Central Funding Co. v C.D. Kobsons Inc.

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Central Funding Co. v C.D. Kobsons Inc. 2013 NY Slip Op 30090(U) January 11, 2013 Sup Ct, New York County Docket Number: 115350/09 Judge: Saliann Scarpulla 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. NNED ON 112212013 [* 1] SUPREME C9URT OF TKE STATE OF NEW YQRK NEW YORK COUNTY nmree.iT. PART I"( Index Number : 1I535012009 CENTRAL FUNDING COMPANY INDEX NO. vs C.D. KOBSONS INC., ET AL. MOTION DATE Sequence Number : 001 MOTION SEQ. NO. SUMMARY JUDGMENT ' Dated: 3. 1 3 ..................................................................... 0 CASE DISPOSED WNON-FINAL DISPOSITION CHECK AS APPROPRIATE: ........................... MOTION I : /;]&ANTED S 0GRANTED IN PART DENIED OTHER CHECK IF APPROPRIATE: ................................................ 0SETTLE ORDER E SUBMIT ORDER d 1; I DO NOT POST uFIDUCIARY APPOINTMENT 0REFERENCE I CHECK ONE: . 2. II [* 2] CENTRAL FUNDING COMPANY AND CCILUMRIA CAPITAL CO., Plaintiffs, - against - Indcx Number: 11535O/09 Submission Date: 8/15/12 DECISJON and ORDER C.D. JSOBSONS INC., W.E. AT,EXANDER LP%, NEW Y ORK SI'ATE l~)I?PAIC'~MEN'l' TAXATION OF hk FINANCE, NEW YORK CITY ENVIRONMENTAL CON'I'KOI, BOARD, MOITAMMED S. MOJALl, ABIIULLA AITMEL), 3 11 GROCERS COW., CBS OUTDOOR GROUP INC. f/lda WTNSI'ON NElWORK INC., JOHN DOE #l - 50, For Plaintiffs: Christopher J. Panny, Gsq. 76 Court Street, Suite 34 Brooklyn, NY 1 120 1 For Defendant W.E. Alexandcr Lee: Dominic Sariia, Esq. 150 East 37'" Strcet New Y ork, NY I00 16 Ilefcndant NY State Department of 'axation & Finance: 77 Hroadway, Suite 1410 ew Yolk, N Y 10007 of the N Y S Attorncy General Parkway, Suitc 125 H:iuppauge, N Y 1 1788-5522 For Defcndant C.D. KO Lawlcr Mahon & 315 West 44"' Street, Suite 1400 New York, N Y 10036 For Ilefcndant NYC Environrticntal Coritral Board: Saul Fishman, Esq. New York City Dcpa~-t~nent Finance of Ol'fice of Legal Affairs 345 A d a m Street. 3 I d Floor Brooklyn, NY 1 120 1 For Defendant Abdulla Ahmed: l,eon 131-ickrnan, l&xj. 224 Beach 147"' Street Neponsit, N Y 1 1694 1 [* 3] l apci-s conqidcrcd in revicw of Plaintifl s motion for summary judgmcnt (motion sec]. no. 001): Notice of Motion/Aftirm. of Memo. of Law in Supp. to Motioii .................................... Memo. of Law in Opp. to Motion/Aftidavit .......................................... Reply Memo of I.aw in Supp. Hrickman Affirm. in Opp. 1 0 Motion ................. Paiiny Reply Affirm. in rcsponse to Hrickman Affirm ............................... Hall Affirm in Opp. to Motioi ....................................... IHnrkavy Kcply Affidavit ................................................ D Anibrosio AL fidavit........... 7 Papers considered in rcview of t laintift s motion for pnr-tial summary judgmcnt (motion seq. no. 002): Notice of MotionlRftirinn. of Counsel/Aft?dnvits/Exhibits ......................... 1 Hall Affnm. in Opp. -1.0 Motion ................................................................ 2 Reply Mcino of I,aw in Supp. ................................................................. 3 HON SALTANN SCARPULLA, J.: Motion sequence numbers 00 1 and 002 are coiisolidated for disposition. In this action to foreclose tlic property locatcd at the address 3 1 1 lot Avenue, a/lc/a 500 West 2SLh Strect, New York, New York I0001, plaintiffs Central Funding Coiiipaiiy and Columbia Capital Co. (together Plaintiffs ) inove (motion scq. no. 00 1): ( I ) for suininary judgineiit dismissing the answer, affirmative derenses, and counterclaims of the defendant C.D. TCobsons Tnc. ( Kobsons ) and for summary .iudgment of its foreclosure aclioii against Kohsons pursuant to CPT,R $ 32 12; (2) for default judgment against New Yorlc State Department of Taxation & Finaiicc (L D l F ), NYC lkpartinent of Eiiviroiiiiieiital Control Board ( ECR ), Mohammed S. Mo-jali ( Mojali ), Ahdulla Ahiiied ( Ahiiied ), 3 11 Grocers Corp. ( 3 11 Groccrs ), and CBS Outdoor Group Tnc. ( CRS Outdoor Group ) pursuant to CP1,R $ 32 15 (a); 2 [* 4] ( 3 ) 10 appoint a rcferec I O coiiipirte and report as against all defendants pursuant to RPAPL $ 1321(1); (4) to amend the title of this action. to delete John Doe # l through John Doc #50 ; and 1 I ( 5 ) to amend the caption of the suinmons to substitutc CUS Outdoor Network lnc. with the correct name of defendant