Bankers Trust Co. of Cal., N.A. v Bok

[*1] Bankers Trust Co. of Cal., N.A. v Bok 2009 NY Slip Op 52650(U) [26 Misc 3d 1203(A)] Decided on April 1, 2009 Supreme Court, New York County Tolub, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 1, 2009
Supreme Court, New York County

Bankers Trust Company of California, N.A., AS TRUSTEE UNDER THE POOLING AND SERVICING AGREEMENT, DATED AS OF JUNE 27, 1997, DELTA FUNDING HOME EQUITY LOAN TRUST 1997-2 c/o DELTA FUNDING CORPORATION SERVICING AGENT, Plaintiffs,

against

Joyce Qua Bok, ENVIRONMENTAL CONTROL BOARD FIRE, JOHN QUA BOK , Defendants.



104484/98



For the Intervenor:

Bruce J. Bergman, Esq.

Berkman, Henoch, Peterson & Peddy, PC

Garden City, New York

for Plaintiff:

Robert Gutman, Esq.

Sanders, Gutman & Brody, P.C.

Brooklyn, NY

Walter B. Tolub, J.

This action arises in connection with an action for the foreclosure and sale of property known as Apartment 14F, located at 377 Rector Place in Manhattan (the "property" or "apartment"). By this application, proposed intervenor 484 Associates, LP ("484 Associates"), as fee owner, seeks an order pursuant to CPLR 1012(a)(3) granting leave to intervene as a matter of right. Additionally sought is an order vacating the October 13, 1999 judgment of foreclosure and sale entered on April 17, 2000, and an order dismissing this action in its entirety. Alternatively, proposed intervenor 484 Associates seeks an order directing a new referee's hearing to recalculate the interest and fees claimed due in this action.

Background

The residential apartment unit giving rise to this application was once owned by defendant Joyce Qua Bok, her title having been derived from ASPIC Corp., of which her son, David Bok, was the principal (see Order to Show Cause, Exhibit B). In 1998, the [*2]property, which was mortgaged,[FN1] became the subject of the instant foreclosure action. A summons and complaint, as well as a Notice of Pendency was filed in this action on March 16, 1998, and on December 4, 1998, the order of foreclosure was granted, and the matter was sent to a referee to compute.

Following the submission of the Referee's report of Thomas Kleinberger, Esq, this court, on October 13, 1999, issued an order and judgment directing the foreclosure and sale of the subject property (Order to Show Cause, Exhibit A). The order and judgment was entered on April 17, 2000 (id.).

Curiously, the foreclosure sale was not conducted in 1999, and had not been conducted when plaintiff assigned the mortgage on November 22, 2000 to CHM Abstract Land Title Research Corp. ("CHM Abstract") and its' president, Perry Y.P Moy ("Mr. Moy").[FN2]

In fact, there still had not been a foreclosure sale by November 12, 2005, the date on which defendant Joyce Qua-Bok, as owner, conveyed the subject property and its companion, unit 14-G to 484 Associates (the "November 2005 conveyance") as partial satisfaction of a debt due ("the debt") from defendant David Bok to 484 Associates (Order to Show Cause, Exhibit C).[FN3] 484 Associates concedes that it took title to both properties knowing that a mortgage existed on each of them, but without any knowledge that the property at issue in this action (14F) was subject to an entered, but not yet executed, judgment of foreclosure.[FN4] Subsequent demands for a mortgage payoff [*3]calculation on both mortgages went ignored,[FN5] and on February 28, 2006, 484 Associates duly recorded the November 15, 2005 conveyance (id.; see also Affidavit of Jeffrey W. Ogren).

In December of 2005, 484 Associates, as lawful owner of the properties, attempted to clear title on both properties pursuant to Article 15 of the RPAPL (Affidavit of Jeffrey W. Ogren). After a protracted set of legal proceedings, in May of 2008, CHM Abstract conceded that the statute of limitations had lapsed on the mortgage for Unit 14G, and issued a mortgage satisfaction for that property dated May 30, 2008 (Affidavit of Jeffrey W. Ogren). The mortgage on unit 14F remained the subject of dispute.

Three events took place contemporaneously which affect this application. On March 15, 2008, CHM Abstract assigned the mortgage for the subject apartment to Mr. Moy (Affirmation in Opposition, Exhibit 5). On April 23, 2008, Mr. Moy recorded the mortgage assignment (id.), and last, but certainly not least, in May of 2008, more than eight years after the foreclosure judgment, Mr. Moy took steps to hold the foreclosure sale ordered in 1999, by publishing a notice announcing the judicially ordered foreclosure sale of the subject property in a newspaper (Order to Show Cause, Exhibit F). According to 484 Associates, until this point in time, despite having conducted two title searches on the subject property, commencing litigation to clear title, making multiple demands for mortgage payoffs, and even deposing Mr. Moy in a somewhat related Federal Court action (see Affidavit of Jeffrey W. Ogren; Order to Show Cause, Exhibit H; Affirmation in Opposition Exhibit 6), 484 Associates had no knowledge whatsoever that a judgment of foreclosure existed against the subject property (Affidavit of Jeffrey W. Ogren).

