Loreto v Wells Fargo Bank, N.A.

[*1] Loreto v Wells Fargo Bank, N.A. 2016 NY Slip Op 51921(U) Decided on September 27, 2016 Supreme Court, Monroe County Rosenbaum, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 27, 2016
Supreme Court, Monroe County

Patrick Loreto, IN THE RIGHT OF AND ON BEHALF OF ENCORE PROPERTIES OF ROCHESTER, LLC; and RICCARDO DURSI, IN RIGHT OF AND ON BEHALF OF ENCORE PROPERTIES OF ROCHESTER, LLC, Plaintiffs,

against

Wells Fargo Bank, N.A., AS TRUSTEE FOR THE REGISTERED SECURITIES CORP., COMMERCIAL MORTGAGE PASS- THROUGH CERTIFICATES, SERIES 2007-C5; ENCORE PROPERTY MANAGEMENT OF WESTERN NEW YORK, LLC; TIMOTHY FOSTER, AS RECEIVER; ESTATE OF KENNETH P. RAY, DECEASED; and LINDA PALMER AS TRUSTEE OF THE PALMER FAMILY TRUST, Defendants.



2010/14641



APPEARANCES

Joseph A. Taddeo, Jr., Esq.

Attorneys for Plaintiff Loreto

John G. Leonard, Esq.

Attorneys for Plaintiff Dursi

Jay G. Williams, III, Esq.

Attorneys for Defendant Estate of Ray

BOND SCHOENECK & KING, PLLC

Gregory McDonald, Esq.

Attorneys for Defendant Foster

RIKER, DANZIG, SCHERER, HYLAND & PERRETTI, LLP

Bethany A. Abele, Esq.

Attorneys for Defendant/ Third Party Plaintiff Wells Fargo
Matthew A. Rosenbaum, J.

Several motions are pending and are listed initially in the order in which they were received. Defendant, Estate of Kenneth P. Ray, moves for an order granting leave to renew and reargue the Estate's prior motion for an order pursuant to CPLR Section 3212. The motion to renew and reargue is the subject of a separate written decision that was previously issued by the Court. Defendant, Wells Fargo Bank, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Securities Corp., moves for an order establishing the amount by which Wells Fargo is to be equitably subrogated in this matter, which it alleges is the total sum due under the Intervest mortgages, and further for an order allowing the property to be sold to satisfy the amount due under the Intervest mortgages.

Plaintiff, Patrick Loreto, moves for an order setting a date certain for trial. Plaintiff, Ricardo Dursi, moves for an order pursuant to Judiciary Law Section 14 requiring the Hon. Matthew A. Rosenbaum to recuse himself and for this matter to be assigned to a different judge.

The factual scenario involved herein is well known to the Court and will not be repeated.

Motion to Recuse

Plaintiff Dursi moves pursuant to Judiciary Law Section 14, seeking recusal by the Court [*2](Rosenbaum, J.) and assignment of this matter to a new judge.

Judiciary Law Section 14 states:

A judge shall not sit as such in, or take any part in the decision of, an action, claim, matter, motion or proceeding to which he is a party, or in which he has been attorney or counsel, or in which he is interested, or if he is related by consanguinity or affinity to any party to the controversy within the sixth degree. The degree shall be ascertained by ascending from the judge to the common ancestor, descending to the party, counting a degree for each person in both lines, including the judge and party, and excluding the common ancestor. But no judge or a court of record shall be disqualified in any action, claim, matter, motion or proceeding in which an insurance company is a party or is interested by reason of his being a policy holder therein. No judge shall be deemed disqualified from passing upon any litigation before him because of his ownership of shares of stock or other securities of a corporate litigant, provided that the parties, by their attorneys, in writing, or in open court upon the record, waive any claim as to disqualification of the judge.

The motion seeking recusal pursuant to Judiciary Law Section 14 is denied. This Court is not a party to this litigation and has not represented any party in this litigation. The Court is not interested in this matter in any respect, nor is there any allegation thereof. Likewise, the Court is not related by consanguinity or affinity to any party to this action within the sixth degree. Consequently, there is no basis for recusal pursuant to Judicial Law Section 14.

Though not stated as a basis for his motion, Dursi's motion papers also question the Court's impartiality, citing to 22 NYCRR 100.0-100.3. 22 NYCRR Section 100.1 states:

An independent and honorable judiciary is indispensable to justice in our society. A judge should participate in establishing, maintaining and enforcing high standards of conduct, and shall personally observe those standards so that the integrity and independence of the judiciary will be preserved. The provisions of this Part are to be construed and applied to further that objective.

