Petitioner, Cheryl Waithe (Waithe), commenced this proceeding, pursuant to CPLR Article 4, by filing and serving a verified petition seeking, among other things, to reverse and/or cancel (1) the non-judicial sale, held on September 13, 2012, of Waithe's 15 shares in 345 Montgomery Owners Corp. and (2) the associated proprietary lease, appurtenant to unit 1L in the cooperative apartment building located at 345 Montgomery Street in Brooklyn, Waithe's primary residence since 2009. Waithe simultaneously moves, by order to show cause, for interim relief separate from the verified petition.

Respondents, Citigroup, Inc., Citibank, N.A., Citimortgage, Inc., (collectively Citimortgage), the successful bidder at auction and Fannie Mae a/k/a Federal National Mortgage Association (Fannie Mae), jointly answered the petition and have opposed the interim relief.

Waithe allegedly suffered personal injuries from a job-related accident on February 11, 2010. She could not work, used her personal and retirement savings to continue her monthly payments to Citimortgage and sought, in the interim, to modify the [*2]loan with Citimortgage to lower her monthly payment. She was initially reviewed for a Home Affordable Mortgage Program (HAMP) modification and was denied such modification, as the promissory note and security agreement were executed six months after the cut-off date established by HAMP's guidelines for qualified loans.

Waithe eventually defaulted under the promissory note and security agreement by failing to make the January 1, 2011 payment. She was offered a three-month forbearance plan by Citimortgage in May, 2011. This plan required two full monthly payments totaling $1,400.58 for April and May, 2011; reduced monthly payments of $560.00 for June, July and August, 2011; and a balloon payment of $1,897.93 due September 1, 2011 to make the loan current and allow resuming the regular $700.29 monthly payment commencing October, 2011. Waithe apparently accepted this plan, made the initial payment and either made the reduced payments as contemplated therein, with a grant for housing assistance from the City of New York, or did not receive proper credit from Citimortgage for these payments. However, she did not make the balloon payment and instead requested further assistance from Citimortgage.

Rosicki, in accord with paragraph 4 of the Loan Security Agreement, sent Waithe a Notice of Default on June 26, 2012 by both regular first-class mail and certified mail return receipt requested. This letter advised Waithe that the entire loan balance would become due and owing to Citimortgage if the loan was not brought current within 30 days. Waithe did not cure the default within 30 days of the letter, and Rosicki, in accord with UCC 9-613, served Waithe with a Notice of Sale on August 21, 2012 by both regular first-class mail and certified mail, return receipt requested, addressed to her residence. This notice of sale advised Waithe that the stock and proprietary lease would be sold at public auction to the highest bidder on the steps of the courthouse on September 13, 2012 at 10:00 AM.

Waithe claims that she was on the phone with Citimortgage representatives all day on September 12, 2012 verifying the receipt of various documents she had sent and that these representatives were trying to qualify her for a loan modification. Waithe called Citi-mortgage that evening to inquire about her request to cancel the sale scheduled for the following day. She alleges that a "Maria" advised her that all it would take "for the postponement or the cancellation of the sale" would be for someone "in that department to come in early and do the paper work; it is not a long process" (Petitioner Aff., 12/20/12, p 5, ¶ 16).

The auction was held on September 13, 2012, as noticed and published, and Citimortgage was the successful bidder for the amount due on the mortgage. Waithe discovered, on September 14, 2012 in another call to Citimortgage, that the sale had not been cancelled but had occurred. She received written notification from Citimortgage on September 17, 2012 (1) denying her request for a modification "at this time" and (2) claiming that Fannie Mae modification requirements were not met. More specifically, Waithe's income was found "insufficient to offer an affordable payment solution."^[FN3] The next day, September 18, 2012, Citimortgage allegedly assigned their bid "[f]or $10.00 and other good and valuable consideration" to Fannie Mae.

Waithe's petition alleges seven causes of action, to wit: 1) a cause of action seeking a declaratory judgment nullifying the sale as violating UCC 9-611 (f); 2) a cause of action seeking a declaratory judgment nullifying the sale as violating UCC 9-613 (a) (4); 3) a cause of action seeking a declaratory judgment nullifying the sale as violating UCC 9-610 (b); 4) a cause of action seeking a declaratory judgment nullifying the sale as violating UCC 2-103 (1) (b), 23 NYCRR 418, et seq., 23 NYCRR 419, et seq. and common law for failing to act in good faith and deal fairly with petitioner; 5) a general cause of action for negligence;

6) a cause of action for deceptive practices in violation of General Business Law (GBL)

§ 349; and 7) a generalized cause of action for "unconscionable conduct." Respondents' Citimortgage and Fannie Mae as mentioned above, filed both opposition to the order to show cause as well as an answer denying all the causes of action alleged in the petition.

