People's United Bank v Ponquogue Manor Constr.

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People's United Bank v Ponquogue Manor Constr. 2012 NY Slip Op 30547(U) February 28, 2012 Supreme Court, Suffolk County Docket Number: 46401/10 Judge: Thomas F. Whelan Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SHORT FORM OlmER INDEX No. 46401/10 Cory SUPREME COURT - STATE OF NEW YORK IAS. PART 45 - SUFFOLK COUNTY PRESENT: Hon. THOMAS F. WHELAN Justice of the Supreme Court MOTION DATE I 1/3/l1 (#005) MOTION DATE 9/6/l1 (#006) MOTION DATE 9/22/]] (#007) ADJ. DATES 2117/12 Mot. Seq. #005 - XMD Mot. Seq. #006 - MG Mot. Seq. #007 - XMD CDISPY_ N X ---------------------------------------------------------------X PEOPLE'S UNITED BANK, Plaintiff, JASPAN, SCHLES]NGER, LLP Attys. For Plaintiff 300 Garden City Plaza Garden City, NY ]] 530 -againstPONQUOGUE MANOR CONSTRUCTION, LLC, NYS DEPT. OF TAXATION & FINANCE, . MICHAEL MARGARELLA, ATRIUM 680, LLC,: WESTHAMTPON PROPERTY ASSOCs, INC, RUSSEL CANDELLA, MICHAEL UILLIAN, And JOHN DOE NO.1 TO JOHN DOE XXX", inclusive, the last names being fictitious & unknown: to plaintiff, the persons or parties intended to be tenants, occupants, persons or corporations, in any or claiming an interest or lien upon the premises Defendants. CHARLES TERMIN], ESQ. Atty for Ponquogue Manor 82 Fairview Ave. Oceanside, NY 11572 MEN]CUCCI VILLA ASSOC Attys. For Margarella 2040 Vietory B]vd. Staten Island, NY ] 03]4 TSUNIS, GASPARIS, LUSTIG & RING Attys. for Westhampton Prop. 2929 Expressway Dr. No. Is]andia, NY ] ] 749 ---------------------------------------------------------------X Upon the following papers num bercd 1 to ---lii....- read on this motion for ludgment offorcclosure & sale and cross motions to vacate judgment and other relief ; Notice of Motion/Order 10 Show Cause and supporting papers~; Notices of Cross Motion and supporting papers 1-4; 9-11 ; Answering Atlidavits and supporting papers 12-14 , Replying Affidavits and supporting papers 15-16 , Other _ __ : (zmci ::tftel hem ilio eotlliscl ill StlppOI"t Illid bppo~ed to tire liibtioli) it is, ORDERED that this motion (#006) by the plaintiff for a judgment of foreclosure and sale considered under RP APL Article 13 and is granted; and it is further IS ORDERED that the cross motion (#005) by the defendants Ponquogue Manor Construction, LLC and Uillian for an order vacating their defaults in answering and an order extending their time to serve an answer is considered under CPLR 5015 and 30I2(d) and is denied. [* 2] People's lJmted Bank v Ponquoguc Manor Construction, LLC, ct, al. Index No. 46401/2010 Page 2 ORDERED that the cross motion (#007) by defendants Margarella and Atrium 680 LLC for relief pursuant to RPAPL § 1351(3) and § 1354(3) is considered thereunder and is denied. In December of 2010, the plaintifl commenced this action to foreclose the lien of its second mortgage of November 30, 2007 in the amount of $1,000,000.00 given by defendant Ponqlloglle Manor Construction, LLC [hereinafter "Ponquoque"J to the Bank ofSmithtowll, which has SInce merged with the plaintiff. This mortgage was thereafter modified and extended by agreement dated October 1,2009. The mortgaged premiscs are situated at 68 Foster Avenue, Hampton Bays, New York. Dcfcndants Uillian and Candela guaranteed the obligations of defendant Ponquoque underthe terms of said mortgage by the execution of written guarantees of payment and performance, After defaulting in making the payment due under the tenus of the second note and mortgage on October 1, 2010, the plaintiff brought this action to foreclose. Defendants Margella and Atrium 680, LLC Lhereinafter "Atrium"] were joined herein as party defendants due to their ownership of a mortgage subordinate to the second mortgage for which foreclosure is herein demanded by the plaintiff. The record rd1ccts that the plaintiff effected service of the summons and complaint upon defendant Ponquogue pursuant to LLC Law 9 303 by delivery of same to the office of the Secremry of State in Albany, New York on January 14, 201 ]. Defendant Uillian was served pursuant to CPLR 308 by delivery of the summons and complaint to a person of suitable age and discretion at Uillian's actual place of business in Coral Springs, Florida and by mailing a copy of same thereto on March 7, 2011, Although service was complete upon both defendants by April 25, 2011, nether appeared by answer or otherwise in response to such service. On June 6, 201 J , the plaintiff moved for an order of reference which was granted on July 6. 