22 NYCRR 100.2 states: (A) A judge shall respect and comply with the law and shall act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary.(B) A judge shall not allow family, social, political or other relationships to influence the judge's judicial conduct or judgment.(C) A judge shall not lend the prestige of judicial office to advance the private interests of the judge or others; nor shall a judge convey or permit others to convey the impression that they are in a special position to influence the judge. A judge shall not testify voluntarily as a character witness.(D) A judge shall not hold membership in any organization that practices invidious discrimination on the basis of age, race, creed, color, sex, sexual orientation, religion, national origin, disability or marital status. This provision does not prohibit a judge from holding membership in an organization that is dedicated to the preservation of religious, ethnic, cultural or other values of legitimate common interest to its members.

22 NYCRR Section 100.3 states: (A) Judicial duties in general. The judicial duties of a judge take precedence over all the [*3]judge's other activities. The judge's judicial duties include all the duties of the judge's office prescribed by law. In the performance of these duties, the following standards apply.(B) Adjudicative responsibilities.(1) A judge shall be faithful to the law and maintain professional competence in it. A judge shall not be swayed by partisan interests, public clamor or fear of criticism.(2) A judge shall require order and decorum in proceedings before the judge.(3) A judge shall be patient, dignified and courteous to litigants, jurors, witnesses, lawyers and others with whom the judge deals in an official capacity, and shall require similar conduct of lawyers, and of staff, court officials and others subject to the judge's direction and control.(4) A judge shall perform judicial duties without bias or prejudice against or in favor of any person. A judge in the performance of judicial duties shall not, by words or conduct, manifest bias or prejudice, including but not limited to bias or prejudice based upon age, race, creed, color, sex, sexual orientation, religion, national origin, disability, marital status or socioeconomic status, and shall require staff, court officials and others subject to the judge's direction and control to refrain from such words or conduct. . .(6) A judge shall accord to every person who has a legal interest in a proceeding, or that person's lawyer, the right to be heard according to law. A judge shall not initiate, permit, or consider ex parte communications, or consider other communications made to the judge outside the presence of the parties or their lawyers concerning a pending or impending proceeding . . .(7) A judge shall dispose of all judicial matters promptly, efficiently and fairly. . .(E) Disqualification.(1) A judge shall disqualify himself or herself in a proceeding in which the judge's impartiality might reasonably be questioned including but not limited to instances where:(a)(1) the judge has a personal bias or prejudice concerning a party; or (ii) the judge has personal knowledge of the disputed evidentiary facts concerning the proceeding. . . .

22 NYCRR Section 100.0 defines "Impartiality": "absence of bias or prejudice in favor of, or against, particular parties or classes of parties, as well as maintaining an open mind in considering issues that may come before the judge."

Moreover, where no basis for mandatory recusal is established by a party, the targeted judge himself, "subject to his own conscience and discretion," is the "sole arbiter of whether to recuse himself." Rochester Community Individual Practice Ass'n. v. Excellus Health Plan, 305 AD2d 1007, 1008 (4th Dept. 2003). "[I]n the absence of ill-will toward a litigant, a judge has an affirmative duty not to recuse himself but to preside over a case." Galasso v. Calder, 31 Misc 3d 1220(A), *1 (Sup.Ct. Dutchess Co. 2011). A motion to recuse will be denied where "[t]here is no proof of any bias or prejudice." T.E.G. v. G.T.G., 44 Misc 3d 449, 455 (Sup. Ct. Monroe Co. 2014.). "Speculative" allegations of bias do not warrant recusal. Rochester Community Individual Practice Ass'n., 305 AD2d at 1008.

Dursi contends that the March 31, 2016 letter was an improper informal or advisory determination that denied the opponents of Wells Fargo's pending motion due process. Due to the [*4]Court's improper exercise of a judicial function in rendering the letter opinion, Dursi alleges that the Court's impartiality might be reasonably questioned and recusal is appropriate.

The Court vehemently disagrees. As the Court acknowledged in the April 13, 2016 letter, the March 13, 2016 letter was issued in error. Despite the allegation that counsel specifically discussed the issues raised in the pending motion during the phone conference, the Court did not realize that the issue being discussed by counsel during the phone conference was the subject of the pending motion. This is a very busy Part, and this is a voluminous file stored in several large boxes. Wells Fargo's motion was pending, but was not to be heard by the Court until late April, 2016. As such, Wells Fargo's motion had not been read or considered by the Court prior to the phone conference, and the Court did not even realize that such a motion was pending. The volume of cases and motions heard by this Court simply does not allow for each motion to be read and reviewed that far in advance of the return date. While participating counsel were undoubtedly fully aware of the intricacies of the pending Wells Fargo motion, the Court did not share that knowledge. Upon receipt, the motion was filed in a motion drawer under the return date and awaited analysis in the week prior to arguments.

The determination set forth in the March 31, 2016 should not have been made; it was a mistake. The Court rectified the mistake in the subsequent letter to all counsel.

