From Casetext: Smarter Legal Research

People's United Bank v. Whitford Dev., Inc.

Supreme Court, Suffolk County, New York.
May 13, 2013
39 Misc. 3d 1228 (N.Y. Sup. Ct. 2013)


No. 35728–12.


PEOPLE'S UNITED BANK, successor by merger to Bank of Smithtown, Plaintiff, v. WHITFORD DEVELOPMENT, INC., New York State Department Of Taxation And Finance, Victor Irizarry, “John Doe No. I to John Doe No. XXX” inclusive, the last thirty names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the complaint, Defendants.

Jaspan Schlesinger, LLP, Garden City, Attys. For Plaintiff. Peter. Gierer, Esq., Hauppauge, Atty. For Defs. Whitford & Irizarry.

Jaspan Schlesinger, LLP, Garden City, Attys. For Plaintiff. Peter. Gierer, Esq., Hauppauge, Atty. For Defs. Whitford & Irizarry.
Charles E. Gary, Esq., Assist. Attorney General, Hauppauge, Atty. For NYS Dept. of Taxation.


ORDERED that this motion (# 001) by the plaintiff for accelerated judgments against the defendants, substitution and deletion of parties, the appointment of a referee to compute and other incidental relief is considered under CPLR 3212, 3215 and RPAPL 1321 and is granted.

The plaintiff commenced this action to foreclose two mortgages given by the corporate defendant, Whitford Development, Inc., to the plaintiff's predecessor-in-interest by merger on January 27, 2006 that encumber certain parcels in Riverhead, New York. The second mortgage secured a building loan note in the amount of $1,000,000.00 while the First mortgage secured a commercial First note in the amount of $1,443,750.00. Also executed on January 27, 2006 was a broad and unconditional written guaranty of the obligations owing from the corporate defendant by defendant Irizarry. The plaintiff alleges that the defendants defaulted in their payment obligations in January of 2008. Following service of the summons and complaint, issue was joined by service of a joint answer by the obligor defendants that includes some nine affirmative defenses.

The plaintiff now moves for an order: (1) awarding it summary judgment on its claims for foreclosure and sale, counsel fees and deficiency judgments against the answering defendants together with a dismissal of the affirmative defenses and counterclaims asserted against the plaintiff; (2) the deletion of the unknown defendants listed in the caption; and (3) appointing a referee to compute amounts due under the subject mortgage. The plaintiff also seeks accelerated judgments on its FOURTH cause of action for declaratory relief by which the second mortgage would be elevated to the same priority of that enjoyed by the First mortgage. The motion is considered under CPLR 3001, 3215, 3212 and RPAPL § 1321 and is granted.

The moving papers established the plaintiff's entitlement to summary judgment on its complaint to the extent it asserts claims for foreclosure and sale and a deficiency judgment against the corporate defendant as such moving papers included copies of the mortgages, the unpaid notes and due evidence of a default under the terms thereof ( seeCPLR 3212; RPAPL § 1321; Citibank, N.A. v. Van Brunt Prop., LLC, 95 AD3d 1158, 945 N.Y.S.2d 330 [2d Dept 2012]; Garrison Special Opportunities Fund, L.P. v. Arthur, 82 AD3d 1042, 918 N.Y.S.2d 894 [2d Dept 2011]; Swedbank, AB v. Hale Ave. Borrower, LLC., 89 AD3d 922, 932 N.Y.S.2d 540 [2d Dept 2011]; Rossrock Fund II, L.P. v. Osborne, 82 AD3d 737, 918 N.Y.S.2d 514 [2d Dept 2011] ). The moving papers further established the plaintiff's entitlement to summary judgment on its pleaded demands for a deficiency judgment against the answering guarantor defendant by the production of the written guarantee signed by him together with the other loan documents listed above and proof of defaults in payment by the corporate borrower/note obligor and the guarantor ( see Emigrant Mtge. Co., Inc. v. Beckerman, 105 AD3d 895, 2013 WL 1632059 [2d Dept 2013]; Solomon v. Burden, 104 AD3d 839, 961 N.Y.S.2d 535 [2d Dept 2013]; Baron Assoc., LLC v. Garcia Group Enter., 96 AD3d 793, 946 N.Y.S.2d 611 [2d Dept 2012]; Archer Capital Fund, L.P. v. GEL, LLC, 95 AD3d 800, 944 N.Y.S.2d 179 [2d Dept 2012] ). The moving papers also established a prima facie showing that each of the affirmative defenses asserted in the answer of the obligor defendants are without merit.

