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Dominick J. GOLIO and Agnes I. Golio, Plaintiffs, v. Ira GREENSTEIN and Sandra Greenstein, and Suffolk Federal Credit Union, Inc., Mortgage Electronic Registration Systems, Inc., and Caliber Home Loans, Inc., brought in as parties to answer the counterclaims, Defendants.
The following papers were read on this motion by defendants, Ira Greenstein and Sandra Greenstein for an order compelling the counterclaim defendants, Mortgage Electronic Registration Systems, Inc. and Caliber Home Loans, Inc. to produce the settlement agreement, correspondence and attachments between the plaintiffs and the counterclaim defendants; the loan applications by plaintiffs to the counterclaim defendants; and the Affidavits of Title and Affidavits of Use and Occupancy in the possession of the counterclaim defendants.
Order to Show Cause - Affirmation in Support - Exhibits 1 - 15
Affirmation of Good Faith - Exhibits 1 - 2
Affirmation in Opposition - Exhibits A - L - Memorandum of Law
Upon the foregoing papers and the proceedings held on December 17, 2018, the motion is decided as follows:
Plaintiffs commenced this action with the filing of a summons and complaint on December 14, 2017. Defendants filed a counterclaim summons and verified answer with counterclaims on January 26, 2018. Plaintiffs filed their verified answer to the counterclaims on February 23, 2018 and on March 29, 2018, counterclaim defendants filed their verified reply to the counterclaims with crossclaim and counterclaim to which the defendants filed a verified reply to the counterclaim on April 17, 2018. Thereafter, on August 10, 2018, a stipulation of discontinuance was filed in which counterclaim defendants discontinued the crossclaim against plaintiffs.1 This case involves a dispute as to the ownership of a strip of land between adjoining property owners in the Bloomingdale Estates Subdivision in the City of New Rochelle.
More specifically, plaintiffs are owners of 101 Country Ridge Road, while defendants are the owners of 103 Country Ridge Road. Defendants assert that plaintiffs' predecessors in title, Anthony and Marie Fava, were specifically conveyed only a portion of lot 10 in the Bloomingdale Estates Subdivision by deed dated March 10, 1980 and that the deed's metes and bounds description specifically excludes an approximately 12.5 x 99′ strip of lot 10. When the Favas conveyed the property to plaintiffs by deed dated September 1, 2016, the same legal description of the property was used as that in the Fava's 1980 deed and only a portion of Lot 10 was conveyed. The 12.5 x 99′ strip was specifically excluded in the conveyance. Defendants further assert that they and their predecessors in title have been in exclusive possession of the excluded portion of lot 10, the approximately 12.5 x 99′ strip of land, for over 38 years. Defendants note as well that the original 1980 Certificate of Occupancy Survey for 103 Country Ridge Road and all subsequent surveys and maps on file and recorded with the City of New Rochelle Bureau of Buildings specifically include the 12.5 x 99′ strip of lot 10 as part of 103 Country Ridge Road. Defendants' 1996 mortgage on 103 Country Ridge Road also has a metes and bounds description that specifically includes the 12.5 x 99′ strip of lot 10 as part of the mortgaged premises. Plaintiffs contend that they own all of Lot 10, including the 12.5 x 99′ strip of property to which defendants also claim ownership.
In addition, defendants posit that plaintiffs' son, Richard Golio, Esq., represented the seller, Marie Fava in the short sale of 101 Country Ridge Road to his parents, plaintiffs at bar. Defendants further posit that Richard Golio contacted Edward Blumenfeld who had been associated with the development corporation for the Bloomingdale Estates Subdivision, Westchester Heights Development Corp. Golio purportedly requested that Blumenfeld sign a quitclaim deed for the strip of land at issue. Ultimately, Blumenfeld did sign a quitclaim deed, but he did so without indicating his authority or title to sign on behalf of Westchester Heights Development Corp. The Westchester County Clerk apparently rejected the filing of the quitclaim deed because the TP 584 Title contained the title “officer” next to Blumenfeld's signature and the TP 584 Title and the deed need to match titles. Golio then added Blumenfeld's title, “Officer,” intitalling the change and resubmitted the quitclaim deed. The County Clerk accepted the deed for recording. Defendants maintain that the quitclaim deed covers only a portion of the property in dispute, i.e, 10 feet of the 12.5 foot width.
