Opinion
No. 16555/10.
2013-05-31
Stoja RAJIC, Plaintiff, v. Donna FAUST, as Executor of the Estate of Noreen Sander, Deceased, Defendant.
Michael M. Lippman, Esq., Hastings–On–Hudson, for the Plaintiff. Carl F. Lodes, Esq., Carmel, for the Defendant.
Michael M. Lippman, Esq., Hastings–On–Hudson, for the Plaintiff. Carl F. Lodes, Esq., Carmel, for the Defendant.
FRANCESCA E. CONNOLLY, J.
This matter involves two consolidated actions relating to the interpretation and enforcement of a purchase money note and mortgage, dated November 20, 2002, which was secured by property located at 21 Lynway Lane, Somers, New York. The plaintiff, Stoja Rajic (“Rajic”) commenced this action seeking a declaratory judgment that she is indebted to Donna Fouste, as Executrix of the Estate of Noreen Sander (“the Estate”), in the sum of $140,726.00, and that she be permitted to pay the Estate the monthly sum of $1,373.27 over a period of twelve years in accordance with the terms of the purchase money note and mortgage and the parties' stipulation of settlement placed on the record in Surrogate's Court on April 27, 2010 and the amended order dated June 1, 2010. The Estate served an answer denying the material allegations and the relief sought, and asserted no affirmative defenses or counterclaims. The Estate commenced a separate action against Rajic to foreclose on the purchase money mortgage based upon her default in payment of principal and interest in accordance with the note and mortgage. Rajic served an answer denying the material allegations and relief sought, and likewise, asserted no affirmative defenses or counterclaims.
Following joinder of issue, a request for judicial intervention was filed on each case and preliminary conferences were held. Three compliance conferences were also held and, following the completion of discovery, the two actions were consolidated for trial pursuant to the so-ordered stipulation of the Hon. Joan B. Lefkowitz, J.S.C., dated August 26, 2011. Although the plaintiff made no formal request that a Residential Foreclosure Action conference be held, settlement was discussed at the final compliance conference on October 6, 2011, as well as at two settlement conferences before Justice Lefkowitz on June 7, 2012 and July 19, 2012. When settlement discussions proved unsuccessful, the matter was marked for trial on March 4, 2012. In addition, the parties and their counsel met four times out-of-court to discuss settlement. Rajic makes no claim that the Estate has failed to negotiate settlement in good faith.
The cases were referred to this Court for trial on March 4, 2013. At trial, Rajic requested that the trial be adjourned and the matter be referred for a mandatory mortgage modification conference pursuant to CPLR § 3408 and 22 NYCRR § 202.12(a). After considering the case history, including the untimeliness of the request, and the parties' numerous efforts to settle the matter before trial, which included three court-mandated conferences, as well as four separate out-of-court conferences, the application was denied and the matter proceeded to trial.
The cases were tried before this Court on March 4 and 5, 2013. The only witnesses to testify were the parties and Gregory Bagen, Esq., an attorney who represented the decedent in the preparation of two wills, and who also represented the Estate in a will contest and discovery proceeding in Westchester County Surrogate's Court.
At the conclusion of trial, the Court reserved decision pending receipt of post-trial memoranda of law, which were subsequently served and filed by both parties. The following papers were submitted in support of the parties' positions at trial:
Defendant's Pre–Trial Brief
Defendant's Post–Trial Brief
Plaintiff's Post–Trial Brief
Defendant's Post–Trial Reply Brief
Parties' Stipulation dated April 17, 2013
After considering the testimony of the parties and the witness, the documents admitted into evidence, the parties' post-trial briefs, and the stipulation, the Court makes the following findings of facts deemed established by the evidence and reaches the following conclusions of law.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Factual Background
The decedent, Noreen Sander, owned a single family residence located at 21 Lynway Lane in Somers, New York. In 1996, the decedent, who was elderly and lived alone, hired the plaintiff, Stoja Rajic, as a companion to assist the decedent with her daily activities, including paying her bills and writing checks. Rajic was paid $2,016.00 per week to care for the decedent 24 hours per day, seven days per week, at $12.00 per hour. In addition to paying Rajic, the decedent would have other aides care for her who were paid $15.00 per hour. Rajic would take the decedent to the bank to withdraw cash to pay the other aides and to pay her bills. Notably, Rajic did not produce copies of any paychecks she received for the period of time from 1996 until December 2002.
