Kahan Jewelry, Inc. v Korsinsky

[*1] Kahan Jewelry, Inc. v Korsinsky 2004 NY Slip Op 51727(U) Decided on August 18, 2004 Supreme Court, Kings County Johnson, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 18, 2004
Supreme Court, Kings County

Kahan Jewelry, Inc., Plaintiff,

against

Eduard Korsinsky, Esq., et al.,, Defendants



35022/02

Diana Johnson, J.

Upon the foregoing papers, defendants Lex Terrae LTD., LT National Title Services and Old Republic National Title Insurance Company (defendants) move, pursuant to CPLR 3212, for summary judgment dismissing the complaint of plaintiff Kahan Jewelry, Corp., s/h/a Kahan Jewelry, Inc., (plaintiff). Plaintiff cross-moves for summary judgment against defendants.

This is an action for negligence and breach of contract wherein plaintiff demands indemnification under a title insurance policy for losses sustained in foreclosure.

In seeking dismissal, defendants allege that plaintiff Kahan is not a corporation in existence and therefore, has no standing to sue. Defendants further maintain that the suit is barred by the statute of limitations. [*2]

In response to defendants' argument that plaintiff corporation has no standing to sue, plaintiff asserts that in an examination before trial Yitzchok Kahan testified as an officer of the corporation that the corporation has been in existence since August 16, 1968 under the name Kahan Jewelry Corp., not Kahan Jewelry, Inc., as the name erroneously appears on the documents.

The record reveals that plaintiff Kahan is a corporation. In this regard, where the correct party is before the court, as here, courts often exercise discretion to permit the correction of a misnomer or a misdescription of the legal status or title, provided a substantial right of the adverse party is not prejudiced (see O'Connell v Hayden, 83 AD2d 30 [1981]). Under the facts at bar, the court can see no adverse effect upon the defendants by the correction of the misnomer (see Cardinale v Woolworth's, Inc. 304 AD2d 351 [2003]). Accordingly, the caption will read Kahan Jewelry, Corp., s/h/a Kahan Jewelry, Inc.

Defendants' second argument is that the action is barred by the statute of limitations. They contend that the alleged negligence occurred on April 2,1997 and that the action must be filed within three years of that date (see Silvester v Time Warner Inc., 1 Misc 3d 250 [2003]). In response, plaintiff states that the three-year statute of limitations did not begin to run on his negligence action until the property was sold at auction on June 7, 2002 (see Howard v Sears Roebuck & Co, 2 Misc 3d 1004 (A) [2004]).

This action initially included Eduard Korsinsky, Esq. (Mr. Korsinsky), plaintiff's former attorney. Plaintiff's complaint alleged (1) legal malpractice against Mr. Korsinsky,

(2) breach of contract against Mr. Korsinsky, (3) negligence against all defendants, and (4) breach of the title insurance contract against all defendants. The first two causes of action are not addressed to defendants here and thus are not at issue. In addition, this action has been dismissed as against Mr. Korsinsky.[FN1] The third and fourth causes of action sound in breach of contract and are governed by a six-year statute of limitations (see Clarke Place Realty Corp. v Rudges & Co. Inc., 267AD2d 141 [1999]). Accordingly, plaintiff's action is timely. The pertinent facts follow.

On or about April 1, 1997, plaintiff, under the name Kahan Jewelry Corp., a corporation dealing in precious metals, entered into an arrangement with Vladimir Vayner and Alla Vayner (Vayner), whereby the Vayners purchased from plaintiff on credit 4000 ounces of gold at $370.00 per ounce. The Vayners paid the $1,480,000.00 purchase price for the gold by signing and delivering to plaintiff a promissory note and a second mortgage of $150,000.00 on their property located at 7 Robin Hood Lane, Parsippany Troy Hills, New Jersey. According to the note, the Vayners were not to receive the gold unless and until it was paid for.

In connection with the loan, defendant LT National Title Service (LT), Lex Terrae Ltd., (Lex Terrae) and Old Republic National Title Insurance Company (Old Republic) were [*3]retained (allegedly by Mr. Korsinsky) for plaintiff, to provide certain title services, such as to record the mortgage, and to provide and issue a title insurance policy insuring the plaintiff in the principal sum of $150,000.00 by reason of any judgment or lien or encumbrance not excepted, in accordance with the terms of the policy.

