Order, Supreme Court, New York County (Gerald Lebovits, J.), entered June 17, 2016, which denied the motion of defendants Carmelo and Vivian Rosabianca (the Rosabiancas), inter alia, to file a late answer pursuant to CPLR 3012 (d), affirmed, without costs.
Notwithstanding the Rosabiancas’ sympathetic position, we conclude that the denial of their motion for relief under CPLR 3012 (d) was warranted for the reasons that follow.
I. Factual and Procedural Background
Since 1974, the Rosabiancas have owned and lived at the residential property located at 2342 Benson Avenue in Brooklyn. Allegedly without their knowledge, in 2008, the Rosabian-cas’ son, defendant Luigi Rosabianca (Luigi),1 used their home as collateral for a $1.76 million mortgage loan he obtained from Emigrant Mortgage Company (EMC) on a condominium unit located at 55 Wall Street in Manhattan. EMC subsequently assigned the collateral mortgage and related note to Emigrant Savings Bank-Manhattan (ESBM), which was later merged into plaintiff, Emigrant Bank.
On April 30, 2008, shortly before Luigi’s purchase of the condominium, the Rosabiancas each granted Luigi a durable general statutory short form power of attorney, appointing Luigi to act as their attorney-in-fact for all matters listed on the instruments, including “real estate transactions” and “banking transactions” with respect to their Brooklyn home. The Rosabiancas’ signatures on both powers of attorney were duly acknowledged by a licensed notary public. Both powers of attorney have a handwritten notation at the bottom stating, “2342 Benson Ave., Brooklyn[,] NY Block 6874[,] Lot 50.”
At the May 14, 2008 closing on the condominium unit, Luigi acted as borrower, attorney-in-fact for the Rosabiancas, title closer, and title agent for Fidelity Title Insurance Company. Also at the closing that day, Luigi executed both the collateral mortgage and an adjustable rate note referring to a “Mortgage/ Lien in the amount of $1,760,000” to be placed on two properties, setting forth the addresses of the Manhattan condominium unit and the Rosabiancas’ Brooklyn home. Luigi signed the collateral mortgage on the Rosabiancas’ behalf as their attorney-in-fact. Luigi also provided an affidavit of effectiveness, sworn and subscribed before a licensed notary public2 with respect to each of the powers of attorney, in which he swore that each power of attorney was a “valid and subsisting [p]ower which has not been revoked.” and that he had “full and unqualified authority to execute all documents.” Luigi alleges that, subsequent to the closing, he was unable to locate the original powers of attorney and collateral mortgage, and for that reason never recorded them.
Luigi allegedly made the collateral mortgage loan payments for more than three years until defaulting on the loan by failing to make the mortgage payment due August 1, 2011. One week later, on August 8, 2011, he obtained a $500,000 loan from a Panamanian lender, Little Bay Investment Corp. (Little Bay), which was secured by a mortgage on the Wall Street condominium. On September 1, 2011, that mortgage was recorded in the Office of the New York City Register.
On April 18, 2012, the Rosabiancas were each served a copy of a summons and complaint in an action brought by ESBM for an order directing the Office of the New York City Register, Kings County, to accept for recording copies of the powers of attorney signed by the Rosabiancas and the collateral mortgage, because the original documents were lost (Emigrant Sav. Bank v Rosabianca, Sup Ct, Kings County, 2012, index No. 6591/12 [the Kings County action]). The first page of the complaint refers to the “Collateral Mortgage in the original principal sum of $1,760,000.00 dated May 14, 2008,” and states that the powers of attorney were “given by Defendants Carmelo Rosabianca and Vivian Rosabianca to Luigi Rosabianca to act as their Attorney in Fact with respect to the granting of a collateral mortgage in favor of [EMC] on the premises known as 2342 Benson Avenue, Brooklyn, New York 11214” (emphasis added).
On September 7, 2012, after the Rosabiancas failed to appear in the Kings County action, ESBM moved for a default judgment directing that the copies of the powers of attorney and collateral mortgage be recorded and to quiet title in its favor. On November 19, 2012, Supreme Court, Kings County, granted the motion and issued an order of default. On January 29, 2013, the Rosabiancas were each served with a notice of entry of the order of default.
