The plaintiff, HSBC Mortgage Services, Inc., (hereinafter, HSBC) seeks [*2]summary judgment, pursuant to CPLR 3212, striking the Answer of defendant, Point Alpha Holding, LLC (hereinafter, Point); alternatively, if Point's Answer is not stricken, then pursuant to CPLR 3025(b) granting leave to HSBC to file and serve an amended complaint based upon the doctrine of equitable subrogation; pursuant to CPLR 3215, a judgment of default against the remaining defendants named herein; and, pursuant to RPAPL 1321, the appointment of a referee to compute the amounts due to HSBC under the mortgage documents, and to examine and report how the mortgaged premises should be sold.

Civil Practice Law and Rules 3212(b) states that summary judgment "shall be granted if, upon all the papers and proof submitted, the cause of action... shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party...(T)he motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact." Movants have a prima facie burden of submitting proof, in evidentiary form, sufficient to demonstrate that there is an absence of any material issue of fact. see Davenport v. County of Nassau, 279 AD2d 497 (N.Y.A.D., 2001); Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851 (1985); Zuckerman v. City of New York 49 NY2d 557 (1980). If the movant meets his or her prima facie burden then the burden shifts to the opponent to produce evidentiary proof to demonstrate the existence of a triable issue of fact. see Davenport v. County of Nassau, supra .

The facts, as presented by HSBC, are that on January 6, 2004, Chaim Parnes (hereinafter, Parnes) acquired title to a two family dwelling, commonly known as 47 Vernon Avenue, Brooklyn, New York (hereinafter, premises). In consideration therefor, Parnes paid $600,000. On the same day, Parnes mortgaged the premises to Florida Bank, N.A., d/b/a Florida Bank Mortgage (with Mortgage Electronic Registration Systems, Inc., "Mers", as Nominee) (hereinafter, Florida Bank) in the principal amount of $420,000 (hereinafter, Parnes mortgage). Both the Parnes deed and the $420,000 Parnes mortgage were recorded in the Kings County Office of the New York City Register (hereinafter, Register) on August 10, 2004.

An appraisal of the premises, signed on September 28, 2005, estimated the value of the premises to be $600,000. On October 11, 2005, defendant, Kenyon J. Alphonso a/k/a Kenyon Alphonso (hereinafter, Alphonso) acquired title to the premises from Parnes, for consideration in the amount of $600,000. On the same day, Alphonso obtained a loan from Encore Credit Corp., d/b/a ECC Encore Credit (hereinafter, Encore) in the amount of $480,000 and executed a mortgage encumbering the premises in this amount. (This $480,000 mortgage is the one which HSBC moved to foreclose on.) At the closing of this $480,000 mortgage, $416,627.11 was paid to satisfy the $420,000 Parnes mortgage (dated January 6, [*3]2004). Also that day, Alphonso obtained a second loan from Encore in the amount of $120,000, which is secured by a second mortgage from Alphonso to Encore. (This $120,000 mortgage HSBC seeks to extinguish by default judgment.)

HSBC also claims that on November 7, 2005, Point acquired title to the premises from Alphonso, in exchange for $20,000. The Point deed (dated November 7, 2005) was recorded in the Register on November 10, 2005. On November 21, 2005, the Alphonso deed (dated October 11, 2005) and both mortgages executed by Alphonso (dated October 11, 2005, in the amounts of $480,000 and $120,000) were recorded in the Register. On December 9, 2005, the satisfaction of the $420,000 Parnes mortgage (dated January 6, 2004, satisfied October 11, 2005) was recorded in the Register. Finally, on June 30, 2006, the $480,000 mortgage executed by Alphonso (dated October 11, 2005) was assigned to HSBC (hereinafter HSBC mortgage), and on July 20, 2006 was recorded in the Register. Due to Alphonso's failure to make payments since November 1, 2005 on the $480,000 HSBC mortgage (dated October 11, 2005), HSBC initiated these proceedings to foreclose on the premises.

