Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller

تمرين 5

BACKGROUND AND FACTS?Beneficial Homeowner Service Corporation filed a suit in a New York state court against Stephen and Susan Steele to foreclose on a mortgage. (A mortgage is a written instrument that gives a creditor an interest in property that the debtor provides as security for the payment of the loan. In a foreclosure, the lender repossesses and sells the property that secured the loan.) Beneficial (the lender) claimed that the loan was secured by real property in East Hampton, New York. Beneficial sought $91,614.34 in unpaid principal, plus interest. The lender, based on its assertion that both Stephen and Susan Steele had signed the loan agreement, filed a motion for summary judgment. Among the documents that Beneficial filed with the court was a copy of the loan agreement. There were two problems-the agreement identified Stephen Steele as the sole obligor (the party owing the obligation), and it had not been signed.
IN THE LANGUAGE OF THE COURT
Jeffrey Arlen spinner, J. [Judge]
* * * * This Court must question how, under the circumstances presented here, Plaintiff can, with unbridled temerity [unchecked audacity], demand enforcement of the Loan Agreement against Defendant STEPHEN STEELE, who has not executed that instrument and against Defendant SUSAN STEELE, who is not even a party to that agreement. * * * This posture by Plaintiff strains credulity and causes the Court to 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 expressly intended to constitute security for some obligation, most commonly an indebtedness. It follows logically then that in order for a mortgage to be valid and subsisting, there must be an underlying obligation that is to be secured by an interest in the real property * * *. Here, the Loan Agreement that has been presented to the Court facially appears to run counter to New York's Statute of Frauds. Since there has been presented to this Court no valid underlying obligation and no further explanation, the mortgage appears to fail as a matter of law. [Emphasis added.]
This situation is all the more disturbing when it is considered that the sworn statements contained in both the Complaint and the Affidavit in Support Of the Motion for Summary Judgment expressly and falsely assert that Defendant SUSAN STEELE executed the Loan Agreement. This is compounded by the sworn statement of Shana Richmond, Plaintiff's foreclosure specialist, * * * which contains the same painfully obvious misstatements of fact.
* * * Where a party comes before the Court and is shown to have acted in a manner which is offensive to good conscience, fairness and justice, that party will be completely without recourse in a court of equity, no matter what his legal rights may be.
DECISION AND REMEDY?The court denied Beneficial's motion for summary judgment. Because a mortgage involves a transfer of real property, it and its underlying obligation must be in writing to satisfy the Statute of Frauds. To be enforceable, the writings must be signed by the party against whom enforcement is sought. The court ordered a hearing to determine whether, in presenting the unsigned document, Beneficial had acted in good faith.
WHAT IF THE FACTS WERE DIFFERENT? Suppose that at the hearing, the Steeles admit they had an obligation to pay the outstanding loan amount. Would the result be different? Explain.
THE ECONOMIC DIMENSION?Why might Beneficial have tried to enforce an unsigned document?