On June 21, 2013, Supreme Court, Kings County, entered a judgment directing that the copies of the powers of attorney and collateral mortgage be recorded in the Office of the City Register, Kings County. On August 13, 2013, a notice of entry of judgment was served on each of the Rosabiancas with a copy of the judgment attached. The judgment describes the “Collateral Mortgage” as a “mortgage in the original principal sum of $1,760,000.00 dated May 14, 2008,” and as “given by Defendants Carmelo Rosabianca and Vivian Rosabianca to Luigi Rosabianca in favor of [EMC], on the Property.” The address of the “Property” appearing on the judgment is “2342 Benson Avenue, Brooklyn, New York 11214.”
On September 6, 2013, the copies of the powers of attorney and collateral mortgage were recorded at the Office of the City Register, Kings County, by EMC.
On November 19, 2013, EMC served a 90-day notice of default on the Rosabiancas pursuant to RPAPL 1304. The notice of default stated that the Rosabiancas were 841 days in default on the collateral mortgage and were at risk of losing their home.
In February 2014, Little Bay assigned its mortgage on the Wall Street condominium to Secured Lending Corp.
On March 26, 2014, plaintiff filed a summons and complaint in the instant action to foreclose on both the Rosabiancas’ home and Luigi’s condominium unit, naming the Rosabiancas, Luigi and Secured Lending as defendants. The Rosabiancas were served with copies of the summons and complaint by delivery to a person of suitable age and discretion at their place of residence on April 11, 2014, followed by delivery of copies of the summons and complaint to the Rosabiancas at their home address via first class mail on April 17, 2014 (see CPLR 308 [2]). The affidavits of service as to both of the Rosabiancas were e-filed in the Office of the New York County Clerk on April 28, 2014.
The Rosabiancas now allege that it was only upon their receipt of the copies of the summons and complaint in this action that they became aware of the existence of the collateral mortgage. They also aver that, after they were served with the summons and complaint, Luigi assured them that he would “do everything in his power” to prevent foreclosure on their home.
On May 28, 2014, the Rosabiancas’ time to answer the summons and complaint expired, without the Rosabiancas having appeared in the action.
On June 9, 2014, plaintiff served the Rosabiancas with notices of default pursuant to CPLR 3215 (g) (3) (i) by first class mail.
On August 20, 2014, Luigi appeared at a mandatory foreclosure settlement conference, where he admitted the default and indicated that he intended to reinstate the loan from plaintiff and to settle with Secured Lending on its mortgage against the condominium unit, which, although obtained subsequently, had been recorded prior to the recording of plaintiff’s mortgage. The settlement conference was adjourned to October 20, 2014, to afford Luigi time to prepare and submit a settlement proposal. However, Luigi failed to appear for the adjourned settlement conference. On December 12, 2014, plaintiff moved for a default judgment of foreclosure.
Subsequently, the Rosabiancas retained counsel. Rather than opposing plaintiff’s motion for a default judgment, however, they moved, on April 23, 2015, as relevant on appeal, for leave to file a late answer. On June 16, 2016, following oral argument, Supreme Court denied the motion.
On appeal, the Rosabiancas argue that Supreme Court should have granted their motion to file a late answer because Luigi used their home as collateral for the mortgage without their knowledge or consent. They also claim that their lack of awareness of the collateral mortgage and their reliance on their son to protect their home from foreclosure once they became aware of the mortgage constitute an excusable default and a meritorious defense. In addition, they argue that the powers of attorney used by Luigi to obtain the collateral mortgage on their home were deficient because their signatures were obtained on those documents without their knowledge of the documents’ true nature and contents.
In response, plaintiff maintains that the Rosabiancas’ default was not excusable because the Rosabiancas could have hired counsel other than Luigi when they first became aware of the collateral mortgage. Plaintiff further contends that the Rosabiancas have no meritorious defense because they each executed a valid power of attorney authorizing Luigi to act as their attorney-in-fact.
II. Discussion
Under CPLR 3012 (d), a trial court has the discretionary power to extend the time to plead, or to compel acceptance of an untimely pleading “upon such terms as may be just,” provided that there is a showing of a reasonable excuse for the delay. In reviewing a discretionary determination, the proper inquiry is whether the court providently exercised its discretion.
