Ditech Financial LLC v. Frantz et al
MEMORANDUM-DECISION AND ORDER denying 30 Motion for Default Judgment: The Court hereby ORDERS that Plaintiff's motion for default judgment (Dkt. No. 30) is DENIED; and the Court further ORDERS that the Clerk of Onondaga County in the State of New York vacate Plaintiff's notice of pendency filed on January 27, 2016 (Dkt. No. 6);5 and the Court further ORDERS that Plaintiff shall serve a copy of this Memorandum-Decision and Order on the Clerk of Onondaga County in the State of New Yor k by Certified Mail, Return Receipt Requested, and file the returned receipt using the Court's electronic filing system; and the Court further ORDERS that Plaintiff is permitted to resubmit this motion for default judgment upon the submission of a letter indicating that request together with a copy of a properly filed notice of pendency. Signed by U.S. District Judge Mae A. D'Agostino on 3/29/2017. (ban)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
DITECH FINANCIAL LLC,
formerly known as GREEN TREE
JOHN F. FRANTZ; LAURA J. FRANTZ;
USAA FEDERAL SAVINGS BANK;
ST. JOSEPH'S HOSPITAL CENTER,
GROSS POLOWY, LLC
1775 Wehrle Drive, Suite 100
Williamsville, New York 14221
Attorneys for Plaintiff
AMY E. POLOWY, ESQ.
GROSS POLOWY, LLC
900 Merchants Concourse, Suite 412
Westbury, New York 11590
Attorneys for Plaintiff
DENNIS JOSE, ESQ.
STEPHEN J. VARGAS, ESQ.
BOND, SCHOENECK & KING, PLLC
One Lincoln Center
Syracuse, New York 13202
Attorneys for Defendants John and Laura Frantz
JOSEPH ZAGRANICZNY, ESQ.
Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
Plaintiff Ditech Financial LLC ("Plaintiff") commenced this action on February 8, 2016
pursuant to Article 13 of the New York Real Property Actions and Proceedings Law ("RPAPL")
to foreclose a mortgage encumbering 409 Brooklea Drive, Fayetteville, New York 13066,
together with the land, buildings, and other improvements located on the property (the
"Mortgaged Property"). See Dkt. No. 1. Defendants USAA Federal Savings Bank ("USAA")1
and St. Joseph's Hospital Center ("St. Joseph's")2 have not appeared in this action.
Presently before the Court is Plaintiff's motion for default judgment and for judgment of
foreclosure and sale of the Mortgaged Property. See Dkt. No. 30 at 1.
According to the complaint, Defendants John and Laura Frantz (collectively, the "Frantz
Defendants") executed and delivered a note promising to pay $144,000.00 plus interest to the
lender, USAA. See Dkt. No. 1 at 6. Defendants John and Laura Frantz also executed and
delivered a mortgage on the property as security for payment of the note. See id. at 6. The
mortgage was subsequently assigned to Plaintiff on October 10, 2013.3 See id. at 2; see also Dkt.
No. 3 at 28. The Frantz Defendants defaulted under the terms of the note and mortgage by failing
to tender the monthly payment due on November 1, 2009, and all subsequent monthly payments.
Dkt. No. 1 at 3. Pursuant to the terms of the note and mortgage, Plaintiff accelerated the
payments and declared due the entire amount owed on the note. Id.
Defendant USAA holds a mortgage encumbering the Mortgaged Property that is subject
and subordinate to Plaintiff's mortgage. See Dkt. No. 1 at 2.
Defendant St. Joseph's holds a lien encumbering the Mortgaged Property that is
subordinate to Plaintiff's mortgage. See Dkt. No. 1 at 2.
The mortgage was assigned from USAA Federal Savings Bank to GMAC Mortgage,
LLC on February 23, 2010. See Dkt. No. 3 at 26. GMAC Mortgage, LLC then assigned its
interest in the mortgage to Plaintiff, known then as Green Tree Servicing LLC. See Dkt. No. 3 at
28. GMAC Mortgage, LLC retained no interest in the mortgage and is not a named party to this
suit. See id.
At the time of the complaint, Plaintiff claimed that the Frantz Defendants owed a principal
balance of $136,096.24 with interest at the rate of 5.75% accruing from October 1, 2009. Id. In
addition, the Frantz Defendants owe late charges, monies advanced for taxes, inspection fees,
insurance disbursements, and the costs, allowances, expenses of sale, and reasonable attorney's
fees for the foreclosure. Id. Furthermore, Plaintiff requests that any taxes, assessments, water
charges, insurance premiums, and other charges necessary to protect the value of the apparently
vacant Mortgaged Property be added to the total amount due to Plaintiff. See id. Plaintiff claims
that it complied with the notice provisions of the mortgage and section 1304 of the RPAPL and
filed the information required under section 1306 of the RPAPL. Id.
