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Aikaterini P. VITHOULKAS, Plaintiff, v. Frank META, et al., Defendants.
The following numbered papers were read on this motion by Sterling National Bank, as successor by merger to defendant Hudson Valley Bank, NA, for, inter alia, summary judgment dismissing the complaint against it
Papers Numbered․NYSCEF Document Nos. 81-104, & 163-168
SALVATORE J. MODICA, J.:
Upon the foregoing papers, it is ordered that the branch of the motion which is for summary judgment dismissing the complaint against defendant Hudson Valley Bank, NA, the predecessor in interest to Sterling National Bank, is granted, and the Court declares that Sterling holds a valid mortgage on premises known as 25-81 31st Street, Astoria, Queens County, New York.
The branch of the motion which is for an order cancelling the notice of pendency is denied without prejudice to making another application, if so advised.
The branch of the motion which is for summary judgment on Sterling's first counterclaim is granted, and the Court declares that Sterling is entitled to equitable subrogation in the amount of $273,294.57.
The branch of the motion which is for summary judgment on the second counterclaim is granted, and the Court declares that Sterling is entitled to an equitable mortgage on property known as 25-81 31st Street, Astoria, Queens County, New York.
I. The Allegations of Plaintiff Aikaternini Vithouklas
The plaintiff, Ms. Aikaterini P. Vithoulkas (“Katerina”), alleges the following:
On April 23, 2015, the day her father died, Katerina was taken by the defendant, Frank Meta, to a closing where he falsely represented to her was for a mortgage to be placed on premises known as 25-81 31st Street, Astoria, New York (the three family dwelling). Instead, the defendant tricked her into signing a deed for the premises, transferring her entire interest to him and his wife, defendant, Evelina Meta. The defendants subsequently placed a $500,000 mortgage on the three family dwelling. The plaintiff did not share in the mortgage proceeds, nor did she receive any other consideration for the transfer. The defendants have collected the rents from the three apartments which comprise the dwelling.
The plaintiff also owns real property known as 31-05 24th Avenue, Astoria, New York, which is comprised of commercial units, currently used for a tire shop and an electrical shop, and residential units (the tire shop property). The plaintiff is the sole owner of the tire shop property in which defendant Meta falsely claims an interest.
II. The Allegations of Defendant Frank Meta
Defendant Frank Meta alleges the following:
By a deed dated July 31, 2013, plaintiff Katerina's father, John Vithoulkas (Johnny), conveyed the tire shop property to himself, to the plaintiff, and to defendant Frank Meta as joint tenants with a right of survivorship. By a second deed dated July 31, 2013, Johnny conveyed the three family dwelling to plaintiff Katerina and defendant Meta. Although not related by blood to defendant Meta, Johnny regarded him as family, and, moreover, Johnny had concerns about plaintiff Katerina's financial responsibility. While there may be technicalities affecting these deeds, defendant Meta took valid interests in the two properties.
In or around the fall of 2014, the parties, facing a problem with the July 31, 2013 deed for the three family dwelling in that the transfer had been made without the consent of a mortgagee bank, decided to refinance the property. However, because plaintiff Katerina, long unemployed, would have difficulty in obtaining the mortgage, they decided to place title to the three family dwelling in defendant Meta's name alone. The parties agreed that while the plaintiff's name would not appear on the deed, she would share in the ownership and income of the property. “I made that promise to Johnny and I will keep it today.” (Italics in the original.)
Johnny was alive at the time, and he approved of the arrangement. Pursuant to the agreement of the parties, plaintiff Katerina and defendant Meta executed a deed dated April 23, 2015, conveying the three family dwelling to the latter and his wife, who the bank wanted to be liable also as a mortgagor.
Pursuant to a deed dated November 13, 2014, plaintiff Katerina and defendant Frank Meta now own the tire shop property as equal tenants in common.
Shortly after the death of her father, the plaintiff, not defendant Meta, began to collect the rents from both the three family dwelling and the tire shop property. However, in or around September, 2015, when defendant Meta learned that plaintiff Katerina had incurred excessive personal expenses, run up significant unpaid credit card expenses, and had left some of the property bills unpaid, they agreed that defendant Meta would collect the rents and pay both the property bills and her personal bills. In April, 2016, Katerina decided that she no longer wanted defendant Meta to pay her personal bills, so the parties decided to share the rental income from the tire shop property on an equal basis. The plaintiff signed a receipt for each time defendant Meta paid her a share of the rents.