A prima facie showing of summary judgment was also advanced by the plaintiff in its moving papers as supplemented with respect to the plaintiff's FOURTH cause of action sounding in declaratory relief for consolidation of the First and second mortgages. Since the foreclosure of a mortgage extinguishes the liens of owners of subordinate mortgages who have been jurisdictionally joined as party defendants to the action and relegates such owners to the remedies, if any, that are available in surplus money proceedings of the type contemplated by RPAPL § 1371 ( see Polish Natl. Alliance of Brooklyn, U.S.A. v. White Eagle Hall Co., Inc., 98 A.D.2d 400, 470 N.Y.S.2d 642 [2d Dept 1983]; see also Board of Mgrs. of Parkchester N. Condominium v. Alaska Seaboard Partners Ltd. Partnership, 37 AD3d 332, 831 N.Y.S.2d 370 [1st Dept 2007]; New Falls Corp. v. Board of Mgrs. of Parkchester N. Condominium, Inc., 10 AD3d 574, 782 N.Y.S.2d 425 [1st Dept 2004] ), the foreclosure of multiple mortgages in a single action is not generally sought by the owners of mortgages of unequal priorities.

There are, however, certain limited circumstances in which a plaintiff may seek foreclosure of one or more mortgages of unequal priority without violating the extinguishment rule that is critical to the remedy of foreclosure and sale. For example, a plaintiff may ask the court to consolidate mortgages of differing priority by declaring them to be of equal priority thereby removing the multiple mortgage conundrum from the case ( see Bergman on New York Mortgage Foreclosures § 2.07 p 2–26.6). So long as the demand for such declaratory relief is expressly pleaded and due proof is put before the court that shows that the elevation of the subordinate mortgage by consolidation of such mortgage with the First by reason of their unity of the time and subject matter will not adversely affect the rights of persons having interests in the premises, including intervening interests, the foreclosure of two separate mortgages of differing priorities may be successfully prosecuted in a single action.

Here, the plaintiff has advanced a duly pleaded claim for consolidation of the First and Second mortgages by a judicial declaration elevating the Second to the same priority as the First. Under well established precepts of contract law, contemporaneous instruments between the same parties relating to the same subject matter are entitled to be read together and interpreted as forming part of one and the same transaction ( see County of Suffolk v. Long Is. Power Auth., 100 AD3d 944, 954 N.Y.S.2d 619 [2d Dept 2012]; 131 Heartland Blvd. Corp. v. C.J. Jon Corp., 82 AD3d 1188,supra; Davimos v. Halle, 60 AD3d 576, 877 N.Y.S.2d 20 [1st Dept 2009] ). The two mortgages at issue here were executed on the same day, by the same parties and have a common subject matter. Accordingly, they may be read together as a single unified, interdependent document. The plaintiff has further demonstrated that the granting of such relief will not adversely affect the rights of others since the plaintiff's mortgages were executed contemporaneously and without any intervening interests posted in the public record. The plaintiff has thus made a prima facie showing of its entitlement to summary judgment on its FOURTH cause of action for a consolidation of the Second mortgage with the First mortgage so as to have equal priority with that of the First mortgage, thereby allowing both to be sold at one public auction of the premises. The two remaining causes of action set forth in the complaint (both labeled “Fifth”) wherein alternative relief was advanced from that set forth in the FOURTH cause of action and are thus dismissed as academic.

