Long Island Judge Slams Lender, Attorney For Careless Filings In Foreclosure Action

In Suffolk County, New York, State Supreme Court Justice Jeffrey Arlen Spinner recently slammed a foreclosing lender and its legal counsel for wasting his time for filing crappy paperwork in an attempt to take the home of a purportedly delinquent borrower. He denied the lender's request to move forward with the foreclosure, and set a date for a hearing to detemine what sanctions, if any, the alleged culprits will be hammered with.

An excerpt from his ruling (bold text is my emphasis, not in the original text):

• Curiously and in direct derogation of the mandatory provisions of 22 NYCRR § 202.7, Plaintiff has failed to specify or insert a return date for the application and has apparently served its papers with no return date. Not surprisingly, counsel for Defendants has neither answered nor responded thereto, presumably due to the lack of both a stated return date and appropriate notice.

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• This Court must question how, under the circumstances presented here, Plaintiff can, with unbridled temerity, demand enforcement of the Loan Agreement against Defendant STEPHEN STEELE, who has not executed that instrument and against Defendant SUSAN STEELE, who is not even a party to that agreement. The most cursory reading of these instruments reveal the obvious facts as set forth above. This posture by Plainitff strains credulity and causes the Court to seriously question Plaintiff's good faith in commencing this action.
  
  Distilled to its essence, a mortgage is a conveyance of an interest in land that is expressly intended to constitute security for some obligation, most commonly an indebtedness, Burnett v. Wright 135 NY 543, 32 NE 253 (1895). It follows logically then that in order for a mortgage to be valid and subsisting, there must be an underlying obligation that is to be secured by an interest in the real property, owed by the obligor to the obligee, which contains both the right of the obligee to foreclose and the right of the obligor to redeem, Baird v. Baird 145 NY 659, 40 NE 222 (1895), R.H. Macy & Co. v. Bates 280 AD 292, 114 NYS 2d 143 (3rd Dept. 1952). Absent these essential elements, a valid mortgage cannot exist because it is the underlying obligation which gives rise to the validity of the mortgage as a lien upon the real property. Here, the Loan Agreement that has been presented to the Court facially appears to run counter to New York's Statute of Frauds, G.O. L. § 5-701. Since there has been presented to this Court no valid underlying obligation and no further explanation, the mortgage appears to fail as a matter of law.
  
  This situation is all the more disturbing when it is considered that the sworn statements contained in the both the Complaint and the Affidavit in Support Of the Motion for Summary Judgment expressly and falsely assert that Defendant SUSAN STEELE executed the Loan Agreement. This is compounded by the sworn statement of Shana Richmond, Plaintiff's foreclosure specialist, which is dated April 28, 2010 and which contains the same painfully obvious mis-statements of fact.
  
  Going further, Plaintiff's counsel has submitted an Affirmation dated December 2, 2010 which purports to comply with Administrative Order no. AO548/10 in which he ratifies and confirms, in essence, the incorrect assertions in the Complaint and the Summary Judgment application. Aside from the papers themselves, it appears that counsel's affirmation runs afoul of the provisions of 22 NYCRR § 130-1.1.

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• Here, it is irrefutable that Defendant SUSAN STEELE was not a party to the Loan Agreement and certainly did not execute the same. It is equally indubitable that Defendant STEPHEN STEELE did not execute the Loan Agreement that has been presented on this application. Nonetheless, Plaintiff has vigorously prosecuted this action, demanding foreclosure of the mortgage as well as money damages against both named Defendants. Under these circumstances, the Court is compelled to conduct a hearing to determine whether or not Plaintiff has proceeded in good faith and what sanction, if any should be imposed should the Court find a lack of good faith.(1)

For the ruling, see Beneficial Homeowner Serv. Corp. v Steele, 2011 NY Slip Op 50015(U) (NY Sup. Ct. Suffolk Cty., January 7, 2011).

Thanks to Bill Collins of Frontier Abstract, Rochester, NY for the heads-up on this court ruling.

(1) Based on the points made by Justice Spinner, don't be surprised if the shameless lender's attorney shows up to court, hat in hand, prepared to invoke what has been referred to as the "pure heart and empty head" defense.

See, e.g.:

• In re Rivera, 342 B.R. 435, 460 (Bankr. D. N.J. 2006), stating that this defense was unavailable to a law firm facing Rule 11 sanctions in a bankruptcy case that resulted in the imposition of a $125,000 fine on the firm in connection with the chronic filing of unreviewed paperwork in foreclosure actions.
• Warner v. Hillcrest Medical Center, 914 P.2d 1060 (Okla. Ct. Civ. App. 1995), stating:
  
  `There is no room for a pure heart, empty head defense under [§ 2011].'" First National Bank and Trust Company of Vinita v. Kissee, 859 P.2d 502, 512 (Okla. 1993) (emphasis in original) (footnotes omitted). "Rule 11 requires lawyers to think first and file later, on pain of personal liability." Stewart v. RCA Corp., 790 F.2d 624, 633 (7th Cir. 1986).