In New York City, a Staten Island trial court recently invoked its "
inherent equitable power over its judgments and decrees"
(1) to set aside a previous judgment foreclosing a mortgage and permitting the sale of the subject property as a result of certain conduct engaged in by the foreclosing lender. The effect of the court's action was not to throw out the foreclosure action altogether, but to give the homeowner a couple of more months to determine if a loan modification on her home loan was possible.
According to the court:
- [W]hile defendant [homeowner] engaged in good faith negotiations, plaintiff’s [foreclosing lender's] counsel chose to submit an order directing the sale of the subject property to this court for signature. This is a classic case of the left hand does not know what the right hand is doing. [...] On several occasions defendant represented to this court that she is currently paying a second mortgage on the subject premises. Obviously the owner would not normally pay a second mortgage when she was not paying the first mortgage unless she reasonably believed she was resolving the problem with the first mortgage holder.
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- In this case the plaintiff engaged in conduct that led defendant to believe that the sale of her home was not imminent. The defendant argues and the plaintiff does not deny that the defendant engaged the plaintiff to modify her loan agreement on November 28, 2007.
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- It is shocking that plaintiff would submit an application for a Judgement of Foreclosure Sale to this court while at the same time leading the defendant to believe a possibility existed to save her home. Defendant further asserts that she engaged in additional telephone conferences with the plaintiff prior to the foreclosure sale date of February 25, 2008. Defendant states that during these subsequent phone calls plaintiff’s attorney never mentioned the impending foreclosure sale of the subject property. Plaintiff does not deny these allegations.
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- Even had the plaintiff offered [evidence that homeowner's income did not support a loan modification,] it does not absolve plaintiff of applying to this court for a judgment from this court while concurrently leading the defendant to believe that modification was possible, especially when she continued paying the second mortgage.(2)
For the court's Decision and Order, see Deutsche Bank National Trust Co. v. White, et al. 2008 NY Slip Op 31906(U); July 2, 2008.
(1) For authority to invoke the court's equitable powers, Richmond County Supreme Court Justice Joseph J. Maltese quoted from, among other cases, the New York Court of Appeals decision in Fisher v. Hersey, 78 NY 387 (1879):
- Courts of equity exercise a supervision of sales made under their decrees, which is not in all cases controlled by legal rules, but may be guided by considerations resting in discretion. They may set aside their own judicial sales, upon grounds insufficient to confer upon the objecting party an absolute legal right to a re-sale. They may relieve against mere mistakes, accidents or hardships, or oppressive or unfair conduct of others, though such conduct may not amount to a violation of law; and where fraud is alleged they may order a re-sale upon facts casting such a degree of suspicion upon the fairness of the sale as to render it, in their judgment, expedient, under all the circumstances, to vacate it, though the alleged fraud may not be clearly established.
(2) In setting aside the Judgement of Foreclosure and Sale, the court stated:
- It is the finding of this court that these actions taken by plaintiff were not maliciously motivated, but were instead careless administrative errors. It is the further finding of this court that this administrative error by the plaintiff’s officers in failing to communicate with their attorneys that the judgment was submitted is a mistake that causes the previous order directing the foreclosure and sale of the subject premises to be patently unfair to the defendant. This court would not have signed that judgment with the knowledge of the foregoing facts. Therefore, this court is setting aside the judgment dated December 21, 2007. A court cannot condone such a practice, even if it is unintentional, by giving it the protection of a judicial order.
