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MAXIMUM INCOME PARTNERS, INC., Plaintiff, v. Carl E. WEBBER, Webber Enterprises, Inc., Mario Curcio and Nicole Curcio, Defendants.
In this instance, parties, who have quibbled over a home construction project gone awry, now seek a judicial determination of the priority of liens associated with the project. The court must “unscramble” the egg of competing priority claims, some of which were resolved by two earlier opinions. The court will not recount the long (and troublesome) history of this dispute, as it is already laid out in the prior opinions. A simply chronology highlights the priorities of the parties.
In 2010, a company called Homestead NY Properties Inc. (“Homestead”) owned land in Greece, New York. That year, 84 Lumber Co. (“84 Lumber”) obtained a judgment against Homestead for $104,164.91. It is undisputed that the judgment encumbered Homestead's property. In 2013, Webber Enterprises Inc., purchased some of Homestead's property in Greece. It is undisputed that the lumber judgment was a lien against Webber's property, acquired from Homestead.Webber then borrowed money from the plaintiff's predecessor, giving a $22,500 mortgage on the real property which is undisputedly the subject of this proceeding (“the first Marasco mortgage”).
Later in 2013, Homestead discharged the 84 Lumber lien from any properties then owned by Homestead, except for lots conveyed to another party. The language of the release is undisputed: it only applied to property then owned by Homestead. The lien which attached to Webber's property when Webber acquired the property from Homestead was not impacted by the agreement between Homestead and 84 Lumber. There is nothing in the lien release that suggests Homestead intended the release to extend to property that Homestead had earlier conveyed to Webber. Importantly, the agreement was not stylized as a “satisfaction” of the judgment. It simply released the lien on certain properties and cannot, in any respect, be considered a “satisfaction of lien.” The agreement did not waive 84 Lumber's claims against other properties to which the judgment may have attached, including the property that Homestead had previously transferred to Webber. At this point, even if nothing further had happened, the Webber property was subject to the 84 Lumber lien and the $22,500 first mortgage from the plaintiff in this action.
On December 8, 2013, Webber entered into a construction agreement with the homeowners, who intervened in this action.1 The homeowners advanced a $20,000 deposit in two checks, one negotiated in September 2013 and the second negotiated on December 3, 2013. In addition, the homeowner claimed a $9,661 credit for certain plumbing work done on the property prior to December 5, 2013, and for which they got a credit from Webber. On December, 20, 2013, Webber gave the plaintiff in this action a second mortgage in the amount of $180,000, and later a third mortgage for $30,000, in August 2014 (“the second and third Marasco mortgages”).
In its prior opinions in this case, this court held that the 84 Lumber lien was still valid against the property which the homeowners had under contract. Homestead, which did not own the property that Webber was developing for the homeowners, was incapable of discharging the lien on that property unless it signed a “satisfaction” of the entire lien and released the entire judgment. Instead, the lien release before this court is carefully crafted only to apply to certain portions of the Homestead property and there is no indication that 84 Lumber was releasing any properties other than those expressly demarcated in the agreement. Under these circumstances, distribution of any proceeds from this foreclosure follows in satisfaction of the liens in their order as recorded or, in the case of any equitable liens, at the time they came into existence. Sautter v. Frick, 242 NYS 369 (4th Dept. 1930).
In this application, the homeowners seek a judgment declaring that the 84 Lumber lien remains the first lien on the subject property. Plaintiff's counsel argues that the 84 Lumber lien was released against the homeowner's property, but never examines the exact language of the Homestead/84 Lumber agreement. Suffice to say, arguments of counsel cannot change the language of the agreement. No argument can vary its exacting terms. Simply put, the lien release does not release the 84 Lumber lien on the homeowner's property because Homestead did not own that property when it executed the agreement. The language is unambiguous and the release only covers property then owned by Homestead.
