MORTGAGE FORCLOSURE

NOTE - THERE IS A COMMENT MAKING A CORRECTION ON THIS POST COURTESY OF DAN BLUMENTHAL, ESQ. WHO WAS THE ATTORNEY FOR THE OCCUPANT IN THIS CASE. We all remember the November 2009 story in which a Suffolk judge awarded a Long Island family their East Patchogue house, wiping the slate clean on their mortgage debt and ruling that the bank holding their home loan had acted in a manner “so completely devoid of good faith that equity cannot be permitted to intervene on its behalf.” Well here is another case from the same court, diffrent judge, just about the same time:

COLLADO v. BOKLARI, HULT 387-09 (11-9-2009) 2009 NY Slip Op 29447, JUAN COLLADO, Petitioner v. AYAZ BOKLARI, MITCHELL GUTKOWSKI, JOHN DOE & JANE DOE, Respondents.

District Court of Suffolk County, Third District. Decided November 9, 2009.

Page 1

Collado, Collado & Fiore, PLLC, John J. Collado, Esq., Attorney
for Petitioner, Brentwood, New York.

Ezratty, Ezratty & Levine, LLP, Dan M. Blumenthal, Esq., Attorney
for the Respondent, Mineola, New York.

C. STEPHEN HACKELING, J.

Mitchell Gutkowski, the above captioned respondent, moves this
Court pursuant to Order to Show Cause seeking to vacate a judgment
of possession and warrant of eviction entered July 23, 2009 upon
default. The grounds stated for the requested relief involve an
assertion that federal law requires prior receipt of a 90 day Notice
to Quit and assorted alleged defects in service of the referee's
deed, Notice to Quit and the instant petition. The above captioned
petitioner, Juan Collado, a foreclosure purchaser of the premises
located at 58 Manchester Road, Huntington, New York, opposes the
vacatur relief arguing the inapplicability of federal law,
compliance with New York's RPAPL eviction statutes and the failure
of the respondent to offer an excuse for his default. The Court
scheduled a hearing of the matter for October 8, 2009 at which time
the respondent requested that the matter be submitted upon papers,
and declined an opportunity to conduct a sworn hearing.

Undisputed Facts
Page 2

The undisputed relevant facts are that the petitioner is the owner
of the real property premises
located at 58 Manchester Road, Huntington, New York, by virtue of a
foreclosure referee's deed dated June 19, 2009, issued pursuant to
a June 5, 2009 assigned bid arising out of
a April 30, 2009 foreclosure sale. The petitioner served a Notice to
Quit and certified referee's deed upon the respondent's wife Lynn
Gutkowski at the premises on June 25, 2005. She also accepted a copy
of same as a person of suitable age and discretion, on behalf of her
husband

Mitchell Gutkowski. Thereafter, the above captioned dispossess
petition was served personally upon the respondent and filed with
the Court on July 15, 2009, returnable July 23, 2009. The respondent
failed to appear and a default was entered resulting in the subject
judgment and warrant of eviction.
Effective May 20, 2009, Title 12 of the United States Code was
amended to add the "Protecting Tenants at Foreclosure Act". The
record presented no indication whether the subject foreclosure
involved a federally subsidized mortgage loan.

Issue Presented

Is the respondent entitled to vacate the petitioner's judgment of
possession? The test to be applied in determining whether the
respondent's default judgment should be vacated is whether the facts
presented demonstrate an excusable default in appearance and a
meritorious defense. See Benadon v. Antonio,
10 AD2d 40 (NYAD 1st Dept. 1960).

Discussion

Meritorious Defense

The respondent's foremost meritorious defense argument requires
codifying a brand new federal statute involving a case of national
first impression. 12 U.S.C. Sec. 5220 (a) provides:

(a) In general — In the case of any foreclosure
on a federally related mortgage loan or on any
dwelling or residential real property after
the date of enactment of this
title [May 20, 2009], any immediate successor
interest in such property pursuant to the
foreclosure shall assume such interest subject
to (1) the provision by such successor in
interest of a notice subject to vacate to any
bona fide tenant at least 90 days before the
effective date of such notice; and (2) the rights
of any bona fide tenant, as of the date of such
notice of foreclosure. Emphasis added.