It was thus incumbent upon the answering defendants to raise one genuine question of fact effecting a rebuttal of the plaintiff's prima facie showing or in support of the legal defense available to them ( see Flagstar Bank v. Bellafiore, 94 AD3d 1044, 943 N.Y.S.2d 551 [2d Dept 2012]; Grogg Assocs. v. South Rd. Assocs., 74 AD3d 1021, 907 N.Y.S.2d 22 [2d Dept 2010]; Washington Mut. Bank v. O'Connor, 63 AD3d 832, 880 N.Y.S.2d 696 [2d Dept 2009]; J.P. Morgan Chase Bank, N.A. v. Agnello, 62 AD3d 662, 878 N.Y.S.2d 397 [2d Dept 2009]; Household Fin. Realty Corp. of New York v. Winn, 19 AD3d 545, 796 N.Y.S.2d 533 [2d Dept 2005] ). Notably, self-serving and conclusory allegations do not raise issues of fact and do not require the plaintiff to respond to alleged affirmative defenses which are based on such allegations ( see Charter One Bank, FSB v. Leone, 45 AD3d 958, 845 N.Y.S.2d 513 [3d Dept 2007]; Rosen Auto Leasing, Inc. v. Jacobs, 9 AD3d 798, 780 N.Y.S.2d 438 [3d Dept 2004] ). Where a defendant fails to oppose some or all matters advanced on a motion for summary judgment, the facts as alleged in the movants' papers may be deemed admitted as there is, in effect, a concession that no question of fact exists ( see Kuehne & Nagel, Inc. v. Baiden, 36 N.Y.2d 539, 369 N.Y.S.2d 667 [1975];see also Madeline D'Anthony Enter., Inc. v. Sokolowsky, 101 AD3d 606, 957 N.Y.S.2d 88 [1st Dept 2012]; Argent Mtge. Co., LLC v. Mentesana, 79 AD3d 1079, 915 N.Y.S.2d 591 [2d Dept 2010] ). A review of the opposing papers submitted by answering defendants reveals that the same were insufficient to raise any genuine question of fact requiring a trial on the merits of the plaintiff's claims for foreclosure and sale and likewise insufficient to demonstrate any bona fide defense to the plaintiff's claim for a judgment of foreclosure and sale ( see Cochran Inv. Co., Inc. v. Jackson, 38 AD3d 704, 834 N.Y.S.2d 198 [2d Dept 2007] ).

The defendants' claims that the complaint fails to state legally claims against the guarantor defendant are without merit. The complaint charges defendant Irizarry with liability by reason the corporate defendant's defaults in payment under the terms of both mortgages and a similar default by Irizarry's under the terms his written guaranty of such obligations. The complaint thus states a legally sufficient claim for recovery of a deficiency judgment against these obligor defendants in the event the sale proceeds are insufficient to cover the mortgage debts. The defendant's claim that questions of fact exist regarding the scope of defendant Irizarry's written guaranty are without merit. The guaranty is enforceable as written in accordance with its terms as it includes a guaranty of prompt payment of all claims, obligations and liability of th corporate defendant owing to the plaintiff's predecessor-in-interest and its successors ( see Marine Midland Bank, N.A. v. Simpson Edson, Inc, 120 A.D.2d 709, 502 N.Y.S.2d 774 [2d Dept 1986] ). As indicated above, a prima facie entitlement to judgment as a matter of law on the issue of liability with respect to the guaranty was made upon the production of the underlying note, the guaranty and due proof of the failure of the obligor defendants to make payment in accordance with the terms of those instruments ( see Emigrant Mtge. Co., Inc. v. Beckerman, 105 AD3d 895, 2013 WL 1632059,supra; Solomon v. Burden, 104 AD3d 839,supra ). The defendants' failed to rebut this prima facie showing by due proof that a question of fact exists with respect to such liability due to the defendants' possession of a legal defense or otherwise.

The defendants' nuanced challenges to the plaintiff's standing are also without merit. The defense of standing was waived by the defendants' failure to assert same as an affirmative defense in their answer ( see HSBC Bank USA, N.A. v. Taher, 104 AD3d 815, 2013 WL 1136611 [2d Dept 2013]; Deutsche Bank Natl. Trust Co. v. Pietranico, 102 AD3d 724, 957 N.Y.S.2d 868 [2d Dept 2013]; Bank of New York v. Alderazi, 99 AD3d 837, 951 N.Y.S.2d 900 [2d Dept 2012]; Wells Fargo Bank Minn., N.A. v. Mastropaolo, 42 AD3d 239, 244, 837 N.Y.S.2d 247 [2d Dept 2007] ). In any event, this newly raised standing defense is substantively insufficient since the plaintiff's status as the successor-by-merger to the original lender clearly vested in it the requisite standing to prosecute the claims interposed herein ( seeBanking Law § 602; Capital One, N.A. v. Brooklyn Flatiron, LLC, 85 AD3d 837, 925 N.Y.S.2d 350 [2011];Ladino v. Bank of America, 52 AD3d 571, 861 N.Y.S.2d 683 [2d Dept 2008]; Barclay's Bank of New York, N.A. v. Smitty's Ranch, 122 A.D.2d 323, 504 N.Y.S.2d 295 [2d Dept 1986] ).

