| American Holdings Inv. Corp. v Josey |
| 2010 NY Slip Op 02495 [71 AD3d 927] |
| March 23, 2010 |
| Appellate Division, Second Department |
| American Holdings Investment Corp., Plaintiff, v YvonneJosey, Respondent. Vincent Longobardi, Nonparty Appellant. (Action No. 1.) Yvonne Josey,Respondent, v Dino James, Defendant. Vincent Longobardi, Nonparty Appellant. (Action No.2.) |
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In an action to foreclose a mortgage and for related relief (action No. 1), and a related actionsounding in fraud and to impose a constructive trust (action No. 2), the nonparty VincentLongobardi, as assignee of the interest in surplus money due to Yvonne Josey in action No.1,appeals from an order of the Supreme Court, Kings County (Saitta, J.), dated September 24,2008, which granted the motion of Yvonne Josey to consolidate the actions and denied hismotion in action No. 1 to confirm a referee's report dated August 31, 2007, which, following ahearing, inter alia, recommended that all surplus money be distributed to him.
Ordered that the order is reversed, on the law, with costs, the motion of Yvonne Josey toconsolidate the actions is denied, the motion of Vincent Longobardi to confirm the referee'sreport is granted, and the matter is remitted to the Supreme Court, Kings County, for distributionof the surplus money to Vincent Longobardi.
Yvonne Josey is the defendant mortgagor in action No. 1, a foreclosure action. Eventually,the mortgaged property was sold at a foreclosure sale, and the referee reported that there weresurplus funds of $207,287.22. Those surplus funds were ultimately deposited with the City ofNew York.
Following the public sale of the foreclosed property, Josey executed a power of attorneydated January 20, 2004, giving her son, Dino James, the authority "to take and [sic] anysteps, sign any documents and collect any money with reference to the foreclosure action. . . including, but not limited to any surplus money proceedings in said action." OnMarch 30, 2004, James, as attorney in fact for Josey, executed an "Assignment of Claim forSurplus Monies" in favor of the appellant, Vincent Longobardi. In return for the assignment,Longobardi paid James the sum of $99,740. James allegedly never turned that sum over to Josey.
After Longobardi moved to confirm the referee's report of sale and for an order of [*2]distribution directing that the $207,287.22 in surplus funds bedistributed to him by virtue of the assignment, Josey moved, inter alia, for the appointment of areferee to determine how much money was due her and that the surplus funds be distributed toher on the ground that James fraudulently induced her to execute the power of attorney bymisrepresenting that he was getting a loan to pay off the outstanding mortgage.Ultimately, the Supreme Court appointed Blaise F. Parascandola as the referee to determine thedisposition and rights to the surplus funds.
Following a hearing pursuant to RPAPL 1361, the referee issued a report dated August 31,2007, wherein he determined that contrary to Josey's contention, no reservation was made in thepower of attorney indicating that the power was only for the purpose of obtaining refinancing.The referee added that Josey's fraud claim would only be allowable against James and that "[n]osuch claim was being made by Josey against [appellant]." He also noted that while Joseyappeared to satisfy the criteria for the imposition of a constructive trust, she "has not interposed acause of action, has not entertained a counterclaim or a third party action or commenced aseparate action for fraud against Dino James." The referee further determined that the appellantwas a bona fide purchaser for value and concluded that the appellant had the "prior lien for thesurplus . . . to the exclusion of [Josey]." The referee also concluded that "[t]hiscourt appears to have no jurisdiction in this surplus money proceeding to adjudicate the claim ofDefendant Yvonne Josey to the surplus monies against Dino James" as James was not named asa defendant in action No. 1. The referee stated that the recommendation was without prejudice toJosey pursuing her claim to the surplus money in a separate action. By notice of motion datedSeptember 12, 2007, Longobardi moved to confirm the referee's report, and have the surplusfunds released to him.
On September 24, 2007, Josey commenced action No. 2 against Dino James only, andsimultaneously moved to consolidate that action with action No. 1, the foreclosure action. Josey'smotion was referred to the justice presiding over action No. 1. In the order appealed from, theSupreme Court granted Josey's motion and denied Longobardi's motion. The Supreme Courtfound that Josey would be severely prejudiced if her allegations of a constructive trust were notconsidered in assigning the interests in the surplus money, whereas Longobardi had not shownprejudice. The Supreme Court rejected the referee's finding that the appellant was a bona fidepurchaser for value. Longobardi appeals, arguing that the referee's findings are substantiallysupported by the record and that the Supreme Court improvidently exercised its discretion ingranting the consolidation motion. We agree and reverse.