On March 3, 2016, Plaintiff filed with the Court affidavits of service, attesting that the
summons and complaint, together with the notice required by RPAPL § 1303, a debt validation
letter, and a certificate of merit were properly served on the Frantz Defendants. See Dkt. No. 11.
This service was followed by a first class mailing of the summons and a section 1303 notice on
February 29, 2016. See id. at 2, 4. On February 25, 2016, Defendant USAA was served by a
process server delivering a copy of the summons, complaint, and certificate of merit on a
registered agent authorized to accept service on behalf of Defendant USAA. See Dkt. No. 7.
Defendant St. Joseph's was similarly served on an agent authorized to accept service on behalf of
Defendant St. Joseph's on February 24, 2016. See Dkt. No. 8.
Defendants USAA and St. Joseph's failed to respond to the complaint or otherwise appear
in this action. On April 8, 2016, Plaintiff requested that the Clerk of the Court enter a certificate
of entry of default against those Defendants pursuant to Rule 55(a) of the Federal Rules of Civil
Procedure and Local Rule 55.1. See Dkt. No. 18. On April 13, 2016, the Clerk of the Court
entered the requested default. See Dkt. No. 20.
On June 6, 2016, the Court granted an extension of time until June 13, 2016 for the Frantz
Defendants to respond to the complaint. See Dkt. No. 22. The Frantz Defendants appeared
before the Court on June 9, 2016 in exchange for Plaintiff's stipulation waiving a deficiency
judgment against them. See Dkt. No. 24. Plaintiff requested entry of default with respect to John
and Laura Frantz on June 16, 2016. See Dkt. No. 26 at 1. On June 21, 2016, the Clerk of the
Court entered the requested default. See Dkt. No. 29. Plaintiff now asks the Court for entry of
default judgment against all named Defendants. See Dkt. No. 30 at 1.
"Rule 55 sets forth a two-step process that first requires the entry of a default through a
notation on the record that the party has defaulted, and then entry of a default judgment, which is
the final action in the case." La Barbera v. Fed. Metal & Glass Corp., 666 F. Supp. 2d 341, 346
(E.D.N.Y. 2009) (citing Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95-96 (2d Cir. 1993)). The
court clerk must enter the default pursuant to Rule 55(a) of the Federal Rules of Civil Procedure,
"[w]hen 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." In addition, Local Rule
[a] party applying to the Clerk for a certificate of entry of default
pursuant to Fed. R. Civ. P. 55(a) shall submit an affidavit showing
that (1) the party against whom it seeks a judgment of affirmative
relief is not an infant, in the military, or an incompetent person (2) a
party against whom it seeks a judgment for affirmative relief has
failed to plead or otherwise defend the action as provided in the
Federal Rules of Civil Procedure and (3) it has properly served the
pleading to which the opposing party has not responded.
Local Rules N.D.N.Y. 55.1.
"After a default has been entered against a party, if that party fails to appear or otherwise
move to set aside the default pursuant to Rule 55(c), a default judgment may be entered." La
Barbera, 666 F. Supp. 2d at 347 (citing Fed. R. Civ. P. 55(b)). Further procedural requisites are
imposed by Local Rule 55.2, requiring a party to submit the clerk's certificate of entry of default,
a proposed form of default judgment, a copy of their pleading, and an affidavit setting forth the
The party against whom it seeks judgment is not an infant or
an incompetent person;
The party against who it seeks judgment is not in the
military service, or if unable to set forth this fact, the
affidavit shall state that the party against whom the moving
party seeks judgment by default is in the military service or
that the party seeking a default judgment is not able to
determine whether or not the party against whom it seeks
judgment by default is in the military service;
The party has defaulted in appearance in the action;
Service was properly effected under Fed. R. Civ. P. 4;
The amount shown in the statement is justly due and owing
and that no part has been paid except as set forth in the
statement this Rule requires; and
The disbursements sought to be taxed have been made in the action
or will necessarily be made or incurred.
Local Rules N.D.N.Y. 55.2(a) - 55.2(b).
Here, Plaintiff has complied with the procedural requirements for default judgment.