Although he and plaintiff Katerina had cooperated with each other in renting out apartments at the subject property, on or about August 23, 2016, he spoke to Spiros Nitis, a real estate broker, who informed him that he had just met with the plaintiff and a tenant who had signed a lease for space at the tire shop property.
III. The Allegations Made By Sterling Bank
By a deed dated June 19, 2013, Johnny conveyed the three family dwelling to himself and plaintiff Katerina. Johnny and the plaintiff mortgaged the premises to Quontic Bank for $300,000 by a mortgage dated June 19, 2013 and recorded on August 7, 2013. Johnny and the plaintiff then conveyed the three family dwelling to himself, plaintiff Katerina, and defendant Meta by deed dated July 31, 2013. By a deed dated August 14, 2014, the three family dwelling was conveyed to the plaintiff and defendant Meta. Johnny died on April 23, 2015. By a quitclaim deed dated April 23, 2015, the plaintiff and defendant Meta conveyed the three family dwelling to defendant Meta and his wife, Evelina Meta. On April 23, 2015, defendant Meta and his wife mortgaged the three family dwelling to Hudson Valley Bank (HVB), Sterling's predecessor, for $500,000. HVB paid off the Quontic mortgage by a wire transfer of $273, 294.57. A satisfaction of the Quontic mortgage dated April 24, 2015 was recorded on February 21, 2017.
IV. Legal Discussion
A. Summary Judgment Dismissing the Complaint Against Sterling
The plaintiff seeks, inter alia, a judgment declaring that the mortgage obtained by HVB is null and void.
“[T]he proponent of a summary judgment motion 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 * * *.” (Alvarez v. Prospect Hospital, 68 NY2d 320, 324.) Defendant Sterling successfully carried that burden. (See, Morris v. Adams, 82 AD3d 946.) Pursuant to RPL § 266, “[a] bona fide purchaser or encumbrancer for value is protected in its title unless it had previous notice of the fraudulent intent of its immediate grantor * * *.” (Fleming-Jackson v. Fleming, 41 AD3d 175, 176; Morris v. Adams, supra ). Sterling, by compelling evidence, in the presentation of Helmut Borchert, Esq., showed prima facie that HVB made a bona fide encumbrance for value, had no notice of any fraud being perpetrated by defendant Meta, and was therefore entitled to the protection of Real Property Law § 266. (See, Gross v. Neiman, 147 AD3d 505; Fleming—Jackson v. Fleming, 41 AD3d 175.)
The burden on this branch of the motion shifted to plaintiff Katerina, requiring her to show that there is a genuine issue of fact which must be tried. (See, Alvarez v. Prospect Hospital, supra ). She failed to carry this burden. (See, Morris v. Adams, supra.)
It is true that “a mortgagee is not protected in its title if it had previous notice of potential fraud by the immediate seller, or knowledge of facts which put it on inquiry notice as to the existence of a right in potential conflict with its own. A mortgagee has a duty to inquire when it is aware of facts that would lead a reasonable, prudent lender to inquire into the circumstances of the transaction at issue. A mortgagee who fails to make such an inquiry cannot claim to have made a bona fide incumbrance for value. (Williams v. Mentore, 115 AD3d 664, 664—65 [internal quotation marks and citations omitted]; Mortg. Elec. Registration Sys., Inc. v. Pagan, 119 AD3d 749; Booth v. Ameriquest Mortg. Co., 63 AD3d 769.)
The plaintiff, however, failed to raise a genuine issue of fact concerning whether HVB was aware, or should have been aware, that defendant Meta was allegedly tricking her, in her vulnerable emotional condition, into signing away her interest in valuable real estate worth approximately $1,500,000 so that he could place a new mortgage on the property. Although the plaintiff alleges that she received none of the proceeds from the new mortgage and that no one explained to her the documents that she was signing, these facts and the other circumstances of this case do not suffice to raise a genuine issue of fact concerning whether HVB “had previous notice of the fraudulent intent of [its] immediate grantor,” (RPL § 266.)
The deed signed by the plaintiff is plainly captioned at its top: “Quitclaim Deed with Covenants against Grantor's Acts.” A signatory to the contract may be presumed to know the contents of the instrument that it signed and to have assented to the terms of the contract. (British W. Indies Guar. Tr. Co. v. Banque Internationale a Luxembourg, 172 AD2d 234.