In Artcorp Inc. v Citirich Realty Corp. (140 AD3d 417 [1st Dept 2016]), we adopted the factors set forth in Guzetti v City of New York (32 AD3d 234, 238 [1st Dept 2006, McGuire, J., concurring]) as those that “must ... be considered and balanced” in determining whether a CPLR 3012 (d) ruling constitutes an abuse of discretion. Those factors include the length of the delay, the excuse offered, the extent to which the delay was willful, the possibility of prejudice to adverse parties, and the potential merits of any defense (32 AD3d at 238).
In this case, with respect to the first Artcorp/Guzetti factor, the length of the delay, the Rosabiancas were served with copies of the summons and complaint in this action showing that plaintiff sought foreclosure on both Luigi’s Manhattan condominium unit and the Rosabiancas’ Brooklyn home, in April 2014. The Rosabiancas made their motion on April 16, 2015. Thus, the length of the delay in their response to the summons and complaint was approximately one year. This factor tends to support denial of their motion, especially when viewed in light of their prior notices of the mortgage at least by April 2012 and of the default by November 2013.
Regarding the second Artcorp/Guzetti factor, the excuse offered for the delay, the Rosabiancas aver that they reasonably relied on their son’s representation that he would “do everything in his power” to prevent foreclosure on their home, which they understood to mean that he would appear in court on their behalf and defend them. Although the circumstances afford a sympathetic view of the Rosabiancas, the merit of their position is questionable, given that they can point to no action taken by Luigi on their behalf following service of the summons and complaint upon them. We treat this factor as neutral, tending neither to favor nor to disfavor denial of the Rosabian-cas’ motion.
With respect to the third Artcorp/Guzetti factor, the absence or presence of willfulness, the Rosabiancas maintain that they first learned that the collateral mortgage had been placed on their home in April 2014, when they were served with the summons and complaint in this action. As the record shows, however, the Rosabiancas were served with the complaint in the Kings County action on April 18, 2012. That complaint showed that ESBM sought to record both powers of attorney signed by the Rosabiancas and contemporaneously record the original collateral mortgage on their Brooklyn home. By no later than August 13, 2013, when they were served with the notice of entry of the default judgment in the Kings County action, the Rosabiancas had been informed that the copies of the powers of attorney and the collateral mortgage on their home would be recorded. Thus, at the time that Carmelo Rosabianca stated, in his April 14, 2015 affidavit in support of the Rosabiancas’ motion, that he had no knowledge that a mortgage had been placed on his home before the commencement of this action, the Rosabiancas were almost certainly knowing participants in the transaction, as they were aware of both the mortgage and its function of enabling Luigi to finance the purchase of the condominium unit using the equity in their home. This factor tends to support denial of the motion.
Concerning the fourth Artcorp/Guzetti factor, the possibility of prejudice to an adverse party, plaintiff’s argument as to the prejudice it would suffer due to the delay in recouping its interest in the property is substantially neutralized by its delay in pursuing its legal remedies. This factor tends neither to favor nor to disfavor denial of the motion.
Regarding the fifth Artcorp/Guzetti factor, whether the Rosabiancas have a meritorious defense, Supreme Court was correct in observing that it is not a defense for the Rosabiancas to state that they were cheated by their son. Moreover, the powers of attorney signed by the Rosabiancas expressly granted Luigi full powers to act on their behalf with respect to real estate, banking and loan transactions relating to their home. In addition, EMC secured from Luigi affidavits of effectiveness attesting to the validity of the powers of attorney and that Luigi had “full and unqualified authority to execute all documents” on behalf of the Rosabiancas. The affidavits of effectiveness demonstrate that the powers of attorney granted Luigi not only apparent, but also express, authority to act on the Rosabiancas’ behalf as their attorney-in-fact. Thus, there is no merit in the Rosabiancas’ argument that the powers of attorney were fraudulently obtained.
