Rossrock 2005 Fund LLC v Estate of Shui King Wong

[*1] Rossrock 2005 Fund LLC v Estate of Shui King Wong 2008 NY Slip Op 50634(U) [19 Misc 3d 1110(A)] Decided on March 17, 2008 Supreme Court, Kings County Rothenberg, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through April 18, 2008; it will not be published in the printed Official Reports.

Decided on March 17, 2008
Supreme Court, Kings County

Rossrock 2005 Fund LLC, as Assignee of Greenpoint Bank, Plaintiff,

against

Estate of Shui King Wong, et al., Defendants.



2147/99



Counsel for Plaintiff:

Cullen & Dykman

177 Montague Street

Brooklyn, NY

Counsel for Defendant:

Alan Gitter

120 Broadway

New York, New York

Karen Rothenberg, J.

Upon the foregoing papers in this foreclosure action, James McGown moves, pursuant to CPLR 1012, to intervene as a party defendant, to vacate two notices of pendency filed by plaintiff Rossrock 2005 Fund LLC, as assignee of Greenpoint Bank (plaintiff), to discharge the mortgage from the City's Registrar's Office, to vacate the referee's oath and report, and to stay or vacate plaintiff's "amended notice of motion to vacate the existing judgment of foreclosure, dated July 1, 1999, and to issue a new judgment." Plaintiff cross-moves to vacate the existing judgment of foreclosure and sale, dated July 1, 1999 and entered July 7, 1999, for confirmation of the referee's oath and report, and for issuance of a new judgment of foreclosure and sale.

Shui King Wong executed a certain bond (note) dated November 28, 1988 for the purpose of securing payment of $245,000 to Greenpoint Bank. As collateral security for the payment of the note, Wong executed and delivered a mortgage to Greenpoint Bank. The [*2]property encumbered by the mortgage was 63 4th Avenue, in Brooklyn, New York. Mr. Wong defaulted under the note and mortgage by failing to pay principal and interest which became due and payable on September 1, 1998 and each month thereafter. The mortgage provided that upon such default, the total indebtedness would become due and payable and that upon such default, plaintiff was entitled to recover reasonable attorney's fees in accordance with the terms of the mortgage.

As a result, the instant foreclosure action was commenced on January 22, 1999 by Greenpoint Bank by the filing of a summons and verified complaint in Kings County.

Defendants Shui King Wong, Kun Eng, Lucy Eng, New York City Parking Violations Bureau, New York State Child Support Enforcement, New York City Environmental Control Board and Mr. Wong s/h/a John Doe No. 1 were allegedly served with the summons and verified complaint within 120 days of the commencement of this action. A notice of pendency was filed on February 3, 1999. On April 13, 1999, an Order of Reference, Amendment and Consolidation was signed. The action was referred to Domenic M. Recchia, as referee to compute the amount due to plaintiff on the bond (note) and mortgage. Thereafter, a judgment of foreclosure and sale was issued on or about July 1, 1999, and was entered on July 7, 1999. The sum determined due Greenpoint was $172,714.80.

Following the issuance of the judgment of foreclosure, Greenpoint learned that Mr. Wong had died on May 1, 1995, four years prior to commencement of the action and the issuance of the judgment of foreclosure and sale. Thereafter, plaintiff purchased Index No. 2601/00 on July 28, 2000 to secure 120 additional days to obtain jurisdiction over the estate of Shui King Wong. As a result, defendants Kenneth Wong, as Heir to the Estate of Shui King Wong, s/h/a John Doe No. II, Steven Wong, as Heir to the Estate of Shui King Wong, s/h/a John Doe No. III, Kun Eng, as Heir to the Estate of Shui King Wong, s/h/a John Doe No. IV, and Lucy Eng, as Heir to the Estate of Shui King, s/h/a John Doe No. V, were served with the summons and verified complaint.

On or about January 31, 2001, Greenpoint moved by order to show cause for an order to appoint a Temporary Administrator. The motion was granted by order dated March 20, 2001 by the Honorable Larry D. Martin, which appointed Elena Makau, Esq. Despite numerous attempts, Greenpoint was unable to contact Elena Makau, Esq. On or about March 1, 2002, Greenpoint moved for an order to appoint a Substitute Administrator. This motion was granted by order dated March 7, 2002, by the Honorable Larry D. Martin, which appointed Walter Rivera, Esq. Greenpoint was then notified that Mr. Rivera declined the appointment. On or about June 28, 2002, Greenpoint again moved for an order to appoint a Substitute Administrator. This motion was granted by order dated July 29, 2002 by the Honorable Larry D. Martin, which appointed John M. Rodriguez, Esq. Thereafter, Mr. Rodriguez declined the appointment. On or about September 26, 2003, Greenpoint again moved for an order to appoint a Substitute Administrator. This motion was granted by order dated October 22, 2003 by the Honorable Larry D. Martin, which appointed David Chidekel, Esq. Subsequently, a supplemental summons and amended verified complaint and an [*3]amended notice of pendency was filed on March 11, 2005. On March 30, 2005, the mortgage was assigned to plaintiff.

