Opinion
17-607541
04-05-2019
TRILOK ENTERPRISE LLC. and Adipiscor Equity Inc, Petitioners, v. YOUR MARKETING CORP., Respondent.
PETITIONERS' ATTORNEY: ROBERT PRIGNOLI, 1491 RICHMOND AVENUE, STATEN ISLAND, NY 10714 RESPONDENT'S ATTORNEY: VERNER SIMON, P.C., 110 WALL STREET, 11TH FLOOR, NEW YORK, NY 10005
PETITIONERS' ATTORNEY: ROBERT PRIGNOLI, 1491 RICHMOND AVENUE, STATEN ISLAND, NY 10714
RESPONDENT'S ATTORNEY: VERNER SIMON, P.C., 110 WALL STREET, 11TH FLOOR, NEW YORK, NY 10005
Sanford Neil Berland, J.
Upon the reading and filing of the following papers in this matter: (1) Order to Show Cause, by the respondent, filed January 22, 2018, and supporting papers; (2) Affirmation in Opposition, by the petitioners, filed February 26, 2018, and supporting papers; (3) Affirmation in Reply, by the respondent, filed February 27, 2018, and supporting papers; (4) Affirmation in Sur-Reply, made by the petitioners, filed March 8, 2018, and supporting papers; it is
ORDERED that Mot. Seq. # 002, made by the respondent, for an order pursuant to CPLR 5015 vacating the court's order dated June 26, 2017 (Asher, J. (ret.) ), is denied, without prejudice to such other claims, if any, as the parties may have against one another, or others, at law on account of the October 19, 2016 agreement or otherwise; and it is further
ORDERED that this matter shall be marked "disposed."
Petitioners Trilok Enterprise LLC ("Trilok") and Adipiscor Equity Inc. ("AEI") brought this proceeding to annul and set aside a deed, dated October 19, 2016 and recorded by the Suffolk County Clerk on November 21, 2016 at Liber D00012889, that purported to convey the premises known as 10 Schoolhouse Way, Dix Hills, New York ("the premises") from AEI, as grantor, to Your Marketing Corp ("YMC") and AEI, as grantees. By order dated, June 26, 2017, the court (Asher, J. (ret.) ) granted the petition as unopposed and nullified and vacated the deed. Respondent YMC now moves to vacate the court's June 26, 2017 order on the grounds that YMC's default in answering the petition was excusable, that it has a meritorious defense, that the prior order was obtained through fraud upon the court and that jurisdiction was never properly obtained over it.
Wading through the parties' irreconcilably divergent and troublingly inconsistent characterizations of the transactions that brought them to this juncture, it appears to be undisputed that on September 27, 2016, US Bank National Association, as trustee for RMAC Trust Series 2013-1T ("US Bank"), executed a deed conveying the Schoolhouse Way premises to AEI ("Deed 1" or "US Bank-AEI Deed" ). According to the petition, US Bank was disposing of the premises in a short sale and AEI, which "could not secure the monies necessary to complete the purchase of the Premises," was acting merely as nominee for Trilock in the transaction. However, because US Bank would not consent to AEI's assigning the short-sale contract directly to Trilock, AEI took title to the premises, but solely as nominee for Trilok, the beneficial owner, which intended to improve the premises and then resell it. Also according to petitioners, at the closing of the sale, which took place on October 19, 2016, Trilok paid the entire $ 551,000 purchase price for the premises, US Bank delivered the September 27, 2016 deed to AEI and, "[s]imultaneously a deed to the Premises was given to ... Trilok from [AEI]" ("Deed 2" or "AEI-Trilok Deed" ). On the same day that a deed to the premises was given to Trilok by AEI, AEI, by its President, Jean Millien — apparently the same individual who executed Deed 2 for AEI — also executed both a separate deed conveying the premises to itself and YMC and an agreement with YMC, which recited, inter alia, that AEI and YMC were to be the owners of the Schoolhouse Drive premises, with a first mortgage in the amount of $ 400,000 to be "placed against the property in favor of Dr. Shaw [sic] or an entity owned by Dr. Shaw [sic] ," and provided, among other things, that YMC would "give AEI the amount of $ 70,000 at the time that YMC is placed on the deed at the time of closing, with AEI to bear all closing costs," and that YMC would execute the "deed and other documents necessary to transfer the premises to a new owner upon and in consideration of" YMC receiving "the amount of $ 100,000 from YMC [sic] as repayment of the above mentioned $ 70,000" — "the $ 100,000" to be inclusive of "all interest and costs associated with the loan" — and, in addition, "ten (10%) of any and all profit that John Millien is entitled to receive at the time of resale of Schoolhouse[.]" This "consideration" was to be "paid within seven months and fifteen days after closing and purchase of Schoolhouse," failing which the $ 100,000 would "start collecting interest at the rate of ten (10%) per annum[.]"