It is black letter law that if the agreement is unambiguous, then no parole evidence is required to interpret it. Estate of Calderwood v Ace Group Intl. LLC, 2016 NY Slip Op 30591 (U), n. 9 (Sup. Ct. New York Cty. 2016) (New York law seeks to divine the parties' intent from the contract and permits the introduction of parole evidence of intent if the contract is ambiguous). The plaintiff, seeking to deconstruct the terms of the Homestead release, offers testimony from a series of participants, who through their recollection and interpretation, attempt to vary the terms of the lien release. The attorney who was supervising the intended closing of the property in 2015 opined that the Homestead/84 Lumber agreement was a “release of lien judgment.” He seeks to add a gloss to the language, but he cannot point to any words in the agreement that favor this new gloss. His comment that his paralegal “verified” that the 84 Lumber lien had been “released” is, at best, inadmissible hearsay, and relies on an inherently unreliable source—“someone told her.” This unattributed comment from an unknown and unsworn source cannot undercut the express terms of the agreement. The plaintiff, seeking to further resuscitate his mortgage as the first lien, also offers the testimony of the attorney who represented Homestead when the limited release agreement was struck with 84 Lumber. The attorney opines that it was “his recollection” that the settlement was a “global agreement and that the judgment was released against all the properties that the 84 Lumber judgment affected.” There are many problems with this testimony. First, the attorney, while apparently hoping that this Court will credit his parole evidence, never suggests that the agreement was ambiguous. Second, the court declines to credit the attorney's hazy “recollection”—he is unable to testify, with clear recollection, directly to the terms of the agreement. Third, this court will not allow the attorney to bind this court based on a recollection that is inconsistent with the terms of the agreement. Similarly, his off-hand, unresearched suggestion that Webber's ownership of the property at the time Homestead entered into the release agreement is somehow “ irrelevant” to resolving the legal question posed in this case is, in this Court's view entitled to no weight at all. The attorney is entitled to his opinion: this Court's opinion, however, is the one that matters. Homestead could only release the lien from the property it owned: the language of the agreement makes that clear. While this court respects the comments of these attorneys, they are no substitute for a reading of the clear language of the agreement. Similarly, the plaintiff offers an affidavit from the title agent, representing a company that prepared the title search when the homeowners were seeking to close on the property. He also states that the 84 Lumber judgment was “vacated” against the homeowner's real property. His observation, seemingly an attempt at an expert opinion on the title questions involved, does not comport with the agreement, which is what binds this court. While this court might credit the affidavit of a title examiner when reading “title,” the reading of the terms of this agreement remains the sole prerogative of this court.
For these reasons, the Court finds that the 84 Lumber lien, now held by the homeowners, is the first priority lien on the subject property.
It is undisputed that the first Marasco mortgage preceded the homeowners purchase and sale contract. Therefore, the $22,500 mortgage remains the second lien on the property. The third lien arises by virtue of the homeowner's payments to the contractor and constitutes an equitable lien. This Court previously held that the homeowners had plead a valid equitable lien in their petition to intervene in this matter. M & B Joint Venture, Inc. v. Laurus Master Fund, Ltd., 12 NY3d 798, 799 (2009); Kain Dev., LLC v Krause Props., LLC, 130 AD3d 1229, 1233 (3d Dept 2015)(New York law allows the imposition of an equitable lien if there is an express or implied agreement “that there shall be a lien on specific property”). See also Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 520 (1996). In this motion, the homeowners seek confirmation of that equitable lien to the extent that they advanced funds for construction of the residence prior to the date of the entry of any additional mortgages. The rule regarding equitable liens for contract vendees has a long history:
An executed contract for purchase and sale of land confers on the vendee an equitable lien on the land as security for the purchase money it has already paid. Where the sale contract fails, absent fault of the purchaser, courts in New York will enforce in favor of the purchaser (vendee) a lien on the subject property to the extent of monies paid so that the purchaser may assert his rights in a court of equity to get out of the land what he paid on it
Donerail Corp. N.V. v 405 Park LLC, 30 Misc 3d 1221[A] (Sup. Ct. New York Cty. 2011)Honua Fifth Ave. LLC v 400 Fifth Realty LLC, 2014 NY Slip Op 31223(U)(Sup. Ct. New York Cty 2011). See also Elterman v. Hyman, 192 NY 113, 122 (1908).2 The plaintiff in this action does not seriously dispute the homeowner's equitable liens as a contract vendee. There is no evidence suggesting that the payments—a $20,000 down payment—were not advanced to the contractor and the further credit—$9661—for plumbing services is also not disputed. Therefore, these advances from the homeowners to the contractor provide the basis for an equitable lien to the extent of the payments. As these payments were made prior to any other mortgages, they have priority against every lien but the lumber lien and the first Marasco mortgage.
The parties argue over the next step in the priority chain: the plaintiff argues that its second mortgage takes priority. The homeowners argue that additional sums, advanced by them during the construction process, take priority over the second mortgage. The second mortgage of $180,000 was recorded on December 20, 2013. All of the additional investments for which the homeowners seek an extended equitable lien were made by the homeowners occurred after the entry of this mortgage. The presence of this mortgage put the homeowners on notice that the lender had a secured interest in the property and, hence, their investment as contract vendees after the entry of the second mortgage does not acquire a higher priority in the distribution of proceeds. In objecting to this conclusion, the homeowners argue that their investment of funds creates an equitable lien if the mortgagor drew down mortgage funds after the homeowner made further investments in the property. Those investments, according to documents submitted by the homeowners, total more than $110,000 in 2014. The Court declines to credit that argument. The Court can find no authority for that proposition, especially when the entry of the mortgage in the public records gave notice to the purchasing homeowners that the second mortgage lien existed on the property. For these reasons, any claim to an equitable lien for funds advanced by the homeowners after the recording of the second mortgage is denied.
