HSBC Bank USA v. McKenna
37 Misc. 3d 885
N.Y. Sup. Ct.2012Background
- Action to foreclose mortgage on 448 Decatur St., Brooklyn; loan date 3/27/2007 for $624,000 to MORTGAGEIT.
- Borrower named as John T. McKenna, Jr.; indorsement to plaintiff and 3/2/2009 assignment from MERS to plaintiff.
- Case referred to Mandatory Foreclosure Conference Part; initially set for 5/21/2009; referred to this court on 5/25/2011 after 18 appearances.
- Special Referee Goldstein pressed for finding under CPLR 3408 for failure to negotiate in good faith; July 8, 2011 report followed by further submissions.
- CPLR 3408 mandates a good-faith settlement conference for residential foreclosures where defendant resides at the subject property.
- Residency issue contested; some evidence suggested vacancy; judge directed supplementation to determine whether McKenna resided at the mortgaged property during commencement and conferencing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CPLR 3408 (a) residency triggers good-faith negotiation | McKenna resided elsewhere; no duty to negotiate in good faith. | McKenna resided at the Decatur Street property during commencement and conferencing; duty applies. | Residency triggers mandatory conference and good-faith negotiation. |
| Whether plaintiff violated CPLR 3408 (f) by not negotiating in good faith | Plaintiff engaged in the process and relied on appraisals; negotiations were ongoing. | Plaintiff refused reasonable short-sale offers; delayed and stalled review. | Plaintiff failed to negotiate in good faith. |
| Remedy for failure to negotiate in good faith | Remedies limited by CPLR 3408; interest may be recoverable. | Equitable remedies should address lack of good faith; potential waivers not applicable. | Interest denied from date of default; attorney-fee and other relief limited as described; standing disclosures required. |
Key Cases Cited
- IndyMac Bank F.S.B. v. Yano-Horoski, 78 AD3d 895 (2d Dept 2010) (lack of good faith can justify sanctions or remedial relief in foreclosure mediation)
- Citibank, N.A. v Van Brunt Props., LLC, 95 AD3d 1158 (2d Dept 2012) (foreclosure relief and equitable considerations in mediation context)
- Norwest Bank Minn., NA v E.M.V. Realty Corp., 94 AD3d 835 (2d Dept 2012) (equitable limits and consideration of lender conduct in foreclosure)
- First Natl. Bank of E. Islip v. Brower, 42 NY2d 471 (Court of Appeals 1977) (equitable relief principles in foreclosure and contract-based outcomes)
- Levine v Infidelity, Inc., 285 AD2d 629 (2d Dept 2001) (good faith and state-of-mind considerations in NY law)