Opinion
26827/08
06-06-2012
Vladimir Sudit, Plaintiff/Judgment Creditor, v. Moses Roth, Defendant/Judgment Debtor. Vladimir Sudit, d/b/a VS International, Plaintiff, v. Sara Roth a/k/a Chaya Roth, Moshe Roth, Congregation Minchas Yosef, Congregation Mincahs Yosef D'Valirsh and Rabbi Mendel Heimlich, Exclusive Door Co., Inc., New York State Department of Taxation and Finance, New York City Environmental Control Board, Defendants.
Plaintiff Attorney Index No. 26827/08: Joseph Haspel, Esq. Defendant Attorney: James Klatsky, Esq. Plaintiff Attorney Index # 34598/08: Joseph Haspel, Esq. Defendant Attorney: Michael Colihan, Esq.
Plaintiff Attorney Index No. 26827/08: Joseph Haspel, Esq.
Defendant Attorney: James Klatsky, Esq.
Plaintiff Attorney Index # 34598/08: Joseph Haspel, Esq.
Defendant Attorney: Michael Colihan, Esq.
David I. Schmidt, J.
Upon the foregoing papers, in the confession of judgment proceeding (Index No. 26827/08), plaintiff/judgment creditor Vladimir Sudit moves for an order: (1) pursuant to CPLR 5251, finding Roth in contempt of court for failing and/or refusing to obey the subpoenas duly served upon him; (2) directing Roth to obey the subpoenas forthwith; (3) imposing sanctions against Roth for obstruction of Sudit's attempts to enforce the judgment; and (4) directing Roth to pay Sudit his costs and attorneys' fees in connection with the preparation, filing and arguing the instant motion. Defendant/Judgment Debtor Moses Roth cross-moves in the enforcement proceeding for an order staying enforcement of Sudit's $1,375,000 judgment against Roth.
In the foreclosure action (Index No. 34598/08), Sudit moves for an order confirming the referee's report and granting a judgment of foreclosure with respect to Mortgage 1.
Mortgage 1 is more fully described below.
Roth's cross-motion in the enforcement proceeding is granted to the extent that Sudit is stayed from enforcing and/or executing his $1,375,000 judgment against Roth pending further order of the court. Sudit's motion in the enforcement proceeding is denied without prejudice to moving for relief in the event that the stay is lifted.
Upon the court's motion in the foreclosure action, Sudit is directed to join FCV Consultants, Inc., (FCV) and Boris Yelisovetsky as parties to this action by amending the complaint and serving it upon FCV and Yelisovetsky within 60 days of this order with notice of entry unless Sudit can demonstrate that FCV and Yelisovetsky have assigned their interests in the notes and mortgages at issue to Sudit or otherwise show why they are not necessary parties. Sudit's motion in the foreclosure action is granted to the extent that the referee's report is confirmed. The portion of Sudit's motion in the foreclosure action that seeks a judgment of foreclosure is denied with leave renew after FCV and Ylesovetsky have been joined as parties to the action or Sudit has demonstrated that FCV and Yelisovetsky are not necessary parties.
Sudit filed the confession of judgment at issue here based on Roth's failure to pay $1,375,000 to Sudit by June 29, 2008 as required by a stipulation and order of settlement (stipulation) dated June 29, 2007. The failure to timely pay this $1,375,000 as required by the stipulation is the default that also underlies the instant mortgage foreclosure action. This stipulation resolved three actions (two in Supreme Court, Kings County, under Index Numbers 39597/04 and 17323/06 and one in Supreme Court, Sullivan County) that involved defaults by Roth and other parties with respect to payments required by various loan obligations. Although defaults with respect to several different loans were addressed in the stipulation, the loan obligations relevant to this confession of judgment and mortgage foreclosure action originally involved three separate notes and mortgages in the amounts of $1,500,000 (Mortgage 1), $216,559.50 (Mortgage 2), and $311,559.50 (Mortgage 3) that originally covered four parcels located in Brooklyn, and that were "spread" over a fifth parcel (146 Rutledge Street, Brooklyn, NY) by way of three separate "spreader agreements," each dated November 6, 2002. Pursuant to an agreement entered into in October 2003, Roth acknowledged the debts owed under the notes and mortgages and agreed to payment terms to satisfy the loans secured by the three mortgages.
Of note, the settlement agreement requires payment of the $1,375,000 to the "Lender," which it defines as a collective reference to "Sudit and FCV [an entity apparently controlled by Sudit], as well as Julia Sherman and Rimma Sherman."
