| 89 Pine Hollow Rd. Realty Corp. v American Tax Fund |
| 2012 NY Slip Op 05136 [96 AD3d 995] |
| June 27, 2012 |
| Appellate Division, Second Department |
| 89 Pine Hollow Road Realty Corp. et al.,Respondents, v American Tax Fund, Foothill, et al., Defendants, and Lehman BrothersBank, FSB, as Assignee of Greenport Mortgage Funding, Inc.,Appellant. |
—[*1] Robert L. Dougherty, Garden City, N.Y., for respondents.
In an action, inter alia, to set aside a tax deed, the defendant Lehman Brothers Bank, FSB, asassignee of Greenpoint Mortgage Funding, Inc., appeals, as limited by its brief, from (1) so muchof an order of the Supreme Court, Nassau County (Woodard, J.), dated April 19, 2010, as, ineffect, granted those branches of the plaintiffs' motion which were for summary judgment on thefirst, second, fifth, and sixth causes of action in the amended complaint, and denied its crossmotion for summary judgment dismissing the amended complaint insofar as asserted against itand Greenpoint Mortgage Funding, Inc., and to cancel the notice of pendency, and (2) so much ofa judgment of the same court dated September 28, 2010, as, upon the order, adjudged that theplaintiff 89 Pine Hollow Road Realty Corp. is the fair title owner of the subject premises, vacatedthe subject tax deed and subsequent conveyances, and vacated and extinguished its mortgage onthe subject premises.
Ordered that the appeal from the order is dismissed; and it is further,
Ordered that the judgment is affirmed insofar as appealed from; and it is further,
Ordered that one bill of costs is awarded to the respondents.
The appeal from the intermediate order must be dismissed because the right of direct appealtherefrom terminated with the entry of judgment in the action (see Matter of Aho, 39NY2d 241, 248 [1976]). The issues raised on the appeal from the order are brought up for reviewand have been considered on the appeal from the judgment (see CPLR 5501 [a] [1]).
In 2001, the Nassau County Treasurer sold a tax lien on certain real property owned by theplaintiff 89 Pine Hollow Realty Corp. (hereinafter the Corporation) to the defendant AmericanTax Fund, Foothill (hereinafter ATF). Pursuant to relevant provisions of the Nassau CountyAdministrative Code, ATF sent a notice to the Corporation, stating that it had until a date certainto [*2]pay the tax lien and that the failure to act would result inthe County commencing a foreclosure action or issuing a tax deed. The sole officer andshareholder of the Corporation had died 11 days earlier, and the notice was returned to ATF withthe notation "refused" written on the return receipt. Additional relevant facts with respect to thenotice to redeem are set forth in our decision and order on a previous appeal (see 89 Pine Hollow Rd. Realty Corp. vAmerican Tax Fund, Foothill, 41 AD3d 771, 772-774 [2007]).
The Corporation failed to pay the tax lien and, in 2003, the County conveyed the property bytax deed to ATF which, in turn, transferred the property to its affiliated entity, ATFH RealProperty, LLC (hereinafter ATFH). In February 2004, the Corporation and the plaintiff YvonnePettineo, as administrator of the estate of its sole shareholder (hereinafter together the plaintiffs),commenced this action to set aside the tax deed and filed a notice of pendency. A year later, inFebruary 2005, ATFH conveyed the premises to the defendant AFAFB, Inc. (hereinafterAFAFB), by quitclaim deed for $150,000. AFAFB intervened in the action and moved forsummary judgment dismissing the complaint. The Supreme Court granted the motion, dismissedthe complaint, and cancelled the notice of pendency on March 30, 2006. Pending its appeal fromthat order, the Corporation unsuccessfully moved in this Court for a stay of enforcement of theorder canceling the notice of pendency. On June 26, 2007, this Court reversed, holding that, inopposition to AFAFB's motion, the Corporation had raised a triable issue of fact as to whetherthe notice to redeem violated the Corporation's constitutional right to sufficient notice(id.).
On November 9, 2006, while that appeal was pending, AFAFB gave a $400,000 mortgage onthe premises to the defendant Greenpoint Mortgage Funding, Inc. (hereinafter Greenpoint), assecurity for a note in that amount. AFAFB's President, the defendant Andrew Wertz, signed aguarantee of the debt. In January 2007, Greenpoint assigned the mortgage to the defendantLehman Brothers Bank, FSB (hereinafter Lehman Brothers). After the previous appeal wasdecided, the Supreme Court granted the plaintiffs' motion to extend the notice of pendency forthree years and for leave to amend the complaint to add causes of action against Greenpoint andWertz as party defendants.
