Client Update | By Robert L. Galbraith, Jr. and Heather C.M. Rogers | May 4, 2010

On April 16, 2010, Suffolk County Judge, Jeffrey Arlen Spinner, issued an opinion in the matter of Emigrant Mortgage Co., Inc. v. Corcione, 2010 NY Slip Op 20133, regarding participation of Plaintiffs in Mandatory Settlement Conference.  This is the second opinion from Judge Spinner regarding a lender's "Bad Faith" in settlement negotiations.  (See Davidson Fink client update dated November 24, 2009.)

            After a series of Foreclosure Settlement Conferences and no less than five adjournments, all while Plaintiff’s Motion for Summary Judgment was pending, the matter was referred from the Mandatory Settlement Conference Part to Judge Spinner. 

Subsequent to a Settlement Conference before Judge Spinner, the Court in its slip opinion stated, “that the terms and conditions of the Adjustable Rate Note, Default Interest Rate Ride[r] and Mortgage were the product of unequal bargaining power as between Plaintiff and Defendants”, and as such “typically would be construed against the drafter thereof.”  The Court’s reasoning was based upon the fact that the Defendants had no power to negotiate the terms of the Note and Mortgage; the terms of which are found in many standard mortgage documents. 

The Court also took issue with Emigrant’s proposed “Loan Modification Agreement,” and loss mitigation negotiations for several reasons, including:

1)      Defendant’s were required to accept the terms of the “Loan Modification Agreement” within ten (10) days of when it was propounded or the offer would be revoked,

2)      The Court found there was a discrepancy in the default interest rate allowed to be charged (18%), and that which was actually charged (16%),

3)      Delay on the part of Plaintiff in responding to Defendants’ requests for settlement (fourteen months),

4)      Plaintiff’s attempt to recapitalize $84,606.45 (equal to $119,330.89 cure amount, less approximately $30,000.00 in default interest to be forgiven) consisting of accrued default interest from date of default at 16%, pre-action late charges, unsubstantiated tax and insurance advances, check fees, excessive and unreasonable attorney fees, property inspection fees and appraisal fees, all recapitalized at 6%; especially in light of the fourteen month delay in responding to Defendants settlement requests, and

5)      A waiver and release of Defendants’ rights which the Court found to be “Unconscionable, unreasonable, overreaching and [ ] absolutely void as against public policy.”

From the perspective of the Judge, the lender didn’t go far enough in trying to negotiate to keep Defendants in their home.  Ultimately the Court held:

Upon reviewing the totality of the circumstances herein, this Court is driven to the inescapable conclusion that Plaintiff has, by way of calculation and pre-meditation (as evidenced by the terms of its carefully crafted Agreement), created a scenario whereby it is a virtual certainty that Defendants will ultimately be irreparably damaged and further, by way of the Agreement, has gone to extraordinary lengths in an attempt to insulate itself from liability while at the same time ensuring that it will not sustain any pecuniary loss and that all cost will be borne by Defendants. In short, the conduct of Plaintiff in this matter has been over-reaching, shocking, willful and unconscionable, is wholly devoid of even so much as a scintilla of good faith and cannot be countenanced by this Court.

Upon its own motion, the Court ORDERED that Plaintiff's application for summary judgment and appointment of a Referee was denied; that Plaintiff, its successors, assigns and others were forever barred, foreclosed and prohibited from demanding, collecting or attempting to collect, directly or indirectly, any and all of the sums in that proceeding delineated as interest, default interest, attorney's fees, legal fees, costs, disbursements, advances or any sums other than the principal balance, that may have accrued from May 1, 2008 up to the date of the Order; and that Defendants recover judgment against Plaintiff EMIGRANT MORTGAGE COMPANY INC. in the principal sum of $ 100,000.00 representing exemplary damages.

While it is not yet known whether Plaintiff in that action will appeal, the opinion is another strong statement that the Courts are looking to force settlements and are willing to take extreme steps to keep individuals in their homes.

            A copy of the Slip Opinion is annexed hereto for your review and convenience.

For more information, please contact Heather C.M. Rogers at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or Robert L. Galbraith, Jr. at This e-mail address is being protected from spambots. You need JavaScript enabled to view it