Beltway Capital, LLC v Soleil

[*1] Beltway Capital, LLC v Soleil 2009 NY Slip Op 52403(U) [25 Misc 3d 1233(A)] Decided on November 23, 2009 Supreme Court, Kings County Lewis, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 23, 2009
Supreme Court, Kings County

Beltway Capital, LLC, Plaintiff,

against

Andre Soleil, et al., Defendant.



22244/07



Plaintiff Attorney: Steven Baum, PC

Defendant Attorney: William J McCann, Jr. Esq.

Yvonne Lewis, J.

The plaintiff, Beltway Capital, LLC (Beltway) moves, by Order to Show Cause, for an order (a) vacating the default of Asset Management Holdings, LLC (Asset) in responding to the motion filed by defendant Andre Soleil a/k/a Andre R. Soleil (Soleil) seeking an order dismissing the complaint; (b) vacating this Court's order dated July 18, 2008 (the Prior Order) which granted that motion; and (c) substituting Beltway as plaintiff, in place and stead of Asset and amending the caption accordingly. Defendant Soleil cross-moves for an order (a) denying Beltway's application to vacate the Prior Order, and (b) pursuant to CPLR 3211 (a) (3), (7), and (10), dismissing the complaint for lack of standing, failure to state a claim, and/or failure to join a necessary party. Proposed Intervenor Deborah Hughes (Hughes) cross-moves for an order, pursuant to CPLR 1012 (a) (1), (2) and (3) and 1013, permitting her to intervene in this action as of right or by permission, in the event the Prior Order is vacated, on the grounds that the relief sought by plaintiff affects title to and security interests in real property, a substantial right of Hughes may be affected by plaintiff's action, and intervention is authorized by statute.

BACKGROUND FACTS AND PROCEDURAL HISTORY

Asset commenced this action on June 19, 2007 to foreclosure a mortgage (the Mortgage) recorded against the real property located at 798 Greene Avenue in Brooklyn, New York. The Mortgage, dated September 15, 2006, was executed by the then-owner of the subject property, Soleil, to secure a note in the amount of $652,000.00. As a result of the failure by defendants, including Soleil and "John Doe," to answer the complaint or otherwise appear in the action, this Court granted Asset's ex-parte application for an Order of Reference on December 19, 2007. [*2]

Soleil subsequently sought to dismiss the action by motion originally returnable on June 18, 2008 (the Motion). When Asset did not appear for the hearing on that date, this Court adjourned the Motion to July 18, 2008. When Asset still did not respond to the Motion, this Court issued the Prior Order on July 18, 2008, granting the motion dismissing the action and discharging the Mortgage. Land records and indices reflect the Prior Order and discharge were recorded against the subject property as of August 5, 2008. On February 19, 2008, Asset sold the Mortgage to Beltway, which recorded its assignment on July 21, 2008. The parties subsequently stipulated to substitute Beltway as plaintiff in this action in place and stead of Asset.

Soleil sold the subject property to Hughes for $248,000.00 by deed duly recorded on October 14, 2008,The Court notes that Hughes has indicated that she and her husband, Nicholas Haven (Haven), subsequently spent over $100,000.00 renovating the subject property, which was in poor condition when purchased. Hughes then mortgaged the property to HB Baron Family Associates (HB Baron).

THE PARTIES' CONTENTIONS

As assignee of Asset and current holder of the Mortgage, Beltway asks the court to substitute it as plaintiff, in place and stead of Asset, and to amend the caption accordingly. Additionally, Beltway urges the court to vacate Asset's default in responding to the Motion and resulting order, which it avers improperly discharged the Mortgage, and to restore the Mortgage as a lien against the subject property. It argues that its assignor, Asset, had a reasonable excuse for defaulting and failing to respond to the motion because Asset's counsel, Heather A. Johnson (Johnson), did not receive notice of the Motion and consequently was not aware of and did not appear on the June 18, 2008 return date. It also alleges various inconsistencies and inaccuracies in the Motion that purportedly demonstrate Soleil's failure to serve the motion on Asset. Moreover, it asserts that the part of the Prior Order which discharged the Mortgage was improper because (1) the scope of relief exceeded that requested by Soleil, and (2) the court had no jurisdiction to grant such relief.