CBS Outdoor Group h c . Plaintiffs also move (motion scq. no. 002) for partial summary judgment of its foreclosure action against defendant W.E. Alexander Lee ( Lee ) disinissing his answer and defeiises pursuant to CN,R 5 32 12. Background A. The Mortgage & Other Agreements rlefendant Kobsons i s the owner of the land and building located at 3 1 1 10 Avenue ( the property ). The building contains one coiniiiercial store and six rcntstabilized apartments. On June 12, 2007, Kohsons borrowed $700,000 coiiiinercial loan from Plaintiffs. In exchange for tlic loan, Kohsons executed a promissory note ( Notc ) and a mortgage ( Mortgage ) to Plaintiffs encunibcring the property. Plaintiffs recorded the Mortgage and Note at the NYC Department of Finaiicc, Office of the City Register, on June 2 I , 2007. The maturity date stated in the Note is the date on which this Note matures and must be fully repaid, unless sooiic r acceleratcd, which is Junc 12,2008. On the same datc that the Note was cxecutcd, Plaintiff s and Kobsons executed two letter agrceinents: (1) an option to extend the maturity date ofthe Note ( Loan Extension 3 [* 5] Qptioil Agreement ) and (2) a tenaiit loan buyout agg-eement ( l enant H L I ~ J O L I ~ Loa11 Agreement ). The Loan Extension Option Agreement granted Kobsons thc right, at its option, to extend tlic term ofthe abovc-referenccd loan for up to four (4) additional, consecutive (6) month periods beyond the current maturity date. 1 0 cxercise each six-i~-~oiitIi option, the agreement required Kobsoiis to: (i) give written notice or its clection to Columbia Capital, and (ii) include with its notice a payinent equal to one (1 .OX) percent of thc thenoutstanding principal amount as an exteiision fee, at least Gftecn ( J 5) days prior to the then-maturity date. Under the Tenant Buyout Loan Agreemcnt, Plaintiffs a p e d to lend Kobsoiis up to an additional $400,000 for the primary purpose of financing the buy-oul of existing tenants of the premises. This agreement states that Plaintiffs advance for this purpose will require signed buy-out agrceinents in form approved by [Plaintiffs] Jxnder. 1 1 1 addition, the agreement states that 1iJt is a filrther condition precedent or any advances to be made hercuiider that there arc 1x1 defaults under any tcrins and conditions of our lirst IJlortgage of $700,000. Tenant Buyout Loan Agreenient hurthcr providcs Plaintiff s loan coininitinent shall bc null and void in the event o f a material adverse change in the condition of thc propcrty, substantial damage duc to fire or other hazard, or a inatcrial change in borrower s or guarantor s fin anci a 1 status. 4 [* 6] 13. The F Q ~ C C ~ O S U ~ P Aclioia On October 30, 2009, Plaintiffs coiiirnciiced this foreclosure action. In the complaint, Plaintiffs allege that the remaining defendants hold the following subordiriate intercsls: ( I ) DTF is ;t holder of a tax warrant against Kobsons in the amount of $159.97, docketed with thc County Clerk on August 1 I , 2009; (2) ECI3 is the holder of iiuinemis judgments against Kobsons based on building code violations; (3) Mojali is an occupant of Apartincnt 2F under an expired coiniiiercial lease or inoiitily tenancy; (4) Aliiiied is an occupant of the coiimercial store and baseincnt under an expired coiniiiercial leasc; (5) 3 1 1 Grocers is an O C C U ~ ~ M I ~ commercial store and basement undcr an expired of the coiiiriicrcinl lease or inoiithly tenancy; (6) CBS Outdoor Group is an assignee of (z property site leasc t o maintain sigiiage on the properly; a i d (7) Lec is thc holdcr ofa .judgment lien against the property, docketed by the County Clerk on Jaiiuniy 30, 2009. On December 4, 2009, Kobsoiis answered the complaint and asserted four affiriiiativc defeiiscs: lack of consideration, unclean hands, breach of contract, aiid ripeness. Kobsons also asserted three couiiterclairns for: (1) a declaratory judgment (i) hiding that Kobsons is not in violation of the Note, Mortgage, guaranty and extension agreeincnts; (ii) coiiipelling Plaintiffs to cxtend the mortgage tlirough and including May 3 1, 20 IO, (iii) coinpelling Phiintiffs to fund the buy-out of certain tenants of the premises, aiid (iv) fiiidiiig that aiiy violation by Kobsons is curable; (2) a pcrinaiieiit in-junction against foreclosurc; aiid (3) contract aiid punjtivc dainagcs. [* 7] Lee asserts two defcnses ii: his aiisweer: (1 his riioiiey judgment lien is superior to Plaintiff s Mortgage and therefore cannot be extinguished ~ipon f oreclosure; and (2) Plaintiff5 sliould be estopped rrom cxtinguishing T,ce s lien bccausc they had actual or constructivc notice of his claims prior to tlic execution of the Mortgage. 