On September 1, 2016, plaintiffs obtained a mortgage from counterclaim defendants, Mortgage Electronic Registration Systems, Inc. (“MERS”) as mortgagee in a nominee capacity for Caliber Home Loans, Inc. (“Caliber”) which was secured by a portion of Section 8, Block 3407, Lot 10. By quitclaim deed dated December 28, 2016, a different portion of Section 8, Block 3407, Lot 10 was transferred to plaintiffs from Westchester Heights Development Corp. A little over one year later, on or about October 23, 2017, plaintiffs executed a gap mortgage and Consolidation, Extension and Modification Agreement (“CEMA”) in favor of MERS and Caliber which covered the properties described in the September 2016 mortgage and that described in the quitclaim deed of December 2016. The initial mortgage was for $ 400,000. After the quitclaim deed was filed, plaintiffs apparently received an additional $ 256,000 as the CEMA was for a total of $ 636,000. Defendants contend that Caliber had to have appraisals and other materials to learn the loan to value ratio, which should indicate how much value is assigned to improvements and the alleged addition of the property described in the quitclaim deed.
Defendants also note that counterclaim defendants allege in their verified reply to counterclaims with crossclaim and counterclaim that if defendants are successful, counterclaim defendants' consolidated mortgage will not encumber the parcel of land that is the subject of the quitclaim deed and that they will not be able to turn to that parcel for security in the event of a default, thereby inequitably benefitting and unjustly enriching plaintiffs.
As part of discovery in this case, defendants demanded that counterclaim defendants MERS and Caliber produce the loan applications by plaintiffs to the counterclaim defendants and the Affidavits of Title and Affidavits of Use and Occupancy in the possession of the counterclaim defendants as well as the settlement agreement, related correspondence and attachments between the plaintiffs and the counterclaim defendants. Counterclaim defendants objected. When the parties were unable to resolve the dispute following a number of good faith attempts and compliance conferences, the court issued a briefing schedule for the instant motion.
With respect to the loan applications, defendants argue that the loan applications include a legal description of the property to be mortgaged and that any similarities, differences and /or alterations of those descriptions is material and relevant to defendants' quiet title action and claims of the plaintiffs as well as MERS and Caliber. The representations plaintiffs made on their loan applications to MERS and Caliber in connection with their 2016 and 2017 mortgages are material and relevant as to what property plaintiffs believed they were purchasing and securing mortgages at those times. If plaintiffs represented to MERS and Caliber that they did not own the realty described in the quitclaim deed until after that deed was recorded, then the falsity of their claim that they obtained all of Lot 10 from Marie Fava in 2016 would be exposed. The description of the property listed in the loan applications is also relevant to whether MERS and Caliber should have known of the defendants' alleged possession of the property at issue. Defendants also argue that the accuracy of plaintiffs' representations in the loan applications bear on the likelihood of a systematic deceitfulness on plaintiffs' part which is relevant to defendants' affirmative defenses of unclean hands and may support the assertion that plaintiffs secured the quitclaim deed by false pretenses.
Defendants further note that mortgage loan applications typically require Affidavits of Title and Affidavits of Use and Occupancy. These affidavits ordinarily inquire whether anyone is claiming use of or is in possession of any of the property being conveyed and again would bear on whether MERS and Caliber had proof of defendants' actual possession of the property at issue. Defendants also seek production of the Affidavits of Use and Occupancy and Affidavit of Title from plaintiffs' predecessor in interest, Marie Fava. These documents will demonstrate what Fava believed was her property which is relevant to the defendants' claims of adverse possession and practical location of the boundary line. Insofar as plaintiffs claim not to have any of their closing documents from their September 1, 2016 purchase, defendants seek their production from MERS and Caliber to the extent that they are in their possession.
As to the settlement agreement and related documents, defendants claim, inter alia, that settlement agreements may be admissible for proving bias or prejudice of a witness; therefore they are discoverable for cross-examination purposes such as impeachment. Because it appears that MERS and Caliber may not have done their due diligence in determining plaintiffs' possession of the property prior to the gap mortgage and CEMA, the parties's settlement agreement may demonstrate their motive to shield each other from blame, evincing a bias, hostility or motive to lie, all of which are directly probative. In addition, defendants claim that any admissions made by counsel in communications relating to the settlement agreement is discoverable and admissible. Defendants further claim that how the counterclaim defendants resolved their unjust enrichment claim against the plaintiffs in the settlement agreement is relevant to defendants' defenses and claims. Moreover, defendants assert that information, representations and potential admissions of plaintiffs and counterclaim defendants regarding the defendants' actual possession of the property at the time the mortgages were given is critical to their case as well as the validity of the quitclaim deed and may be revealed in the communication and analysis leading up to and including the terms of the settlement agreement. As such, the settlement agreement and related communications must be disclosed.