The September 27, 2016 deed conveying the premises from US Bank to AEI was recorded on November 29, 2016.
The deed from AEI to Trilok, which is dated October 19, 2016 but was not recorded until March 31, 2017, includes the recitation that it is given "in consideration of $ 551,000.00 paid by Trilok Enterprises LLC to U.S. Bank National Association."
The deed from AEI to AEI and YMC was recorded on November 21, 2016 ("Deed 3" or "AEI-YMC Deed").
"Darshan T. Shah," who identified himself as the President of Trilok, was one of the individuals who verified the petition in this proceeding.
In the same provision of the agreement between YMC and AEI, Paragraph 2(b), the parties "confirmed that John Millen will be receiving 50% of any and all profit from the resale of Schoolhouse. The other 50% profit will be received by Dr. Shaw [sic] or an entity owned by Dr. Shaw [sic]."
In support of its current motion, YMC contends that Deed 3 was granted to it to collateralize "the Petitioners'" promise to pay $ 100,000 to [YMC] upon the sale or transfer" of the Schoolhouse Drive property. Dennis St. John, who describes himself as an "authorized officer" of YMC, avers, in his initial affidavit in support of YMC's motion, that "[i]n the interim [sic], the Petitioners were in a partnership to locate and purchase undervalued [sic] for rehabilitation and resale and the Premises ... was one such property against which [YMC] loaned the Petitioner funds" (corrected Affidavit of Dennis St. John sworn to January 9, 2018, Paragraph 5, emphasis supplied ("corrected January 9, 2018 St. John Aff.") ), that YMC "was responsible as well for various tasks including sourcing purchasers, rehabilitation contractors, and listing agents" (id. , paragraph 6), and that "these services together with the loan was the consideration for the $ 100,000 Deed" (id. ). In a reply affidavit, sworn to February 27, 2018, St. John expands these contentions, averring that he "entered into a partnership with the property owner, John Millien, principal of [AEI] to buy, improve, and flip the house in Dix Hills (he was making that purchase with Dr. Shah who is the principal of Trilock Enterprises, LLC ...."); that Millien asked him to "put $ 70,000 into the Dix Hills property as my equity contribution"; that Millien "agreed to his condition that we secure the return of my money and the payment of the agreed sum of and [sic] additional $ 30,000 for the work I performed and the services I provided such as taking care of interviewing the listing agents, listing the premises for sale, engaging contractors and pool liner companies for a total of $ 100,000"; that he was also to receive 10% of Millien/Trilock's profit on the resale of the Dix Hills property; and that he borrowed the $ 70,000 to "fund" his "contribution" and paid it to Millien.
The loan agreement, however, makes no reference to the rendition of such services to AEI by YMC.
