Requirements under Truth in Lending Act

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The Truth in Lending Act requires the lender to provide the consumer with clear, conspicuous, and accurate disclosures of loan terms. Regulation Z (see footnote 1), 12 C.F.R. Section 226.18 (“Content of Disclosures”). Among other required disclosure items, the amount of credit provided to the consumer and every loan charge must be properly described. See, e.g., Regulation Z, 12 C.F.R. Section 226.18(b) (amount of credit provided), 12 C.F.R. Section 226.18(d) (finance charges), and 12 C.F.R. Section 226.18(e) (interest rate and prepaid charges). The security interest to be taken in the consumer’s principal residence, and any other property, must be disclosed. Regulation Z, 12 C.F.R. Sections 226.5 – 15 (open end transactions), 226.17-23 (closed end transactions).

Section 226.5b requires that the disclosures be given at the time of application, as follows:

“(b) Time of disclosures. The disclosures and brochure required by paragraphs (d) and (e) of this section shall be provided at the time an application is provided to the consumer.”

Footnote:
[1] The provisions of Part 226 of Title 12 of the C.F.R. are commonly known as Regulation Z.  Regulation Z (including its commentary) are consistently followed by courts in determining compliance with TILA, which is a “strict liability” statute.  See, e.g., Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980) (Regulation Z and its commentary are entitled to substantial deference and are dispositive unless demonstrably irrational).

R. A. Klass
Your Court Street Lawyer

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An Extra $1,500,000 for the Aged

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More than fifty years ago, a charitable woman executed her Last Will and Testament, bequeathing all of her assets to two Catholic charities in the event that her siblings did not survive her. The two Catholic charities named in the Will were the Columbus Hospital and St. Joseph Rest Home for the Aged, each to get 50% of her estate. Both of these institutions were founded or operated by Italian American Catholic Orders.

In March 2008, the woman passed away, leaving more than $3,000,000 worth of assets in her estate. Since her siblings predeceased her, the Will left everything to the two Catholic charities.

Demise of Columbus/Cabrini Hospital

Columbus Hospital was founded in 1892 and operated a hospital in Manhattan. It was opened by a mission of the Missionary Sisters of the Sacred Heart of Jesus to address the needs of Italian immigrants. In 1973, Columbus Hospital and Italian Hospital merged to form Cabrini Medical Center. Cabrini Medical Center operated as a hospital on the same site as Columbus Hospital on East 19th Street until it filed for bankruptcy on July 9, 2009. Through the bankruptcy proceedings, Memorial Sloan Kettering Cancer Center purchased the buildings in which Cabrini Medical Center was formerly located.

Charitable mission of St. Joseph Rest Home for the Aged

Similarly to Cabrini, St. Joseph Rest Home for the Aged was founded by Nuns whose lives are committed, without compensation, solely to their charitable and religious convictions. Both charitable organizations — Cabrini and St. Joseph — were founded and operated by Nuns of Italian heritage. The Order of St. Joseph’s was founded in Rome by Italian Nuns and still has a mother house located in the Vatican. St. Joseph’s Rest Home for the Aged, which operates a licensed nursing home facility that accommodates forty women, was founded by the Catholic Sisters of The Order of St. Joseph’s and is located in Paterson, New Jersey.

Accounting proceeding

Because Columbus Hospital had ceased to exist, the executor of the deceased woman’s estate filed a judicial accounting with the Surrogate’s Court, requesting that the Surrogate give the 50% share originally meant for Cabrini Hospital to Memorial Sloan Kettering. The executor indicated that the bequest originally meant for Cabrini should be given to Memorial Sloan Kettering because the deceased had been treated there.
The Chairman of the Board of Directors of St. Joseph contacted Richard A. Klass, Your Court Street Lawyer, about objecting to the bequest to Memorial Sloan Kettering and, instead, requesting that the Surrogate pay the entire net estate to St. Joseph Rest Home for the Aged.

