Opinion
No. 14810/2007.
2010-10-1
U.S. BANK NATIONAL ASSOCIATION, etc. v. Gitit GRAFI, et al.
Fein, Such & Crane, LLP, by Samit G. Patel, Esq., Chestnut Ridge, For Plaintiff. Thomas G. Sherwood, LLC, by Thomas G. Sherwood and James P. Truitt III, Esq., Garden City, For Proposed Intervenor CPC.
Fein, Such & Crane, LLP, by Samit G. Patel, Esq., Chestnut Ridge, For Plaintiff. Thomas G. Sherwood, LLC, by Thomas G. Sherwood and James P. Truitt III, Esq., Garden City, For Proposed Intervenor CPC.
CHARLES J. MARKEY, J.
Community Preservation Corp. (“CPC”) moves for leave to intervene as a party defendant, pursuant to CPLR 1012 and 1013, serve an answer as proposed, amend the caption to reflect the intervention, vacate the judgment of foreclosure and sale, and cancel the foreclosure sale.
Upon the foregoing papers, plaintiff U.S. Bank National Association commenced this foreclosure action on June 11, 2007, by filing a copy of the summons and complaint and notice of pendency. It alleged that it was the holder, pursuant to an assignment by Option One Mortgage Corp. (“Option”), of a mortgage dated March 23, 2005 given by defendant Gitit Grafi a/k/a Gitit Graffi, on the real property known as 18–59 Gateway Boulevard, Far Rockaway, New York, as security for a note evidencing a loan, in the principal amount of $390,080.00, plus interest.
Plaintiff named Mendel Bochner, the record owner of the subject premises (the transfer of title from Grafi to Bochner occurred prior to the commencement of the action), and Option, a subordinate mortgage holder, among others, as party defendants. Plaintiff obtained a judgment of foreclosure and sale dated December 5, 2007, and entered on January 11, 2008, in the amount of $406,477.84 as of October 16, 2007, plus per diem interest for every day thereafter, to the date of sale.
Proposed intervenor CPC asserts that defendant Bochner, as the seller, sought to enter into a short sale with Brookhaven Development LLC (“Brookhaven”), as the proposed purchaser, of the subject property and an adjacent parcel he owned. A “[s]hort sale' is a term used to describe a situation in which the foreclosing secured creditor allows its loan to be paid off either by the debtor or by a third party (such as through a sale or refinance) for less than is actually owed on the secured debt” (In re Mi La Sul, 380 BR 546, 548 n 1 [Bankr.CD Cal.2007] ).
CPC also asserts that it agreed to extend mortgage loans to Brookhaven to finance Brookhaven's purchase of both parcels and for the properties' development. CPC contends, in doing so, it relied upon an assignment dated December 31, 2007, of the subject mortgage and underlying note, from plaintiff, as assignor, to Madison 118, LLC (“Madison”), as assignee, and another assignment, dated December 26, 2007, of the Option mortgage and underlying note from Option, as assignor, to Madison, as assignee.
In addition, CPC asserts that John A. Simmons, Esq., as a member of, and attorney in fact for, Madison, issued a payoff letter, dated January 16, 2008, to defendant Grafi (the letter is unsigned), whereby Madison agreed, in effect, to a “compromise short sale,” and to consider the outstanding mortgages, which “are all in default and litigation,” on both lots satisfied in full, upon the payment of a total sum in the amount of $800,000.00, made payable by bank or certified checks in various stated amounts, drawn to specified payees, including a bank or certified check made payable to John A. Simmons, Esq., as attorney in trust for Madison, in the amount of $100,000.00. The letter reflected there already had been a payment made on January 4, 2008 on behalf of Grafi in the amount of $39,200.00.
By deed dated January 16, 2008, defendant Bochner conveyed title to the two properties to Brookhaven. According to CPC, the proceeds of its mortgage loans were used to pay, among other things, the sums required by Madison, as plaintiff's assignee, pursuant to the January 16, 2008 payoff letter.
