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Default Residential Foreclosure Judgment Vacated

Vacating a Foreclosure Defense Default - The case is US Bank v. Losner, 2016 NY Slip Op 08560 (2d Dep't. Dec. 21, 2016). Often times, when a foreclosure action is filed, the defendant(s) fail to file an answer and default. This case involves a situation where a residential foreclosure was commenced, the matter was stayed (due to a preliminary injunction) in 2013 and a motion to vacate the default was made and denied by the Supreme Court. On appeal, the motion to vacate the default judgment was granted:

Under CPLR 5015(a), a court is empowered to vacate a default judgment for several reasons, including excusable neglect; newly-discovered evidence; fraud, misrepresentation or other misconduct by an adverse party; lack of jurisdiction; or upon the reversal, modification or vacatur of a prior order" (Woodson v Mendon Leasing Corp., 100 NY2d 62, 68; see Hudson City Sav. Bank v Cohen, 120 AD3d 1304, 1305). "The decision as to the setting aside of a default in answering is generally left to the sound discretion of the Supreme Court, the exercise of which will generally not be disturbed if there is support in the record therefor" (Manigat v Louis, 262 AD2d 289, 289 [internal quotation marks omitted]; see Hudson City Sav. Bank v Cohen, 120 AD3d at 1305; Tobin v Perlmutter, 288 AD2d 210)..."In addition to the grounds set forth in section 5015(a), a court may vacate its own judgment for sufficient reason and in the interests of substantial justice" (Woodson v Mendon Leasing Corp., 100 NY2d at 68, citing Ladd v Stevenson, 112 NY 325, 332; see Hudson City Sav. Bank v Cohen, 120 AD3d at 1305). Moreover, "[a] foreclosure action is equitable in nature and [*3]triggers the equitable powers of the court" (Deutsche Bank Natl. Trust Co. v Luden, 91 AD3d 701, 701 [internal quotation marks omitted]; see Notey v Darien Constr. Corp., 41 NY2d 1055, 1055-1056; US Bank N.A. v Williams, 121 AD3d 1098, 1101-1102; Norwest Bank Minn., NA v E.M.V. Realty Corp., 94 AD3d 835, 836; Mortgage Elec. Registration Sys., Inc. v Horkan, 68 AD3d 948). "Once equity is invoked, the court's power is as broad as equity and justice require" (Norstar Bank v Morabito, 201 AD2d 545, 546; see Mortgage Elec. Registration Sys., Inc. v Horkan, 68 AD3d at 948). Thus, a court may rely on "its inherent authority to vacate [a judgment] in the interest of substantial justice, rather than its statutory authority under CPLR 5015(a)," as the "statutory grounds are subsumed by the court's broader inherent authority" (Matter of Adelson, 84 AD3d 952, 953).

The plaintiff commenced this action in 2007 to foreclose two mortgages on a residential property in Ozone Park. In 2006, a year before this action was commenced, the appellant, Sixta Rodriguez, and Jose Bello commenced an action to quiet title to the subject property. They alleged that Ronald B. Losner, a codefendant in the instant foreclosure action, fraudulently induced them to convey title to the subject property to him by representing that a document he gave them to sign as a mortgage loan agreement was, in fact, a deed to the property. After he obtained title to the property, Losner obtained two loans, secured by mortgages against the property, from the plaintiff's predecessor-in-interest, Approved Funding Corp. (hereinafter AFC), and then defaulted on the loans. The action to quiet title named AFC as a defendant.

The Appellate Court decides, "[u]nder the unique circumstances of this case," that the Defendants was entitled to vacatur of the judgment of foreclosure and sale. Are you facing a commercial or residential foreclosure? Does the factual circumstance of US Bank v. Losner sound similar to your matter or one that a loved one is facing? Call the Law Offices of Cory H. Morris, 631-450-2515 for your foreclosure defense needs.

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