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Jacqueline MEJIA, Plaintiff, v. QBE INSURANCE CORPORATION, Defendant.
The following papers numbered 1 to 10 read on the below motions noticed on November 20, 2017 and March 30, 2018 duly submitted on the Part IA15 Motion calendars of February 13, 2018 and March 30, 2018:
Defendant's Notice of Motion, Memo. of Law, Exhibits 1,2,3
Pl.'s Aff. In Opp., Memo. of Law, Exhibits 4,5,6
Defendant's Memo. of Law in Reply 7
Midfirst's Notice of Motion, Exhibits 8,9
Defendant's Aff. In Response 10
Upon the foregoing papers, defendant QBE Insurance Corporation (“Defendant”) moves for an order granting it summary judgment pursuant to CPLR 3212, dismissing the complaint of the plaintiff Jacqueline Mejia (“Plaintiff”) with prejudice. Plaintiff opposes the motion.
In a separate motion, proposed intervenor Midfirst Bank (“Midfirst”) moves for leave to intervene as a plaintiff in this action pursuant to CPLR 1012 and/or 1013. Defendant submits an affirmation in response to the motion, but the motion is not opposed. In the interest of judicial economy, these two motions are consolidated and disposed of in the following Decision and Order.
In November 2003, Plaintiff and non-party Nancy Montero borrowed the sum of $350,960 from Ideal Mortgage Bankers Ltd. to finance a purchase of real property located at 524 Van Nest Avenue, Bronx, New York, 10460 (the “Property”). Plaintiff executed a note dated November 6, 2003, promising to repay the principal plus 7% interest in monthly installments. Plaintiff also executed a mortgage on the Property to secure Plaintiff's monthly payments due under the Note. The mortgage required Plaintiff to, among other things, insure the Property against any hazards, including fire, for which the lender required insurance. The mortgage further provided that the insurance company was authorized and directed to make payments for such losses directly to the lender instead of to the borrower and lender jointly, and “[a]ll or any part of the insurance proceeds may be applied by Lender, at its option, either (a) to the reduction of the indebtedness under the Note and this Security Agreement ․or (b) to the restoration or repair of the damaged Property.”
In or around April 2007, Plaintiff defaulted under the terms of the policy by failing to make the required monthly payments which included the cost of insurance premiums. The mortgage was then assigned to Midfirst. In November 2007, Midfirst commenced a foreclosure action against Defendant. According to an attorney affirmation submitted in support of a motion to appoint a referee to compute the amount due, by 2013 Plaintiff no longer lived at the Property. In January 2015, Supreme Court, Bronx County entered a judgment of foreclosure and sale which provided that Plaintiff was “forever barred and foreclosed of all right, claim, lien, title, interest and equity of redemption in the said mortgaged premises and each and every part thereof.” The judgment awarded Midfirst the sum of $676,549.45 in principal and interest. Plaintiff remained in default and in February 2016, Midfirst paid the premiums for an insurance policy from Defendant to protect the Property from loss. The purpose of the policy was “to provide coverage for the Mortgagee if the Named Insured fails to provide insurance which meets the requirements of the Mortgage.” The policy states, in relevant part:
2. Insurable Interest and Amount of Insurance. Even if more than one person has an insurable interest in the property covered, we will not be liable in any one loss:
a. for an amount greater than the interest of a person insured under this policy; or
b. for more than the applicable amount of insurance.
If the Described Property is vacant and the mortgage on the property has been declared in default by the mortgagee at the time of loss, we shall be liable for no more than the Mortgagee's interest in the property at the time of the loss. The mortgagee's interest is represented by the mortgagor's unpaid balance, less unearned interest and finance charges, less unearned insurance premiums, less collection and foreclosure expenses, and less late charges and penalties added to the mortgagor's unpaid balance after the inception date of this policy. (Defendant's insurance policy, “Conditions,” at P.4).