Based upon St. John's averments and its October 19, 2016 agreement with AEI, YMC contends that it has a meritorious defense to the claims asserted in the petition. Also based upon St. John's averments as well as those of Lawrence J. Spiegel, Esq., of Spiegel & Ultera, P.A., YMC's admitted registered agent for service of process at the time this proceeding was commenced, and notwithstanding the averments of the affidavit of service filed by petitioners, YMC claims it was never in fact properly served with the petition and that, in any event, St. John only learned about the proceeding when he "followed up with [AEI] for repayment of the loan and found that the [June 26, 2017] Order had been issued by the Court" (corrected January 9, 2018 St. John Aff., Paragraph 13). In addition, YMC submits an affidavit executed by John Millien in December 2017 stating, among other things, that he was hospitalized recovering from a stroke at the time he signed the verification to the petition and did not know that the "court papers ... were to be used to litigate against" YMC, that he does not oppose the relief sought by YMC in the current motion and, in substance, that he requests that the matter be heard on the merits.
The acknowledgments for Deed 2 and Deed 3 and AEI's verification of the petition name a "Jean Millien," which appears to be consistent with the signature of the grantor on each of those documents. (A surreply affidavit submitted by petitioners, sworn to by "John Millien" on March 6, 2018, indicates that "Jean Millien" is an alias used by Mr. Millien.)
AEI and Trilok oppose YMC's motion, contending, among other things, that YMC was properly served through its registered agent, Spiegel & Utrera, that YMC's bare denial of receipt of process is insufficient to establish a reasonable excuse for the default in answering the petition; that pursuant to Real Property Law 320, YMC cannot, as a matter of law, establish a meritorious defense to the petition because the deed was intended as security for repayment and not as a conveyance; that YMC in fact provided no services in consideration for full repayment of the loan and the loan agreement is, therefore, usurious; and that Millien was coerced by St. John into providing the December 2017 affidavit that YMC has proffered in support of its motion. Counsel submits an affidavit by Millien reaffirming all of the facts alleged in the petition and averring that although he had suffered a vascular seizure of his lumbosacral nerves, he did not have a "brain stroke," his hospitalization for the vascular seizure ended months before he executed the verification, he was not cognitively impaired at the time he verified the petition and that Mr. St. John and others came to his office and "created an atmosphere of intimidation and fear" and pressured him to sign the December 2017 affidavit that YMC has offered in support of its current motion.
Discussion . Pursuant to CPLR 5015(a), "[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just." (See Toyota Motor Credit Corp. v. Impressive Auto Ctr., Inc . , 80 AD3d 861, 862 [3d Dept 2011].) "Where a defendant seeking to vacate a default judgment raises both a jurisdictional objection pursuant to CPLR 5015(a)(4) and alternatively seeks a discretionary vacatur ... the court is required to resolve the jurisdictional question before determining whether it is appropriate to grant a discretionary vacatur of the default under CPLR 5015(a)(1)" ( Falvo v. Cerra , 127 AD3d 919, 920 [2d Dept 2015] ).
A respondent seeking to vacate a default pursuant to CPLR 5015 (a)(4) must, in the first instance, rebut the presumption of proper service inherent in the affidavit of service of process filed by the petitioner. CPLR 311(a)(1) provides, in pertinent part, that service of process may be effected upon a domestic or foreign corporation "by delivering the summons to an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service." CPLR 311(a)(1) also provides that a "business corporation may also be served pursuant to section three hundred six or three hundred seven of the business corporation law." Pursuant to Business Corporation Law § 306(a), "[s]ervice of process on a registered agent may be made in the manner provided by law for the service of a summons, as if the registered agent was a defendant." "A process server's affidavit stating that personal service was effected by delivering a copy of the summons with notice to an authorized agent, and providing a description of that person, constitutes prima facie evidence of proper service" ( Purzak v. Long Is. Hous. Services, Inc ., 149 AD3d 989, 991 [2d Dept 2017] ). However, "[w]hile a process server may generally rely upon the direction of corporation employees in delivering a summons, the process server's reliance must necessarily be reasonable ( Todaro v. Wales Chem. Co. , 173 AD2d 696, 697 [2d Dept 1991], citing Fashion Page v. Zurich Ins. Co. , 50 NY2d 