1. Motion for Summary Judgment Against Kobsons In support of its motion for summary judgment, Plaintiffs argue that thcy establish a primafacie eiititleinent to foreclosure against Kobsons. Plaintiffs subinit copies of the Note, Mortgage, and receipts of filings with the Office oftht: City Register to prove the cxistencc of a niortgage. PlaintiKs also subinit evidence to dcmonstratte that Kobsons dcf aulted on the Mortgage through the affidavits of Stephen 5. Harltavy ( Harkavy ), general partner of Central Frrndiiig Company, and Rudolf Katz, priiicipal of Columbia Capital Co. Plaintiffs argue that Kobsoiis clchnulted when it failed to pay the principal balaiice due by Deceinber 12, 2008, thc alleged maturity date of the Mortgage. According to Harkavy, the original maturity date of thc Mortgage and Notc was June 12, 2008, which Kobsoiis extended to December 12, 2008, by exercising its first six-montli option undcr the Loan Extension Option Agreement. Harkavy Aff., 7 29. Harlcavy stated that once tlic Mortgage matured on December 12, 2008, it was not repaid on that date by Kobsons. Id., 71 140. Kobsoiis does not contcst that it hiled to pay the principal balancc due by Dcceinber 12, 2008. IIowevcr, in opposition to the molion, Kobsoiis argues that h [* 8] P h i n t X s should not be cntitled IC?xuinrnaiy judgiiierit becausc they created thc coiiditioiis ofKobsons defmlt by wrongfully refusing to extend the maturity date for a second time, and refiising to provide a $300,000 loan to Kobsons as required undcr thc Tenant Buyout I .oan Agreement. Further, Plaintiffs argue that Kobsons answer, affirmative defcnses, and counterclaim should be dismissed because Kobsons waived its right to interpose any defknses, oxcept for payment, and waived its right lo interpose ally countcrclaiins. Plaintiffs argue that this waivcr appcars in paragraph 30 of the Mortgage, which statcs that the imrtgagor and any guarantor hereby severally waive and will waive ... (ii) the right to interpose any def ciise (other than payment), any setoff, and/or any counterclaim lo any action brought by mortgagee to enforce the note or this mortgage or any of the loan documents . According to Douiigrat I.:aiiilrakul ( Eariitrakul ), the principal of C.D. Kobsons lnc., Kobsons exercised its first option of extending the maturity date to December 3 1, 2009, and that in or around Dccembcr, 2009, [Kobsons] took steps to cxtend the maturity date again.? Howcver, Eaintrakul states that Plaintiffs rcjected Knbsons second atleinpt to further extend the mortgage term on completely spurious grounds. In their reply, Plaintiff,, argue that they did not create the conditions ofKobsons dcfault. Plaintiffs claim that they refused to extend the iiiatiirity date and provide the - __ __ - Based 011the civerall contcxt of tlie dispute and the cvideiice iii the record, 1 aswine that this date is in error and should read December 3 1,2008. IIowever, wen if this datc is correctly sct forth, the analysis in this decision rcinaiiis thc samc. 7 [* 9] $300,0U0 loa11 because Kobsoiis had already def aulted on i)cccinber 12, 2008, arid did not fulfjll the conditions of eithcr the Loan Extensioii Option Agrceiiient or the Tenant Buyout I mi1 Agrccinent. To support their argument, Plaintiffs subinit two lettcrs. The first letter, dated Dccmber 16,2008, contains Kobsons request for a $300,000 loan from Plaintiffs, pursuant to the Tenant T,oan Buyout Agreemcnt. In order to invoke its right to the loan, Kobsoiis stated in the Dcceimber 16 letter that the loan would be used for the potential tenniiiation oftlie leases for thc coininercial tenants on the ground floor (3 1 1 lot Avenue Gourmet 1)eli) and Suite 2F. The second lettcr, dated February 1 1 2009, contains Plaintiffs response and ~ rqjection of Kobsons rcyuest for the $300,000 loan. According to Plaintiffs, Kobsons could not obtain a loan under the Tciiant Loan Buyout Agrccinent because it did not fdfill thc requisite loan conditions. First, Plaintiffs claiiiicd that Kobsons was in default on the Mortgage because