Source: http://www.wallstreetmainstreet.com/2013/05/interest-tolled-from-day-ofdefault.html
Timestamp: 2019-04-21 16:25:46+00:00

Document:
"Interest tolled from day of default because of Bad Faith dealing. Too bad this isn't imposed on every bank every time they operate in bad faith!"
HSBC Bank USA, NATIONAL ASSOCIATION AS TRUSTEE FOR MORTGAGEIT SECURITIES CORP. MORTGAGE LOAN TRUST SERIES 2007-1 MORTGAGE PASS-THROUGH CERTIFICATES, Plaintiff, v John McKenna, Jr. A/K/A JOHN T. MCKENNA, JR., MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR MORTGAGEIT, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY PARKING VIOLATIONS BUREAU, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, JOHN DOE (Said name being fictitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, and any parties, corporations or entities, if any, having or claiming an interest or lien upon the mortgaged premises.), Defendants.
THE LEXIS PAGINATION OF THIS DOCUMENT IS SUBJECT TO CHANGE PENDING RELEASE OF THE FINAL PUBLISHED VERSION. THIS OPINION IS UNCORRECTED AND SUBJECT TO REVISION BEFORE PUBLICATION IN THE PRINTED OFFICIAL REPORTS.
COUNSEL: [***1] For Plaintiff: Allison J. Schoenthal, Esq. and Nicole E. Schiavo, Esq. of Hogan Lovells U.S. LLP.
For John McKenna, Defendant: John E. Petiton, Esq.
JUDGES: Jack M. Battaglia, Justice, Supreme Court.
[*887] [**748] Jack M. Battaglia, J.
-Letter of John E. Petition, Esq.
Plaintiff was represented by Allison J. Schoenthal, Esq. and Nicole E. Schiavo, Esq. of Hogan Lovells U.S. LLP. Defendant John McKenna was represented by John E. Petiton, Esq.
[*887contd] [**748contd] This action was commenced on March 11, 2009 to foreclose a mortgage on property located at 448 Decatur Street, [***2] Brooklyn. The subject Mortgage, dated March 27, 2007, was given to "MORTGAGEIT" as Lender to secure payment of an Adjustable Rate Note with the same date in the principal amount of $624,000, which note was also given to "MORTGAGEIT" as Lender. The Borrower designated in the note and mortgage is defendant John T. McKenna, Jr. The note shows an undated indorsement on behalf of "MortgageIt, Inc." to the order of Plaintiff, and an Assignment of Mortgage dated March 2, 2009 purports to assign the subject mortgage from Mortgage Electronic Registration Systems, Inc., designated in the Mortgage as "a nominee for Lender" and so-called "mortgagee of record," to Plaintiff.
This mortgage foreclosure action was referred to the Mandatory Foreclosure Conference Part, where it was first calendared for May 21, 2009. On May 25, 2011, after 18 further scheduled appearances, the action was referred to this Court.
A conference was held on June 27, 2011, at which time Special Referee Deborah L. Goldstein advised the Court that she was requesting a finding by the Court that Plaintiff had not complied with its obligations under CPLR 3408, and, upon such finding, imposing a suitable penalty. A schedule was agreed [***3] upon for Special Referee Goldstein to prepare a written report and recommendations, which she did with a Report and Recommendation [*888] dated July 8, 2011, and for Plaintiff and defendant/mortgagor John McKenna, Jr. to comment, which they each did.
The Report and Recommendation of Special Referee Goldstein seeks the imposition of a penalty on Plaintiff for failing to negotiate in good faith as required by CPLR 3408 (f). Although Special Referee Goldstein also refers to Part 130 of the Rules of the Chief Administrator (see 22 NYCRR §130.1 et seq.) and Judiciary Law §§753 and 754, the essential thrust of the report to this Court is the contention that Plaintiff acted in bad faith in refusing to agree to a "short sale" of the [**749] mortgaged property as proposed by [***4] defendant McKenna.
Plaintiff raised a threshold question, however, as to whether defendant McKenna is or has ever been "a resident of the property subject to foreclosure" (see CPLR 3408 [a]), so as to trigger Plaintiff's obligation to negotiate with him "in good faith to reach a mutually agreeable resolution" (see CPLR 3408 [f].) Plaintiff submitted copies of documents dated subsequent to the commencement of this action that show defendant McKenna's address to be different from the property subject to foreclosure; and the Report and Recommendation notes that, at least at one point, "the premises were vacant because it required repairs."