Plaintiff requested a certificate of default and met all the requirements in Fed. R. Civ. P. 55(a) and
Local Rule 55.1. See Dkt. Nos. 18, 26. The Clerk of the Court entered the default with respect to
USAA and St. Joseph's on April 13, 2016, see Dkt. No. 20, and with respect to Defendants John
and Laura Frantz on June 16, 2016, see Dkt. No. 26. Further, Plaintiff has complied with Fed. R.
Civ. P. 55(b) and Local Rule 55.2(b). Plaintiff submitted the Clerk's entry of default, see Dkt. No.
31-4, a copy of the summons and complaint, see Dkt. No. 31-1, a proposed form of default
judgment, see Dkt. No. 31-9, and affidavits setting forth all the requirements in Local Rule
55.2(a), see Dkt. Nos. 31-3, 31-4, 31-7 at 1-3, 31-8, 31-9. Plaintiff has sufficiently demonstrated
that Defendants are not in military service or incompetent, and that service was proper under Fed.
R. Civ. P. 4. See Dkt. No. 26 at 3; Dkt. No. 26-1 at 5, 8; Dkt. No. 31-3. Having found that
Plaintiff has complied with the procedural requirements for a default judgment, the Court will
now consider the substance of Plaintiff's motion.
As long as a plaintiff meets the procedural requirements, "the decision to grant a motion
for a default judgment lies in the sound discretion of the trial court." O'Callaghan v. Sifre, 242
F.R.D. 69, 73 (S.D.N.Y. 2007) (citing Shah v. New York State Dep't of Civil Serv., 168 F.3d 610,
615 (2d Cir. 1999)). There are several factors that a court may consider when deciding a default
judgment motion, including "whether plaintiff has been substantially prejudiced by the delay
involved and whether the grounds for default are clearly established or are in doubt." Id.
(citation and internal quotation marks omitted). "The [C]ourt is also guided by the same factors
that apply to a motion to set aside entry of default: (1) whether the default was willful; (2)
whether the plaintiffs would be prejudiced by the denial of the motion for default judgment; and
(3) whether there are meritorious defenses to plaintiff's claims." Id. (citing Percarsky v.
Galaxiworld.com Ltd., 249 F.3d 167, 170-71 (2d Cir. 2001)) (other citations omitted). The Court
notes that "default judgments are disfavored" and that "[a] clear preference exists for cases to be
adjudicated on the merits." See Percarsky, 249 F.3d at 175 (citing Cody v. Mello, 59 F.3d 13, 15
(2d Cir. 1995)).
"In a mortgage foreclosure action under New York law, a lender must prove (1) the
existence of a debt, (2) secured by a mortgage, and (3) a default on that debt." U.S. Bank, N.A. v.
Squadron VCD, LLC, 504 Fed. Appx. 30, 32 (2d Cir. 2012) (citing R.B. Ventures, Ltd. v. Shane,
112 F.3d 54, 59 n.2 (2d Cir. 1997)). The RPAPL also sets forth procedural requirements in
sections 1303 (service of a statutory notice to mortgagor with the summons and complaint), 1304
(prior notice to mortgagor before a lender or assignee commences a legal action), 1306 (lender
must file certain information with the superintendent of New York State Department of Financial
Services), 1320 (summons must contain a statutory notice), and 1331 (the filing of a notice of
pendency). See RPAPL §§ 1303, 1304, 1306, 1320, 1331. Section 1331 of the RPAPL requires
that "[t]he plaintiff, at least twenty days before a final judgment directing a sale is rendered, shall
file in the clerk's office of each county where the mortgaged property is situated a notice of the
pendency of the action, which shall specify, in addition to other particulars required by law, the
date of the mortgage, the parties thereto and the time and place of recording." Id. § 1331. In
addition, the notice of pendency must be filed with a copy of the complaint, unless the complaint
has already been filed in that county. See N.Y. C.P.L.R. § 6511(a).
Here, Plaintiff has met the common law requirements to foreclose its mortgage. Plaintiff
has sufficiently demonstrated that Defendants John and Laura Frantz executed a note secured by a
mortgage on the Mortgaged Property, and that those Defendants defaulted on the note. See Dkt.
No. 1 at 3, 6-8. However, Plaintiff has not met all the procedural requirements set forth in Article
13 of RPAPL. Plaintiff sent a prior notice pursuant to RPAPL § 1304, see Dkt. No. 31-7 at 2-9,
and filed the information required by RPAPL § 1306, see id. at 22-23. Plaintiff also served, with
the summons and complaint, notices pursuant to RPAPL § 1303 and § 1320. See Dkt. No. 31-3.