265, 273 [1980] ). "Further, the service in question must be made ‘in a manner which, objectively viewed, is calculated to give the corporation fair notice’ " ( Fashion Page v. Zurich Ins. Co. , supra, at 272, 428 N.Y.S.2d 890, 406 N.E.2d 747 ) of the action." ( Todaro v. Wales Chem. Co. , supra , 173 AD2d at 697, quoting Fashion Page v. Zurich Ins. Co. , supra, 50 NY2d at 272 ). (Compare Hoffman v. Petrizzi , 144 AD2d 437, 438-39 [2d Dept 1988] (service insufficient where no evidence receptionist was authorized by appointment or law to accept service of process on behalf of professional corporation and "merely stated with respect to the legal papers that ‘I will take them’, after which the process server left without further inquiry" and there was "nothing in the record to indicate that this receptionist ever accepted service of process for the professional corporation in the past"), with Eastman Kodak Co. v. Miller & Miller Consulting Actuaries, Inc. , 195 AD2d 591, 591 [2d Dept 1993] (where record demonstrated that service of process had been effected upon receptionist situated outside the office of defendant's president on at least six prior occasions, receptionist held "clothed with apparent authority to receive service on behalf of the defendant") ).
Here, the affidavit of service filed by petitioners creates a presumption of proper service of the notice of petition and verified petition upon YMC. YMC does not dispute that its registered agent for service of process within the State of New York is Spiegel & Utrera, P.A., P.C., with a stated address of 1 Maiden Lane, 5th Floor, New York, New York 10038, the same address at which the process server avers that he served the notice of petition and verified petition upon "Respondent's Registered Agent Spiegel & Utrera, PA PC" by "delivering a copy of each to personally ... Christie Doe agent of Spiegel & Utrera PA PC [who] said she was authorized to accept service on behalf of said respondent as the Registered Agent."
In support of its motion, respondent submits an affirmation of Lawrence J. Spiegel, Esq., who describes himself as the Chief Executive Officer of Spiegel & Utrera, PA and provides, as exhibits to his affirmation, copies of the New York Department of State's "entity information," downloaded from the Department of State, Division of Corporation's website, both for YMC and for Spiegel & Utrera, P.A., which is registered as a foreign business corporation. Even assuming that the affirmation of Mr. Spiegel is properly receivable by the court on the current motion , his bare assertions are insufficient to rebut the presumption of proper service that arises from the process server's affidavit and its averments. In particular, although Mr. Spiegel asserts that Gracielle Cabungcal, Esq. is the "managing attorney" of Spiegel & Utrera, P.A.; that "only Gracielle Cabungcal, Esq. is authorized to accept service of process" (emphasis provided); and that "Gracielle Cabungcal, Esq. was not the person [upon] whom process was served," the Division of Corporation's entity information he has provided, and to which he cites, indicates only that Ms. Cabungcal is the individual at the Maiden Lane address to whom the Secretary of State is to forward process served upon the Secretary of State as statutory agent for service of process upon the foreign corporation; however, that same exhibit lists no registered agent for Spiegel & Utrera, P.A. (see also CPLR 318 ). Thus, even if it were possible to limit those upon whom process could be served by designating a registered agent for that purpose — and it is not (see Fashion Page v. Zurich Ins. Co. , supra, 50 NY2d at 272 ("a corporation may assign the task of accepting process and may establish procedures for insuring that the papers are directed to those responsible for defending its interests [but a] process server may, of course, always serve the corporate personnel specifically identified in [ CPLR 311(a)(1) ]") ) - Spiegel & Utrera, P.A. evidently has not done so. It is especially notable, then, that Mr. Spiegel's affirmation is silent as to whether "Christie Doe," the individual to whom, according to the affidavit of service, process was delivered, was or was not, at that time, a Spiegel & Utrera, P.A. corporate official or employee "specifically identified in" CPLR 311(a)(1) upon whom service may be effectuated or, even if not, a person upon whose direction the process server could, or could not, reasonably rely in delivering process (see Eastman Kodak Co. v. Miller & Miller Consulting Actuaries, Inc. , supra ; Todaro v. Wales Chem. Co. , supra ). Nor is any affidavit of "Christie Doe" provided or any explanation offered for its absence. In short, respondent has failed to make the showing necessary, under CPLR 5015(a)(4), to overcome the presumption of proper service of the notice of petition and verified petition created by the process server's affidavit of service.