Since the July 2011 Report and Recommendation does not state that the Special Referee had made any finding as to Mr. McKenna's residency at the mortgaged property, with a Decision and Order dated October 3, 2011, the Court referred the matter back to Referee Goldstein with a direction that she "supplement her Report and Recommendation with a statement as to her finding that defendant McKenna was a resident of the mortgaged property when the action was commenced and through the settlement conference process; or, if she has not made such finding, she shall [***5] direct and schedule such proceedings, including such further appearances and submissions as she might deem appropriate, so that she might make a determination on the issue of residency."
[*889] A determination as to whether the mortgagor would be deemed "a resident of the property subject to foreclose" for purposes of CPLR 3408 (a) is crucial, however, to whether there is an obligation under CPLR 3408 (f) to negotiate "in good faith to reach a mutually [***6] agreeable resolution." No such obligation is imposed by uniform court rules or the local rule, assuming that it could be. The July 2011 Report and Recommendation cites to no other source of an express "good faith" obligation that would apply to conferences that are not mandated by CPLR 3408 (a).
Defendant submitted uncontroverted testimonial and documentary evidence proving that he resided at the Premises from January 2009 through December 2010, the two-year period during which he and his wife were separated. Based on the evidence, this Referee has determined [**750] that Defendant resided at the Premises at the time of commencement in March 2009 and throughout the majority of CPLR 3408 conferencing. Plaintiff failed to satisfy [***7] its burden of disproving Defendant's residence at the Premises."
While Defendant submitted affidavit testimony regarding his residence at the Brooklyn Premises from January 2009 through December 2010, Plaintiff failed to submit an affidavit for an exemption from CPLR 3408 and an affidavit of investigation regarding Defendant's residency, as explicitly required under the Kings County Local Rules, Part F (7)."
[*890] Plaintiff is judicially estopped from challenging application of the good faith requirement of CPLR 3408 (f). The doctrine of judicial estoppel' or estoppel against inconsistent positions' may be invoked to prevent a party from inequitably adopting a position directly contrary to or inconsistent with an earlier assumed position in the same proceeding' Maas v. Cornell Univ., 253 AD2d 1, 5, 683 N.Y.S.2d 634, affd. 94 NY2d 87, 721 N.E.2d 966, 699 N.Y.S.2d 716."
ORDERED that Referees Nuccio, Goldstein, Berson, Soto-Fier, and Amster mayso-order stipulations [*891] with the consent of both parties to a pending action; . . ."
Here, as noted above, the June 1, 2011 order of the Administrative Judge is designated an Order of Reference to Hear and Determine, and, as will appear again, the decretal paragraphs reflect that. The Order cites as authority CPLR 4301 (Powers of referee to determine), CPLR 4311 (Order of Reference), and CPLR 4312 (Number of referees; qualifications), but does not cite either of the statutory provisions that address the circumstances in which a reference to report (see CPLR 4212) or a reference to determine [***11] (see CPLR 4317) may be made.
Specifically, the referees assigned to the Residential Foreclosure Conference Part may "hear and determine whether a mutually agreeable resolution to the foreclosure proceeding pending before them can be reached at the mandatory conference stage"; "may conference, negotiate, settle, adjourn, and make procedural determinations regarding the qualifications of cases pending before them in the Residential Foreclosure Conference Part, as defined by the laws of New York State"; [*892] and "may so-order stipulations with the consent of both parties."
"ORDERED that upon the conclusion of a mandatory settlement conference, the presiding referee shall issue a Residential Foreclosure Conference Order, in the form annexed, to be filed with the County Clerk in and for the County of Kings, memorializing the results of the [***12] conference and setting forth those further proceedings that shall occur in the pending foreclosure action."
The annexed form includes direction to a judge for determination of any question as to the good faith participation of any party in settlement conference proceedings.