In opposition to Beltway's motion and in support of his own cross motion, Soleil argues that, although Beltway presents a reasonable excuse why Asset did not appear at the June 18th oral argument, it lacks a reasonable excuse for the failure to appear on July 18th. He also attempts to dispel the alleged inconsistencies and inaccuracies that Beltwayclaims his motion contains and opines that the true reason Asset failed to appear on either hearing date is because that original plaintiff went bankrupt in early 2008 and ceased to exist. He further maintains that Beltway fails to state a claim and has no standing to bring a claim, given that Soleil does not own the subject property, which had been purchased by Hughes, who he asserts is protected as a bona fide purchaser for value.Finally, he asserts that Beltway failed to join Hughes and HB Baron, the current owner and mortgagee, respectively, as necessary parties to the action, and therefore the foreclosure claim must be dismissed because plaintiff cannot seek to "foreclose on property that [Soleil] does not own."

In her cross motion, Hughes seeks leave to intervene because no present party represents her interests as fee owner. She contends that intervention is warranted under RPAPL articles 13 and 15 and CPLR 1012 (a) (1), (2) and (3) and 1013 because her rights in the real property on which plaintiff has a mortgage lien must be determined. Finally, she contends that no prejudice will result, [*3]as no discovery or other proceedings have yet commenced in this action. In opposition to Beltway's motion, Hughes argues, that Beltway is not the holder of the Mortgage and lacks standing to seek relief. She also argues that she is protected as a bona fide purchaser for value without notice or knowledge of any claim by plaintiff and holds title to the subject property free and clear of plaintiff's alleged lien. Alternatively, she asserts that Beltway's mortgage should be subordinated to her existing mortgage and her equitable lien for improvements as of the date of reinstatement.

DISCUSSION

Beltway's Motion: Vacating the Default and Prior Order

It is well established that an assignee may bring an action to enforce an assignment of a claim or demand in the same manner as the assignor might have done (see General Obligations Law § 13-105). The assignee may pursue the same remedies as would have been available to the assignor (see National Commercial Bank & Trust Co. v Malik, 72 Misc 2d 865, 867 [1973]). An assignee of a claim or cause of action, however, takes it "subject to all the infirmities, equities, and defenses that could have been asserted [by the obligor] against the assignor at the time of the assignment" (Trans-Resources, Inc. v Nausch Hogan & Murray, 298 AD2d 27, 30 [2002]; see also Condren, Walker & Co., Inc. v Portnoy, 48 AD3d 331, 331 [2008]; TPZ Corp. v Dobbs, 25 AD3d 787, 789 [2006]; Crispino v Greenpoint Mtge. Corp., 304 AD2d 608, 609 [2003]; Amedeo Hotels Ltd. Partnership v Zwicker Elec. Co., 291 AD2d 322, 323 [2002]; Robischon v Genesee Val. Med. Care, 92 Misc 2d 854, 856 [1977], affd 65 AD2d 681 [1978]).

Since "[a]n assignee stands in the shoes' of an assignor" (Long Is. Radiology v Allstate Ins. Co., 36 AD3d 763, 765 [2007], quoting Arena Constr. Co. v Sackaris & Sons, 282 AD2d 489, 489 [2001]; see also Wald v Marine Midland Bus. Loans, 270 AD2d 73, 74 [2000]), Beltway, as an assignee, "stands in the shoes" of Asset by reason of the assignment of the Mortgage. As the assignee of Asset, the original holder of the Mortgage, Beltway is the apparent holder of the Mortgage. and has standing and is entitled to continue this foreclosure proceeding in its own name (see RCR Servs. v Herbil Holding Co., 229 AD2d 379, 380-81 [1996], citing General Obligations Law § 13-105).CPLR 5015 (a) makes clear that a party seeking to vacate a default judgment must establish both a reasonable excuse for the default and a meritorious defense or claim (see Kay Waterproofing Corp. v Ray Realty Fulton, Inc., 23 AD3d 624, 625 [2005]; Rolston v Rolston, 261 A.D2d 377, 689 [1999]; Nicolsi v Sleuth Sec. Systems, Ltd., 247 AD2d 521 [1998]). Whether there is a reasonable excuse for a default is a discretionary, sui generis, determination to be made by the court deciding the motion (see Harcztark v Drive Variety, Inc., 21 AD3d 876 [2005]). On that point, Beltway avers that its predecessor, Asset, was not properly served with Soleil's motion to dismiss the complaint, and consequently, was not aware of and could not appear on the June 18th return date, as reflected in Johnson's Affirmation, dated February 9, 2009, nor on the adjourned return date. The Court finds that vacating the default judgment entered against Beltway is appropriate in light of the meritorious defense presented.

