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Emigrant Bank v. Rosabianca

Supreme Court of New York, First Department

December 14, 2017

Emigrant Bank, as successor-by-merger with Emigrant Savings Bank - Manhattan, Plaintiff-Respondent,
v.
Luigi Rosabianca, et al., Defendants, Carmelo Rosabianca, et al., Defendants-Appellants.

          Petroff Amshen LLP, Brooklyn (James Tierney of counsel), for appellants.

          Adam Leitman Bailey, P.C., New York (Jeffrey R. Metz of counsel), for respondent.

          Friedman, J.P., Gische, Kapnick, Kahn, Gesmer, JJ.

         Order, Supreme Court, New York County (Gerald Lebovits, J.), entered June 17, 2016, which denied the motion of defendants Carmelo and Vivian Rosabianca (the Rosabiancas), inter alia, to file a late answer pursuant to CPLR 3012(d), affirmed, without costs.

         Notwithstanding the Rosabiancas' sympathetic position, we conclude that the denial of their motion for relief under CPLR 3012(d) was warranted for the reasons that follow.

         I. Factual and Procedural Background

         Since 1974, the Rosabiancas have owned and lived at the residential property located at 2342 Benson Avenue in Brooklyn. Allegedly without their knowledge, in 2008, the Rosabiancas' son, defendant Luigi Rosabianca (Luigi), [1] used their home as collateral for a $1.76 million mortgage loan he obtained from Emigrant Mortgage Company (EMC) on a condominium unit located at 55 Wall Street in Manhattan. EMC subsequently assigned the collateral mortgage and related note to Emigrant Savings Bank - Manhattan (ESBM), which was later merged into plaintiff, Emigrant Bank.

         On April 30, 2008, shortly before Luigi's purchase of the condominium, the Rosabiancas each granted Luigi a durable general statutory short form power of attorney, appointing Luigi to act as their attorney-in-fact for all matters listed on the instruments, including "real estate transactions" and "banking transactions" with respect to their Brooklyn home. The Rosabiancas' signatures on both powers of attorney were duly acknowledged by a licensed notary public. Both powers of attorney have a handwritten notation at the bottom stating, "2342 Benson Ave., Brooklyn[, ] NY Block 6874[, ] Lot 50."

         At the May 14, 2008 closing on the condominium unit, Luigi acted as borrower, attorney-in-fact for the Rosabiancas, title closer, and title agent for Fidelity Title Insurance Company. Also at the closing that day, Luigi executed both the collateral mortgage and an adjustable rate note referring to a "Mortgage/Lien in the amount of $1, 760, 000" to be placed on two properties, setting forth the addresses of the Manhattan condominium unit and the Rosabiancas' Brooklyn home. Luigi signed the collateral mortgage on the Rosabiancas' behalf as their attorney-in-fact. Luigi also provided an affidavit of effectiveness, sworn and subscribed before a licensed notary public [2] with respect to each of the powers of attorney, in which he swore that each power of attorney was a "valid and subsisting [p]ower which has not been revoked" and that he had "full and unqualified authority to execute all documents." Luigi alleges that, subsequent to the closing, he was unable to locate the original powers of attorney and collateral mortgage, and for that reason never recorded them.

         Luigi allegedly made the collateral mortgage loan payments for more than three years until defaulting on the loan by failing to make the mortgage payment due August 1, 2011. One week later, on August 8, 2011, he obtained a $500, 000 loan from a Panamanian lender, Little Bay Investment Corp. (Little Bay), which was secured by a mortgage on the Wall Street condominium. On September 1, 2011, that mortgage was recorded in the Office of the New York City Register.

         On April 18, 2012, the Rosabiancas were each served a copy of a summons and complaint in an action brought by ESBM for an order directing the Office of the New York City Register, Kings County, to accept for recording copies of the powers of attorney signed by the Rosabiancas and the collateral mortgage, because the original documents were lost (Emigrant Savings Bank - Manhattan v Rosabianca, Sup Ct, Kings County 2012, Index No. 6591/12) (the Kings County action). The first page of the complaint refers to the "Collateral Mortgage in the original principal sum of $1, 760, 000.00 dated May 14, 2008, " and states that the powers of attorney were "given by Defendants Carmelo Rosabianca and Vivian Rosabianca to Luigi Rosabianca to act as their Attorney in Fact with respect to the granting of a collateral mortgage in favor of [EMC] on the premises known as 2342 Benson Avenue, Brooklyn, New York 11214" (emphasis added).

