Opinion
No. 3635/2010.
2012-08-20
IRM REALTY GROUP LLC, Plaintiff, v. 124–15 JAMAICA AVE. REALTY CORP., Peoples Bank, New York City Environmental Control Board, New York State Department of Taxation and Finance, Herman Ovadia, Robbin Thomas, Melissa Merschman, Alma Ramos, Victor Pacheco, Barbara Stevenson, Defendants.
ROBERT J. McDONALD, J.
Plaintiff's predecessor in interest commenced this action to foreclose a consolidated mortgage on the premises known as 124–11, 124–13 and 124–15 Jamaica Avenue, Jamaica, New York. In the complaint, it alleged, among other things, that defendant 70124–15 Jamaica Ave. Realty Corp. entered into an agreement, consolidating, modifying and extending GreenPoint mortgages recorded in the office of the Register of Queens County, in Reel 5330, at page 1977 (GreenPoint mortgage No.1) and Reel 6402, at page 1508 (GreenPoint mortgage # 2), as previously consolidated, with the GreenPoint mortgage recorded as CRFN 2004000390377 (GreenPoint mortgage # 3), into a single combined, coordinated and consolidated first mortgage lien in the principal amount of $780,000.00. Defendants defaulted in answering the complaint, and a judgment of foreclosure and sale dated May 25, 2011 was entered against them. At a public auction conducted on September 16, 2011, nonparty WP Plaza, successfully bid the amount of $1,000,000.00 for the property, and tendered a 10% deposit to the Referee, and executed the terms of sale and a memorandum of sale.
It is undisputed that following the sale, plaintiff and WP Plaza worked to clear title, but an issue arose regarding the effect and continued viability of an intervening mortgage dated March 10, 2000 and recorded on January 26, 2001, which was assigned by Sterling Mortgage Investments, L.P. to People's Bank pursuant to an assignment dated March 10, 2000 and recorded on January 26, 2001 (the People's Bank mortgage). The People's Bank mortgage appears of record between the GreenPoint mortgage # 1 and GreenPoint mortgage # 2. In the papers submitted in support of the order show cause, WP Plaza asserted, among other things, that notwithstanding the judgment of foreclosure and sale named People's Bank as a defendant in the caption and purportedly foreclosed the interest of People's Bank in the property, the viability of the People's Bank mortgage remained in doubt vis-a-vis the GreenPoint mortgages # 2 and # 3 since there was no evidence the People's Bank mortgage had been satisfied or subordinated to the GreenPoint mortgages # 2 and # 3. WP Plaza sought to be excused from completing its purchase based upon such title defect, and the purported presence of a dangerous tenant or squatter at the premises on September 27, 2011.
Plaintiff, in opposition to the motion, and in support of its cross motion, produced a satisfaction from the People's Bank, indicating the People's Bank mortgage was discharged as of March 30, 2012 (following the date of the order to show cause). Plaintiff, however, still seeks to hold WP Plaza in default for failure to complete its purchase on December 13, 2011, the scheduled extended closing date. It argues that WP Plaza was not entitled to rely upon its claim the property was sold subject to an open mortgage interest of People's Bank to excuse its failure to complete its purchase. Plaintiff cites to the provision in the terms of sale which states the property was being sold subject to the “prior lien(s) of record” ( see paragraph no. 9[f] ).
The Referee has not appeared in relation to the motion or cross motion.
“As a general rule, a purchaser at a foreclosure sale is entitled to a good, marketable title (Heller v. Cohen, 154 N.Y. 299, 306 [1897] )” (Jorgensen v. Endicott Trust Co., 100 A.D.2d 647 [1984] ). A purchaser at a foreclosure sale may not be compelled to accept a defective or doubtful title, unless the bid was offered with notice of the defect ( see March v. Marasco, 165 App.Div. 348 [1914];Foy v. McGarry, 160 App.Div. 329 [1913] ), nor may it be compelled to complete the purchase and pay the balance of the purchase money until the defect is obviated ( see Downes v. Wenninger, 207 N.Y. 286 [1913];Fryer v. Rockefeller, 63 N.Y. 268 [1875];Equitable Life Assur. Socy. of U.S. v. Hochstein, 45 Misc.2d 450 [1964] ).