The defendants' claims that the plaintiff should be estopped from enforcing its mortgages due to overreaching and/or bad faith conduct on its part which allegedly caused the defendants' defaults in payment is rejected as unmeritorious. These claims rest upon vague recollections of purported conversations defendant Irizarry allegedly had with bank officers during the course of the loan, in which, the bank was advised of the corporate defendant's worsening financial circumstances. Defendant Irizarry was allegedly led to believe that some accommodation would be made in the form of a modification to the payment schedule. Scenarios discussed allegedly included putting “interest on the back of the loan, in that due to the economy, the property was under water” ( see ¶ 10 of defendant Irizarry's affidavit in opposition) or by deferring loan payments until sales of lots were realized ( see id at ¶ 12). The bank allegedly caused the default in payment when it reneged on a purported promise to appraise the property and work something out by deferring loan payments “until sales were realized” and/or by refusing to accept interest only payments ( see id. at ¶¶ 11–12).

That a lender has no obligation to forebear its remedies before or after a default by a borrower or to modify the terms of its loan by the extension of a new loan or other refinance arrangement is clear ( see Graf v. Hope Bldg. Corp., 254 N.Y. 1, 4–5, 171 NE 884 [1930];Wells Fargo Bank, N.A. v. Meyers 2013 WL 1811781 [2d Dept 2013]; Wells Fargo Bank, N.A. v. Van Dyke, 101 AD3d 638, 958 N.Y.S.2d 331 [1st Dept 2012]; Key Intern. Mfg. Inc. v. Stillman, 103 A.D.2d 475, 480 N.Y.S.2d 528 [2d Dept 1984]; Valley Natl. Bank v. 58 Vlimp, LLC., 39 Misc.3d 1221(A), 2013 WL 1849124 [Sup.Ct. Suffolk County 2013]; JP Morgan Chase Bank, Natl. Assn. v. Ilardo, 36 Misc.3d 359, 940 N.Y.S.2d 829 [Sup.Ct. Suffolk County 2012]; Onewest Bank, FSB v. Davies, 38 Misc.3d 1230(A), 2013 WL 846573 [Sup Ct. Suffolk County 2013]; Flushing Preferred Funding Corp. v. Patricola Realty Corp., 36 Misc.3d 1240(A), 2012 WL 3984476 [Sup.Ct. Suffolk County 2012]; Carver Fed. Sav. Bank v. Redeemed Christian Church, 35 Misc.3d 1228(A), 954 N.Y.S.2d 758 [Sup.Ct. Suffolk County 2012]; US Bank Natl. Ass'n v. Major Holdings, LLC., 35 Misc.3d 1224(A), 953 N.Y.S.2d 554 [Sup.Ct. Suffolk County 2012] ). Consequently, a failure to modify or refinance an existing loan does not give rise to an estoppel or constitute bad faith, unclean hands or other conduct upon which a mortgagor defendant may predicate a cognizable defense to a claim for foreclosure and sale ( see Graf v. Hope Bldg. Corp., 254 N.Y. 1,supra; Jo–Ann Homes v.. Dworetz, 25 N.Y.2d 112, 302 N.Y.S.2d 799 [1969];Wells Fargo Bank, N .A. v. Van Dyke, 101 AD3d 638,supra; Key Intern. Mfg. Inc. v. Stillman, 103 A.D.2d 475,supra; JP Morgan Chase Bank, Natl. Assn. v. Ilardo, 36 Misc.3d 359,supra; Valley Natl. Bank v. 58 Vlimp, LLC., 39 Misc.3d 1221(A), supra; cf., Nassau Trust Co. v. Montrose Concrete Prods., 56 N.Y.2d 175, 451 N.Y.S.2d 663 [1982] ( potentially meritorious waiver defense based on oral assurances ); but see DiStefano v. Maclay, 102 Fed.Appx. 188 [C .A.2 2004] ( that parties communicate orally about the status of their affairs with a view toward concluding a contract does not indicate an agreement to perform the contract on any terms other than those stated in the written agreement and does not indicate a willingness to waive the contract's requirement for written waiver of any of its terms ). The court thus rejects the defendants' claims that oral negotiations between the lender and defendant Irizarry effected an enforceable modification upon which the defendants reasonably relied to their detriment and warrants the imposition of an estoppel against the plaintiff from enforcing the contractual rights and remedies conferred upon it under the loan documents.

To the extent that these oral discussion may be construed as settlement negotiations because they were engaged in after a default in payment had occurred, such negotiations do not furnish the defendants with a cognizable defense to the plaintiff's claims. A promise or agreement to negotiate “cannot be equated with a promise to finalize an agreement on a restructured mortgage” ( Massachusetts Mut. Life Ins. Co. v. Gramercy Twins Assocs., 199 A.D.2d 214, 217, 606 N.Y.S.2d 159 [1st Dept 1993] ). Consequently, the mere engagement in settlement discussions does not effect an enforceable forbearance or a modification of maturity dates or others terms of a mortgage that is the subject of a foreclosure action ( see Citibank, N.A. v. Van Brunt Prop., LLC., 95 AD3d 1158,supra; Citibank, N.A. v. Silverman, 85 AD3d 463, 925 N.Y.S.2d 442 [1st Dept 2011] ).