"[T]he scope of a referee's duties are defined by the order of [***13] reference" (First Data Merchant Servs. Corp. v One Solution Corp., 14 AD3d 534, 535, 789 N.Y.S.2d 198 [2d Dept 2005]; see also Hovhannessian v. Yetemian, 75 AD3d 623, 623-24, 904 N.Y.S.2d 671 [2d Dept 2010]); and "[a] referee has no power beyond that limited in the order of reference" (L. H. Feder Corp. v. Bozkurtian, 48 AD2d 701, 368 N.Y.S.2d 247 [2d Dept 1975]; see also Fernald v Vinci, 302 AD2d 354, 355, 754 N.Y.S.2d 668 [2d Dept 2003].) Although statute and caselaw address the functions and authority of referees at various stages of a mortgage [*893] foreclosure action (see RPAPL §§ 1321 , 1351 , 1361 ; 2-20 Bergman on New York Mortgage Foreclosures §20.03; Central Mtge. Co. v Acevedo, 34 Misc 3d 213, 220, 934 N.Y.S.2d 285 [Sup Ct, Kings County 2011]; Mortgage Elec. Registration Sys., Inc. v Maki, 9 Misc 3d 983, 984-85, 801 N.Y.S.2d 515 [Sup Ct, Seneca County 2005]), no statute and little caselaw deals with the settlement conference proceedings mandated by CPLR 3408 (a).
The questions then become, first, whether Special Referee Goldstein's finding that the settlement conference proceedings in this case were mandated by CPLR 3408 (a), so as [***17] to impose on the parties the obligation to negotiate "in good faith to reach a mutually agreeable resolution" (see CPLR 3408 [f]), should be confirmed or rejected; and, if confirmed, whether her finding that Plaintiff failed to participate in good faith should be confirmed or rejected, and, if confirmed, the appropriate remedy.
When CPLR 3408 (a) and RPAPL §1304 (5) (a) are read together, it appears that a settlement conference will be mandated where two "residency" requirements are met, one considered as of the time the subject mortgage is given, and one considered as of the time the foreclosure action is commenced. Under this reading, although the borrower need not reside at the property when the mortgage is given if the property "is or will be occupied by the borrower as the borrower's principal dwelling" (see RPAPL § 1304  [a] [iii]), a conference is only mandated where the borrower "is a resident of the property [*896] subject to foreclosure" (see CPLR 3408 [a]) when the foreclosure action is commenced.
At least two trial courts have rejected this reading of CPLR 3408 (a). (See One West Bank, FSB v Greenhut, 36 Misc 3d 1205[A], 2012 NY Slip Op 51197[U], *** 4 [Sup Ct, Westchester County 2012]; Accredited Home Lenders, Inc. v Hughes, 22 Misc 3d 323, 326-27, 866 N.Y.S.2d 860 [Sup Ct, Essex County 2008].) These courts rely upon the definition of "home loan" in RPAPL §1304, which necessarily is applied at the time the [***20] loan is obtained and necessarily speaks of intention and future occupancy, buttressed by an assumed legislative intent "to remove owners of investment properties or second homes from the ambit of the statute, not to require a homeowner to remain at the mortgaged premises even as a foreclosure action is being prepared or pending." (See One West Bank, FSB v Greenhut, 36 Misc 3d 1205[A], 2012 NY Slip Op 51197[U], *** 4; Accredited Home Lenders, Inc. v Hughes, 22 Misc 3d at 326-27.) The language of CPLR 3408 (a) itself is not examined.
"[T]he statutory text is the clearest indicator of legislative intent . . . If the terms of the statute are clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used . . . The objective of the court in this regard is to discern and apply the will of the Legislature, not the court's own perception of what might be equitable." (Maraia v Orange Regional Med. Ctr., 63 AD3d 1113, 1116, 882 N.Y.S.2d 287 [2d Dept 2009] [internal quotation marks and citations omitted].)"
[*897] This Court can easily agree that the "plain language" of the definition of "home loan" found in RPAPL §1304, which requires that specified notices be given to the borrower prior to commencement of a foreclosure action, includes intention and future occupancy in the determination of residency. (See One West Bank, FSB v Greenhut, 36 Misc 3d 1205[A], 2012 NY Slip Op 51197[U], at *** 4 [***22] .) But the controlling language for present purposes is found in CPLR 3408, i.e., "in which the defendant is a resident of the property subject to foreclosure" (see CPLR 3408 [a] [emphasis added].) The quoted language qualifies the incorporated definition of "home loan," again determined at the time the mortgage is given, for purposes of a determination made after a foreclosure action is commenced as to whether a settlement conference should be mandated. The Legislature's presumed intent for that purpose might well be limited to attempting to keep people in their homes, which is not furthered by diverting limited resources to people who, for reasons unrelated to the foreclosure, are no longer, or perhaps never were, "a resident" of the property.