CPC offers, among other things, copies of its checks drawn in amounts in accordance with the January 16, 2008 payoff letter, and asserts they were negotiated and deposited by the various named payees. CPC also contends that it received two acknowledged documents, each denominated as “SATISFACTION OF MORTGAGE” and dated January 16, 2008, executed by John A. Simmons, Esq., as attorney in fact for, and member of, Madison, which served to discharge the subject mortgage and the subordinate Option mortgage. CPC argues that it should be permitted to intervene to protect its mortgage liens based upon such discharges.
CPC also argues that the judgment of foreclosure and sale should be vacated because plaintiff lacked any interest in the subject property at the time the complaint in this action was prepared, and thus plaintiff misrepresented in the complaint that it was in the holder of the subject mortgage. CPC offers a proposed answer asserting various affirmative defenses, including one based upon the payment of the indebtedness secured by the subject mortgage, interposing a counterclaim, and cross claim against defendant Option, for a judgment declaring the subject mortgage and the Option mortgage to have been satisfied and CPC's mortgage liens to constitute valid first and second mortgages.
Plaintiff opposes the motion. It contends that CPC is precluded, pursuant to the doctrines of res judicata and collateral estoppel, from seeking intervention, by virtue of the order of this court dated November 25, 2008, which denied a prior motion by AFG Abstract, LLC (AFG Abstract) for leave to intervene in the action, or alternatively, to vacate the judgment of foreclosure and sale. Plaintiff also contends that it did not engage in fraud, misrepresentation, or other misconduct in procuring the judgment, and the interests of justice will not be served by vacating the judgment. Plaintiff further contends that it never assigned the cause of action or judgment herein to Madison, or consented to a substitution of counsel, and CPC's application for leave to intervene is untimely. In addition, plaintiff contends that the assignment to Madison, and the discharge issued by Madison are fraudulent, and that the subject mortgage never has been satisfied.
“Under the doctrine of res judicata, a disposition on the merits bars litigation between the same parties or those in privity with them of a cause of action arising out of the same transaction or series of transactions as a cause of action that either was raised or could have been raised in the prior proceeding (Goldstein v. Massachusetts Mut. Life Ins. Co., 32 AD3d 821, 821 [2nd Dept.2006]; see Matter of Hunter, 4 NY3d 260, 269 [2005] )” (Greenstone/Fontana Corp. v. Feldstein, 72 AD3d 890 [2nd Dept.2010] ). As the Appellate Division, Second Judicial Department, in Wisell v. Indo–Med Commodities, Inc., 74 AD3d 1059, 1060 [2010], recently stated: “The doctrine of collateral estoppel precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same' (Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500 [1984];Chiara v. Town of New Castle, 61 AD3d 915, 916 [2009] ).”
“Privity' is usually defined as mutual or successive relationships to the same rights of property' (Haverhill v. International Ry. Co., 217 App.Div. 521, 522 [4th Dept.1926], aff'd, 244 N.Y. 582 [1927];Litchfield v. Goodnow's Adm'r, 123 U.S. 549, 551 [1887] )” (Matter of Shea, 309 N.Y. 605 [1977] ). Contrary to plaintiff's assertion, CPC is not in privity with AFG Abstract and, consequently, it is not bound by the denial of the prior motion by AFG Abstract. AFG Abstract asserted no claim that it had an interest in, or title to, the property, but rather contended it had an interest in the outcome of this action as a title insurance underwriter for Stewart Title. This Court determined such interest was insufficient to warrant intervention. CPC, on the other hand, has mortgage interests in the property, albeit acquired by a conveyance after the filing of the notice of pendency and the issuance of the judgment.
Plaintiff asserts that CPC's motion is untimely because CPC was aware of the existence of the judgment and its potential ramifications as early as July 17, 2008 ( see plaintiff's Exhibit “C,” letter of Helene S. Rudolph). Plaintiff, however, has failed to demonstrate that it has suffered any prejudice thereby. The purported assignment of the subject mortgage and underlying note to Madison occurred after the issuance of the judgment of foreclosure and sale, and plaintiff did not seek to reschedule the sale during the period plaintiff defended against AFG Abstract's efforts to intervene and vacate the judgment.