The plaintiffs then moved for summary judgment on the amended complaint, in essence,seeking to vacate the tax deed and subsequent conveyances, place title of the premises back inthe name of the Corporation, and to vacate and extinguish the November 9, 2006, mortgage.Lehman Brothers cross-moved for summary judgment dismissing the amended complaint insofaras asserted against it and Greenpoint and to cancel the notice of pendency. In the order appealedfrom, the Supreme Court, inter alia, granted the plaintiffs' motion and denied Lehman Brothers'cross motion. In the judgment appealed from, the Supreme Court adjudged that the Corporationis the fee title owner of the premises, vacated the tax deed and subsequent conveyances, andvacated and extinguished Lehman Brothers' mortgage. Lehman Brothers appeals, and we affirmthe judgment insofar as appealed from.
The plaintiffs established their prima facie entitlement to judgment as a matter of law ontheir causes of action to vacate the tax deed to ATF and the subsequent conveyance by ATF'saffiliate, ATFH, to AFAFB. In opposition, Lehman Brothers failed to raise a triable issue of fact.Contrary to Lehman Brothers' contention, the Corporation had the capacity to commence thisaction despite its dissolution (see Business Corporation Law §§ 1005, 1006;Luna Light., Inc. v Just Indus., Inc.,45 AD3d 814 [2007]). On the record, as now fully developed after the previous appeal(see 89 Pine Hollow Rd. Realty Corp. v American Tax Fund, Foothill, 41 AD3d at 771),the Supreme Court properly determined that, under the circumstances of this case, the notice toredeem sent to the Corporation failed to comply with the requirements of due process (seeJones v Flowers, 547 US 220 [2006]; Mullane v Central Hanover Bank & Trust Co.,339 US 306 [1950]; cf. Matter ofOrange County Commr. of Fin. [Helseth], 18 NY3d 634, 639-640 [2012]; Temple Bnai Shalom of Great Neck vVillage of Great Neck Estates, 32 AD3d 391 [2006], cert denied 552 US 1183[2008]; Matter of American Cars 'R' Us v Chu, 147 AD2d 797 [1989]). Moreover, theSupreme Court properly determined that AFAFB was not a bona fide purchaser for value in thatit paid well below fair market value and obtained its interest by quitclaim deed when the originalnotice of pendency in the lawsuit against ATF was in effect (see Mallick v Farfan, 66 AD3d 649, 649-650 [2009]; Yen-TeHsueh Chen v Geranium Dev. Corp., 243 AD2d [*3]708, 709[1997]). Accordingly, the Supreme Court properly vacated the tax deed to ATF and thesubsequent conveyance by ATF's affiliate, ATFH, to AFAFB.
Further, the Supreme Court properly vacated and extinguished the mortgage interest held byLehman Brothers. An encumbrancer which "knows facts that would excite the suspicion of anordinarily prudent person and fails to investigate [is] . . . chargeable with thatknowledge which a reasonable inquiry, as suggested by the facts, would have revealed," and a"mortgagee who fails to make such an inquiry is not a bona fide encumbrancer for value" (Booth v Ameriquest Mtge. Co., 63AD3d 769, 769 [2009] [internal quotation marks omitted]). Here, the plaintiffs submittedevidence establishing prima facie that Greenpoint was not a bona fide encumbrancer for value, asit failed to make proper inquiry upon becoming aware of facts regarding a cloud on AFAFB'stitle and its inability to convey a mortgage interest. For example, Greenpoint was aware thatAFAFB acquired the property by quitclaim deed at a price less than a quarter of its appraisedvalue and that Greenpoint's title insurer initially expressed objections to AFAFB's title, includingquestions as to the transfer from ATF to ATFH and the propriety of the notice to redeem sent tothe plaintiffs prior to the tax sale. In opposition to the plaintiffs' showing, Lehman Brothers, asassignee of Greenpoint, did not address this evidence and failed to raise a triable issue of fact asto its alleged status as a bona fide encumbrancer for value.
However, Lehman Brothers contends that Greenpoint acquired its mortgage interest after theSupreme Court had cancelled the original notice of pendency and before that order had beenreversed by this Court in the previous appeal, noting that "the 'good faith' of a purchaser who hasacquired the property for value during the pendency of a claimant's appeal is not vitiated by thepurchaser's actual knowledge of the appeal" (Da Silva v Musso, 76 NY2d 436, 442[1990]). Contrary to this contention, Da Silva is inapplicable here, where Greenpoint wasnot a bona fide encumbrancer for value as established by independent evidence, irrespective ofits knowledge of the pending appeal (cf. Marcus Dairy v Jacene Realty Corp., 298 AD2d366 [2002]).
Accordingly, the Supreme Court properly, in effect, granted those branches of the plaintiffs'motion which were for summary judgment on the first, second, fifth, and sixth causes of action inthe amended complaint and properly entered judgment in accordance therewith.
Lehman Brothers' remaining contention is without merit. Angiolillo, J.P., Dickerson, Austinand Cohen, JJ., concur. [Prior Case History: 2010 NY Slip Op 31049(U).]