"Every affidavit for an exemption from a conference made pursuant to CPLR 3408 and RPAPL 1304 must specify the grounds for same and provide supporting documentation and affidavits from persons with direct knowledge. Where the claim is that the borrower is not living in the subject house, then an affidavit [***23] of investigation substantiating this allegation must be appended which states inter alia that the borrower is not living in the house and that no action by the mortgagee or its agents procured same. This affidavit shall be included in the motion for a Judgment of Foreclosure and Sale."
The words, "is not living in the subject house" does not appear to this Court to be in any way ambiguous, and is consistent with the statutory language, "is a resident of the property."
The meaning of "residency" for purposes of CPLR 3408 (a) must yet be determined. In this case, however, that determination would be unnecessary were the Court to accept Special Referee Goldstein's alternative contention that Plaintiff's failure to submit affidavits and [**756] documentation that would comply with the just-quoted rule in effect waived any claim that CPLR 3408 (f) [*898] does not apply; or that Plaintiff is judicially "estopped" from challenging the application of CPLR 3408 (f) by reason of Plaintiff's participation in foreclosure settlement conference proceedings.
The Court finds and concludes that the record is sufficient to support the finding of Special Referee Goldstein that a settlement [*899] conference was required in this action pursuant to CPLR 3408 (a), such that the parties were each under an obligation pursuant to CPLR 3408 (f) to "negotiate in good faith to reach a mutually agreeable [***26] resolution," whether the evidentiary burden on the issue is placed on the plaintiff/mortgagee, as other courts have done (see One West Bank, FSB v Greenhut, 36 Misc 3d 1205[A], 2012 NY Slip Op 51197[U], at *** 3), or upon the defendant/mortgagor, who might be in a better position to produce material evidence.
Defendant McKenna submitted his own affidavit, asserting that in March 2007, after separating from his wife, he purchased the mortgaged property at 448 Decatur Street in Brooklyn. He had lived with his wife at 65 Ontario Road in Bellerose. The Decatur Street property is a three-unit [***27] residential building, which Mr. McKenna purchased subject to existing tenancies in all units. He asserts that, although he "always intended to move into the first floor apartment" (see affidavit ¶ 4), he did not obtain possession of the apartment until December 2008. After making extensive necessary repairs, he moved into the first floor unit in January 2009, approximately three months prior to commencement of this action. From November 2009 through November 2010, he spent weekends with his wife at the Bellerose house, "with the goal of reconciling our differences," and moved back into the Bellerose house in December 2010. Mr. McKenna also submitted copies of his federal tax returns for 2009 and 2010, and his state tax return for 2010, each of which shows his address at the Decatur Street property.
Considering "residency" as a component of the definition of "home loan," there is no evidence in the record to contradict defendant McKenna that, at the time the loan was obtained, the mortgaged property was "intended to be used or occupied wholly or partly, as [his] home or residence . . . and [would] be occupied by [him] as [his] principal dwelling" (see RPAPL §1304  [a] [iii].) The tax returns and W-2 statements for 2007 and 2008 merely confirm what Mr. McKenna acknowledges, i.e., that he did not occupy the Decatur Street building until December 2008. There is no evidence to contradict Mr. McKenna's assertions in explanation about his inability to obtain possession [***29] from the tenants and the necessity of repairs. Special Referee Goldstein was entitled to accept Mr. McKenna's testimony on these matters.
Considering "residency" at the time of commencement of the action, the only evidence that would undermine defendant McKenna's assertions that he occupied the Decatur Street building from January 2009 until December 2010, except for weekends during the period November 2009 through November 2010, are the bank and earnings statements that show the Ontario Road address. Mr. McKenna offered an explanation [**758] that is plausible on its face, particularly in light of his weekend access to mail at that address, and Special Referee Goldstein was entitled to credit it.