Cy Pres doctrine

There is a centuries’ old doctrine of cy pres (pronounced “sigh – pray”), which is a rule that when literal compliance with a Will or trust is impossible, the intention of a donor or testator should be carried out as nearly as possible. This is especially true when a bequest to a charity has “lapsed” as the result of the charity no longer existing to receive the bequest; then the Surrogate may designate another charity in its place.
In the seminal case of In re Brundrett’s Estate [1940], a percentage of the remainder of the estate was left to St. Mark’s Hospital, but the hospital was bankrupt in 1931 and ceased to operate as a hospital and perform the functions for which it was originally incorporated. The court held that the gift to the hospital was, therefore, ineffectual. The court then applied the doctrine of cy pres and paid over that charity’s portion to the other charitable ‘remaindermen’ named in the Will (the term ‘remaindermen’ refers to others who receive the residuary or balance of an estate).
Following the holding in In re Brundrett’s Estate, the court in In re Shelton’s Estate [1942] was faced with a similar issue as presented here. In that case, the decedent left moneys to a charitable institution located in Italy that was maintained by a New York religious corporation. After the death of the decedent, the New York religious corporation relinquished its maintenance of the Italian institution and discontinued all of its religious and charitable activities. Although its officers continued to function, it was a “charity in name only.” The court held that the discontinuance of the charitable and religious functions precluded authorization of payment of the legacy to the entity. However, the court recognized that the decedent had charitable intentions to provide a gift for religious purposes and invoked the doctrine of cy pres. In granting the legacy originally left to the Italian charity to the other charitable legatee, the court in In re Shelton’s Estate held: “By the application of that doctrine [cy pres] the surrogate holds that the legacy did not lapse and may be paid to The Cathedral Church of St. John the Divine in the City and Diocese of New York, the other charitable legatees named in the will and object of the generous bounty of the testatrix.”
After the objection to the judicial accounting by St. Joseph, with sufficient case law being presented in support of the request to pay the bequest of Cabrini Hospital over to St. Joseph, the executor agreed to pay 100% of the residuary estate to St. Joseph, roughly $3 million in total. The nursing home needs a new roof — now they’ll be able to afford it!
Richard A. Klass, Esq.

Credits:

Photo of Richard Klass by Robert Matson, copyr. Richard A. Klass, 2011.
Newsletter marketing by The Innovation Works, Inc.
Image on page one: Salzgitter, Städtisches Altenheim, 1961, Maria retirement home in Tann, in a hospital room with a Dutch nun. Licensed under the Creative Commons Attribution-Share Alike 3.0 Germany license. Attribution: Bundesarchiv, B 145 Bild-F010160-0001 / Steiner, Egon / CC-BY-SA.

copyr. 2012 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Seminar: Mortgage Foreclosure: Process, Defenses and Options

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Dear Readers,

You may be interested in this seminar that I have organized with the Brooklyn Bar Association.

Best,
Richard

Mortgage Foreclosure: Process, Defenses and Options
May 14, 2012, 6 – 8:00 PM

Richard A. Klass, Esq., Chair, Mentoring Committee
Program Organizer and Moderator

The Brooklyn Bar Association’s Meeting Hall
123 Remsen Street
Brooklyn Heights, New York 11201

All members of the public are invited to attend an informational lecture outlining the process of a typical mortgage foreclosure proceeding; defenses available to the homeowner; and other options

To reserve a seat or for information, contact: 
Avery Eli Okin, Esq., CAE
e-mail: aokin@brooklynbar.orgcreate new email

This Brooklyn Bar Association Foundation Law Committee program is a joint presentation with the Brooklyn Bar Association, the Brooklyn Bar Association Volunteer Lawyer’s Project, Inc., and the Brooklyn Bar Association Lawyer Referral Service.

R. A. Klass
Your Court Street Lawyer

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When Do Two Feet Matter? When $16,728,000 Rides on It!

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In 2006, a developer entered into a contract to purchase a large industrial warehouse in Greenpoint, Brooklyn, in order to convert the property into residential housing. The Contract of Sale provided for a purchase price of $16,728,000.
 
The contract was amended and extended eight times in order to provide for several issues to be resolved. Among those issues, there were tenant buy-out agreements concerning the several remaining commercial tenants. During the entire process, the developer was required to make several types of payments to the seller (separate from the large down payment) towards the operating costs of the property. The developer made substantial payments to the seller, including Surrender Agreements, Tenant Buy-Outs, Operating Expenses, and Security Costs. The property finally became completely vacant, and a closing was to be scheduled in 2007.

