HSBC Bank USA, Nat'l Ass'n v. Alexander

221 A.D.3d 865

201 N.Y.S.3d 66

HSBC BANK USA, NATIONAL ASSOCIATION, etc., respondent,

v.Kinta ALEXANDER, et al., appellants.

2021–00991

Index No. 522616/19

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

Argued—May 9, 2023

November 22, 2023

Belowich & Walsh LLP, White Plains, NY (Joanna Sandolo and Daniel G. Walsh of counsel), for appellants.

Greenberg Traurig, LLP, New York, NY (Sarah Lemon, Patrick G. Broderick, and Leah Jacob of counsel), for respondent.

MARK C. DILLON, J.P., VALERIE BRATHWAITE NELSON, ROBERT J. MILLER, JOSEPH J. MALTESE, JJ.

DECISION & ORDER

In an action, inter alia, to foreclose a mortgage, the defendants Kinta Alexander and Mortgage Electronic Registration Systems, Inc., as nominee for Mid–Island Mortgage Corp. appeal from an order of the Supreme Court, Kings County (Robin K. Sheares, J.), dated November 9, 2020. The order, insofar as appealed from, denied those defendants’ separate motions pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying those branches of the separate motions of the defendants Kinta Alexander and Mortgage Electronic Registration Systems, Inc., as nominee for Mid–Island Mortgage Corp. which were pursuant to CPLR 3211(a) to dismiss the second cause of action insofar as asserted against each of them, and substituting therefor a provision granting those branches of the motions; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.

In July 2006, nonparty Joan Tyrell Morgan (hereinafter Tyrell Morgan) executed a note which was secured by a mortgage (hereinafter the TM mortgage) on certain real property located in Brooklyn. The TM mortgage was subsequently assigned to the plaintiff.

In March 2009, the plaintiff commenced an action against Tyrell Morgan, among others, to foreclose the TM mortgage (hereinafter the 2009 foreclosure action). The plaintiff filed a notice of pendency in the 2009 foreclosure action (hereinafter the 2009 notice of pendency). In an order dated June 11, 2013, the Supreme Court directed dismissal of the 2009 foreclosure action without prejudice and vacated the 2009 notice of pendency (hereinafter the dismissal order).

By a series of indentures, the subject property was conveyed to nonparty BSD 270, LLC (hereinafter BSD). In November 2015, BSD commenced an action against the plaintiff to cancel and discharge the TM mortgage (hereinafter the BSD action). On May 16, 2016, in the BSD action, the Supreme Court, upon the plaintiff's default, inter alia, granted BSD's motion to discharge the TM mortgage (hereinafter the 2016 discharge order). The 2016 discharge order was recorded on May 19, 2016.

In June 2016, BSD conveyed the property to nonparty Truly Commerce, LLC (hereinafter Truly). Thereafter, in the BSD action, the Supreme Court granted a motion by the plaintiff to vacate the 2016 discharge order (hereinafter the 2016 vacatur order). In January 2017, after the issuance of the 2016 vacatur order, but prior to the 2016 vacatur order being recorded in 2019, Truly conveyed the property to the defendant Kinta Alexander (hereinafter the defendant). Contemporaneously, the defendant executed a note, which was secured by a mortgage on the property, in favor of the defendant Mortgage Electronic Registration Systems, Inc., as nominee for Mid–Island Mortgage Corp. (hereinafter Mid–Island, and together with the defendant, the defendants).

In 2018, the Supreme Court vacated the dismissal order in the 2009 foreclosure action and restored the case to the court's active calendar.

By summons and complaint dated October 7, 2019, the plaintiff commenced this action against the defendants to foreclose the TM mortgage and seeking to consolidate this action with the 2009 foreclosure action. The defendants separately moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint insofar as asserted against each of them. The defendants contended in their respective motions, inter alia, that the supporting documentary submissions therein, which included judicial orders and public land records, established that the defendant was a bona fide purchaser for value and Mid–Island was a bona fide encumbrancer for value. In an order dated November 9, 2020, the Supreme Court, inter alia, denied the defendants’ respective motions without prejudice. The defendants appeal.

" ‘To succeed on a motion to dismiss based upon documentary evidence pursuant to CPLR 3211(a)(1), the documentary evidence must utterly refute the plaintiff's factual allegations, conclusively establishing a defense as a matter of law’ " ( J.P. Morgan Mtge. Acquisition Corp. v. South Homes, Inc., 189 A.D.3d 1381, 1382, 138 N.Y.S.3d 566, quoting Gould v. Decolator, 121 A.D.3d 845, 847, 994 N.Y.S.2d 368 ).

" ‘A mortgagee may have an erroneous discharge of mortgage, without concomitant satisfaction of the underlying mortgage debt, set aside, and have the mortgage reinstated where there has not been detrimental reliance on the erroneous recording’ " ( Beltway Capital, LLC v. Soleil, 175 A.D.3d 451, 452–453, 107 N.Y.S.3d 68, quoting New York Community Bank v. Vermonty, 68 A.D.3d 1074, 1076, 892 N.Y.S.2d 137 ; see Bank of Am., N.A. v. Snyder, 154 A.D.3d 671, 671, 62 N.Y.S.3d 136 ). "Only bona fide purchasers and lenders for value are entitled to protection from an erroneous discharge based upon their detrimental reliance thereon" ( Beltway Capital, LLC v. Soleil, 175 A.D.3d at 453, 107 N.Y.S.3d 68, citing Bank of Am., N.A. v. Snyder, 154 A.D.3d at 672, 62 N.Y.S.3d 136 ). However, the status of a bona fide purchaser for value or a bona fide encumbrancer for value cannot be maintained by a purchaser or encumbrancer " ‘with either notice or knowledge of a prior interest or equity in the property, or one with knowledge of facts that would lead a reasonably prudent purchaser [or encumbrancer] to make inquiries concerning such’ " ( Emigrant Bank v. Drimmer, 171 A.D.3d 1132, 1134, 99 N.Y.S.3d 79, quoting Gregg v. M & T Bank Corp., 160 A.D.3d 936, 940, 76 N.Y.S.3d 191 [internal quotation marks omitted]; see Yen–Te Hsueh Chen v. Geranium Dev. Corp., 243 A.D.2d 708, 709, 663 N.Y.S.2d 288 ).

Here, despite the defendants’ documentary submissions that established that they acquired their respective interests in the property after the 2016 discharge order had been recorded, but prior to...