Upon learning of the foreclosure sale, counsel for 484 Associates wrote to Mr. Moy's attorneys requesting a payoff letter for outstanding mortgage. The payoff letter, issued on May 19, 2008, seeks a total mortgage payoff of more than $500,000, including $215,144.30 in interest, the bulk of which is calculated from April 19, 2000 - the date that the October 13, 1999 judgment was entered (Order to Show Cause, Exhibit G).

This application followed.

Discussion

As a preliminary matter, and over the objections of plaintiff, leave is granted to allow 484 Associates to intervene as of right. In 2005, 484 Associates became both the legal fee [*4]owner of the subject property, and the holder of the right of redemption on the underlying mortgage. This right of redemption is not extinguished until the property is actually sold (see, NYCTL 1996 I Trust v. Moore, 51 AD3d 885 [2nd Dept 2008]). Since the rights of 484 Associates may be inequitably affected by any further transactions involving the subject property, leave to intervene in the instant action is granted (CPLR 1001(a) 1003, 1012(a)(3); See generally, See generally, Barr, Altman, Lipshie, and Gerstman; New York Civil Practice Before Trial [James Publishing 2008] §14:__ et seq.).

Having considered the papers presented, it is this court's conclusion that there is no legal justification for the issuance of an order vacating the 1999 order of foreclosure and sale. What is warranted under the circumstances of this case however, is a recalculation of what is actually due upon the existing judgment.

Plaintiff in this action obtained a reference to compute what was owed on the subject mortgage in December of 1998. The referee's report, issued on June 7, 1999, indicated that as of January 15, 1999, the sum of $266,033.58 was due on the mortgage (see, Order to Show Cause, Exhibit A). Two months elapsed before plaintiff moved for the order granting the judgment of foreclosure and sale, which was ultimately signed on October 13, 1999 (id.). Inexplicably, plaintiff did not enter the judgment until April 17, 2000 and then failed to take any action on the property until May of 2008, or, in more measurable terms, until more than $200,000 in interest had accrued on the outstanding mortgage balance.

Plaintiff, in opposition to the plea for a recalculation of the mortgage payoff amount, offers two basic arguments for why reduction of interest is unwarranted: 1) 484 Associates delayed the foreclosure sale in by commencing a Federal Action (Affirmation in Opposition, p. 10); and 2) 484 Associates was somehow not diligent in their search, which would have indicated the existence of a foreclosure judgment in this action. Both of these arguments, are at best, misguided. The papers are devoid of any "good excuse" justifying why plaintiff, who obtained an order and judgment of foreclosure and sale in October of 1999, failed to complete the sale of the property prior to the 2005 conveyance. Plaintiff's claim that the sale of the property was further thwarted by the commencement of the Federal action is equally incredulous, given that the Federal Court declined to stay the foreclosure sale and, more significantly, the action, and the validity claims asserted by 484 Associates, are still pending (Affirmation in Reply, p. 12; Affidavit of Jeffrey W. Ogren; Affirmation in Opposition, Exhibit 7).

Plaintiff's second argument, that 484 Associates would have known about the foreclosure judgment had they been diligent in their search, is equally flawed. According to plaintiff, a [*5]diligent search of the records pertaining to the subject property would have led 484 Associates to the expired Notice of Pendency, which would have in turn led them to the Index Number for the instant action, and the 1999 entry of judgment directing the foreclosure sale (Affirmation in Opposition ¶¶ 22-27).

A Notice of Pendency however, only serves as constructive notice while it is valid, that is to say, for three years unless otherwise extended (CPLR 6501, 6513; see, Polish National Alliance of Brooklyn, U.S.A. v. White Eagle Hall Call, Inc., 98 AD2d 400 [2nd Dept 1983]). In the case at bar, there was only one Notice of Pendency, which was filed in 1998, and expired long before 484 Associates obtained title. Searches conducted on the subject property, even today, would not reveal the existence of a judgment of foreclosure against the property,[FN6] because judgments of foreclosure are not included in the land records. Of course, the court would be remiss if it failed to note that either CHM Abstract or Mr. Moy could have provided 484 Associates with notice of the foreclosure judgment as early as the Fall of 2005. For whatever reason, however, they simply chose not to.