The original mortgagees with respect to this $1,500,000 mortgage were FCV, Sudit, Julia Sherman and Rimma Sherman. Julia and Rimma Sherman assigned their interest in this note and mortgage to Sudit and Boris Yelisovetsky on April 8, 2002.
The original mortgagee with respect to this $216,559.50 mortgage was 405 Bedford Realty, which assigned its interest in the property to FCV in March 1999.
FCV was the original mortgagee with respect to this $311,559.50 mortgage.
Upon Roth and other parties defaults on these three loans (as spread by the spreader agreement and modified by the October Agreement) and other loans not before the court, actions were commenced that led to the above noted stipulation. Although the stipulation reduced the total amount owed under the three separate notes to $1,375,000, it also expressly provided that, in the event of default, the obligations and mortgages would remain independent and several obligations, that Sudit could enter judgment based on the confession of judgment, and that leave was granted to Sudit "to commence foreclosure proceedings on any obligation in accordance with Election of remedies provisions of the RPAPL." It is undisputed that Roth failed to pay the $1,375,000 due under the stipulation by June 29, 2008. Based on this default, Sudit, on September 24, 2008, filed the confession of judgment with the County Clerk, Kings County (Index No. 26827/08), and, on December 30, 2008, Sudit commenced the mortgage foreclosure action in this court (Index No. 34598/08).
In the foreclosure complaint, Sudit collectively refers to the three mortgages noted above, as spread onto 146 Rutledge Street by the Spreader agreements, as the "Rutledge Mortgage" (¶ 17 complaint, Foreclosure Action), and alleges that the total due and owing under the three mortgages is the stipulated amount of $1,375,000, plus interest (¶ 30 complaint, Foreclosure Action). Although the complaint identifies Sudit as the holder of the above noted mortgages, the complaint does not address whether FCV and Yelisovetsky, assignees of interests in the notes and mortgages and/or original mortgagees, still retained an interest in the notes and mortgages. Roth appeared in the Foreclosure Action by way of an answer dated March 25, 2009. The court thereafter granted Sudit's summary judgment motion, and signed an order of reference appointing Jack Segal, Esq., as a referee to hear and report on the amount due on the "Note and Mortgage." In his referee's report, Segal considered the amount due under each mortgage to be its pro rata percentage of the $1,375,000 total for all three mortgages.
In this regard, Segal identified the $1,500,000 mortgage as Mortgage 1, found it represented 73.96 percent of the $1,375,000 total, and thus calculated the interest on a total due of $1,016,950 for Mortgage 1. With respect to the $216,559.50 mortgage (Mortgage 2), Segal found it represented 10.68 of the $1,375,000 total, and thus calculated the interest due on a total of $146,850. Finally, with respect to the $311,559.50 mortgage (Mortgage 3), Segal found it represented 15.36 percent of the $1,375,000 total, and thus calculated the interest due on a total of $211,200.
In the foreclosure action, Sudit now moves for an order confirming the referee's report, and for an order granting a judgment of foreclosure and sale. Sudit, however, has specifically requested that the judgement of foreclosure and sale be limited to Mortgage 1, the mortgage that initially secured the loan of $1,500,000. With respect to the confession of judgment, Sudit served Roth with a subpoena pursuant to CPLR 5223 requiring Roth to appear for a deposition. Counsel and Roth were not able to agree to the time and terms of Roth's testimony, and Sudit thus made the instant motion requesting that Roth be held in contempt, and/or directed to testify. Roth has since cross-moved to stay the enforcement proceedings. Although the proceedings with respect to the confession of judgment and the foreclosure action have not been formally consolidated, they have both been referred to this court for determination. Given the overlapping factual and legal arguments raised by the motion and cross-motion with respect to the confession of judgment and the motion in foreclosure action, this court has addressed them in a single decision and order.
SUDIT'S STANDING - POST-COMMENCEMENT ASSIGNMENT
In moving to stay the enforcement of the judgment and in opposing Sudit's motion in the foreclosure action, Roth contends that Sudit no longer has standing to enforce the judgment and his right to foreclose on the mortgages because Sudit assigned at least one of the notes and mortgages to a third party. Although there is no assignment in the record before the court, Sudit's counsel essentially concedes that Sudit assigned one or two of the notes and mortgages to a third-party. In addition, there is no dispute that this assignment occurred after Sudit filed the confession of judgment and after he commenced the foreclosure action.