Mr. Spiegel states that he is an attorney admitted to practice law in the State of Florida, and his affirmation does not state where it is made. Accordingly, the affirmation on its face fails to satisfy CPLR 2106's prerequisites for treating an affirmation as the evidentiary equivalent of an affidavit.
Inasmuch as YMC has failed to demonstrate that absence of personal jurisdiction to render the June 26, 2017 order jurisdictionally defective, the court must determine whether to grant a discretionary vacatur of YMC's default under CPLR 5015(a)(1)" ( Falvo v. Cerra , 127 AD3d 919, 920 [2d Dept 2015] ). "A [respondent] seeking to vacate a default pursuant to CPLR 5015(a)(1) must demonstrate a reasonable excuse for the default and a potentially meritorious defense to the action" ( JP Morgan Mortg. Acquisition Corp. v. Hayles , 113 AD3d 821, 822 [2d Dept 2014] ; see Wells Fargo Bank v. Malave , 107 AD3d 880 [2d Dept 2013] ).
Although "[t]he absence of a reasonable excuse renders it unnecessary to determine whether the [respondent] demonstrated the existence of a potentially meritorious defense to the action" ( US Bank Nat. Ass'n v. Smith , 132 AD3d 848, 851 [2d Dept 2015] ; New Century Mortg. Corp. v. Adeyan-Ju , 139 AD3d 683, 684 [2d Dept 2016] ), this court finds that it is prudent here to address the latter question first because in this case it is dispositive. Pursuant to Real Property Law § 320, a "deed conveying real property, which, by any other written instrument, appears to be intended only as a security in the nature of a mortgage, although an absolute conveyance in terms, must be considered a mortgage," although it is of no effect "unless every writing, operating as a defeasance of the same, or explanatory of its being desired to have the effect only of a mortgage, or conditional deed, is also recorded therewith, and at the same time." (See In re Cirasuolo , 48 BR 447, 449 [Bankr NDNY 1985] (where deeds intended as security for loans were recorded without corresponding note or bond and therefore constituted an improperly recorded mortgage interest, bankruptcy trustee "takes subject to the constructive notice accorded by [lender's] filing of the deeds") ). "In determining whether a deed was intended as security, examination may be made not only of the deed and a written agreement executed at the same time, but also of [parole evidence] bearing on the intent of the parties and to a consideration of the surrounding circumstances and acts of the parties" ( Wohl v. Frankel , 2019 NY Slip Op 02147 [2d Dept Mar. 20, 2019], quoting Bouffard v. Befese , LLC, 111 AD3d 866 [2d Dept 2013] [internal citations omitted] ). Thus, "a court of equity will treat a deed, absolute in form, as a mortgage, when it is executed as a security for a loan of money. That court looks beyond the terms of the instrument to the real transaction; and when that is shown to be one of security, and not of sale, it will give effect to the actual contract of the parties" ( Wohl v. Frankel , supra , quoting Basile v. Erhal Holding Corp ., 148 AD2d 484 [2d Dept 1989] [internal citations omitted] ).
Here, the petition alleges and respondent's "authorized officer," St. John, has conceded in his affidavits that the deed from AEI to AEI and YMC was intended to secure payment of amounts due YMC (see Patmos Fifth Real Estate Inc. v. Mazl Bldg ., LLC, 140 AD3d 527, 528 [1st Dept 2016] ). Accordingly, pursuant to Real Property Law § 320, Deed 3 was ineffective to convey to AEI and YMC an ownership interest in the subject property nor, because the October 19, 2016 agreement between AEI and YMC was not recorded with it, was it effective to create a mortgage interest in favor of AEI and YMC. Accordingly, respondent cannot establish that it has a potentially meritorious defense to the petition.