In its answer, Point asserted the affirmative defense that its deed was filed and recorded (dated November 7, 2005, recorded November 10, 2005) prior to HSBC's mortgage (dated October 11, 2005, recorded November 21, 2005, assigned June 30, 2006 and recorded July 20, 2006). HSBC then motioned this court for summary judgment to strike Point's Answer, pursuant to CPLR 3212. HSBC claims that it is entitled to summary judgment because Point's deed is subsequent and subordinate to the HSBC mortgage. HSBC argues that Point not only took the deed to the premises with constructive/inquiry notice, if not actual knowledge of the HSBC mortgage, but with lack of valuable consideration. HSBC also asserts that, in its Answer, Point does not dispute that Alphonso is in default under its mortgage documents, nor does it dispute that its mortgage documents are valid and enforceable according to their terms. Thus, HSBC reasons that Point is not a bona fide purchaser, Point's subsequently dated deed (dated November 7, 2005) is not entitled to priority, and HSBC is entitled to foreclose under its $480,000 mortgage (dated October 11, 2005, recorded November 21, 2005, assigned June 30, 2006) and the underlying note.

The defendant, Point, counters that HSBC's motion for summary judgment should be denied because issues of fact exist as to whether it paid valuable consideration for the premises, if it knew of a previous $480,000 mortgage on the premises, and/or that the house needed major repairs costing over $100,000. Furthermore, Point argues that since its deed (dated November 7, 2005, recorded November 10, 2005) was recorded prior to the recording of the $480,000 HSBC [*4]mortgage (dated October 11, 2005, recorded November 21, 2005, assigned June 30, 2006), there is an issue of fact as to whether Point is entitled to the protection of the recording statutes.

An unrecorded conveyance of real property is void against the interests of subsequent purchasers when the subsequent purchaser obtains the interest for a valuable consideration, in good faith, and is first to record. See NYRPL 291. (Conveyance includes a mortgage. NYRPL 290) HSBC posits that because only $80 was paid in transfer taxes to record the Point deed, only $20,000 in consideration could have been paid. NY Tax 1402. HSBC also argues that since the premises were appraised for $600,000 on September 28, 2005 and Point only paid Alphonso $20,000 for the premises less than a month and a half later, it is demonstrated that there was a lack of valuable consideration. These arguments set forth a valid basis for summary judgment. Thus the burden switches to Point to demonstrate that there is a triable issue of fact. Point asserts that the premises required serious repairs, costing over $100,000, and recited an Appellate Division decision in which the price constituted valuable consideration based upon the fact that the property was in a state of disrepair and was purchased "as is." Berger v. Polizzotto, 148 AD2d 651 (N.Y.A.D., 1989). Yet, in the Berger case the determination that the payment constituted valuable consideration was made when compared to the price agreed to by the plaintiffs who were suing for specific performance of their contract. In addition, there was an appraiser in the Berger case who testified to the diminished value. Berger v. Polizzotto, supra .

Point also claims that there was valid consideration due to the fact that Point believed they were taking the premises with the prior mortgage. In his Affidavit, Eli Maor (hereinafter, Maor), the principal of Point, states, "I was only aware of a mortgage in the amount of $480,000 on the property at 47 Vernon Avenue. This was public record which was easy for me to find. It was my understanding that Alphonso was experiencing serious financial problems so that he can no longer pay for the mortgage or other expenses on the property. In fact I expected that a foreclosure would be started by the prior mortgage holder." Aff, Maor, 4-5. Maor puts forth that the premises cost Point, "Payment$20,000.00

Encore Mortgage480,000.00 (plus arrears)

