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STATUTE OF FRAUDS--Beneficial v Steele

STATUTE OF FRAUDS--Beneficial v Steele

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Published by 83jjmack
Every state has a statute of frauds, which means that there are certain types of transactions that won’t be enforced by the court, or where parts of the transactions won’t be enforced by the court without a written instrument executed in the form set forth in that state statute.

A transaction alleged to be enforceable is not enforceable as a mortgage loan if it violates the statute of frauds
Every state has a statute of frauds, which means that there are certain types of transactions that won’t be enforced by the court, or where parts of the transactions won’t be enforced by the court without a written instrument executed in the form set forth in that state statute.

A transaction alleged to be enforceable is not enforceable as a mortgage loan if it violates the statute of frauds

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Published by: 83jjmack on Feb 08, 2011
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Beneficial Homeowner Serv. Corp. v Steele
2011 NY Slip Op 50015(U) [30 Misc 3d 1208(A)]Decided on January 7, 2011Supreme Court, Suffolk CountySpinner, J.Published by New York State Law Reporting Bureaupursuant to Judiciary Law §431.This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on January 7, 2011
Supreme Court, Suffolk CountyBeneficial Homeowner Service Corporation, Plaintiff againstStephen Steele, Susan Steele, Ocean Bank Fsb, "John Doe" and"Mary Roe" (said names being fictitious, it being the intention of Plaintiff to designate any and all occupants of the premises beingforeclosed herein), Defendants
2010-01996ATTORNEYS FOR PLAINTIFFJonathan D. Pincus, Esq95 Allens Creek RoadRochester, New York 14618ATTORNEYS FOR DEFENDANTS STEELESteven Tekulsky, Esq.113 Cedar StreetEast Hampton, New York 11937Jeffrey Arlen Spinner, J.Plaintiff has commenced this action pursuant to Real Property Actions and Proceedings LawArticle 13, claiming foreclosure of a mortgage which encumbers real property located at 634
Beneficial Homeowner Serv. Corp. v Steele (2011 NY Slip Op 50015(U))http://www.nycourts.gov/reporter/3dseries/2011/2011_50015.htm1 of 42/6/2011 9:32 PM
Stephen Hands Path, East Hampton, Suffolk County, New York. In both its Verified Complaint both and the present motion papers, Plaintiff alleges that it is the owner and holder of a LoanAgreement executed by STEPHEN STEELE and SUSAN STEELE dated October 26, 2006 inthe principal amount of $ 92,696.60 which is secured by a Mortgage of the same date andexecuted by both STEPHEN STEELE and SUSAN STEELE, recorded with the Suffolk CountyClerk in Liber 21410 of Mortgages at Page 639. Plaintiff further alleges that Defendants[*2]STEELE are in default of their obligations under the Loan Agreement (though the natureand extent of the default is nowhere specified) and it is claimed that the principal sum of $91,614.34 is due and owing, together with interest at the rate of 5.250% per annum as computedfrom October 1, 2008. Defendants STEELE, through counsel, have timely appeared and haveinterposed an Answer consisting of general denials as to the allegations of the Plaintiff'sComplaint together with eight affirmative defenses.Plaintiff has moved for summary judgment in accordance with the provisions of CPLR 3212,having filed a Notice of Motion and supporting papers dated May 18, 2010 and containing aCPLR § 2214(b) seven day notice as well as a request for appointment of a Referee pursuant toRPAPL § 1921. Curiously and in direct derogation of the mandatory provisions of 22 NYCRR §202.7, Plaintiff has failed to specify or insert a return date for the application and has apparentlyserved its papers with no return date. Not surprisingly, counsel for Defendants has neither answered nor responded thereto, presumably due to the lack of both a stated return date andappropriate notice. The Clerk of the Court apparently scheduled the motion for June 10, 2010,which was administratively adjourned by the Court to November 17, 2010. In the interim period,mandatory foreclosure settlement conferences in accordance with CPLR § 3408 were convenedon September 2, 2010 and November 9, 2010 respectively. Thereafter and on December 22,2010, the Court received an Affidavit from Plaintiff's counsel which purports to comply with the provisions of Administrative Order no. AO548/10.It is settled law in New York that the initial burden is placed upon the proponent of anapplication for summary judgment as to making a prima facie case for entitlement to the relief sought,
 orwest Bank Minnesota .A. vs. Sabloff, 297 AD2d 722 (2nd Dept. 2002)
. WherePlaintiff comes forward with the mortgage at issue together with the underlying note or bondcoupled with evidence of the alleged default, it establishes its prima facie right to judgment as amatter of law,
 Household Finance Realty Corporation of ew York vs. Winn, 19 AD3d 544(2nd Dept. 2005)
 Fleet ational Bank vs. Olasov, 16 AD3d 374 (2nd Dept. 2005), leave toappeal dismissed 5 Y3d 849 (2005)