On November 20, 2002, the decedent sold her residence to Rajic for the sum of $275,000.00, subject to a life estate in favor of the decedent. The parties agreed that the fair market value of the residence was $375,000.00 and that it would be reduced by $100,000.00 to account for the value of the decedent's life estate and to make certain repairs on the property. Plaintiff paid $1,000.00 as a down payment.
Both parties were represented by counsel throughout the transaction. The closing took place on November 20, 2002, at which time the decedent executed a bargain and sale deed conveying title to the property to Rajic, subject to the life estate. At the closing, Rajic executed a purchase money note and mortgage for $274,000.00. The note provided for Rajic to pay the decedent $274,000.00, together with interest at 6% per annum, with principal and interest to be paid in equal monthly installments of $1,963.02, commencing in December 2002, for a period of twenty years. The note was secured by a purchase money mortgage, which operated as a lien upon the property. If any payment was not made on the date due, the payment would bear interest at 12% per annum or the highest lawful rate permitted, from the date when the payment was due until paid. The purchase money mortgage provided that Rajic was to pay all real estate taxes, assessments, water charges, and sewer rents.
According to the mortgage and note, the decedent had the right to declare the entire unpaid amount of principal and interest immediately due in the event of a default. Rajic had the right to prepay on the note upon written notice ten days prior to payment, however, the installment amounts would continue without change after any prepayment. Under the mortgage and note, Rajic waived presentment for payment, demand, protest, notice of protest, notice of nonpayment, notice of intention to accelerate maturity, notice of acceleration of maturity, and notice of dishonor of the note. All of the covenants, conditions, and agreements contained in the mortgage were incorporated by reference into the note, with the terms of the mortgage governing any conflict between the terms of the note and the terms of the mortgage. The note could not be changed or terminated except by written agreement signed by the party against whom enforcement was being sought.
Rajic testified that starting in December 2002, she took her entire paycheck in the amount of $2,016.00 and made 28 weekly payments of this same amount towards the mortgage. In July 2003, Rajic decreased the number of hours she worked and correspondingly, she decreased her weekly payment to $800.00 per week. The parties stipulated that Rajic made 13 payments of $800.00, three in July 2003, five in August 2003, three in September 2003, and two in October 2003. Rajic made no other payments on the note until February 10, 2004, when she made a lump sum payment of $15,000.00.
From December 2002 through October 2003, Rajic wrote her own paychecks from the decedent's bank account and had the decedent sign the checks. Rajic deposited these paychecks into her own account, from which account she wrote her mortgage payment checks payable to the decedent in the exact same amount as each paycheck.
On June 8, 2004, the decedent executed a satisfaction of mortgage, which was prepared by a bank manager, discharging Rajic's financial obligation under the note and mortgage. Rajic admitted that she had not paid the decedent the sum of $274,000.00 at the time the satisfaction was prepared or filed and that her last mortgage payment was on February 10, 2004 when she made the lump sum payment of $15,000.00. The decedent died on January 17, 2006. The cause of death is listed as multi-infarct dementia.
Attorney Gregory Bagen testified at trial that he knew the decedent and had represented her in the past, including preparing two wills for her. The first will was prepared in the 1990's and the second will was prepared in 2000, with only minor changes made.
In 2002, Attorney Bagen met Rajic for the first time when she brought the decedent to his office to ask for his assistance in preparing documents to effectuate a transfer of the decedent's home to Rajic. After speaking with the decedent, Mr. Bagen refused to prepare the documents, as he was convinced the decedent was not competent to understand the transaction.
Following the decedent's death on January 17, 2006, Donna Fouste learned that the decedent had a new will prepared in 2003 that left her entire estate to Rajic. Donna Fouste, as Executrix, retained Mr. Bagen to commence a will contest in Surrogate's Court on behalf of the Estate, as well as a discovery proceeding to discover the assets of the estate. The Estate sought to have the decedent's most recent will and the satisfaction of mortgage declared invalid based upon fraud and undue influence. After conducting discovery, the Estate determined that $352,000.00 had inexplicably been removed from the decedent's account over the period of three-and-a-half years before the decedent's death.
Ultimately, the Surrogate's Court declared the 2003 will invalid and reinstated the 2000 will based upon undue influence. The estate matter was settled on the record in Surrogate's Court on April 27, 2010, with Rajic agreeing to pay the estate the sum of $100,000.00 in settlement of the $352,000.00 claim. She also agreed to satisfy an equity line of credit she placed on the premises in the approximate amount of $100,000.00, and to vacate the satisfaction of mortgage and reinstate the purchase money mortgage of November 20, 2002. An amended order vacating the satisfaction of mortgage dated June 8, 2004 and reinstating the purchase money mortgage of November 20, 2002 was signed by the Hon. Anthony A. Scarpino, Jr., Surrogate, on June 1, 2010.