Although evidence on these matters would be more available to defendant McKenna, and there was no formal disclosure during the settlement conference proceedings, Mr. McKenna provided documentation at Plaintiff's request. Plaintiff does not assert that it was in any way hindered in obtaining information on these matters from Mr. McKenna. If a mortgagee applies for an "exemption" from settlement conference proceedings on the ground that the mortgagor is "not living in the subject house," it is required [***30] to submit "an affidavit of investigation substantiating this allegation." (See Kings County Local [*901] Rules, Part F .) No less should be required here. The process server's conversation with a person at a neighboring address in Bellerose does not qualify.
May 2011. Special Referee Goldstein was given sufficient opportunity to assess Mr. McKenna's credibility.
The only remaining question on this point is whether Mr. McKenna's departure from the Decatur Street building in December 2010 to reconcile with his wife, which he readily acknowledges, affects the "good faith" obligation imposed by CPLR 3408 (f). The short answer would be that the determination of residency for purposes of CPLR 3408 (a) is made at the commencement of the action, and there is nothing in the statute to suggest that it is subject to re-determination. (See One West Bank, FSB v Greenhut, 36 Misc 3d 1205[A], 2012 NY Slip Op 51197[U], at *** 4; Accredited Home Lenders, Inc. v Hughes, 22 Misc 3d at 326-27.) [***31] In this case, moreover, the Special Referee's Report and Recommendation dated July 8, 2011 relies only on events prior to December 2010 as the basis for the Special Referee's determination that Plaintiff did not negotiate in good faith.
"During more than thirteen (13) settlement conferences, the Presumed Foreclosing Parties have failed to offer a reasonable explanation for their failure to accept the short sale offers and proceed with a reasonable alternative to foreclosure for all parties involved. In addition, the Presumed Foreclosing Parties' utter disregard for the Legislature's clear directive that in mandatory foreclosure settlement conferences [b]oth the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution . . . if possible' should not be condoned. N.Y.C.P.L.R. §3408 (f)."
As Special Referee Goldstein explained elsewhere, the designation "Presumed Foreclosing Parties" reflects her uncertainty as to the real party in interest and the authority of [*902] the persons who appeared for Plaintiff during settlement conference proceedings. For present [***32] purposes, however, there is no contention that Plaintiff is not fully bound by the conduct of those who appeared on its behalf.
It appears that, from the beginning of the settlement [***33] conference proceedings, the only resolution seriously contemplated by the parties was a short sale. Defendant McKenna listed the property in the summer of 2009, with an asking price of $499,000. As stated by the Special Referee, in July Mr. McKenna accepted an all cash offer of $325,000, which was the best offer received. In September, Plaintiff obtained an appraisal of the property, which showed a "quick sale" value of the property at $315,000 and an "as is" market value of $350,000. The appraisal report noted that the real estate market in the area of Brooklyn in which the Decatur Street property is located was "oversaturrated and prices [were] falling sharply." Plaintiff rejected the $325,000 contract and counter-offered at $340,000.
In December 2009, defendant McKenna presented Plaintiff with a second short-sale contract, this one from a different prospective buyer, at the $340,000 price demanded by Plaintiff. In the interim, Mr. McKenna had made repairs to the property, including a new boiler, totaling $15,000. The review process that followed included a further appraisal of the property in June 2010, six months later, that appraised the property at $412,000.
Special Referee Goldstein's Report and Recommendation includes as exhibits copies of the September 2009, June 2010, and October 2010 appraisal reports. Other than the "directive" dated August 19, 2010, the appraisals are the only exhibits.
At a scheduled hearing before this Court, the parties were invited to respond to the findings and determinations of Special Referee Goldstein, and both parties did so. As will appear, however, to the extent that the parties' respective submissions include factual [***35] assertions or documents that are not included or addressed in the Report and Recommendation, the evidentiary significance is suspect.
Defendant McKenna responded with a letter from his counsel, John E. Petiton, Esq., that contains factual assertions that are not affirmed to be true (see CPLR 2106.) Of some note, Mr. Petiton states that in May 2011 a fourth appraisal of the subject property, obtained by Mr. McKenna, valued the property at $355,000. [**760] Plaintiff's counsel acknowledges having received a copy of that appraisal at a May 25, 2011 conference. Neither party submits a copy of the appraisal, which is not referred to in Special Referee Goldstein's Report and Recommendation. As noted above, the Special Referee's findings and determinations as to Plaintiff's lack of good faith are based upon conduct through December 2010.
It is also not clear whether the plaintiff/mortgagee or the defendant/mortgagor bears the evidentiary burden on the issue of good faith where it is required by CPLR 3408 (f). (See One West Bank, FSB v Greenhut, 36 Misc 3d 1205[A], 2012 NY Slip Op 51197[U], at *** 7] [defendant/mortgagor]; Deutsche Bank Trust Co. of Am. v Davis, 32 Misc 3d 1210[A], 2011 NY Slip Op 51238[U], at * 2 [plaintiff/mortgagee].) It appears to this Court, however, that, assuming fair access to material evidence on the issue, the burden should be placed on the party who seeks some judicial consequence from the determination, which in most cases would likely be the defendant/mortgagor.
as part of general court-ordered mediation programs, do not necessarily apply to limit the meaning of "good faith" where, as here, imposed to achieve a particular statutory purpose.
[*909] [**764] Here, is not disputed that in August 2009 defendant McKenna presented Plaintiff [***47] with the first of two proposed short-sale contracts. The Court notes that Plaintiff disputes the Special Referee's statement that the proposed purchase price was $325,000, and that the Residential Contract of Sale dated July 6, 2009 states a purchase price of $300,000; but also notes that a rider to that contract refers to a purchase price of $325,000. In any event, after appropriate deductions from the purchase price, Plaintiff would have received $249,600 of a $300,000 purchase price, which Plaintiff "deemed insufficient to yield Plaintiff a reasonable percentage of fair market value" (see affidavit of Jessica Jones ¶¶ 11, 13). The first proposal was promptly rejected.
"Plaintiff advised Defendant that a purchase amount of $340,000 would be needed to approve the sale of the Property at that time." (See id.) At a settlement conference on November 16, 2009, "Defendant's counsel advised Plaintiff's counsel that he had submitted a short sale offer for $340,000.00." (See affirmation of Michael Jablonski, Esq. ¶ 7.) This second short-sale proposal, with a different prospective purchaser, is reflected in a Residential Contract of Sale dated December 1, 2009, and was also an "all cash" transaction. By the end of 2009, therefore, defendant McKenna had in hand a contract for sale of the property at the amount demanded by Plaintiff, which was $25,000 more than the "quick sale" [***49] appraisal value and only $10,000 less that full appraised market value.
It is important to note at this point that defendant McKenna's procurement of a contract for purchase of the mortgaged [*910] property at the price demanded by Plaintiff obviates consideration of the facts that would otherwise be assessed and weighed in determining whether Plaintiff lacked good faith in refusing to approve a short sale. Those factors would include the amount of the outstanding indebtness, which here, according to Special Referee Goldstein, was $684,000 at the time of the first settlement conference; the likely movement of the market, which here, according to the September 2009 appraisal, was sharply declining; and the likelihood of a greater yield through a private short sale than through a public foreclosure auction, considering both the expense and time associated with each. Neither Special Referee Goldstein nor either of the parties addresses this last factor.
The Court has little difficulty concluding that, unless there is a good reason for the second proposed short-sale transaction not to have been formally approved by Plaintiff and consummated, there is sufficient support in the record to support [***50] Special [**765] Referee Goldstein's determination that Plaintiff did not "negotiate in good faith to reach a mutually agreeable resolution" (see CPLR 3408 [f].) Nor, given the circumstances existing at the end of 2009, does the Court hesitate in placing the burden on Plaintiff to come forward with evidence of a good reason.
There is no doubt that after submission on January 13, 2010 of the second proposed short sale contract "along with a financial package" (see affirmation of Michael Jablonski, Esq. ¶ 7), the review and approval process sputtered and stalled. Special Referee Goldstein acknowledges in her Report and Recommendation that some delay during the first six months of 2010 was attributable to the newly promulgated HAFA program, with requirements for "the homeowner's submission of additional paperwork on official Fannie Mae Treasury forms."
Nonetheless, Special Referee Goldstein describes a "prolonged," and "protracted short sale review," during which Plaintiff "demanded multiple submissions of documents from the defense, unnecessarily insisted on two additional appraisals over the course of months," and was "unable to support the basis for the delays in the extended review of the short [***51] sale contracts presented fro [sic] approval . . . and the basis of the increasing appraisals in the declining market in mid-2010." Plaintiff disclaims any responsibility for the delay, which it suggests belongs to defendant McKenna and Special Referee Goldstein.
