MFC Real Estate LLC v Litt

[*1] MFC Real Estate LLC v Litt 2017 NY Slip Op 50910(U) Decided on July 11, 2017 Supreme Court, Richmond County McMahon, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 11, 2017
Supreme Court, Richmond County

MFC Real Estate LLC, Plaintiff,

against

Nataliya Litt, MIKHAIL LITT, OLEG IZRAILOZ, OCEANWOODS HOMEOWNERS ASSOCIATION, INC., and JOHN DOE No.1 through JOHN DOE #100 (said John Doe, defendants being fictitious, it being intended to name all other parties who may have some interest in or lien upon the premises sought to be foreclosed), Defendants.



102061/2013
Judith N. McMahon, J.

The following papers numbered 1 to 6 were marked fully submitted on June 29, 2017:

Numbered

Notice of Motion for Summary Judgment by Plaintiff MFC REAL ESTATE, LLC,

(dated June 27, 2016) 1

Affidavit of Noel Rabb, Vice President of Trimont Real Estate Advisors, LLC, the Attorney in Fact for Plaintiff MFC Real Estate LLC, and Exhibits Annexed

(dated June 23, 2016) 2

Affirmation of Jesse L. Jensen, Esq. in Support of MFC REAL ESTATE, LLC'S motion for summary judgment and other relief (dated June 27, 2016) 3

Notice of Cross-Motion for Summary Judgment by Defendants, NATALIYA LITT and MIHAIL [*2]LITT, Affidavit of Natalyia Litt, and Affirmation of Joseph E. Magnotti, Esq. in Support of Cross-Motion, with Exhibits annexed (dated January 3, 2017) 4

Reply Affirmation of Brett M. Collings, Esq. in Further Support of Plaintiff's Motion for Summary Judgment and in Opposition to Defendants' Cross-Motion for Summary Judgment, with Exhibits annexed (dated May 22, 2017) 5

Affirmation of Joseph E. Magnotti, Esq. in Further Support of Cross-Motion for Summary Judgment (dated June 20, 2017) 6

Upon the foregoing papers, Plaintiff's motion (003) for summary judgment is granted, and the caption is amended to strike therefrom the names "JOHN DOE #1" through "JOHN DOE #100"; and the cross motion (004) made by Defendants, Nataliya Litt and Mikhail Litt is denied in its entirety.

FACTS

The present action represents the second of two foreclosure proceedings brought by Plaintiff to recover debts owed by Waterfront Owners, LLC (hereinafter "Waterfront") in connection with property located at 365 Bay Street, Staten Island, New York 10301 (hereinafter the "Bay Street Property"). Waterfront executed a consolidated, amended and restated promissory note in the principal amount of $1,470,000.00 in favor of Metro Funding Corp (hereinafter "Metro") on February 28, 2008. Metro secured this note through a mortgage on the Bay Street Property. Waterfront contemporaneously executed a building loan promissory note in the principal amount of $2,330,000.00 in favor of Metro also secured by a mortgage against the Bay Street Property. In total Waterfront borrowed $3,800,000.00 from Metro secured by the Bay Street Property.

Metro sought the additional security of its total $3,800,000.00 loan by requiring two personal guarantees. First, Myron Ayzen and Roman Litt, both non-parties to this action, guaranteed payment to Metro in their individual capacities on February 27, 2008. See Jensen Affirmation Exh. 3, I. Similarly, defendant Nataliya Litt, and non-parties Natalia Ayzen, and David Ayzen guaranteed payment to Metro in their individual capacities through a non-recourse Guaranty of Payment dated February 27, 2008. See Jensen Affirmation Exh. 3, J.

In addition, Metro obtained a Collateral Mortgage and Assignment of Rents and Leases (New York) securing $500,000 of its loans through a mortgage on property owned by Roman Litt and Nataliya Litt located at 1243 Father Capodanno Boulevard, Staten Island, New York (hereinafter "Subject Residential Property"). See Jensen Affirmation Exh. 3, K.

Metro thereafter assigned its interest in Waterfront's debt to Plaintiff through a series of allonges.

Plaintiff commenced its first action captioned, MFC Real Estate LLC v. Waterfront Owners, LLC, et al., Richmond County Index No. 130970/2011 (hereinafter "Action 1") in 2011.[FN1] The Supreme Court (Minardo, J.)granted Plaintiff's Amended Judgment of Foreclosure [*3]and Sale on March 9, 2015, confirming an indebtedness to Plaintiff as of July 30, 2013, in the amount of $7,310,271.03. The Amended Judgment of Foreclosure and Sale contains a provision stating:

that if the proceeds of such sale be insufficient to pay the amount reported due to the plaintiff with interests and costs as aforesaid, the plaintiff shall recover from the defendants Waterfront Owners LLC and Miron Ayzen the whole deficiency or so much thereof as the Court may determine to be just and equitable of the residue of the mortgage debt remaining unsatisfied after a sale of the mortgaged premises and the application of the proceeds thereof, provided a motion for a deficiency judgment shall be made as prescribed by Section 1371 of the Real Property Actions and Proceedings Law within the time limited therein, and the amount thereof is determined and awarded by an order of this Court as provided for in said section

Jensen Affirmation at Exh. 1.

Plaintiff purchased the Bay Street Property located on the North Shore Staten Island Waterfront at a public auction held on June 18, 2015 for $1,000.00.

