Shaw Funding, LP v Joam LLC
Decided on January 6, 2009
Supreme Court, Kings County
Shaw Funding, LP, Plaintiff,
Joam LLC, CLEAR BLUE WATER, LLC, ADEOLOU J. ADENIJI, ANTONIA ADEDJI, and NICOLA A. HARRY, and "JOHN DOE No.1 through JANE DOE# 10," the last ten names being fictitious and unknown to the Plaintiff, the persons or parties intended being the occupants, tenants, persons, or entities, if any, having or claiming an interest in or lien upon the mortgaged premises described in the verified complaint, Defendants.
Irwin Popkin, Esq.
George O. Guldi, Esq.
Yvonne Lewis, J.
Shaw Funding, LP. (hereinafter Shaw Funding), by its attorney, has moved this court for an order granting it summary judgment and striking the answer and counterclaims of the defendant, Clear Blue Water, LLC (hereinafter Clear Blue), and appointing a referee to compute the amount due it on account of the note and mortgage, dated December 24, 2007, on which foreclosure is sought in connection with 263 Sumpter Street, Brooklyn, NY and 72 Orchard Street, Yonkers, NY (respectively recorded February 22, 2008 and March 27, 2008). According to the plaintiff, the defendants defaulted on said note in the amount of six-thousand, one-hundred and eleven ($6,111.67) dollars and sixty-seven cents as of February 1, 2008, whereupon it elected to declare the entire balance of the principal immediately due and owing in accordance with the terms, covenants, and conditions of the mentioned mortgage resulting in payment due of four-hundred thousand ($400,000.00) dollars, with interest thereon, from January 1, 2008, at the rate of twenty-four (24) percent per annum. The plaintiff notes that all of the defendants have been served with its summons and complaint and that the statutory time for an answer to be filed has elapsed with only the defendant, Clear Blue, having done so, asserting that its interest in the property is superior to that of the plaintiff's. However, a search made by First American Title Insurance Company of New York reveals that on November 19, 2007, Joam, LLC (hereinafter Joam) transferred 263 Sumpter Street, Brooklyn, NY to Clear Blue which deed was recorded on March 19, 2008, whereas its note and mortgage, dated December 24, 2007, with regards to said property was recorded February 22, 2008, as earlier noted, thereby giving it priority under the [*2]recording act, RPL § 291. Plaintiff asserts that the Yonkers property alone is insufficient to satisfy its note, and that at the time of its mortgage and note, a title search by Grant Abstract, Inc., agent for Old Republic National Title Insurance Policy, did not disclose Clear Blue's purported interest in the subject property, as confirmed by its manager's affidavit.
In opposition, counsel for Clear Blue states that the (November 19, 2007) Joam to Clear Blue deed was diligently sent to the City Registrar of Kings County for recording on December 6, 2007, returned to Clear Blue on February 2008 to correct a "ministerial error on one of the accompanying transfer documents," and re-filed with the Registrar on March 18, 2008. More importantly, counsel asserts that since Clear Blue had actual custody and control over the subject premises as of November, 2007, Shaw funding had actual knowledge of its inherent interest therein therefrom. Consequently, counsel urges that the note and mortgage executed to Shaw Funding from Joam constitute a fraud since at the time of their execution Joam had already transferred the property to Clear Blue and hence had no proprietary interest to convey. Finally, counsel argues that since Clear Blue exercised due diligence in attempting to earlier record its deed, it should be permitted to keep the subject property now owned by it and Shaw funding should be required to pursue Joam for satisfaction of its debt from which only Joam has benefitted. Clear Blue then concludes by asserting that summary judgment should be denied since issues of fact arise as a consequence of the fact that title had vested to it in the subject property upon delivery of the deed (citing RPL §244), which was prior to Shaw Funding acquiring any interest in the same, and which acquisition was made with full knowledge of Clear Blue's actual possession. An affidavit by one Alysia Metzler, who identified herself as one with "personal knowledge of the underlying facts and circumstances by virtue of my employment with Clear Blue Water, LLC," was submitted in corroboration of the preceding. Although her exact title and/or position was never identified, it is to be noted that Ms. Meltzer identified herself as having been present at the closing of Clear Blue's purchase, being familiar with the closing documents, the initial filing attempt, and having made the re-submission to the Registrar's Office.