Gateway State Bank vs. Shangri-La Private Club For Women, 113 AD2d 791 (2nd Dept. 1985), aff'd 67 Y2d 627 (1986)
. Once such a prima facieshowing has been made, the burden shifts to the party opposing the application to come forwardwith sufficient evidence to controvert the summary judgment motion by demonstrating theexistence of a genuine triable issue of fact,
 Barcov Holding Corp. vs. Bexin Realty Corp., 16  AD3d 282 ( 1st Dept. 2005)
. For the reasons hereinafter set forth, the Court finds that Plaintiff has failed to satisfy its burden of setting forth a prima facie case for entitlement to the relief itseeks.The copy of the mortgage appended to Plaintiff's moving papers bears the signatures of bothSTEPHEN STEELE and SUSAN STEELE and contains an acknowledgment by a notary public.However, the copy of the Loan Agreement that is appended to Plaintiff's papers raises disturbing
Beneficial Homeowner Serv. Corp. v Steele (2011 NY Slip Op 50015(U))http://www.nycourts.gov/reporter/3dseries/2011/2011_50015.htm2 of 42/6/2011 9:32 PM
issues. That instrument bears the date of October 26, 2006 and recites a principal amount of $92,696.60. The Loan Agreement clearly reflects Defendant STEPHEN STEELE as the soleobligor thereunder but, most glaring of all, the Loan Agreement bears no signature whatsoever.General Obligations Law § 5-701 requires promises such as those contained in the LoanAgreement to be both in writing and signed by the party to be charged [G.O.L. § 5-701(a)(1)].This Court must question how, under the circumstances presented here, Plaintiff can, withunbridled temerity, demand enforcement of the Loan Agreement against Defendant STEPHENSTEELE, who has not executed that instrument and against Defendant SUSAN STEELE, who isnot even a party to that agreement. The most cursory reading of these instruments reveal theobvious facts as set forth above. This posture by Plainitff strains credulity and causes the Courtto seriously question Plaintiff's good faith in commencing this action.Distilled to its essence, a mortgage is a conveyance of an interest in land that is expresslyintended to constitute security for some obligation, most commonly an indebtedness,
 Burnett v.Wright 135 Y 543, 32 E 253 (1895)
. It follows logically then that in order for a mortgage to be valid and subsisting, there must[*3] be an underlying obligation that is to be secured by aninterest in the real property, owed by the obligor to the obligee, which contains both the right of the obligee to foreclose and the right of the obligor to redeem,
 Baird v. Baird 145 Y 659, 40 E 222 (1895)
 R.H. Macy & Co. v. Bates 280 AD 292, 114 YS 2d 143 (3rd Dept. 1952)
.Absent these essential elements, a valid mortgage cannot exist because it is the underlyingobligation which gives rise to the validity of the mortgage as a lien upon the real property. Here,the Loan Agreement that has been presented to the Court facially appears to run counter to NewYork's Statute of Frauds, G.O. L. § 5-701. Since there has been presented to this Court no validunderlying obligation and no further explanation, the mortgage appears to fail as a matter of law.This situation is all the more disturbing when it is considered that the sworn statementscontained in the both the Complaint and the Affidavit in Support Of the Motion for SummaryJudgment expressly and falsely assert that Defendant SUSAN STEELE executed the LoanAgreement. This is compounded by the sworn statement of Shana Richmond, Plaintiff'sforeclosure specialist, which is dated April 28, 2010 and which contains the same painfullyobvious mis-statements of fact. Going further, Plaintiff's counsel has submitted an Affirmationdated December 2, 2010 which purports to comply with Administrative Order no. AO548/10 inwhich he ratifies and confirms, in essence, the incorrect assertions in the Complaint and theSummary Judgment application. Aside from the papers themselves, it appears that counsel'saffirmation runs afoul of the provisions of 22 NYCRR § 130-1.1.An action claiming foreclosure of a mortgage is a suit in equity,
 Jamaica Savings Bank v. M.S. Investment Co. 274 Y 215 (1937)
, and the very commencement of the proceeding invokes theequity jurisdiction of the Supreme Court. Thus, in order to obtain equitable relief, the applicantmust come before the Court with clean hands, else such relief will be denied. Thus, where a party comes before the Court and is shown to have acted in a manner which is offensive to goodconscience, fairness and justice, that party will be completely without recourse in a court of equity, no matter what his legal rights may be,
York v. Searles 97 AD 331 92nd Dept. 1904),aff'd 189 Y 573 (1907)
. IStated a bit differently, in order to obtain equity, one must do equity.Here, it is irrefutable that Defendant SUSAN STEELE was not a party to the Loan Agreement
Beneficial Homeowner Serv. Corp. v Steele (2011 NY Slip Op 50015(U))http://www.nycourts.gov/reporter/3dseries/2011/2011_50015.htm3 of 42/6/2011 9:32 PM

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