         On September 7, 2012, after the Rosabiancas failed to appear in the Kings County action, ESBM moved for a default judgment directing that the copies of the powers of attorney and collateral mortgage be recorded and to quiet title in its favor. On November 19, 2012, Supreme Court, Kings County, granted the motion and issued an order of default. On January 29, 2013, the Rosabiancas were each served with a notice of entry of the order of default.

         On June 21, 2013, Supreme Court, Kings County, entered a judgment directing that the copies of the powers of attorney and collateral mortgage be recorded in the Office of the City Register, Kings County. On August 13, 2013, a notice of entry of judgment was served on each of the Rosabiancas with a copy of the judgment attached. The judgment describes the "Collateral Mortgage" as a "mortgage in the original principal sum of $1, 760, 000.00 dated May 14, 2008, " and as "given by Defendants Carmelo Rosabianca and Vivian Rosabianca to Luigi Rosabianca in favor of [EMC], on the Property." The address of the "Property" appearing on the judgment is "2342 Benson Avenue, Brooklyn, New York 11214."

         On September 6, 2013, the copies of the powers of attorney and collateral mortgage were recorded at the Office of the City Register, Kings County, by EMC.

         On November 19, 2013, EMC served a 90-day notice of default on the Rosabiancas pursuant to RPAPL 1304. The notice of default stated that the Rosabiancas were 841 days in default on the collateral mortgage and were at risk of losing their home.

         In February 2014, Little Bay assigned its mortgage on the Wall Street condominium to Secured Lending Corp.

         On March 26, 2014, plaintiff filed a summons and complaint in the instant action to foreclose on both the Rosabiancas' home and Luigi's condominium unit, naming the Rosabiancas, Luigi and Secured Lending as defendants. The Rosabiancas were served with copies of the summons and complaint by delivery to a person of suitable age and discretion at their place of residence on April 11, 2014, followed by delivery of copies of the summons and complaint to the Rosabiancas at their home address via first class mail on April 17, 2014 (see CPLR 308[2]). The affidavits of service as to both of the Rosabiancas were e-filed in the Office of the New York County Clerk on April 28, 2014.

         The Rosabiancas now allege that it was only upon their receipt of the copies of the summons and complaint in this action that they became aware of the existence of the collateral mortgage. They also aver that, after they were served with the summons and complaint, Luigi assured them that he would "do everything in his power" to prevent foreclosure on their home.

         On May 28, 2014, the Rosabiancas' time to answer the summons and complaint expired, without the Rosabiancas having appeared in the action.

         On June 9, 2014, plaintiff served the Rosabiancas with notices of default pursuant to CPLR 3215(g)(3)(i) by first class mail.

         On August 20, 2014, Luigi appeared at a mandatory foreclosure settlement conference, where he admitted the default and indicated that he intended to reinstate the loan from plaintiff and to settle with Secured Lending on its mortgage against the condominium unit, which, although obtained subsequently, had been recorded prior to the recording of plaintiff's mortgage. The settlement conference was adjourned to October 20, 2014, to afford Luigi time to prepare and submit a settlement proposal. However, Luigi failed to appear for the adjourned settlement conference. On December 12, 2014, plaintiff moved for a default judgment of foreclosure.

         Subsequently, the Rosabiancas retained counsel. Rather than opposing plaintiff's motion for a default judgment, however, they moved, on April 23, 2015, as relevant on appeal, for leave to file a late answer. On June 16, 2016, following oral argument, Supreme Court denied the motion.

