U.S. Bank Nat'l Ass'n v. Sirota

• Decision Date: 02 December 2020
• Docket Number: 2018-14358,Index No. 711687/15
• Citation: 189 A.D.3d 927,138 N.Y.S.3d 160
• Parties: U.S. BANK NATIONAL ASSOCIATION, etc., Respondent, v. Howard SIROTA, et al., appellants, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

189 A.D.3d 927

138 N.Y.S.3d 160

U.S. BANK NATIONAL ASSOCIATION, etc., Respondent,

v.Howard SIROTA, et al., appellants, et al., Defendants.

2018-14358

Index No. 711687/15

Supreme Court, Appellate Division, Second Department, New York.

Argued—October 29, 2020

December 2, 2020

Borah, Goldstein, Altschuler, Nahins & Goidel, P.C., New York, N.Y. (Brian D. Graifman of counsel), for appellant Howard Sirota.

Law Offices of Cahn & Cahn, P.C., Melville, N.Y. (Daniel K. Cahn of counsel), for appellant Rochelle Sirota.

Berkman Henoch Peterson Peddy & Fenchel, P.C., Garden City, N.Y. (James Durso, Bruce Berkman, and Martin E. Valk of counsel), for respondent.

REINALDO E. RIVERA, J.P., LEONARD B. AUSTIN, JEFFREY A. COHEN, COLLEEN D. DUFFY, JJ.

DECISION & ORDER

In an action, inter alia, to foreclose a mortgage, the defendant Rochelle Sirota appeals, and the defendant Howard Sirota separately appeals, from an order of the Supreme Court, Queens County (Salvatore J. Modica, J.), dated October 15, 2018. The order denied those defendants' separate motions, inter alia, pursuant to, among other things, CPLR 3126 for the imposition of sanctions against the plaintiff for discovery violations, and pursuant to 22 NYCRR 130–1.1 for an award of costs and reasonable attorney's fees.

ORDERED that the order is modified, on the facts and in the exercise of discretion, (1) by deleting the provision thereof denying those branches of the separate motions of the defendants Rochelle Sirota and Howard Sirota which were pursuant to CPLR 3126 for the imposition of sanctions against the plaintiff for discovery violations, and substituting therefor a provision granting those branches of the motions to the extent of directing the plaintiff to produce in the Supreme Court, within 45 days after service of a copy of this decision and order, all outstanding discovery, including a privilege log and the original note and allonges for inspection, and, if the plaintiff fails to comply, then a negative inference will be drawn against the plaintiff on the issue of standing at trial or upon a dispositive motion, and (2) by deleting the provision thereof denying those branches of the separate motions of the defendants Rochelle Sirota and Howard Sirota which were pursuant to 22 NYCRR 130–1.1 for an award of costs and reasonable attorney's fees, and substituting therefor a provision granting those branches of the motions; as so modified, the order is affirmed insofar as appealed from, with one bill of costs to the defendants Rochelle Sirota and Howard Sirota, and the matter is remitted to the Supreme Court, Queens County, for a determination of the amount of costs and reasonable attorney's fees to be awarded to each of those defendants pursuant to 22 NYCRR 130–1.1.

In November 2015, the plaintiff commenced this action against, among others, the defendants Rochelle Sirota and Howard Sirota (hereinafter together the defendants) to foreclose a mortgage on certain property owned by the defendants in Belle Harbor. In their respective answers, each of the defendants asserted affirmative defenses including, inter alia, the plaintiff's lack of standing and the existence of a fatal defect in the allonges to the note underlying the mortgage, and a counterclaim for a declaration that the defendants were entitled to the release of certain homeowners' insurance proceeds that were issued by the defendants' homeowners' insurance carrier in connection with damage to the defendants' house caused by Hurricane Sandy. The insurance company had issued checks for the insurance proceeds which were made payable to the defendants and the plaintiff. Counsel for Rochelle Sirota was holding those checks in escrow pending a determination of the counterclaims.

Thereafter, the defendants each served discovery demands upon the plaintiff, which included a demand for the production of the original note for inspection, as well as the production of other documents reflecting the chain of custody and current location of the note. After receiving the plaintiff's discovery responses, Rochelle Sirota served a letter identifying deficiencies in the plaintiff's production, and then moved to compel discovery. While that discovery motion was pending, the plaintiff moved for summary judgment on the complaint, attaching documents that were not previously produced in discovery. Rochelle Sirota cross-moved for summary judgment on her counterclaim, and for the immediate release of the insurance funds to the defendants.

In an order entered August 7, 2017 (hereinafter the August 2017 order), the Supreme Court (1) "granted in its entirety" the motion to compel responses to discovery, to be furnished on or before September 14, 2017; (2) denied the plaintiff's motion for summary judgment; and (3) "granted in its entirety" the cross motion "for the release of the escrowed funds," to be released within 14 days of service of a copy of the order with notice of entry. The court noted, inter alia, that the need for discovery in the action was "acute," in light of the issues raised in a prior action to foreclose the same mortgage, with respect to the plaintiff's standing and the validity of the note's allonges. The plaintiff produced additional documents in response to the August 2017 order, but the defendants contended that the plaintiff's discovery responses were still deficient.

Thereafter, the plaintiff, which had filed a notice of appeal from the August 2017 order, moved in this Court in October 2017 to stay enforcement of so much of the August 2017 order as directed release of the escrowed insurance funds. In its papers submitted to this Court in support of the motion, the plaintiff disclosed for the first time that the insurance company had released the insurance proceeds to the plaintiff's loan servicer and the funds had been deposited into the account of the plaintiff's loan servicer without the defendants' knowledge or consent. In November 2017, this Court denied the plaintiff's motion to stay enforcement of the relevant portion of the August 2017 order. Several weeks later, the plaintiff wired the insurance proceeds to the defendants' counsel.

The defendants thereafter separately moved in the Supreme Court pursuant to, inter alia, CPLR 3126, for the imposition of sanctions against the plaintiff for discovery violations, and pursuant to 22 NYCRR 130–1.1 for an award of costs and reasonable attorney's fees. Howard Sirota also sought to hold the plaintiff in civil contempt and Rochelle Sirota joined in that branch of his motion. In an order dated October 15, 2018 (hereinafter the October 2018 order), the court denied the defendants' separate motions. The defendants separately appeal.

Although we agree with so much of the Supreme Court's determination as denied the defendants' requests to strike the complaint, the court should have imposed a lesser sanction on the plaintiff to ensure that the plaintiff complies with its discovery obligations (see Turiano v. Schwaber , 180 A.D.3d 950, 952, 119 N.Y.S.3d 206 ; Gutman v. Cabrera , 121 A.D.3d 1042, 1043–1044, 995 N.Y.S.2d 180 ).

CPLR 3126 gives a trial court broad discretion to fashion an appropriate discovery sanction, even when the particular...