Following the mortgage reinstatement, Rajic claims that commencing in June of 2010 she tendered monthly payments towards the mortgage in the amount of $1,327.27, which the Estate rejected. Her reasoning for reducing the amount of the monthly mortgage payments was based upon her accountant's “recalculation” of the amount due under the terms of the purchase money note and mortgage and the Surrogate's Court settlement. Rajic then commenced this action seeking a declaration that her payments due under the purchase money note and mortgage were $1,327.27 per month for twelve years. The Estate commenced a separate action to foreclose on the property, have it sold, and for Rajic to pay any remaining deficiencies.
DISCUSSION/ANALYSIS
Plaintiff is Estopped from Requesting a Mandatory Foreclosure Settlement Conference under CPLR § 3408
To address the alarming increase in residential foreclosure actions in New York state caused by the subprime lending crisis, in 2008, the New York State Legislature enacted a “a variety of statutes that are known, in omnibus form, as the Subprime Residential Loan and Foreclosure Laws” (Hon. Mark C. Dillon, The Newly–Enacted CPLR 3408 For Easing The Mortgage Foreclosure Crisis: Very Good Steps, But Not Legislatively Perfect, 30 Pace L Rev 855 [2010] ). Among the statutory reforms, CPLR § 3408 was enacted to provide for mandatory settlement conferences in residential foreclosure actions involving home loans secured by mortgages on one to four family dwellings, which are occupied by the borrower as the borrower's principal dwelling (CPLR § 3408; RPAPL § 1304 [5][a] ).
“CPLR § 3408 was enacted to foster the early settlement of foreclosure actions as a means of preserving home ownership and to mitigate the subprime credit crisis, through the mandated auspices of the courts. The law requires that a conference be conducted in foreclosure actions between the parties and the court, for the purpose of, inter alia, determining whether the parties can resolve the litigation and keep families in their homes by adjusting payment schedules or the amounts due” (Hon. Mark C. Dillon, 30 Pace L Rev at 858–859).
While CPLR § 3408 was initially limited in its application to high cost, subprime, or nontraditional home loans, in 2009 the statute was amended to broaden its scope to cover all types of home loans in which the borrower is a resident of the property subject to foreclosure. The statutes's broadened scope sunsets on January 14, 2015, when it reverts back to covering only high cost, subprime, and nontraditional home loans. (CPLR § 3408[a]; RPAPL § 1304 [5] [a]; see Wells Fargo Bank, N.A. v. Meyers, 2013 WL 1811781 [2d Dept, May 1, 2013].) CPLR § 3408 contains no limitation in its application to a particular class or type of lender, and therefore, the mandatory settlement conference rule appears to apply to home loans given by institutional lenders, as well as those given by private individuals, which would include the Estate.
In contrast to CPLR § 3408(a), the Court notes that in RPAPL § 1304, the 90–day notice requirement before legal action may be commenced against any borrower under any home loan secured by a mortgage on an owner-occupied one to four family dwelling, applies only to licensed mortgage bankers, exempt organizations empowered by the United States or any state to make mortgage loans, assignees, and loan servicers ( seeRPAPL § 1304[1], [2] and [5][b]; Banking Law § 590[1][e] and [f] ).
A further amendment to the statute requires the parties to “to negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible” (CPLR § 3408[f] ). “While the aspirational goal of CPLR 3408 negotiations is that the parties reach a mutually agreeable resolution to help the defendant avoid losing his or her home' ... the statute requires only that the parties enter into and conduct negotiations in good faith” (Wells Fargo Bank, N.A. v. Van Dyke, 101 AD3d 638 [1st Dept 2012] ). If the parties are unable to reach an agreement after negotiating in good faith, the court is without power to force an agreement on the parties ( see Wells Fargo Bank, N.A. v. Meyers, 2013 WL 1811781 [2d Dept, May 1, 2013] ).
Although settlement conferences are required in all residential foreclosure actions covered by the statute, the failure to hold such a conference does not deprive the court of subject matter jurisdiction ( see Pritchard v. Curtis, 101 AD3d 1502, 1504 [3d Dept 2012]; Hon. Mark C. Dillon, 30 Pace L Rev at 885).