On May 9, 1997, former co-defendant Mr. Korsinsky delivered the mortgage to defendants to be recorded. Plaintiff alleges that defendants failed to record the mortgage until 28 months after they received it from Mr. Korsinsky. The documents were recorded on September 22, 1999.

On April 2, 1997, Old Republic issued "a letter of commitment to issue a policy as of the date designated in schedule A." That date was originally April 2, 1997. However, the title insurance policy was not issued until September 22, 1999 and coverage provided for plaintiff did not commence until that date.

During the gap in time between May 9, 1997 (the document delivery) and September 22, 1999, (the title's recording), intervening liens and securities were recorded on the property that was securing plaintiff's mortgage.

Thereafter, on June 7, 2000, the U.S. Trust Company of New York, the holder of the first mortgage, commenced a foreclosure action on the property which resulted in the sale of the premises for $183,000.00 and disbursement of the proceeds according to the sheriff's report of sale.

The sheriff's report of the sale indicates that $49,657.93 of the proceeds were claimed by American Business Credit, Inc., (ABC), based on a mortgage made by Vladimir Vayner and Alla Vayner to ABC, dated February 19, 1998, eighteen months before plaintiff's mortgage was legally recorded. Plaintiff's mortgage was subordinated to ABC's mortgage because in "the race to the courthouse" ABC's mortgage was recorded before plaintiff's.

Plaintiff asserts that the defendants' failure to timely record his mortgage represents a breach of contract. Plaintiff also contends that the contract promises indemnification and damages in the amount awarded to ABC since "but for" defendants' delay in the recording of the plaintiff's mortgage, his mortgage would have had the priority and seniority in the determination of the disbursement of the proceeds at the sale.

Schedule B of Old Republic's policy of "loan insurance" expressly identifies and excepts the prior existing mortgage on the property. It reads in part:

"This policy does not insure against loss or damage by reason of the following: 12. Mortgage made by Vladimir Vayner and Ally Vayner to American Business Credit Inc., dated February 19, 1998 and recorded February 25, 1998 in Mortgage book 7450 page 621Principal Amount $45,000.00"

Plaintiff asserts that Old Republic's agreement to indemnify plaintiff for losses is a valid and enforceable contract. The court disagrees. [*4]

In Citibank, N.A. v Commonwealth Land Title Insurance Company (228 AD2d 635 [1996]) it is stated: "The liability of the insurer to the insured is essentially based on contract law and not negligence law. As such, it is governed and limited by agreements, terms, conditions and provisions contained in the title insurance policy . . . the title insurer will be liable for hidden defects and all matters affecting title within the policy coverage not excluded or specifically excepted from said coverage (see 5A Warren's Weed, New York Real Property, Title Insurance, § 1.03 [6][ 4th ed], at 15" (emphasis added).

Under Exclusions From Coverage, the policy reads: "The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys' fees or expenses which arise by reason of:3. Defects, liens, encumbrances, adverse claims or other matters:(a) Created, suffered, assumed or agreed to by the insured claimant."

Here, the policy alludes to plaintiff's attorney's errors. Plaintiff's own complaint alleges that Mr. Korsinsky represented plaintiff in connection with the note and mortgage and that he negligently failed to timely record the mortgage. Since Mr. Korsinsky was plaintiff's attorney and agent, the delay must be attributed to plaintiff and not to defendants. This is an act of the insured not covered by the policy under exclusion (3[a]).

It is undisputed that in plaintiff's complaint, the negligence of drafting an incomplete and non-recordable mortgage is rightfully attributed to Mr. Korsinsky.

Accordingly, defendants' motion for summary judgment dismissing the complaint is granted. Plaintiff's cross motion for summary judgment is denied in its entirety.

The court has examined plaintiff's additional arguments and finds them to be without merit.

The above constitutes the decision, order and judgment of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1: Plaintiff's order to show cause for contempt against defendant Michael Samuel, Esq., an employee of defendant Lex Terrae, was denied for lack of service on March 25, 2004.