On or about April 1, 2016, a fire allegedly damaged the Property. Plaintiff retained a public adjuster and submitted a claim under the Defendant's policy estimating the loss to be $353,883.57. Defendant issued a reservation of rights letter and eventually denied a portion of the claim on September 21, 2016, stating that certain items were not covered under the policy and explaining that Defendant did not waive any additional rights or defenses under the policy.
Plaintiff thereafter commenced this action in November 2016 asserting inter alia that Defendant is in breach of the insurance contract. Defendant now moves for summary judgment, alleging that this action must be dismissed because Plaintiff lacks an insurable interest in the Property. Plaintiff opposes the motion, alleging that “insurable interest” is not limited to ownership and since Plaintiff is still liable under the subject note and mortgage, she maintains an economic interest in the Property. Plaintiff alleges that the issuance of insurance proceeds will impact both the Property as well as Plaintiff's unpaid mortgage debt. Plaintiff further asserts that this motion should be denied as premature as discovery has yet to take place.
In support of its motion to intervene as a plaintiff in this action, Midfirst notes that following the subject fire, Defendant issued checks in the total amount of $130,028.80. The checks were received by Midfirst but not deposited or credited towards the Judgment of Foreclosure and Sale amount of $676,549.45, and the checks have since expired. On July 31, 2017, the Property was sold at foreclosure auction, however Midfirst rescinded the sale due to this pending litigation. Midfirst thus contends that it is entitled to intervene based upon its insurable interest in the subject Property.
Defendant's Motion for Summary Judgment
To be entitled to the “drastic” remedy of summary judgment, the moving party “must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact from the case.” (Winegrad v. New York University Medical Center, 64 NY2d 851 ; Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395 ). The failure to make such prima facie showing requires denial of the motion, regardless of the sufficiency of any opposing papers. (Id., see also Alvarez v. Prospect Hosp., 68 NY2d 320, 324 ). Facts must be viewed in the light most favorable to the non-moving party (Sosa v. 46th Street Development LLC., 101 AD3d 490 [1st Dept. 2012]). Once a movant meets his initial burden, the burden shifts to the opponent, who must then produce sufficient evidence, also in admissible form, to establish the existence of a triable issue of fact (Zuckerman v. City of New York, 49 NY2d 557 ). When deciding a summary judgment motion the role of the Court is to make determinations as to the existence of bonafide issues of fact and not to delve into or resolve issues of credibility (Vega v. Restani Constr. Corp., 18 NY3d 499 ). If the trial judge is unsure whether a triable issue of fact exists, or can reasonably conclude that fact is arguable, the motion must be denied. (Bush v. Saint Claire's Hospital, 82 NY2d 738 ).
New York Insurance Law § 3401 provides that “[n]o contract or policy of insurance on property made or issued in this state, or made or issued upon any property in this state, shall be enforceable except for the benefit of some person having an insurable interest in the property insured.” “Insurable interest” is defined as “any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage” (id., see also First National Bank of Scotia v. Sterling, 71 AD2d 723 [3rd Dept. 1979]). A mortgagor and a mortgagee each have an insurable interest in mortgaged premises (see Bodwitch v. Allen, 91 AD2d 1177 [4th Dept. 1983]). A mortgagor's insurable interest in the premises generally remains where he or she remains liable under the promissory note and the premises are still subject to the mortgage, even after the entry of a judgment of foreclosure and sale (see Schlesinger v. PG Ins. Co. of New York, 210 AD2d 179 [1st Dept. 1994], citing Waring v. Loder, 53 NY 581 ).