Titles 12 and 42 of the United States Code are the statutory
mechanisms wherein the federal government created and continues to
maintain the Department of Housing and Urban Development, the
Federal Housing Agency and other related agencies, which administer
its affordable housing programs through subsidized federal mortgages
and direct rent payments.
Page 3

On its face, Sec 5220 (a) Public Law 111-22 Div. A. Title VII of

2009 Emergency Economic Stabilization "Protecting Tenants at Foreclosure
Act" of 2009,123 State 1660, and its accompanying legislative summary in
the Federal Register, Vol. 74 No. 120, appears to support the respondent's
assertion of a meritorious defense, in that the use of the word "or"
in Sec. (a) spreads the 90 day Notice to Quit requirement
beyond HUD, FHA or other federally related properties to "any dwelling and
residential property".[fn1] It is undisputed in this case that only a
ten day notice was utilized per New York State law (RPAPL Sec. 713).The
utilization of the conjunctive expander word "or" in this
instance is intriguing as a review of the voluminous provisions of
Titles 12 and 42 reveals no other instance where Congress seeks to
regulate real property rights outside of its HUD/FHA subsidized
housing mission. The Court's threshold query is, whether this
expansion of federal authority to areas not involving federal
expenditure is constitutionally permissible?

Authority to Regulate

The fundamental premise/truism of the United States Constitution
is that the power and regulatory ability of the federal government
is limited to those areas surrendered by the states. See generally
U.S. v. Darby, 61 S. Ct. 451 (1941) citing to Story,
Commentaries on the Constitution, § 1907, 1908. Anals of
Congress 432, 761-768. Article 1, Section 8 of the
United States Constitution expressly details the 18 areas which the
federal government may lawfully regulate. All other areas not
expressly delegated to the United States "are reserved to the
states, or to the people". Amendment X United States Constitution.
(See also Amendment IX). Quoting James Madison, the
United States Supreme Court has held that "the powers delegated to
the federal government are few and defined . . . those which remain
in the states governments are numerous and infinite".
U.S. v. Lopez, 115 S. Ct. 1624 (1995).

The creation of rights and responsibilities concerning a private
landlord/tenant relationship is not listed as one of the 18 enacted
federal powers. As such, the justification for a federal presence
and the preemption of state law in this landlord/tenant area would
seem to fall to the general "catchall" power detailed in the
Constitution's Article I Section 8 (1) which provides:

Section 8. The Congress shall have power:

1. To lay and collect taxes, duties, imposts and excises, to pay
the debts and provide for the common defense and general welfare of
United States; but all duties, imposts and excises shall be uniform
throughout the United States.

Section 8 (1) is generally known as the "Taxation and Expenditure"
power under which Congress created and operates its assorted
affordable housing departments. The mission of these
Page 4
agencies is to expend federal funds to facilitate and subsidize
affordable housing in the United States. See 42 USCA 1437 (a) (1).
Conditioned upon the expenditure of the federal treasury; Congress
may regulate how HUD, the FHA and other related agencies are to
administer themselves and spend their funds. South Dakota v.
Dale, 107 S. Ct. 2793 (1987). See also "The Basis of the Spending
Power", 18 SEA. L.R. 215 (1995). However, absent a federal subsidy,
Congress has no authority to regulate the private relationship of a
landlord/tenant which is the province of state law. The law is
settled that the "general welfare" language does not extend
Sec. 8 (1) to issues of local non-interstate concern such a tenants'
rights unless linked to United States spending through its federal
housing agencies. See "Conforming the General Welfare Clause",
13 Harvard J.L. & Tech 87 (1999). The reason being that to hold
otherwise would extend federal control to arguably every area of
human endeavor and vitiate the constitutional framers' requirement
that "federalism" involves a limited universe of power and that the
states retained all but expressly ceded powers. U. S. V.
Butler, 56 S. Ct. 312 (1935).