Repairs135,000.00

TOTAL$635,000.00As for knowledge of the unrecorded HSBC mortgage, there was no way that I could know about it. ALPHONSO certainly did not tell anyone about it. Nor could I imagine how he could even get a new mortgage with such poor [*5]credit and no job." Aff, Maor, 7-8. Similarly, the Attorney for Point states, "In sum, although only $20,000 was paid by POINT HOLDING, as far as it knew, a mortgage of $480,000 remained on the property. At least that is what POINT HOLDING (by MAOR) believed." Aff. In Opp., Fink, 9. Interestingly however, the mortgage that was in the public record at the time of Point's purchase of the premises (November 7, 2005), is the Parnes mortgage in the amount of $420,000, (dated January 6, 2004, recorded August 10, 2004, and satisfied October 11, 2005, but recorded December 9, 2005) and not $480,000, which is the amount of the "unrecorded" HSBC mortgage (dated October 11, 2005, recorded November 21, 2005, assigned to HSBC on June 30, 2006) that Maor denies knowledge of. Secondly, in Maor's calculation he includes an Encore Mortgage, but the Parnes mortgage (dated January 6, 2004, recorded August 10, 2004, satisfied October 11, 2005), which was the one in the public record, was held by Florida Bank, and Encore was the holder of the "unrecorded" $480,000 mortgage executed by Alphonso (dated October 11, 2005, recorded November 21, 2005, assigned to HSBC on June 30, 2006) that Maor denies knowledge of. Even assuming the Attorney and Maor's reference to a $480,000 mortgage, as opposed to a $420,000 mortgage, and Maor's reference to the Encore mortgage, were honest mistakes, Maor claims that he believed that he took the premises subject to the ($420,000) Parnes mortgage, but makes no mention that he attempted to contact the mortgage holder, nor that he attempted to make any payments on the ($420,000) Parnes mortgage.

Although while determining whether to grant summary judgment a court should "draw all reasonable inferences in favor of the nonmoving party and should not pass on issues of credibility," Torres v. Jeremias, 283 AD2d 484, 484 (N.Y.A.D., 2001), the fact is that Point has failed to establish that it gave valuable consideration for the premises. Point has not produced any evidentiary proof that it reasonably believed that it took the premises only subject to a prior mortgage or that the premises had diminished in value. (see, Dolphin v. Marocik, 222 AD2d 549 [N.Y.A.D., 1995] Did not establish that valuable consideration was paid due to failure to submit sufficient documentation of the claims) As such, Point has neither offered any proof in evidentiary form sufficient to rebut HSBC's argument, nor to prove that there exists any triable issue of fact with regards to valuable consideration.

HSBC has demonstrated that Point acquired the deed under circumstances giving rise to constructive/inquiry notice. HSBC argues that upon searching the public records, Point would have found Parnes to be the record owner of the premises even though Alphonso may have been in possession. "A reasonable [*6]purchaser, faced with title and possession apparently resting in two different people, would certainly investigate the matter further, rather than simply assume that the possessor of the property held an unrecorded and unencumbered title." In re Rodriguez, 261 B.R. 92, 94 (E.D.N.Y 2001); also see, Tompkins County Trust Co. v. Talandis, 261 AD2d 808 (N.Y.A.D. 3rd Dept., 1999) (purchaser has a duty to examine where person in open and notorious possession of the property is inconsistent with the title owner of record). Since Parnes was the record owner and Alphonso was in possession and the seller of the premises, Point was on notice to investigate further. Such an investigation would have revealed that the Parnes mortgage (dated January 6, 2004, recorded August 10, 2004) was already satisfied by proceeds from the HSBC mortgage (satisfied October 11, 2005). "Where a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that [which] he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser." Williamson v. Brown, 15 N.Y 354, 354 (1857); Vitale v. Pinto, 118 AD2d 774, 776 (N.Y.A.D., 1986). Once HSBC established that Point was on notice, and thus not a purchaser in good faith, the burden switched to Point to prove that there remained any issue of fact. see Davenport v. County of Nassau, supra . However, Point failed to provide any evidentiary proof to rebut the plaintiff's arguments. Maor states that he knew of the Parnes mortgage (in the amount of $420,000, dated January 6, 2004, recorded August 10, 2005) because it was in the public records but provides no evidence or claims of a further investigation as to the title or status of the property and/or mortgage. Hence, Point does not meet its burden of showing that there are issues of fact, rather, its principal, Maor, actually admitted to having knowledge that would lead a reasonable person to inquire further (see In re Rodriguez, supra ), but provided no reason or explanation as to why no further inquiry was ever undertaken.