it failed to pay the principal balance due by December 12, 2008. Plaintiff s also stated that Kobsoiis could no longer extend thc maturity dale beyond rkcember 12, 2008 because it did not scricl the written notice and the oxtension fee requircd undcr the Loan Extension Option Agreemciit. Second, Plaintiffs stated that Kobsoiis hiled to fdfi I1 other conditions for a loan because il did not obtain any tenant buy out agreements, or a certificate from its commercial tenaiil stating that the lcase was subordiiiate to tlic Mortgage. Furthermore, 8 [* 10] Plaintiffs claimed that an adverse change in the condition of the properly occurred as a rcsult of the Article 7A proceeding cominenced against Kobsons. Although Plaintilrs rc-jccted K O ~ S O Irequest for the Tenant Buyout I m i i and ~S stated that Kobsoiis no longer 1i;td thc right to extciid tlic maturity datc of the Mortgage, they made an offer in tlicir Fcbruary 11 letter to rctroactivcly extend the maturity date of the Mortgage on the condition that Kobsons: (a) aclciiowledgc that Plaintiffs had no further obligation under the Tenant Buyout Loaii Agreement, (b) provide financial stateincnts to establish that Kobsons possessed suflicjeiit funds to inake rcpairs and make mortgagc payments, and (c) pay the $7,000 extension fce. According to IIarkavy, Kobsons never fulfilled any of the coiiditions retroactively to extend the maturity of the loan. 2. Motion for Partial Summary Judgment Against Lee Plaintifls also argue that Lee s answer a i d defenses should be dismissed. Plaintiffs argue that the Mortgage is superior to Lec s judgment lien bccause it has filrst in tiinc priority because the Mortgage was recordcd 011 June 2 1,2007, and Lee s judgment lien was not docketed until January 30, 2009. In opposition, Lce argues that his lien is superior to the Mortgage because it is based 011 a rent overcharge award issued by the Division ofHousing and Community Renewal (DHCR) on March 28, 2007. According to Lee, the carryover liability provision 9 [* 11] of tlic Rml Stabilization Code 5 2561 (9 preserves his judgment lien through a judicial forcclosure sale. Lee also argues that Plaintiffs should be estopped from extinguishing lice s lien because they had actual or constructive notice of his rent overcharge award prior to the execution of thc Mortgage. In thc event that his lien is extinguished, Lcc requests the right to withhold rent from any liiture owner of the property. 3. Motion for Default ,Iiidgmcnt and to Appoint Referee In their motion, Plaintiffs argue h a t they are entitled to a default judgment against defendants DIT, ECB, Ahmed, Mojali, 3 1 1 Groccr, and CBS Outdoor Group and lo axncnd the caption to delcte the fictitious John The defendants. Plaintiffs submit an atlirmation of their counsel, Christopher Panny ( l)anny ), who stattcs that the above iiained dcfendants failed to filc an answer to the complaint. 111opposition to the motion, defendant Ahined submits an affjrination of his counscl Leon Briclcmaii ( Hrickman ), Brickman claims that Plaintiffs are riot entitled to judgment against Ahined because he is a coininercial tenant occupying the store under a valid lcase that expires on October 3 1, 20 13. No other opposition has been presented. Discussion 1. Motion for Summary Judgment Against Kobsons In a motion for suminary .j udginent, a plaintiff establishes a primn,fiicie entitlement to foreclosure by producing evidcnce of the mortgage, the unpaid note, and evidence of 10 [* 12] dcfault. Grcatcr New York L Y m , Bunk v. 2120 Rmlty lfiizc.,202 A.D.2d 248,248 ( 1 st Bunk v. Wild Ouks Holding, 196 A.D.2d 812, 812 (2d Dcp t 1993). Dep t 1994); Villag~ To defeat plaiiitifrs motion, the defeiidant inust come forward with coiiipetcnt evidence of any defenses to raisc a triable issue ol fact. Barcov l-?o/ding Cory. v. Bexin Reulfy C orp., 16 A.D.3d 282, 283 (1st Dcp t 2005). Here, 1 find that Plaintiffs established aprinza facie entitlement to forcclosure against Icobsons by producing evidciice of the mortgage, the unpaid note, and Kobsoiis s defailt. Plaintiffs establish that Kobsoiis defaulted on December 12,2008. According to the Note, the original maturity date was June 12, 2008. The maturity date was theri extended from Juiic 12, 2008 to December 12, 2008, becatrsc I<obsons obtained one six- month cxtension under thc Loan Extension Option Agreement. Kobsons claiiiis that tlic inaturity date was extended to Deceinbcr 3 1, 2008, but this claim is unsupported by the record. ? he Loan Extension Option Agreeiiicnt states that cadi cstensiori term is for a six month period. Thus, the first option extended the original niatirrity date by six months froin June 12, 2008 to Jlccember 12, 2008.2 Plaintiff s also csiablisli that T<ol?sons failed to pay the unpaid principal balance by Tlcceinbcr 12, 2008. In his affidavit, IIarlcavy stated that when the Mortgage matured . -_ 011 - Kobsoiis suggests in its papers that thc original maturity date was May 3 1, 2008. However, even if the Court were to accept that the original inaturity date was May 3 1, 2008, one six-iiionth extensjoii would have only extcnded the maturity date froiii May 3 1, 2008 to Noveiiiber 30, 2008, and not to December 3 1, 2008, as Kobsons claims. [* 13] Dcceiiiber 12, 2008, the Mortgage loan L L w ~ s repaid on that date. Kobsoiis offers 110 not evidence that it made the required payment by Deceinber 12. T hcburden now shifts to Kobsons to raise a triablc issue of fact as to its dcfenscs. T-lcre, 1 find that Kobsons failed to raise a triable issue of fact that Plaintiffs somehow created Kobsons default. First, Kobsons failed to introduce: any cvideiice to show that Plaintiffs created the conditions of its default by wrongfully rejecting Kobsons rcyuest lo extend the inaturity date. In her af iidavit, 1 :anitraliul vaguely stated that Kobsoiis in or around December, 2009, took steps to extend the iiialurity date. Howwer, Kobsons subinits no further evidence to show that it actually provided tht: writtcn notice and extension k e required to extciid the inaturity date beyond Decciiiber 12, 2008. Second, Kobsons failed to introduce any evidence that Plaintiffs created the conditions of its defmlt by wrongfully rejecting Kobsons request for a loan under the Tcnm? Huyoiit l,oan Agreement. Although Kobsons sent a writtcn letter to Plaintiffs requesting the $300,000 Joan on Deccinber 16, 2008, Kobsons was aJrcady in default 011 the Note and Mortgage at that time because of its failure to pay tlic principal balance due by Deccinber 12, 2008. As a result of its default, Kobsons could not iiivolie its riglit lo a loan under the Tenant Buyout Loan Agreement because it was a condition precedciit of any advances that Kobsons was not in default on the Mortgage. Kobsoiis further failcd to fiilfill the other conditioiis oi obtaiiiing a loan lkoin PJaiiitiffs, such as procuring signed 12 [* 14] buy-out agrccinents from tcnants or a certificate rrolm its coiiiimcrcial tcnant stating that the lcase was subordinate to the Mortgage. Thus, whcn Plaintiffs rejected Kobsons loaii rcqucs t arid refused to extend the maturity date in their February 1 I, 2009 letter, they acted w i t h their contractual rights uiider both the Taan Hxtcnsion Option Agreement and the Tcnarit Buyout 1,oan Agrccmeiit. Here, I also find that Plaintiffs ofkrs to retroactively extcnd thc maturity date did not contribute to Kobsons default. Thc record shows that Kobsons already defi~ulted on December 12,2008, inore than two months prior to PlaintiEs o f h . Kobsons made no showing thal Plaintiffs offercd any :issurances to cxteiid the maturity date or provide additional fiiiancing such that it would have caused Kobsoiis to default. Red Tulip, LLC v. Neiva, 44 A.D.3d 204, 21 1 (2007). Further, Plaintiffs also establish that Kobsons is barred from asserting any defenses, except paymcnt, or any counterclaims in this action. Paragraph 30 of the Mortgagc states that Kobsons waivcs the right to interpose any defknse (other than payment), any setoff, and/or any counterclaim to any action broiight by mortgagee to ciilbrce the note or this mortgage. Such a guaranty, sigiicd in connection with a inortgagc I c m , is sufficient to preclude the assertion of any defenses and couiiterclaiim by defendant. C, itibank, N.A. v. Ylapingw, 66 N.Y.2d 90, 93 ( 1985); Red Till@, LLC, v. Neiva, 44 A.D.3d at 204. 13 [* 15] Accordingly, I grant Plaintiffs motion for sumrimy judgment dismissing Kobsons answcr, affiniiativc: defenses, and countcrclaims, and for summary Judgment of its forcclosure action against Kobsons. 2. Motion for Partial Summary Judgment Against Lee In their motion, Plaintirfs argue that they are entitled to suimnary judgment against Lee because his inoiicy judgment lien is subordinate to the Mortgage. To support this argument, Plaintiffs clajm that the Mortgage is superior becausc it has first in time priority over T,cc s judgment, which was recordcd after the Mortgage. In his defensc, Lee argues that although his judgment licii was recorded aftcr the Mortgage, it is a supcrior lien becausc it is based on a relit overcharge award which is preservcd throitgh forcclosure by the carryover liability provision of Relit Stabilization Codc Ij 2526.l(f). The issuc presented here appears to be a iiovel one - whether a judgment lien, junior in time to a mortgage, survives a foreclosure sale because of the existcnce of carryover 1i abil ity . The Rent Stabilization Codc provides that a tenant, who has been overcharged by his or her landlord in excess of-the legal rcgitlated rent, limy file a complaint with DIiCK to rccciver the amount of thc overcharge. N.Y. Comp. Codes R. & Rcgs. tit. 9, subtit. S, ch. 9 9 2526. I(a)(2). Once an overchargc award has been issued and the pcriod for judicial review has expired, the tenant may cl~oosc recover the award under onc of two to methods: (1) deduct thc amount from the rent due to the present owner at the prcscribed 14 [* 16] rate. or ( )if no such rent crcciit is taken, tlic award 3 be cntered, filcd and eni orced by a tenant in thc saiiic manner as ajudgment of the Supreiix Court. 5 2526.l(e). A separate provision of the Kent Stabilization Code, Section 2526.1(f) defines the scope of a prcsent owner s carryovcr liability for any overcharges collected by a prior owner. Under that section, a current owner is responsible for all ovcrcharge penalties, including penalties based upon ovcrcharges collected by any prior owner unless the .jiidicial sale exception ttpplics. 5 2526.l(f)(z)(i). The judicial sale exception provjdcs that a current owner is not liablc for overcharges collected by a prior owner if (1) the current owiier purchased the property upon or subsequcnt to ajudicial salc; (2) t h e is an absence ol collirsioii or any relationship between such owiier and any prior owncr; and (3) no records sufficient to establish the legal regulated rent were provided at the judicial sale. fj 2S26.1(f)(2)(i). Here, the DTICR issued a rent ovcrcharge award to Ideeon March 28,2007, and Lee chose to enforce his award against Kobsons as ajudginent by docketing it with the County Clerk 011January 30, 2009. Ajudgincnt becomes a lien on the judgment debtor s property on thc date that it is docketed. CPLR $ 5203; Dep t of Hozi,r. Prex & Dev. qf City uf New York v. Ferranti, 212 A.D.2d 438, 439 (1st Dep t 1995). Thus, Lee s +jiidgriieiit became a lien agaiiisl the property on Januaiy 30, 2009, the date that it was dockcted. 15 [* 17] Based on the date that Lee s Ljudgmentwas docketed, I find that Plaintiff,, havz deinonstratcd that Lee s judgment licii is subordinate to tlic Mortgage. It has long been established that first in time priority obtains as between mortgages and judginents. Bunk Leunzi Tiwsl Ca. qf New York v. Liggelt, 115 A.T,,.2d 378, 380 (1st Dep t 1985). l lic record shows that Plaintiffs Mortgage on the property was recorded on June 21, 2007, and Lee did not docket his DIlCK award until January 30, 2009. Lee s argument that his junior lien is prcserved, or converted into a supcrior lien, by virtue of the carryover liability provision is unavailing, l he existence of Carryover liability [or rcnt overcharges does not alter the rules of foreclosure, or how money judgments are enforced. It is well-scttled that upon a foreclosrrrc sale, all junior licns iiiadc party to the action, are cxtinguished. See RPAPT, 8 1311; Polish Nul. Alliance of Brooklyrz, U S A . v. White Eagle Hull Co., Inc., 98 A.D.2d 400, 404 (2d Dep t 1983), CPLK 5 5203 also provides that any <judginciitliens against a property are extinguished upon ajudicial fbreclmure sale. (3; 5203(a)(3); David D. Siege], New York Practice 5 5 17 (2012). IIere, tlic regulation providing for carryover liability should be read in harmony with existing statutes governing the treatment of judgment liens upon foreclosure. See Hurholic v. Rerger, 43 N.Y.2d 102, 109 (1977); Mnttcr ofJoiqes v. Berman, 37 N.Y.2d 42, 53 ( Administrative agcricies can only promilgate rules to further the iiiiple~icnlation of the law as it exists; they have no authority to create a rule out of harinony with the statute ). [* 18] In soinc instanccs, carryover liability may ailow an overcharge claim to conlinue after a foreclosure salt: whcii the c l a h has not been reduced to a judgment. L S w Guiiws, 90 N.Y.2d at 548 (overcharge claims not entered as a judgment prior to foreclosure sale may be subject to carryover liability if the judicial sale exception did not apply); East 7 ji Strcef D)c.velopmentC orp. v. Paul T Miller, 138 Misc.2d 345, 347 (Civ. Ct., New York County 1988) (ovcrchargc award docketed against prior owncr could not be deducted as an o f f k tagainst new owner). However, in this case, Lee s award was converted into a judgiiient lien aiid is thercfore subject to the statutes governing judgimerit liens upon a foreclosure sale. T,ce argues that if his judgment lien is extinguishcd upon forcclosure, hc should be entitled to enforce his overcharge award by offsetting his rent against any futurc owner of the property. However, under the Rent Stabilization Code, Lee is only cntitlcd to pursue one remedy .- either ot fsetting future rent or filing thc order as a -judgment. Muzelier v. 633 W. 135, LLC, 22 A.D.3d 361, 363 ( I st Dep t 2005). Altliough Lee argues that hc will have no recourse if his judgiiieiit Iicn is extinguishcd, Lec may choose to eiiforcc his j udginent against Kobsom through other means. I%sI 7th Streel Development Gorp v. Pnul T. Miller, 138 Misc.2d 345, 348 (Civ. Ct., New York County 1988). I also reject Lee s argument that Plaintiffs should be estopped from cxtinguishing his lien upon foreclosure because they allcgedly had knowledge of his rent overchargc claims prior to the execution of the mortgage. Lee hiled to introduce any evideiicc that 17 [* 19] Plaintiffs iiiduccd him to rciy on the continuation of his judgment lien after fbreclosurc. Bancpw Arcrhr et Internutionale D fl?vestissenzer7t One Tiines Square Associates Ltd. v. Partnersh@, 207 A.D.2d 727, 727 (1st Dep t 1994). Accordingly, Plaintiffs motion for partial summary judgmcnl dismissing TAX S answcr and dcfenses and for summary judgment of its foreclosure action against Lee is granted. 3. Motion for Dcfault Judgment and to Appoint a Referee A. Motion for Default Judgment CPLR 5 32 15(a) providcs that a plaintiff may scelc a default judgment against a defcndant who lias failed to appcar, plead, or proceed to trial. An application for a default Judgment intist include: (1) proof of scrvice of the smiinons and complaint; (2) proof of thc merits of the claim; and (3) proof of the dehult. CPLR 5 32 15(f). io prove the merits of tlic claim, an applicant must submit an affidavit execiiled by a party with personal knowledge of the merits. Francisco v. Soto, 286 A.D.2d 573, 573 ( I st Dep t 2001); Thaffilv. Mundcsir, 253 A.D.2d 809, 8 I O (2nd Dep t 1998). l hc affydavil of incrit inust also establish apri~nujircic casc against thc defendant. See ktc v. Williuim, 44 A.11.3d 1149, I152 (3d Dep t 2007). TI? a foreclosure action, tlic plaintiff is required to .join as a dcfendant, evcry person liaving any lien, encumbrance, or interest in posscssioii that is subject to and subordinate 18 [* 20] to plaintifl-s lien. RPAPL 5 131 1 . The purpose ofjoining tliesc iiitcrests dcrivcs frcjiil the underlying objective of a foreclosure action - to extinguish the rights of rcdeinption of all those who have a subordinate interest in thc property and to vest coinpJetc title in [he purcliascr at the judicial sale. Polish Nut. Alliance of BrmkZyn, U.S.A.,98 A.D.2d at 404. 1. DTF, ECB, Mojali, 311 Grocer, and CBS Here, 1 find that PlaintilTs are entitled to a default judgment against DTF, ECB, M 1 li, 3 1 1 Grocer, and CSS. Plaintiffs submitted proper proof of service of the SLiiniiions and complaint, and proof of default through the affkination of thcir coumcl, Christopher J. Panny. I anny afflrined that DTF, ECB, Mojali, 3 I 1 Grocer, and CBS never subiiiittcd an answer to the complaint. Although DTT; and JXl3 each filcd a notice of appearance and waiver of service, thcsc filings are not responsive pleadings that preclude the cntry of a defaultjudginent. Leone v. Johnson, 99 A.D.2d 567, 568 (3d Dep t 1984). Plaintiffs also submitted a proper affidavit of merit, the coinplaint verified by Ilarkavy, who attests that he has personal lcnowledgc of the facts constituting Plaintiffs claiiiis. Jousten v. Gale, 129 A.D.2d 531, 534 (1st Dep t 