DECK v. MERRIMACK MUTUAL FIRE INSURANCE CO (1997)

Supreme Court properly denied the motion of defendant for summary judgment seeking a declaration that it owed no obligation to indemnify plaintiffs under a policy of insurance issued by defendant to plaintiffs' mortgagor, Louis Fumerelle.   Defendant contends that, because plaintiffs failed to move for a deficiency judgment within 90 days after they obtained the mortgaged property at a foreclosure sale and received the referee's deed, their insurable interest in the property was extinguished (see, RPAPL 1371[2], [3];  Moke Realty Corp. v. Whitestone Sav. & Loan Assn., 82 Misc.2d 396, 370 N.Y.S.2d 377, affd. 51 A.D.2d 1005, 382 N.Y.S.2d 289, affd. 41 N.Y.2d 954, 394 N.Y.S.2d 881, 363 N.E.2d 587;  Cohen v. New York Prop. Ins. Underwriting Assn., 160 A.D.2d 287, 288, 554 N.Y.S.2d 477).   The resolution of that issue turns on the critical issue whether Fumerelle, the sole party with standing to challenge the entry of the deficiency judgment on the ground that plaintiffs failed to comply with RPAPL 1371(2), waived his right to object to the deficiency judgment proceedings (see, Mortgagee Affiliates Inc. v. Jerder Realty Corp., 62 A.D.2d 591, 593-594, 406 N.Y.S.2d 326, affd. 47 N.Y.2d 796, 417 N.Y.S.2d 930, 391 N.E.2d 1011;  see also, Procco v. Kennedy, 88 A.D.2d 761, 451 N.Y.S.2d 487, affd. 58 N.Y.2d 804, 459 N.Y.S.2d 267, 445 N.E.2d 650;  Amsterdam Sav. Bank v. Amsterdam Pharm. Dev. Corp., 106 A.D.2d 797, 484 N.Y.S.2d 217).   In a prior action in which defendant sought to vacate the deficiency judgment, County Court found that Fumerelle had expressly waived his statutory right to notice of the deficiency judgment proceedings and that the failure of plaintiffs to comply with RPAPL 1371(2) therefore did not affect the validity of the deficiency judgment.   Defendant appealed, and we affirmed “for reasons stated” in County Court's decision (Deck v. Fumerelle, 237 A.D.2d 984, 985, 656 N.Y.S.2d 988).

 “The doctrine of collateral estoppel * * * precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity” (Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500, 478 N.Y.S.2d 823, 467 N.E.2d 487).   A party invoking the doctrine of collateral estoppel must show that the critical issue in the instant action was necessarily decided in the prior action and that the party against whom the estoppel is sought has been afforded a full opportunity to contest the issue (see, Allied Chem. v. Niagara Mohawk Power Corp., 72 N.Y.2d 271, 276, 532 N.Y.S.2d 230, 528 N.E.2d 153, cert. denied 488 U.S. 1005, 109 S.Ct. 785, 102 L.Ed.2d 777;  Kaufman v. Eli Lilly & Co., 65 N.Y.2d 449, 456, 492 N.Y.S.2d 584, 482 N.E.2d 63;  Ryan v. New York Tel. Co., supra, at 500-501, 478 N.Y.S.2d 823, 467 N.E.2d 487).

 Although the determination of County Court with respect to the validity of the deficiency judgment was not necessary to its determination of the threshold issue of the standing of defendant, that does not preclude the application of the doctrine of collateral estoppel.   Because the issue of the validity of the deficiency judgment was “actually litigated, squarely addressed and specifically decided” in the prior action, collateral estoppel applies to preclude relitigation of that issue (Ross v. Medical Liability Mut. Ins., 75 N.Y.2d 825, 826, 552 N.Y.S.2d 559, 551 N.E.2d 1237;  see, Malloy v. Trombley, 50 N.Y.2d 46, 52, 427 N.Y.S.2d 969, 405 N.E.2d 213).

Order unanimously affirmed with costs.

MEMORANDUM: