Windward Bora LLC v. Cohen
| Decision Date | 04 November 2021 |
| Docket Number | 18-CV-5997 (GRB) |
| Parties | WINDWARD BORA LLC, Plaintiff, v. DAVID COHEN A/K/A DAVID L. COHEN, TRACY J. COHEN, A/K/A TRACY JACANIN, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Seth Daniel Weinberg Hasbani & Light, P.C. Counsel for Plaintiff
William Grausso Grausso & Foy, LLP
Counsel for Defendant David Cohen
Kevin Snover Esq. Court Appointed Referee
After several years of litigation in this mortgage foreclosure action, plaintiff prevailed on summary judgment against one defendant and obtained default judgment against another. See DE 52, 58. In August 2021, this Court entered an Amended Judgment of Foreclosure and Sale, appointing a referee to handle disposition of the property, which was scheduled for September 21, 2021. Id. On September 20, 2021, defendant David Cohen filed a hardship declaration pursuant to the amendment and extension of New York State's COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (“CEEFPA”). DE 60.
That same day, plaintiff moved by Order to Show Cause to challenge the hardship declaration and seeking a preliminary injunction directing that the sale proceed as originally ordered. DE 61. That defendant had defaulted on the mortgage in 2012 - nearly eight years before the advent of the pandemic - represented plaintiff's principal basis for challenging the hardship declaration. DE 61-9 at 9. Based on this showing, the Court temporarily stayed the foreclosure sale and directed that a hardship hearing be held on October 18, 2021. This opinion follows.
At the hearing, defendant testified and several exhibits were received into evidence. Defendant testified that in 2019, he was working in a senior management role at a company called Tensator, a position he had held for eight years. Tr. 8-9. In 2019, he left Tensator, which manufactured “crowd management products, ” in favor of a more senior position at a firm called Fleetwood. Tr. 8-10. In July 2019, due to a reduction in workforce, defendant was laid off and began collecting unemployment. Id. Later that year, he formed a new business called Barrier Direct, working with products similar to those produced by Tensator. Id. at 11, 17. The advent of COVID had a considerable negative effect on the fledgling business. Id. Though the business has offered some promise, defendant has not yet been able to draw a salary or share in the revenue. Id. at 11, 14-15.
The net financial effect upon defendant was significant. On his 2019 tax return, defendant reported total income of $85, 000. Id. at 12-13, Ex. 1. The following year's tax return reveals total income of $26, 000. Id., Ex. 2. The principal source of the 2020 income was unemployment insurance payments. Id. at 14.
Defendant acknowledges that he has not paid his mortgage payments in many years, as he initially defaulted while attempting to qualify for relief under the Home Affordable Modification Program (HAMP). Id. at 20. At the same time, his financial situation was such that, in March 2020, immediately prior to the commencement of the pandemic, he was unemployed and financially unable to make mortgage payments. Id. at 22.
Though the Hardship Declaration does not specify the specific sections claimed, counsel for defendant identified two specific paragraphs applicable to this defendant: paragraph one, relating to significant loss of income during the pandemic and paragraph 5, relating to circumstances arising from the pandemic having a negative effect on his ability to earn income or obtain employment. Id. at 24. Counsel for plaintiff emphasized that the testimony establishes that, assuming defendant did suffer financial setbacks from the pandemic, “it's not a cause and effect.” Id. at 26. In other words, given that defendant admitted he was unable to pay the mortgage obligations before the pandemic, he should not be entitled to the benefit of the eviction moratorium.
“On September 2, 2021, the New York State legislature extended foreclosure and eviction protections through January 15, 2022, and, in an apparent attempt to address the due process concerns identified in Chrysafis, created a mechanism for landlords to contest tenants' declarations of financial hardship.” Melendez v. City of New York, 2021 WL 4997666, at *5 n.19 (2d Cir. Oct. 28, 2021) (). Under the current framework, a resident can invoke hardship by the filing of a declaration. Id. at *39 (). While the statements contained therein are not made under oath, the declaration bears the clear, unequivocal warning that:
You are signing and submitting this form under penalty of law. That means it is against the law to make a statement on this form that you know is false.
