Wells Fargo Bank, NA v Edsall

[*1] Wells Fargo Bank, NA v Edsall 2009 NY Slip Op 50112(U) [22 Misc 3d 1113(A)] Decided on January 22, 2009 Supreme Court, Suffolk County Whelan, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 22, 2009
Supreme Court, Suffolk County

Wells Fargo Bank, NA, Plaintiff,

against

Paul Edsall, FREEMONT INVESTMENT & LOAN, PETER DOPWELL, ET ALS, Defendants.



3523-07



ROSICKI, ROSICKI & ASSOC., PC

Attys. For Plaintiff

51 E. Bethpage Rd.

Plainview, NY 11803

JEFFREY L. WEINSTEIN, ESQ.

Atty. For Defendant Dopwell

225 Broadway

New York, NY 10007

Thomas F. Whelan, J.

It is,

ORDERED that this motion (#

003) by defendant, Peter Dopwell, for an order staying all proceedings in this mortgage foreclosure action including the public sale of the subject premises as directed in the judgment of foreclosure and sale previously entered herein and for an order "dismissing the complaint" is considered under CPLR 5015 and Article 13 of Real Property Actions and Proceedings Law (RPAPL) and is denied.

This mortgage foreclosure action was commenced by the plaintiff in February of 2007 after [*2]the defendant, Paul Edsall, (mortgagor/obligor) failed to pay the monthly installments due under the terms of the March 29, 2006 note and mortgage given by Edsall to the plaintiff's predecessor-in-interest. In May of 2008, the plaintiff obtained a judgment of foreclosure and sale which was entered by the Clerk on May 9, 2008. That judgment was preceded by the issuance of an order of reference which the plaintiff obtained on August 1, 2007, pursuant to RPAPL 1321, as none of the defendants in this action contested the plaintiff's demands for relief by answer or otherwise.

The moving defendant, Peter Dopwell, is the former owner of the subject premises. He occupies the premises under an agreement executed by him and the defendant/mortgagor, Edsall, in April of 2006. Shortly after the commencement of this action, the plaintiff served Dopwell with the summons and complaint. Upon learning of Dopwell's occupation of the subject premises, the plaintiff moved to substitute Dopwell as a party defendant for the unknown defendant "John Doe" originally listed in the caption and for an order fixing Dopwell and the other defendants' defaults in answering the summons and complaint. That application was granted in the order of reference dated August 1, 2007.

By the instant motion, defendant Dopwell seeks a stay of further proceedings in this action, including the public sale of the subject premises which was directed in the May 9, 2008 judgment of foreclosure and sale, and for an order dismissing the plaintiff's complaint. While not set forth as an item of relief demanded in the Order to Show Cause by which this motion was interposed, defendant Dopwell also demands an order rescinding his conveyance of the subject premises to Edsall on March 28, 2006.

In support of these demands for relief, defendant Dopwell claims that he was the victim of a "mortgage rescue scam" which was purportedly perpetrated upon him by defendant Edsall and others acting in concert with him. According to Dopwell, his ownership of the subject premises was in jeopardy in the latter half of 2005, due to the pendency of a mortgage foreclosure action his lender had commenced against him. Dopwell admits that he was unable to make the monthly mortgage payments required under his note and mortgage due to financial difficulties. Dopwell claims that his attempts to secure a refinancing of his first mortgage at an affordable rate were unsuccessful due to his poor credit rating.

In the fall of 2005, Dopwell was introduced to Edsall through a non-party real estate broker named Rosen. By a contract of sale dated February 3, 2006, Dopwell agreed to sell the subject premises to Edsall for $410,000.00. To fund the purchase, Edsall applied to the plaintiff's predecessor-in-interest for a first mortgage loan in the amount of $328,000.00. This first mortgage loan, along with a second mortgage by a non-party to this action, closed at the sale of the subject premises by Dopwell to Edsall on March 29, 2006. The record reflects that at said closing, the proceeds of Edsall's first mortgage loan, which is the subject of this action, were used to pay the mortgage loan given by Dopwell that was in default. The record further reflects that a second mortgage loan given by Dopwell which was encumbering the subject premises at the time of the sale to Edsall was also paid off at the March 29, 2006 closing. [*3]

Following the closing and on April 7, 2006, Edsall and Dopwell entered into an "Occupancy Agreement and Re-purchase Option." Pursuant to the terms thereof, Dopwell agreed to pay Edsall $1,500.00 per month for Dopwell's use and occupancy of the subject premises and Dopwell was afforded the right to re-purchase the premises under certain conditions. Dopwell alleges that he paid the $1,500.00 monthly occupancy fee to Edsall and/or his agent for approximately eight or nine months following the April 7, 2006 execution of the agreement but thereafter stopped when Dopwell suspected that Edsall was in arrears in paying the first mortgage which is the subject of this action.