Waithe claims that the non-judicial auction sale of her shares of stock violated UCC

9-611 (f). This added subsection to UCC 9-611 is part of The Home Equity Theft Prevention Act of 2009 (HETPA), which amended sections of the Real Property Actions and Proceedings Law (RPAPL), the UCC and the Civil Practice Laws and Rules (CPLR) in an effort to, among other things, "expand the number of borrowers who would benefit from the [RPAPL 1304] notice and from the 90-day time period during which the lender and the borrower may attempt to reach a mutually agreeable resolution without [the] imminent threat of a foreclosure action" (Governor's Mem, Bill Jacket, L 2009, Ch 507 at 6). Waithe claims that Citimortgage violated this provision, which became effective on January 14, 2010, by failing to serve her with the required notice. In addition, she alleges that any such notice that Citimortgage claims to have served at least 90 days before the auction sale of September 13, 2012 did not comport with the font size and language requirements of UCC 9-611 (f) (3). Waithe supports these arguments by heavily relying upon Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95 [2011], Stern-Obstfeld v Bank of Am., 30 Misc 3d 901 [Sup Ct, NY County 2011] and Millien v. Citigroup, Inc., 37 Misc 3d 1229[A], 2012 NY Slip Op 52224[U] [Sup Ct, Kings County 2012, Rivera, J.]).

Citimortgage claims compliance with UCC 9-611 (f) in both the content of the notice and the timely manner that such notice was sent to Waithe. It has annexed a purported copy of a cover page enclosing the notice, as well as the affidavit of Sherry Romine, a "Business Operations Analyst" employed by Citimortgage to bolster its position. Ms. Romine avers personal knowledge of [*5]Citimortgage's practice and procedure for creating and maintaining both physical and electronic loan records. She further states that her review of these unspecified records concerning Waithe's loan, "reflect that on December 7, 2011, Citi sent Petitioner a Ninety-Day Notice pursuant to NY UCC 9-611(f)(1) via certified mail and registered mail." No other documentation, such as copies of the loan records or the certificate of mailing, were annexed to Ms. Romine's affidavit in opposition.

Aurora Loan Servs., LLC v Weisblum, supra, held that the notice requirement under RPAPL 1304 is a condition precedent to filing a foreclosure action. Stern-Obstfeld and Millien, both supra, found that the notice requirement of UCC 9-611 (f) is a condition precedent to non-judicial foreclosure of a cooperative apartment since the notices in these statutes were "enacted for the purpose of avoiding similar evils and affording similar remedies [and therefore] should have uniformity of application and construction" (Matthews v Matthews, 240 NY 28, 35 [1925]). These cases, however, did not address the issue of service of the UCC 9-611 (f) notice itself.

RPAPL 1304 (2) requires that the lender send the notice "by registered or certified mail and also by first-class mail to the last known address of the borrower, and if different, to the residence that is the subject of the mortgage."^[FN4] The lender initially bears the burden to show compliance with this section, and evidence of compliance requires producing an affidavit of service from someone with personal knowledge of the subject mailing (see Aurora Loan Services, LLC v Weisblum, 85 AD3d at 106). Citimortgage clearly failed to meet this initial burden if the notice herein had been required under RPAPL 1304, as the affidavit of Ms. Romine is not an affidavit of service of the actual mailing. However, the same cannot be said at this time under the notice requirements of UCC 9-611 (f). Therefore, a hearing in the JHO Part of this Court as to service of the notice is required and determination of this issue shall be held in abeyance pending this hearing.

Waithe next alleges a cause of action seeking a declaratory judgment nullifying the

sale as violating UCC 9-613 (a) (4). That section requires that the notice of disposition of collateral sent to a debtor must advise the debtor that he or she is "entitled to an accounting of the unpaid indebtedness," and sets forth the fees, if any, to be charged for providing such an accounting. Waithe suggests that an accounting must be provided in this notice, but that is not what is required. Only information as to how to obtain such an accounting is required to be provided. The notice must contain the contents of UCC 9-613 (a), but there is no approved specific form or format required. UCC 9-613 (e) provides a sample form to be used, but the use of that sample form is optional.

Here, no specific form was used, and a review of the notice of disposition, including the August 21, 2012 cover letter from Rosicki (sent more than 10 days before the scheduled sale date) appears to offer the debtor an opportunity to obtain an accounting of the debt. Although the notice and letter does not disclose "the charge, if any" for such an accounting and since there is no proof that Waite availed herself of the opportunity to obtain an accounting, the contents of the notice sent substantially complies with UCC 9-613 (b).

The petition also alleges a cause of action seeking a declaratory judgment nullifying the public auction sale as conducted in violation of UCC 9-610 (b). Specifically, UCC 9-610 (b) requires that "[e]very aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable. If commercially reasonable, a secured party may dispose of collateral by public or private proceedings, by one or more contracts, as a unit or in parcels, and at any time and place and on any terms." [*6]

Waithe argues two distinct grounds for finding that the sale herein was commercially unreasonable. First, that the sale bid accepted as the highest amount ($125,991.46), which coincided with the total amount of the indebtedness, is unreasonable as the value of the shares and proprietary lease were much higher and that this difference had represented Waithe's now lost equity in the collateral. Citimortgage, in response, correctly notes that insufficiency of sale price alone will not overturn an auction sale unless the amount obtained "shocks the court's conscience" (see Crossland Mtge. Corp. v Frankel, 192 AD2d 571, 572 [1993] lv denied 82 NY2d 655 [1993]; see also Dime Sav. Bank of NY v Zapala, 255 AD2d 547, 548 [1998] ["the mere inadequacy of price is an insufficient reason to set aside a sale unless the price is so inadequate as to shock the court's conscience"]). Waithe claims, and without substantiation, that the value of the shares and proprietary lease were closer to $150,000.00. If that is true, then the approximate amount of $24,000 or 16% of the property's value in lost equity is not sufficient to shock the conscience of the court (see Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400, 409 [1983]).