Neither is it a defense in the foreclosure action that Luigi apparently committed fraud in carrying out his duties under the powers of attorney. “[A] principal may be held liable in tort for the misuse by its agent of his apparent authority to defraud a third party who reasonably relies on the appearance of authority, even if the agent commits the fraud solely for his personal benefit, and to the detriment of the principal” (Parlato v Equitable Life Assur. Socy. of U.S., 299 AD2d 108, 113 [1st Dept 2002], lv denied 99 NY2d 508 [2003]). Because the record amply demonstrates the lack of any meritorious defense, this factor weighs strongly in favor of denial of the motion.
Of these five factors, three—the lack of a potential meritorious defense, which is the most notable, the length of the delay, and the willfulness of the default—weigh against granting the motion. The remaining factors, whether the delay was excusable and whether there was any possibility of prejudice to an adverse party, are arguably neutral. Therefore, considering and weighing the five Artcorp/Guzzetti factors, we conclude that Supreme Court properly denied the Rosabiancas’ motion.
The dissent advances several arguments for its differing view, most of them not raised by the Rosabiancas and requiring rejection for that reason alone. Moreover, these arguments are contrary to the well-settled statutory scheme regarding short form powers of attorney and its underlying policy considerations.
First, the dissent’s view is that the limiting language of the powers of attorney prohibited Luigi from exercising any of the broad general powers enumerated in those instruments except in relation to the refinancing of the Rosabiancas’ residence. This argument was not advanced by the Rosabiancas before either Supreme Court or this Court, and cannot serve as a basis for finding that the motion should have been granted.
Similarly never raised by the Rosabiancas is the dissent’s argument that EMC was obligated to refuse Luigi’s exercise of authority over his parents’ home because of language in the powers of attorney purportedly limiting his authority solely to refinancing that property. Moreover, there is no support in law for the notion that, when presented with statutory short form powers of attorney in conjunction with mortgages, a third party, such as EMC here, is required to look beyond their facial validity and interpret their language to ensure that the named attorney-in-fact is not acting outside the scope of the authority granted. Rather, because the statutory short form powers of attorney used by Luigi had been recently executed and were in all respects facially valid at the time of the closing, EMC was entitled to rely on them (Oliveto Holdings, Inc. v Rattenni, 110 AD3d 969, 971 [2d Dept 2013]).
In fact, examination of the statutory scheme respecting powers of attorney makes clear that the dissent’s position is contrary to the law. The statutory short form power of attorney was created by the Legislature in 1948 to assure that the grant of authority given by a principal to an agent would not be thwarted by a third party’s unreasonable refusal to accept the power of attorney (Rose Mary Bailly & Barbara S. Hancock, Practice Commentaries, McKinney’s Cons Laws of NY, Book 23A, General Obligations Law § 5-1504 at 155). Until that time, refusal by financial institutions to accept general powers of attorney had been a common occurrence (id.). As a result, the Legislature enacted General Obligations Law § 5-1504, which bars lenders and others doing business in New York from refusing, without reasonable cause, to honor a statutory short form power of attorney that has been properly executed. A bank is entitled, under the statute, to accept and rely on a properly executed power of attorney in the absence of actual knowledge that the principal lacked capacity to subscribe it or was subject to fraud, duress or undue influence in executing it, unless the bank has actual notice that the instrument has been terminated or revoked (General Obligations Law § 5-1504; see Oliveto Holdings, 110 AD3d at 971).
The statutory short form powers of attorney granted to Luigi were properly executed, and there is no claim that EMC possessed actual knowledge of any of the specified grounds for their rescission. Moreover, as noted, at the closing, Luigi furnished affidavits of effectiveness attesting to his authority to act on behalf of his parents in the transaction. Indeed, the Rosabiancas have not challenged the overall validity of the powers of attorney, nor have they questioned EMC’s legal duty to honor them.
Thus, EMC reasonably relied on Luigi’s actual authority to bind his parents to the collateral mortgage, as set forth in his contemporaneous sworn statements. The bank was statutorily bound to honor the documents presented to it, as it had no reasonable cause not to do so.
