December 2013 Archives

Substituted Service of Process on Co-Defendant Ruled Insufficient

December 18, 2013

The plaintiff was a home health aide for Gilberto Rivas in Rivas's apartment, where she claims to have been injured by a defective window. The plaintiff sued the apartment's owner and Rivas. The plaintiff served the owner of the apartment by substituted service upon Rivas. Neither defendant responded and plaintiff obtained a default judgment. In seeking to vacate the default, the owner claimed that he was never served and that Rivas did not forward the litigation papers to him.

Putting aside the issue of whether the owner listed that apartment as his home address, the Court found it unreasonable and unreliable for the plaintiff to have served the owner by leaving the lawsuit papers with Rivas, who had interests that were adverse to the interest of the apartment's owner. In this setting, Rivas could not be relied upon to properly forward the papers to the owner. Therefore, the property owner was allowed to file his late answer and to defend the case.

Martinez v. McSweeny, Queens County - J. McDonald

Court Applies Pre-Suit Notice for Non-Foreclosure Action Based on Mortgage Note

December 10, 2013

A lender has two options in seeking repayment on a defaulted home loan. A lender has the option of commencing a foreclosure action, auctioning the property, and applying the sale proceeds against the loan amount due. Or, a lender can sue based on the promissory note underlying the loan and obtain a money judgment. A lender cannot do both. RPAPL § 1304 requires that a lender provide a 90-day notice before it commences a lawsuit based on a home loan, which is typically a foreclosure action. The question facing the court in this case was whether the 90-day notice is also required where the lender sues on the promissory note and foregoes seeking foreclosure.

Construing the statute broadly, the court found that RPAPL § 1304 is to be applied to any lawsuit commenced against a borrower that involves a home loan. The court seemed compelled to explain this outcome, because aside from finding this outcome to be consistent with the language of the statute, it grounded its decision on the fact that once a money judgment is obtained by the lender, the home owner will be "subject to levy upon his or her personal property, motor vehicle, savings account and/or other asset, such could result in the borrower being compelled to sell the property in order to protect these possessions." The court was also concerned that a money judgment "may complicate settlement negotiations" in the event the borrower also defaulted on a senior loan (this case involved a second loan). As a result, this borrower was entitled to the remedial provisions of this statute.

While the outcome here seems reasonable, it is clear that Judge Demarest felt the need to rationalize the outcome by making assumptions about what might occur in the future which could result in the sale of the property. Does that mean that for RPAPL § 1304 to apply in this setting there must be a possibility that the subject property will be at some point sold?

Cadelrock Joint Venture, LP v. Callender; Kings County, Judge Demarest