Here, Rajic never formally raised the issue of a mandatory mortgage modification conference pursuant to CPLR § 3408 and 22 NYCRR § 202.12(a) during the litigation until the time of trial. She raises the issue at trial seeking an adjournment despite having actively participated in numerous court-mandated settlement conferences and out-of-court settlement conferences and exhausted all settlement possibilities. Importantly, Rajic makes no claim that the Estate has failed to negotiate in good faith in an effort to find a reasonable means to allow Rajic to remain in the home. While not specifically labeled “mortgage modification conferences,” indeed, the numerous settlement conferences held in this matter achieved the goals of the mandatory conference requirement of CPLR § 3408 and therefore, the statute is satisfied.
In view of the statutory goal of CPLR § 3408 and Rajic's delay in requesting the conference, she is estopped from requesting any further settlement conferences under the statute. Indeed, adjourning the trial so that a conference with a specific label could be held would serve no purpose other than cause further delay, exalt form over substance, and distort the statutory intent.
Waivers of Presentment, Demands, and Notices for Defaults Under the Note and Mortgage
“A familiar and eminently sensible proposition of law is that, when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms” (W.W.W. Associates, Inc. v. Giancontieri, 77 N.Y.2d 157, 162 [1990] ). Under the purchase money note Rajic waived presentment of the note for payment in addition to the waiver of protest, notice of protest, notice of nonpayment, notice of intention to accelerate maturity, notice of acceleration of maturity and notice of dishonor of the note. The terms of the agreement are unambiguous. Both parties were represented by counsel throughout the transaction. Rajic understood the meaning and intent of the documents despite her trial testimony otherwise. As such, the contract terms will be enforced as written.
Pursuant to UCC § 3–511(2)(a), presentment or notice of protest is excused when “the party to be charged has waived it expressly or by implication either before or after it is due.” Since Rajic expressly waived this right in paragraph six of the purchase money note, the Estate was not required to present the note and demand payment before commencing this action (Gildin v. Hirschhorn, 93 A.D.2d 807 [2d Dept 1983]; Manufacturers and Traders Trust Company v. Griffin, 226 A.D.2d 1088, 1089 [4th Dept 1996] ).
The purchase money note also unequivocally states that upon Rajic's default, the payee was entitled to accelerate the entire remaining unpaid balance without providing Rajic notice of intention to accelerate maturity or notice of such acceleration. Therefore, Rajic expressly waived her right to this notice ( see Long Island Savings Bank Of Centereach, F.S.B. v. Denkensohn, 222 A.D.2d 659 [2d Dept 1995] ). “[W]here the acceleration of the maturity of a mortgage debt on default is made optional with the mortgagee, some affirmative action must be taken by [the mortgagee] evidencing his election to take advantage of the accelerating provision, and that until such action has been taken the provision has no operation” (Ward v. Walkley, 143 A.D.2d 415, 417 [2d Dept 1988] ).
The Estate exercised its option of accelerating the note's maturity by filing the summons, complaint, and notice of pendency with the County Clerk. “[T]he mere filing of a summons and complaint with notice of pendency is sufficient indication of the intent to accelerate the mortgage” (City Streets Realty Corp. v. Jan Jay Construction Enterprises Corp., 88 A.D.2d 558, 559 [1st Dept 1982] ). Since notice of default or demand for payment was not required under the agreement as a condition precedent to declaring the entire unpaid amount of principal and interest immediately due under the note, the commencement of the foreclosure action, and filing of a lis pendens operates as a valid election to accelerate the maturity of the unpaid principal balance and accrued interest ( see Hudson City Savings Institution v. Burton, 88 A.D.2d 728, 729 [3d Dept 1982] ).
Moreover, although not raised by Rajic, the Court notes that the 90–day notice required to be sent to a borrower under any home loan secured by a mortgage on an owner-occupied one to four family dwelling before legal action can be commenced does not apply to this action, as the Estate is not a lender, assignee, or loan servicer
( seeRPAPL § 1304[1], [2] and [ 5][b] and Banking Law § 590[1][e] and [f] ).
Id.
Conclusions and Order of Reference
The evidence presented at trial establishes that Rajic exercised undue influence over the decedent, a trusting elderly woman who lived alone and suffered from dementia. Rajic was indeed unscrupulous in handling the decedent's financial affairs, including writing herself paychecks from the decedent's checking account and then making “mortgage payments” to the decedent in the exact same amounts, accepting a satisfaction of mortgage from the decedent knowing the mortgage was far from being satisfied, and failing to adequately account for $352,000.00 missing from the decedent's bank account. However, considering that Rajic resolved the financial issues with the Estate in the Surrogate's Court action by agreeing to pay the Estate $100,000.00 and to payoff the home equity line of credit in the amount of $100,000.00, Rajic shall be credited for the payments she made on the note as established by the credible evidence at trial.
