[*1]
Stabilis Fund II, LLC v Nostrand Plaza, Inc.
2014 NY Slip Op 50674(U) [43 Misc 3d 1217(A)]
Decided on April 23, 2014
Supreme Court, Kings County
Rivera, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on April 23, 2014
Supreme Court, Kings County


Stabilis Fund II, LLC, Plaintiff,

against

Nostrand Plaza, Inc., NEW YORK STATE DEPARTMENT OFTAXATION AND FINANCE, NEW YORK CITY DEPARTMENT OF FINANCE, MOSES KARPEN, AND "JOHN DOE NO. 1" TO "JOHN DOE NO. XXX," INCLUSIVE, THE LAST THIRTY NAMES BEING FICTITIOUS AND UNKNOWN TO PLAINTIFF, THE PERSONS OR PARTIES INTENDED BEING THE TENANTS, OCCUPANTS, PERSONS OR CORPORATIONS, IF ANY, HAVING OR CLAIMING AN INTEREST IN OR LIEN UPON THE PREMISES DESCRIBED IN THE COMPLAINT, Defendants.




10239/12



Reed Smith LLP

Nana Japaridze, Esq.

599 Lexington Avenue

New York, NY 10022

(212) 521- 5400

Atty For Defendant

Barry R. Feerst & Associates

Barry R. Feerst, Esq.

194 South 8th Street

Brooklyn, NY 11211 (718) 384-9111

Francois A. Rivera, J.



Recitation in accordance with CPLR 2219 (a) of papers considered on the notice of motion of Stabilis Fund II, LLC's (hereinafter plaintiff), filed on October 30, 2013, under motion sequence number three, for an order pursuant to CPLR 3212 and 3215 granting an accelerated judgment in its favor against all defendants.

Also recited are the papers considered on the notice of cross motion of defendants Nostrand Plaza, Inc. and Moses Karpen (hereinafter the answering defendants) filed on January 28, 2014, under motion sequence number four, for summary judgment in their favor and dismissal of the complaint. -

Plaintiff's Notice of Motion -

Affidavit of service of the motion -

Supporting affidavit of plaintiff's counsel -

Exhibits 1 through 7, and sub-exhibits A through C under Exhibit 1 -

Answering Defendants'affirmation in opposition -

Exhibit 1 -

Affirmation in Reply -

Answering Defendants' cross motion[FN1] -

Exhibit 1 -

Affidavit of service of the cross-motion

BACKGROUND

In this mortgage-foreclosure action, plaintiff moves under motion sequence number three, for an order (1) pursuant to CPLR 3212, granting summary judgment in its favor against answering defendants; (2) pursuant to CPLR 3215 (a), granting leave to enter a default judgment in its favor against the remaining named defendants, New York State Department of Taxation and Finance, and New York City Department of Finance (collectively, the taxing authorities); (3) pursuant to Real Property Actions and Proceedings Law § 1321, appointing a referee to compute the amount due and to determine whether the mortgaged property can be sold in parcels; and (4) amending the caption to delete the "John Doe" defendants.

Answering defendants oppose and separately cross-move under motion sequence number four, for an order, pursuant to CPLR 3212, granting summary judgment in their favor and, pursuant to CPLR 3211 (a) (1), (3), and (7), dismissing the complaint based on documentary evidence, lack of standing, and failure to state a cause of action, [*2]respectively.

BACKGROUND

On May 16, 2012, plaintiff's assignor, First National Bank of New York, successor by merger to Madison National Bank (First National), commenced this action to foreclose a mortgage encumbering certain real property at 619 Nostrand Avenue in Brooklyn (Tax Block 1220, Lot 9) (the subject property) by filing a summons and complaint with the Kings County Clerk's office. By answer, dated June 15, 2012, answering defendants joined issue. No other defendant has answered or otherwise appeared in this action.

