E. Sav. Bank, FSB v. Campbell

Decision Date12 December 2018
Docket Number2016–01737,Index No. 16781/09
Citation167 A.D.3d 712,90 N.Y.S.3d 212
Parties EASTERN SAVINGS BANK, FSB, Plaintiff-Appellant, v. Loretta CAMPBELL, et al., Respondents, et al., Defendants; 326 Troy Realty, LLC, Intervenor-Defendant-Appellant.
CourtNew York Supreme Court — Appellate Division

DECISION & ORDER

In an action to foreclose a mortgage, the plaintiff and the intervenor defendant separately appeal from an order of the Supreme Court, Kings County (Johnny L. Baynes, J.), dated January 13, 2016. The order granted the motion of the defendant Loretta Campbell to vacate a judgment of foreclosure and sale dated December 15, 2011, issued upon her failure to appear or answer the complaint, and to vacate the subsequent foreclosure sale, the order of reference, the referee's deed, and the settlement of a deficiency judgment entered against her, and granted that branch of the separate motion of the defendant Otis Parker which was to vacate the judgment of foreclosure and sale as to him, entered upon his failure to appear or answer the complaint.

ORDERED that the order is modified, on the law, by deleting the provision thereof granting the motion of the defendant Loretta Campbell and substituting therefor a provision denying her motion; as so modified, the order is affirmed; and it is further,

ORDERED that one bill of costs is awarded to the plaintiff and the intervenor-defendant payable by the defendant Loretta Campbell, and one bill of costs is awarded to the defendant Otis Parker, payable by the plaintiff and the intervenor-defendant.

The defendant Loretta Campbell obtained a loan from the plaintiff in September 2007, secured by a mortgage against real property owned by Campbell at 326 Troy Avenue in Brooklyn. That property was improved by a mixed-use building with a storefront on the first floor and two apartments on the second floor. The defendant Otis Parker lived in one of the apartments pursuant to an arrangement with Campbell. On July 7, 2009, the plaintiff commenced this mortgage foreclosure action against, among others, Campbell and Parker (hereinafter together the defendants). Neither Campbell nor Parker answered the complaint or moved by pre-answer motion to dismiss the complaint. On December 15, 2011, the Supreme Court ratified a referee's report and entered a judgment of foreclosure and sale on default. On April 19, 2012, the subject property was sold at an auction to the plaintiff, which thereafter sold the subject property to 326 Troy Realty, LLC (hereinafter the intervenor). The plaintiff obtained a deficiency judgment against Campbell in December 17, 2012. The amount of the deficiency judgment, including statutory interest and fees, was $223,730.99. The deficiency judgment was not based on the auction price, which was nominal, but on the fair market value on the date of the auction sale, which was set forth in the deficiency judgment.

In January 2013, Parker moved to vacate the judgment of foreclosure and sale and the subsequent foreclosure sale as to him. Two years later, in February 2015, while Parker's motion was still pending, Campbell, who had settled the deficiency judgment in February 2013 by making payment in the sum of $158,700.09, significantly less than the total amount of that judgment, moved to vacate the judgment of foreclosure and sale as to her, the order of reference, the foreclosure sale, the settlement of the deficiency judgment, and the referee's deed, on the ground of, inter alia, lack of personal jurisdiction. Following a hearing to determine the propriety of service of process as to the defendants, the Supreme Court held that the plaintiff failed to prove by a preponderance of the evidence that service had been effected on the defendants. Further, the court rejected arguments by the plaintiff and intervenor (hereinafter together the appellants) that each of the defendants had waived the issue of personal jurisdiction.

The plaintiff has the burden of proving the court's personal jurisdiction over a defendant (see Wells Fargo Bank, N.A. v. Decesare, 154 A.D.3d 717, 717, 62 N.Y.S.3d 446 ). Ordinarily, a proper affidavit of a process server attesting to personal delivery of a summons to a defendant is sufficient, prima facie, to establish jurisdiction. Where, however, there is a sworn, nonconclusory denial of service by a defendant, the affidavit of service is rebutted and the plaintiff must establish jurisdiction by a preponderance of the evidence at a hearing (see Washington Mut. Bank v. Murphy, 127 A.D.3d 1167, 1174, 10 N.Y.S.3d 95 ; Aurora Loan Servs., LLC v. Gaines, 104 A.D.3d 885, 886, 962 N.Y.S.2d 316 ). Here, the plaintiff failed to prove by a preponderance of the evidence that jurisdiction over Parker and Campbell was obtained by proper service of process (see Hobbins v. North Star Orthopedics, PLLC, 148 A.D.3d 784, 787, 49 N.Y.S.3d 169 ; HSBC Bank USA, N.A. v. Hamilton, 116 A.D.3d 663, 664, 983 N.Y.S.2d 585 ).