Finally, the defendants' claims that summary judgment is premature within the purview of CPLR 3212 since the parties have not engaged in pre-trial discovery proceedings are without merit. The rule at CPLR 3212(f) provides that “should it appear from affidavits submitted in opposition to the motion that facts essential to justify opposition may exist but cannot then be stated, the court may deny the motion or may order a continuance to permit affidavits to be obtained or disclosure to be had and may make such other order as may be just”. Appellate case authorities have long instructed that to avail oneself of the safe harbor this rule affords, the claimant must “offer an evidentiary basis to show that discovery may lead to relevant evidence and that the facts essential to justify opposition to the motion were exclusively within the knowledge and control of the plaintiff” (Martinez v. Kreychmar, 84 AD3d 1037, 923 N.Y.S.2d 648 [2d Dept 2011]; see Seaway Capital Corp. v. 500 Sterling Realty Corp., 94 AD3d 856, 941 N.Y.S.2d 871[2d Dept 2012] ). The “mere hope or speculation that evidence sufficient to defeat a motion for summary judgment may be uncovered' by further discovery is an insufficient basis for denying the motion” (Woodard v. Thomas, 77 AD3d 738 at 740, 913 N.Y.S.2d 103 [2d Dept 2010], quoting, Lopez v. WS Distrib., Inc., 34 AD3d 759, 760, 825 N.Y.S.2d 516;see Friedlander Organization, LLC v. Ayorinde, 94 AD3d 693, 943 N.Y.S.2d 538 [2d Dept 2012] ). Here, the defendants failed to meet this standard. Moreover, their participation in the transactions in which the mortgage loan documents were executed, coupled with their failure to advance any material and relevant defenses to the claims on which summary judgment have been demanded, further warrant the rejection of any claim of prematurity in the plaintiff's motion ( see Lambert v. Bracco, 18 AD3d 619, 795 N.Y.S.2d 662 [2d Dept 2005] ).

The court thus finds that the plaintiff's prima facie showing of its entitlement to summary judgment on its FIRST, SECOND, THIRD and FOURTH causes of action has not been rebutted. The plaintiff is thus awarded summary judgment on those claims against the answering defendants. In addition, the plaintiff is entitled to the declaratory relief it demanded in its FOURTH cause of action The court thus declares the Second mortgage to be consolidated with the First mortgage so as to have equal priority with that of the First mortgage, thereby allowing both to be sold at but one public auction of the premises.

Those portions of the instant motion wherein the plaintiff seeks an order dropping, as party defendants, the unknown defendants listed in the caption and an amendment of the caption to reflect same is granted.

The moving papers further established the default in answering on the part of the remaining defendants, none of whom served answers to the plaintiff's complaint. Accordingly, the defaults of all such defendants are hereby fixed and determined. Since the plaintiff has been awarded summary judgment against the answering defendants and has established a default in answering by the remaining defendants, the plaintiff is entitled to an order appointing a referee to compute amounts due under the subject note and mortgage ( seeRPAPL § 1321; Bank of East Asia, Ltd. v. Smith, 201 A.D.2d 522, 607 N.Y.S.2d 431 [2d Dept 1994]; Vermont Fed. Bank v. Chase, 226 A.D.2d 1034, 641 N.Y.S.2d 440 [3d Dept 1996]; LaSalle Bank, N.A. v. Pace, 31 Misc.3d 627, 919 N.Y.S.2d 794 [Sup.Ct. Suffolk County 2011], aff'd, 100 AD3d 970, 955 N.Y.S.2d 161 [2d Dept 2012] ).

Proposed Order of Reference, as modified by the court, has been signed.

Summaries of

People's United Bank v. Whitford Dev., Inc.

Supreme Court, Suffolk County, New York.
May 13, 2013
39 Misc. 3d 1228 (N.Y. Sup. Ct. 2013)
Case details for

People's United Bank v. Whitford Dev., Inc.

Case Details

Full title:PEOPLE'S UNITED BANK, successor by merger to Bank of Smithtown, Plaintiff…

Court:Supreme Court, Suffolk County, New York.

Date published: May 13, 2013


39 Misc. 3d 1228 (N.Y. Sup. Ct. 2013)
2013 N.Y. Slip Op. 50795
972 N.Y.S.2d 146