| Beltway Capital, LLC v Soleil |
| 2013 NY Slip Op 01366 [104 AD3d 628] |
| March 6, 2013 |
| Appellate Division, Second Department |
| Beltway Capital, LLC, Appellant, v Andre Soleil,Also Known as Andre S. Soleil, et al., Respondents, et al.,Defendants. |
—[*1] AndrÉ Soleil, Brooklyn, N.Y., respondent pro se. Edward C. Kesselman, New York, N.Y., for respondent Deborah Hughes. Fidelity National Law Group, New York, N.Y. (Donald G. Davis of counsel), forrespondent Sperry Associates Federal Credit Union.
In an action to foreclose a mortgage, the plaintiff appeals, as limited by its brief, fromso much of an order of the Supreme Court, Kings County (Lewis, J.), dated January 7,2011, as (a) denied its motion to vacate an order of the same court dated July 18, 2008,which discharged a mortgage held by the plaintiff on the subject property, and toreinstate the mortgage as a lien against the property, (b) granted the motion of thedefendant Deborah Hughes pursuant to CPLR 6514 to cancel the notice of pendencyfiled on December 8, 2009, and (c) granted that branch of the cross motion of thedefendant Andre Soleil which was pursuant to CPLR 3211 (a) (7) to dismiss thecomplaint.
Ordered that the order is reversed insofar as appealed from, on the law, with one billof costs, the plaintiff's motion to vacate the order dated July 18, 2008, and to reinstate itsmortgage as a lien against the subject property is granted, the motion of the defendantDeborah Hughes pursuant to CPLR 6514 to cancel the notice of pendency is denied, andthat branch of the cross motion of the defendant Andre Soleil which was pursuant toCPLR 3211 (a) (7) to dismiss the complaint is denied.
On June 18, 2007, while certain real property was owned by the defendant AndreSoleil, nonparty Asset Management Holdings, LLC (hereinafter Asset), commenced thisaction to foreclose upon a mortgage it held on the property in the principal sum of$625,000 (hereinafter the Soleil mortgage), and filed a notice of pendency. Soleil did notappear and the Supreme Court, in an order dated December 19, 2007, granted Asset'smotion for an order of reference.
Thereafter, on June 1, 2008, Soleil moved to dismiss the complaint and cancel thenotice of pendency "for cause of payment." Soleil swore, in an accompanying affidavit,that Asset had "no present interest in the subject property" and that the "mortgage lienwas paid, and [Asset's] [*2]mortgage interest transferredto a third-party." Asset did not respond to Soleil's motion. In an order dated July 18, 2008(hereinafter the July 2008 order), the Supreme Court, upon Asset's"non-appearance/non-opposition," granted Soleil's motion, directed that the foreclosureaction be "dismissed for cause of payment," canceled the notice of pendency, and"canceled and discharged" the Soleil mortgage.
The July 2008 order, discharging the Soleil mortgage, was filed and recorded onAugust 5, 2008. Soon thereafter, Soleil sold the property for $248,000 to the defendantDeborah Hughes, who recorded her deed on October 14, 2008. Hughes obtained amortgage from HB Baron in the sum of $135,000, which was recorded on February 5,2009. On May 7, 2009, Hughes transferred title of the subject property to herself and herhusband, the defendant Nicholas Haven. At that time, the HB Baron mortgage wassatisfied, and Hughes and Haven obtained a mortgage in the sum of $300,000 from thedefendant Sperry Associates Federal Credit Union (hereinafter Sperry).
Meanwhile, on February 19, 2008, Asset assigned its rights, title, and interest in theSoleil mortgage to the plaintiff, Beltway Capital, LLC (hereinafter Beltway), by anassignment which was not recorded until July 21, 2008, 18 days before Soleil recordedthe July 2008 order discharging the Soleil mortgage. Thereafter, on February 12, 2009,Beltway, as Asset's assignee, moved to be substituted as the plaintiff in this action inplace of Asset, to vacate Asset's default in appearing and responding to Soleil's motion todismiss, and to vacate the July 2008 order entered thereon, which, inter alia, dischargedthe Soleil mortgage. Beltway contended that Asset had not been served with Soleil'smotion papers. Moreover, Beltway asserted that Soleil had misrepresented the status ofthe Soleil mortgage to the Supreme Court, in that no payments had been made on theSoleil mortgage and, therefore, the discharge of that mortgage was erroneous. Soleilcross-moved to dismiss the complaint, and Hughes cross-moved for leave to intervene.The parties stipulated to substitute Beltway as the plaintiff in place of Asset.
In an order dated November 23, 2009 (hereinafter the November 2009 order), theSupreme Court, inter alia, granted those branches of Beltway's motion which were to besubstituted as the plaintiff in Asset's place and to vacate Asset's default in appearing andresponding to Soleil's motion. However, the court declined to vacate the July 2008 order,directing that further discovery be conducted on the issue of whether the Soleil mortgagehad been paid, in order to determine whether it should be reinstated. The court deniedSoleil's cross motion to dismiss the complaint without prejudice to Soleil's right to movefor this relief at a later time and granted Hughes's cross motion for leave to intervene.
