Tuesday, May 7, 2013

NY Appeals Court To Foreclosing Banksters: Little Downside To Screwing Over Homeowners By Failing To Negotiate In Good Faith In Foreclosure Settlement Conferences Since State Lawmakers Failed To Specify Sanctions, Remedies

Reuters reports:

  • A New York state judge's order sanctioning Wells Fargo for failing to negotiate during a foreclosure settlement conference violated the bank's constitutional rights, a state appeals court ruled Wednesday.

    The Appellate Division, Second Department, reinstated a foreclosure action brought by Wells Fargo Bank N.A. against Paul and Michela Meyers.

    In doing so, the court held that Acting Supreme Court Justice Patrick Sweeney in Suffolk County had overstepped his authority by dismissing the complaint and ordering the bank to enter a loan modification.

    The order violated the Contract Clause - which bars the impairment of a contractual relationship - by effectively rewriting a mortgage and loan agreement, as well as Wells Fargo's due process rights by not giving it notice that the Supreme Court was considering the dismissal and modification, Dickerson wrote.

    "It is obvious that the parties cannot be forced to reach an agreement, CPLR 3408 does not purport to require them to, and the courts may not endeavor to force an agreement upon the parties," Justice Thomas Dickerson wrote in a unanimous opinion.

    CPLR 3408 is a law passed in 2008 that requires parties in foreclosure settlement conferences to negotiate in good faith.
  • Sweeney found that Wells Fargo had not met its obligations, and ordered the bank to enter into a modification agreement with the defendants. He also dismissed the foreclosure complaint.

    The Second Department upheld Sweeney's ruling with regard to Wells Fargo's failure to meet its obligations under CPLR 3408 to negotiate in good faith.

    However, the appeals court found that Sweeney created his own sanction for violating CPLR 3408 by dismissing the complaint and making the bank enter the modification agreement.(1)

    Dickerson was joined by Justices Daniel Angiolillo, Leonard Austin and Jeffrey Cohen.
  • A lawyer for the defendants, Diana Ruiz, said that the decision made it clear that the ball was in the legislature's court to hold banks accountable for their actions during foreclosure settlement conferences.

    "The court makes it clear there was bad faith, the question is what we're going to do about it," Ruiz said.
For the story, see Sanction vs bank in foreclosure case went too far: appeals court.

For the court ruling, see Wells Fargo Bank, N.A. v Meyers, 2011-00482 (NYS App. Div. 2d Dept. May 1, 2013).

(1) An excerpt from the court's opinion:
  • In sum, it is beyond dispute that CPLR 3408 is silent as to sanctions or the remedy to be employed where a party violates its obligation to negotiate in good faith.

    In amending CPLR 3408 to add subdivision (f), the Legislature declined to authorize or set forth any particular sanction or penalty to impose upon a party found to have failed to satisfy its obligation under CPLR 3408(f)to negotiate in good faith.

    Unless the Legislature chooses to specify appropriate sanctions or remedies to be employed in such circumstances, the courts will continue to endeavor to enforce the mandate of CPLR 3408(f) as best they can in the absence of a sanctioning provision.

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