In opposition, counterclaim defendants MERS and Caliber maintain that defendants are not entitled to any of the documents at issue because none of them is relevant to any of the claims or defenses at issue in this case and because their confidential and sensitive nature outweigh any speculative or hypothetical probative value the defendants allege they have. MERS and Caliber contend that the documents are objectionable for at least one of two reasons: they contain private, confidential information related to plaintiffs' mortgage that pertain solely to financial considerations that have no bearing on the nature of or title to the property at issue; or they refer or consist of a settlement agreement that is by its nature irrelevant, inadmissible and subject to a confidentiality provision.
In particular, counterclaim defendants note that even assuming arguendo that the loan application and closing documents would provide defendants with any information as to the value of the property at issue, plaintiffs representations concerning the property they intended to mortgage or their motives in procuring the quitclaim deed would not provide support for the defendants' claims or defenses to any other party. The value of the property is not an element of or a defense to defendants' adverse possession claims and has no impact on the validity of the quitclaim deed.
Additionally, counterclaim defendants aver that plaintiffs' motives and representations to them is also irrelevant to the case. Inasmuch as no one is challenging the fact that the property at issue is currently encumbered by the mortgage, there is nothing of relevance in the loan application and closing documents. Moreover, counterclaim defendants assert that the loan applications and closing documents are comprised solely of financial information from plaintiffs and information regarding underwriting and amortization which is immaterial to this action and confidential, requiring an authorization from plaintiffs as well as significant redaction.
Finally, MERS and Caliber contend that the settlement agreement and related correspondence are of even less relevance. Because defendants concede that these documents are not admissible to prove liability, but can be used for cross-examination, it is improper for defendants to demand such documents until such time as there is a concrete reason to believe they can be used for impeachment purposes. Given that depositions have yet to occur, defendants can only speculate as to the possible impeachment value of these documents.
It is by now axiomatic that CPLR 3101(a) requires “full disclosure of all matter material and necessary in the prosecution or defense of an action.” The phrase “material and necessary” is “to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason” (Allen v. Crowell-Collier Publishing Co., 21 NY2d 403 ; see Matter of Kapon, 23 NY3d 32 , Foster v. Herbert Slepoy Corp., 74 AD3d 1139 [2d Dept 2010] ). Accordingly, in this context, ‘ “[t]he word ‘necessary’ means needful and not indispensable” Vargas v. Lee, 2019 WL 1271883, ––– AD3d –––– (2d Dept 2019), quoting Shutt v. Pooley, 43 AD2d 59, 60 [3d Dept 1973] ).
“The court has also broad discretion to supervise discovery and to determine whether information sought is material and necessary in light of the issues in the matter (Mironer v. City of New York, 79 AD3d 1106, 1108 [2d Dept 2010]; Auerbach v. Klein, 30 AD3d 451, 452 [2d Dept 2006] ).
CPLR § 3124 states that “[i]f a person fails to respond to or comply with any request, notice, interrogatory, demand, question or order under this article ․ the party seeking disclosure may move to compel compliance or a response.”
When measured against these standards, it becomes clear that the defendants' demands for the loan applications by plaintiffs to the counterclaim defendants as well as the Affidavits of Title and Affidavits of Use and Occupancy in the possession of the counterclaim defendants are indeed material and necessary, i.e., needful. In short, the description of the property contained in the loan applications and any representations regarding ownership and claims as to the property at issue contained in the Affidavits of Title and Affidavits of Use and Occupancy directly bear on the parties' contentions in this case, including the defendants' claim of adverse possession.
Counterclaim defendants' reliance on O'Neill v. Oakgrove Construction, Inc, 71 NY2d 521, 527 (1988), for the proposition that “[i]n New York “discovery may be ordered only if the litigant demonstrates, clearly and specifically, that the items sought are (1) highly material, (2) critical to the litigant's claim, and (3) not otherwise available,’ ” is misplaced. The O'Neill Court was addressing “[w]hether nonconfidential photographs taken by journalists in the course of newsgathering activities and kept as resource material are protected from compelled disclosure by a qualified reporter's privilege under the State or Federal Constitution, (71 NY2d at 523), an issue plainly not before this court.