2011 by the Justice originally assigned to this matter [see Order dated July 6, 20 11; Emerson, J]. Subsequent to the filing of the report oft11e referee to compute appointed in the July 6, 2011 order of reference, the plaintiff mterposed the motion, now numbered "006", for a judgment of foreclosure and sale. The plaintiff's Illotion contained a return date of September 16,2011. By notice of cross motion dated September 9, 2011, defendants Margarella and Atrium 680, LLC, moved for an order directing that the plaintifrs judgment contain a direction that a subordinate mOltgage allegedly owned by the cross movants be paid out of the surplus, if any, realized by the sale pursuant to RPAPL § 1351(3) and § 1354(3). Bya notice of cross motion (#005) dated September 30, 2011, with a return date of November 3,2011, defendants Ponquogue and Uillian cross moved to vacate their default in answering and for an extension of time to serve an answer. Each of the three applications were marked submitted before Justice Emerson on Novcmber 3, 201 I. On February 1,2012, Justice Emcrson issued an order recusing herselffrom further presiding over this action. The motions were re-numbered by clerical staff and calendared before the undersigned on February 17,2012 on which date, they were marked fully submitted for determination. For the reasons stated below, the plaintiff's motion is granted while the cross motion by the subordinate m011gagee defendants Margerella & Atrium 860, 1.LC and the cross motion by defendant's Ponquogue and Uillian, are denied. The court first considers the cross motion (#005) by defendants Ponquogue and Uillian for an order vacating their defaults and extending their time to answer. It is well settled that a "defendant who [* 3] People's United Bank v Ponquogue Manor Construction, LLC, et. al. Index No. 4640] /2010 Page 3 has failed to timely appear or ans\ver the complaint must provide a reasonable excuse for the ddault and demonstrate a meritorious defense 10 the action when. . moving to extend the time to answer or to compel the acceptance aran untimely answer" (/'laspeth Fed. Sov. & Loan Assn. v McGowlI, 77 AD3d X90, 909 NYS2d 642 [2d Dep' 2010j, ciling Lipp v Port Auth. of NY & NJ, 34 AD3d 649, 649, 824 NYS2d 671 12d Dep' 2006J; see 01.1'0 idfirst Bank vAl-Rahman, 81 AD3d 797, 9] 7 NYS2d 871 [2d M Dep' 201 I]; Deutsche Bank Nal/. Trast Co. v Rudman, 80 AD3d 65],9] 4 NYS2d 67212d Dept 2010]). This standard to applications made both prior and subsequent to the a formal fixation of a default by the court (see Bank of New York v Espejo, _AD3d_, 2012 WL 503661 [ld Dcpt 2012], Inlegon Nal/. Ins. Co. v Norterile, 88 AD3d 654, 930 NYS2d 260 [2d Dept 2011]; Ennis v Lema, 305 AD2d 632, 760 NYS2d 197 [2d Dept 2003]; Lallda, Picard & Weinstein v Ruesch, 102 AD2d &13,476 NYS2d 383 [2d Dept 1984] cf, Guzetti v City of New York, 32 AD3d 234, 820NYS2d 29 list Dept 2006]). Where sueh a motion is coupled with a request to serve a late answer, the motion papers should Il1clude a proposed answer, verified by one having knowledge of facts constituting a potentially meritorious defense (see CPLR 3012td]; Ogman v Mastrantonio Catering, Inc., 82 AD3d 852, 918 NYS2d 375 [2d Dept 2011]; Gross v KlIiI, 70 AD3d 997, 893 NYS2d S91 [2 Dept 201 OJ; Baldwin v Mateogarcia, 57 AD3d 594, 869 NYS2d 217 [2d Dept 2007]; Bekker v Fieischmall, 35 AD3d 334, 825 NYS2d 270 [2d Dept 2006]). The determination orthat which constitutes a reasonable excuse lies within the discretion of the Supreme Court (see MelloJl v. Izmirligil, 88 AD3d 930, 931 NYS2d 667 [2d Dept 2011]; Maspeth Fed. Sav. & Loan Assn. v McGown, 77 AD3d 890, supra; Star Indus. Inc. v Innovative Beverages, Inc., 55 AD3d 903. 