Opinion
Index No. 65566/2020
05-28-2024
U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust, Plaintiff, v. Tabatha Marraccini, as Executrix of the Estate of Robert J. Luiso, Deceased; Great Notice of Claim Western Trust; New York State Department of to Surplus Monies Taxation and Finance; JP Morgan Chase Bank N.A.; Balboa Capital Corp; Standish Cabot Apartments Inc.; United States of America, Defendants.
Attorney for defendant/surplus money claimant Great Western Trust: Edward Rugino, Esq., Roach & Lin, P.C. Attorney for defendant/surplus money claimant Tabatha Marraccini, as Executrix of the Estate of Robert J Luiso: Mark W. Blanchard, Esq., Blanchard & Wilson, LLP
Unpublished Opinion
Attorney for defendant/surplus money claimant Great Western Trust: Edward Rugino, Esq., Roach & Lin, P.C.
Attorney for defendant/surplus money claimant Tabatha Marraccini, as Executrix of the Estate of Robert J Luiso: Mark W. Blanchard, Esq., Blanchard & Wilson, LLP
HON. WILLIAM J. GIACOMO, J.S.C.
In this underlying foreclosure action, defendant Great Western Trust moves by order to show cause to vacate this Court's decision and order dated March 7, 2024, directing the full amount of the surplus funds to be paid immediately to Tabatha Marraccini, as Executrix of the Estate of Robert J. Luiso (Marraccini).
The relevant facts are as follows: The subject premises was sold at a foreclosure sale on December 5, 2023. The referee's report of sale indicated that the foreclosure sale generated a surplus in the amount of $36,334.38. The report of sale was filed on January 30, 2024 and the surplus funds were submitted to the County of Westchester Department of Finance. On February 26, 2024, Marraccini filed a notice of appearance and proposed order disbursing the surplus funds. Great Western also filed a notice of claim to surplus monies. This Court inadvertently granted Marraccini's proposed order, in error.
Although Marraccini submitted a notice of claim and a proposed order directing release of surplus monies to her, it does not appear that any of the procedures set forth in the Real Property Actions and Proceedings Law (RPAPL) have been followed. See RPAPL §§ 1355 (2), 1361, 1362. For instance, RPAPL § 1355 (2) states:
"A motion to confirm such report of sale shall not be made within three months after the filing of the report and shall in any event be made not later than four months after the filing of such report, except that if there be no surplus moneys arising from the sale of the mortgaged premises under such judgment, an application for confirmation of the report of sale may be made at any time after the report shall have been filed eight days. Where the report of sale shows surplus money the party moving for confirmation of the report of sale shall present with his motion papers a proper voucher for the surplus moneys showing that they have been paid into court, a certificate of the clerk specifying the notices of claim to the surplus moneys, if any, so filed with him, and an affidavit showing any other unsatisfied lien on the property."
RPAPL § 1361 provides the procedures for filing a notice of claim and a surplus money proceeding. In relevant part, a notice of claim may be filed at any time before the confirmation of the report of sale. Further, pursuant to RPAPL § 1361 (3), any holders of recorded liens shall be given notice to attend any hearing on disposition of surplus money. Pursuant to § 1362 (1), "[u]pon confirmation of the report of sale, or upon such proceedings as are provided in section 1361, the court shall order the payment of the surplus proceeds of sale out of court to such persons as are entitled thereto."
Here, there is no indication that the referee's report of sale was ever confirmed. Thus, Marraccini's proposed order was premature, as it was made prior to the expiration of the three-month period after the referee filed his report. This three-month time period allows potential claimants time to file notices of claim to any surplus monies. Furthermore, Marraccini, as the claimant, failed to submit an affidavit showing whether there are any other unsatisfied liens on the property.
The underlying complaint stated that Great Western Trust was named as a party defendant because it held a mortgage lien on the subject premises, which mortgage is subordinate to the lien of plaintiff's mortgage. Great Western Trust may have a potential claim for surplus monies. See e.g. Maspeth Fed. Sav. & Loan Assn. v. O'Connell, 221 A.D.3d 883, 885 (2d Dept 2023) (internal quotation marks and citation omitted) ("Under New York law, the lien of a junior mortgagee who is made a party to a foreclosure action brought by a senior mortgagee, although cut-off and extinguished as to the land, continues as a lien upon the surplus funds arising from the foreclosure").
Case law indicates that a party to the foreclosure action is "not required to file a notice of claim to the surplus money in order to preserve its right to satisfaction of its lien from the surplus." NYCTL 1997-1 Trust v Stell, 184 A.D.3d 9, 15 (2d Dept 2020). In any event, Great Western Trust filed a notice of claim within the three-month time period. There has never been a reporting on the priority of the liens, nor was Great Western Trust put on notice of a hearing on disposition of surplus money.
Accordingly, it is hereby
ORDERED that the decision and order dated March 7, 2024 directing the full amount of the surplus funds to be paid immediately to Tabatha Marraccini, as Executrix of the Estate of Robert J. Luiso, is vacated; and it is further
ORDERED that the parties, including the Referee, are directed to appear on June 18, 2024 at 10:00 a.m. in Courtroom 102, for an in-person hearing to ascertain the priority of the lien holders and proper distribution of the surplus monies. No further motion practice is necessary or will be accepted; and it is further
ORDERED, that pending the hearing and final determination of the surplus monies, defendants, their attorneys and agents, and non-parties Referee Robert D. Ryan, Esq. and the County of Westchester Department of Finance and/or Commissioner of Finance are stayed from disbursing, expending, spending or distributing in any manner any part of the surplus funds from the foreclosure sale held on the fifth day of December 2023 in this matter; and it is further
ORDERED that moving defendant shall serve of a copy of this Order, together with the papers upon which it is granted, upon each defendant who has appeared in this action and Referee Robert D. Ryan, Esq. pursuant to CPLR Rule 2103(b), (c), and upon non-party County of Westchester Department of Finance in the same manner as prescribed for service of a summons, on or before May 31, 2024.
The foregoing constitutes the decision and order of this Court.