In reply, counsel for Shaw Funding questions the uncorroborated relationship between Ms. Metzler and Clear Blue, and notes that no proof has been submitted to substantiate that Clear Blue had even attempted a preliminary filing with the Registrar's Office. In any event, RPL § 371 clearly provides that every instrument entitled to be recorded must be recorded by the recording officer in the order and as of the time of its delivery to him therefor, and is considered recorded from the time of such delivery (citing, Security Discount Associates, Inc. v. Lynmar Homes Corp., 13 AD2d 389, 216 NYS2d 543 [2d Dept., 1961]). Consequently, the initial rejection if it occurred demonstrates that the proffered instrument was entitled to be recorded. In addition, counsel stresses that this action of foreclosure is against both the Brooklyn and Yonkers properties, and that in its answer, Clear Blue admitted that Joam had transferred the Brooklyn property to it as collateral for a loan. RPL § 320 makes its clear that "[a] deed conveying real property , which, by any other written instrument, appears to be intended only as a security in the nature of a mortgage, although an absolute conveyance in terms, must be considered a mortgage; and the person for whose benefit such deed is made, derives no advantage from the recording thereof, unless every writing, operating as a defeasance of the same, or explanatory of its being desired to have the effect only of a mortgage, or conditional deed, is also recorded therewith, and at the same time." In other words, the interest conveyed by deed will not supersede a priorly [*3]recorded mortgage.
"A party seeking summary judgment 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" (Ayotte v. Grevasioi, 81 NY2d 1062, 601 NYS2d 463; Alvarez v. Prospect Hosp., 68 NY2d 320, 508 NYS2d 923). Once a prima facie showing has been made, the burden shifts to the opposing party to produce evidentiary proof in admissible form sufficient to establish the existence of material questions of fact (see Alvarez v. Prospect Hosp., supra ).
It is elementary hornbook law that New York State is a race-notice jurisdiction, a concept
more commonly referred to as "first in time, first in right." (See RPL §290, et seq.). RPL
§290 (3) includes in its protection the interests of a grantee of a deed and the mortgagee
of a mortgage.
It is to be noted that an instrument conveying an interest in realty that has been duly recorded will impart constructive notice of the interest it creates (see RPL §316, Baccari v. DeSanti, 70 AD2d 198 [2d Dept., 1979]). A person is deemed to have acted in good faith if acting without notice of the competing interest (see Andy Associates, Inc. v. Bankers Trust Co., 49 NY2d 13 ). Of crucial note is the fact that to bar avoidance of an unrecorded interest (such as Clear Blue's) as a bona fide purchaser (in this instance, Shaw Funding) one (such as Clear Blue) must demonstrate that the competing interest's (in this instance, Shaw funding's) actual knowledge, constructive knowledge, and/or inquiry notice arising by virtue of its (Clear Blue's) possession. Inquiry notice is said to arise by the existence of facts sufficient to excite the suspicion of an ordinary prudent person to investigate (see Anderson v. Blood, 152 NY 285 ).
In the matter sub judice, it is also readily apparent thatJoam conveyed a mortgage to Shaw Funding at a time when it had already deeded the property to Clear Blue. No evidence has been furnished by which to impute collusion on the part of either Shaw Funding or Clear Blue with Joam to defraud the other. Furthermore, it is quite clear that Shaw Funding recorded its mortgage ahead of Clear Blue's deed (transferred as security for a mortgage), it therefore follows that the former is presumptively entitled to priority in satisfying its debt and thereby should be entitled to summary judgment herein. However, that prima facie showing by Shaw Funding is sufficiently rebutted by Clear Blue's assertion that it was in open and notorious occupancy of the subject premises at the time that Shaw Funding obtained its interest so as to raise issues of fact that bar the grant of summary judgment. Put another way, the record needs to be developed to corroborate and/or negate the existence of actual and/or inquiry notice on the part of Shaw Funding before summary judgment can be decided upon herein.
WHEREFORE, Shaw Funding's motion for summary judgment and striking the answer and counterclaims of the defendant, Clear Blue Water, LLC, and appointing a referee to compute the amount due it on account of the note and mortgage is denied as issues of fact preclude the grant of such relief at this time.
This constitutes the decision and order of this Court.