Appeals court overturns E. Patchogue couple's mortgage debt decision

Foreclosure is reinstated for the Horoskis of East

Foreclosure is reinstated for the Horoskis of East Patchogue after an appeals court protected the "sanctity" of a contract. (Nov. 25, 2009) (Credit: Joel Cairo)

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An East Patchogue couple whose mortgage debt was erased despite a foreclosure ruling against them have seen their victory overturned by an appeals court.

In a case watched closely by lenders and attorneys, the appellate division of the Supreme Court of New York reversed last Tuesday an order made a year ago by a Riverhead judge that allowed Greg Horoski and his wife, Diana Yano-Horoski, to keep their home free and clear. The reversal reinstated the judgment of foreclosure and sale of their home.

On Nov. 19, 2009, Justice Jeffrey A. Spinner ordered their $292,500 mortgage "canceled, voided, avoided, nullified, set aside" and criticized the behavior of the lender, IndyMac Mortgage Services, a division of OneWest Bank F.S.B., and its representatives, as "harsh, repugnant, shocking and repulsive."

According to the appellate court's ruling, that sanction "was not authorized by any statue or rule . . . nor was the plaintiff given fair warning that such a sanction was even under consideration."

Late attempts to reach the couple were unsuccessful.

Tom Maligno, director of public interest at Touro College's law center, who had not yet read the decision, said he was disappointed. "The way the banks have been dealing with homeowners has not been fair. I wish all courts would take the fairness part of the equation into account more," he said.

Lenders and attorneys have been watching the appeals case closely because leaving Spinner's ruling intact could have influenced what judges and borrowers do in other cases.

The appeals ruling protected the "sanctity" of a contract and told other judges that they can't erase a debt on their own, said attorney Chris Palmer, who represents several New York lenders and whose Manhattan Cullen and Dykman law firm represents major lenders in foreclosure cases.

"The fear among all lenders was that somewhat activist judges would follow this decision and it would become precedent," he said after reading the decision. "Judges in lower courts would become emboldened to cancel long-established contract principals. Borrowers see things like this and . . . become more and more emboldened to maybe not pay as quickly because they think a judge is going to come to their rescue."

With Ellen Yan

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