Secondly, Waithe claims that the purported "assignment of bid" by Citimortgage to Fannie Mae, five days after the auction, is commercially unreasonable. Waithe does not specify how such an assignment is commercially unreasonable and only claims it is not based in law, procedure or custom. Citimortgage counters that such an assignment is valid regardless of whether there is precedent for such a procedure.

The Eighth Edition of Black's Law Dictionary defines a "bid" as an "offer to pay a specified price for something that may or may not be for sale" (Black's Law Dictionary 170 [8th ed 2004]). The bid allegedly assigned was the "offer" of Citimortgage to purchase the stock and proprietary lease at the public auction for the amount of the indebtedness. As such, the bid can be assigned to a third party. Therefore, the assignment is commercially reasonable.

Next, Waithe seeks to nullify the sale for violating UCC 2-103 (1) (b), 23 NYCRR 418, et seq., 23 NYCRR 419, et seq., and under common law for failing to act in good faith and deal fairly with petitioner. UCC 2-103 (1) (b) provides that " Good faith' in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade." However, UCC 2-103 (1) would only apply to the actual sale, and not the "bad faith" claimed by Waithe concerning her modification reviews. Indeed, UCC 2-103, by its very terms, is limited to "this Article" (meaning Article 2) and not Article 9, which has its own standard of good faith annunciated in UCC 9-102 (a) [43]. The sale itself was conducted in a commercially reasonable manner, and, therefore, this claim must be dismissed. Additionally, Waithe's claims under the non-existent sections of 23 NYCRR 418, et seq. and 23 NYCRR 419, et seq. fail to provide her any assistance. However, if Waithe meant to allege a violation of 3 NYCRR 419.14, the claim would still be dismissed as duplicating her claim under UCC 9-611.

Waithe has asserted a general claim for negligence as against Citimortgage. The

crux of this claim appears to rely upon violations of the above-referenced UCC sections as well as 3 NYCRR 419.2 (f) which requires Citimortgage to "provide trained personnel and telephone facilities sufficient to respond promptly to borrower inquiries regarding their mortgage loans[.]" Assuming arguendo that Citimortgage did employ and assign untrained and unqualified personnel to respond to Waithe's inquiries and that Citimortgage bore some duty to modify her mortgage either upon request or under the Home Affordable Mortgage Program (HAMP), this claim must still be dismissed as such failures on Citimortgage's part cannot be said to be the proximate cause of any alleged damages suffered by Waithe. Indeed, it appears that the sole proximate cause of Waithe's alleged damages are due to her default under the note and security, and not her reliance on untrained and unqualified Citimortgage personnel or any duty they may or may not have assumed. Waithe has thus failed to "allege how such reliance placed her in a more vulnerable position, as is necessary to impose tort liability for an assumed duty" (Kelso v Wall St. Funding, 94 AD3d 1186, 1189 [2012]), [*7]and this claim must also be dismissed.^[FN5]

Waithe's generalized cause of action for "unconscionable conduct" must also be dismissed for the same reasons. "The doctrine of unclean hands applies when the complaining party shows that the offending party is guilty of immoral, unconscionable conduct and even then only when the conduct relied on is directly related to the subject matter in litigation and the party seeking to invoke the doctrine was injured by such conduct" (Columbo v Columbo, 50 AD3d 617, 619 [2008] [emphasis added]).

It appears, turning to Waithe's Order to Show Cause and the relief it seeks, that

relief may be available if, after the contemplated hearing is held, Waithe can prove her claim that the sale violated UCC 9-611 (f). If the service of the notice is found defective, Waithe may be entitled to an order reversing the sale and a declaration that the auctioneer's certificate of sale is invalid. In the interim, the stay of the Kings County Civil Court Housing Part action under docket number 12K195697, is continued pending the hearing, provided Waithe monthly deposits $700.29 in escrow with her attorney, commencing, December 1, 2013, and continues to the pay the maintenance assessed against the unit and keeps same current with 345 Montgomery Owners Corp. Accordingly, it is

ORDERED that petitioner's motion, by order to show cause, is granted only to the extent of setting this matter down for a hearing on Petitioner's first cause of action and in accordance with this decision; and it is further

ORDERED that the stay of eviction proceedings commenced under docket No. 12K1056967 in the Kings County Civil Court Housing Part is extended pending the hearing in this matter, and provided Waithe complies with the conditions provided herein; and it is further

ORDERED that the second, third, fourth, fifth, sixth and seventh causes of action alleged in the petition are hereby dismissed.

This constitutes the decision and order of the court.

E N T E R,

J. S. C.