Plaintiff subsequently commenced this action seeking foreclosure of the collateral mortgage on the subject residential property used as collateral for the commercial real estate transaction executed by Waterfront. Unlike the defendants in Action 1, this action names cross-movants Nataliya Litt and Mikhail Litt as defendants.

Plaintiff's motion for summary judgment seeks to foreclose on and sell the subject residential property used to secure Waterfront's debt on the Bay Street Property located at 1243 Father Capodanno Boulevard, Staten Island, New York 10306 (hereinafter the "Litt Property"). Plaintiff supports its motion based on a Non-Recourse Guaranty of Payment executed by defendant Nataliya Litt on February 27, 2008 guarantying payment of $3,800,000.00 and a Collateral Mortgage and Assignment of Rents and Leases (New York) given by Nataliya Litt and Roman Litt to Metro Funding Corp., dated February 27, 2008.

The Litts oppose Plaintiff's motion for summary judgment through a cross motion seeking summary judgment dismissing the Complaint, and discharging the Notice of Pendency and Collateral Mortgage. The Litts argue the Collateral Mortgage, along with the Guaranty (Non-Recourse) executed by Nataliya Litt executed in favor of Metro existed to provide additional security to Plaintiff in the event the Note and Building Loan could not be satisfied by the judgment and resulting purchase of the Bay Street Property in the first foreclosure action. It is undisputed the defendants to this action did not have a legally defined interest in the Bay Street Property. The Litts maintain the Guaranty and Collateral Mortgage provided a means for Plaintiff to collect a deficiency from non-parties to the commercial loans given by Metro to Waterfront. The Litts further maintain this subsequently commenced action relating to the Bay Street Property is a veiled attempt to circumvent the mechanisms proscribed in RPAPL § 1371 limiting the time to seek a deficiency judgment to ninety days after the "the date of consummation of the sale by the delivery of the proper deed of conveyance to the purchaser."

DISCUSSION

Defendants base their cross motion for summary judgment on an expanded interpretation of their affirmative defense alleging Plaintiff failed to state a cause of action. Here, such [*4]reliance is misplaced. Defendants' argument interpreting this action as one for a deficiency judgment assumes the satisfaction of the debt in Action 1 guaranteed by Nataliya Litt because Plaintiff failed to meet the requirements set forth in RPAPL § 1371 to seek a timely deficiency judgment. Plaintiff argues, correctly, that certain affirmative defenses such as collateral estoppel, payment, and release must be pled in their Answer. See C.P.L.R. § 3018(b), Pallette Stone Corp. v. Mangino, 217 AD2d 738 (3d Dep't 1995) (refusing to consider arguments at summary judgment not raised as affirmative defenses). Defendants, having failed to properly raise this newfound defense in a timely manner, they are barred from asserting it now. Thus, the cross motion is denied.

In the event Defendants' cross motion was not procedurally barred, Defendants arguments on the merits would similarly have failed. The provisions of RPAPL § 1311 do not require foreclosure plaintiffs to name guarantors as necessary defendants.[FN2] Consequently, the Court of Appeals decision in Sanders v. Palmer, 68 NY2d 180 (1986), is inapplicable to the facts presented in this case. In Sanders, the Court of Appeals prevented defendants in a foreclosure suit from being subjected to multiple lawsuits. Here, cross movants were not defendants in the prior foreclosure action. Therefore, this separate foreclosure action does not constitute a second action against the same defendants seeking a deficiency judgment.

CONCLUSION

Plaintiffs' motion for summary judgment is granted in its entirety. Defendants' cross motion is denied.

Accordingly, it is hereby:

ORDERED, that Defendants' cross motion is denied; it is further

ORDERED, that Plaintiff's motion for summary judgment is granted; it is further

ORDERED, that the Clerk is directed to amend the caption as follows:

X

MFC REAL ESTATE LLC,

Plaintiff,

against-

NATALIYA LITT,

MIKHAIL LITT,

OLEG IZRAILOZ, and

OCEANWOODS HOMEOWNERS ASSOCIATION, INC.,

Defendants.

X

and it is further

ORDERED, that Plaintiff shall settle judgment in accordance with this Decision and Order.

DATED: July 11, 2017

ENTER,

__________________________________

Hon. Judith N. McMahon, J.S.C. Footnotes

Footnote 1:The Complaint in that action named the following entities and individuals as defendants: Waterfront Owners, LLC, Myron Ayzen, Roman Litt, Metro Structural Steel, Inc., McDonald Metal & Roofing Supply Corp., Certified Lumber Corp., Zaim Contractor Corp., Master Mix LLC d/b/A NYC Concrete Materials, New York City Environmental Control Board, and John Doe #1 through John Doe #100.

Footnote 2:Each of the following persons, whose interest is claimed to be subject and subordinate to the plaintiff's lien, shall be made a party defendant to the action: 1. Every person having an estate or interest in possession, or otherwise, in the property as tenant in fee, for life, by the curtesy, or for years, and every person entitled to the reversion, remainder, or inheritance of the real property, or of any interest therein or undivided share thereof, after the determination of a particular estate therein. 2. Every person having a right of dower or an inchoate right of dower in the real property or any part or share thereof. 3. Every person having any lien or incumbrance upon the real property which is claimed to be subject and subordinate to the lien of the plaintiff. 4. Where the mortgage is upon any of the public utilities regulated by the public service law, the public service commission. RPAPL § 1311