Under the standard New York mortgagee clause found in insurance policies, “an insurer is required to first make payment to the mortgagee to the extent of its interest in the property and then to pay the balance of loss, if any, to the mortgagor so long as the mortgagor has not breached any of the conditions of the policy” (see Sportsmen's Park, Inc. v. New York Property Ins. Underwriting Ass'n, 97 AD2d 893, 894 [3rd Dept. 1983], aff'd, 63 NY2d 998 , citing Grady v. Utica Mut. Ins. Co., 69 AD2d 668, 673 [2nd Dept. 1979]). However, “[a] defaulting mortgagor is not entitled to the insurance proceeds of [an insurance] policy on a premises that is maintained, inter alia, for the benefit of the mortgagee” (Greater NY Sav. Bank v. Sanroman, 218 AD2d 783 [2nd Dept. 1995], citing Builders Affiliates v. North Riv. Ins. Co., 91 AD2d 360 [1st Dept. 1983], and Grady v. Utica Mut. Ins. Co., 69 AD2d 668). As stated in Grady, under the standard mortgagee clause, “where a mortgagor is in default of any of the conditions of the policy, the insurer is not liable to him thereunder and it need only pay the mortgagee up to the extent of the mortgagee's interest” (69 AD2d at 674).
In this case, Defendant has established prima facie that Plaintiff is not entitled to the insurance proceeds under the terms of the subject mortgage and insurance policy. Defendant's policy provides that if the Property “is vacant and the mortgage on the property has been declared in default by the mortgagee at the time of loss, we shall be liable for no more than the Mortgagee's interest in the property at the time of loss.” (Insurance Policy at p.4, Par.2). This language tracks that of the standard New York mortgagee clause (Grady v. Utica Mut. Ins. Co., 69 AD2d 668). It is not disputed that Plaintiff-mortgagor defaulted under the terms of the note and mortgage prior to the date of loss, and as of 2013 she no longer resided at the Property. Accordingly, the mortgagee-Midfirst has a superior right to any insurance proceeds. Furthermore, mortgagee-Midfirst's interest in the property of $676,549.45 — the amount awarded in the judgment of foreclosure and sale — exceeds the insurance claim of $341,663.85. Plaintiff therefore has no insurable interest in the Property and no right to the insurance proceeds (see Greater NY Sav. Bank v. Sanroman, 218 AD2d 783; see also Sanroman v. Atlantic Mutual Ins. Co., 250 AD2d 585, 586 [2nd Dept. 1998]).
In opposition to the motion, Plaintiff argues, among other things, that she still maintains an insurable interest in the Property because she still appears to be liable for the unpaid mortgage debt, and the issuance of the insurance proceeds will impact both the Property as well as that unpaid mortgage debt. Plaintiff notes that the Property has yet to be sold at foreclosure auction, thus she has an economic interest in the Property. Plaintiff alleges that even if she is not entitled to receive the insurance proceeds directly, she still has an interest in ensuring that the claim is fully paid so that the proceeds are used to either reduce the mortgage debt and/or be used to repair the Property and to preserve its market value for a subsequent foreclosure sale that would reduce or eliminate the unpaid mortgage debt. Plaintiff also notes that this mortgage does not include any language limiting the mortgagee's ability to seek to enforce a deficiency judgment against Plaintiff after the foreclosure sale. Plaintiff also contends that the motion is premature due to the lack of discovery, that she is in need of, among other things, the mortgagee file, and discovery is needed to determine the impact that her prior voluntary bankruptcy proceeding has on the subject mortgage and foreclosure.
Notwithstanding the foregoing contentions, it remains evident that Plaintiff is not entitled to recover the insurance proceeds from Defendant. It is not disputed that Plaintiff has been in default since 2007 and has not resided at the Property since 2013, years before this loss occurred. Accordingly, unlike in the matter Schlesinger v. PG Ins. Co. of New York, 210 AD2d 179 ( [1st Dept. 1994] ), there is no question here that the Property was maintained for the benefit of the mortgagee Midfirst — the entity that paid Defendant's insurance premiums — at the time of this loss. The possibility that Midfirst could seek a deficiency judgment against Plaintiff after the foreclosure sale does not preclude entry of summary judgment. As noted in Sanroman v. Atlantic Mutual Ins. Co., the critical issue is not the mortgagee's right under the note but rather the mortgagor's rights under the subject insurance policy (250 AD2d at 586). In this case, there is no dispute that the mortgage debt amount exceeds the insurance claim, and Plaintiff thus cannot point to any insurance policy provision or “insurable interest authorizing her to recover those proceeds” (id. at 586). In any event, as noted by Defendant in reply, Midfirst cannot obtain a deficiency judgment against Plaintiff because the mortgage debt on the Property was listed in Plaintiff's bankruptcy petition and the debt was discharged by the Bankruptcy Court.