At some point, plaintiff learned that the referee appointed in 1999 (Mr. Recchia) was unable to perform the required duties. Plaintiff made an application to have a substitute referee appointed [FN1] and to amend the caption to substitute itself in place of Greenpoint, and to replace the defendants who were first served with the heirs of the estate of Shui King Wong. This application was granted on or about March 27, 2006.The substitute referee computed the amount due plaintiff and issued an oath and report sworn to July 11, 2006. The referee found that the sum of $430,835.92 was due as of November 30, 2005, computed as follows:

Principal:$ 151,335.35 Interest13%from 8/1/98 to 11/20/05 $ 144,273.03 [FN2] Default5%From 9/1/98 to 11/30/05$ 54,859.06 Pre-Default late charges 8/98-11/98@ $185.66$742.64 Inspection fees$389.80 Advances (Taxes) $81,433.42 less Escrow Balance ($2,197.38) Total$ 430,835.92
The referee also found that the mortgaged premises should be sold in one parcel.

Motions

James McGown moves by order to show cause to intervene as a necessary party, to vacate the notices of pendency, to discharge the mortgage from the City Registrar Office, to vacate the referee's report, and to stay or vacate plaintiff's cross motion to vacate the judgment of foreclosure and issue a new judgment. In his pro se supporting papers, he asserts that he was a "tenant in possession" and was not served; that plaintiff failed to auction the subject property; and that the March 11, 2005 notice of pendency is null and void under CPLR 6513. In addition, Mr. McGown states that plaintiff failed to execute on the first judgment and now asks the court to "re-wind time so . . . [plaintiff] could foreclose on a non enforceable note and mortgage" which constitutes unjust enrichment on default interest from 1998 to the present. He also asserts that:

"Greenpoint Bank failed to enforce their mortgage-note and judgment, they failed to re-new their lis-pendency only amending post judgment. A lis pendency is null-void if not [*4]renewed-docket prior to expiration (CPLR 6513) . . . post judgment lis pendency in a foreclosure is a violation of operation of law expiration. Greenpoint knew this mortgage was unenforceable and statute of limitations barred: They sold-assigned junk notes for pennies on the dollar to RossRock 2005 Fund LLC. RossRock tried to turn these dead' mortgages into unjust enrichment by playing with lis pendencies and old judgments to create a time machine to turn back the clock and get 8-9 years of default interest on dead mortgages. The plaintiff and their attorneys have hid true facts and statements from the court[]. The court is allowing the thief of equity to occur. I am a tenant of interest with possession equity' who will get hurt. [sic] a bank' [or] investment group or the home owner. I could help the court see the fraud and protect my interest at the same time."

Mr. McGown also submits an affirmation by his counsel in support of those branches of his motion to intervene as a party defendant, to vacate two notices of pendency filed by plaintiff, and in opposition to plaintiff's cross motion to vacate the judgment and issue a new judgment. With respect to that branch of Mr. McGown's motion to intervene as a party defendant, his counsel asserts that this court has the inherent power to grant intervention to parties whose rights will be adversely effected by the outcome of an action, and that provisions dealing with intervention should be liberally construed. Counsel argues that since Mr. McGown has sworn that he is a tenant at 63-4th Avenue in Brooklyn, the premises which are the subject of the instant foreclosure action, Mr. McGown is a proper and necessary party whose interests will be adversely affected by the outcome of the instant foreclosure action.With respect to that branch of Mr. McGown's motion to vacate the notices of pendency, counsel argues that the notice of pendency filed on February 3, 1999 has expired and should be removed. As to the second notice of pendency filed on March 11, 2005, counsel states that it is null and void by operation of law as a result of plaintiff's failure to move to renew the original notice of pendency within the statutory three year period, in accordance with CPLR 6513. Counsel also notes that there is no right to file a second notice of pendency in the same action where plaintiff did not move to extend the original notice within the initial three year period.