Beltway filed a notice of pendency against the subject property on December 8,2009.
After limited discovery was conducted, as directed by the Supreme Court in theNovember 2009 order, Hughes moved to cancel the December 2009 notice of pendencyfiled by Beltway. Beltway again moved to vacate the July 2008 order and to reinstate theSoleil mortgage as a lien upon the subject property. Soleil cross-moved, inter alia,pursuant to CPLR 3211 (a) (7) and (8) to dismiss the complaint. Sperry cross-moved forsummary judgment dismissing the complaint and for a determination that its lien wassuperior in priority to the Soleil mortgage.
In an order dated January 7, 2011, the Supreme Court, in effect, denied that branchof Beltway's motion which was to vacate the July 2008 order and denied that branch ofits motion which was to reinstate the Soleil mortgage. The court held that, while an orderthat erroneously discharged a mortgage without true satisfaction of the underlying debtmay be set aside and the mortgage reinstated, it is only appropriate to do so where therehas not been detrimental reliance on the erroneous recording by subsequent innocentpurchasers or encumbrancers who lacked notice of the erroneous discharge. The courtfound that, in this action, while the evidence established that the Soleil mortgage wasindeed erroneously discharged, Hughes, among others, had reasonably relied upon therecorded July 2008 order discharging the Soleil mortgage in securing her current rights tothe property to her detriment. Therefore, the court concluded that reinstatement of theSoleil mortgage as a lien was not equitably appropriate.[*3]
In light of its determination, the Supreme Courtalso granted Hughes's motion to cancel the December 2009 notice of pendency, grantedthat branch of Soleil's cross motion which was to dismiss the complaint pursuant toCPLR 3211 (a) (7), and, in effect, denied Sperry's cross motion as academic in light of itsdetermination. Beltway now appeals from the January 7, 2011, order insofar as it deniedits motion, granted Hughes's motion to cancel the December 2009 notice of pendency,and granted that branch of Soleil's cross motion which was pursuant to CPLR 3211 (a)(7) to dismiss the complaint.
Pursuant to CPLR 5015, a court may vacate a judgment or order on the basis of"fraud, misrepresentation, or other misconduct of an adverse party" (CPLR 5015 [a] [3]).Here, there is no dispute that the July 2008 order was based upon Soleil's fraud andmisrepresentation to the Supreme Court that the subject mortgage had been satisfied.Accordingly, the court erroneously discharged the subject mortgage and canceled theinitial notice of pendency. "A mortgagee may have an erroneous discharge of mortgage,without concomitant satisfaction of the underlying mortgage debt, set aside, and have themortgage reinstated where there has not been detrimental reliance on the erroneousrecording" (New YorkCommunity Bank v Vermonty, 68 AD3d 1074, 1076 [2009]; see Deutsche Bank Trust Co., Ams.v Stathakis, 90 AD3d 983, 984 [2011]; DLJ Mtge. Capital, Inc. v Windsor, 78 AD3d 645, 647[2010]; Citibank, N.A. vKenney, 17 AD3d 305, 308 [2005]). Only bona fide purchasers and lenders forvalue are entitled to protection from an erroneous discharge of a mortgage based upontheir detrimental reliance thereon (see Fischer v Sadov Realty Corp., 34 AD3d 630, 631[2006]; Karan v Hoskins,22 AD3d 638, 638 [2005]). Given that only limited discovery was conducted, it wasimproper for the court to determine, on this record, that Hughes established that she wasa bona fide purchaser for value (see Hood v Webster, 271 NY 57 [1936]; seealso Serota v Power House Realty Corp., 274 AD2d 427 [2000]; Yen-Te HsuehChen v Geranium Dev. Corp., 243 AD2d 708, 709 [1997]). Accordingly, the courtshould have granted Beltway's motion to vacate the July 2008 order and reinstate itsmortgage.
Similarly, the Supreme Court erred in determining, at this juncture, that Hughes wasentitled to cancellation of the notice of pendency.
With regard to the claim against Soleil, we note that although no independent causeof action was alleged to recover on the note, Beltway, in its complaint, seeks adetermination of all amounts due on account of the mortgage and note. Accordingly, theSupreme Court improperly granted that branch of Soleil's cross motion which waspursuant to CPLR 3211 (a) (7) to dismiss the complaint insofar as asserted against him(see CPLR 5015 [a] [3]; cf. Matter of New York Diet Drug Litig., 47 AD3d 586[2008]). Rivera, J.P., Hall, Lott and Austin, JJ., concur. [Prior Case History: 30 Misc3d 1214(A), 2011 NY Slip Op 50064(U).]