Turning to the merits of Soleil's earlier motion to dismiss, I find that Beltway has successfully established a meritorious defense to the requested relief. Beltway argues, contrary to Soleil's contentions, that the mortgage note has not been satisfied. In this regard, Beltway submits the affidavit of its Senior Vice President, Stephen V. Rieger, attesting that the Mortgage taken by Soleil on the subject property has yet to be paid. The conflicting evidence regarding Soleil's payment of [*4]the Mortgage constitutes a meritorious defense that would be sufficient to withstand the Motion. However, the Court withholds judgment on whether to reinstate the Mortgage until further discovery is conducted by the parties.

With regard to Hughes, who claims she is a bona fide purchaser who would suffer prejudice if the Mortgage were reinstated, the Court declines to now consider the substantive issues regarding whether she was a bona fide purchaser for value. Any prejudice that may result is avoided by Hughes' intervention in the action, as discussed below. Accordingly, Beltway's motion is granted only to the extent of vacating Asset's default in responding to the Motion. That branch of Soleil's cross motion requesting that the court deny Beltway's application to vacate is denied.

(b) Soleil's Cross Motion: Dismissal of the Action

With regard to Soleil's cross motion to dismiss the action, the Court notes that he is moving for the same relief requested in his original motion. It is inappropriate at this juncture to issue a ruling on the cross motion to dismiss, given that arguments regarding dismissal were raised chiefly in opposition to Beltway's motion to vacate the default judgment. Moreover, this motion can more fairly and thoroughly be raised if all parties have an opportunity to respond to it. The request for dismissal is denied, without prejudice to re-notice the original motion.

(c) Hughes' Cross Motion: Intervention

CPLR 1012 provides that intervention as of right is permitted when a state statute confers an absolute right to intervene, when the representation of the proposed intervenor's interest by the parties is or may be inadequate and the proposed intervenor is or may be bound by the judgment, and when the action involves an interest in property and the proposed intervenor may be adversely affected by the judgment. In Hughes' cross motion seeking to intervene as of right in the instant foreclosure action, she highlights RPAPL articles 13 and 15 as statutes conferring a right to intervene. She also asserts that her interests as current owner are not adequately represented because Soleil is not a fee owner of the subject property and Beltway's interest is adverse to that of Hughes, leaving her title to the subject property to be determined in her absence. Finally, she avers that the instant action involves the disposition of the title to real property and she may be adversely affected by the judgment. No party opposes Hughes' cross motion. Indeed, Beltway concedes that Hughes should be allowed to intervene. Additionally, permissive intervention under CPLR 1013 would similarly be appropriate, as Hughes has established that her claim and the main action have a common question of law or fact regarding title to the subject property and the mortgage priorities affecting the subject property. Therefore, Hughes cross motion is granted insofar as she seeks to intervene in this foreclosure action.

We note that under CPLR 3211 (a) (10), an action may be dismissed for failure to join a person who should be a party to it. Additionally, CPLR 1001 defines necessary parties as: "[p]ersons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action shall be made Plaintiffs or Defendants. When a person who should join as a Plaintiff refuses to do so he may be made a Defendant." However, neither RPAPL 1311, which governs foreclosure actions, nor CPLR articles 10 and 3211 (a) (10), which govern civil actions generally, requires dismissal of an action in all cases in which there has been a failure to join a necessary party (see Dime Sav. Bank of New York FSB v Johneas, 172 AD2d 1082 [1991]). Dismissal for nonjoinder should occur only when the third party cannot be joined, where, for example, he or she is not subject to the jurisdiction of the court and, [*5]even then, dismissal should not occur unless the third party is indispensable to the case in the sense that the action cannot fairly proceed without that party (see CPLR 1001 [b]; CPLR 3211 [a] [10]; Dime Sav. Bank of New York FSB, 172 AD2d 1082; Flushing Sav. Bank v CNN Realty Corp, 73 AD2d 945 [1980]).The Court, sua sponte, finds that HB Baron should be joined as a necessary party in this action pursuant to CPLR 1001 in that it may be inequitably affected by a judgment herein. As a result, the Court directs plaintiff to join HB Baron as a party defendant in this proceeding.

Accordingly, Beltway's motion is granted only to the extent of vacating the default judgment entered against it and Hughes' cross motion to intervene is granted in its entirety. Soleil's cross motion to dismiss is denied and he is directed to re-notice his original motion to dismiss the complaint. Plaintiff is directed to join HB Baron as a party defendant in this action. In the June 19, 2009 Order, upon stipulation by the parties, the Court granted that part of Beltway's motion seeking to substitute Beltway as plaintiff in place and stead of Asset and to amend the caption accordingly.

The foregoing constitutes the decision and order of the court.

E N T E R,

___________________

yvonne lewis, J.S.C.

Footnotes