To the extent that CPC asserts the judgment of foreclosure and sale was procured by fraud, misrepresentation, or other misconduct, or that it should be vacated in the interest of justice, the complaint was verified on June 8, 2007. By that time, plaintiff was the holder of the subject mortgage pursuant to an assignment dated December 27, 2006 and recorded on January 24, 2007. Thus, notwithstanding the date appearing at the foot of the complaint, CPC has failed to show the complaint contained a misrepresentation as to plaintiff's status when it was filed and the action was instituted.
In the absence of a stay, CPC's mortgage liens will be lost upon the sale of the property at foreclosure ( see,CPLR 6501; Westchester Fed. Sav. & Loan Assn. v. H.E.W. Const. Corp., 29 A.D.2d 670 [2nd Dept.], appeal denied,21 N.Y.2d 646 [1968];Polish Natl. Alliance of brooklyn, U.S.A. v. White Eagle Hall Co., 98 A.D.2d 400 [2nd Dept.1995]; see also, Bova v. Vinciguerra, 139 A.D.2d 797 [3rd Dept.1988] ). To the degree that CPC seeks leave to intervene to prevent the foreclosure sale, CPC makes no claim that it redeemed the subject mortgage by paying off the subject mortgage debt, and, consequently, is subrogated to the rights of plaintiff ( cf. Venture I, Inc. v. Voutsinas, 8 AD3d 475 [2nd Dept.2004] ). CPC, rather, asserts plaintiff assigned the subject mortgage and note to Madison after judgment without retaining any rights to the claims against defendants, including any right to proceed to a foreclosure sale. CPC asserts, in addition, that Brookhaven caused the subject mortgage to be discharged when Brookhaven met Madison's conditions to consent to the short sale. CPC offers proof that it provided the funds used, among other things, to meet the conditions set by Madison for the short sale and obtain the discharges, and took back two mortgages from Brookhaven.
CPC, however, has failed to demonstrate that it was entitled to rely upon the assignments and satisfaction and discharge when making its mortgage loans to Brookhaven. At such time, plaintiff had already obtained the judgment, and CPC has failed to offer evidence that the judgment itself was properly assigned to Madison. Once the judgment had been obtained, any assignment of the underlying mortgage debt to Madison needed to include an assignment of the rights pursuant to the judgment itself, so to avoid that which has occurred herein, i.e., the continued attempted enforcement of the judgment by the named plaintiff.
Insofar as CPC relies upon the document denominated “ASSIGNMENT OF CAUSE OF ACTION AND CONSENT TO CHANGE ATTORNEYS” (the “Document”), as an assignment of the judgment, it bears a signature of Mark K. Broyles, Esq., in his capacity as counsel for plaintiff. Mr. Broyles, however, attests that he never executed the Document, and that the signature thereon is not his signature. He also attests that plaintiff never directed him or anyone else from the law firm to execute the Document, and he never had any communication with John A. Simmons, Esq., or with anyone associated with Madison. He further attests that he never was involved in the alleged misrepresentations or fraud committed by Madison.
CPC offers no proof that Mr. Broyles had the authority to transfer the rights to an asset of plaintiff (i.e., the judgment) on behalf of plaintiff, or to contradict Mr. Broyles' averments regarding the inauthenticity of his signature. It is also noted the Document lacks any signature or acknowledgment of plaintiff, and as result, did not constitute a proper consent to change attorney form (CPLR 321). Such impropriety should have led a reasonable, prudent lender to make inquiries of the circumstances of the transaction at issue ( see, LaSalle Bank Natl. Assn. v. Ally, 39 AD3d 597, 600 [2nd Dept.2007] ).
Accordingly, the motion by CPC is denied.
The foregoing constitutes the decision and order of the Court.