Bank of America, National Association, etc., appellant, v. Galina Lucido, etc., defendants, John A. Lucido, respondent. (2014)

Supreme Court, Appellate Division, Second Department, New York.

Bank of America, National Association, etc., appellant, v. Galina Lucido, etc., defendants, John A. Lucido, respondent.

2012–05450 (Index No. 3769 /09)

Decided: February 13, 2014

REINALDO E. RIVERA, J.P. RUTH C. BALKIN L. PRISCILLA HALL SANDRA L. SGROI, JJ.

McGuire Woods LLP, New York, N.Y. (Marshall Beil, Jeffrey J. Chapman, and Meghan S. Mastrocovi of counsel), and Leopold & Associates, PLLC, New York, N.Y. (Henry P. DiStefano of counsel), for appellant (one brief filed). Peter C. Kaiteris, Patchogue, N.Y., for respondent. ORDERED that the judgment is reversed, on the law, with costs, and the matter is remitted to the Supreme Court, Suffolk County, for further proceedings consistent herewith.   Although the Supreme Court had authority to impose a sanction or remedy in the event it determined, after a hearing, that the plaintiff had failed to negotiate in good faith in the mandatory foreclosure settlement conferences (see CPLR 3408;  Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 11), it lacked authority to include such a provision in the judgment in the absence of any application for that relief (see Emigrant Mtge. Co., Inc. v Fisher, 90 AD3d 823, 824;  Putnam County Temple & Jewish Ctr., Inc. v Rhinebeck Sav. Bank, 87 AD3d 1118, 1121;  Hunter Sports Shooting Grounds, Inc. v Foley, 73 AD3d 702, 705;  Ambrosino v Village of Bronxville, 58 AD3d 649, 652;  cf.  Kay Found. v S & F Towing Serv. of Staten Is., Inc., 31 AD3d 499, 501–502).   Moreover, the court's imposition of sanctions, specifically, of exemplary damages, and the utilization of those exemplary damages to, in effect, award a reduction of the principal balance of the subject mortgage, was done without notice to the plaintiff that the court was contemplating such sanctions, and thereby deprived the plaintiff of its right to due process (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 22–23;  IndyMac Bank, F.S.B. v Yano–Horoski, 78 AD3d 895, 896;  Miller v Cruise Fantasies, Ltd., 74 AD3d 919, 920).   In any event, although we are aware of the unfortunate situation of the defendant John A. Lucido (hereinafter the respondent) here, the record reveals that the conduct of the plaintiff in this case was not so egregious as to merit the imposition of sanctions against it.   Neither the plaintiff's refusal to consider a reduction in principal, nor the plaintiff's delay in producing the pooling and servicing agreement (hereinafter PSA) for the subject mortgage, establish that the plaintiff failed to negotiate in good faith.   To the contrary, over the course of the settlement negotiations, counsel for the plaintiff consistently represented the unlikelihood of the plaintiff's acceptance of the respondent's proposed reduction in principal, and any misstatement by the plaintiff's counsel regarding the import of the provisions of the PSA did nothing to change the plaintiff's stance with respect to the respondent's proposal.  “Nothing in CPLR 3408 requires plaintiff to make the exact offer desired by [the] defendant[ ], and [the] plaintiff's failure to make that offer cannot be interpreted as a lack of good faith” (Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638, 638;  see Citibank, N.A. v Van Brunt Props., LLC, 95 AD3d 1158, 1159).