RPAPL 1361 (2) provides that the Supreme Court, by reference or otherwise, shall ascertainthe amount due to any claimants and the priority of any liens for purposes of the distribution ofsurplus money. Furthermore, a "referee may inquire into and determine all questions of law andfact, usury, fraud or the like, and every question tending to show the equities of the claimant, tothe end that it may be decided in such proceedings finally and on the merits to whom suchsurplus money belong" (Wilcox v Drought, 36 Misc 351, 352-353 [1901], affd71 App Div 402 [1902]; see Shankman v Horoshko, 291 AD2d 441, 442 [2002];Citibank v Schroeder, 266 AD2d 332, 333 [1999]; Corporate Inv. Co. v MountVernon Metal Prods. Co., Inc., 206 App Div 273, 276 [1923]).
In this instance, the issue of Longobardi's status as a bona fide purchaser was raised beforethe referee, who concluded, in the face of Josey's opposition, that he was. James's authority toassign Josey's interest was encompassed in the plain language contained in the power of attorneygiving James the power to take "any" steps, sign "any" documents and collect "any" money "withreference to the . . . surplus money proceedings." This is consistent with theprinciple that "a person with a vested interest or lien upon the land may assign or convey thatinterest, and that such an assignment or conveyance will be recognized in a surplus moneyproceeding" (Chase Manhattan Mtge.Corp. v Hall, 18 AD3d 413, 414 [2005]; see Shankman v Horoshko, 291 AD2dat 441). Even if the power of attorney had contained language relating to refinancing, James'sauthority to act in that regard would have been circumscribed because the mortgagor's right ofredemption was extinguished once the property was sold at the foreclosure sale, "even though nodeed had been delivered to the purchaser" (Chase Manhattan Mtge. Corp. v Harper, 54 AD3d 987, 988[2008]).
Since the power of attorney, on its face, granted James the authority to assign Josey's [*3]interest in the surplus funds, and since there is no allegation that theappellant had actual or constructive notice of Josey's adverse claim, it cannot be said that theappellant had "knowledge of facts that would lead a reasonably prudent purchaser to makeinquiry" (Bachurski v Polish & SlavicFed. Credit Union, 33 AD3d 739, 741 [2006]). Accordingly, the record supports thereferee's finding that Longobardi is a bona fide purchaser.
Contrary to the Supreme Court's finding, the consideration paid by Longobardi for theassignment does not shock the conscience of the court as to be deemed inadequate (seePolish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400, 408 [1983];Federal Deposit Ins. Corp. v Forte, 144 AD2d 627, 631 [1988]). Furthermore, while theSupreme Court pointed to the fact that Longobadri took the assignment from James after the saleas an indication of fraud, it ignored Josey's action in also executing the apparently unlimitedgeneral power of attorney after the foreclosure sale took place. Finally, we note Josey's failure toname Longobardi as a defendant in action No. 2, her action to impress a constructive trust on thesurplus funds, notwithstanding her awareness of him by way of her participation in theproceeding before the referee. Thus, the referee's determination that Longobardi was a bona fidepurchaser is correct.
Since there are no common issues of fact or law here, consolidation would not further thestated goal of CPLR 602 (a) of "avoiding unnecessary costs or delay" (see Skelly v SachemCent. School Dist., 309 AD2d 917, 918 [2003]; Stephens v Allstate Ins. Co., 185AD2d 338 [1992]).
Based on this record, Longobardi's motion to confirm the referee's report should have beengranted (see Shankman v Horoshko, 291 AD2d at 442; Chase Manhattan Mtge. Corp.v Hall, 18 AD3d at 415; Fidelity N.Y. v Madden, 228 AD2d 473 [1996]) and Josey'smotion to consolidate should have been denied (see Skelly v Sachem Cent. School Dist.,309 AD2d at 918; Stephens v Allstate Ins. Co., 185 AD2d at 339). Accordingly, thematter is remitted to the Supreme Court, Kings County, to distribute the surplus money toLongobardi. Dillon, J.P., Florio, Hall and Sgroi, JJ., concur.