MISC 08-376160

August 2, 2010

ESSEX, ss.

Trombly, J.


CSE Mortgage, LLC (CSE”) filed this action on March 18, 2008 under the provisions of an act of Congress known as the Servicemembers’ Civil Relief Act (50 USC ss. 501-596)(“the Act”). Specifically, CSE sought a judgment authorizing it to make entry and foreclose by exercise of the power of sale contained in a mortgage given to it by Lazaro Santiago (“Defendant”) on October 5, 2006, said mortgage being recorded in the Essex (North District) Registry of Deeds on Book 10439, Page 1, and encumbering land and buildings in Lawrence having an address of 378-386, 408-410 and 416-418 Park Street. The buildings contain fourteen (14) vacant apartments which Mr. Santiago intends to refurbish and a liquor store.

The Court issued an Order of Notice on July 2, 2008 which was published, recorded, and served upon Mr. Santiago. In reply, Defendant filed an answer on August 1, 2008 objecting to the foreclosure and stating that his Army Reserve unit had been activated and that he was then on active military duty. Pursuant to the terms of the Act, Attorney Joseph E. Boulanger was appointed on November 16, 2009 to act as Military Attorney for Mr. Santiago.

Attorney Boulanger filed his report on January 14, 2010 objecting to the continuation of the foreclosure proceedings. In his report, the military attorney noted that he had talked to Mr. Santiago and been informed that the defendant had been activated in May of 2008 and that he was then stationed at Fort Dix, New Jersey. Attorney Boulanger confirmed this information with the Department of Defense Manpower Data Center, and requested on behalf of the Defendant that the interest rate on the note secured by the mortgage, in excess of fifteen per cent (15%), be reduced retroactively to the rate on the date of his activation in May, 2008. He also requested that the term of the loan be extended until Defendant’s discharge from active duty, “and for such other relief the Court deems proper”.

Wallace Capital, LLC, successor in interest to CSE, filed a motion on December 14, 2009 seeking relief from the provisions of the Servicemembers’ Act and an order authorizing foreclosure of the mortgage by entry and sale. Also filed at that time was an affidavit by Robert V. Wallace, a principal of Wallace Capital, and a memorandum of law in support of the motion. Specifically, Wallace requested permission to foreclose or accept a deed in lieu of foreclosure, to bring other “possessory” actions, and that it be allowed to collect any rents due to or being paid to Santiago from parties renting any portions of the encumbered property. Wallace also contended that Santiago was not entitled to any reduction in the rate of interest.

The mortgage at issue in this case, as noted above, was given by Defendant to Wallace Capital in 2006 to secure a note in the amount of $400,000. At the time of the mortgage, Mr. Santiago was in the Army Reserves but had not yet been activated. The note, mortgage and assignment were assigned to CSE on October 16, 2006 and were re-assigned to Wallace on October 1, 2009. The note matured by its terms on October 5, 2007 but that date was extended by agreement to April 5, 2008. The last payment made by Defendant was in January of 2008.

The total amount due as of November 13, 2009 was $450,330.65, of which the amount of $4,006.62 was paid by the mortgagee for insurance coverage due to the fact that Mr. Santiago failed to do so. Real estate taxes totaling over $20,000 due to the City of Lawrence are being paid by Wallace because, once again, Defendants is not doing so. It appears that no rents are being collected because of the fact that the fourteen apartments are vacant and because the operator of the liquor store is constantly delinquent with rent payments.

Wallace contends that it is being “extremely prejudiced” by the continued stay of this action given Defendant’s failure to pay off a note which matured two years ago, to insure the property, and to pay taxes and other costs to the City of Lawrence. For these reasons, Wallace seeks permission to proceed with the foreclosure notwithstanding the fact that Mr. Santiago is currently on active military duty and will not be released for at least several months. In short, Wallace argues that Defendant should not be afforded the protections of the Act where he was in the Reserves at the time he entered into the mortgage and has been in default on his payments since that time. Plaintiff avers that Santiago’s activation has had no effect or impact upon his ability or inability to pay the defaulted obligation and that it should therefore be allowed to immediately proceed with the foreclosure.


The Servicemembers’ Civil Relief Act, and its predecessor, the Soldiers’ and Sailors’ Civil Relief Act, were enacted by Congress and spring from the desire of the American people to make sure as far as possible that men and women in the military service are not placed at a civil disadvantage during their absence. The Act also recognizes the inability of persons in the service to properly manage their normal business affairs while away, and that their pay is probably less while in the military that what it was when they were in civilian life. In a case of a person who entered into a mortgage prior to entry into the military, the Act provides that a Court can “stay the proceedings for a period of time as justice and equity require, or adjust the obligation to preserve the interest of all parties”. 50 USC ss. § 303. Clearly, the Act is to be administered as an instrument to accomplish substantial justice which requires an equitable consideration of the rights of both parties to the end that their respective interests may be properly conserved. New York Life Ins. Co. v. Litke, N. Y. Sup. 1943, N.Y.S. 2d 576, 181 Misc. 32. However, the Act “may not be used as a sword against persons with legitimate claims against servicemembers. Some balancing of rights is required”. Slove v. Strohm, Ill. App. 1968, 236 N. E. 2d 326, 94 Ill.App. 2d 129.

In the present case, there is no dispute that Mr. Santiago was not on active duty at the time he entered into the mortgage. He is therefore entitled to the benefits of the Act. However, this does not mean that the present holder of the mortgage is without remedies. Defendant has made few, if any, payments for several years. He is not paying taxes or for insurance. The apartments are not rented and the one commercial tenant is not paying rent. This is a recipe for disaster, yet Defendant asks that no action be taken on the mortgage delinquency until he returns to civilian life. In the opinion of this Court, to allow this would be to ignore the legitimate rights of both parties, especially in view of the fact that Mr. Santiago will remain on active duty until at least the end of 2010.

After consideration of the above, I find and rule that the mortgage is clearly in default, and has been for several years. I also rule that while Mr. Santiago is in the active military and is entitled to the benefits of the Act, he does not have the right to ignore his obligations to Wallace. Accordingly, I rule that the interest rate shall be reduced from its current rate of approximately 15% to 6%, retroactive to the date of Defendant’s entry onto active duty in 2008, and that Mr. Santiago must begin immediately to make regular monthly payments on the mortgage. The monthly payment will revert to its former rate upon Defendant’s release from active military service. Failure to begin making such payments within sixty days, in the amount of at least $2,500 per month, shall constitute just cause for Plaintiff to bring and mark for hearing, with notice to Attorney Boulanger and Mr. Santiago, a motion seeking entry of a judgment authorizing foreclosure by entry and exercise of the power of sale.

Charles W. Trombly, Jr.


Dated: August 2, 2010