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Beneficial Homeowner Serv. Corp. v Steele (2011 NY Slip Op 50015(U)) http://www.nycourts.gov/reporter/3dseries/2011/2011_50015.

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Beneficial Homeowner Serv. Corp. v Steele
2011 NY Slip Op 50015(U) [30 Misc 3d 1208(A)]

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Decided on January 7, 2011
Supreme Court, Suffolk County

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Spinner, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law §
431.
This opinion is uncorrected and will not be published in the printed Official Reports.

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Decided on January 7, 2011
Supreme Court, Suffolk County

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Beneficial Homeowner Service Corporation, Plaintiff

against
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Stephen Steele, Susan Steele, Ocean Bank Fsb, "John Doe" and
"Mary Roe" (said names being fictitious, it being the intention of
Plaintiff to designate any and all occupants of the premises being
foreclosed herein), Defendants
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2010-01996

ATTORNEYS FOR PLAINTIFF


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Jonathan D. Pincus, Esq

95 Allens Creek Road


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Rochester, New York 14618

ATTORNEYS FOR DEFENDANTS STEELE


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Steven Tekulsky, Esq.


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113 Cedar Street

East Hampton, New York 11937


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Jeffrey Arlen Spinner, J.

Plaintiff has commenced this action pursuant to Real Property Actions and Proceedings Law
Article 13, claiming foreclosure of a mortgage which encumbers real property located at 634

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Beneficial Homeowner Serv. Corp. v Steele (2011 NY Slip Op 50015(U)) http://www.nycourts.gov/reporter/3dseries/2011/2011_50015.htm

Stephen Hands Path, East Hampton, Suffolk County, New York. In both its Verified Complaint
both and the present motion papers, Plaintiff alleges that it is the owner and holder of a Loan
Agreement executed by STEPHEN STEELE and SUSAN STEELE dated October 26, 2006 in
the principal amount of $ 92,696.60 which is secured by a Mortgage of the same date and

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executed by both STEPHEN STEELE and SUSAN STEELE, recorded with the Suffolk County
Clerk in Liber 21410 of Mortgages at Page 639. Plaintiff further alleges that Defendants

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[*2]STEELE are in default of their obligations under the Loan Agreement (though the nature
and extent of the default is nowhere specified) and it is claimed that the principal sum of $
91,614.34 is due and owing, together with interest at the rate of 5.250% per annum as computed
from October 1, 2008. Defendants STEELE, through counsel, have timely appeared and have

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interposed an Answer consisting of general denials as to the allegations of the Plaintiff's
Complaint together with eight affirmative defenses.

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Plaintiff has moved for summary judgment in accordance with the provisions of CPLR 3212,
having filed a Notice of Motion and supporting papers dated May 18, 2010 and containing a
CPLR § 2214(b) seven day notice as well as a request for appointment of a Referee pursuant to
RPAPL § 1921. Curiously and in direct derogation of the mandatory provisions of 22 NYCRR §
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202.7, Plaintiff has failed to specify or insert a return date for the application and has apparently
served its papers with no return date. Not surprisingly, counsel for Defendants has neither
answered nor responded thereto, presumably due to the lack of both a stated return date and
appropriate notice. The Clerk of the Court apparently scheduled the motion for June 10, 2010,
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which was administratively adjourned by the Court to November 17, 2010. In the interim period,
mandatory foreclosure settlement conferences in accordance with CPLR § 3408 were convened
on September 2, 2010 and November 9, 2010 respectively. Thereafter and on December 22,
2010, the Court received an Affidavit from Plaintiff's counsel which purports to comply with the
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provisions of Administrative Order no. AO548/10.

It is settled law in New York that the initial burden is placed upon the proponent of an
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application for summary judgment as to making a prima facie case for entitlement to the relief
sought, orwest Bank Minnesota .A. vs. Sabloff, 297 AD2d 722 (2nd Dept. 2002). Where
Plaintiff comes forward with the mortgage at issue together with the underlying note or bond
coupled with evidence of the alleged default, it establishes its prima facie right to judgment as a
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matter of law, Household Finance Realty Corporation of ew York vs. Winn, 19 AD3d 544
(2nd Dept. 2005), Fleet ational Bank vs. Olasov, 16 AD3d 374 (2nd Dept. 2005), leave to
appeal dismissed 5 Y3d 849 (2005), Gateway State Bank vs. Shangri-La Private Club For
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Women, 113 AD2d 791 (2nd Dept. 1985), aff'd 67 Y2d 627 (1986). Once such a prima facie
showing has been made, the burden shifts to the party opposing the application to come forward
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with sufficient evidence to controvert the summary judgment motion by demonstrating the
existence of a genuine triable issue of fact, Barcov Holding Corp. vs. Bexin Realty Corp., 16
AD3d 282 ( 1st Dept. 2005). For the reasons hereinafter set forth, the Court finds that Plaintiff
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has failed to satisfy its burden of setting forth a prima facie case for entitlement to the relief it
seeks.