The complaint alleges that First National issued a loan to defendant Nostrand Plaza, Inc. (the borrower) in the principal amount of $1,550,000 under a Consolidated Mortgage Note, dated Aug. 13, 2009 (the note). The complaint further alleges that the loan is secured by a Consolidated Mortgage, dated Aug. 13, 2009, on the subject property and is guaranteed as to specified monetary obligations under a Limited Guaranty of Payment of "Non-Recourse" Mortgage of the same date (the guaranty) by Moses Karpen (the guarantor). The complaint next alleges that both answering defendants are in default, in that (1) the borrower has failed to pay principal and interest under the note since Feb. 1, 2012, and (2) both answering defendants have failed to pay real property taxes. The complaint maintains that, by reason of these defaults, First National has elected that the entire principal sum and all amounts due shall be immediately due and payable in full. The complaint continues that the guarantor is made a party to this action so as to permit the assessment of any deficiency in the amount not recovered by plaintiff by sale of the subject property without the need for a separate action against the guarantor. The complaint concludes that the taxing authorities are named as party defendants as potential lienors for any unpaid franchise and corporate taxes of the borrower.

Answering defendants' answer consists of a general denial and a single affirmative defense of lack of personal jurisdiction over them. The answering defendants do not assert any counterclaims. During the pendency of this action, First National assigned the note and mortgage to plaintiff. By short-form order, dated March 8, 2013, plaintiff and its counsel (Reed Smith LLP) were substituted in place of First National and its counsel (Jaspan Schlesinger LLP).

LAW AND APPLICATION

RPAPL 1321 (1) provides, in pertinent part, that:

"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 such of the defendants as are prior incumbrancers of the mortgaged premises, and to examine and report whether the mortgaged premises can be sold in parcels and, if the whole amount [*3]secured by the mortgage has not become due, to report the amount thereafter to become due."


When seeking an order of reference to determine the amount that is due on an encumbered property, a plaintiff must show its entitlement to a judgment" (Perkins v Barry, 2013 NY Slip Op 50674[U], [Sup Ct, Kings County 2013]). "[A] reference may be directed where a defendant has appeared in an action if summary judgment is granted in favor of the plaintiff since there would be no questions of fact" (Perla v Real Prop. Holdings, LLC, 23 Misc 3d 697, 700 [Sup Ct, Kings County 2009]). In addition, "a reference to compute the amount due is prescribed when the defendant is in default in answering the complaint within the time allowed" (Id.).

Here, plaintiff is seeking summary judgment against the answering defendants. A party moving for summary judgment must demonstrate that "the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment" in its favor (CPLR 3212 [b]). Thus, the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact (see Jacobsen v New York City Health & Hosps. Corp., 2014 NY Slip Op 02098, [Ct App 2014]). If the movant meets this burden, the burden shifts to the non-movant to establish the existence of material issues of fact which require a trial (Id.).

In a mortgage-foreclosure action, a lender establishes its prima facie case against the borrower through "the production of the mortgage, the unpaid note, and evidence of default" (MLCFC 2007-9 Mixed Astoria, LLC v 36-02 35th Ave. Dev., LLC, 2014 NY Slip Op 02416, [2nd Dept 2014]). Where "a creditor seeks summary judgment upon a written guaranty, the creditor need prove no more than an absolute and unconditional guaranty, the underlying debt, and the guarantor's failure to perform under the guarantee" (City Natl. Bank v 424 Lafayette Ave. LLC, 30 Misc 3d 1236[A], 2011 NY Slip Op 50377[U], [Sup Ct, Kings County 2011] [internal quotation marks omitted], appeal withdrawn 2012 NY Slip Op 61086[U] [2nd Dept 2012]).

Here, plaintiff has included with its moving papers (1) copies of the executed note, mortgage, and guaranty, (2) copies of a recorded Assignment of Mortgage, executed on June 8, 2012, and effective as of June 21, 2012 (the assignment agreement), (3) the pleadings, and (4) the original affidavit, dated Oct. 18, 2013, of Joseph J. Tuso, General Counsel and Managing Director of Stabilis Capital Management LP on behalf of Stabilis General Partner, LLC, plaintiff's managing partner. Mr. Tuso avers in his affidavit that plaintiff is the assignee of the note and mortgage, and that the borrower is in default under the note by failing to pay principal and interest since February 1, 2012.