Statutory Construction

In furtherance of its members oath of office to uphold the
Constitution, it is presumed that Congress intends to act
constitutionally. See generally, U. S. v. Lopez,
115 S. Ct. 1624 (1995) citing to the "Great Speeches and Orations of
Daniel Webster", 227-272 (E. Whipple ed. 1879). One of the
primary rules of federal statutory construction is that the Court
may make a non-literal interpretation so to reconcile and disregard
the language of the statute or to correct a manifest error or
absurdity. See, Holy Trinity Church v. U.S.,
12 S. Ct. 511 (1992). Peter Pan Fab. Inc. v. Martin Weiver
Corp., 274 F2d 487 (2d Cir. 1960);

The meaning of a word such as "or" may be construed in other than
its plain and ordinary sense so as to correct a mistake and to meet
constitutional muster. See U.S. v. Rumely,
73 S. Ct. 543 (1953). Blau v. Oppenheim,
250 F. Supp. 881 (S. D. NY, 1966). When considering whether Congress
intended to extend the regulatory jurisdiction of an existing
federal program, the Court is permitted to look beyond the words of
the statute to effectuate its underlying purpose. Salt Riv.
Project Agr. Imp. Dist. v. Fed. Power Dist.,
391 F 2d 470 (C.A.D.C. 1967). Statutes are instruments of
government, not exercises in composition and a departure from their
literary reading sometimes is necessary. See Malat v.
Riddell, 86 S. Ct. 1030 (1966).

The United States Supreme Court, citing Judge Learned Hand, has
held that "The art of statutory interpretation is the art of
proliferation of a purpose". U.S. vs. Shirev,
79 S. Ct. 746 (1959). Precedent exists that requires this Court to
ignore the plain meaning of the word "or", inserted into a hastily
enacted amendment, to make it consonant with the function sought to
be served, see Clark v. Uebersce Finanz-Korp.,
68 S. Ct. 174 (1947). See also, Markham v. Cable,
66 Sp. Ct. 193 (1945) which held that the use of the word "or" to
add an additional jurisdictional
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class which nullifies/sterilizes the limits of the original covered
class may be disregarded in the interest of statutory harmony. In
furtherance of same, the simplest way to restore constitutionality
to Sec. 5220 (a) is to simply deem the insertions of the word
"or" in par. (a) as a scrivener's error and to ignore same.
Simply removing it establishes the language as follows:

(a) In general — In the case of any foreclosure on a
federally related mortgage loan on any dwelling or residential
real property after the date of enactment of this
title [May 20, 2009], any immediate successor interest in such
property pursuant to the foreclosure shall assume such interest
to (1) the provision by such successor in interest of a notice to
vacate to any bona fide tenant at least 90 days before the effective
date of such notice; and (2) the rights of any bona fide tenant, as
of the date of such notice of foreclosure-Emphasis added.

Under this construction, the statute limits its reach to only
those tenancies arising from dwellings or residential real property
in which a federally related mortgage was foreclosed and comports
with the constitution as Congress is not expanding its regulation to
individuals who have not attached themselves to the federal purse
strings. This is consistent with the affordable housing "spending
power" jurisdictional grant embodied in the rest of the
United States Code. It also corrects the illogical coupling of a
subsequent universal jurisdictional grant which serves to nullify a
previously described limited jurisdictional grant. Without the word
"or" the limited grant (federally related loans) are now
further limited to federally related mortgages on residential
dwellings. As the petitioning tenant does not even allege a federal
loan nexus; he is not jurisdictionally covered by this federal
statute.[fn2] Moreover, Sec. 5220 (a) has already been judicially
construed not to contain a "private right of action".
Mangosing v. Wells Fargo Bank,
2009 WL 1456783 (Dist. Ct. Arizona 2009). To extend the 90 day
notice to non federally related loans would inherently created a
private right of action.[fn3]

New York Law Defenses
Page 6

As to the tenant's alternative arguments sounding under New York
State law; the Court notes the absence of any excuse for
respondent's failure to appear on July 23, 2009, a necessary
component of an application to vacate on the grounds of excusable
default. In fact, at no point does the petitioner seek to rebut the
petitioner's process server's affidavit that Mitchell Gutkowski
knew about the petition's return date and advised him he would not
appear. See Exhibit No. 4 Affidavit in Opposition.