The copy of the mortgage appended to Plaintiff's moving papers bears the signatures of both
STEPHEN STEELE and SUSAN STEELE and contains an acknowledgment by a notary public.
However, the copy of the Loan Agreement that is appended to Plaintiff's papers raises disturbing

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Beneficial Homeowner Serv. Corp. v Steele (2011 NY Slip Op 50015(U)) http://www.nycourts.gov/reporter/3dseries/2011/2011_50015.htm

issues. That instrument bears the date of October 26, 2006 and recites a principal amount of $
92,696.60. The Loan Agreement clearly reflects Defendant STEPHEN STEELE as the sole
obligor thereunder but, most glaring of all, the Loan Agreement bears no signature whatsoever.
General Obligations Law § 5-701 requires promises such as those contained in the Loan

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Agreement to be both in writing and signed by the party to be charged [G.O.L. § 5-701(a)(1)].
This Court must question how, under the circumstances presented here, Plaintiff can, with

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unbridled temerity, demand enforcement of the Loan Agreement against Defendant STEPHEN
STEELE, who has not executed that instrument and against Defendant SUSAN STEELE, who is
not even a party to that agreement. The most cursory reading of these instruments reveal the
obvious facts as set forth above. This posture by Plainitff strains credulity and causes the Court

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to seriously question Plaintiff's good faith in commencing this action.

Distilled to its essence, a mortgage is a conveyance of an interest in land that is expressly

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intended to constitute security for some obligation, most commonly an indebtedness, Burnett v.
Wright 135 Y 543, 32 E 253 (1895). It follows logically then that in order for a mortgage to
be valid and subsisting, there must [*3]be an underlying obligation that is to be secured by an
interest in the real property, owed by the obligor to the obligee, which contains both the right of
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the obligee to foreclose and the right of the obligor to redeem, Baird v. Baird 145 Y 659, 40
E 222 (1895), R.H. Macy & Co. v. Bates 280 AD 292, 114 YS 2d 143 (3rd Dept. 1952).
Absent these essential elements, a valid mortgage cannot exist because it is the underlying
obligation which gives rise to the validity of the mortgage as a lien upon the real property. Here,
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the Loan Agreement that has been presented to the Court facially appears to run counter to New
York's Statute of Frauds, G.O. L. § 5-701. Since there has been presented to this Court no valid
underlying obligation and no further explanation, the mortgage appears to fail as a matter of law.
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This situation is all the more disturbing when it is considered that the sworn statements
contained in the both the Complaint and the Affidavit in Support Of the Motion for Summary
Judgment expressly and falsely assert that Defendant SUSAN STEELE executed the Loan
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Agreement. This is compounded by the sworn statement of Shana Richmond, Plaintiff's


foreclosure specialist, which is dated April 28, 2010 and which contains the same painfully
obvious mis-statements of fact. Going further, Plaintiff's counsel has submitted an Affirmation
dated December 2, 2010 which purports to comply with Administrative Order no. AO548/10 in
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which he ratifies and confirms, in essence, the incorrect assertions in the Complaint and the
Summary Judgment application. Aside from the papers themselves, it appears that counsel's
affirmation runs afoul of the provisions of 22 NYCRR § 130-1.1.
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An action claiming foreclosure of a mortgage is a suit in equity, Jamaica Savings Bank v. M.S.
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Investment Co. 274 Y 215 (1937), and the very commencement of the proceeding invokes the
equity jurisdiction of the Supreme Court. Thus, in order to obtain equitable relief, the applicant
must come before the Court with clean hands, else such relief will be denied. Thus, where a
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party comes before the Court and is shown to have acted in a manner which is offensive to good
conscience, fairness and justice, that party will be completely without recourse in a court of
equity, no matter what his legal rights may be, York v. Searles 97 AD 331 92nd Dept. 1904),
aff'd 189 Y 573 (1907). IStated a bit differently, in order to obtain equity, one must do equity.

Here, it is irrefutable that Defendant SUSAN STEELE was not a party to the Loan Agreement

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Beneficial Homeowner Serv. Corp. v Steele (2011 NY Slip Op 50015(U)) http://www.nycourts.gov/reporter/3dseries/2011/2011_50015.htm

and certainly did not execute the same. It is equally indubitable that Defendant STEPHEN
STEELE did not execute the Loan Agreement that has been presented on this application.
Nonetheless, Plaintiff has vigorously prosecuted this action, demanding foreclosure of the
mortgage as well as money damages against both named Defendants. Under these circumstances,

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the Court is compelled to conduct a hearing to determine whether or not Plaintiff has proceeded
in good faith and what sanction, if any should be imposed should the Court find a lack of good

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faith.

It is, therefore,

ORDERED that the Plaintiff's application for summary judgment and other relief is hereby

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denied; and it is further

ORDERED that a hearing shall be held in this matter, at which all counsel and parties shall

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appear, which shall not be adjourned except by the Court; and it is further

ORDERED that said hearing shall be held on March 16, 2011 at 2:30 p.m. in Courtroom
229-A, Supreme Court, 1 Court Street, Riverhead, New York; and it is further
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ORDERED that Plaintiffs' counsel shall, within ten days after entry hereof, serve a copy of
this Order with Notice of Entry upon all parties in this action as well as all counsel who have
appeared in this action. [*4]
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Dated: January 7, 2011

Riverhead, New York


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E N T E R:

______________________________________
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JEFFREY ARLEN SPINNER, J.S.CFINAL


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