Oral arguments on Wells Fargo's motion have now been heard and all parties have had a meaningful opportunity to voice arguments. The Court approached this argument with an open mind, having read all of the papers in support and in opposition to the pending application. The Court has no bias for or against any party to this action. An impartial decision is rendered infra by the Court on Wells Fargo's motion after reviewing all the papers submitted and hearing oral arguments.

While it is apparent that Dursi is dissatisfied with the Court's ruling on Wells Fargo's motion for summary judgment and fears additional adverse rulings in the future, that is not a basis for recusal. The Court's determinations, as always, are made based upon the papers, proof, and arguments submitted. The Court has no bias in this matter and makes all determinations with the same impartiality it approaches all matters that come before it. The Court will not allow recusal in this matter to be used as a litigation tactic, particularly considering the long history of this matter and extensive Court involvement thus far. It is the Court's opinion that it is his affirmative duty to preside over this case to conclusion.

The motion to recuse is denied.

Wells Fargo's Motions

Wells Fargo moves for an order establishing the amount by which it is to be equitably subrogated in this matter, as well as an order allowing the property to be sold to satisfy the amount due under the Intervest mortgages.

According to Wells Fargo, the law of the case doctrine prohibits Plaintiffs from challenging the relief requested. As judges in two separate actions have established that Wells Fargo holds the senior mortgage on the property and is entitled to foreclose, it is alleged that the law of the case doctrine should allow the Court to establish the amount due on the Intervest mortgages and order the sale of the property. Given the decisions already rendered by the Court in this matter, any relief ultimately obtained by Plaintiffs, if any, will be subject to Wells Fargo's mortgage, at least to the amount owed on the Intervest mortgages paid off and assigned to Wells [*5]Fargo. According to Wells Fargo, if the amount owed on the Intervest mortgages exceeds the value of the property, the relief sought by Wells Fargo herein would essentially bring this action to a close. Wells Fargo submits the Affidavit of Robert Records, servicing officer for Keybank National Association, and the Affidavit of Timothy Foster, rent receiver. Wells Fargo states that these affidavits provide the total amount due on the Intervest loans in detail. It is alleged that as of January 31, 2016, $43,811,544.00 was due on the Intervest loans after applying credits due. It is noted that interest continues to accrue.

Loreto and Ray oppose the relief sought by Wells Fargo. Loreto argues that Wells Fargo is improperly seeking the functional equivalent of summary judgment, which is untimely because the Note of Issue was filed and served on August 4, 2014.[FN1]

Loreto further argues that Wells Fargo's relief violates due process guarantees. Loreto asserts that at this point, Wells Fargo has only two options: bring an action against EPR on the debt or bring an action against EPR to foreclose on the mortgage. The relief sought by Wells Fargo currently, it is argued, seeks to sell the property and unduly extinguish EPR's alleged property interest. Loreto also argues that RPAPL Section 1301(3) would be violated if

Wells Fargo's requested relief were to be granted.

The Estate of Ray also opposes Wells Fargo's motion. In part, Ray argues points also raised in the motion to reargue, discussed and denied in a separate written decision. The Court will not discuss those arguments again but notes that the motion to reargue was denied.

Like Loreto, Ray also argues that if Wells Fargo seeks to foreclose the Intervest mortgages, EPR must be named as a party. Ray also states that the amount to which Wells Fargo is subrogated is zero. Finally, Ray alleges that RPAPL Section 1311 or Section 1523 requires that issues as to the amount owed should be litigated in a separate foreclosure action against the proper defendants. Ray further notes that EPR has defenses to a foreclosure or re-foreclosure action, including notice of the default, refusal to accept payment, and the statute of limitations. Finally, Ray states that questions of fact exist as to the receiver's accounting.

The Court has previously, in the summary judgment motion, confirmed Wells Fargo's legal right to enforce the Intervest mortgages and to foreclose the property. While Loreto and Ray contend that EPR must be named in a foreclosure action, the Court disagrees. EPR has not been adjudged to have an interest in the property. The alleged defenses EPR would raise in a [*6]foreclosure action against it are thus irrelevant. See NY RPAPL §1311(1) (stating that necessary parties are "[e]very person having an estate or interest in possession, or otherwise, in the property as tenant in fee, for life, by 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. . . "). Waiting to allow the foreclosure to proceed until after the quiet title claim is brought to trial is unnecessary. As Wells Fargo's mortgage is equitably subrogated to the Intervest mortgages and Wells Fargo is entitled to step into the shoes of Intervest and foreclose on the Intervest mortgages, allowing the foreclosure sale to proceed at this juncture, particularly where the value of the property will fall short of the amount due, is in the best interests of judicial economy and timely case resolution.

