Freedom Mortg. Corp. v. Bullock
| Decision Date | 22 September 2022 |
| Docket Number | 19-CV-664 (NGG) (SJB) |
| Court | United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York) |
| Parties | FREEDOM MORTGAGE CORPORATION, Plaintiff, v. JAMES M. BULLOCK, JR., DEBORAH DURUSSEL, CLERK OF THE SUFFOLK COUNTY TRAFFIC & PARKING VIOLATIONS AGENCY, Defendants. |
Pending before the court is Plaintiff Freedom Mortgage Corporation's (“Freedom Mortgage'') motion for default judgment. On March 11, 2022, Magistrate Judge Sanket J. Bulsara issued a Report and Recommendation recommending that the court deny the motion and direct Freedom Mortgage to file a letter demonstrating compliance with the statutory notice requirements of New York Real Property Actions and Proceedings Law (“RPAPL”) §§ 1304 and 1306 before it can move for default judgment again. (See Mar. 11, 2022 R&R (“Second R&R”) (Dkt. 46).) For the following reasons, the Second R&R is ADOPTED in full.
I. BACKGROUND
The Second R&R sets forth the relevant background (Second R&R at 2-3), to which no party has objected. The court therefore adopts the Second R&R's Factual Background and Procedural History and includes the following summary for context. See Saleh v. Pompeo, 393 F.Supp.3d 172 174-75 (E.D.N.Y. 2019). On October 14, 2011, Defendants James M. Bullock, Jr. and Deborah DuRussell (the “Owners”) executed a note in the amount of $245,611.00, secured by a mortgage encumbering the property at 4 Krause Street, Bay Shore, New York 11706 (the “Property”).
(Compl. ¶¶ 1, 10-11.) On April 30, 2016, the original holder and owner of the note and mortgage, Continental Home Loans, Inc., assigned its rights to Freedom Mortgage. (Id. ¶ 12; Pl.'s Decl. (Dkt. 44) ¶ 3.)
Beginning on January 1, 2016, and continuing through the filing of the Complaint, the Owners failed to make the required monthly payments. (Compl. ¶ 13.) Each missed payment constituted an event of default. (See Note (Dkt. 1) at ECF p. 6.)
On February 4, 2019, Freedom Mortgage filed the Complaint, naming the Owners and the Suffolk County Traffic & Parking Violations Agency, holder of a subordinate lien on the Property, as Defendants. (Compl. ¶¶ 3-5.) Though Freedom Mortgage served the Owners with the Complaint, (see Nov. 14, 2019 Summons (Dkt. 13); Nov. 21, 2019 Summons (Dkt. 16)), the Owners neither appeared nor answered the Complaint. At Freedom Mortgage's request, the Clerk of Court entered default with respect to the Owners on December 20, 2019. (Dec. 20, 2019 Certificate of Default (Dkt. 19).)
On February 10, 2020, Freedom Mortgage moved for default judgment. (Feb. 10, 2020 Mot. for Default J. (Dkt. 21).) At that time, the United States Court of Appeals for the Second Circuit was awaiting an answer to a question certified to the New York Court of Appeals regarding the necessary quantum of proof needed to show compliance with RPAPL §§ 1304 and 1306. See CIT Bank N.A. v. Schiffman, 948 F.3d 529, 537-38 (2d Cir. 2020), certified questions accepted 34 N.Y.3d 1137 (2020). The court referred the motion for default judgment to Magistrate Judge Bulsara, who issued a Report and Recommendation on July 31, 2020. (See July 31, 2020 R&R (Dkt. 37) (the “First R&R”).) Magistrate Judge Bulsara observed that the record left unclear whether Freedom Mortgage had complied with the notice requirements of RPAPL §§ 1304 and 1306. (First R&R at 4). Accordingly, in adopting the First R&R, this court denied the motion for default judgment without prejudice to renew, and stayed the filing of new dispositive motions pending the resolution of the certified questions. (Oct. 13, 2020 Order (Dkt. 39).)
On March 30, 2021, the New York Court of Appeals answered the certified questions, see CIT Bank NA. v. Schiffinan, 36 N.Y. 3D 550 (2021), and the Second Circuit issued its opinion on the appeal on May 28, 2021. See CIT Bank NA. v. Schiffinan, 999 F.3d 113 (2d Cir. 2021). Consequently, the court lifted the stay on May 28, 2021. (See May 28, 2021 Order Lifting Stay.) On October 4, 2021, Freedom Mortgage renewed its motion for default judgment, which was again referred to Magistrate Judge Bulsara. (Second Mot. for Default J. (“Mot.”) (Dkt. 43); Oct. 5, 2021 Order Referring Mot.) On March 11, 2022, Magistrate Judge Bulsara issued the Second R&R, recommending that the court deny the motion and direct Freedom Mortgage to file a letter demonstrating compliance with the statutory notice requirements of RPAPL §§ 1304 and 1306 before it would be permitted to move for default judgment again. (See Mar. 11, 2022 R&R (Dkt. 46).) Freedom Mortgage filed objections to the Second R&R on March 22, 2022.
