| Norwest Bank Minn., NA v E.M.V. Realty Corp. |
| 2012 NY Slip Op 02650 [94 AD3d 835] |
| April 10, 2012 |
| Appellate Division, Second Department |
| Norwest Bank Minnesota, NA, as Trustee for the RegisteredHolders of DJL Commercial Mortgage Corp., Commercial Mortgage Pass-Through Certificates,Series 1999-CG-2, Plaintiff, v E.M.V. Realty Corp. et al., Respondents-Appellants, andRJR Mechanical, Inc., Appellant-Respondent, et al., Defendants. |
—[*1] Joseph P. Dineen, Garden City, N.Y., for respondents-appellants.
In an action to foreclose a mortgage, the defendant RJR Mechanical, Inc., appeals (1) from adecision of the Supreme Court, Queens County (Joseph G. Golia, J.), dated July 30, 2010, madeafter a hearing, and (2), as limited by its brief, from so much of an order of the same court datedMay 2, 2011, as, upon the decision, granted its motion, in effect, for the distribution from escrowof the proceeds from the sale of the subject premises to the extent of directing that escrowedfunds in the total sum of only $424,790.42 be distributed to it, and the defendants E.M.V. RealtyCorp. and Harry Baron cross-appeal from (1) the same decision, and (2) so much of the sameorder as, upon the decision, granted that branch of the motion of the defendant RJR Mechanical,Inc., which was for the distribution of escrowed funds in the sum of $399,933.82, representing anaward of interest upon the unpaid principal balance of the subject mortgage.
Ordered that the appeal and cross appeal from the decision are dismissed, without costs ordisbursements, as no appeal lies from a decision (see Schicchi v J.A. Green Constr.Corp., 100 AD2d 509, 511 [1984]); and it is further,
Ordered that the order is modified, on the facts and in the exercise of discretion, (1) bydeleting the provision thereof granting that branch of the motion of the defendant RJRMechanical, Inc., which was for the distribution of escrowed funds in the sum of $399,933.82,representing an award of interest upon the unpaid principal balance of the subject mortgage andsubstituting therefor a provision denying that branch of the motion, and (2) by deleting theprovision thereof directing that escrowed funds in the total sum of $424,790.42 be distributed tothe defendant RJR Mechanical, Inc., and substituting therefor a provision directing that escrowedfunds in the total sum of $24,856.60 be distributed to that defendant; as so modified, the order isaffirmed insofar as appealed from, with one bill of costs to the defendants E.M.V. Realty Corp.and Harry Baron.
During the course of this foreclosure action, the tenant of the subject premises, the defendantRJR Mechanical, Inc. (hereinafter RJR), obtained an assignment of the mortgage from the [*2]plaintiff, as well as an assignment of a judgment lien against thepremises. A private sale of the premises was eventually completed. The proceeds of the sale wereplaced into an escrow account pending a hearing to determine RJR's interests in the mortgage andjudgment, the circumstances surrounding RJR's acquisitions of the mortgage and judgment, andrental offsets claimed by the owner of the premises, the defendant E.M.V. Realty Corp.(hereinafter EMV).
After the hearing, the Supreme Court, in an order dated May 2, 2011, among other things,granted RJR's motion, in effect, for the distribution from escrow of the proceeds from the sale ofthe subject premises to the extent of directing that escrowed funds in the total sum of$424,790.42 be distributed to it, limiting RJR's recovery on the mortgage and the judgment basedupon principles of equity. The total sum of RJR's distribution included interest upon the unpaidprincipal balance of the subject mortgage in the sum of $399,933.82. RJR appeals, contendingthat it is entitled to the entirety of the funds held in escrow in satisfaction of the mortgage and thejudgment. EMV and its principal, the defendant Harry Baron, cross-appeal from so much of thesame order as granted that branch of RJR's motion which was for the distribution of escrowedfunds in the sum of $399,933.82, representing an award of interest upon the unpaid principalbalance of the subject mortgage.
A foreclosure action is equitable in nature and triggers the equitable powers of the court(see Notey v Darien Constr. Corp., 41 NY2d 1055 [1977]; Mortgage Elec. Registration Sys., Inc. vHorkan, 68 AD3d 948 [2009]). A wrongdoer should not be permitted to profit from hisor her own wrong (see Kirschner vKPMG LLP, 15 NY3d 446, 464 [2010]; Campbell v Thomas, 73 AD3d 103, 116-117 [2010]; Beaumontv American Can Co., 215 AD2d 249 [1995]).
In determining the distribution of the proceeds from the sale of the subject premises, theSupreme Court properly denied RJR recovery for charges accrued due to the default in themortgage payments and the resulting foreclosure action in light of the Supreme Court's finding,which is supported by the record, that RJR itself intentionally precipitated the foreclosure actionby failing to make mortgage payments in lieu of rent. Likewise, the Supreme Court properlylimited RJR's interest in the judgment to its cost of acquisition since the record reveals that RJRrepeatedly thwarted EMV's efforts to compromise the judgment for a fraction of its value prior toobtaining assignment of the judgment itself.
However, under the circumstances of this case, the Supreme Court improvidently exercisedits discretion when it granted that branch of RJR's motion which was for the distribution ofescrowed funds in the sum of $399,933.82, representing an award of interest upon the unpaidprincipal balance of the subject mortgage. "In an action of an equitable nature, the recovery ofinterest is within the court's discretion" (Dayan v York, 51 AD3d 964, 965 [2008]; see CPLR 5001[a]; Deutsche Bank Trust Co., Ams. vStathakis, 90 AD3d 983, 984 [2011]). In light of RJR's deliberate course of conductwhich triggered the subject foreclosure, equity requires the cancellation of any interest awardedto RJR on the unpaid principal balance of the mortgage. Thus, the total sum of the escrowedfunds to be distributed to RJR must be reduced by the sum of $399,933.82.
The parties' remaining contentions either are without merit or need not be reached in light ofour determination. Skelos, J.P., Leventhal, Lott and Miller, JJ., concur.