Opinion
37-04-0514.
Decided August 4, 2005.
LETTER DECISION
The above-referenced matter is before this court pursuant to defendants', Tomas Aleksandravicius, a/k/a Anthony Aleksandravicius individually and as heir and successor in interest to Kvirinas Aleksandravicius, Vytautas Aleksandravicius and Donatas a/k/a Donald Aleksandravicius individually and as heir and successor in interest to Kvirinas Aleksandravicius [hereinafter defendants] motion for summary judgment [New York Civil Practice Law and Rules § 3212]. Following submission by the parties on July 7, 2005, decision was reserved. Having reviewed the submissions of the parties, for the reasons set forth below, this court makes the following Findings of Fact and Conclusions of Law.
I. Findings of Fact:
Plaintiff, Zonum, Inc. commenced the instant foreclosure action on April 26, 2004 against defendants seeking to recover on a bond and mortgage executed on February 28, 1974. Plaintiff is the assignee of the mortgage. The mortgage obligated defendants to installments over a twenty five year period, with the last payment due in February of1999. In its complaint, plaintiff alleges that:
. . . the defendants . . . have failed and neglected to comply with the terms of said Bond and Mortgage by omitting and failing to pay the principal and interest or taxes, assessments, water rates, insurance premiums, escrow and/or any other charges, all as more fully appears in Exhibit C' and accordingly hereby elects to cal due the entire amount secured by the Bond and Mortgage . . .
[Plaintiff's Complaint at ¶ 7].
The moving defendants predicate their motion for summary judgment on two arguments, first that the instant action is barred by the applicable six year Statute of Limitations [New York Civil Practice Law and Rules § 213], and in the alternative, that it is barred by the equitable doctrine of merger. In support of its argument that the instant motion is barred by the Statute of Limitations, counsel for the moving defendants argue:
Attached . . . is an amortization schedule that was prepared using the terms set forth in the mortgage. This schedule clearly indicates that the principle [sic] would have been reduced to the approximate amount of $70,996.64 in September of 1977. After that point in time no other payments of principal or interest could have been made or the assignments described below would have reflected a lesser amount of principal due and owing.
As a consequence of the facts as set forth above, it is clear that any cause of action for foreclosure on the mortgage accrued no later than October of 1977 . . .
Further the mortgage does not contain a final payment due date but only states that the payments shall commence on April 1, 1974 and shall continue monthly for a period of 25 years. The mortgage further states that the whole amount shall become due and payable upon the default of any payment. Thus the action clearly accrued in October of 1977.
[Defendants' Counsel's Affirmation in Support of Summary Judgment at ¶¶ 7-9].
In opposition, plaintiff's counsel argues:
It is not clear from the moving papers the significance of the October 1977' date.
Apparently, the defendant [sic] is relying upon an acceleration clause contained within the boilerplate of the mortgage . . .
But the acceleration clause of the mortgage is at the option of the mortgagee.
The mortgage at issue is dated February 28, 1974.
The mortgagors were obligated to play in installments over the 25 year period.
Thus the statute of limitations began to run on the maturity date, to wit in 1999.
[Plaintiff's Counsel's Affirmation in Opposition to Summary Judgment at ¶¶ 17-23 [emphasis original]].
With respect to the equitable doctrine of merger, defendants' counsel argues:
The Plaintiff is nothing more than a sham corporation acting on behalf of the Defendant Vytautas Vebeliunas and the fraudulent action of its officers . . . constitute ultra vires acts which would permit the court to pierce the corporate veil. If the Plaintiff acquired the mortgage by assignment, it acquired the mortgage on behalf of and for the benefit of Defendant Vytautas Vebeliunas. Vebeliunas, however had a duty to pay the entire principal . . . of the mortgage as a joint owner of the Property. Therefore, the same person, Vebeliunas, acquired the mortgage and had the duty to pay same, thereby extinguishing the mortgage.
[Defendants' Counsel's Affirmation in Support of Summary Judgment at ¶¶ 12]. In opposition,
plaintiff's counsel argues:
The defendant's [sic] counsel affirms without a scintilla of evidence that the plaintiff corporation is somehow-someway creating a merger.
The defendant [sic] has not even come close to meeting its burden of proof.