Title Defects Raised – Especially Chimney Protrusion

As is common in real estate contracts, there was a clause that all title “defects” were to be cured before closing. A title defect is generally defined as an issue relating to ownership or possession of the property, the legal description of the property to be sold or liens affecting the property – or, more to the point, a title defect is one that a reputable title company believes would render title unmarketable. In this case, the survey revealed that a chimney from an adjoining property was protruding two feet into the property to be sold.

The title defect was raised to the seller’s attorney by the developer. In response, the seller’s attorney claimed that the title defect was insignificant and was being raised as a delay tactic and was without merit. To that end, the seller declared a certain date as the “time of the essence” date for the closing. If the developer did not close on that date, then the down payment and all of the operating costs would be deemed forfeited to the seller. Needless to say, that date came and passed, and the seller declared the developer in breach of the contract, entitling the seller to retain the moneys.

Your Court Street Lawyer, Richard A. Klass, was then retained by the developer to ensure that the down payment moneys would not be lost and title would transfer to the buyer under the Contract of Sale.

Quick Action Was Needed

The first step was to file, along with the Summons and Complaint, a Notice of Pendency (also known as a Lis Pendens) against the Block and Lot of the property. This is a statutory creation under New York’s Civil Practice Law and Rules Article 65. This document gives notice to the entire world that there is a dispute which affects the title, use or possession of real property. The filing of this Notice preserves the rights of the buyer from a seller transferring title to the property in contract, as whoever buys the property is deemed to have knowledge of the dispute.

Simultaneously, the Complaint against the seller was filed with the County Clerk’s Office, which contained several allegations against the seller, including that:

  1. the developer fully complied with the Contract of Sale and was entitled to “specific performance” because real estate is considered a “unique” asset that cannot be replicated (the law recognizes that each piece of real estate is distinct);

  2. the electronic communication from the seller’s attorney to the buyer’s attorney concerning the “time of the essence” closing date did not comply with the “notice” provision of the Contract of Sale (it is always important to check the notice provision of any contract to see how notices to the other side are to be sent, e.g. certified mail, overnight delivery, etc.);

  3. the seller failed to actually “tender” the Deed to the property by coming to the place of closing, as required by the contract (the non-breaching party to a real estate contract must show that it showed up at the place and time indicated in the contract to deliver the Deed, even if the other side does not come; thus, recognizing that the breaching party could potentially show up at the last minute to actually close the transaction); and

  4. the title defects rendered title to the property unmarketable and uninsurable; thus, the developer was entitled to the return of all of its down payment and operating costs.

In New York, it is well settled that in order to place a contract vendor (seller) in default for a claimed failure to provide clear title, the purchaser must first tender performance and demand good title. See, Capozzola v. Oxman, 216 AD2d 509. Following that line, a tender of performance by the purchaser is excused only if the title defect is not curable. See, Cohen v. Kranz, 12 NY2d 242. The law also recognizes that a purchaser may opt to waive a title defect concerning the property in order to close title.

The end result of this case was that, despite the claim of the seller that the developer breached the contract and it was entitled to retain all of the moneys paid, the seller agreed to extend the date of closing for an additional month to facilitate the closing of title to the developer.

by Richard A. Klass, Esq.

 

©2008 Richard A. Klass. Art credits: page one, Dorfstraße by Giovanni Fattori, 1903-1904.

copyr. 2011 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Home! Sweet Home!

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The homeowner had a bunch of problems. Not only was he saddled with over $30,000 in credit card debt spread across several credit card accounts, he had also just received the Summons and Complaint, filed by his mortgage lender, seeking to foreclose on the mortgage recorded against his home. He was delinquent on his mortgage and owed many months’ worth of mortgage arrears. This homeowner is one of the tens of thousands of homeowners across the State (and more across the country) who have fallen into foreclosure with little help or support. Fortunately for the homeowner, he came to Richard A. Klass, Your Court Street Lawyer, for help.

Establishing the Best Strategy

In order to establish the best strategy for the particular situation, the house’s fair market value first had to be considered.

Many homeowners have seen their property values drop so low that their houses are “underwater,” meaning they owe more on their mortgage than the house is worth. In such circumstances, there are different strategies which may be taken by homeowners, including offering the lender a deed in lieu of foreclosure or staying in possession of the house for as long as possible until the foreclosure auction sale. In this case, the homeowner was unsure of his house’s fair market value, so he was advised to hire a licensed appraiser for an honest, unbiased opinion as to the value of the house. The appraisal came back and showed that the amount due to the mortgage lender on the outstanding mortgage was nearly equal to the fair market value. The homeowner and his wife liked their home and neighborhood, so he wanted to figure out a way to save the house, if possible.

