Opinion
No. 19410/08.
06-25-2014
U.S. BANK, NA 475 Crosspoint Parkway Getzville, N.Y. 14068–9000, Plaintiff, v. Desiree RUBIN, Harvey Cooley, New York City Environmental Control Board, New York City Transit Adjudication Bureau, New York State Department of Taxation and Finance, John Doe (said name being fictitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, and any parties, corporations or entities, if any, having or claiming an interest in or lien upon the mortgaged premises.), Defendants.
Shapiro DiCaro & Barak, LLC, Rochester, for Plaintiffs. DelBello Donnellan Weingarten, Wise & Wiederkehr, LLP, White Plains, NY, for Defendant EPOABC, Inc.
Shapiro DiCaro & Barak, LLC, Rochester, for Plaintiffs.
DelBello Donnellan Weingarten, Wise & Wiederkehr, LLP, White Plains, NY, for Defendant EPOABC, Inc.
DECISION/ORDER
DONALD SCOTT KURTZ, J.
Recitation, as required by CPLR § 2219(a), of the papers considered in the review of this motion to Amend the Summons and Complaint and for Summary Judgment:
| Papers | Numbered | |
|---|---|---|
| Order to Show Cause/Notice of Motion and Affidavits/Affirmations Annexed | 1,2 | |
| Answering Affidavits/Affirmations | 3,4 | |
| Reply Affidavits/Affirmations | 5 | |
| Memoranda of Law | 6 | |
| Filed Papers | 7 |
Upon the foregoing cited papers, the Decision/Order on this motion to Amend the Summons and Complaint and for Summary Judgment is decided as follows:
Plaintiff commenced the instant foreclosure action by the filing of a Summons and Verified Complaint on July 3, 2008. Defendant, Harvey Cooley (hereinafter “Cooley”), filed a pro se Answer on August 13, 2009. Pursuant to CPLR § 3408, the case was transferred to the Foreclosure Settlement Conference Part. On June 24, 2010, after several settlement conferences, an order was written transferring the case to this IAS part. The order stated in pertinent part, “there is a dispute about the title, Harvey Cooley claims he is (full) owner.” While the conferences were being adjourned, but prior to the aforementioned order being issued, plaintiff filed a motion for Summary Judgment and an Order of Reference. Cooley opposed the motion and on November 3, 2010, the motion was withdrawn. Approximately three years later, due to inaction on this case, the Court scheduled a conference for September 24, 2013. At the conference, an order was issued providing that the action would be dismissed unless plaintiff proceeded by motion within ninety days thereof. Pursuant to a stipulation dated October 11, 2013, EPOABC Inc. (hereinafter “EPOABC”), named herein as defendant “John Doe,” appeared in this action and was given time to serve an Answer. On October 29, 2013, EPOABC filed a “Summons with Answer with Counterclaim and Cross–Claim.” On November 20, 2013, plaintiff filed a Reply to said papers. On December 20, 2013, plaintiff made the instant motion to Amend the Summons and Complaint for the purposes of substituting the present plaintiff due to an assignment; adding additional necessary parties as defendants; and asserting additional causes of action alleging fraud. EPOABC moved for summary judgment dismissing the complaint, or in the alternative, awarding EPOABC summary judgment on its counterclaim and cross-claim pursuant to Article 15 of the Real Property Actions and Proceedings Law.