Although the absence of a potentially meritorious defense alone is sufficient basis to deny a motion pursuant to CPLR 5015(a)(1) for relief from a default, it is worth noting that it is doubtful that respondent can satisfy the other prerequisite for discretionary vacatur of the June 26, 2017 order, that is, the demonstration of a reasonable excuse for its default. "The determination of what constitutes a reasonable excuse for a default lies within the sound discretion of the trial court" ( Gambardella v. Ortov Light., Inc ., 278 AD2d 494, 495 [2d Dept 2000] ). "[S]ervice of process on a corporation is deemed complete when [it's agent] is served, regardless of whether such process ultimately reaches the corporate defendant" ( Cedeno v. Wimbledon Bldg. Corp ., 207 AD2d 297, 298 [1st Dept 1994] ). A bare denial of awareness that process had been properly served is insufficient to excuse a default without competent affidavits either corroborating the excuse or excusing the absence of such affidavits (see Tower Ins. Co. of New York v. Provencio Ltd ., 20 Misc 3d 132(A) [App Term 2008] (corporate officer's claimed lack of awareness that action had been commenced because he was neither served personally with process nor informed that managing agent had been served insufficient to excuse default where defendant failed to submit an affidavit from the managing agent supporting the excuse nor provided an excuse for failing to submit such an affidavit). Here, Dennis St. John, YMC's "authorized officer," avers that he "never saw the petition arrive in our mail," that he learned that the petition had been made only after "he followed up with [AEI] for repayment of the loan," that "after investigation," he learned that the order YMC now seeks to vacate had been entered, and that he then contacted Spiegel & Utreta and was "informed that they had no record of having sent me a pleading in this matter to my forwarding address in Florida" (February 27, 2018 St. John Affidavit, Paragraph 12 (emphasis omitted) ). However, even though Spiegel & Utrera, P.A.'s Chief Executive Officer, Lawrence J. Spiegel, has provided an affirmation in support of YMC's motion, that affirmation is directed solely to the sufficiency, vel non, of the service of process upon Speigel & Utrera, P.A. — specifically, whether the individual to whom the notice of petition and petition were delivered on April 21, 2017 was an appropriate recipient of process — and offers no support for St. John's separate contention, that he was unaware of this matter and was not sent and did not receive the pleadings until December 2017. Nor is any explanation or excuse offered for the absence of any affidavit or other support for that contention. Hence, even if respondent could demonstrate a potentially meritorious defense to the petition — and it cannot — the court would be hard-pressed to grant it the relief it seeks pursuant to CPLR 5015(a)(1).
Finally, YMC contends that the court's June 26, 2017 order should be vacated pursuant to CPLR 3015(a)(3) on the ground that it was procured through fraud. A respondent seeking to vacate a default pursuant to CPLR 5015(a)(3) has the burden of demonstrating that the petitioner "procured that order and judgment by fraud, misrepresentation, or other misconduct" ( Katz v. Marra , 74 AD3d 888, 891 [2d Dept 2010] ; Golden First Bank v. Tal , 136 AD3d 974, 974 [2d Dept 2016] ; Citimortgage, Inc. v. Bustamante , 107 AD3d 752, 753 [2d Dept 2013] ). It has been held that affidavits which are submitted, and later recanted, are insufficient to establish the existence of fraud ( Shomron v. Fuks , 147 AD3d 685, 686 [1st Dept 2017] ).
