| Seidman v Industrial Recycling Props., Inc. |
| 2010 NY Slip Op 02769 [71 AD3d 1117] |
| March 30, 2010 |
| Appellate Division, Second Department |
| Sheldon Seidman, Respondent, v Industrial RecyclingProperties, Inc., et al., Appellants, et al., Defendants. |
—[*1] Smith, Buss & Jacobs, LLP, Yonkers, N.Y. (James R. Anderson of counsel), forrespondent.
In an action to foreclose a mortgage, the defendants Industrial Recycling Properties, Inc.,Zalman Alenick, Menachem Bronstein, and Hillel Alenick appeal, as limited by their brief, fromso much of an order of the Supreme Court, Nassau County (McCarty, J.), entered January 15,2009, as denied those branches of their motion which were (a) for summary judgment dismissingthe complaint insofar as asserted against the defendant mortgagor Industrial RecyclingProperties, Inc., (b) for leave to amend the pleadings to assert a counterclaim on behalf ofIndustrial Recycling Properties, Inc., sounding in conversion, (c) in effect, to vacate so much of ajudgment of the same court entered December 21, 2006, as was in favor of the plaintiff andagainst the defendant guarantors Zalman Alenick, Menachem Bronstein, and Hillel Alenick, and(d) to require the plaintiff to disgorge the proceeds of the foreclosure sale.
Ordered that the order is modified, on the law, (1) by deleting the provisions thereof denyingthose branches of the motion which were for summary judgment dismissing the complaintinsofar as asserted against the defendant mortgagor Industrial Recycling Properties, Inc., and, ineffect, to vacate so much of the judgment entered December 21, 2006, as was in favor of theplaintiff and against the defendant guarantors Zalman Alenick, Menachem Bronstein, and HillelAlenick, and substituting therefor provisions granting those branches of the motion, and (2) bydeleting the provision thereof denying that branch of the motion which was to require theplaintiff to disgorge the proceeds of the foreclosure sale, and substituting a provision thereforgranting that branch of the motion to the extent of directing that the proceeds of the foreclosuresale received by the plaintiff be placed in escrow pending a determination of the interest, if any,of Industrial Recycling Properties, Inc., in the proceeds of the sale and otherwise denying thatbranch of the motion; as so modified, the order is affirmed insofar as appealed from, with coststo the appellants, and the matter is remitted to the Supreme Court, Nassau County, for furtherproceedings consistent herewith.
The plaintiff mortgagee commenced this foreclosure action alleging, inter alia, that thedefendant mortgagor Industrial Recycling Properties, Inc. (hereinafter Industrial), failed tomaintain insurance on the subject property as required by the mortgage. In a prior appeal in thisaction, this Court reversed the Supreme Court's grant of that branch of the plaintiff's motionwhich was for summary [*2]judgment as to Industrial andreinstated Industrial's answer, finding that the plaintiff did not submit proof in admissible form todemonstrate that Industrial failed to maintain insurance on the subject property and that theplaintiff had complied with other conditions precedent permitting acceleration of the mortgagedebt (see Seidman v Industrial Recycling Props., Inc., 52 AD3d 678 [2008]). However,while that appeal was pending, since the action was not stayed pending appeal, the refereeappointed by the Supreme Court sold the subject property pursuant to a judgment of foreclosureand sale for the sum of $695,000.
Subsequently, Industrial and the defendant guarantors Zalman Alenick, MenachemBronstein, and Hillel Alenick (hereinafter collectively the defendant guarantors) moved, interalia, (a) for summary judgment dismissing the complaint insofar as asserted against Industrial,(b) for leave to amend the pleadings to assert a counterclaim on behalf of Industrial sounding inconversion, (c) in effect, to vacate so much of a judgment entered December 21, 2006, as was infavor of the plaintiff and against the defendant guarantors, and (d) to require the plaintiff todisgorge the proceeds of the foreclosure sale. As is relevant here, the Supreme Court denied themotion. We modify.
The Supreme Court should have awarded Industrial summary judgment dismissing thecomplaint insofar as asserted against it. Industrial met its initial burden of establishing itsentitlement to judgment as a matter of law by showing that the plaintiff failed to comply with acondition precedent permitting the acceleration of the mortgage debt, namely, that two or morefire insurance companies lawfully doing business in the State of New York refused coverage tothe plaintiff upon his application for fire insurance on the subject premises (see Winegrad vNew York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Zuckerman v City of NewYork, 49 NY2d 557, 562 [1980]). In response, the plaintiff failed to raise a triable issue offact regarding his failure to comply with that condition precedent (see Zuckerman v City ofNew York, 49 NY2d at 562).
The Supreme Court providently exercised its discretion in denying leave to Industrial toassert a counterclaim sounding in conversion. Under the circumstances of this case, such acounterclaim would be palpably insufficient as well as patently devoid of merit (see ZendlerConstr. Co., Inc. v First Adj. Group, Inc., 59 AD3d 439, 440 [2009]; Garelick vCarmel, 141 AD2d 501, 502 [1988]; Boll v Town of Kinderhook, 99 AD2d 898, 899[1984]).
In light of the fact that Industrial was entitled to summary judgment dismissing thecomplaint insofar as asserted against it, the Supreme Court should have vacated so much of thejudgment entered December 21, 2006, as was in favor of the plaintiff and against the defendantguarantors as well. Furthermore, since the subject property was sold by the referee, the mattermust be remitted to the Supreme Court, Nassau County, for a determination of the interest, ifany, of Industrial in the proceeds of the foreclosure sale, and pending that determination, theproceeds of the sale received by the plaintiff must be placed in escrow. Rivera, J.P., Miller,Dickerson and Roman, JJ., concur.