In order to address the instant motions, it is necessary to review the undisputed history of the deed and mortgage transfers relating to this property. Desiree Rubin (hereinafter “Rubin”) acquired title to the premises from defendant Cooley by deed dated November 20, 2006. On December 4, 2006, Rubin took a mortgage in the principal sum of $533,850 from Bank of America, NA (hereinafter “Bank of America”). Rubin then conveyed the property back to Cooley by deed dated March 10, 2007. Cooley then conveyed the property to himself by deed dated March 11, 2008. Bank of America recorded a Satisfaction of Mortgage dated April 3, 2008 on April 21, 2008. Cooley then conveyed the premises to Cool Water Group, LLC (hereinafter “Cool Water Group”) by deed dated June 25, 2008. A second Satisfaction dated October 17, 2008 was recorded on November 19, 2008 by plaintiff. Cool Water Group then encumbered the premises with a mortgage in the principal amount of $471,000 in favor of JNL Funding Corp. (hereinafter “JNL Funding”) dated June 26, 2008 and recorded on July 19, 2011. JNL Funding then assigned its mortgage to Liquidation Trustee Services, LLC (hereinafter “Liquidation Trust”) by Assignment of Mortgage dated October 10, 2012 and recorded on November 5, 2012. Subsequent to the date the assignment was made, but prior to it being recorded, Cool Water Group conveyed the premises, subject to the $471,000 mortgage, to TRHPZ, LLC. (hereinafter “TRHPZ”) by deed dated October 16, 2012 and recorded on October 22, 2012. By deed dated July 12, 2012 and recorded on November 9, 2012, Cool Water Group also conveyed title to the premises to Grabthedealnow Corp. subject to the $471,000 mortgage. An assignment of the $471,000 mortgage from Liquidation Trust to EPOABC dated January 18, 2013 was recorded on February 13, 2013.Motions for leave to amend are “to be liberally granted absent prejudice or surprise resulting directly from the delay (citations omitted. )” Del Bourgo v. 138 Sidelines Corp., 208 A.D.2d 795, 796 lv denied 85 N.Y.2d 924 (1995). See CPLR § 3025(b) ; Degregorio v. American Mfrs. Mut. Ins. Co., 90 AD3d 694,696 (2d Dept 2011). Leave shall be denied when the proposed amendment prejudices or surprises the opposing party, or is palpably insufficient as a matter of law or is totally devoid of merit.” Del Bourgo v. 138 Sidelines Corp., 208 A.D.2d at 296, supra. Furthermore, “where a party is guilty of extended delay in moving to amend, the court should insure that the amendment procedure is not abused by requiring a reasonable excuse for the delay and an affidavit of merit (citations omitted. )” Gallo v. Aiello, 139 A.D.2d 490 (2d Dept 1998). See Boyd v. Trent, 297 A.D.2d 301, 304 (2d Dept 2002) ; Evans v. Kringstein, 193 A.D.2d 714, 715 (2d Dept 1993). “A determination whether to grant such leave is within the Supreme Court's broad discretion, and the exercise of that discretion will not be lightly disturbed.” Finkelstein v. Lincoln Nat. Corp., 107 AD3d 759, 761 (2d Dept 2013).In support of its position, plaintiff argues that at the time the complaint was prepared, it was not aware that the April 3, 2008 Satisfaction was fraudulent. The complaint alleges that “through inadvertence and mistake” a Satisfaction was prepared on April 3, 2008 and recorded on April 21, 2008. It alleges Rubin had knowledge of the mistake and continued to make payments under said note and mortgage. Plaintiff points to various mistakes in the April 3, 2008 Satisfaction and argues that this furthers its argument that the document is fraudulent in nature. Plaintiff argues that the October 17, 2008 Satisfaction is fraudulent as well. It maintains that although the second Satisfaction was recorded on November 19, 2008, plaintiff never sought to discontinue the action. Therefore, EPOABC had notice of the pending litigation.
In opposition, EPOABC maintains that plaintiff's motion is barred by laches and should be denied because plaintiff failed to set forth a reasonable excuse for the five year delay in seeking an amendment. Moreover, plaintiff failed to submit an affidavit from an individual with knowledge of the facts supporting its proposed amendment. EPOABC argues that plaintiff had constructive notice of the recorded October 17, 2008 Satisfaction and failed to take steps to address it. Moreover, EPOABC claims it relied on that Satisfaction to its detriment.