904, 866 NYS2d 357 [2d Dept 2008]). While the successful assertion ofa claim of improper or defective service usually results in a dismissal for lack of jurisdiction (see CPLR 3211 [a1[8]), a defect in service may, instead. simply constitute a reasonable excuse for a default in answering (see CPLR 317; see also Equicredit Corp. Am. v Campbell, 73 AD3d 1119,900 NYS2d 907 l2d Oept 2010]). (~r As an excuse for Ponquogue's failure to answer, defendant Vilhan asserts the following allegations: that "as managing member [of defendant Ponquoque,LLCJ Iwas never served the summons and complaint but received a copy in the mail." [see ~ 17 ofUillian's affidavit dated September 30, 2011). Advanced as an additional ground of excusable default is a claim by Uillian and his counsel that the "matter was in efIect stayed" because immediately after his receipt of the summons and complaint by mail, defendant, Ujlhan, then acting without counsel, was engaged in complex settlement negotiations with the plaintiff (see 11~ 18-21 ofUillian's affidavit; and ~1117 of the September 30, 2011 affirmation -II ofUillian's counsel). Unfortunately, neither of these circumstances constitute a reasonable excuse for the defendants' defaults. It is well settled that a process server's sworn affidavit of service constitutes prima facie evidence of proper service and that conclusory and unsubstantiated claims that this court lacks Jurisdiction due to improper service arc insufficient to rebut the presumption of due service that arose front the process server's affidavit (see US Nat!. Bal1k Assn. as Trustee v Me/tOil, 90 AD3d 742, 934 NYS2d 352 [2d Dcpt 201 I.!; Deutsche Bank Natl. Tru.,·tCo. v Hussain, 78 AD3d 9&9, 912 NYS2d 595 r·2d Dept 20101; III re Will Mlge. Corp. v Davis, 72 AD3d 943, 898 NYS2d 854 [2d Dcpt 2010-1; Beneficial Homeowner ,ServoCorp. v Girault, 60 AD3d 984, 875 NYS2d 815 [2d Dept 2009]). Here, defendant Uilliano 's claim that he was never "served" with the summons and complaint, in his capacity as a manager of defendant Ponquoque is insufficient to rebut the presumption of due service set forth In the affidavits of the plaintilT's process server and does not qualify as reasonable excuse for the defaults [* 4] People's United Bank v Ponquogue Manor Construction, LLC, et. al. Index No. 46401120] 0 Page 4 of the moving defendants in answering (see Bank of New York v J:.)"pejo, 50366112d Dept 2012], supra). AD3d __ , 2012 WL Also rejected are the moving defendants' claims that their engagement in settlement negotiations constitutes a reasonable excuse for their default in answering. While claims of ongoing sctilement negotiations between a defendant and a plaintiff to a pending action may, under ce11ain circumstances, constitute a reasonable excuse for a default in answenng (see Scarlett v McCartlty, 2 AD3d 623, 768 NYS2d 342 [2d Oept 2003]), the movant must demonstrate a good faith belief in a settlement that is supported by substantial evidence (see Armstrong Trading, Ltd. v MBM Enter., 29 A03d 835, 815 NYS2d 689 [2d Dept 2006] ) and justifiable rehance thereon (see American Shoring, inc. v D.C.A. Const., Ltd., 15 AD3d 431, 789 NYS2d 722 [2d Dept 2005]). Absent such a showing, vague and unsubstantiated claims of on-going settlement negotiations will not be accepted as a justification for a default (Set Mellon v lzmirligil, 88 AD3d 930, 931 NYS2d 667 [2d Dept 2011]; Kouzios v Dery, 57 AD3d 949, 950, 871 NYS2d 303 [2d Oep! 2008]; Antoine v Bee, 26 AIJ3d at 306, 812 NYS2d 557 [2d Dept 2008]; Mlljestic Clothing Inc. v East COllsISlor., LLC, 18 AD3d 516, 518, 795 NYS2d 289 [2d Ocp! 2006]). Here, the record is devoid of due proof that the parties engaged in settlement discussions from which a good faith belief in a settlement could have been justifiably relied upon by the moving defendants. Uilhan's claims that a reasonable excuse for the defaults exist because he ,"vasin a self.. representative capacity when his purported self ..initiated contacts and "complex settlement negotiations" with the plaintiff or its agents were undertaken arc equally unavailing and do not \varrant of finding of a reasonable excuse for such defaults. While not a model of clarity, these allegations may fairly be read as asserting claims that ignorance of the law and/or legal procedures should be viewed as a reasonable justification for the defaults. However, recent appellate case authorities have instructed that confusion or ignorance of the law, legal processes and/or court procedures do not constitute reasonable excuses for the failure to answer or otherwise appear (see Goral Wholesalers, Ltd. I' Raven