WILMINGTON SAVINGS FUND SOCIETY FSB v. AMTRUST TITLE INSURANCE COMPANY (2025)

Order, Supreme Court, New York County (Louis L. Nock, J.), entered on or about March 28, 2024, which granted defendant's motion to dismiss the complaint, unanimously affirmed, with costs.

Plaintiff's predecessor in interest obtained a first mortgage, followed by a second mortgage that was consolidated with the first mortgage to create a Consolidation, Extension, and Modification Agreement (CEMA).  In connection with the CEMA, nonparty Security Title Guarantee Corporation of Baltimore issued a loan policy of title insurance in the insured amount of $3,000,000 (the security policy).  By assignment of mortgage, the CEMA was thereafter assigned to plaintiff, which is the current holder.

Initially, this action is not premature.  In relation to a separate foreclosure action, plaintiff made a claim for coverage under defendant's title insurance policy, and defendant denied that claim.  Thus, to the extent defendant denied the claim, a justiciable controversy exists as to defendant's obligation to defend and indemnify under the policy (see Allergan Fin., LLC v. Pfizer Inc., 188 A.D.3d 402, 403–404, 135 N.Y.S.3d 90 [1st Dept. 2020]).

As to the merits, the CEMA, by its terms, effectuated a new single lien upon the mortgaged property in the principal sum of $3,000,000 (see Ridgewood Sav. Bank v. Glickman, 197 A.D.3d 1189, 1190–1191, 151 N.Y.S.3d 363 [2d Dept. 2021]).  When the mortgages were consolidated into a single lien superseding all prior liens, the first mortgage no longer secured an “estate or interest” in the property as required to continue coverage under the title insurance policy issued by defendant (see E.C.I. Fin. Corp. v. First Am. Tit. Ins. Co. of N.Y., 121 A.D.3d 833, 834, 995 N.Y.S.2d 100 [2d Dept. 2014]).  Nor was plaintiff a successor in ownership under defendant's policy (cf.  Wells Fargo Bank, N.A. v. Douglas, 186 A.D.3d 532, 534, 129 N.Y.S.3d 102 [2d Dept. 2020];  Benson v. Deutsche Bank Natl. Trust, Inc., 109 A.D.3d 495, 497–498, 970 N.Y.S.2d 794 [2d Dept. 2013]).  Because plaintiff was not an assignee under defendant's policy, it lacks privity with defendant and does not have standing to sue.  Notably, even if plaintiff could be considered an insured under its policy, plaintiff would first have to exhaust the security policy as the primary policy (see Matter of Allcity Ins. Co. [Sioukas], 51 A.D.2d 525, 525, 378 N.Y.S.2d 711 [1st Dept. 1976], affd 41 N.Y.2d 872, 393 N.Y.S.2d 993, 362 N.E.2d 623 [1977]).

We have considered plaintiff's remaining arguments and find them unavailing.