Although motions for leave to amend are “to be liberally granted,” in light of the fact that over five years have elapsed since commencement of the instant foreclosure action, the Court must address the prejudice or surprise that may have resulted from the delay. Plaintiff must come forward with a reasonable excuse for the delay as well as an affidavit of merit substantiating the claims in its proposed amendment. Gallo v. Aiello, 139 A.D.2d at 490, supra. Plaintiff seeks to amend the complaint to assert that the signatures on the Satisfactions are forgeries. With respect to the Satisfaction dated October 17, 2008, plaintiff's attorney alleges that the Satisfaction was “fraudulently procured” since there is “no evidence” that the representative from U.S. Bank had any authority to sign it. However, the affidavit of merit executed by an employee of Bank of America (servicing agent for plaintiff) fails to allege that these signatures were forgeries, that a representative of Bank of America did not record these Satisfactions, or that its representative did not have authority to sign the October 17, 2008 Satisfaction. The only party making such allegations is plaintiff's attorney. The affidavit of merit fails to address either Satisfaction. Moreover, assuming arguendo that plaintiff's representative did not have authority to sign the Satisfaction, this would not amount to fraud against any of the defendants since the fraud being alleged would be by the plaintiff itself. Finally, since both of the Satisfactions were recorded years prior to this motion being made, plaintiff knew or should have known about both Satisfactions. Plaintiff fails to set forth a reasonable excuse for failing to move to amend its complaint earlier. It was only after the property was conveyed several times and after a mortgage was given in reliance upon said Satisfactions that the plaintiff sought to amend the complaint. The Court finds that such late amendment would prejudice the defendants. Moreover, the lack of an affidavit of merit detailing the specific circumstances surrounding the alleged fraud is fatal to the motion. Therefore, that part of plaintiff's motion to amend its complaint to include causes of action alleging fraud is denied. The remainder of the motion seeking to amend the caption to substitute “U.S. Bank, National Association, as Trustee for the Certificateholders of Banc of America Funding Corporation Mortgage Pass–Through Certificates, Series 2007–2” in place of plaintiff and to add Bonny Henderson, Enrique Castillo, Jose Fernandez, and Desiree Mitchell as defendants is granted without opposition. In addition, based upon the stipulation dated October 11, 2013 previously referred to herein, EPOABC, Inc. is also added as a defendant.
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence in admissible form to demonstrate the absence of any material issues of fact. Alvarez v. Prospect Hospital, 68 N.Y.2d 320 (1986). In light of such a showing, if the party opposing the motion comes forward with evidence of issues of fact requiring a trial, the motion will be denied. Rebecchi v. Whitmore, 172 A.D.2d 600 (2d Dept 1991).
New York has a so-called “race-notice” recording statutory scheme. See Real Property Law § 291. In order to “cut off a prior lien, such as a mortgage, the purchaser must have no knowledge of the outstanding lien and win the race to the recording office.” Goldstein v. Gold 106 A.D.2d 100,101affd 66 N.Y.2d 624 (1985). See Novastar Mortg., Inc. v. Mendoza, 26 AD3d 479, 480 (2d Dept 2006) ; Jenkins v. Stephenson, 293 A.D.2d 612, 614 (2d Dept 2002). A Notice of Pendency serves as constructive notice “from the time of filing of the notice only.” CPLR § 6501. By merely filing a Notice of Pendency, the “world [is put] on notice of the plaintiff's potential rights in the action and warning all comers that if they then buy the realty * * * or otherwise rely on defendant's right, they do so subject to whatever the action may establish as the plaintiff's right.” Goldstein v. Gold, 106 A.D.2d at 102, supra. “A person whose conveyance or incumbrance is recorded after the filing of the notice is bound by all proceedings taken in the action after such filing to the same extent as if he were a party.” CPLR § 6501. See Mallick v. Farfan, 66 AD3d 649 (2d Dept 2009) ; Green Point Sav. Bank v. St. Hilaire, 267 A.D.2d 203 lv dismissed in part denied in part 95 N.Y.2d 778 (2000). However, the “filing of a notice of pendency prior to the recordation of an instrument granting a superior title to the subject property is not conclusive of the substantive rights of the parties.” Goldstein v. Gold, 106 A.D.2d at 104, supra. “Generally, a lien affecting real estate, satisfied through mistake, may be restored to its original status and priority as a lien, provided that no one innocently relied upon the discharge and either purchased the property or made a loan thereon in reliance upon the validity of that satisfaction.” DLJ Mortg. Capital, Inc. v. Windsor, 78 AD3d 645, 647 (2d Dept 2010). However, if a “purchaser or encumbrancer knows facts that would excite the suspicion of an ordinarily prudent person' and fails to investigate, the purchaser or encumbrancer will be chargeable with that knowledge which a reasonable inquiry, as suggested by the facts, would have revealed (citations omitted ).” In re Hill, 95 AD3d 889 (2d Dept 2012). See Booth v. Ameriquest Mtge. Co., 63 AD3d 769 (2d Dept 2009) ; Miner v. Edwards, 221 A.D.2d 934 (4th Dept 1995.) “A mortgagee who does not make such inquiry will not be considered a bona fide encumbrancer for value.” In re Hill, 95 AD3d at 890, supra.