Since the assignment occurred after the foreclosure action was commenced, the foreclosure action can be continued by Sudit and there is no need to substitute the assignee as the plaintiff in the action (see CitiMortgage, Inc. v Rosenthal, 88 AD3d 759, 761 [2011]; Buywise Holding, LLC, v Harris, 31 AD3d 681, 683 [2006]; Betts v De Selding, 81 App Div 161, 162 [1903][where an assignment is made after the commencement of an action, the assignor can continue the action as a trustee for the assignee]). The assignment thus does not effect Sudit's standing to continue the foreclosure action through judgment (see Buywise Holding, LLC, 31 AD3d at 683; Bova v Vinciguerra, 139 AD2d 797, 799 [1988]).
With respect to the confession of judgment, the assignment of the note and mortgage must also be deemed to include an assignment of any judgment that arises from the note and mortgage (see Reichert v Stilwell, 57 App Div 480, 482 [1901], affd 172 NY 83 [1902]; see also Freeman v Auld, 44 NY 50, 57 [1870]; Gasco Corp. & Gordian Group v Tosco Props., 236 AD2d 510, 512 [1997]). The confession of judgment was entered only because Roth failed to pay the amount due on the notes secured by the mortgages as reduced by the Stipulation. As such, Sudit's assignment of one or more of the notes and mortgages necessarily included an assignment of at least a portion of the amount due under the confession of judgment.
As noted above, the assignment undisputedly occurred after Sudit entered the confession of judgment. Thus, there is no requirement that the caption of the judgment be amended to reflect the assignment (see Levine v Simon, 212 NYS2d 888, 890 [Sup Ct, Nassau County 1961]; see also CitiMortgage, Inc., 88 AD3d at 761; Betts, 81 AD at 162). However, the assignment might preclude or limit Sudit's right to pursue enforcement of the judgment as a judgment creditor, since Sudit is no longer deemed a judgment creditor to the extent the assignment reduces his interest in the judgment (see Kemp v Gartenberg, 93 Misc 313, 314 [Sup Ct, Bronx County 1916]; see also Catrakis v Jaris, 280 App Div 414, 417-419 [1952]). On the other hand, Roth has conceded that Sudit's counsel also represents the assignee of the note and mortgage, and, as such, Sudit's counsel may be authorized to enforce the judgment on the assignee's behalf (see Maigille v Leonard, 102 App Div 367 [1905], affd 181 NY 558 [1905]; cf. Kemp, 93 Misc at 314-315). Accordingly, while Roth has demonstrated that the enforcement proceedings should be temporarily stayed in order to allow Sudit to clarify his status as a judgment creditor and/or to allow Sudit's counsel to address whether he has authority to enforce the judgment on behalf of the assignee, Roth has failed to demonstrate that the judgment of confession must be permanently stayed because of the assignment.
NECESSARY PARTIES
With respect to the foreclosure action, Roth also argues that Sudit does not have standing because the complaint and the supporting papers show that FCV, as an assignee and original mortgage holder, and Yelisovetsky, as an assignee, have an interest in the mortgages at issue. Roth, however, has waived his standing argument by failing to raise it in opposition to Sudit's motion for summary judgment.
Nevertheless, since Sudit's own papers show FCV and Yelisovetsky to be co-mortgagees, FCV and Yelisovesky are necessary parties to this action (see Rosen v 124 State St. Corp., 141 AD2d 812 [1988]; 418 Trading Corp. v Moon Realty Corp., 285 App Div 444, 445 [1955]). Although Roth did not specifically raise this argument regarding necessary parties, this court can raise it at this time since "the absence of a necessary party may be raised at any stage of the proceedings, by any party or by the court on its own motion" (Matter of Estate of Prospect v New York State Teachers' Retirement Sys., 13 AD3d 699, 700 [2004]; see also Lezette v Board of Educ., Hudson County School Dist., 35 NY2d 272, 282 [1974]; Rumman v Reade, 64 AD3d 715 [2009]). The failure to join FCV and Yelisovesky does not require dismissal of the complaint, however, as the proper remedy, at least initially, is for the court to direct the joinder of the necessary parties (see Hartford/North Bailey Homeowners Assn. v Zoning Bd. of Appeals of Town of Amherst, 63 AD3d 1721, 1723 [2009], lv denied 66 AD3d 1504 [2009], lv dismissed 13 NY3d 901 [2009]; The Dime Sav. Bank of NY, FSB, v Johneas, 172 AD2d 1082, 1083 [1991]; see also Windy Ridge Farm v Assessor of Town of Shandaken, 11 NY3d 725, 727 [2008]). Since Sudit did not have an opportunity to specifically address the necessary party argument, the court will allow him an opportunity to demonstrate that FCV and Yelisvosky are not necessary parties, such as through proof that they have assigned their interests in the mortgages to Sudit.