The determination that the documents should be disclosed does not, however, end the inquiry. The court is mindful that plaintiffs' loan applications contain private financial information not germane to this case. As such, and insofar as defendants are seeking in particular the legal description of the property to be mortgaged, counterclaim defendants shall be ordered to redact all financial information from the two loan applications.
Turning now to defendants' demand for the settlement agreement and related documents: disclosure of the terms of a settlement agreement by a settling party to a non-settling party is appropriate, even in the presence of a confidentiality clause in the agreement where the terms of the agreement are material and necessary to the non-settling party's case (see Hiller v. Amelia, 128 AD3d 897, 897-98 [2d Dept 2015] ); Altonen v. Kmart of NY Holdings, Inc., 94 AD3d 920, 920 [2d Dept 2012] ). Of course the court in determining an issue such as the discoverability of a settlement agreement must keep in mind that it is well settled that strong policy considerations favor settlements (Randall Elec. v. State of New York, 150 AD2d 875 [3rd Dept 1989] ). The court must weigh the goals of encouraging the settlement of disputes and stemming the burgeoning tide of litigation against the rights of those not privy to the settlement agreement (In re New York County Data Entry Worker Product Liability Litigation, 162 Misc 2d 263 [Supreme Court, New York County, 1994], aff'd 222 AD2d 381[1st Dept 1995] ).
In the matter of In re New York County Data Entry Worker Product Liability Litigation, (162 Misc 2d at 263,), which counterclaim defendants cite, the question for the court was whether in a repetitive stress injury action plaintiffs were entitled to a protective order against non-settling defendants who sought to discover the terms of the confidential settlement agreements entered between them and the settling co-defendants. The non-settling defendants pointed to General Obligations Law § 15-108 which, in a multi-defendant case, reduces the verdict by the settlement amount of any settling defendant or the settling tortfeasor's equitable share, whichever is greater. The non-settling defendants contended that disclosure of the settlement agreements was material and necessary in order to recalculate their maximum exposure should an unfavorable verdict be reached or to determine whether they should settle rather than continue to defend against plaintiffs' claims. The court noted that these arguments amounted to nothing more than trial strategy. The non-settling defendants' need to obtain the settlement information arose out of desirability and not materiality. The court further noted that this action was part of a larger mass tort litigation and that the settlement agreements reached here could not be viewed in a vacuum. The court stated that if “a defendant facing multiple plaintiffs seeks to settle a meritorious claim for a certain amount of money, it may be deterred from doing so if it knows that the terms of such a settlement would be made public.” The First Department affirmed the Supreme Court's grant of a protective order to plaintiffs against pre-verdict disclosure to the non-settling defendants of materials relating to the settlement agreement between plaintiffs and the settling defendants. The First Department stated that while the requested material would be useful to the non-settling defendants in assessing their maximum exposure, and thus help them to determine if they too should settle, this was about strategizing and had no bearing on the underlying issues of fault and damages, (see id. 222 AD2d at 381).
There was, however, a different result in the First Department case of Masterwear Corp. v. Bernard, (298 AD2d 249 [1st Dept 2002] ). In this action, a corporation sought to recover allegedly excessive compensation and other payments received by its former executives. Defendant Bernard moved to compel disclosure of the settlement agreement entered into between plaintiffs and co-defendant Mushkin. The court noted that although the settling parties had agreed that their settlement would be confidential, Bernard had a strong interest in disclosure since it was undisputed both, that plaintiffs' claims against him sought recoupment of improper payments allegedly made to Mushkin, and that the settlement agreement contained admissions by this co-defendant. The court further noted that the confidential materials here appeared to be material and necessary to the non-settling defendant's case. The court directed an in camera inspection of the settlement documents. In Masterwear Corp. v. Bernard, (3 AD3d 305 [1st Dept 2004] ), the court stated that “settlement agreement” as used by the court previously referred to all of the confidential documents sought by Bernard, including affidavits.