"The equity of redemption, which long predates the RPAPL, allows property owners to redeem their property by tendering the full sum at any point before the property is actually sold at a foreclosure sale." NYCTL 1999-a Trust v. 573 Jackson Ave. Realty Corp., 13 NY3d 573, 579 (2009). This right "extends beyond the mortgagor to all who claim through or under him." Mackenna v. Fidelity Trust Co., 184 N.Y. 411, 416 (1906). The right of redemption "'is inseparably connected with a mortgage' and 'cannot be waived or abandoned.'" Hammerstein v. Henry Mtn. Corp., 11 AD3d 836, 838 (3d Dept. 2004), quoting Mooney v. Byrne, 163 NY 86, 92 (1900). Plaintiffs' due process rights are protected by their right of redemption. Plaintiff can pay off the mortgage and step into the shoes of Wells Fargo and/or appear and purchase the property at auction.

As to the argument raised with respect to RPAPL Section 1301(3), the Court notes that "'[t]he purpose of the statute is to avoid multiple lawsuits to recover the same mortgage debt.'" Wells Fargo Bank, N.A. v. Irizarry, 142 AD3d 610 (2d Dept. 2016), quoting Aurora Loan Servs., LLC v. Lopa, 88 AD3d 929, 930 (2d Dept. 2011). RPAPL Section 1301(3) states: "While the action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought." In certain situations, a failure to comply with RPAPL Section 1301(3) can be "disregarded as a mere irregularity which did not prejudice a substantial right of any party. . . ." Wells v. Irizarry, 142 AD3d at 610. "The purpose of this statute is to protect the mortgagor 'from the expense and annoyance' of simultaneously defending against two independent actions to recover the same mortgage debt." Old Republic Nat. Title Ins. Co. v. Conlin, 129 AD3d 804, 805 (2d Dept. 2015), quoting Central Trust Co. v. Dann, 85 NY2d 767, 772 (1995). "Courts have recognized that this statute 'should be strictly construed since it is in derogation of a plaintiff's common-law right to pursue the alternate remedies of foreclosure and recovery of the mortgage debt at the same time.'" Old Republic, 129 AD3d at 805, quoting Dollar Dry Dock Bank v. Piping Rock Bldrs., 181 AD2d 709, 710 (2d Dept. 1992).

RPAPL Section 1301(3) does not prevent the Court from granting the relief sought herein. First, Wells Fargo is not seeking to recover a debt in this action and did not commence this second action in an effort to otherwise collect the debt. Indeed, this action was commenced by Plaintiffs after the Court (Fisher, J.) granted the judgment of foreclosure in the previous related foreclosure action. Plaintiffs herein opted to commence a separate action to address the issues raised in this litigation, knowing that a separate foreclosure action relative to the property had already proceeded and a judgment of foreclosure had been granted. Moreover, despite Loreto [*7]and Ray's contentions, the previous foreclosure action included not only the Column mortgage but also the Intervest mortgages, as unambiguously set forth in the foreclosure Complaint. Wells Fargo's request for relief seeks to limit the claims set forth by Plaintiffs by the amount paid for the Intervest mortgages.

Wells Fargo's pending request for relief seeks to confirm the amount due. Wells Fargo's motion for an order establishing the amount by which it is equitably subrogated in this matter is granted, and this issue shall be referred to the Referee appointed in the pending foreclosure action for re-computation.

The motion for an order allowing the property to be sold to satisfy the amount due is also granted. Such sale shall proceed in the pending foreclosure action under Index Number 2009/8540. That foreclosure action, which is integrally related to this action, has been transferred from Justice Fisher to Justice Rosenbaum in the interests of consistency and judicial economy.

Motion to Set Trial Date

Loreto's motion to set a trial date is granted. All issues still unresolved shall be tried by the Court at the earliest possible date. The Court will schedule a phone conference for the purpose of scheduling the trial on any outstanding matters.

The Court will consider a stay pending appeal upon proper application, including proof that the moving party is bondable in the amount determined owed by the referee.

Signed at Rochester, New York this 27th day of September, 2016.

_____________________________

Matthew A. Rosenbaum

Supreme Court Justice Footnotes

Footnote 1:Loreto also incorrectly argues that the relief sought herein was previously denied by the Court. The relief sought herein was never denied by the Court. Rather, in signing the order on the summary judgment motion, the Court limited the relief granted in the order to exactly what was requested on summary judgment, fully anticipating a subsequent motion establishing the amount due and/or seeking other determinations. The Court did not deny the amount due in crossing that portion of the order out. Rather, the Court granted in the order what was specifically requested, leaving issues that were raised by that Decision to be either worked out by the parties or raised in a subsequent motion. The Court finds no support in New York law for the proposition that crossing out proposed language in an proposed order gives preclusive summary judgment effect as to the items not ordered, particularly where the language crossed out was not relief specifically requested in the motion.