In support of its motion for summary judgment, EPOABC submits the affidavit of its president wherein he recites the chain of title and how EPOABC acquired title to the $471,000 mortgage. Moreover, he states that he relied upon the recorded Satisfactions of plaintiff's mortgage and therefore, he is a good faith purchaser for value. EPOABC argues that a purchaser is entitled to rely upon a mortgage satisfaction mistakenly recorded and that on its face, the April 3, 2008 Satisfaction is valid.
Plaintiff argues that the April 3, 2008 Satisfaction was void on its face due to numerous errors. Those errors include reference to the incorrect date of the mortgage, the incorrect mortgage instrument number, and a notary's acknowledgment dated November 21, 2007 even though the Satisfaction is dated April 3, 2008. Plaintiff maintains that since the $471,000 mortgage was not recorded until after the Notice of Pendency was recorded, the interest in the property stemming from the $471,000 mortgage was not created until it was recorded, pursuant to the race-notice recording statutory scheme. Moreover, plaintiff maintains that the Notice of Pendency put the world on notice of its potential rights to this property. Therefore, plaintiff concludes, EPOABC was on notice of the foreclosure proceeding and was not a bona fide purchaser.
Plaintiff recorded two Satisfactions, one before the JNL Funding mortgage was made and one after. The lis pendens filed by plaintiff did not create a lien upon the property owned by defendant but was merely a “notice of some claim made in respect of the property which was the subject of the suit.” John H. Dair Bldg. Const. Co. v. Mayer, 31 A.D.2d 835 (2d Dept 1969). The filing of a Notice of Pendency does not create any rights that do not already exist. See Del Pozo v. Impressive Homes, Inc., 86 AD3d 622 (2d Dept 2011).
Since JNL Funding assigned its interest in the premises to Liquidation Trust who then assigned its interest to EPOABC, the Court must determine the interest of JNL Funding at the time the mortgage was given in order to determine the interest of EPOABC. Plaintiff alleged in the summons and complaint that the recording of the Satisfactions over a year prior to the commencement of this action was a mistake. Therefore, its lien may be “restored to its original status and priority as a lien, provided that no one innocently relied upon the discharge and either purchased the property or made a loan thereon in reliance upon the validity of that satisfaction.” DLJ Mortg. Capital, Inc. v. Windsor, 78 AD3d at 647 supra. At the time JNL Funding gave Cool Water Group a mortgage, the April 3, 2008 Satisfaction had been recorded. In Regions Bank v. Campbell, the Second Department held that “even though the satisfaction was mistakenly recorded by the plaintiff's agent after the filing of the notice of pendency and before the closing, the respondents were entitled to rely on the satisfaction.” Regions Bank v. Campbell, 291 A.D.2d 437 (2d Dept 2002). EPOABC alleges it relied on the validity of the April 3, 2008 Satisfaction which was recorded on April 21, 2008. The Court notes that JNL Funding could not have relied upon the Satisfaction dated October 17, 2008 and recorded on November 17, 2008 because JNL Funding allegedly gave a mortgage to Cool Water Group on June 26, 2008, prior to the recording of the second Satisfaction. At the time JNL Funding gave its mortgage, although the Notice of Pendency had been filed, the April 3, 2008 Satisfaction had already been recorded. Therefore, the Court must look at the April 3, 2008 Satisfaction to see if a question of fact exists whether it would “excite the suspicion of an ordinarily prudent person” and whether JNL Funding failed to investigate the recorded document.
Examination of the April 3, 2008 Satisfaction indicates that it was notarized on November 21, 2007, but is dated April 3, 2008, approximately six months prior. Upon further review, the mortgage being “satisfied” is the mortgage dated October 1, 2006 and recorded December 4, 2006 and not the mortgage from Bank of America to Rubin dated December 4, 2006 and recorded on January 8, 2007. Finally, the Satisfaction states “Book/Reel/Liber:N/A page/folio as instrument No. 2006121500996001” when in fact, the mortgage was recorded under CFRN 2007000012190, although the “Document ID No.” matches the instrument number.Consequently, the Court finds that questions of fact exist regarding the April 3, 2008 Satisfaction whether it would “excite the suspicion of an ordinarily prudent person” and whether JNL Funding was or was not a bona fide encumbrancer for value. The Court need not determine whether the October 17, 2008 Satisfaction was sufficient since it was recorded after JNL Funding gave a mortgage to Cool Water Group.
In view of the foregoing, the Court finds that issues of fact exist requiring a trial. Consequently, EPOABC's motion is denied in its entirety.
The foregoing shall constitute the Decision and Order of the Court.