| Rose v Levine |
| 2013 NY Slip Op 04788 [107 AD3d 967] |
| June 26, 2013 |
| Appellate Division, Second Department |
| Steve Rose, Appellant, v Julie H. Levine et al.,Defendants, and Robert Levine et al., Respondents. |
—[*1] Shapiro Gettinger & Waldinger, LLP, Mount Kisco, N.Y. (Mona D. Shapiro ofcounsel), for respondents.
In an action to foreclose three mortgages, in which the defendants Robert Levine,Jason Levine, Jared Levine, and Janet Torre counterclaimed for declaratory relief, theplaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court,Westchester County (Nicolai, J.), entered July 8, 2011, as, in effect, upon renewal, (a)granted the motion of the defendants Robert Levine, Jason Levine, Jared Levine, andJanet Torre for summary judgment in connection with the first cause of action declaringthat the maximum that is due on the first mortgage, which was dated October 9, 2002, isonly $9,321.21, dismissing, insofar as asserted against those defendants, the second andthird causes of action, which were to foreclose the second and third mortgages, whichwere dated February 26, 2003, and December 2, 2003, respectively, on the firstcounterclaim of those defendants declaring that the second and third mortgages areinvalid and unenforceable, that the first mortgage is invalid and unenforceable except tothe extent of $9,321.21, and that the mortgages are invalid against the interest that thedefendant Robert Levine possessed in the subject premises as a tenant in common withthe defendant Julie H. Levine, and (b) pursuant to CPLR 6514 (b) to discharge a noticeof pendency filed on August 31, 2005, against the subject premises, except to the extentof granting him leave to file a new notice of pendency against the subject premises inconnection with the first mortgage only in the amount of $9,321.21.
Ordered that the order is modified, on the law, (1) by deleting the provisions thereof,in effect, upon renewal, granting those branches of the motion of the defendants RobertLevine, Jason Levine, Jared Levine, and Janet Torre which were for summary judgmentin connection with the first cause of action declaring that the maximum that is due on thefirst mortgage, which was dated October 9, 2002, is only $9,321.21, dismissing, insofaras asserted against those defendants, the second and third causes of action, which were toforeclose the second and third mortgages, which were dated February 26, 2003, andDecember 2, 2003, respectively, and on the first counterclaim of those defendantsdeclaring that the second and third mortgages are invalid and unenforceable, and that thefirst mortgage is invalid and unenforceable except to the extent of $9,321.21, andsubstituting therefor provisions, upon renewal, denying those branches of the motion,and (2) by deleting the provision thereof, in effect, upon renewal, granting that branch ofthe motion of the defendants Robert Levine, Jason Levine, Jared Levine, and Janet Torrewhich was pursuant to CPLR 6514 (b) to discharge a notice of pendency filed on August31, 2005, against [*2]the subject premises, except to theextent of granting the plaintiff leave to file a new notice of pendency against the subjectpremises in connection with the first mortgage only in the amount of $9,321.21, andsubstituting therefor a provision, upon renewal, denying that branch of the motion; as somodified, the order is affirmed insofar as appealed from, with costs to the plaintiff, andthe matter is remitted to the Supreme Court, Westchester County, for the entry of ajudgment, inter alia, declaring that the mortgages are invalid against the interest that thedefendant Robert Levine possessed in the subject premises as a tenant in common withthe defendant Julie H. Levine.
During the pendency of a divorce action between the defendant Julie Levine(hereinafter Julie) and the defendant Robert Levine (hereinafter Robert), Julie borrowedlarge sums of money from her boyfriend, the plaintiff Steven Rose. The loans werememorialized by promissory notes, and secured by three mortgages on the maritalresidence given only to Rose, individually. The first of the three mortgages (hereinafterthe first mortgage) was dated October 9, 2002, the second of the three mortgages(hereinafter the second mortgage) was dated February 26, 2003, and the third of the threemortgages (hereinafter the third mortgage) was dated December 2, 2003. At theconclusion of the proceedings in the divorce action, Robert was awarded sole title to thesubject premises, and the then-principal sum of the debt secured by the three mortgages,or $1,050,000, was deducted from Julie's share of the equitable distribution award madein the divorce action.
Subsequently, Rose commenced this action against Julie and Robert, among others,to foreclose on the subject three mortgages. Robert, along with several other defendantsin this action, asserted counterclaims challenging the validity of the mortgages on theground that they were given in the absence of valid consideration. By notice of motiondated January 25, 2011, Robert, along with several other defendants (hereinaftercollectively the moving defendants), moved, inter alia, for summary judgment declaringthat the mortgages are invalid, except up to the first $9,321.21 of the first mortgage. Themoving defendants contended that Rose conceded that, although he personally paid thatamount for the first mortgage, the remaining balance of mortgage loan proceeds paid toJulie, which was purportedly secured by the remainder of the first mortgage, as well asthe entirety of the proceeds secured by the second and third mortgages, came from Rose'swholly-owned corporation, Tally Display Corp. (hereinafter Tally). The Supreme Courtgranted that relief to the moving defendants.