The June 2010 appraisal assigned an "As Is Quick Sale" value to the property of $325,000, and an "As Is Market Value" of $412,000. The proposed "all cash" short-sale contract price of $340,000, [***52] therefore, exceeded the "quick sale" value, and was only $10,200 less than the amount obtained by applying Ms. Jones's 85% yield requirement to the $412,000 market value, i.e., $350,200. The Court also notes Special Referee Goldstein's finding that, after the September 2009 appraisal, defendant McKenna spent $15,000 in repairs to the property.
her August 19, 2010 "directive," Special Referee Goldstein states that Plaintiff "approved short sale w/ all cash buyer [at] price BPO quoted by bank representative, Justin Pagel," but Plaintiff "has failed to allow short sale to proceed since 6/10 approval by bank."
The October 2010 appraisal assessed the market value of the property at $520,000. Nothing in the record explains the more [*912] than 26% increase in appraised market value during the four months from June 2010, when the property was said to have an "As Is Market Value" of $412,000, particularly in light of the statement in the June 2010 appraisal report, "Property Value Trend, because of higher lending standards, prices has [sic] declined."
The Court finds no good reason in the record for Plaintiff's failure to approve the second proposed short-sale contract, calling for an "all cash" purchase price of $340,000, so as to result in a transfer of title no later than February 28, 2010. In consequence, the Court finds sufficient support in the record for Special Referee Goldstein's determination that Plaintiff failed to "negotiate in good faith" (see CPLR 3408 [f]) with respect to defendant McKenna's second proposed short sale in failing to promptly approve the sale, in unnecessarily prolonging and delaying the review and approval process, and in obtaining successive appraisals that became the basis for increased demands, all without any showing that its conduct was likely to yield a higher net return through a delayed foreclosure sale.
Remedy for Failure to Negotiate in "Good Faith"
"(a) barring Plaintiff from collecting from Defendant any attorney's fees or other legal costs incurred [***55] as a result of this action; (b) awarding Defendant reasonable attorney's fees and other legal costs and disbursements associated with its participation in foreclosure conferencing; and (c) barring Plaintiff from collecting from Defendant any interest accrued on the loan since September 2009."
In the absence of any notice to Plaintiff that any additional or different remedy might be imposed (see IndyMac, F.S.B. v Yano-Horoski, 78 AD3d at 896), and the novelty of the issues raised by the Special Referee's Report and Recommendation, the [*913] Court will limit its consideration of remedy to those recommended by the Special Referee.
[*914] It seems beyond argument that breach of a statutorily-imposed duty - -here, the duty to negotiate in good faith of CPLR 3408 (f), is wrongful conduct sufficient to affect the discretionary award of interest, as well as of a nature to warrant relieving a mortgagor of some consequence of default, although apparently not to the extent of cancellation of the loan and mortgage (see IndyMac Bank, F.S.B. v Yano-Horoski, 78 AD3d at 896.) [***58] Likewise, it would appear indisputable that discretion and equity require that the appropriateness of the remedy be determined by the nature and effect of the breach.
Where, as here, the mortgagee's lack of good faith consists of the failure to promptly approve and facilitate a short sale at the price demanded by the mortgagee, with the result that the sale is lost, a denial of interest from the date of the mortgagor's default fits the mortgagee's breach. Indeed, since the consummated short sale would have relieved the mortgagor of any further responsibility for the debt, even a denial of interest from the date of default does not fully compensate the mortgagor for the consequences of the mortgagee's breach.
Assuming that a reference may even be made for the purpose of Part 130, no such reference was made here. Although the Court may sanction frivolous conduct "upon the court's own initiative, after a reasonable opportunity to be heard" (see [**769] 22 NYCRR §130-1.1 [d]), the Court declines to do so here, where none of the conduct upon which a sanction order would be based took place before the Court. If so advised, defendant McKenna may move for the imposition of a Part 130 sanction.
In sum, the Court determines that in mandated settlement conference proceedings (see CPLR 3408 [a]) Plaintiff failed to negotiate "in good faith to reach a mutually agreeable resolution" (see CPLR 3408 [f]), and as a consequence Plaintiff may not recover interest on the subject note and mortgage from the date of the mortgagor's alleged default.

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