Based on these facts, the court holds that the priority of liens on the property is as follows:
(A) the first lien is the 84 Lumber lien and, as there is no evidence of any pay down of such lien before the court, the lien remains as valid on the date of its entry plus accumulated interest at the statutory rate;
(B) the second lien is the Marasco mortgage of $22,500, together with accumulated interest at the stated mortgage rate;
(C) the third lien is an equitable lien, retained by the homeowners, in an amount of $29,661 together with interest at the statutory rate from December 5, 2013;
(D) the fourth lien is the $180,000 Marasco mortgage lien, together with accumulated interest at the stated mortgage rate; and,
(E) the fifth lien is an equitable lien, retained by the homeowners, in an amount equal to the sums they advanced for construction of the residence, together with interest at the statutory rate from February 5, 2015, the scheduled closing date for the property.
It is undisputed that the homeowner's acquired a valid and enforceable assignment of the 84 Lumber lien in March 2015. As the holders of that lien, they step in the shoes of 84 Lumber and can enforce the lien against the property. There is no evidence before this court of any offset or reduction in the 84 Lumber lien amount and therefore, the homeowners have first right to the proceeds of any sale of the property at the impending foreclosure to the extent of the value of the recorded lien.
In this regard, this court grants the request of the parties as follows:
(A) the plaintiff's motion to dismiss the answer of the intervening homeowners is denied and the homeowners have voluntarily withdrawn several of the counterclaims and affirmative defenses and to the extent that they are not withdrawn, they are dismissed except to the extent necessary to implement the decision of this Court;
(B) the homeowner's cross motion for a judgment declaring the property or liens against this property is granted to the extent that it is:
(1) declared that the 84 Lumber lien remains valid and enforceable against this property; and,
(2) declared that this lien is the first priority for payment of proceeds from any foreclosure of this property; and,
(3) declared that the intervening homeowners, who possess a valid and enforceable assignment of that lien, may collect the full amount of the lien assignment from the proceeds from the sale at foreclosure of the underlying property and such sums, including interest at the statutory rate from the date of its filing, that shall be paid before any proceeds are used to pay any other lien on the property at the time of the foreclosure sale; and, it is further
(4) declared that the Marasco mortgage in the amount of $22,500 is the second priority lien on the property and that amount, including interest at the statutory rate from the date of its filing, shall be paid from the proceeds of any foreclosure sale, after the sums are paid as directed above, and prior to the payments of any other sums to any other lienholder; and, it is further
(5) declared that the intervening homeowners have en equitable lien in the amount of $29,661, together with interest at the statutory rate from December 31, 2013, and that amount shall be paid from the proceeds of any foreclosure sale, after the sums are paid as directed above, and prior to the payments of any other sums to any other lienholder;
(6) declared that the Marasco mortgages, other than those specified above, shall be paid, together with interest at the statutory rate from the date of their last payment received from the borrower after the sums are paid as directed above, and prior to the payments of any other sums to any other lienholder; and,
(7) declared that the homeowners have an equitable lien for any other improvements, paid for by the homeowners in 2014 and such equitable lien shall be paid from the proceeds of the property after the liens described above are paid in full․
This opinion constitutes the decision of this court.
SUBMIT ORDER ON NOTICE.
1. In this opinion, the Court refers to the interveners as “homeowners” but, in fact, the interveners never actually acquired title to the property. They appeared for a closing but, in disputed circumstances not relevant for this opinion, they never closed or acquire legal title. For convenience and simplicity, the Court refers to them as the “homeowners.”
2. The Court of Appeals in Elterman v. Hyman quoted John Norton Pomeroy's treatise on Equity Jurisprudence and Equitable Remedies, published posthumously in 1905. Pomeroy, the nation's leading expert on equity jurisprudence in the 19th Century was born in Rochester, not far from the property which is the subject of this proceeding. See Dollinger, ROCHESTER'S MOST FAMOUS ATTORNEY—THE ONE YOU NEVER HEARD OF, The Daily Record, March 2, 2015.
Richard A. Dollinger, J.
Response sent, thank you
Docket No: 14/12829
Decided: July 18, 2016
Court: Supreme Court, Monroe County, New York.
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