YMC contends that central allegations of the petition are false, and that petitioners knew them to be so, as YMC had lent money to AEI in connection with the purchase and rehabilitation of the Schoolhouse Way property, the deed was "offered by Petitioners to collateralize" the obligation to YMC, and the recording of the deed from AEI to AEI and YMC "was in all respects authorized by Petitioners and proper." YMC cites petitioners' procurement of the Millien verification of the petition, which it claims Millien was duped into signing while in a medically impaired state and which he subsequently repudiated, as constituting a further act of fraud in obtaining the June 26, 2017 order. In support of its contention, YMC relies on St. John's affidavits, the October 19, 2016 agreement between itself and YMC, and Millien's December 2017 affidavit repudiating his verification of the petition . In a surreply, petitioners tender yet a further affidavit of Millien, among other things reaffirming his original verification of the petition and repudiating his YMC-filed affidavit as having been obtained from him through coercion on December 2, 2017, "when Dennis came to my office with a couple of his friends and created an atmosphere of intimidation and fear. They pressured me into signing the document even though it is not true..."
The full text and exact date of Millien's affidavit cannot be ascertained from the scanned copy submitted by counsel, as portions of it, including a portion of the jurat, are cut off. In an affidavit filed by YMC in reply to a further affidavit of Mr. Millien, filed by petitioners in opposition to the current motion, in which Mr. Millien repudiates his December 2017 affidavit and reaffirms his verification of the petition, non-party John Torino, who describes himself as a friend of St. John, avers that he prepared the December 2017 affidavit of Millien based upon conversations with St. John and on December 2, 2017contacted Mr. Millien, who signed the affidavit, which was notarized and then scanned by Mr. Torino, who on December 20 2017 gave it to attorney John Verner, "who did not know about this case until that date." Mr. Verner, for his part, disclaims both having had any contact with Millien and any involvement in obtaining his December 2017 affidavit.
Remarkably, however, despite petitioners' insistence — in the verified petition (at ¶¶ 14 and 20), in their attorney's affirmation in opposition to the current motion (at ¶¶ 14 and 18), and in Millien's March 6, 2018 affidavit (at ¶ 14) — that the deed delivered to St. John by Millien, on October 19, 2016, purporting to convey title to the Schoolhouse Way property from AEI to YMC and AEI in order to collateralize and secure the loan that YMC had made to AEI was in actuality "a nullity" because Millien — notwithstanding the recitals and terms of AEI's agreement with YMC, which he signed that same day — had already executed a deed on behalf of AEI transferring the entirety of AEI's interest in that property to Trilok — neither petitioners, nor their principals, nor anyone representing any of them, offers any cognizable explanation, or even the semblance of an excuse, for the seemingly abject absence of good faith and fair dealing that respondent alleges culminated in petitioners' commencement and prosecution of this proceeding. The most petitioners offer, is that Deed 3 "was a conditional deed not to be recorded and held in escrow" and that "Respondent was aware the Petitioner Trilok would be conveyed the 100% fee interest in the Premises by Petitioner AEI" (Affirmation in Opposition dated February 22, 2018, ¶¶ 18 and 19; see also verified petition, ¶¶ 20 and 21).
On the current record, in any event, it appears that there are ample unclean hands on both sides of the caption. Nonetheless, respondent's invocation of CPLR 5015(a)(3) must fail for the same reason that it cannot show a potentially meritorious defense to the petition, that is, because it is undisputed that the deed from AEI to AEI and YMC was intended to secure payment of amounts due YMC, and because the October 19, 2016 agreement between AEI and YMC was not recorded with it, pursuant to Real Property Law § 320, that deed was ineffective to convey any ownership interest in the Schoolhouse Way property or to create a mortgage interest (see Patmos Fifth Real Estate Inc. v. Mazl Bldg ., LLC, and discussion, supra ).
The court has considered the remaining contentions of the parties and finds that they neither require discussion nor alter the court's determination. Accordingly, respondent's motion sequenced as #002 for an order pursuant to CPLR 5015 vacating the court's order dated June 26, 2017 (Asher, J. (ret.) ), is denied, without prejudice to such other claims, if any, as the parties may have against one another, or others, at law on account of the October 19, 2016 agreement or otherwise.
The foregoing constitutes the decision and order of the court.