The respondent claims that the petition should be dismissed as the
referee's deed was not exhibited to him. "In a summary proceeding
under RPAPL 713 (5), a purchaser real property at a mortgage
foreclosure sale must allege that either the deed delivered pursuant
to the foreclosure sale or a certified copy of such deed, has
been exhibited to the persons sought to be removed." 2 NY
Landlord & Tenant Summary Proc. § 35:8 (4th Edition).The Notice to
Quit served upon the respondent's wife contained a copy of the
referee's deed, which was accompanied by a certification
(which complied with CPLR 2105) of Juan Collado, an attorney
admitted to practice law in New York State. Respondent's conclusory
statement that the deed was not exhibited to him does not constitute
a defense to the proceeding.

The respondent seeks to jurisdictionally
dismiss the proceeding alleging that because the
Notice to Quit does not use the words "summary
proceeding" to describe the type of action
that would be commenced against him upon his
failure to surrender possession. This contention
is without merit. The Notice to Quit
substantially complies with the statute and
serves as an adequate basis for this proceeding.
Such notice need not be in the exact language of
the statute, rather it must be "to the effect"
prescribed in the statute.

(Folz v.Shalow, 16 N.Y.S. 942 (CP 1891); NY
Landlord & Tenant Incl. Summary Proc. § 30:47).The notice herein
adequately apprised respondent that in the event he failed to
surrender possession, "a legal proceeding shall be commenced against
(respondent) to remove (respondent) from the premises."

The respondent also alleges that the Notice to Quit
(dated June 23, 2009) is defective because it does not state an
exact date on which respondent must surrender possession. In order
to maintain this proceeding, petitioner was required to give
respondent the statutory ten day Notice to Quit prior to commencing
this proceeding. 2 NY Landlord & Tenant Incl. Summary
Proc. § 35:8 (4th Ed.). It is undisputed that the respondent's ten
day notice was served on him (by delivery to a suitable aged person
on June 25, 2009, and by mailing on June 26, 2009). The instant
proceeding was not commenced until July 17, 2009, when the petition
was filed. Olivero v. Duran, 70 Misc 2d 882,
(NY City Civ. Ct. 1972; 528 East 11th Street HDFC v. Durieaux,
164 Misc 2d 595 (NY City Civ. Ct. 1995). Respondent was provided
with sufficient notice prior to commencement of this
special proceeding. Respondent's claim that he was unable to
ascertain what date was ten days from his receipt of the Notice to
Quit is unavailing.

Any objections respondent may possess, such as that he allegedly
was not served in a prior foreclosure action appear to be related to
that action and are not in the subject matter jurisdiction of this
Court. Moreover, the Court notes that a "John Doe" was served
therein. The
Page 7
respondent has not shown he is more than a mere occupant at the
premises.

Lastly, the Court notes that the respondent did not avail himself
of the Court scheduled opportunity to conduct a hearing subject to
oath and cross examination in this matter. Such a hearing would have
been a more suitable forum to establish the validity of his
assertion that a lease exists and that he is a victim in this
instance. The failure to produce a lease and to state under oath
that he has been paying rent, together with his statement to the
process server, creates an inference that no such lease exists,
that no rent has been paid in excess of a year, and that the
respondent lacks the "clean hands" necessary to petition this Court
to vacate its prior judgment premised upon an acceptable excuse for
default and a meritorious defense.

Accordingly, the above captioned tenant respondents' application
is denied and the petitioner and the Sheriff may immediately proceed
to eviction without the need for any further 72 hour notice.


[fn1] The Court also notes that Sec. (a) (2) (A) of this statute
also utilizes the word "or" to further extend its reach to include
non bona fide tenants who lack a lease.



[fn2]



[fn3] Similarly, the Court notes that par. (a)(2)(A) also creates an
illogical statutory nullification situation wherein all Congress's
efforts to require that the tenant be a bona fide leasor in
Sec. (a)(2)(A) are vitiated by Sec.(a)(2)(B) which then provides that you
do not need a lease and do not need to be a BFP. Apparently the
tenant in this instance realized that production of his previously
alluded to lease would require him to be a rent paying BFP while
switching to having no lease lets him receive a 90 day notice, even
if he is not a BFP. The record presented does not contain even a
scintilla of evidence of a rental payment.