Next, the dissent argues that the Rosabiancas have a meritorious defense, i.e., that the complaint fails to state a cause of action. In the dissent’s view, the collateral mortgage secures a nonexistent note, since no note was signed by either of the Rosabiancas as “borrower.” Again, this argument was not advanced before either Supreme Court or this Court, and must be rejected for that reason alone. Furthermore, it is an argument that emphasizes form over substance. The collateral mortgage, signed by Luigi as attorney-in-fact for each of the Rosabiancas, was clearly intended to secure the Rosabiancas’ home and to refer to the adjustable rate note signed by Luigi the same day. Moreover, both the note and the mortgage set forth the address of the Rosabiancas’ home in Brooklyn and $1,760,000 as the amount of principal to be paid to the lender.
Relying upon Ford v Unity Hosp. (32 NY2d 464, 472-473 [1973]), the dissent further argues that because Luigi lacked any express authority to enter into the loan transaction, but relied on apparent authority to justify his actions, EMC had a duty to determine the extent of his authority. Once again, this argument must be rejected because it was not raised before either Supreme Court or this Court. Furthermore, as indicated, Luigi’s express authority to engage in the transaction was demonstrated at the closing. In any case, even were we to find that Luigi demonstrated only apparent authority to act for his parents, Ford is both inapposite and distinguishable. In Ford, the Court of Appeals found that the unauthorized act of a foreign agent for a Mexican insurance company in delivering into this State a cover letter for a policy of malpractice insurance, which was both beyond the scope and in direct contravention of its agency agreement, did not sufficiently comply with standards of due process to subject its principal to the jurisdiction of New York courts pursuant to former section 59-a of the Insurance Law. It was conceded that the entity in question was unauthorized to deliver the letter regarding the issuance of the insurance policy, and, in fact, had been directed not to do so. The common-law rule there invoked, that “[o]ne who deals with an agent does so at his peril, and must make the necessary effort to discover the actual scope of authority” (32 NY2d at 472), upon which the dissent relies, is not at issue here, where the applicable principles regarding powers of attorney have been statutorily codified and supplant the general common-law doctrine.
Under the principles applicable in this case, as set forth in General Obligations Law §§ 5-1502A and 1504 and in currently prevailing case law, lenders without actual knowledge to the contrary are required to rely on facially valid and, at the time of closing, unrevoked, statutory short form powers of attorney where “the circumstances surrounding [their] presentation would not . . . put a reasonable person on notice that something was amiss” (see Oliveto Holdings, 110 AD3d at 971 [internal quotation marks omitted]). These principles govern the duties of lenders in real estate mortgage loan transactions involving statutory short form powers of attorney, such as EMC in this case. Thus, the general common-law principles set forth in Ford v Unity Hosp., which govern the duties of third parties to investigate the extent of the authority of agents in circumstances other than real estate transactions involving statutory short form powers of attorney, are inapplicable in this case.
Finally, the dissent contends that although powers of attorney bar attorneys-in-fact from making gifts, including to themselves, exceeding $10,000, Luigi essentially made a gift to himself of all of the equity in his parents’ home, violating his statutory duty to act in the best interests of his principals (see General Obligations Law § 5-1514 [former General Obligations Law § 5-1502]). Again, this argument was not advanced before either Supreme Court or this Court and, accordingly, we reject it.
We have considered the Rosabiancas’ remaining contentions and find them unavailing.
Concur—Friedman, J.P., Gische, Kapnick and Kahn, JJ.. Luigi was suspended from the practice of law on March 12, 2015. He was indicted for stealing $4.4 million from clients and pleaded guilty to multiple counts of grand larceny, and was sentenced to 4 to 12 years’ imprisonment subsequent to the events here at issue. He has since been disbarred.
. Although both affidavits state that Luigi swore and subscribed them before notary public David Ross Koshers on the “14th day of May, 2007 [,] the collateral mortgage, which was signed by Luigi as attorney-in-fact for both of the Rosabiancas, reflects that “[o]n the 14th day of May 2008” before the same notary public, Luigi “acknowledged . . . that. . . he . . . executed the same in his . . . capacity . . . and that by his . . . [signatures] on the instrument, the [individuals] or the person upon behalf of which the [individuals] acted, executed the instrument.” The 2007 date on the affidavits of effectiveness was evidently a typographical error, which, under the circumstances, was cured by the recitation of the correct date on the collateral mortgage.