1987). Tlic verified complaint scts forth aprima,jucie case for forcclosure against DTF, ECH, Mqjali, 3 1 I Grocer, and CES, based on Plaintilfs claim that cach defendant holds a subordinate interest to the Mortgage. CPLR $ 32 1S(c) provides that a inotion for dclault judgiiicnt inust bc made within oiic year of the dcfault. However, if tlic niotion is macle inore than oiie year aftcr the 19 [* 21] dcihult, the court retains discrclioii to pcriiiit entry of adefault judgiiient upoil a sliowiiig of sufficient causc. Clm-lcs F. Winson Gems, Inc. v. D. Gumhiner, Inc., 85 A.D.2d 69, 71 (1st Ilep t 1982). Although the motion for default jirdgiii~iit against Mojali, CBS, and 3 I I Grocer was filed inore than one year alter their defiiult, I l h d that sufficient cause cxists to permit the entry of default judgment against these defendants. In ordcr io enter a default jiidgineiit afler inore than one year, a plahtilf must offer a reasonable e x u s e and demonstrate: that their coiiiplaint is mcritorious. Firsf Nutionwide Bank v. Pretel, 240 A.D.2d 629, 629 (2d Dep t 1997). IIcre, Plaintiilk demonstrated that their complaint against Kobsons is meritorious, and they also oflered a reasonable cxcusc based OII thc cxistence of origoiiig settlenicnt negotiations with Kobsons since December 201 0. 2. Ahmed Plaintiffs are also entitled lo a default judgment against Ahmcd. Plaintiffs submitted propcr proof or service of the summons and complaint and proof of Ahmed s default. Plaintiffs counsel afErined that Ahined never submitted an answer to thc complaint. Although Ahined did subinit an afllrination from his own counsel, in opposition to the instant motion, his counsel s affirmation does riot constitute an answer which would prcclude entry of a default judgincnt against Ahmcd. See .Juseinoslciv. Z3d. of Kducution qf fhr C i t y ofNew York, I5 A.D.3d 3 5 3 , 356 (2d Dep t 2005). 20 [* 22] Plaintiffs also submit a propcr afiidavii merit, thc: verified complaint, which sets forth a prima fucie casc for foreclosure against Ahined. According to the verified cornplaint, Afiincd is an occupant of the store and basement uiider an expired lease, and his rights of occupancy are subordinatc to Plaintiffs Mortgage. To avoid cntry of a dcfiiult judgiment, a del endaiil must deinoiistratc a justiiiablc excuse for thc default and a meritorious dcl ense. Young v. Richards, 26 A.D.3d 249,250 (1st Dep 12006). Ilere, Aliiiied failcd to demonstrate ajustiliable cxcusc as hc offered 110 explanation for his failure to answer the complaint. Aliiiied also failed to deinoiistratc a meritorious defense. Brickinan s affirmation, which states that AEirned s Ieasc is valid until October 3 1, 2013, is insuflicient to cstablisli a meritorious defciise bccause there is no indication that Rrickman lias any pcrsonal knowledge of the facts pertaining to the Icase. Y o z u ~26, A.D.3d at 250. ~ Accordingly, Plaintiffs motion lor a dcfaault judgment against DTF, ECB, Mojali, 3 1 1 Grocer, CBS, and Ahrncd is granted. In accordance with the foregoing, it is ORDEKED tlial Plaintiffs motion for suininary judgmciil (motion seq. no. 00 1) dismissing TCobsons answer, affirmative dcfenses, and counterclaims and [or suiiiiiiary judgment of its foreclosure action against ICobsons is grantcd; and it is further 21 [* 23] OICDEIUD that Plaintifk motion ¬or partial suininary ,j iidgmcnt (motion ssq. no. 002) against defendant Lee dismissing his answer and defenses pursuant to CPLR $ 32 12 is grantcd; and it is further ORDERED that Plaintiffs inotion for default judgment (motion seq. no. 00 1) against New Yorlc Statc Department of Taxation & Finance, NYC Departinelit of Environiiicntal Control Board, Mojali, Ahmed, 3 1 1 Groccrs Corp., and CHS Outdoor Group Tnc. is granted; and it is furthcr ORDERED that PlaintifKs motion to appoint a rderee (motion seq. 110. 001) to coiiipute and report pursuant t o RPAPL 8 132 I ( 1) is granted; and it is furthcr OIDEREL) that Plaintiffs iiiotion to amend the title of this action (motion sey. 11o. 00 1) to delete John Doe # 1 through John Doe #50 is granted; and it is further OICDEREII that Plaintiffs inotion to amend the caption of the suimmoiis (motion scq. no. 001) to set f orlh tlic correct 11ame granted . Settle order on noticc. Datled: New York, New Yorlc January/) ,2013 ENTER: 22

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