In reviewing a magistrate judge's report and recommendation on a dispositive motion, the court reviews portions to which no party objects, or to which only conclusory, general objections are made, for clear error. Saleh, 393 F.Supp.3d at 177. Clear error exists only where “the [c]ourt is left with the definite and firm conviction that a mistake has been committed.” Mental Disability Law Clinic v. Hogan, 739 F.Supp.2d 201, 203 (E.D.N.Y. 2010).[1] Any specific portion of the report and recommendation to which a party makes a non-conclusory objection is reviewed de novo.
See 28 U.S.C. § 636(b)(1); Condoleo v Guangzhou Jindo Container Co., 427 F.Supp.3d 316, 318-19 (E.D.N.Y. 2019).
III. DISCUSSION
“When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). After default is entered, a party may “apply to the court for a default judgment.” Id. at 55(b). “The decision whether to enter default judgment is committed to the district court's discretion,” Greathouse v. JHS Sec. Inc., 784 F.3d 105, 116 (2d Cir. 2015), but the scope of such discretion is circumscribed by the Second Circuit's “oft-stated preference for resolving disputes on the merits.” Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). “[W]hen doubt exists as to whether a default should be granted or vacated, the doubt should be resolved in favor of the defaulting party.” Id. at 96.
In keeping with this guidance, the court may enter a default judgment only “if liability is established as a matter of law when the factual allegations of the complaint are taken as true.” Bricklayers & Allied Craftworkers Local 2 v. Moulton Masonry & Constr., LLC, 779 F.3d 182,187 (2d Cir. 2015); see also Finkel v. Romanowicz, 577 F.3d 79,84 (2d Cir. 2009) (“In light of [defendant's] default, a court is required to accept all of the [plaintiffs] factual allega-dons as true and draw all reasonable inferences in its favor..., but it is also required to determine whether the [plaintiffs] allegations establish [the defendant's] liability as a matter of law.”). But even where the well-pleaded allegations are sufficient to establish liability, the court's discretion is guided by considerations of equity, ‘such as “whether the entry of default would bring about a harsh or unfair result.” Enron Oil, 10 F.3d at 96.
Further, a court deciding whether to enter default judgment should consider whether the entry of default would be set aside pursuant to Rule 55(c), had the defendant appeared and moved for such relief See Pecarsly v. Gahxiworld.com Ltd., 249 F.3d 167, 171 (2d Cir. 2001) (); James v. Arango, No. 05-CV-2593 (TCP) (AKT), 2011 WL 1594832, at *8 (E.D.N.Y. Mar. 28,2011), report and recommendation adopted in 2011 WL 1627099 (E.D.N.Y. Apr. 27, 2011) (“In determining whether to grant a default judgment.... the Court is guided by the same factors which apply to a motion to set aside entry of a default.”). The court determines whether there is “good cause” to set aside an entry of default under Rule 55(c) by considering three factors: (1) the willfulness of the default, (2) the existence of a meritorious de fense, and (3) the prejudice suffered by the non-defaulting party. Powerserve Indi, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001).
The Second R&R concluded that Freedom Mortgage's motion for default judgment should be denied because the Complaint and attached documents failed to establish liability. (Second R&R at 7-8.) Specifically, Freedom Mortgage failed to demonstrate strict compliance with two statutory requirements, RPAPL § 1304 () and RPAPL § 1306 (). (Second R&R at 6-7.) Although the Complaint alleged that Freedom Mortgage “complied with the notice provision of the Mortgage and RPAPL Section 1304 and filed the information required by RPAPL Section 1306,” (see Compl. ¶ 16), Freedom Mortgage failed to attach the relevant notices. It attempted to fix this problem for the present motion by attesting to its compliance and attaching documents it claimed were the required notices, but those notices cite to other statutory obligations and fail to meet the requirements of sections 1304 and 1306. (Second R&R at 7 & n.1 ().) Therefore, Freedom Mortgage “failed to meet its initial burden of demonstrating the absence of material issues as to its strict compliance” with sections 1304 and 1306, precluding a grant of foreclosure relief Flagstar Bank, FSB v. Damaro, 44 N.Y.S.3d 128, 131 (2d Dep't 2016) (granting summary judgment to defendant where plaintiffs evidence of compliance with section 1304 showed the notice was “defective on its face”); see also Deutsche Bank Natl. Tr. Co....
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