This is of course not meant to imply that 484 Associates is not subject to the foreclosure judgment because of an expired lis pendens. That is not the case (see, Pacific Lime Incorporated v. Lowenberg Corporation, 77 AD2d 737 [3rd Dept 1980]). Plaintiff still holds a valid order and judgment of foreclosure. However, the unusual circumstances of this case dictate a reduction of interest. To conclude otherwise would be unconscionable. There simply is no justifiable reason to direct any party to pay in excess of $200,000 worth of interest in a situation where plaintiff is the singular cause for the delayed sale (see, Danielowich v. PBL Development, 292 AD2d 414 [1st Dept 2000](mortgage interest rate reduced from default rate of 16% to 9% where respondent delayed confirmation of referee's report for five months); Yagamo Acquisitions, LLC v. Baco Development 102 Street, Inc., 278 AD2d 134 [1st Dept 2000]; (award of post-summary judgment interest limited to one year where plaintiff failed to expeditiously obtain the judgment of foreclosure).

The remaining question then, is from what point in time should interest be reduced, and by how much.

As noted by the Second Department, "in an action of an equitable nature, the recovery of interest is within the court's discretion" (Danielowich, 292 AD2d 414, 415). That discretion is [*6]governed by the particular facts of the case, including any wrongful conduct by either party (Dayan v. York, 51 AD3d 964 [2nd Dept 2008]; Yagamo, 278 AD2d 134).

In the Second Department case of Dayan v. York, 51 AD3d 964 [2008], the court, faced with a situation where a mortgagee was responsible for delaying the completion of a foreclosure action, determined that the mortgagee was not entitled to accrued interest and penalties accruing after the judgment of foreclosure was entered. The First Department, faced with a similar situation in Yagamo Acquisitions LLC v. Baco Development 102 Street Inc., 278 AD2d 134 [2000], limited the accrual of post-summary judgment interest to one year.

In the case at bar, as noted earlier, plaintiffs obtained a judgment of foreclosure against the subject property in October of 1999, which was entered in April of 2000. The mortgage and the judgment of foreclosure were transferred to CHM Abstract on November 22, 2000, but not recorded. The mortgage and the judgment of foreclosure were transferred a second time to Mr. Moy in March of 2008, who recorded the transfer in April of 2008.

Under the circumstances of this case, it is this court's determination that interest accrual should terminate on the date that plaintiff's assignee, CHM Abstract, obtained the mortgage and the responsibility to complete the foreclosure sale. In this court's opinion, that sale should have taken place no later than December 31, 2000. As such, the interest on the mortgage principal should be recalculated from the date of the appointment of the referee to compute through that date only. This court will not penalize the legal fee owner by mandating the payment of interest for the unexplained further delay of the sale. Accordingly, it is

ORDERED that the relief sought by proposed intervenor, as fee owner is granted as to those portions seeking leave to intervene and for a new referee's hearing to recalculate the interest and fees claimed due in this action; and it is further

ORDERED that the balance of the relief sought is denied; and it is further

ORDERED that the parties shall contact the prior referee in this action to ascertain whether he remains eligible to recalculate the interest and fees claimed due in this action, and to so notify this court within 30 days of service of a copy of this order with notice of entry; and it is further

ORDERED that upon notification of the parties, in the event a new referee to compute is required, this court shall randomly select and appoint a new referee to compute within 20 days of notification; and it is further

ORDERED that said referee shall recompute interest in accordance with this decision. [*7]

This memorandum opinion constitutes the decision and order of the Court.

Dated:

____________________________

HON. WALTER B. TOLUB, J.S.C. Footnotes

Footnote 1: The mortgage, held by Executive Mortgage Bankers Ltd. was for the amount of $217,000 (Affirmation in Opposition ¶2)

Footnote 2: It is also claimed, and not disputed, that Mr. Moy is a close friend of David Bok (Affidavit of Jeffrey W. Ogren).

Footnote 3: David Bok's debt was the result of two judgments taken against him and his mother for their respective roles in defrauding 484 Associates of nearly $700,000 (Affidavit of Jeffrey W. Ogren, Esq.). 484 Associates, through their then attorney, Jeffrey W. Ogren, Esq., learned of the condominium unit involved this action (14F), and its companion (14G), when it was discovered that David Bok lived in both of them (id.).

Footnote 4: Title searches conducted on the two properties revealed that both properties were held in the name of Joyce Bok, and both properties were mortgaged. No recorded judgments against either property were found (id.).

Footnote 5: In May and June of 2005, before the transfer of title of Apartment 14F to 484 Associates, Joyce Bok individually, and through her attorney, contacted CHM Abstract and Mr. Moy seeking a mortgage payoff calculation. Neither letter generated a response (Affidavit of Jeffrey W. Ogren, Esq.).

Footnote 6: As a side note, the court notes the record on the property, as it existed in 2005, would not have even indicated up front that the mortgage was held by CHM Abstract - because CHM Abstract never bothered to record its assignment of mortgage on the property until 2008.