In opposition to plaintiff's cross motion to, among other things, enter a new judgment, counsel for Mr. McGown argues that the cross motion is barred by the doctrine of laches because plaintiff failed to diligently prosecute this action, as demonstrated by plaintiff's delay in appointing a temporary administrator, and permitting more than eight years to pass since the action was first commenced until seeking to enter a new judgment. Specifically, counsel notes that it took more than 18 months for plaintiff to obtain the appointment of a temporary administrator for the estate, another year to appoint a second administrator, more than 14 [*5]months to appoint a third administrator,[FN3] and then another 4 ½; years to make the instant cross motion.

Counsel also asserts that since the existing judgment of foreclosure and sale entered on July 7, 1999 determined that the sum due plaintiff was $172,714.90, "with interest accruing thereon at the rate of 9%," vacating that judgment and entering a new judgment in the sum of $430,835.92, based upon a calculation of default interest at the rate of 18% per annum, "as if the original judgment did not exist," would unjustly enrich plaintiff, and would permit plaintiff to profit by his own eight-year delay in completing the foreclosure and sale in accordance with the original judgment.

In support of its cross motion to vacate the existing judgment of foreclosure and sale, for confirmation of the referee's oath and report, and for the issuance of a new judgment, counsel for plaintiff asserts in her affirmation of regularity that a notice of pendency and amended notice of pendency have been properly filed; that all of the necessary parties have been duly served or have voluntarily appeared by their respective attorneys; that all of the necessary defendants "are of full age and sound mind and that no necessary defendant is an absentee, prior encumbrancer or in the military, except the defendant Heirs of the Estate of Shui King Wong, who was served pursuant to an order of publication and appears herein by William C. Thompson, Guardian ad Litem for said defendant;" that more than 30 days have elapsed since the completion of service of process in this action; that no defendant has answered the complaint or moved with respect thereto, and the time to do so has expired; that the whole amount secured by the mortgage is due and payable; and that all the proceedings in this action have been regular and in accordance with the rules and practice of this court.In opposition to Mr. McGown's order to show cause, plaintiff's counsel notes that Mr. McGown's moving papers do not contain any proof of a lease or other document evidencing his tenancy in the premises and when that tenancy began. Counsel also argues that since an estate representative has never been appointed, Mr. McGown cannot be a "legal" tenant at the premises as only Mr. Wong or his legal representative would have the right to enter into a lease of the subject premises.

Assuming this court entertains Mr. McGown's application, counsel argues that it must still be denied because Mr. McGown is merely a tenant in the property and does not have legal standing to challenge either the validity of the mortgage or the instant action. In this regard, counsel notes that tenants are not indispensable parties to a foreclosure action and that the failure to name or serve a tenant is not a defense to a foreclosure action; it merely leaves the tenant's rights unaffected. [*6]

As to the initial notice of pendency filed on February 3, 1999, counsel asserts that it merged with the judgment, effectively cutting off the interest of any persons whose purported interest arose thereafter.

As to Mr. McGown's claims regarding the validity of the mortgage, counsel states that Mr. McGown "is neither a borrower nor fee owner of the property and, as such, has no privity of contract either with the current plaintiff or its predecessor and, therefore, has no legal standing to challenge same."

As to the delays which occurred in this action, namely the death of the mortgagor and the failure of court appointees to accept their appointments, counsel states they were outside the control of plaintiff.

As to the amended notice of pendency, counsel asserts that it should suffice for the filing requirement since it was filed with this court's permission. In any event, counsel contends that the second filing was not a defect to the instant action because the first notice of pendency merged with the judgment, and thus a new filing was not required as the first notice of pendency could not be considered to have lapsed. Counsel further states that even if the first notice of pendency had lapsed, CPLR 6516 permits the refiling of successive notices of pendency in foreclosure actions since same is a prerequisite to the issuance of a judgment of foreclosure and sale.

In further support of plaintiff's cross motion, counsel for plaintiff asserts that it is plaintiff who has been severely prejudiced by having to overcome various obstacles in prosecuting this foreclosure action while it appears that both the heirs of the mortgagor and Mr. McGown have been collecting rents and failing to pay plaintiff any mortgage payments and/or reimburse plaintiff for expenses regarding real taxes and/or hazard insurance.

As to Mr. McGown's arguments regarding the validity of the second notice of pendency, counsel for plaintiff states that while it is valid (CPLR 6516), counsel is filing another notice of pendency under CPLR 6516, rendering Mr. McGown's argument as to its invalidity moot.

Discussion

Mr. McGown first moves to intervene as a party defendant. As noted, plaintiff challenges this branch of Mr. McGown's order to show cause on the grounds that Mr. McGown has failed to produce a lease evidencing his tenancy in the subject premises. In the alternative, plaintiff contends intervention is unwarranted since Mr. McGown's rights are unaffected by the judgment and sale.