Where personal jurisdiction has not been obtained by proper service of process, a "defendant may waive the issue of lack of personal jurisdiction by appearing in an action, either formally or informally, without raising the defense of lack of personal jurisdiction in an answer or pre-answer motion to dismiss" ( Cadlerock Joint Venture, L.P. v. Kierstedt, 119 A.D.3d 627, 628, 990 N.Y.S.2d 522 ; see CPLR 320[b] ; Wilmington Sav. Fund Socy., FSB v. Zimmerman, 157 A.D.3d 846, 847, 69 N.Y.S.3d 654 ). A defendant appears formally in an action "by serving an answer or a notice of appearance, or by making a motion which has the effect of extending the time to answer" ( CPLR 320[a] ). A defendant "may appear informally by actively litigating the action before the court" ( Taveras v. City of New York, 108 A.D.3d 614, 617, 969 N.Y.S.2d 481 ). "When a defendant participates in a lawsuit on the merits, he or she indicates an intention to submit to the court's jurisdiction over the action, and by appearing informally in this manner, the defendant confers in personam jurisdiction on the court" ( id. at 617, 969 N.Y.S.2d 481 ; see Jaramillo v. Asconcio, 151 A.D.3d 947, 949, 58 N.Y.S.3d 412 ).

Here, Parker presented papers pro se in 2012 in the form of a motion, by order to show cause, for a stay of the foreclosure sale. However, Parker abandoned this pro se attempt to obtain a stay even before he obtained a signature on the order to show cause or a return date. We agree with the Supreme Court's determination that, under these circumstances, Parker did not, merely by presenting papers, participate in the action and thereby waive the defense of lack of personal jurisdiction (cf. Taveras v. City of New York, 108 A.D.3d at 617, 969 N.Y.S.2d 481 ).

A defect in personal jurisdiction may also be waived when a party stipulates to settling an action or makes payments on a judgment (see Calderock Joint Ventures, L.P. v. Mitiku, 45 A.D.3d 452, 453, 848 N.Y.S.2d 36 ; cf. Cadlerock Joint Venture, L.P. v. Kierstedt, 119 A.D.3d at 628, 990 N.Y.S.2d 522 ). Although a court has control over stipulations and has the power to relieve a party from the terms of a stipulation, that power is not unlimited. "Where both parties can be restored to substantially their former position the court, as a general rule, exercises such power if it appears that the stipulation was entered into inadvisedly or that it would be inequitable to hold the parties to it" ( Matter of Frutiger, 29 N.Y.2d 143, 150, 324 N.Y.S.2d 36, 272 N.E.2d 543 [internal quotation marks omitted] ). Further, "[o]nly where there is a legally sufficient cause to invalidate a contractual obligation, such as where it is manifestly unfair to one party because of the other's overreaching or where its terms are unconscionable or constitute fraud, collusion, mistake, or accident, will a party be relieved from the consequences of the bargain struck with the stipulation" ( Rogers v. Malik, 126 A.D.3d 874, 875, 5 N.Y.S.3d 525 ).

Here, in vacating the settlement of the deficiency judgment "in the interests of justice," the Supreme Court incorrectly determined that Campbell was not represented by counsel. In fact, Campbell was represented by counsel when she settled and made payment on the deficiency judgment. As part of the settlement, the plaintiff agreed not to proceed in other pending foreclosure actions against Campbell. Additionally, Campbell retained the same attorney with respect to other actions arising out of the settlement. By settling the deficiency judgment, Campbell clearly submitted to the court's jurisdiction and acknowledged the validity of the judgment (see Augustin v. Augustin, 79 A.D.3d 651, 652, 913 N.Y.S.2d 207 ; Calderock Joint Ventures, L.P. v. Mitiku, 45 A.D.3d at 453, 848 N.Y.S.2d 36 ; Lomando v. Duncan, 257 A.D.2d 649, 650, 684 N.Y.S.2d 569 ; Biener v. Hystron Fibers, 78 A.D.2d 162, 165–166, 434 N.Y.S.2d 343 ; cf. HSBC Bank USA, N.A. v. A & R Trucking Co., Inc., 66 A.D.3d 606, 607, 887 N.Y.S.2d 581 ). Therefore, we disagree with the court's determination granting Campbell's motion to vacate the judgment of foreclosure and sale, the subsequent foreclosure sale, the order of reference, the referee's deed, and the settlement of the deficiency judgment, the terms of which had been fully performed.

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