor's counsel questioned whether mortgagee was negotiating in good faith. Nevertheless, the action was transferred out of the settlement part without resolution of that issue, allegedly because mortgagor's counsel believed that the transfer was designed to resolve whether mortgagee was acting in good faith. Mortgagee then denied mortgagor's counsel's request to return the action to the settlement part, and mortgagee then moved for summary judgment. Supreme Court granted the motion, and mortgagor appealed.

In modifying, the Appellate Division held that it was premature for Supreme Court to entertain mortgagee's summary judgment motion. The court noted that during settlement conferences, motions are to be held in abeyance, and emphasized that mortgagor had presented evidence to support its position that mortgagee was not acting in good faith with respect to mortgagor's application for a loan modification. In particular, mortgagor presented evidence that mortgagee might have violated federal regulations pursuant to the Home Affordable Modification Program (HAMP). In light of the factual dispute about whether mortgagee was negotiating in good faith, the court remitted to Supreme Court for a hearing to resolve that issue before considering mortgagee's summary judgment motion. The court noted that if Supreme Court concluded that mortgagee had not negotiated in good faith, that court should order further participation in settlement conferences.

'

Cooperation with Development Plans

Dreisinger v. Teglasi

NYLJ 7/23/15, p. 25, col. 1

AppDiv, First Dept.

(memorandum opinion).

In an action by landowner against neighbor for specific performance of an agreement to cooperate with development plans, neighbor appealed from Supreme Court's denial of his summary judgment motion. The Appellate Division reversed, holding that plaintiff landowner had not demonstrated any need for cooperation, so that defendant neighbor's actions could not have constituted a breach of the agreement.

In 2003, landowner and neighbor acquired adjacent parcels from a common owner. Neighbor's lot was improved with a house and landowner's parcel was vacant. Before the closing, landowner and neighbor entered into a contract requiring landowner to convey the rear portion of his lot to neighbor, and requiring neighbor to forward no objection to landowner's plans for construction on his lot. The parties also agreed to cooperate fully and to execute any documents and to take any action necessary to give full force and effect to the contract's basic terms. In 2005, landowner asked neighbor to sign papers relating to construction on landowner's parcel. Neighbor asked for the plans, but landowner refused to provide them. The dispute escalated, with landowner refusing to provide plans and neighbor refusing to sign documents provided by landowner. In 2010, landowner brought this action for specific performance. Supreme Court denied neighbor's motion for summary judgment dismissing the complaint, and neighbor appealed.

In reversing, the Appellate Division acknowledged that neighbor created an affirmative obligation on neighbor's part to consent when required to develop landowner's parcel. But the court emphasized that landowner had not demonstrated that he was ever required to obtain neighbor's consent for any proposed development. Landowner had not demonstrated that he had ever submitted an application to any governmental agency, or that any plans he prepared complied with applicable laws and regulations. As a result, he could not show that neighbor had refused to provide any consent necessary to give effect to the contract's terms. Neighbor did not, therefore, breach the agreement, and was entitled to summary judgment.

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