Opinion
1918, 1919.
Decided March 23, 2004.
Orders, Supreme Court, New York County (Marylin Diamond, J.), entered July 10, 2002 and November 29, 2002, which, respectively, granted defendant JP Morgan Chase's CPLR 3211(a)(7) motion to dismiss the complaint, and which, insofar as appealable, denied plaintiff's motion to renew, reversed, on the law, without costs, the order vacated and, upon de novo review of the entire record, defendant's motion to dismiss the complaint granted. The Clerk is directed to enter judgment accordingly.
David B. Cohen, for Plaintiff-Appellant.
Stephen E. Zaino, for Defendants-Respondents.
Jeffrey M. Eilender Leah M. Campbell, for Defendant.
Before: Mazzarelli, J.P., Andrias, Ellerin, Friedman, Gonzalez, JJ.
In 1998, plaintiff obtained a $192,000 mortgage from JP Morgan Chase (Chase or the bank) to purchase a cooperative apartment, unit 5J of 250 West 89th Street, New York, New York. In September 2000, plaintiff lost his job and stopped making his mortgage payments. The bank sent plaintiff notices of default and sale of the property by regular and certified mail. While the notices of default misidentified plaintiff's apartment (A5J instead of 5J), and the notices of sale were sent to the wrong zip code (11514 instead of 10024), the record indicates that plaintiff's doorman signed for both certified letters. The bank also published notices of the sale of the property in the New York City edition of Newsday on February 8, 15 and 22, 2001. The Newsday notices misstated the year of the sale as March 1, 2000, instead of 2001. On March 1, 2001, Chase sold the apartment to defendant Pesochinsky at a public auction. Pesochinsky agreed to pay $200,000 plus all of plaintiff's maintenance arrears for the foreclosed property.
On March 9, 2001, plaintiff advised Chase that he had the funds to pay off his mortgage. We note, however, that plaintiff has not denied the allegation contained in defendant Pesochinsky's attorney's affidavit, dated December 19, 2001, that plaintiff had made no maintenance payments since March 31, 2000. Plaintiff alleges in his complaint that on March 9, 2001, he was notified, for the first time, that his apartment had been sold. This action to annul the sale and to compel Chase to allow him to redeem his stock ensued.
Chase moved to dismiss plaintiff's complaint pursuant to CPLR 3211(a)(7). In the first order appealed, Justice Diamond, to whom the case had been assigned, granted Chase's motion. She concluded that the misidentification of the zip code did not nullify the notices of default and sale. Justice Diamond further concluded that Uniform Commercial Code (UCC) § 9-504(3) does not require actual notice of sale, only that the secured creditor took reasonable steps to provide such notification. In the second order appealed, the IAS court denied plaintiff's application for reargument/renewal, rejecting plaintiff's argument that publication of the sale in Newsday was insufficient to cover prospective purchasers in the New York City area.
On appeal, plaintiff raises the issue of the ability of Justice Diamond to preside over the matter. Plaintiff asks this Court to take judicial notice of Justice Diamond's 2001 and 2002 Annual Statements of Financial Disclosure. As relevant to the appeal, in both of these documents, Justice Diamond declared that she and her husband own JP Morgan Chase stock. She did not disclose this to the parties, nor did she recuse herself.
Plaintiff contends that Justice Diamond was statutorily disqualified from hearing the case, based upon Judiciary Law
§ 14. That statute provides, as relevant:
". . . No judge shall be deemed disqualified from passing upon any litigation before him because of his ownership of shares of stock or other securities of a corporate litigant, provided that the parties, by their attorneys, in writing, or in open court upon the record, waive any claim as to disqualification of the judge" (emphasis supplied).
We agree with plaintiff that under this statute, Justice Diamond should have recused herself from the case, or else, at a minimum, disclosed her interest to the parties in order to give them an opportunity to waive her disqualification. Because Justice Diamond failed to follow this course, she was without power to hear the case, and the orders appealed are null and void ( Oakley v. Aspinwall, 3 N.Y. 547; Matter of Harkness Apt. Owners Corp. v. Abdus-Salaam, 232 A.D.2d 309, 310; see also Matter of Thoms' Trust, 24 A.D.2d 536).
Nevertheless, it remains that the Supreme Court has subject matter jurisdiction, and as a branch of that court, vested with co-equal powers and discretion ( see Small v. Lorillard Tobacco Co., 94 N.Y.2d 43, 52-53; Phoenix Mut. Life Ins. Co. v. Conway, 11 N.Y.2d 367, 370; O'Brien v. Vassar Bros. Hosp., 207 A.D.2d 169, 171), we have the ability to review, de novo, the substantive issues presented to the IAS Court upon the record before us.