Brands, 1Ile., 82 AD3d 1041,919 NYS2d 358 [2d Ocp! 2011]; US Bank Naif. Assoc. v Slavinski, 78 A03d 1167,912 NYS2d 285 [2d OcP! 2010]; Yao Ping Tang v Grand E.state, LLC., 77 AD3d 822, 910 NYS2d 104 [2d Ocpt 2010]; Dorrer v Berry, 37 A03d 519, 830 NYS2d 277 [2d Ocp! 2007]; Awad v. Severino, 122 AD2d 242.505 NYS2d 437 [2d Oept 1986]). In view of the lack of a reasonable excuse, it is unnecessary to consider whether the defendants sufficiently demonstrated the existence of a potentially meritorious defense (see Tribeca Lending Corp, v Correa, _AD3d_, 2012 WI, 502467, [2d Dept 2012]; Alterbaum v Shubert Org., fnc., 80 AD3d 635.914 NYS2d 681 [2d Oept 2011]). In any event, review of the record indicates that no such defense was advanced here by the moving defendants. The court thus denies the cross motion (#005) by defendants Ponquogue and Uillian for relief from their defaults. The plamtifPs motion (//006) for confirmation ofthe report orthe referee to compute and tor entry of judgment of foreclosure and sale is granted. The moving papers clearly demonstrated the plaintilJ' s entitlement to such relief (see RPAPL 1351). The cross motion (#007) by defendants, Margarella and Atrium, the subord1l1ate mortgagors, for all order directing that the plaintiff's judgment contain a direction that the subordinate mortgage be paid [* 5] People's United Bank v Ponquogue Manor Construction, LLC, el. aJ. Index No. 46401/20Jl) Page 5 out of the surplus, ifany, realized by the sale pursuant to RPAPL §1351(3) and §1354(3) is considered thereunder and denied. RPAPL § 1351(3) provides as follows: 3. If it appears to the satisfaction of the court that there exists no more than one other mortgage on the premises which is then due and which is subordinate only to the plaintiffs mortgage but is entitled to priority over all other liens and encumbrances except those described in subdivision 2 of section 1354, upon motion of the holder of such mortgage made without valid objection of any other party, the final judgment may direct payment of the subordinate mortgage debt from the proceeds in accordance with subdivision 3 of section 1354. This statutory provision thus authorizes the direct payment of surplus monies derived from a mortgage foreclosure sale to the holder of a valid second mortgage and allows the second mortgagee to be paid without having to bear the delay and expense attendant with surplus money proceedings (see Liberty View Ltd. Partnership l! 90 West Assoc., 150 Misc2d 913, 571 NYS2d 376 [Sup Ct. New York County, 1991 J). Upon a successful motion by the subordinate mortgage under this section, RPAPL ~ 1354(3) authorizes the court to make provision in the judgment of foreclosure that the referee apply surplus monies directly in satisfaction of the subject second mortgage. Here, the cross moving papers submitted by defendants Margarella and Atrium included no proof whatsoever in support of defendant Margarella's claim that the October 23, 2009 mortgage purp011edly owncd by him and defendant Atrium is subordinate only to the mortgage of the plaintiff for \vhich foreclosure is sought. Moreover, there are no allegations, let alone proof~that the mortgage of these cross movants is entitled to priority over all other liens and encumbrances except those described in subdivision 2 ofRPAPL § 1354. Indeed, the record retlects that neither of these statements are accurate as it is replete with evidence that the premises are subject to a first mortgage owned by the plaintijf for which foreclosure is not demanded herein. These ccircumstances appear to run afoul of the statutory requirement that there be "no more than one other mortgage on the premises which is then due" and the requirement that the movant show that its mortgage "is entitled to priority over all other liens and encumbrances except those described in subdivision 2 of section 1354" (see RPAPL 01351 [3]; cl, Liberty View Ltd. Partnership v 90 West Assoc., 150 Misc2d 913, supra). For these reasons. the cross motion (#007) by defendants Margarella and Atrium is denied, and their proposed order to the contrary has been marked "not signed". The plaintiff shall settle judgment, upon a copy of this order. I j I r"l{ DATED_a.Jc9J4-1'Q..

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