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CPLR 3408, Which Requires a Settlement Conference in a Foreclosure Action Involving a Primary Residence, Does Not Apply Where the Mortgage Collateralizes a Personal Guaranty of a Commercial Loan to a Corporation

In a full-fledged opinion by Justice Cohen, the Second Department determined a statute designed to assist homeowners faced with foreclosure on their primary residence (calling for a settlement conference) did not apply where the mortgage collateralizes a personal guaranty of a commercial loan to a corporation:

CPLR 3408 (requiring a settlement conference) is certainly applicable to many residential foreclosure actions. However, CPLR 3408 does not apply to every residential foreclosure action. Indeed, CPLR 3408 is limited to residential foreclosure actions involving home loans as the term “home loan” is defined by RPAPL 1304. As so defined, home loans are those which are made to a natural person and in which the debt incurred is primarily for personal, family, or household purposes (see RPAPL 1304[5][a][ii], [iii]).

The borrower, as defined under the instant term loan agreement and the note, and the entity that is recognized in the guaranty, was [a corporation]. … The borrower …was not a natural person (see RPAPL 1304[5][a][ii]).

Further, the debt incurred was the $230,000 loan given to [the corporation]. The Supreme Court correctly determined that since the purpose of the loan was to purchase machinery and equipment, and to fund other various start-up, closing, and construction costs associated with fashioning a … store, it was clearly not primarily incurred for personal, family, or household purposes (see RPAPL 1304[5][a][ii]…).  Independence Bank v Valentine, 2013 NY Slip Op 07937, 2nd Dept 11-27-13

 

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