Defending the Mortgage Foreclosure Case

The foreclosure proceeding brought by the mortgage lender had to be answered. The homeowner answered the Complaint and also brought Counterclaims against the lender, alleging that the lender engaged in predatory lending practices, fraud, and violations of the Truth in Lending Act (TILA) and the Home Ownership and Equity Protection Act (HOEPA). Filing the Answer and Counterclaims placed an obstacle in the path of the mortgage lender and helped slow down the foreclosure process.

As another part of slowing down the mortgage lender’s case, discovery demands were served, including a request for copies of all documents signed at the closing, when the mortgage was first obtained. It is crucial to a homeowner’s defense of a mortgage foreclosure case, in a time when affidavits are “robo-signed” by non-bank representatives, original documentation is lost by mortgage departments, and mortgages lack assignment from the original lender, that all documents be reviewed for their authenticity and truthfulness.

A Dollar Can Be Stretched Only So Far!

After establishing that the house was not very much “underwater” and that the homeowner wanted to keep the house, the next step was to consider how to pay the mortgage, property taxes and other carrying charges of the house. The homeowner’s take-home salary could only go so far — he could not afford to make the regular monthly mortgage payment as well as the minimum payments on all the various credit card accounts. However, if he could shed the credit card debt, he could more easily afford all of his other expenses.

“Straight” Bankruptcy

Generally, homeowners have to file a “Chapter 13” bankruptcy case to save their home. In a Chapter 13 case, a monthly payment plan over a three- to five-year term is proposed by the debtor, reviewed by the trustee, and then approved or denied by the Bankruptcy Judge. However, in the present situation, a Chapter 13 bankruptcy case was not necessary because there was no equity in the house to protect (net equity being the fair market value of the house less the balance due on the mortgage). Accordingly, the decision was made to file a “Chapter 7” bankruptcy case. A Chapter 7 bankruptcy case — also known as a “straight bankruptcy” — is a legal proceeding in which all of the debtor’s ‘unsecured debts’ (such as credit cards, personal loans and lines of credit) are discharged or extinguished. Once the bankruptcy case was filed, the homeowner benefited from the automatic stay provisions of the Bankruptcy Code. Basically, these provisions act as a “Stop Sign” against creditors, prohibiting them from taking any collection actions against debtors. When this homeowner/debtor received his Discharge, by which he discharged or extinguished all of the unsecured credit card debt, he was left with only the mortgage debt (also known as ‘secured debt’ because the house is collateral for the loan).

Mortgage Foreclosure Proceeding — Round Two!

In New York State, when a homeowner/defendant puts in an appearance in a mortgage foreclosure case, the court puts the case onto its Foreclosure Settlement Conference calendar and schedules a conference between the mortgage lender and the homeowner. The purpose of the conference is to see whether there is any way to mediate and settle the dispute, including exploring the loan modification process.

In our present situation, with the bankruptcy case over and the homeowner coming straight out of his Chapter 7 case with his Discharge of all other debts (his “fresh start!”), the mortgage foreclosure proceeding was placed back onto the Supreme Court’s Foreclosure Settlement Conference calendar. Pursuant to the conference, the homeowner applied for loan modification with the mortgage lender and provided all documentation required, including the application, and his tax returns and paystubs.

With no outstanding credit card debt, the homeowner’s salary clearly demonstrated that he had more than sufficient income to support the mortgage and carrying charges of the house. The good news came at the next foreclosure settlement conference: the homeowner’s application to modify his mortgage loan was approved by the lender and the foreclosure proceeding was dismissed. Home! Sweet Home!

by Richard A. Klass, Esq.
©2012 Richard A. Klass.

copyr. 2012 Richard A. Klass, Esq.
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

Credits:
Legal services marketing by The Innovation Works, Inc.
Image at top: Flowering Plum Tree, Eragny, 1894, by Camille Pissarro (1830-1903). This image is in the public domain because its copyright has expired. This applies to Australia, the European Union and those countries with a copyright term of life of the author plus 70 years. This image is in the public domain in the United States. This applies to U.S. works where the copyright has expired, often because its first publication occurred prior to January 1, 1923.

R. A. Klass
Your Court Street Lawyer

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