L.I. Judge Gives Foreclosing Lender Verbal Horse-Whipping As He Wipes Out Mortgage Debt, Cancels Lien For "Repugnant, Shocking, Repulsive" Conduct

In Riverhead, New York, Suffolk County trial judge Jeffrey Arlen Spinner gave plaintiff IndyMac Mortgage Services, division of OneWest Bank F.S.B., and its Regional Manager of Loss Mitigation, Karen Dickinson, one hell of a beat-down last week in a home foreclosure ruling in which he wiped out the mortgage holder's security interest in the subject home, cancelling the debt and apparently leaving a financially strapped homeowner with a mortgage-free home in the process. In doing so, the judge cited the "harsh, repugnant, shocking and repulsive" conduct of the plaintiff during the course of the foreclosure action.

The court ruling sets forth the judge's descripition of the plaintiff's conduct that got it in hot water; the following excerpt addresses Justice Spinner's legal basis for taking the action he did (citations to legal authority omitted for ease of reading, bold text is my emphasis):

• Since an action claiming foreclosure of a mortgage is one sounding in equity, [...] the very commencement of the action by Plaintiff invokes the Court's equity jurisdiction. While it must be noted that the formal distinctions between an action at law and a suit in equity have long since been abolished in New York [...], the Supreme Court nevertheless has equity jurisdiction and distinct rules regarding equity are still extant, [...] . Speaking generally and broadly, it is settled law that "Stability of contract obligations must not be undermined by judicial sympathy..." [...] . However, it is true with equal force and effect that equity must not and cannot slavishly and blindly follow the law, [...] . Moreover, as succinctly decreed by our Court of Appeals in the matter of Noyes v. Anderson 124 NY 175 (1890) "A party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression..." [...].

• In the matter of Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), Special Term stated that "The maxim of "clean hands" fundamentally was conceived in equity jurisprudence to refuse to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful, unconscionable or inequitable conduct in the matter with relation to which he seeks relief." [...] .

• In attempting to arrive at a determination as to whether or not equity should properly intervene in this matter so as to permit foreclosure of the mortgage, the Court is required to look at the situattion in toto, giving due and careful consideration as to whether the remedy sought by Plaintiff would be repugnant to the public interest when seen from the point of view of public morality, [...]. Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, [...], neither will equity be available to one who acts in a manner that is oppressive or unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary, [...]. The compass by which the questioned conduct must be measured is a moral one and the acts complained of (those that are sufficient so as to prevent equity's intervention) need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong, [...]. Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be, [...].

• An objective and painstaking examination of the totality of the facts and circumstances herein leads this Court to the inescapable conclusion that the affirmative conduct exhibited by Plaintiff at least since since February 24, 2009 (and perhaps earlier) has been and is inequitable, unconscionable, vexatious and opprobrious. The Court is constrained, solely as a result of Plaintiff's affirmative acts, to conclude that Plaintiff's conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff's actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against Defendant. The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option. Likewise, the imposition of monetary sanctions [...] is not likely to have a salubrious or remedial effect on these proceedings and certainly would not inure to Defendant's benefit. This Court is of the opinion that cancellation of the indebtedness and discharge of the mortgage, when taken together, constitute the appropriate equitable disposition under the unique facts and circumstances presented herein.

• After careful consideration, it is the determination of this Court that the indebtedness evidenced by the Adjustable Rate Note [...] in the original principal amount of $292,500.00 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. should be cancelled, voided and set aside. In addition, the Mortgage which secures the Adjustable Rate Note, given to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. [...] and recorded with the Clerk of Suffolk County [...] should be cancelled and discharged of record. Further, Plaintiff, its successors and assigns should be forever barred and prohibited from any action to collect upon the Adjustable Rate Note. In addition, the Judgment of Foreclosure & Sale granted on January 12, 2009 and entered on January 23, 2009 should be vacated and set aside and the Notice of Pendency should be cancelled and discharged of record. For this Court to decree anything less than the foregoing would be for the Court to be wholly derelict in the performance of its obligations.

For Justice Spinner's court ruling, see Indymac Bank F.S.B. v Yano-Horoski, 2009 NY Slip Op 52333(U), November 19, 2009.

For media reports on this court ruling, see:

• New York Law Journal: Judge Blasts Bank's Foreclosure Conduct and Cancels Mortgage (A lender's "unconscionable, vexatious and opprobrious" conduct in attempting to foreclose on a Long Island home has prompted a state judge to cancel the mortgage on the property),
• New York Post: Judge blasts bad bank, erases 525G debt (Judge KOs 525G mortgage to slap bank),
• ABC World News Tonight: Judge Rescues Struggling Couple From Foreclosure (New York Judge Cancels Mortgage in Thanksgiving Surprise; Bank Will Appeal).

Thanks to Rob Harrington for the heads-up on this court ruling. EpsilonMissingDocsMtg