Plaintiff has made a prima facie showing of entitlement to judgment as a matter of law against the borrower by submitting the mortgage, the unpaid note, the assignment [*4]agreement, and Mr. Tuso's affidavit attesting to the borrower's default (see Sperry Assoc. Fed. Credit Union v Alexander, 2014 NY Slip Op 02423, [2nd Dept 2014]).

In opposition, the borrower cross-moves for summary judgment and for dismissal pursuant to CPLR 3211 (a) (1), (3), and (7). The borrower claims a defense based on documentary evidence pursuant to CPLR 3211 (a) (1) and a defense of lack of capacity to sue pursuant to CPLR 3211 (a) (3). However, both defenses were waived by the borrowers failure to raise them in the answer (see CPLR 3211 [e] US Bank Natl Assn. v Eaddy, 79 AD3d 1022 [2nd Dept 2010] Masada Universal Corp. v Goodman Sys. Co., 121 AD2d 518, 519 [2nd Dept 1986]). Although a defense based on CPLR 3211 (a) (7), namely, a failure to state a cause of action, may be raised at any time in the course of the action, the complaint here adequately pleads a cause of action for foreclosure and sale against the borrower. The factual allegations asserted in the complaint state a legally cognizable claim for the foreclosure and sale of the subject property as against the borrower, as they assert the existence and the borrower's execution and delivery of the note and mortgage, and several defaults thereunder.

The borrower advances two principal arguments in opposition to plaintiff's motion and in support of its cross motion. First, the borrower contends that no foreclosure is feasible because the loan has not been accelerated. However, the commencement of this foreclosure action constitutes unmistakable evidence of acceleration (see Albertina Realty Co. v Rosbro Realty Corp., 258 NY 472, 476 [1932] Clayton Natl. v Guldi, 307 AD2d 982 [2nd Dept 2003]). Second, the borrower posits that plaintiff, as assignee of First National, lacks standing to prosecute this action.

A plaintiff has standing where it is the holder or assignee of both the underlying note and the subject mortgage at the inception of the foreclosure action (see Bank of NY v Silverberg, 86 AD3d 274, 279 [2nd Dept 2011]). Here, it is undisputed that First National was the holder of the underlying note and the subject mortgage at the commencement of this action. When a valid assignment is made, the assignee succeeds to the assignor's position and acquires whatever rights the latter had (see Matter of Stralem, 303 AD2d 120, 123 [2nd Dept 2003]). Either a written assignment of the note or its physical delivery is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident (see US Bank, N.A. v Collymore, 68 AD3d 752, 754 [2nd Dept 2009]). Here, the note was validly assigned to plaintiff by way of the assignment agreement (see Stralem, 303 AD3d at 123; LibertyPointe Bank v 75 East 125th, LLC, 2013 WL 582254 [Sup Ct, NY County 2013]). Therefore, the assignment agreement establishes plaintiff's standing to continue this action. The borrower's argument that the allonge was not firmly affixed to the note at the time of its assignment to plaintiff is a red herring. Even assuming that the allonge was not firmly affixed to the note at the time of assignment B, an inference unsupported by record evidence B, the assignment agreement is sufficient, in and of itself, to establish a valid assignment of the note and mortgage to plaintiff (see Stralem, 303 AD3d at 123 [assignment of a note by [*5]written assignment was valid, despite the assignor's failure to endorse the note to the assignee]). Accordingly, the branch of plaintiff's motion for an order granting summary judgment on the complaint against the borrower is granted. Conversely, the branch of answering defendants' motion which is for summary judgment in the borrower's favor is denied.