The judgment of foreclosure and sale and the terms of sale herein indicate that property was to be sold subject to “prior, liens of record if any,....” People's Bank, however, was named as a party defendant in the action as a subordinate mortgage holder of the GreenPoint mortgage # 1, and was not joined as a party with a paramount interest to the GreenPoint mortgages # 2 and # 3 ( see complaint and exhibits thereto on file with the County Clerk). Therefore, a reasonable doubt existed as to whether the mortgage interest of People's Bank, to the extent it had record priority over the GreenPoint mortgages # 2 and # 3, survived the judgment ( see Jorgensen v. Endicott Trust Co., 100 A.D.2d 647 [1984],supra; see generally F.D.I.C. v. Five Star Management, Inc ., 258 A.D.2d 15 [1999];Dime Sav. Bank of New York, F.S.B. v. Levy, 161 Misc.2d 480 [1994] ). Plaintiff also has failed to show it eliminated such doubt by providing proof of satisfaction of the People's Bank mortgage to WP Plaza prior to the scheduled extended closing time. In addition, the notice of sale did not state that the title company would indemnify a purchaser against any risk with respect to the People's Bank mortgage interest ( cf. Bankers Trust Co. of California, NA v. Wen Zhou, 57 AD3d 294 [2008] ).
Generally, parties with senior mortgage interests are not necessary party defendants to foreclosure actions (RPAPL 1311). Nevertheless, they may be a proper party if priority is sought to be challenged ( see McDermott v. Lawyers' Mtge. Co., 232 N.Y. 336 [1922];Sohmer v. Gedney Hills, Inc., 8 A.D.2d 959 [1959). Plaintiff makes no claim that it named People's Bank as a party defendant for this purpose.
Under such circumstances, WP Plaza was not in default based upon its failure to complete its purchase on the scheduled extended closing date ( see Downes v. Wenninger, 207 N.Y. 286 [1913];Fryer v. Rockefeller, 63 N.Y. 268 [1875],supra; Equitable Life Assur. Socy. of U.S. v. Hochstein, 45 Misc.2d 450 [1964],supra; see also Ilemar Corp. v. Krochmal, 44 N.Y.2d 702, 703–704 [1978];Anderson v. Meador, 56 AD3d 1030 [2008];R.C.P.S. Assoc. v. Karam Devs., 258 A.D.2d 510, 511 [1999] ).
To the extent the satisfaction was not obtained from People's Bank until after the order to show cause was obtained by WP Plaza, however, is of no moment. The terms of sale designates time to be of the essence as to the extended closing date as against the purchaser only, and thus, the WP Plaza remains obligated to tender performance for a reasonable period during which title defects may be cured. The satisfaction from People's Bank, which eliminated the doubt regarding the title, was obtained within a reasonable time after the extended closing date, and the delay does not provide an equitable basis to set aside the subject sale and direct the Referee to return the deposit to WP Plaza ( see Bank of New York v. Segui, 91 AD3d 689 [2012];Manufacturers & Traders Trust Co. v. Foy, 79 AD3d 825 [2010] ). Moreover, WP Plaza's claim it may now be overpaying for the property also does not provide an equitable basis to void the sale ( see Guardian Loan Co. v. Early, 47 N.Y.2d 515, 521 [1979];Manufacturers & Traders Trust Co. v. Foy, 79 AD3d 825 [2010],supra ).
That the premises may be now occupied by tenants or squatters, including an alleged unidentified person who purportedly brandished a knife and made threats to representatives of WP Plaza on September 27, 2011, does not constitute a basis for relieving WP Plaza of its bid. WP Plaza has failed to present any proof as to the status of this alleged person. Nor has WP Plaza demonstrated that there is any person in occupancy or possession at the premises who was a necessary party who was not joined in the action as a defendant and therefore was improperly omitted from the judgment of foreclosure and sale ( see Jorgensen v. Endicott Trust Co., 100 A.D.2d 647 [1984],supra ).
To the extent WP Plaza argues the terms of sale include terms which are not in conformity with the judgment and applicable statutes, it improperly raises such argument for the first time in its reply papers ( see generally Dannasch v. Bifulco, 184 A.D.2d 415 [1992] ). However, because WP Plaza, in making such argument, by implication, criticizes the conduct of the Referee appointed by the court to conduct the sale, the court shall address the argument. The notice of sale provided that the premises would be sold pursuant to the filed judgment and the terms of sale, and included the name and telephone number of the Referee. WP Plaza makes no claim that a copy of the terms of sale was unavailable prior to the sale, and furthermore, WP Plaza expressly agreed to the terms of the sale by executing them and the memorandum of sale ( see Fried v. Granite Management Corp., 261 A.D.2d 878 [1999];March v. Marasco, 165 App.Div. 348, 350 [1914],supra ). The court finds that the amount of $1250.00 in attorneys' fees, set forth therein, to be paid to plaintiff's counsel in relation to the closing, is a reasonable amount.
Accordingly, the motion by WP Plaza is denied, and the cross motion by plaintiff is granted only to the extent of directing WP Plaza to complete its purchase of the property in question in accordance with its bid and the terms of the foreclosure sale upon the date to be fixed by the Referee.