Plaintiff's allegation that the motion should be denied as premature is without merit. Under CPLR 3212(f), “[s]hould it appear from affidavits submitted in opposition to the motion that facts essential to justify opposition may exist but cannot then be stated, the court may deny the motion.” A plaintiff alleging that a motion is premature for want of discovery must demonstrate that the needed proof is in the exclusive knowledge of the moving party, that the claims in opposition are supported by more than mere hope or conjecture, and that the party has at least made some attempt to discover facts at variance with the moving party's proof (see Voluto Ventures LLC. v. Jenkens, Gilchrist Parker Chapin LLP, 44 AD3d 557, 557 [1st Dept. 2007] [internal citations omitted] ). A plaintiff's “hope and speculation that evidence sufficient to defeat the motion might be uncovered during discovery [is] an insufficient basis for denying the motion” (see Brewster v. Five Towns Health Care Realty Corp., 59 AD3d 483, 484 [2nd Dept. 2009] [internal quotation omitted] ).
Plaintiff here failed to set forth a non-speculative basis for her contention that discovery would lead to relevant evidence necessary to oppose Defendant's motion. As noted supra, issues regarding the potential deficiency judgment enforcement have no bearing on Defendant's entitlement to summary judgment. Plaintiff does not detail any efforts she has undertaken to obtain information as to whether insurance proceeds have been used with respect to the Property. Plaintiff does not submit any affidavit in opposition to the motion alleging that she lacks personal knowledge concerning her outstanding mortgage debt or the current disposition of the Property. Plaintiff fails to explain what discovery materials are needed to “determine the impact, if any” of her bankruptcy proceeding on the subject mortgage or foreclosure, or what discovery materials are needed to determine the “impact, of any,” of Plaintiff's own “apparent failure to identify” the proper lender and/or mortgage amount in her bankruptcy petition. Plaintiff further fails to explain how obtaining such materials would justify opposition to this motion.
MidFirst's Motion to Intervene
Midfirst's motion to intervene in this action as a plaintiff is granted without opposition. CPLR 1012(a) provides that upon a timely motion, any person shall be permitted to intervene in an action when “the action involves the disposition or distribution of, or the title or a claim for damages for injury to, property and the person may be affected adversely by the judgment” (subd. 3) (see Yuppie Puppy Pet Products, Inc. v. Street Smart Realty, LLC., 77 AD3d 197, 201 [1st Dept. 2010]). CPLR 1013 further provides that upon a timely motion, a court may, in its discretion, permit intervention when inter alia, the person's claim or defense and the main action have common questions of law or fact, provided that the intervention does not unduly delay the determination of the main action or prejudice the rights of any party (id.). Midfirst-mortgagee is clearly entitled to intervene as a plaintiff and assert its rights under Defendant's insurance policy.
Accordingly, it is hereby
ORDERED, that Defendant's motion for summary judgment is granted, and Plaintiff's complaint against Defendant is dismissed, and it is further,
ORDERED, that Midfirst's motion to intervene as a plaintiff is granted, the caption is thus amended accordingly, and Midfirst's proposed summons and complaint annexed to its moving papers is deemed served as of the date of this Decision and Order
This constitutes the Decision and Order of this Court.
Mary Ann Brigantti, J.
Response sent, thank you
Docket No: 27802/2016E
Decided: July 06, 2018
Court: Supreme Court, Bronx County, New York.
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