Here, under the above precedents, defendants have established their entitlement to the settlement agreement and related documents. This finding is further enhanced by the Vargas Court's, (2019 WL 1271883, quoting Shutt v. Pooley, 43 AD2d 59, 60 [3d Dept 1973] ), unequivocal statement that
[i]n this context, “[i]f there is any possibility that the information is sought in good faith for possible use as evidence-in-chief or for cross-examination or in rebuttal, it should be considered [matter] ‘material’ in the action,” Shutt v. Pooley, 43 AD2d at 60, 349 N.Y.S.2d 839; see Fell v. Presbyterian Hosp. in City of NY at Columbia—Presbyt. Med. Ctr., 98 AD2d 624, 625, 469 N.Y.S.2d 375; see also Manzo v. Westchester Rockland Newspapers, 106 AD2d 492, 492, 482 N.Y.S.2d 834; see generally 6 Weinstein—Korn—Miller, NY Civ Prac CPLR ¶ 3101.07 [online treatise] ). “Indeed, as the name suggests, the purpose of discovery is to determine if material relevant to a claim or defense exists” (Forman v. Henkin, 30 NY3d at 664, 70 N.Y.S.3d 157, 93 N.E.3d 882). “In many if not most instances, a party seeking disclosure will not be able to demonstrate that items it has not yet obtained contain material evidence” (id.) “A party seeking discovery must satisfy the threshold requirement that the request is reasonably calculated to yield information that is ․ relevant” (id. at 661, 93 N.E.3d 882).
As such, the counterclaim defendants' contention that it is improper for defendants to demand the settlement agreement and related documents until such time as there is a concrete reason to believe they can be used for impeachment purposes is without merit. Moreover, counterclaim defendants do not address the other grounds upon which defendants seek the production of the settlement agreement and related communications, including evincing bias and/or motive on the part of a party; admissions of plaintiffs and counterclaim defendants regarding the defendants' actual possession of the property at the time the mortgages were given; how the resolution of counterclaim defendants unjust enrichment claim against plaintiffs impacts defendants' defenses and claims; as well as the validity of the quitclaim deed, all of which may be revealed in the communication and analysis leading up to and included in the terms of the settlement agreement. Under these circumstances, it can only be said that defendants have satisfied the threshold requirement that their request is reasonably calculated to yield information that is relevant.
However, the Masterwear Corp. Court, (supra.), and others, including this court most recently in In re Metro-North Train Accident of February 3, 2015 in the Town of Mount Pleasant, New York, Index No.: 64924/2015 (Lefkowitz, J.), determined that an in camera review of the settlement agreement and related documents is initially warranted. Therefore, counterclaim defendants shall be directed to submit a copy of the settlement agreement and related documents for an in camera review.
All other arguments raised on this motion and evidence submitted by the parties in connection thereto have been considered by this court, notwithstanding the specific absence of reference thereto.
Accordingly, in view of the foregoing, it is hereby
ORDERED that defendants' motion for an order compelling the counterclaim defendants, Mortgage Electronic Registration Systems, Inc. and Caliber Home Loans, Inc. to produce the loan applications by plaintiffs to the counterclaim defendants is granted to the extent that counterclaim defendants are directed to serve copies of said documents less all of plaintiffs' private financial information as well as the Affidavits of Title and Affidavits of Use and Occupancy in the possession of the counterclaim defendants within 14 days of date of this Order; and it is further
ORDERED that defendants' motion for an order compelling the counterclaim defendants, Mortgage Electronic Registration Systems, Inc. and Caliber Home Loans, Inc. to produce the settlement agreement, correspondence and attachments between the plaintiffs and the counterclaim defendants is granted to the extent that counterclaim defendants are directed to deliver to the Compliance Part Clerk, Room 800 a copy of the settlement agreement between plaintiffs and the counterclaim defendants and related correspondence and attachments, all Bates stamped, within 14 days of the date of this Order for an in camera review; and it is further
ORDERED that the parties shall appear for a conference in the Compliance Part, Courtroom 800, on April 29, 2019, at 10:30 a.m.; and it is further
ORDERED that defendants are directed to serve a copy of this order with notice of entry upon all parties within seven days of entry.
The foregoing constitutes the decision and order of this court.
1. On May 25, 2018, a default judgment was entered against Suffolk Federal Credit Union for failing to appear in the action.
Joan B. Lefkowitz, J.
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Docket No: 70481/2017
Decided: March 28, 2019
Court: Supreme Court, Westchester County, New York.
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