Mr. McGown has averred in a sworn affirmation that he is a tenant of the subject premises. Further, it is true, as plaintiff asserts, that "the absence of a necessary party in a foreclosure action leaves that party's rights unaffected by the judgment and sale, and the foreclosure sale may be considered void as to the omitted party" (6820 Ridge Realty, LLC v Goldman, 263 AD3d 22, 26 [1999]). In this regard, "[a] tenant is not an indispensible party to a foreclosure action, and the failure to name a tenant does not render the judgment of foreclosure and sale defective" (Balt v J.S. Funding Corp., 230 AD2d 699, 699 [1996]). [*7]"Thus, a tenant or occupant who was not named as a party in the foreclosure action retains his or her possessory rights and a right of redemption" (Mers, Inc. v Bernard, 2008 NY Slip Op. 50308 (U) [2008]).

Nevertheless, 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. Further, it is settled that pursuant to Real Property Actions and Proceedings Law (RPAPL) 1311, "tenants are clearly necessary parties to a foreclosure action" (6820 Ridge Realty, LLC, 263 AD3d at 25). Inasmuch as tenants are necessary parties to a foreclosure action under RPAPL 1311, it stands to reason that this statute confers upon Mr. McGown an absolute right to intervene. As such, the branch of Mr. McGown's motion to intervene is granted to the extent that this court will accept his moving papers and allow him to make the arguments set forth therein.As to the remainder of his order to show cause, Mr. McGown moves to discharge the mortgage from the "City Register Office." This branch of the motion is denied as Mr. McGown has failed to offer any explanation or justification for this relief. Further, Mr. McGown's counsel has not addressed this branch of Mr. McGown's motion.

As to Mr. McGown's assertion that the mortgage and note are "non-enforceable" via [the] Statute of Limitations, this claim is rejected since Mr. McGown fails to elaborate upon or support this claim in any respect.

Mr. McGown's argument that he was not served is also rejected since "plaintiff's failure to serve [him] does not nullify the judgment of foreclosure and sale" (G.C.M. Corp. v 382 Van Duzer Corp., 249 AD2d 264, 264 [1998], lv denied 99 NY2d 507 [2003]).

With respect to that branch of Mr. McGown's motion to vacate the notice of pendency (filed February 3, 1999), and the amended notice of pendency (filed March 11, 2005), even assuming the first notice of pendency did not merge with the judgment, CPLR 6516 permits the refiling of successive notices of pendency in foreclosure actions as same is a prerequisite to the issuance of a judgment of foreclosure and sale.

As to the claim of Mr. McGown's counsel that plaintiff is guilty of laches by failing to diligently prosecute this action, it is rejected. "The essential element of this equitable defense is that the delay in bringing the action is prejudicial to the defendant" (Resk v City of New York, 293 AD2d 661, 662 [2002]). "Prejudice is established by showing an injury, change of position, loss of evidence, or some other disadvantage resulting from the delay" (id.). Here, Mr. McGown, the proposed intervenor, has failed to demonstrate that he has suffered any injury or some other disadvantage resulting from the delay. In this regard, although Mr. McGown has a right of redemption, he has failed to demonstrate that he has plans or the means to exercise this right.

With respect to Mr. McGown's claim that plaintiff's cross motion should be dismissed because the delay in seeking a new judgment has unjustly enriched plaintiff, and that this is [*8]presumably a basis to vacate the referee's oath and report, this claim is also rejected. In this regard, "a person is unjustly enriched when retention of the benefit received would be unjust considering the circumstances of the transfer and the relationship of the parties" (Cinquemani v Lazio, 37 AD3d 882, 883 [2007]). However, "[t]he theory of unjust enrichment lies as a quasi-contract claim. It is an obligation the law creates in the absence of any agreement" (Goldman v Metro. Life Ins. Co., 5 NY3d 561, 572 [2005]). Here, there can be no unjust enrichment because the matter at issue is controlled by the mortgage contract (id., citing Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987] ["(t)he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"]; see also EBC I, Inc. v. Goldman Sachs & Co., 5 NY3d 11, 23 [2005]; State of New York v Barclays Bank of NY, 76 NY2d 533, 540 [1990]; Goldstein v CIBC World Markets Corp., 6 AD3d 295, 296 [ 2004] ["A claim for unjust enrichment, or quasi contract, may not be maintained where a contract exists between the parties covering the same subject matter"]).