Relying on the foregoing factual averments, Dopwell claims that this action should be stayed and that the plaintiff's complaint should be dismissed. Dopwell's demands for relief are not accompanied by a demand for an order vacating his default in answering the plaintiff's service of the summons and complaint upon him back in March of 2007. Nor are such demands accompanied by a request to serve a late answer containing bona fide defenses to the plaintiff's demands for relief and counterclaims against Edsall and others for recision of the March 29, 2005 deed, cancellation of Edsall's purchase money mortgages and other relief to which Dopwell believes he is entitled to by reason of the purportedly tortious conduct by Edsall and others who allegedly duped Dopwell into conveying the subject premises to Edsall under false pretenses. Instead, Dopwell, a mere occupant of the subject premises having neither legal title nor any duly asserted claim for recovery of his former legal title, moves in this foreclosure action to non-suit the plaintiff, against whom, Dopwell asserts no claims of wrongdoing. For the reasons set forth below, this motion is denied.

It is well established that the remedy of recision of a deed and a concomitant cancellation of a mortgage issued on the premises conveyed by such deed at the time of such conveyance is available to a claimant in cases wherein it is established that such deed was either forged, obtained under false pretenses (fraud in the factum) or fraudulently induced (see Euba v Euba, 40 AD3d 689, 835 NYS2d 688 [2d Dept 2007]; Betz v N.Y.C. Premiere Prop., Inc., 38 AD3d 815, 833 NYS2d 153 [2d Dept 2007]; Cruz v Cruz, 37 AD3d 754, 832 NYS2d 217 [2d Dept 2007]). Consequently, a victim of a mortgage rescue scam that results in a conveyance of said victim's home which is immediately encumbered by a purchase money mortgage issued in connection with such conveyance may have a defense to a mortgage foreclosure action commenced by the purchase money mortgagee or its assignee against the mortgagor who either forged or fraudulently induced the conveyance (see GMAC Mtg. Corp. v Chan, 56 AD2d 521, 867 NYS2d 204 [2d Dept 2008]; Karan v Hoskins, 22 AD3d 638, 803 NYS2d 666 [2d Dept 2005]); Watson v Melnikoff, 19 Misc 3d 1130(A), 866 NYS2d 96 [Kings County, Supreme Ct., Demarest, J., 2008]).

Forged deeds and/or encumbrances or those executed under false pretenses which constitute fraud in the factum are void ab intio (see Marden v Dorthy, 160 NY 39, 54 NE 726 [1899]; GMAC Mtg. Corp. v Chan, 56 AD2d 521, supra ; Cruz v Cruz, 37 AD3d 754, supra ). The interests of subsequent bona fide purchasers or encumbrancers for value are thus not protected under RPL § 266 when their title is derived from a forged deed or one that is the product of fraud in the factum (see Ameriquest Mtg. Co. v Gaffney, 41 AD3d 750, 839 NYS2d 203 [2d Dept 2007]; LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 835 NYS2d 264 [2d Dept 2007]). [*4]

In contrast, a fraudulently induced deed is merely voidable, not void (see Marden v Dorthy, 160 NY 39, supra ; see also Dalessio v Kessler, 6 AD3d 57, 773 NYS2d 434 [2d Dept 2004]; Yin Wu v Wu, 288 AD2d 104, 733 NYS2d 45 [1st Dept 2001]). Thus, the remedy of recision of a fraudulently induced deed and the cancellation of any purchase money mortgage issued in connection therewith is not available against a bona fide purchaser or encumbrancer for value (see RPL§§ 266; Fleming-Jackson v Fleming, 41 AD3d 175, 838 NYS2d 506 [1st Dept 2007]; Fischer v. Sadov Realty Corp., 824 NYS2d 434, 34 AD3d 630 [2d Dept 2006]; Miner v Edwards, 221 AD2d 934, 634 NYS2d 306 [2d Dept 1995]).

Remedies in favor of the victims of mortgage rescue scams who convey their homes to a stranger in order to avoid a foreclosure or tax sale while retaining occupancy of the premises under a residency agreement are also available under recent remedial legislation such as RPL 265-a (known as the Home Equity Theft Prevention Act, effective February 1, 2007). Qualified claimants may thus possess viable claims to set aside a deed and for cancellation of any mortgage issued in connection therewith under this remedial statute (see Phillips-Thomas v Ellison, 8/13/2008 NYLJ 28, [col 3] [Nassau County, Supreme Ct., Lally, J., 2008]; Washington Mut. Bank v Sholomov, 20 Misc 3d 773, 862 NYS2d 890 [Nassau County, Supreme Ct., Palmieri, J., 2008]). Such claims need not be predicated upon claims of forgery, fraud in the factum or fraudulent inducement, but may simply be predicated upon claims that the conveyance and concomitant mortgage violated the provisions of this statute (see RPL 265-a). However, the remedies of deed recision and the cancellation of a related mortgage under RPL 265-a are subject to the rights of bona fide purchasers or encumbrances for value and are available only to qualifying claimants who sue within two years of the transaction (see RPL 265-a [2][e], [8]; Washington Mut. Bank v Sholomov, 20 Misc 3d 773, supra ).