Of note, in this respect, Sudit appears to have signed many of the documents contained in the record on FCV's behalf and would thus appear to be a principal or officer of FCV.
ELECTION OF REMEDIES
Roth also contends that the confession of judgment cannot be enforced because of the election of remedies requirements of RPAPL 1301(3). Section 1301 is intended to "avoid multiple suits to recover the same mortgage debt and confine the proceedings to collect the mortgage debt to one court and one action" (Valley Savings Bank v Ross, 228 AD2d 666, 667 [1996]) as well as preventing double recoveries (Central Hanover Bank & Trust Co. v Rosylyn Estates, Inc., 266 App Div 244, 249-250 [1943], affd 293 NY 680 [1944]). Sudit initially argues that section 1301 does not bar him from enforcing the confession of judgment and proceeding with his foreclosure action because the court granted him permission to pursue both remedies in the 2007 so-ordered stipulation and because the stipulation bars Roth from raising any defenses or from seeking to stay the entry of judgment.
RPAPL 1301 provides:
1. Where final judgment for the plaintiff has been rendered in an action to recover any part of the mortgage debt, an action shall not be commenced or maintained to foreclose the mortgage, unless an execution against the property of the defendant has been issued upon the judgment to the sheriff of the county where he resides, if he resides within the state, or if he resides without the state, to the sheriff of the county where the judgment-roll is filed; and has been returned wholly or partly unsatisfied.
2. The complaint shall state whether any other action has been brought to recover any part of the mortgage debt, and, if so, whether any part has been collected.
3. While the action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.
Contrary to Sudit's contention, however, the stipulation, while it granted Sudit permission to pursue both remedies, did not grant him permission to pursue both remedies simultaneously. In this regard, the final sentence before the court's signature provides that "SO ORDERED, including leave is granted to Lender to commence foreclosure proceedings on any obligation in accordance with Election of remedies provisions of The RPAPL in the event of a default on an provisions contained herein." The plain and unambiguous meaning of this provision is that any remedy pursued would be subject to - rather than excused from - RPAPL 1301's election of remedies requirements.
The stipulation also contains a provision in which Roth waived his right to assert defenses to entry of judgment and precluding him from seeking to stay entry of judgment (stipulation at ¶ 27). Roth's cross-motion is not barred by this provision as he is not seeking to stay entry of judgment, but is seeking to stay the enforcement proceeding. In addition, Roth's current claim is not barred by this waiver of defenses since the election of remedy provision is not a defense, but, as noted above, a statutory means of preventing double litigation and a double recovery.
Sudit also argues that RPAPL 1301(3) does not apply to the confession of judgment because the requested post-judgment discovery with respect to the confession of judgment is not an action. Sudit's argument would have more force if the court read section 1301(3) on its own without considering it in the context of the entire election of remedies framework. However, when RPAPL 1301(3) is read in conjunction with 1301(1), it is evident that the concern with respect to multiple proceedings is not just limited to recovery in actions, but also encompasses the enforcement of judgments, which include confessions of judgment (see Sabbatini v Galati, 14 AD3d 547, 547-548 [2005]; but see CDR Creances S.A. v Euro-American Lodging Corp., 40 AD3d 421, 422-423 [2007]).
Indeed, if Roth had timely raised the election of remedies argument in the context of the mortgage foreclosure action, RPAPL 1301(1) would have required dismissal of the foreclosure complaint since Sudit has submitted no evidence that he has attempted to execute upon the judgment (see Sabbatini, 14 AD3d at 547-548). Roth, however, did not raise the issue in his answer, in opposition to Sudit's motion for summary judgment, or even in opposition to Sudit's current motion for a judgment of foreclosure. While RPAPL 1301(1) bars the commencement or maintenance of a foreclosure action after a judgment has been maintained on the note unless execution on the judgment has been returned unsatisfied, this court finds that section 1301(1)'s bar does not affect the subject matter jurisdiction of the court to entertain a mortgage foreclosure action (see Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 243-244 [2007]; cf. Brandenberg v Tirino, 34 AD2d 658, 658-659 [1970], after remand 37 AD2d 713, 714 [1971]). Since section 1301(1) bar is not jurisdictional, it can be waived, cannot be raised at any time, and does not warrant action by the court sua sponte (see Wells Fargo Bank Minn., N.A., 42 AD3d at 243).