Plaintiff also served a debt validation letter and certificate of merit. See id. Plaintiff filed a notice
of pendency pursuant to RPAPL § 1331 with the Onondaga County Clerk in the State of New
York. See Dkt. No. 6. The notice states that a foreclosure action has been commenced against
Defendants in the United States District Court for the Northern District of New York. See id. at
1. However, there is no indication that Plaintiff filed the complaint with the notice of pendency
as required by CPLR § 6511(a). See id. The only document attached to the notice of pendency is
a legal description of the property, see id. at 3, and Plaintiff has provided no proof that the
complaint was filed with the notice of pendency.
The purpose of a notice of pendency is to provide constructive notice to a purchaser from
any defendant named in the notice and bind a purchaser by all proceedings taken in the action
after such filing. See N.Y. C.P.L.R. § 6501. The notice of pendency is "'an extraordinary
privilege,'" which permits a party to hinder the transfer of another's property without judicial
intervention. See Richard J. Zitz, Inc. v. Pereira, 965 F. Supp. 350, 354 (E.D.N.Y. 1997)
(quoting Israelson v. Bradley, 308 N.Y. 511, 516 (1955)). "[T]he New York Court of Appeals
has required strict compliance with the statutory procedural requirements" of the notice of
pendency. Richard J. Zitz, 965 F. Supp. at 354 (internal quotation marks omitted) (citing 5303
Realty Corp. v. O & Y Equity Corp., 64 N.Y.2d 313, 320-21 (1984)).
The Court finds that Plaintiff's notice of pendency is ineffective. The failure to file a
complaint with the notice renders Plaintiff's notice defective and void. See Chateau Rive Corp. v.
Riverview Partners, LP, 18 A.D.3d 492, 493 (3d Dep't 2005) ("[W]here, as here, no complaint
was filed with the notice of pendency, it follows that the notice was defective and void from the
beginning . . . .)." However, successive notices of pendency are permitted to be filed when
prosecuting a foreclosure action to final judgment. See Slutsky v. Blooming Grove Inn, Inc., 147
A.D.2d 208, 212 (2d Dep't 1989).
In consideration of whether there are clearly established grounds for the foreclosure of the
mortgage, the Court finds that Plaintiff's motion must be denied without prejudice. The failure to
file a complaint with the notice of pendency, as statutorily required, rendered Plaintiff's notice
defective and void. Accordingly, the Court directs that the notice of pendency filed with the
Clerk of Onondaga County in the State of New York is vacated.4 Without a valid notice of
pendency filed twenty days before a final judgment, Plaintiff has not complied with the statutory
requirements of RPAPL § 1331. As such, Plaintiff's motion for default judgment must be denied.
After carefully reviewing Plaintiff's submissions and the applicable law, and for the
reasons stated herein, the Court hereby
ORDERS that Plaintiff's motion for default judgment (Dkt. No. 30) is DENIED; and the
ORDERS that the Clerk of Onondaga County in the State of New York vacate Plaintiff's
notice of pendency filed on January 27, 2016 (Dkt. No. 6);5 and the Court further
ORDERS that Plaintiff shall serve a copy of this Memorandum-Decision and Order on
the Clerk of Onondaga County in the State of New York by Certified Mail, Return Receipt
It should be noted that vacating a notice of pendency and cancelling a notice of
pendency "are two different concepts in New York." See In re Murphy, 331 B.R. 107 (Bankr.
S.D.N.Y. 2005). Vacating a notice of pendency is used when a party did not meet the
requirements of the CPLR and, therefore, the notice was improperly issued. See id. Cancelling a
notice of pendency is pursuant to the statutory reasons enumerated within CPLR § 6514 or §
6515. See id.
The Court notes that two notices of pendency are filed on the docket. See Dkt. Nos. 5,
6. It appears that only one notice of pendency was actually filed with the Onondaga County
Clerk, and that Dkt. No. 5 is merely a filing error. To the extent that Plaintiff has more than one
notice of pendency filed regarding the Mortgaged Property in the Office of the Onondaga
County Clerk, each of those notices of pendency is to be vacated.
Requested, and file the returned receipt using the Court's electronic filing system; and the Court
ORDERS that Plaintiff is permitted to resubmit this motion for default judgment upon the
submission of a letter indicating that request together with a copy of a properly filed notice of
IT IS SO ORDERED.
Dated: March 29, 2017
Albany, New York
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