71-21 Loubet, LLC v. Bank of Am., N.A.

208 A.D.3d 736

174 N.Y.S.3d 400

71–21 LOUBET, LLC, respondent,

v.BANK OF AMERICA, N.A., appellant, et al., defendant.

2020–01313

Index No. 708850/16

Supreme Court, Appellate Division, Second Department, New York.

Argued—March 24, 2022

August 24, 2022

Borchert & LaSpina, P.C., Whitestone, NY (Edward A. Vincent and Robert W. Frommer of counsel), for appellant.

Erin E. Wietecha, Farmingdale, NY, for respondent.

VALERIE BRATHWAITE NELSON, J.P., ANGELA G. IANNACCI, PAUL WOOTEN, JOSEPH A. ZAYAS, JJ.

DECISION & ORDER

In an action for strict foreclosure pursuant to RPAPL 1352, the defendant Bank of America, N.A., appeals from an order and judgment (one paper) of the Supreme Court, Queens County (Leslie J. Purificacion, J.), entered January 8, 2020. The order and judgment, insofar as appealed from, denied that defendant's motion pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against it and for summary judgment on its counterclaim to quiet title, granted that branch of the plaintiff's cross motion which was for summary judgment on the complaint insofar as asserted against that defendant, and directed that defendant to redeem the subject property within the specified period or suffer extinguishment of its interest therein.

ORDERED that the order and judgment is affirmed insofar as appealed from, with costs.

On March 29, 2000, Kimie Miyamoto and Akira Miyamoto (hereinafter together the Miyamotos) executed a mortgage on certain real property in Queens in favor of Lincoln Equities Credit Corp. (hereinafter Lincoln) in exchange for a loan in the sum of $110,000 (hereinafter the Lincoln mortgage). The mortgage was recorded. The Miyamotos immediately defaulted, and in June 2000, Lincoln commenced an action to foreclose its mortgage (hereinafter the Lincoln foreclosure action). Shortly after commencing the foreclosure action, Lincoln assigned the note and mortgage to Harry Dorvilier. That assignment was not recorded.

In December 2009, while the Lincoln foreclosure action was pending, Kimie Miyamoto executed a mortgage on the same property in favor of Bank of America, N.A. (hereinafter BANA), in exchange for a reverse mortgage loan in the principal sum of $915,000 (hereinafter the reverse mortgage). At that time, the last notice of pendency filed in the Lincoln foreclosure action had expired (see CPLR 6513 ) and a new notice of pendency had not yet been filed. On the date of the closing, BANA obtained from Lincoln a faxed copy of a "Release of Mortgaged Premises [and] Satisfaction of Lien" indicating that the Lincoln mortgage had been paid in full. The fax contained the annotations "original by overnight" and "original to follow" and included a copy of a UPS Next Day Air label. However, the signature on the faxed satisfaction was illegible, the signer's position was not indicated, and the signer's name was not written in either the space provided underneath the signature or in the notary's stamp. Originals never followed, and it is undisputed that no satisfaction of the Lincoln mortgage had been recorded. BANA nevertheless closed on the reverse mortgage. In 2012, BANA assigned the note and reverse mortgage to Champion Mortgage Company (hereinafter Champion).

In December 2013, Dorvilier commenced an action against Champion for a judgment declaring, inter alia, that he was entitled to sell the property "free and clear" of the reverse mortgage (hereinafter the Dorvilier action). Champion commenced a third-party action against Lincoln and its vice president, alleging fraud. In an order entered December 9, 2014, the Supreme Court, inter alia, granted Champion's motion for summary judgment dismissing the complaint in the Dorvilier action, finding that Champion would not be bound by any judgment in the Lincoln foreclosure action as it was not joined as a defendant therein, its mortgage continued, and Dorvilier had made no claim that he had purchased the premises at foreclosure. In an order entered May 13, 2015, the court, inter alia, denied that branch of Dorvilier's motion which was to clarify the order entered December 9, 2014. Champion appealed, and this Court dismissed the appeal on the ground that Champion was not aggrieved by the denial of that branch of Dorvilier's motion which was to clarify the prior order (see Dorvilier v. Champion Mtge. Co., 156 A.D.3d 761, 65 N.Y.S.3d 731 ).

Neither the order entered December 9, 2014, nor the order entered May 13, 2015, disposed of the third-party complaint in the Dorvilier action. The third-party action continued, and, in an order dated April 6, 2018, the Supreme Court, inter alia, granted the third-party defendants’ motion to dismiss the third-party complaint, concluding, among other things, that it was not reasonable for BANA to have closed on the reverse mortgage loan as a purported first mortgage lien prior to receiving the original document showing a satisfaction of the Lincoln mortgage and in the absence of any escrow, particularly in light of the blanks appearing on the faxed satisfaction of lien form.