See, e.g., DE 60.
Under the amended statute, service of the hardship declaration stays eviction until January 15, 2022, unless challenged in a hearing. See Wilmington Sav. Fund Soc'y, FSB v. Horn, 2021 WL 4803709, at *1 (S.D.N.Y. Oct. 14, 2021) (“Pursuant to [CEEPFA], foreclosure cases such as the instant matter have been stayed by operation of law.”). To obtain such a hearing, the landlord must seek a declaration hardship hearing by filing a motion “attesting a good faith belief that the respondent has not experienced a hardship.” Chrysafis v. Marks, 15 F.4th 208, 213 (2d Cir. 2021) (quoting CEEFPA Subpart C(A) 2021, § 10(a)).
State courts have taken varied approaches to the showing required to demonstrate a “good faith belief” in these circumstances.[1] According to one court:
the Legislature did not require landlords to, for example, show “knowledge” of a tenant's hardship status to obtain a hearing. Rather, landlords only have to show a “belief, ” albeit one that has a good-faith basis.
Harbor Tech LLC, v. Correa, 2021 WL 4945158, at *3 (N.Y. Civ. Ct. Oct. 25, 2021); see Bitzarkis v. Evans, 2021 WL 4889193, at *2 (N.Y. Civ. Ct. Oct. 20, 2021) (same). Several decisions have granted hearings that upended hardship declarations under a variety of circumstances. See, e.g., Harbor Tech, 2021 WL 4945158 at *3 (); Bitzarkis, 2021 WL 4889193, at *2 (); Sanchez-Tiben v. Washington, 2021 WL 4839235, at *2 (N.Y. Civ. Ct. Oct. 18, 2021) (); cf. Omega Melville, LC v. Fusion Mgmt., Inc., 72 Misc.3d 1048, 1051 (N.Y. Dist. Ct. 2021) (). At least one state court has held a hardship declaration invalid under circumstances similar to those presented here. Diamond Ridge Partners LLC v. Hanspal, No. LT-6528/17, 2021 WL 4271024, at *4 (N.Y. Dist. Ct. Sept. 14, 2021) (“Respondents' behavior, which reflect no payments of any kind for decades, augurs strongly against any protection under the CEEFPA statute, as this could not be considered a temporary issue warranting interim protection.”). Ultimately, the Court determined, and counsel agreed, that the facts set forth in this case, to wit: that defendant's default long preceded the pandemic, constituted sufficient grounds to hold a hearing. Tr. at 6. As to the burden of proof at that hearing, the Court determined, and counsel agreed, that once plaintiff demonstrated its entitlement to a hearing, the burden was upon defendant to produce at least some evidence to support the hardship declaration. Tr. 5-6; Compare Harbor Tech, 2021 WL 4945158, at *3 ().
The evidence here is easily summarized: defendant defaulted on his mortgage years before the onset of the COVID-19 pandemic, and it cannot be gainsaid that factors other than COVID caused his default and inability to pay. The day before the pandemic began, he was unable to make his mortgage payments. At the same time, it is beyond dispute that the defendant suffered significant financial setbacks during and as a result of the pandemic, most specifically, the inability to grow his new business. Those financial setbacks undermined any ability to meet his obligations under the mortgage.
The question, then, is the effect of the statute as applied to these facts. Does CEEFPA apply to a mortgagor who suffers a financial hardship from COVID-19, even if that hardship does not represent the initial cause of the default? One state court interpreting the amended statute noted the following:
The legislative intent of the act, and all of its precedent legislation, has been to be as expansive as possible - as is explicitly set forth in § 2 of L. 2021 Ch. 417. The Court of Appeals has repeatedly stated that the primary method of statutory interpretation deference courts should be the legislature's intent. DaimlerChrysler Corp v....
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