| Vitvitsky v Heim |
| 2008 NY Slip Op 05626 [52 AD3d 1103] |
| June 19, 2008 |
| Appellate Division, Third Department |
| Jack Vitvitsky, Appellant-Respondent, v David Heim et al.,Respondents-Appellants. |
—[*1] Wilkins & Griffin, P.L.L.C., Lake Placid (John T. Wilkins of counsel) forrespondents-appellants.
Spain, J. Cross appeals from an order of the Supreme Court (Dawson, J.), entered September 17,2007 in Essex County, which, among other things, partially granted defendants' motion to dismiss thecomplaint.
In July 2000, defendant David Heim was the sole passenger in an airplane piloted by plaintiff whenit crashed into a golf course in the Village of Lake Placid, Essex County. Heim and his spouse,derivatively, commenced a personal injury action against plaintiff and others to recover for the seriousinjuries that Heim sustained as a result of the crash. A stipulated settlement (hereinafter the settlementagreement) was reached by plaintiff and the Heims in January 2006, which provided, among otherthings, that a $500,000 judgment would be entered against plaintiff in favor of the Heims and become alien against plaintiff's real property. The Heims agreed that they would not seek to "foreclose upon orotherwise attempt to collect their judgment" during plaintiff's lifetime so long as plaintiff, among otherthings, protected the Heims' security interest by remaining current on property taxes and naming theHeims as insured under his homeowner's insurance policy. The settlement agreement further providedthat a deed transferring the property to the Heims would be held in escrow by the law firm representingthe Heims unless a "material default" of the agreement occurred. The settlement agreement documentwas incorporated but not merged into a judgment that was subsequently entered in [*2]Essex County in July 2006.
At the time the judgment had been entered, plaintiff had not added the Heims as additional insuredson his homeowner's insurance policy and taxes were due on the real property dating back to 2001 andtotaling more than $21,784. The Heims, through their counsel, defendant Wilkins & Griffin, PLLC,repeatedly notified plaintiff's attorney of plaintiff's obligations under the settlement agreement and,eventually, gave plaintiff a 30-day time period to "cure the defects" before plaintiff's deed transferringhis property to the Heims would be released from escrow and recorded. In August 2006, when plaintifffailed to respond, the deed was recorded at the office of the Essex County Clerk and the Heimsobtained a judgment of eviction the following November.
Plaintiff commenced the instant action in February 2007, alleging, first, that he had not been inmaterial breach of the settlement agreement so as to justify the release and recording of the deed to hisproperty; second, that forfeiture of his property was inequitable; third, that the deed in escrow wasessentially a mortgage instrument and that he was entitled to the rights of a mortgagor; and, finally, thatWilkins & Griffin breached a fiduciary duty to plaintiff by recording the deed and obtaining the evictionorder. Defendants moved to dismiss the complaint and plaintiff cross-moved to amend the complaint.Supreme Court partially granted defendants' motion, dismissing plaintiff's first, second and fourth causesof action, and denied plaintiff's cross motion to amend his pleadings. The parties cross-appeal, and wenow affirm.[FN*]
We turn first to defendants' contention that plaintiff's third cause of action—asserting that thedeed to plaintiff's real property functioned as a mortgage under the terms of the settlement agreementand, therefore, defendants were required to foreclose upon the deed in order to evict plaintiff from thepremises and assume control of the property—should have been dismissed. Defendants claimthat the deed and settlement agreement can only be interpreted to mean that the deed was directcompensation to the Heims and not merely as a security for plaintiff's debt. The settlement agreementclearly states that the deed may "be released from escrow and recorded" under a number of specificcircumstances, lending support to defendants' argument that the property was intended as direct, albeitconditional, compensation.
However, the applicable statutory and case law of this state make it clear that the holding of a deedin escrow is not sufficient, in and of itself, to demonstrate that the deed will operate as an actualconveyance. Real Property Law § 320 provides that "[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; and the person for whosebenefit such deed is made, derives no advantage from the recording thereof" (see Leonia Bank vKouri, 3 AD3d 213, 216-217 [2004]; Basile v Erhal Holding Corp., 148 AD2d 484, 485[1989], lv denied 75 NY2d 701 [1989]). "Significantly, the statute does not require aconclusive showing that the transfer was intended as a security; it is sufficient that the conveyance'appears to be' intended only as a security in the nature of a mortgage" (Leonia Bank v Kouri,3 AD3d at 217, quoting Real Property Law § 320). Indeed, "the giving of a deed to [*3]secure a debt, in whatever form and however structured, creates nothingmore than a mortgage" (Leonia Bank v Kouri, 3 AD3d at 213, 216-217) "giving to the partiesthe relative rights of mortgagor and mortgagee" (11 West's McKinney's Forms Real Property Practice§ 5A:05 [2008]; see Henley v Foreclosure Sales, Inc., 39 AD3d 470, 470 [2007]).
We agree with Supreme Court that plaintiff made sufficient allegations to state a cause of action forviolation of plaintiff's rights as a mortgagor. The settlement agreement contains language suggesting thatthe escrowed deed was to operate as a mortgage. It specifically states that the $500,000 judgment shall"become a lien against [plaintiff's] real property," that, so long as plaintiff is alive and not in breach of theagreement, "[the Heims] agree not to foreclose upon" their judgment, and the escrowed deed isintended "[t]o secure the timely performance of [plaintiff's] obligations." Thus, despite the language inthe settlement agreement stating that, should plaintiff breach, the deed may be "released from escrowand recorded"—given the law indicating that a deed, absolute on its face, is insufficient toestablish that it was intended as more than a security instrument—plaintiff successfully stated acause of action based on his potential rights as a mortgagor (see Leonia Bank v Kouri, 3AD3d at 218; Gioia v Gioia, 234 AD2d 588, 589 [1996], lv denied 89 NY2d 814[1997]; Basile v Erhal Holding Corp., 148 AD2d at 486; Pioneer Vil. Dev. Corp. v XARCorp., 55 AD2d 769, 769 [1976]). Accordingly, Supreme Court properly denied defendants'motion to dismiss the third cause of action.
Plaintiff's challenge to the dismissal of his first cause of action—alleging that he was not inbreach of the settlement agreement because it did not state when he had to add defendants asadditional insured—is unpersuasive. The settlement agreement expressly provided that,"[d]uring the period of this agreement" plaintiff would ensure that the real property wasinsured and would name both of the Heims as additional insureds (emphasis added). The parties signedthe agreement in January 2006 and judgment was entered in July 2006, yet plaintiff did not add DavidHeim to his policy until October 2006. Even assuming that a claim could be made that plaintiff's delaywas reasonable or permitted under the terms of the settlement agreement, it is undisputed that plaintiffnever added Juliette Heim as an additional insured. Accordingly, plaintiff was clearly in default of thesettlement agreement and, thus, Supreme Court's dismissal of plaintiff's first cause of action was whollyproper. We have considered plaintiff's challenges to the dismissal of his remaining causes of action andhold that they were also properly dismissed by Supreme Court for failure to state a cause of action.
Mercure, J.P., Lahtinen, Kane and Malone Jr., JJ., concur. Ordered that the order is affirmed,without costs.
Footnote *: Plaintiff has abandoned his challengein this Court to the denial of his cross motion to amend the complaint by failing to address it in his brief(see Peak v Northway Travel Trailers, Inc., 27 AD3d 927, 928 [2006]).