Despite the foregoing, Mr. McGown and his counsel raise a legitimate claim regarding the amount of interest which has accrued because of the delay involved in completing the foreclosure and sale in accordance with the original judgment obtained in this action. In this regard, "[e]quitable considerations may result in an estoppel which can toll the accrual of interest" (Matra Bldg. Corp. v Kucker, 19 AD3d 496, 496 [2005]; see also M & T Real Estate, Inc. v JJF Associates, LLC, 308 AD2d 362, 363 [2003], lv denied 1 NY3d 504 [2003]; Yagamo Acquisitions, LLC v Baco Dev. 102 St. Inc., 278 AD2d 134 [2000]; ERHAL Holding Corp. v Rusin, 252 AD2d 473, 474 [1998]; Matter of Venables v Painewebber, Inc., 205 AD2d 788 [1994]; Meiselman v Allstate Ins. Co., 197 AD2d 561 [1993]). More specifically, courts have held that dilatory conduct by the plaintiff can preclude its entitlement to interest earned (id.).

Here, it is true that the delays in obtaining a temporary administrator were attributable, in part, to Greenpoint, since Greenpoint waited 18 months before moving to appoint a temporary administrator, and on two occasions waited significant periods of time to move for the appointment of substitute administrators (one year; fourteen months). Moreover, after the substitute temporary administrator was finally appointed by order dated October 22, 2003, it took until March, 2005 for Greenpoint to file a supplemental summons and amended verified complaint and an amended notice of pendency, and to assign the mortgage to plaintiff (on March 30, 2005).

In addition, plaintiff, as assignee, was guilty of dilatory conduct in moving to vacate the judgment of foreclosure and sale, to confirm the referee's report, and in seeking the issuance of a new judgment. In this regard, the mortgage was assigned to plaintiff on March 30, 2005. However, it appears that plaintiff waited until the latter part of 2005 or the beginning of 2006 to move for the appointment of a substitute referee, which motion was granted by order dated March 27, 2006. Further, although the substitute referee computed the amount due plaintiff and issued an oath and report sworn to July 11, 2006, plaintiff did [*9]not make the instant cross motion until September 2007, and it appears it was only prompted to do so when the proposed intervenor, Mr. McGown, moved to intervene.

As a result of the foregoing delays, from entry of the judgment of foreclosure and sale, interest has been calculated by the referee at the default rate of 18% per annum. "In an action of an equitable nature, the recovery of interest is within the court's discretion. The exercise of that discretion will be governed by the particular facts in each case, including any wrong conduct by either party" (Danielowich v PBL Dev., 292 AD2d 414, 415 [2002]). Under the circumstances of this case, it would be unconscionable to hold defendants responsible for the lengthy delay of Greenpoint and plaintiff in completing the foreclosure and sale in accordance with the original judgment obtained in this action. Defendants did not contribute to these delays and they should not suffer the penalty of paying 18 % interest as a result of this delay (id.; Yagamo, 278 AD2d at 134-135; Dollar Federal Sav. and Loan Asso. v Herbert Kallen, Inc., 91 AD2d 601, 602 [1982]). Further, in general, "[o]nce the judgment of foreclosure and sale is entered, interest is payable at the prevailing legal' rate" (Bergman on New York Mortgage Foreclosures § 27.04, at 27-34 [2007]).

In light of the foregoing, the court directs an award of post-judgment interest to plaintiff at the rate of 9%, to run from July 8, 1999, the day after the judgment of foreclosure and sale was entered, but permits this award only for a period of three years, a period which the court deems sufficient for the mortgagees to have completed the foreclosure and sale in accordance with the original judgment(Yagamo, 278 AD2d at 135-135).

In sum, that branch of Mr. McGown's motion to intervene as a party defendant is granted to the extent indicated above, that branch of his motion to vacate the referee's oath and report is granted to the extent that the portion of the report which granted interest is not confirmed and is directed to be recalculated in accordance with this court's instant decision, and the remainder of his motion is denied. The cross motion of plaintiff is granted to the extent of vacating the judgment of foreclosure and sale, confirming the referee's oath and report except that portion of the report which calculated the interest, and directing the parties to settle the judgment on notice in accordance with this court's instant decision.

This constitutes the decision and order of the court.

E N T E R

J. S. C.

Footnotes

Footnote 1: The substitute referee was Mr. Leo J. Kimmel, Esq.

Footnote 2: The referee's oath and report incorrectly indicates that the 13% interest from 8/1/98 to 11/30/05 is $114,273.03, but the Affidavit of Computation indicates that it is $144,273.03.

Footnote 3: As noted, in those 14 months, two motions were made to appoint an administrator, one was made four months after the second appointment was declined, and the last motion was made approximately 14 months after that.