Conclusory allegations are insufficient as a matter of law.
A set forth in the accompanying party affidavit, the defendant Vytautas Vebeliunas is neither a shareholder or officer of the plaintiff corporation.
[Plaintiff's Counsel's Affirmation in Opposition to Summary Judgment at ¶¶ 31-34].
II. Conclusions of Law:
A. Statute of Limitations:
Prior to reaching the issues before the court, it should be noted that a review of the submissions of the parties fails to establish the date on which the defendants first failed to remit payment to plaintiff or its predecessors in interest. However, for the reasons set forth below, such failure is not, under the circumstances of the instant action necessary for the court to determine the issues before it.
New York Civil Practice Law and Rules § 213 provides, in pertinent part: "The following actions must be commenced within six years . . . [4] an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond, note or mortgage so secured, or upon a mortgage of real property, or any interest therein." N.Y.Civ.Prac.L. R. § 213[4] (McKinney 2003). It is well settled that:
The Statute of Limitations in a mortgage foreclosure action begins to run six years from the due date for each unpaid installment or the time the mortgagee is entitled to demand full payment, or when the mortgage has been accelerated by a demand or an action is brought ( see, Serapilio v. Staszak, 255 AD2d 824; Loiacono v. Goldberg, 240 AD2d 476, 477; Pagano v. Smith, 201 AD2d 632, 633).
Saini v. Cinelli Enterprises Inc., 289 AD2d 770, 771 (3rd Dept. 2001), lv.to.app.denied, 98 NY2d 602 [emphasis added]. As more fully set forth above, moving defendants' counsel argues, attaching a copy of an amortization schedule that the last payment on the mortgage must have been made in October of 1977, and that such default, under the language of the mortgage, triggered the applicable Statute of Limitations.
Specifically, counsel for the moving defendants avers: "The mortgage further states that the whole amount shall become due and payable upon the default of any payment." However, paragraph four of the bond and mortgage provides: "That the whole of said principal sum and interest shall become due at the option of the mortgagee after default in the payment of any installment of principal or of interest for ___ days . . ." [February 28, 1974 Bond and Mortgage at ¶ 4 [emphasis added]]. Thus:
[w]here, as here, a mortgage is payable in installments, there are separate causes of action for each installment accrued, and the Statute of Limitations [begins] to run, on the date each installment [becomes] due' ( Pagano v. Smith, 201 AD2d 632; see also, Loiacono v. Goldberg, 240 AD2d 476; Khoury v. Alger, 174 AD2d 918).
Although acceleration of the mortgage will trigger the Statute of Limitations against the entire debt ( see, Loiacono v. Goldberg, supra), here acceleration of the mortgage debt was at the option of the Trust, and the Trust did not exercise that option. Accordingly, recovery of installments due within six years of the commencement of Action No. 2, including the installment due upon the recording of the deed conveying lot five to Pepe, are not time-barred ( see, Reliance Fed. Sav. Bank v. Altman, 269 AD2d 380; Loiacono v. Goldberg, supra; Pagano v. Smith, supra).
Esther M. Mertz Trust v. Fox Meadow Partners, Ltd., 288 AD2d 338, lv.to app.dismissed, 97 NY2d 714 (2nd Dept. 2001); see also, Notarnicola v. Lafayette Farms, Inc., 288 AD2d 198 (2nd Dept. 2001); EMC Mortgage Corp. v. Patella, 279 AD2d 604 (2nd Dept. 2001); 78 NY Jur. 2d Mortgages § 459, Accrual of cause of action — Effect of acceleration clause; 2B Carmody-Wait 2d § 13:251, Effect of acceleration clause — Mortgage.
In the instant action, there is not scintilla of evidence before the court that the plaintiff or its predecessors in interest exercised the optional acceleration clause in the mortgage, and thus the instant action was timely commenced within six years of the time the mortgagee was entitled to demand full payment. Thus, defendants' motion to dismiss the complaint on the ground of the Statute of Limitations is DENIED without prejudice to renewal upon the completion of disclosure.