We note that the full record of Chase's CPLR 3211(a)(7) motion is presently before us, and all parties to this appeal ask us to decide the merits of this motion at this juncture. The motion presents a pure question of law that can be answered on the existing record, without further proceedings, credibility determinations or findings of fact. Since we have already reviewed the record and considered the parties' substantive arguments, it would serve no constructive purpose, under these particular circumstances, to do as the dissent suggests, namely, decline to decide the merits of the motion and, in disregard of the parties' wishes, remand the matter to the Supreme Court for assignment of another justice for a new decision to be made on the basis of the very same arguments and record that are already before this Court. We also note that at oral argument, both appellant and respondents invited a de novo review by this Court. A disposition on the merits is fully appropriate under these circumstances.
On a motion to dismiss the complaint pursuant to CPLR 3211(a)(7), the question is whether, assuming that the allegations in the complaint are true, they state a cause of action upon which relief may be granted ( see Becker v. Schwartz, 46 N.Y.2d 401, 408). Here, plaintiff seeks to annul a foreclosure sale. He alleges that defects in the notices and the amount of the sale preclude its enforcement under Article 9 of the UCC ( see UCC 9-504 [requiring commercially reasonable disposition of property]). Because we find that, even assuming the truth of all of plaintiff's protestations, the sale was conducted in a commercially reasonable manner as a matter of law, we grant defendant's motion to dismiss the complaint.
This section is presently codified at UCC 9-610 .
Plaintiff's first challenge is based upon his purported failure to receive personal notice of the auction. However, it is undisputed that the bank sent plaintiff notices of the default and sale by regular and certified mail. Further, it can be assumed that any mortgagor who has not made a payment for six months would ultimately be anticipating such action. Despite the errors in addressing these notices, the bank also provided evidence that plaintiff's doorman signed for the notification letters, proving, at the least, that the letters reached plaintiff's building. Even accepting plaintiff's contention that he never actually received these notices, this error would not afford a basis for setting aside the sale of the collateral ( see generally Raschel v. Rish, 69 N.Y.2d 694, 697 [actual receipt of papers is generally irrelevant to whether service is proper]). Moreover, cases interpreting UCC 9-504 have not required a secured party to conclusively establish that it provided the debtor with actual notice of a foreclosure, only that the secured party took reasonable steps to provide such notice, as here, by sending letters to the debtor by certified and regular mail ( Morris v. Citibank, N.A., ___ F. Supp ___; 1999 WL 461161 [SDNY 1999], affd sub nom Troni v. Citibank, N.A., 216 F.3d 1073 [service by certified and regular mail deemed proper and whether plaintiffs actually received notices immaterial to determining commercial reasonableness]; Thornton v. Citibank N.A., 226 A.D.2d 162, lv denied 89 N.Y.2d 805 [same]; Dougherty v. 425 Dev. Assoc., 93 A.D.2d 438 [upholding notice of sale as a matter of law]).
Plaintiff next argues that the publication of the sale in Newsday violated RPAPL 231(2)(a), which requires that publication take place in the same county where the property is located. However, defendant convincingly shows that Newsday's New York City Edition satisfies § 231(2)(a) because it is published in all five boroughs of New York City. Moreover, the choice of paper would not, by itself, make the sale commercially unreasonable, and plaintiff has not otherwise shown that any other claimed defect precluded prospective bidders from attending the sale ( Amresco New Eng. II, L.P. v. Denino, 283 A.D.2d 599 [failure to provide proper notice under RPAPL 231 did not require that a sale be vacated, absent a showing that any prospective bidders were prevented from attending]; Buttermark Plumbing and Heating Corp. v. Sagarese, 119 A.D.2d 540, 540-541, lv denied 68 N.Y.2d 607 [sale upheld despite single publication of adjourned date where no evidence of irregularity that would have inhibited prospective bidders' attendance]). In addition, we find that the error in the published notice as to the year of the sale, stating a year which antedated the circulation of the newspaper, was an error which would have been apparent on its face to any prospective purchaser.
Finally, plaintiff challenges the sale based upon Chase's acceptance of $200,000 plus outstanding maintenance for the collateral. Plaintiff contends, without any support, that this was only 45% of the market value of the property. Section § 9-507(2) of the UCC expressly provides:
This section is presently codified at UCC 9-627(a).
The fact that a greater amount could have been obtained by a collection, enforcement, disposition, or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition, or acceptance was made in a commercially reasonable manner.
Courts have consistently declined to disturb a foreclosure sale upon a challenge to amount recovered for the collateral, except in the narrow circumstance where the price alone is so inadequate as to shock the court's conscience. This is not such a case ( Thornton, supra at 163 [noting that foreclosure sales often result in prices substantially less than market value]; Crossland Mtge. Corp. v. Frankel, 192 A.D.2d 571, lv denied 82 N.Y.2d 655 [sales price of $55,000 for property with market value of between $160,000 and $200,000 upheld]; Buttermark, supra [sale at 30% of plaintiff's uncorroborated opinion as to fair market value upheld]; cf. Dougherty, supra at 447 [question as to commercial reasonableness where property sold for less than 50% of purchase price one year earlier]).