The Supreme Court should have denied those branches of the moving defendants'motion which were for summary judgment in connection with the first cause of actiondeclaring that the maximum that is due on the first mortgage is only $9,321.21,dismissing, insofar as asserted against them, the second and third causes of action, whichwere to foreclose the second and third mortgages, respectively, on their first counterclaimdeclaring that the second and third mortgages are invalid and unenforceable, and that thefirst mortgage is invalid and unenforceable except to the extent of $9,321.21. Themoving defendants seek such relief based on the fact that the balance of the mortgageloan proceeds paid to Julie did not originate with Rose, but with Tally.
"[T]he validity of the mortgage usually depends indirectly upon consideration, notfor the mortgage itself, but for the obligation upon which it depends" (Grant S. Nelson &Dale A. Whitman, 1 Real Estate Finance Law § 2.3 [5th ed 2010]; seeRestatement [Third] of Property [Mortgages] § 1.2 [a]; William F. Walsh, ATreatise on Mortgages § 14 at 74 [1934]). It is not necessary, however, that theparty seeking to foreclose provided the consideration. A mortgage may be valid as longas proper consideration exists for the underlying obligation; once a party has lawfullyobtained both the mortgage and the underlying promissory note, that party has standingto foreclose on the mortgage in the event of the default on the borrower's obligation (see e.g. Mortgage Elec.Registration Sys., Inc. v Coakley, 41 AD3d 674 [2007] [Mortgage ElectronicRegistration Systems, Inc., which did not provide the proceeds of the underlyingmortgage loan, nonetheless had standing to maintain its foreclosure action where, at thetime of the commencement of the action, it was the lawful holder of the promissory note,as well as of the mortgage, which passed into its possession as an incident to thepromissory note]). Thus, the fact that Tally provided the consideration, rather than Rose,does not, by itself, render the mortgages invalid. Accordingly, the moving defendantsfailed to establish, prima facie, that Rose can only foreclose on the first mortgage up tothe first $9,321.21 in debt secured by that mortgage, and that the balance of the debtsecured by that [*3]mortgage, along with the debtssecured by the second and third mortgages, were invalid. Since the moving defendantsfailed to meet their prima facie burden, this Court need not consider the sufficiency of thepapers submitted in opposition (see Winegrad v New York Univ. Med. Ctr., 64NY2d 851, 853 [1985]).
However, the moving defendants satisfied their prima facie burden in connectionwith that branch of their motion which was for summary judgment declaring that themortgages are invalid against Robert's interest in the premises, and, in opposition, Rosefailed to raise a triable issue of fact. At the time when Julie mortgaged her interest in thepremises to Rose, she and Robert, who were still married, held their ownership interestsas tenants by the entirety. "As tenants by the entirety, both spouses enjoy an equal right topossession of and profits yielded by the property" (Goldman v Goldman, 95NY2d 120, 122 [2000]). However, "there is nothing in New York law that prevents oneof the co-owners from mortgaging or making an effective conveyance of his or her owninterest in the tenancy. To the contrary, each tenant may sell, mortgage or otherwiseencumber his or her rights in the property, subject to the continuing rights of the other"(V.R.W., Inc. v Klein, 68 NY2d 560, 565 [1986]; see Goldman vGoldman, 95 NY2d at 122). Nevertheless, "a conveyance by one tenant, to which theother has not consented, cannot bind the entire fee" (V.R.W., Inc. v Klein, 68NY2d at 564; see Lawriw v City of Rochester, 14 AD2d 13, 15 [1961],affd 11 NY2d 759 [1962]; see also Kwang Hee Lee v Adjmi 936 Realty Assoc., 34 AD3d646, 648 [2006] ["A co-owner can only encumber its own interest in propertywithout the consent of the other co-owners"]).
In this case, Julie's unilateral execution of the mortgages in favor of Rose wasineffective to encumber Robert's interest in the property, and Rose is therefore limited toseeking foreclosure on the interest in the property that Julie possessed at the time whenthe mortgages were executed and delivered (see V.R.W., Inc. v Klein, 68 NY2dat 564-565; 1.2.3. HoldingCorp. v Exeter Holding, Ltd., 72 AD3d 1040, 1042 [2010]; Northgate Elec.Profit Sharing Plan v Hayes, 210 AD2d 384 [1994]). We note, however, that afterRobert and Julie were divorced, and their interest in the premises converted into atenancy-in-common, Rose retained a security interest in the tenancy-in-common,notwithstanding that the equitable distribution award divested Julie of the monetaryequivalent of her interest in the property (see Goldman v Goldman, 95 NY2d at122; V.R.W., Inc. v Klein, 68 NY2d at 566-568; Money Store/Empire State vLenke, 151 AD2d 256, 257-258 [1989]). In sum, the Supreme Court properlygranted that branch of the motion which was for summary judgment declaring that themortgages are invalid against Robert's interest in the premises.
Rose's remaining contentions either are without merit or need not be reached in lightof our determination.
Since this is, in part, a declaratory judgment action, the matter must be remitted to theSupreme Court, Westchester County, for the entry of a judgment, inter alia, declaring thatthe mortgages are invalid against the interest that the defendant Robert Levine possessedin the subject premises as a tenant in common with the defendant Julie H. Levine (seeLanza v Wagner, 11 NY2d 317, 334 [1962], appeal dismissed 371 US 74[1962], cert denied 371 US 901 [1962]). Mastro, J.P., Lott, Roman and Cohen,JJ., concur.