OLOWOFELA v. 1822 LLC (2026)

DECISION & ORDER

In an action, inter alia, to set aside a deed to real property, the intervenor-defendant, 1822 Nostrand Realty, LLC, appeals from an order of the Supreme Court, Queens County (Lumarie Maldonado–Cruz, J.), entered February 26, 2024.  The order, insofar as appealed from, denied the intervenor-defendant's cross-motion for summary judgment on its first and second counterclaims.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The plaintiffs commenced this action against the defendants, inter alia, to set aside an allegedly fraudulent deed.  According to the plaintiffs, title to the property located at 1822 Nostrand Avenue in Brooklyn (hereinafter the property) was fraudulently transferred from joint ownership by the defendant Godfrey Olowofela (hereinafter Godfrey) and the plaintiff Segun Olowofela (hereinafter Segun) to sole ownership by Godfrey.  The plaintiffs also alleged, among other things, that Godfrey forged Segun's signature on the deed.  Thereafter, in September 2015, the intervenor-defendant, 1822 Nostrand Realty, LLC (hereinafter Realty LLC), purchased the property.  Realty LLC subsequently interposed an answer, which, inter alia, asserted counterclaims for equitable subrogation (the first counterclaim) and unjust enrichment (the second counterclaim), alleging that $338,874 was used from the proceeds of its purchase of the property, among other things, to satisfy a mortgage encumbering the property.

Thereafter, Realty LLC cross-moved for summary judgment on its first and second counterclaims.  The plaintiffs opposed the cross-motion.  In an order entered February 26, 2024, the Supreme Court, inter alia, denied Realty LLC's cross-motion.  Realty LLC appeals.

“The doctrine of equitable subrogation applies in New York where the funds of a mortgagee are used to satisfy the lien of an existing, known incumbrance when, unbeknown to the mortgagee, another lien on the property exists which is senior to his [or her] but junior to the one satisfied with his [or her] funds” (Arbor Commercial Mtge., LLC v. Associates at the Palm, LLC, 95 A.D.3d 1147, 1149, 945 N.Y.S.2d 694 [internal quotation marks omitted] ).  “In order to avoid the unjust enrichment of the intervening, unknown lienor, the mortgagee is entitled to be subrogated to the rights of the senior incumbrance” (id. [internal quotation marks omitted] ).  “The doctrine operates to erase the lender's mistake in failing to discover intervening liens, and grants him [or her] the benefit of having obtained an assignment of the senior lien that he [or she] caused to be discharged” (id. [alteration and internal quotation marks omitted] ).  “In this manner, equitable subrogation preserves the proper priorities by keeping the first mortgage first and the second mortgage second, and prevents a junior lienor from converting the mistake of the lender into a magical gift for himself [or herself]” (id. [citation and internal quotation marks omitted] ).

Realty LLC does not allege that it holds a lien against the property nor has it identified a lien against the property that is senior to its interest.  Thus, under the current posture, the doctrine of equitable subrogation is inapposite (see King v. Pelkofski, 20 N.Y.2d 326, 333–334, 282 N.Y.S.2d 753, 229 N.E.2d 435;  Arbor Commercial Mtge., LLC v. Associates at the Palm, LLC, 95 A.D.3d at 1149, 945 N.Y.S.2d 694).  Moreover, Realty LLC did not establish, prima facie, that the plaintiffs were unjustly enriched at its expense, particularly in the absence of any determination as to the alleged fraud.

Accordingly, the Supreme Court properly denied Realty LLC's cross-motion for summary judgment on its first and second counterclaims, without regard to the sufficiency of the plaintiffs' opposition papers (see Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316, 476 N.E.2d 642).

DUFFY, J.P., WOOTEN, DOWLING and TAYLOR, JJ., concur.