         On appeal, the Rosabiancas argue that Supreme Court should have granted their motion to file a late answer because Luigi used their home as collateral for the mortgage without their knowledge or consent. They also claim that their lack of awareness of the collateral mortgage and their reliance on their son to protect their home from foreclosure once they became aware of the mortgage constitute an excusable default and a meritorious defense. In addition, they argue that the powers of attorney used by Luigi to obtain the collateral mortgage on their home were deficient because their signatures were obtained on those documents without their knowledge of the documents' true nature and contents.

         In response, plaintiff maintains that the Rosabiancas' default was not excusable because the Rosabiancas could have hired counsel other than Luigi when they first became aware of the collateral mortgage. Plaintiff further contends that the Rosabiancas have no meritorious defense because they each executed a valid power of attorney authorizing Luigi to act as their attorney-in-fact.

         II. Discussion

         Under CPLR 3012(d), a trial court has the discretionary power to extend the time to plead, or to compel acceptance of an untimely pleading "upon such terms as may be just, " provided that there is a showing of a reasonable excuse for the delay. In reviewing a discretionary determination, the proper inquiry is whether the court providently exercised its discretion.

         In Artcorp Inc. v Citirich Realty Corp. (140 A.D.3d 417');">140 A.D.3d 417');">140 A.D.3d 417');">140 A.D.3d 417 [1st Dept 2016]), we adopted the factors set forth in Guzetti v City of New York (32 A.D.3d 234, 238 (id.) [1st Dept 2006] [McGuire, J., concurring]) as those that "must . . . be considered and balanced" in determining whether a CPLR 3012(d) ruling constitutes an abuse of discretion. Those factors include the length of the delay, the excuse offered, the extent to which the delay was willful, the possibility of prejudice to adverse parties, and the potential merits of any defense (32 A.D.3d at 238).

         In this case, with respect to the first Artcorp/Guzetti factor, the length of the delay, the Rosabiancas were served with copies of the summons and complaint in this action showing that plaintiff sought foreclosure on both Luigi's Manhattan condominium unit and the Rosabiancas' Brooklyn home, in April 2014. The Rosabiancas made their motion on April 16, 2015. Thus, the length of the delay in their response to the summons and complaint was approximately one year. This factor tends to support denial of their motion, especially when viewed in light of their prior notices of the mortgage at least by April 2012 and of the default by November 2013.

         Regarding the second Artcorp/Guzetti factor, the excuse offered for the delay, the Rosabiancas aver that they reasonably relied on their son's representation that he would "do everything in his power" to prevent foreclosure on their home, which they understood to mean that he would appear in court on their behalf and defend them. Although the circumstances afford a sympathetic view of the Rosabiancas, the merit of their position is questionable, given that they can point to no action taken by Luigi on their behalf following service of the summons and complaint upon them. We treat this factor as neutral, tending neither to favor nor to disfavor denial of the Rosabiancas' motion.

         With respect to the third Artcorp/Guzetti factor, the absence or presence of willfulness, the Rosabiancas maintain that they first learned that the collateral mortgage had been placed on their home in April 2014, when they were served with the summons and complaint in this action. As the record shows, however, the Rosabiancas were served with the complaint in the Kings County action on April 18, 2012. That complaint showed that ESBM sought to record both powers of attorney signed by the Rosabiancas and contemporaneously record the original collateral mortgage on their Brooklyn home. By no later than August 13, 2013, when they were served with the notice of entry of the default judgment in the Kings County action, the Rosabiancas had been informed that the copies of the powers of attorney and the collateral mortgage on their home would be recorded. Thus, at the time that Carmelo Rosabianca stated, in his April 14, 2015 affidavit in support of the Rosabiancas' motion, that he had no knowledge that a mortgage had been placed on his home before the commencement of this action, the Rosabiancas were almost certainly knowing participants in the transaction, as they were aware of both the mortgage and its function of enabling Luigi to finance the purchase of the condominium unit using the equity in their home. This factor tends to support denial of the motion.

         Concerning the fourth Artcorp/Guzetti factor, the possibility of prejudice to an adverse party, plaintiff's argument as to the prejudice it would suffer due to the delay in recouping its interest in the property is substantially neutralized by its delay in pursuing its legal ...


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