Rajic paid the decedent a total of $81,848.00 from December 2002 through February 2004, for which she shall receive a credit against the note. Specifically, Rajic made 28 weekly payments of $2,016.00 from December 2002 through June 2003, totaling $56,448.00. She then made 13 payments of $800.00 from July 2003 through October 2003, totaling $10,400.00, and one final payment of $15,000.00 in February 2004.
The evidence establishes that Rajic paid at least the minimum required monthly installment of $1,963.02 each month from December 2002 through September 2003. Rajic never notified the decedent of her intention to make excess payments as required by the note and therefore, none of the excess sums paid shall be applied to extend her default date or reduce the amount required for her monthly payments. In October 2003, Rajic made only two payments of $800.00, totaling $1,600.00, rather than the required monthly amount of $1,963.02. Although Rajic was technically in default under the terms of the mortgage and note at that time, the decedent did not exercise her acceleration option.
Thereafter, in February 2004, Rajic tendered a payment to the decedent in the sum of $15,000.00, thereby curing the October 2003 default. “The mortgagor may cure any default before the election to accelerate is made. Thus, the payment or tender of a sum in arrears effectively bars acceleration” (11PT2 West's McKinney's Forms Real Property Practice § 5A:81 [2013] [Note: online treatise] ). However, “when a default is willful, intentional and deliberate, equity will not grant relief from an acceleration provision” ( id.). Despite the fact that the sum paid for February 2004 was well in excess of the monthly installment amount of $1,963.02, and shall be credited against the amount owed under the note, it shall not serve to extend her default date or reduce the amount required for her monthly payments. Rajic made no further payments on the mortgage in the amount required under the note of $1,963.02 before the Estate exercised its acceleration option by filing the summons and complaint on August 16, 2010. Although Rajic unilaterally attempted to rewrite the mortgage and note by reducing her payments to $1,373.27 once the mortgage was reinstated on June 1, 2010, she had no right or good faith basis to do so. Rajic's tender of payments in amounts less than the monthly amount set forth in the note did not operate to cure her March 2004 default. Accordingly, the date of default under the note is March 1, 2004, the month following Rajic's $15,000.00 payment.
The Estate has submitted the relevant mortgage, the underlying note, and evidence of default, thereby entitling it to a judgment of foreclosure and sale of the premises (Emigrant Mortgage Company, Inc. v. Turk, 71 AD3d 721, 722 [2d Dept 2010]; Washington Mutual Bank, F.A. v. O'Connor, 63 AD3d 832 [2d Dept 2009] ). The sum due the Estate shall be determined by a Referee who shall compute the amount due upon notice to Rajic.
David G. Gallo, Esq., 5 MacDonald Avenue, Armonk, New York, 10504, is hereby appointed as Referee to calculate the amount Rajic owes under the note based upon her March 1, 2004 default. The date of acceleration is August 16, 2010. For every payment due that was not paid on the due date, the payment shall bear interest at the lesser of 12% per annum or the highest lawful rate permitted by law from the date the payment was due until it was paid in accordance with the terms of the note. The Estate shall also be entitled to any other costs or fees, including reasonable attorneys' fees, as set forth under the note and mortgage, or as otherwise allowable by law. Rajic shall receive a credit of $81,848.00 for the sums she paid the decedent between December 2002 and February 2004. The Referee shall advise whether the mortgaged premises can be sold in one parcel.
Upon completion of the computation, the Referee shall file a final report with the Clerk of Court and the Estate may then move for confirmation of the Referee's report and a judgment of foreclosure and sale of the property on notice to the plaintiff. Pursuant to CPLR § 8003(a) in the discretion of the Court, a fee of $500.00 shall be paid to the Referee for the computation stage and upon the filing of the report. The Referee is granted leave to submit a further application on notice to the parties for additional reasonable fees should the set fee be insufficient. By accepting this appointment, the Referee certifies that he is in compliance with Part 36 of the Rules of the Chief Judge (22 NYCRR Part 36).
In light of the foregoing, Rajic's complaint seeking a declaratory judgment that the amount owed is $1,373.27 per month for a period of twelve years is dismissed.
This constitutes the decision and order of the Court.