Foreclosure Conference Denied in Commercial Transaction

, New York Law Journal


Justice Cohen

A residential foreclosure action triggered by a default on a commercial loan is not entitled to a mandatory settlement conference, a Brooklyn appellate court has decided.

"While it is unfortunate that here, a primary residence may be lost in foreclosure, not everyone under every circumstance is entitled to reap the protections afforded to victims of the mortgage crisis by the New York Legislature," Justice Jeffrey Cohen (See Profile) of the Appellate Division, Second Department, wrote in Independence Bank v. Valentine, 2012-08136.

The unanimous Nov. 27 decision affirmed a lower court's grant of summary judgment and order of reference. Justices Mark Dillon (See Profile), Daniel Angiolillo (See Profile) and Thomas Dickerson (See Profile) joined Cohen in the ruling, which was submitted for decision on May 28.

In December 2006, Independence Bank agreed to loan Roz-Valt Corp., a New York corporation, an amount of $230,000. The loan was principally intended to fund the purchase of equipment, construction costs and start-up costs for a "Quizno's Sub" shop in Brooklyn.

Roselyn Valentine, Roz-Valt's president, executed the promissory note for the loan. She also executed a personal guaranty and, as collateral, executed and delivered a $230,000 mortgage to the bank that gave it a subordinate lien on her primary residence in Queens.

When Roz-Valt defaulted on the loan and Valentine did not honor the personal guaranty, the bank initiated the foreclosure action.

In her response, Valentine asserted that she was entitled to a mandatory settlement conference, pursuant to CPLR 3408.

In June 2012, Queens Supreme Court Justice Allan Weiss (See Profile) granted the bank's summary judgment motion and Valentine appealed.

Cohen observed that Valentine did not question the validity of the agreement or deny a default had occurred.

Instead, he said her only challenge to the bank's prima facie showing it was entitled to a judgment of foreclosure was her contention she had been improperly denied a settlement conference.

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