Although the plaintiff may not have been represented during the transaction with HVB, there were two attorneys in attendance, one from the bank and one representing the Metas, which should have offered some assurance of the regularity of the transaction to HVB. Moreover, the plaintiff and the Metas knew each other. This is not a case such as where the lender knew or should have known of the occupation of the mortgaged property by another (see, Mortg. Elec. Registration Sys., Inc. v. Pagan, supra ), an open and obvious fact, but a case concerning the emotional state of the plaintiff which HVB could not be expected to know.
A party seeking to set aside a contract or similar document because of mental incapacity has the heavy burden of proving that her “mind was so affected as to render [her] wholly and absolutely incompetent to comprehend and understand the nature of the transaction and, further, that such incompetency/incapacity existed when [she] executed [the contract].” Adsit v. Wal-Mart Stores, Inc., 79 AD3d 1168, 1169 [internal citations and quotation marks omitted]; Sears v. First Pioneer Farm Credit, ACA, 46 AD3d 1282).
The plaintiff did not allege on this motion sufficient facts showing that her mental state was so obviously and seriously impaired that HVB was put on inquiry notice. Indeed, Ian K. Henderson, Esq., the attorney who represented HVB at the transaction which occurred on April 23, 2015, alleges that the plaintiff “attended this closing and did not appear to be under any duress or coercion and did not seem to be confused about the nature of the transactions that were occurring at the closing.”
Defendant Sterling is entitled to summary judgment dismissing the complaint against it. Sterling, furthermore, is entitled to a declaration that it holds a valid mortgage on the three family dwelling.
B. Cancellation of the Notice of Pendency
Sterling, however, did not show that it is entitled to the cancellation of the notice of pendency that remains valid as against other parties to this action. Moreover, the time to appeal from a final judgment against the plaintiff has not expired. (See, CPLR 6514[a]; York Zafarani v. Gluck, 2006 WL 140716, 2006 NY Slip Op. 50056(U) (Sup. Ct. Kings County 2006), aff'd, 40 AD3d 1082 [2nd Dept. 2007]; Freedom Enterprises, Inc. v. Hager Realty Corp., 52 Misc 2d 1043 [Sup. Ct. New York County 1967] ).
C. Summary Judgment on Sterling's First Counterclaim
The first counterclaim seeks a judgment declaring that Sterling is entitled to equitable subrogation to the extent that HVB lent funds to any parties in this action which were used to pay off prior liens and encumbrances. Sterling made a prima facie showing that it is entitled to summary judgment on its first counterclaim by producing evidence that on April 23, 2015, HVB satisfied the Quontic mortgage with the proceeds of HVB's mortgage and that the payoff amount was $273,294.57. “Where, as here, the funds of a mortgagee are used to discharge a prior lien upon the property of another, the doctrine of equitable subrogation applies to prevent unjust enrichment by subrogating the mortgagee to the position of the senior lienholder * * *.” (Great E. Bank v. Chang, 227 AD2d 589, 589; Citimortgage, Inc. ex rel. Principal Residential Mortg., Inc. v. Chouen, 154 AD3d 914.)
Helmut Borchert, Esq., for Sterling National Bank as successor by merger to defendant Hudson Valley Bank, N.A., makes a convincing, well-researched, and eloquent presentation that Sterling is entitled to be equitably subrogated to the position of the paid off Quontic Bank mortgage in the sum of $273,294.57, with interest thereon from the date of payment and to an equitable mortgage therefore. The plaintiff, in opposition, failed to raise a triable issue of fact.
D. Summary Judgment on Sterling's Second Counterclaim
“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 * * *.” (Deutsche Bank Tr. Co. Americas v. Cox, 110 AD3d 760, 761). In the case at bar, Sterling made a prima facie showing that the plaintiff at minimum understood that she was participating in the refinancing of the mortgage on the three family dwelling and that at minimum the plaintiff gave her implied consent to a lien on the property. The plaintiff alleges in her complaint that she “was told and misled by Frank that she was signing papers relating to a mortgage for the 3 family dwelling.” (¶ 48.) In opposition, the plaintiff failed to raise a triable issue of fact.
The foregoing constitutes the decision, order, and opinion of the Court.
Salvatore J. Modica, J.
Response sent, thank you
Docket No: 704554/2017
Decided: October 03, 2018
Court: Supreme Court, Queens County, New York.
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