The most recent flurry of legislative enactments aimed at providing protection and remedies to homeowners in default of their mortgages who attempt to stave off a foreclosure sale by refinancing an existing mortgage with a new or additional mortgage loan that is so laden with oppressive and unconscionable terms and conditions that it renders the borrower doomed to failure from the moment he or she puts his or her signature on the loan documents were enacted in August of 2008 (see 2008 Sess. Law of NY Ch 472 [known as the Subprime Residential Loan and Foreclosure Laws effective August 5, 2008] amending or adding to RPL § 265-b; RPAPL: §§ 1302; 1303;1304; CPLR 3408; Banking Law §§ 6-l; 6-m; 590-b; 592; 595- 599; General Obligations Law §5-501 (3); Penal Law Article 187). It appears, however, that the remedies afforded under the newly enacted Subprime Residential Loan and Foreclosure Law (2008 Session Law of NY Ch. 472) are available only to residential owner, occupant mortgagors and not to those who conveyed their homes and are not mortgagors under the loan that is subject to foreclosure. Similar statutory remedies are available to qualifying mortgagors who are victims of predatory lending practices (see

Bankers Trust Co. of California N.A. v Ward, 269 AD2d 480, 703 NYS2d 504 [2d Dept 2000]; Murthurin v Lost & Found Recovery, LLC, 19 Misc 3d 756, 854 NYS2d 629 [Kings County, Supreme Ct., Jacobsen, J., 2008]; LaSalle Bank, N.A. v Shearson, 19 Misc 3d 433, 850 NYS2d 871 [Richmond County, Supreme Ct., Maltese, J., 2008]; cf. WM Speciality Mtg., LLC v Miner, 2007 WL 3000325 [Nassau County, Supreme Ct., Palmieri, J., 2007]). [*5]

While this court is mindful of the salutary purposes underlying the enactment of these remedial statutes and the equitable underpinnings of the common law principles espoused in the case authorities cited above, the remedies afforded by such statutes and/or case authorities have never been and are not now available to those who participated in a duplicitous scheme about which they now complain or to those who otherwise come into court seeking redress with unclean hands (see Koran v Hoskins, 22 AD3d 638, supra ; Ta Chun Wang v Chun Wong, 163 AD2d 300, 557 NYS2d 434 [2d Dept 1990]; Vasquez v Zambrano, 196 AD2d 840, 602 NYS2d 29 [2d Dept 1993]; Old Republic Natl. Title Ins. Co. v Chan, 10/17/2007 NYLJ 30 [col 3], Richmond County, Supreme Ct., Giacobbe, J]). Nor are any such remedies available to those who have not properly asserted viable claims for such remedies against parties to the action in which such claims are asserted or in a separately, commenced, related action (see Fremont Inv. & Loan v Sessions, 21 Misc 3d 1121(A), 2008 WL 4712567 [Kings County, Supreme Ct., Shack, J., 2008]; Modeste v Lost & Found Recovery, LLC, 19 Misc 3d 1109(A), 859 NYS2d 904 [Kings County, Supreme Court, Starkey, J., 2008]; cf. Washington Mutual Bank v Sholomov, 20 Misc 3d 773, 862 NYS2d 890 [Nassau County, Supreme Ct, Palmieri, J., 2008]; Mortgage Elec. Registration Sys., Inc. v Bastian, 12 Misc 3d 1182(A), 824 NYS2d 764 [Suffolk County, Supreme Ct., Rebolini, J., 2006]).

Here, moving defendant Dopwell appears in this action by a post-judgment application for an order staying this action indefinitely and/or dismissing same. There is no application to vacate his default in answering, and upon the granting of same, for an order permitting him to appear herein by service of a proposed, verified answer of the type attached to the moving papers. Had such applications been made, the court might have ascertained that defendant Dopwell possesses potentially meritorious defenses, in whole or are in part, to the plaintiff's foreclosure claims and facially cognizable claims against co-defendant Edsall for recision and/or damages. In light, however, of the absence of any demonstration of the existence of these factors, the court finds that the defendant Dopwell is not entitled to the relief demanded by him on this motion. Under these circumstances, Dopwell's motion (#

003) for a stay of this action and a dismissal of the complaint is all respects denied.



Dated:__________________________________________________________

THOMAS F. WHELAN, J.S.C.