For the first time in their reply papers, counsel for the moving defendants raises the equitable defense of laches as a ground on which this action should be dismissed. However, having found, at this juncture that the action is timely, the doctrine of laches has no applicability to the instant action. As succinctly observed by the Appellate Division, Third Department, in First Federal Sav. and Loan Ass'n of Rochester v. Capalongo, 152 AD2d 833 (3rd Dept. 1989), app.dismissed, 74 NY2d 945:
The applicable case law of New York, though seemingly unevenly applied, appears to be that if brought within the limitations period for the commencement of suit, the doctrine of laches is no defense to a foreclosure action ( Wesselman v. Engel Co., 309 NY 27, 32 [Dye, J., dissenting] [footnote omitted]; Monroe County Sav. Bank v. Baker, 147 Misc. 522, 523; see also, Kings County Trust Co. v. Derx, 237 App.Div. 548, 551; cf., National Sav. Bank of City of Albany v. Fermac Corp., 241 App.Div. 204, 207, affd. 266 NY 443; contra, Inland Credit Corp. v. Gold, 87 AD2d 753, 754 , lv. denied, 57 NY2d 608; Verna v. O'Brien, 78 Misc 2d 288, 291). But even if the defense were available here, plaintiff would still be entitled to summary judgment for defendants have not demonstrated, or for that matter alleged, that they changed their position or failed to take some action as a result of the delay to their prejudice (see, Orange Rockland Utils. v. Philwold Estates, 70 AD2d 338, 343, mod. on other grounds 52 NY2d 253, 260-261).
Id. at, 834 [emphasis added].
B. Merger:
In defining the equitable doctrine of merger, the Appellate Division, Second Department held: "As a general rule of law, a mortgage may become merged and extinguished where title to the land and ownership of the mortgage become vested in the same person (see, 78 N.Y.Jur.2d, Mortgages and Deeds of Trust, § 314; Becker v. Snowden Dev. Corp., 66 Misc 2d 1060; American Sav. Loan Assn. v. Eidelberg, 54 Misc 2d 668)." Cambridge Factors, Inc. v. Thompson, 215 AD2d 427 (2nd Dept. 1995); see also, 200 E. 64th St. Corp. v. Manley, 44 AD2d 11 (3rd Dept. 1974). Simply stated:
A merger is accomplished when two or more estates comprising the whole legal and equitable interest in property involved unite in the same person who then becomes the absolute owner. It requires the existence of a greater and lesser estate, and on merging taking place, the lesser estate is extinguished and absorbed by the greater.
Becker v. Snowden Development Corp., 66 Misc 2d 1060, 1062 (Co.Ct. Broome Co. 1970). It is further well settled that: "The doctrine of merger has never been especially favored in equity ( Dunkum v. Maceck Bldg. Corp., 256 NY 275, 281; Smith v. Roberts, 91 NY 470, 475)." Jemzura v. Jemzura, 36 NY2d 496, 502 (1973); see also, Riley v. South Somers Development Corp., 222 AD2d 113 (2nd Dept. 1996); Arch Assets, Inc. v. AL LP Realty Co., 227 AD2d 295 (1st Dept. 1996).
As more fully set forth above, the court finds that the moving defendants' motion for summary judgment is based upon little more than the conjecture and surmise of their counsel that the holder of the mortgage and title to the property are one and the same, thus implicating the doctrine of merger. The court cannot, however, AT THIS POINT, prior to the completion of discovery rule on the merits of the defense, in light of the fact that the facts supporting such a defense are uniquely within the knowledge of the plaintiff corporation. Thus, the motion to dismiss the complaint based upon the doctrine of merger is DENIED without prejudice to renewal upon the completion of disclosure.
It is important to note that a substantiated claim similar to that advanced by the defendants in this action was found to be sufficient to implicate the doctrine of merger. see, Cambridge Factors, Inc. v. Thompson, supra at 427 ["We agree with the Supreme Court that, under the circumstances of this case, it was clear that the appellant, through the use of aliases and alter egos, held title to the property under one name and held the first mortgage in the name of a sham corporation with the apparent purpose of perpetrating a fraud upon the plaintiff, the holder of a second mortgage. Accordingly, the court did not err in finding that a merger of the interests of the owner and the first mortgagee had occurred."].
The foregoing constitutes the Letter Decision of the court. Counsel for the plaintiff is to submit an Order consistent herewith within five days of receipt for signature.
Dated: August 4, 2005 at Oswego, New York.