Consequently, HSBC has demonstrated that, as a matter of law, Point was not a bona fide purchaser for valuable consideration and in good faith,and thus cannot invoke the protection of the recording statute although they had won the race to record. Barrett v. Littles, 201 AD2d 444 (N.Y.A.D., 1994); see Real Property Law 291. Furthermore, since Point has failed to raise any issue of fact requiring a trial, HSBC's motion for summary judgment to strike the Answer of the defendant, Point, should be granted pursuant to CPLR 3212.

As summary judgment has been granted striking the Answer of Point, there is no need for discussion of HSBC's request, in the alternative, for leave to file and [*7]serve an amended complaint based upon the doctrine of equitable subrogation.

Civil Practice Law and Rules 3215 states, "When a defendant has failed to appear, plead

or proceed to trial of an action reached and called for trial... the plaintiff may seek a default judgment against him." NY CPLR 3215. The only defendant to answer HSBC's complaint in this action was Point. Another defendant, People of the State of New York, appeared but waived notice of all proceedings except notice of an application for discontinuance of the action, the referee's report of the sale, and all proceedings to obtain surplus money. In support of this branch of its motion, and as required by CPLR 3215, HSBC has filed proof of service of the summons and complaint to the defendants, and proof of the facts constituting the claim and the default. NY CPLR 3215(f). Affidavits of service indicate that Kenyon J. Alphonso was personally served on July 3, 2006; B & B Associates and Equicredit Corporation of America f/k/a Old Stone Credit Corporation were served by service on Amy Lesch, an authorized agent of the Secretary of the State, on June 27, 2006; Mortgage Electronic Registrations Systems, Inc., as nominee for Encore Credit Corp. was served by service on Dan McLaughlin, an authorized agent of the corporation, on June 28, 2006; New York City Environmental Control Board, New York City Parking Violations Bureau, and New York City Transit Adjudication Bureau were served by service on the clerks on June 27, 2006; Option One Mortgage Corp. was served by service on Nora Dindyal, a process specialist, on June 27, 2006; and People of the State of New York were served by service on Marilyn Hartley, an Assistant Attorney General, on June 23, 2006. As the rest of the defendants have neither appeared nor submitted an answer to the complaint, and HSBC has made a prima facie showing of entitlement to judgment, default judgment against the remaining defendants is granted. Beneficial Homeowner Service Corp. v. Butler, 836 NYS2d 491 {14 Misc 3d 1233(A)} (N.Y.Sup., 2007).

According to RPAPL 1321, "if the defendant fails to answer within the time allowed or the right of the plaintiff is admitted by the answer, upon motion of the plaintiff, the court shall ascertain and determine the amount due, or direct a referee to compute the amount due to the plaintiff... and to examine and report whether the mortgaged premises can be sold in parcels and, if the whole amount secured by the mortgage has not become due, to report the amount thereafter to become due." RPAPL 1321. Since HSBC's motion for summary judgment to strike Point's Answer has been granted, and the remaining defendants have failed to answer within the time allowed, pursuant to RPAPL 1321, a referee should be appointed to calculate the amount due to HSBC, and to determine how the premises should be sold. Bank of East Asia, Ltd. v. Smith, 201 AD2d 522 (N.Y.A.D., 1994) (No [*8]inconsistency in the granting of summary judgment and the order of reference); also see, Vermont Federal Bank v. Chase, 226 AD2d 1034 (N.Y.A.D. 3 Dept., 1996) (Mortgagor's default in foreclosure action entitled mortgagee to summary judgment in its favor and a referee to compute should have been appointed).

WHEREFORE, on the basis of the foregoing, (1) HSBC's motion for summary judgment, striking Point's Answer, is granted; (2) default judgment against the defendants, with the exclusion of Point and People of the State of New York; is granted; and (3) a referee to compute the amount due to HSBC, and to determine how the premises should be sold, shall be appointed by a separate order. This constitutes the decision and order of this court.

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