Resmac 2 LLC v Madison Realty Capital, L.P.

Resmac 2 LLC v Madison Realty Capital, L.P. 2011 NY Slip Op 05876 Decided on July 7, 2011 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on July 7, 2011
Mazzarelli, J.P., Catterson, DeGrasse, Abdus-Salaam, Román, JJ. 5530- 5531-
601049/08 50639/09 5532

[*1]Resmac 2 LLC, Plaintiff-Appellant,

v

Madison Realty Capital, L.P., et al., Defendants, Stewart Title Insurance Company, Defendant-Respondent. [And a Third-Party Action]



 
Wachtel & Masyr, LLP, New York (Howard Kleinhendler of
counsel), for appellant.
Sanders, Gutman & Brodie, P.C., Brooklyn (D. Michael
Roberts of counsel), for respondent.

Order and judgment (one paper), Supreme Court, New York County (Charles E. Ramos, J.), entered November 1, 2010, granting defendant Stewart Title Insurance Company's motion for summary judgment and dismissing the complaint as against it, and bringing up for review an order, same court and Justice, entered on or about October 29, 2010, which denied plaintiff's motion for summary judgment on its claims for defense costs and indemnification as against defendant, unanimously modified, on the law, the order and judgment vacated, defendant's motion denied and plaintiff's motion granted to the extent of declaring that defendant is obligated to reimburse plaintiff for defense costs, and otherwise affirmed, without costs. Appeal from October 29, 2010, order unanimously dismissed, without costs, as subsumed in the appeal from the November 1, 2010 order and judgment.

Plaintiff's failure to notify defendant of the adversary proceeding commenced in the bankruptcy court is not excused by the fact that defendant received notice of the pending litigation from another source (see Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 43 [2002]). However, defendant did not establish that it was prejudiced by plaintiff's failure, and thus, pursuant to the terms of the policy, plaintiff's failure "shall" not prejudice plaintiff's rights under the policy. Defendant received notice from plaintiff of its potential liability under the policy, as well as a copy of the complaint in the bankruptcy proceeding. Yet, instead of exercising its right under the policy to take action to prevent or reduce loss or damage to its insured, defendant "chose to stay on the sidelines and to allow [plaintiff] to defend the suit on its own" (see Deutsche Bank Trust Co. of Ams. v Tri-Links Inv. Trust, 74 AD3d 32, 42 [2010]; American Tr. Ins. Co. v Hashim, 68 AD3d 618 [2009], lv denied 14 NY3d 708 [2010]). Thus, defendant must reimburse plaintiff for the latter's defense costs. [*2]

Defendant is not, however, obligated to indemnify plaintiff for the difference between the face amount of the policy and the amount for which it compromised the value of the subject mortgage at the bankruptcy proceeding, because plaintiff sustained no loss or damage under the policy by taking title to the property (see Grunberger v Iseson, 75 AD2d 329 [1980]; Citibank v Chicago Tit. Ins. Co., 214 AD2d 212, 222 [1995], lv dismissed 87 NY2d 896 [1995]). Further, plaintiff voluntarily agreed to the settlement amount in the bankruptcy proceeding without notifying defendant, although it was not absolved from complying with its obligations under the policy by defendant's disclaimer of coverage (see Seward Park Hous. Corp. v Greater N.Y. Mut. Ins. Co., 43 AD3d 23, 30-31 [2007]).

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: JULY 7, 2011

CLERK