Sudit's conclusory assertions fail to demonstrate that the $1,375,000 sought in the confession of judgment and relates to loan obligations separate from the $1,375,000 sought in the mortgage foreclosure complaint (cf. Brandenberg v Tirino, 37 AD2d 713, 714 1971]).
While Roth may have waived the election of remedies argument in the context of the mortgage foreclosure action, he has not done so in the confession of judgment proceeding. In this regard, Roth's current cross-motion was made within a reasonable time after Sudit first sought discovery with respect to the confession of judgment. Under of the facts here, the court finds that the policies of avoiding duplicate litigation and double recovery underlying RPAPL 1301 are best served by staying enforcement of the confession of judgment until after any foreclosure sale in the foreclosure action (see Anron Air Sys. v Columbia Sussex Corp., 202 AD2d 460, 461-462 [1994]). Following the foreclosure sale, Sudit may seek an order lifting the stay, and allowing him to enforce the confession of judgment to the extent that he does not obtain a full recovery as a result of the sale.
Even if section 1301(3) is inapplicable to the confession of judgment, New York's policy against double recovery warrants issuance of the stay pending a sale in the foreclosure proceeding (see Simon Noma Elec. Corp., 293 NY 171, 177 [1943]; Singlton Mgt. v Compere, 243 AD2d 213, 218 [1998]; Simon v Royal Bus. Fund Corp., 34 AD2d 758 [1970], affd 29 NY2d 758 [1971]).
TRANSFER TAX UNDER TAX LAW § 255
Roth also contends that the foreclosure action is barred by Tax Law § 258 (requiring that no mortgage may be admitted into evidence where the transfer taxes required to be paid by the Tax Law have not been paid) based on Sudit's failure to pay a transfer tax at the time the spreader were recorded as required by Tax Law § 255 (requiring that a transfer tax be paid under certain circumstances upon the recording of an supplemental instrument or mortgage, including a spreader agreement). Initially, it would appear that Roth has waived any argument based on the failure to pay the tax by failing to raise it in his answer or in opposition to the summary judgment motion (see Home Sav. of Am. v Weingrad, 248 AD2d 253, 254 [1998]; see also Cooper v Gossett, 263 NY 491, 494 [1934]; Matter of Olson's Estate, 119 NYS2d 207, 210 [Sup Ct Queens County 1952]). In any event, Sudit has presented the affidavits submitted at the time the spreader agreements were recorded in which the attorney then representing Sudit stated that the recording of the agreement did not require payment of a transfer tax because the spreader agreement did not involve any new financing (see Home Sav. of Am., 248 AD2d at 254). Roth's conclusory assertions to the contrary fail to demonstrate that the tax should have been paid.
LIMITING FORECLOSURE TO MORTGAGE 1
Finally, Roth objects to Sudit's request that the judgment of foreclosure be limited to Mortgage 1, and that the action as it relates to Mortgage 2 and Mortgage 3 be withdrawn "without prejudice but subject to this foreclosure proceeding as a subordinate lien to Mortgage 1." Contrary to Roth's assertions, although the stipulation and foreclosure complaint in places referred to the three mortgages as a single mortgage for ease of reference, these papers clearly indicate that three mortgages were involved. As such, there has been no consolidation or merger of the mortgages. In addition, Sudit undoubtedly had the discretion to choose which of the three mortgages to enforce in a foreclosure action (see Seawood Invs. v Goldstein, 51 AD2d 592 [1976]). Having commenced the action with respect to all three mortgages, and having obtained summary judgment with respect to all three mortgages, however, it would appear that Sudit's current request to withdraw the claims relating to Mortgage 2 and Mortgage 3 is governed by CPLR 3217(b) (see 1701 Rest. on Second, Inc. v Armato Props., Inc., 83 AD3d 526, 526-527 [2011]; Kaplan v Villege of Ossining, 35 AD3d 816, 817 [2006]). Given that the parties' submissions do not address the propriety of the withdrawal of the mortgage claims under that section, and given that the court is denying Sudit's motion with leave to resubmit, it will address the propriety of Sudit's request to withdraw the claims relating to Mortgage 2 and Mortgage 3 at the time Sudit's motion is resubmitted.
This constitutes the decision and order of the court.
ENTER,
J. S. C.