Despite plaintiff's protestations to specific aspects of the instant sale, we find that the totality of the record establishes that it was conducted in a commercially reasonable manner ( Orix Credit Alliance, Inc. v. Blevins, 1993 US Dist LEXIS 6489). We reach this conclusion upon our view of "the aggregate of circumstances . . . rather than specific details of the sale taken in isolation" ( Matter of Zsa Zsa Ltd., 352 F. Supp. 665, 670 [SD N.Y. 1972], affd 475 F.2d 1393). "The facets of manner, method, time, place and terms cited by the [UCC] are to be viewed as necessary and interrelated parts of the whole transaction" ( id. at 670).
Defendant has established that it made reasonable attempts to notify plaintiff that it intended to sell the property at a public auction, and it published notice of the sale in Newsday, a paper of general circulation in the five boroughs of the City. The notice set forth the day, time and place of the sale, as well as the collateral and the terms of the sale. The sale complied with the notification provisions in UCC 9-504(3) and was otherwise conducted in a commercially reasonable manner under UCC 9-507(2). Accordingly, we grant defendant's motion to dismiss the complaint.
All concur except Andrias, J. who dissents in part in a memorandum as follows.
Because the motion court did not disclose its interest in Chase to the parties, I agree with the majority that under the express terms of Judiciary Law § 14 it was without power to hear the case and the orders appealed from are null and void. However, I cannot agree that this Court should act as the nisi prius court and decide the motions "upon de novo review of the entire record."
Indeed, in Matter of Harkness Apt. Owners Corp. v. Abdus-Salaam ( 232 A.D.2d 309), one of the cases cited by the majority for the nullity of the orders appealed from, this Court took what I consider the proper corrective action in such a situation, viz., declaring that the nisi prius justice is without jurisdiction to act in respect to this matter and remanding the case to Supreme Court for disposition before a different justice. In Matter of Thoms' Trust ( 24 A.D.2d 536), another of the cited cases involving a statutorily disqualified judge, the Fourth Department held: "This motion should be considered and decided anew by Special Term. . . . We find no authority for the procedure adopted by Special Term by which new life was breathed into the void orders by the use of a nunc pro tunc order. The void order eliminating appellant and her objections from the accounting proceeding was made after a hearing before a Justice who was statutorily disqualified. There should be a full and new hearing as to all matters that were decided by the disqualified Justice. . . ."
As stated by Professor Siegel in his treatise on New York Practice (third edition):
It is sometimes noted that the appellate division, as a branch of the supreme court, has all of the latter's original jurisdiction; at other times doubt is expressed about that. But even if the assumption is that the appellate division has it all, it has been held that "as a matter of administrative convenience, it will ordinarily decline to take original jurisdiction" though it "may do so whenever it sees fit." It rarely sees fit. Practically speaking, the only matters of which the appellate division regularly assumes original jurisdiction are the few expressly conferred ( id. at § 11, pp 14-15 [footnotes omitted]).
Research reveals that the only cases in which this Court has previously conducted a de novo review and determined a matter in lieu of the nisi prius court are those where, in an article 78 proceeding involving a question of substantial evidence, the nisi prius court, rather than transferring the proceeding to the Appellate Division as required by CPLR 7804, decided the issue and it then reached us on appeal rather than as a transferred article 78 proceeding, one of the "few" cases alluded to by Professor Siegel in which we regularly assume the original jurisdiction expressly conferred by statute.
The only case cited by the professor where this Court saw fit to take original jurisdiction was Matter of Association of the Bar of the City of New York ( 222 A.D. 580), a 1928 case in which this Court was asked by a number of bar associations to order an investigation into the improper practice of ambulance chasing and exercise its power to discipline the guilty attorneys.
In granting the petition, the Court (per Dowling, P.J.) stated: "This court is agreed upon the necessity of the investigation prayed for, and it is of the opinion that it has the power to direct it, as a necessary corollary of the powers expressly conferred by statute upon this court, as well as an indispensable part of the inherent power of the Supreme Court" ( id. at 584).
Clearly, the present case does not present the extraordinary circumstances of the Bar Association opinion. It is simply a garden variety civil case where the original justice assigned has been found to be without jurisdiction to decide the matter. Thus, the ordinary and proper procedure is simply to remand the matter for determination by another justice, as we did in Harkness Apartments ( supra) and have done in many other cases.
To act as the nisi prius court and decide this motion as if it came directly to us is unprecedented. It would, in effect, deprive any party aggrieved by our decision of an additional layer of appeal, and sets an unfortunate precedent. Logically, if the nisi prius court was without jurisdiction to hear this matter, this Court should not address the merits of the motions, but simply remand the matter to Supreme Court for determination by another justice, whereupon any party aggrieved would be free to appeal to this Court as provided by statute.
M-4139 M-4202 M-4313 M-4380 — DeRosa v. JP Morgan Chase, etc., et al.
Motions seeking leave to supplement record granted and seeking sanctions denied. Motions seeking leave to strike reply brief denied and to file corrected brief granted.
THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.