NY Appellate Court Tells Trial Judge: Cancelling Mortgage, Note Because Of Lender's "Repugnant, Shocking & Repulsive" Conduct Goes A Bit Too Far

The New York Law Journal reports:

• A judge who blasted a lender's "repugnant, shocking and repulsive" conduct in trying to foreclose on a Long Island home exceeded his authority when he canceled the mortgage on the property, a state appeals court has ruled. After IndyMac Bank obtained a foreclosure judgment against Diana J. Yano-Horoski, who took out a $292,500 mortgage in 2004, the East Patchogue homeowner requested a settlement conference with the bank.

• In a decision last year, Supreme Court Justice Jeffrey A. Spinner in Suffolk County criticized an IndyMac representative for what he called her "opprobrious demeanor and condescending attitude" during the conference, and said she had made it "abundantly clear that no form of mediation, resolution or settlement would be acceptable to the bank."

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• Blasting IndyMac for its "egregious" conduct, he concluded that monetary sanctions would not benefit Ms. Yano-Horoski, and took the unusual step of canceling the debt and discharging the mortgage (NYLJ, Nov. 23, 2009).

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• Last week, the Appellate Division, Second Department, held in an unsigned ruling that the "severe sanction…was not authorized by any statute or rule…nor was the plaintiff given fair warning that such a sanction was even under consideration." "The reasoning of the Supreme Court that its equitable powers included the authority to cancel the mortgage and note was erroneous, since there was no acceptable basis for relieving the homeowner of her contractual obligation to the bank," the panel wrote in its unanimous unsigned ruling in IndyMac Bank, F.S.B. v. Yano-Horoski, 2010 NY Slip Op 08532 (App. Div. 2nd Dept., November 16, 2010).(1)

For the story, see Panel Upsets Ruling That Canceled Mortgage.

(1) After getting hammered in the lower court (during which the lender was represented by the foreclosure mill law firm Steven J. Baum, P.C.), the lender rolled out a couple of heavyweight law firms (4 attorneys named for the filing of one brief) to win reversal of the earlier ruling. The homeowner, unrepresented by counsel in the lower court, remained unrepresented on appeal.