Meanwhile, in May 2014, in the Lincoln foreclosure action, the Supreme Court substituted Dorvilier as the plaintiff and entered a judgment of foreclosure and sale in his favor. Neither BANA nor Champion was named as a defendant to the foreclosure action nor moved to intervene therein. At the ensuing foreclosure sale, on March 25, 2016, Dorvilier submitted the winning bid. On June 10, 2016, Dorvilier assigned his bid to 71–21 Loubet, LLC (hereinafter Loubet), Loubet took title to the subject property, and the surplus funds from the foreclosure sale were deposited with the Clerk's Office. Between the foreclosure sale and the assignment of the bid to Loubet, by assignment dated June 2, 2016, Champion assigned the reverse mortgage back to BANA.

In July 2016, Loubet commenced this action seeking strict foreclosure pursuant to RPAPL 1352 against, among others, Champion. BANA was thereafter substituted for Champion, and submitted an answer which asserted several affirmative defenses, including that the action was barred by collateral estoppel and the statute of limitations, and Loubet lacked standing, and a counterclaim to quiet title, seeking a declaration that its lien was the first in priority.

BANA moved pursuant to CPLR 3211(a)(5) to dismiss the complaint insofar as asserted against it as barred by collateral estoppel and for summary judgment on its counterclaim, arguing that the priority of the parties’ liens was determined in the Dorvilier action, which resulted in summary judgment in favor of the BANA mortgage. Loubet cross-moved, inter alia, for summary judgment on the complaint insofar as asserted against BANA. In opposition to the cross motion, BANA argued, among other things, that Loubet lacked standing, that the action was time-barred, and that Loubet's request for summary judgment was premature. In an order and judgment entered January 8, 2020, the Supreme Court, inter alia, denied BANA's motion, granted that branch of Loubet's cross motion which was for summary judgment on the complaint insofar as asserted against BANA, and directed BANA to redeem the subject property within the specified period or suffer extinguishment of its interest therein. BANA appeals.

RPAPL 1311 requires the plaintiff in a mortgage foreclosure action to join, as a party defendant, among others, "[e]very person having any lien or incumbrance upon the real property which is claimed to be subject and subordinate to the lien of the plaintiff" ( RPAPL 1311[3] ). "The rationale for joinder of these interests derives from the underlying objective of foreclosure actions—to extinguish the rights of redemption of all those who have a subordinate interest in the property and to vest complete title in the purchaser at the judicial sale" ( Polish Natl. Alliance of Brooklyn v. White Eagle Hall Co., 98 A.D.2d 400, 404, 470 N.Y.S.2d 642 ; see NC Venture I, L.P. v. Complete Analysis, Inc., 22 A.D.3d 540, 542, 803 N.Y.S.2d 95 ). "The absence of a necessary party in a foreclosure action leaves that party's rights unaffected by the judgment and sale, and the foreclosure sale may be considered void as to the omitted party" ( 6820 Ridge Realty v. Goldman, 263 A.D.2d 22, 26, 701 N.Y.S.2d 69 ; see Polish Natl. Alliance of Brooklyn v. White Eagle Hall Co., 98 A.D.2d at 406, 470 N.Y.S.2d 642 ).

Where, as here, a necessary party was omitted from a foreclosure action, the purchaser of the foreclosed property may commence a strict foreclosure action pursuant to RPAPL 1352 (see Bass v. D. Ragno Realty Corp., 111 A.D.3d 863, 864, 976 N.Y.S.2d 118 ; 6820 Ridge Realty v. Goldman, 263 A.D.2d at 26, 701 N.Y.S.2d 69 ). " RPAPL 1352 permits a strict foreclosure action against a person not named in the original foreclosure action, who has either a right of redemption to the subject property or a right to foreclose a subordinate mortgage or other lien" ( Bass v. D. Ragno Realty Corp., 111 A.D.3d at 865, 976 N.Y.S.2d 118 ). The statute authorizes the court to issue a judgment that fixes a time period within which any such person must act to redeem or begin a foreclosure action. If the person fails to redeem the property or commence a foreclosure action within the time period fixed by the court, such person "shall be excluded from claiming any title or interest in such property and all title or interest of such person ... or the right to foreclose a subordinate mortgage or other lien against such property shall thereby be extinguished and terminated" ( RPAPL 1352 ; see Bass v. D. Ragno Realty Corp., 111 A.D.3d at 864, 976 N.Y.S.2d 118 ; 6820 Ridge Realty v. Goldman, 263 A.D.2d at 26, 701 N.Y.S.2d 69 ). "Since RPAPL 1352 operates to dispose of the encumbrances of those whose interests were junior at the time of the original foreclosure but who were not joined as parties to that action, a judgment of strict foreclosure cures a defect in the judgment or sale under the first foreclosure" ( 6820 Ridge Realty v. Goldman, 263...