On the other hand, the Court finds that plaintiff has failed to make a prima facie showing of entitlement to summary judgment against the guarantor. The guaranty, which requires payment of real property taxes and other specified obligations, is not triggered by a default in payment of principal or interest under the note. For the guarantor to be liable under the guaranty, two events must occur: first, there must be a default in payment of real property taxes or other specified obligations, and, second, a demand to pay must be made on the guarantor (see Guaranty at 2 ["If Borrower shall default in the punctual payment of any sum payable on Guaranteed Amounts, Guarantor shall, upon demand of Bank, immediately pay the sums so past due up to the Guaranteed Amount."] [emphasis added]). Although the complaint recites that the borrower has failed to pay real estate taxes (i.e., that the first condition to invoke the guaranty has been met), the complaint is silent as to whether a demand to pay was ever made on the guarantor. Mr. Tuso's affidavit is similarly unhelpful in this regard, as it is silent as to whether the guarantor was served with a demand to pay. The reply affirmation of plaintiff's counsel, in asserting for the first time that a demand on the guarantor was made, comes "too little, too late." This point should have been addressed in plaintiff's opening papers and, in any event, lacks any documentary support (see King v Dobriner, 106 AD3d 1053, 1054 [2nd Dept 2013]). Accordingly, the branch of plaintiff's motion for an order granting summary judgment on the complaint against the guarantor is denied. Likewise, the branch of answering defendants' motion which is for summary judgment in the guarantor's favor is denied.

The Court now turns to the branch of plaintiff's motion which is for leave to enter a default judgment against the taxing authorities. CPLR 3215 (f) provides, in relevant part, that "[o]n any application for judgment by default, the applicant shall file proof of service of the summons and the complaint, . . . and proof of the facts constituting the claim, the default and the amount due by affidavit made by the party." "[T]he affidavit . . . need only allege enough facts to enable a court to determine that a viable cause of action exists" (Woodson v Mendon Leasing Corp., 100 NY2d 62, 71 [2003]). Here, plaintiff has presented proof of service of the summons and complaint on the taxing authorities, an affidavit of merit as to their potential liens against the subject property, and their failure to answer or otherwise appear in this action. Thus, the branch of plaintiff's motion which is for leave to enter a default judgment against the taxing authorities is granted (see City Natl. Bank, 2011 NY Slip Op 50377 [U]).

Additionally, the branch of plaintiff's motion seeking the appointment of a referee to ascertain and compute the amount due upon the note and mortgage being foreclosed in [*6]this action and to determine whether the mortgaged premises can be sold in parcels pursuant to RPAPL 1321 is granted. The remaining branch of plaintiff's motion for an order, in effect pursuant to CPLR 3217 (b), to discontinue voluntarily this action against the "John Doe" defendants and to amend the caption accordingly is also granted. "In the absence of special circumstances, such as prejudice to a substantial right of the defendant, or other improper consequences, a motion for a voluntary discontinuance should be granted" (Wells Fargo Bank, N.A. v Chaplin, 107 AD3d 881, 883 [2nd Dept 2013] [internal quotation marks omitted]). As there is no showing that the answering defendants would be prejudiced by discontinuance, this branch of plaintiff's motion is granted, this action is discontinued against the "John Doe" defendants, and the caption is amended to delete them from this action.

Accordingly, the branch of plaintiff's motion which is for an order, pursuant to CPLR 3212, granting summary judgment in its favor against the borrower and the guarantor is granted as to the borrower and is denied as to the guarantor.

The branch of plaintiff's motion for leave, pursuant to CPLR 3215 (a), to enter a default judgment in its favor against New York State Department of Taxation and Finance, and New York City Department of Finance is granted.

The branch of plaintiff's motion for the appointment of a referee to compute the amount due and to determine whether the mortgaged property can be sold in parcels is granted.

The remaining branch of plaintiff's motion which is, in effect pursuant to CPLR 3217 (b), to voluntarily discontinue this action against the "John Doe" defendants and to amend the caption accordingly is granted, this action is discontinued against the "John Doe" defendants, and the caption is amended to delete the "John Doe" defendants.

The branch of answering defendants' motion which is for an order, pursuant to CPLR 3212, granting summary judgment in their favor is denied.

The remaining branch of answering defendants' motion which is for an order, pursuant to CPLR 3211 (a) (1), (3), and (7), dismissing the complaint is also denied.

The plaintiff and answering defendants are directed to settle an order on notice.

Enter:

J.S.C.

Footnotes


Footnote 1: Answering defendants= cross motion also serves as opposition to plaintiff=s motion