Allison Lending LLC v. Croton Development LLC

Background

Allison Lending LLC brought a mortgage-foreclosure action against Croton Development LLC and Vasel Balbona, who guaranteed the mortgage. On November 25, 2024, the parties entered into a forbearance agreement that became part of the loan documents. The agreement provided that a default under the agreement would immediately be a default under the loan documents and allowed Allison Lending to seek judgment immediately. Defendants defaulted on their payments beginning January 1, 2025.

The clerk entered certificates of default against both defendants on January 8, 2025. After the court issued an order to show cause concerning default judgment, defendants submitted a response, Balbona’s declaration, proof of a $38,000 wire transfer, and a proposed answer containing nine affirmative defenses. The court treated that response both as opposition to default judgment and as a cross-motion under Federal Rule of Civil Procedure 55(c) to vacate the clerk’s entries of default.

Request to Vacate the Default

Rule 55(c) permits a court to set aside an entry of default for good cause. The court considered whether the default was willful, whether setting it aside would prejudice Allison Lending, and whether defendants presented a potentially complete defense. The court found that defendants’ conduct was not willful and that Allison Lending would suffer only minimal prejudice, but it concluded that defendants had not shown a meritorious defense.

The court rejected defendants’ unsupported assertion that Allison Lending had failed to state a claim. It also rejected the accord-and-satisfaction defense because the forbearance agreement described the $38,000 payment as a down payment and contained a merger clause; the payment therefore would not constitute a complete defense if proven at trial.

The court found that defendants’ improper-service argument was contradicted by affidavits showing service on Croton Development LLC through the New York Secretary of State and personal service on Balbona. Balbona’s statement that he was unaware of service because he had been hospitalized was unsupported by additional evidence and did not overcome the service affidavits.

The court also found that defendants offered no evidence supporting their equitable defenses, including unclean hands, equitable estoppel, and bad faith. Their assertions concerning unmet conditions in the loan documents and failure to participate in a mortgage-modification process were too vague to establish a complete defense.

The court further held that the foreclosure-notice provisions defendants cited—sections 1304 and 1306 of New York’s Real Property Actions and Proceedings Law—did not apply because the loan was between Allison Lending and Croton Development LLC, not a natural person. Finally, the court noted that defendants did not explain how Allison Lending had failed to comply with the forbearance agreement.

Default Judgment

Because defendants were in default, the court accepted the well-pleaded factual allegations in the complaint as true but independently evaluated whether those allegations established a valid foreclosure claim and whether the claimed damages were supported. Under New York law, a mortgage foreclosure plaintiff must establish a debt, a mortgage securing that debt, and a default. The plaintiff must also satisfy applicable statutory requirements under Article 13 of the Real Property Actions and Proceedings Law.

The court concluded that Allison Lending established the common-law elements of foreclosure. It also found that the notice requirements under sections 1303 and 1320, and the notice-of-pendency requirement under section 1331, were satisfied.

The forbearance agreement stated that the original loan’s outstanding principal was $268,240.00, that interest accrued at 13.00% and increased to 24.00% after default, and that defendants owed a $12,000 exit fee. The court accepted Allison Lending’s calculation of the amount owed through March 17, 2025: $296,606.62. The court also stated that the 24.00% default interest rate did not violate New York usury law under the authorities discussed in the opinion.

Disposition

The court denied defendants’ cross-motion to vacate the clerk’s entries of default. It granted Allison Lending’s motion for default judgment, granted a judgment of foreclosure and sale, and directed that the foreclosure-sale proceeds be paid to Allison Lending in the amount of $296,606.62. The judgment was to be docketed separately.