CAPSTONE BUS. CREDIT v. IMPERIA FAMILY REA

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Docket Number

Nos. 2008-10844, 2009-03062.

Attorney(S)

Friedman, Harfenist, Kraut Perlstein, LLP, Lake Success, N.Y. (Steven J. Harfenist and Andrew C. Lang of counsel), for plaintiff third-party defendant-appellant. Frank J. Monteleone, New York, N.Y., for defendant third-party plaintiff-respondent.

Judges

Robert J. Miller
Randall T. Eng

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Smart Summary

Factual and Procedural Background

This consolidated action involves a foreclosure of a mortgage and a judgment declaring the rights and obligations of the parties under an inter-creditor agreement dated March 15, 2005. The plaintiff/third-party defendant, Capstone Business Credit, LLC, appeals from two orders of the Supreme Court, Westchester County: (1) an October 15, 2008 order denying parts of its motion for summary judgment on the foreclosure complaint and dismissing part of the third-party complaint, and (2) a February 10, 2009 order, entered upon reargument, that adhered to the original denial of summary judgment on the foreclosure complaint, granted the defendant/third-party plaintiff's cross motion for leave to reargue his opposition, effectively dismissing a cause of action seeking a declaration that the mortgage is null and void, but upon reargument vacated that dismissal and denied the cross motion.

Legal Issues Presented

Whether the plaintiff/third-party defendant, Capstone Business Credit, LLC, was entitled to summary judgment on the complaint to foreclose the mortgage.
Whether the seventh cause of action in the third-party complaint to recover damages for alleged waste of corporate assets should be dismissed as to Capstone.
Whether the defendant/third-party plaintiff was entitled to reargue his opposition to the summary judgment motion, particularly concerning the eleventh cause of action seeking a declaration that the mortgage is null and void.

Arguments of the Parties

Plaintiff/Third-Party Defendant's Arguments

Capstone argued it was entitled to summary judgment on the foreclosure complaint by establishing prima facie entitlement through submission of the mortgage, unpaid note, and evidence of default.
It contended that the defendants failed to raise a triable issue of fact to defeat summary judgment, such as bona fide defenses including waiver, estoppel, bad faith, fraud, or unconscionable conduct.
Capstone also argued for dismissal of the seventh cause of action in the third-party complaint on the ground that the defendant/third-party plaintiff lacked standing because he sold his interest in Imperia Brothers, Inc. prior to asserting that claim.
Capstone opposed the defendant/third-party plaintiff's cross motion for leave to reargue, asserting the court did not err in its original decision dismissing the claim that the mortgage was null and void.

Defendant/Third-Party Plaintiff's Arguments

The defendant/third-party plaintiff opposed summary judgment on the foreclosure complaint, asserting grounds sufficient to raise triable issues of fact.
He sought leave to reargue his opposition to the summary judgment motion, particularly regarding the eleventh cause of action seeking a declaration that the mortgage was null and void.
He contended that the mortgage should be declared null and void and challenged Capstone's entitlement to summary judgment.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
U.S. Bank Natl. Assn. TR U/S 6/01/98 [Home Equity Loan Trust 1998-2] v Alvarez, 49 AD3d 711, 712	Requirements for prima facie entitlement to summary judgment in foreclosure actions (mortgage, unpaid note, evidence of default).	Used to establish Capstone’s prima facie entitlement to summary judgment on the foreclosure complaint.
Hoffman v Kraus, 260 AD2d 435, 436	Supporting the evidentiary standard for foreclosure summary judgment.	Reinforced the plaintiff's burden in foreclosure summary judgment motions.
Mahopac Natl. Bank v Baisley, 244 AD2d 466, 467	Defendant’s burden to show triable issues of fact with bona fide defenses such as waiver, estoppel, fraud, or unconscionable conduct.	Applied to determine that defendants failed to raise triable issues of fact defeating summary judgment.
Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d 175, 183	Standard for bona fide defenses in foreclosure summary judgment context.	Supported the court’s analysis that defendants did not meet their burden to oppose summary judgment.
EMC Mtge. Corp. v Riverdale Assoc., 291 AD2d 370	Establishing prima facie entitlement to summary judgment in mortgage foreclosure by assignee.	Confirmed Capstone’s status as assignee and entitlement to summary judgment.
Alvarez v Prospect Hosp., 68 NY2d 320	Standard for opposing summary judgment by raising triable issues of fact.	Applied to conclude defendants failed to raise triable issues on both foreclosure and corporate waste claims.
State of New York Mtge. Agency v Lang, 250 AD2d 595, 595-596	Supporting the standard for opposition to summary judgment in foreclosure actions.	Used to affirm that defendants failed to raise triable issues.
Artigas v Renewal Arts Realty Corp., 22 AD3d 327, 328	Standing to pursue claims for corporate waste requires ownership interest at the time of suit.	Applied to find defendant/third-party plaintiff lacked standing to pursue seventh cause of action.
Everhart v County of Nassau, 65 AD3d 1277, 1278	Standards for granting leave to reargue motions require showing of overlooked or misapprehended facts or law.	Supported the conclusion that the Supreme Court improvidently granted leave to reargue the opposition to summary judgment.
Matter of Williams v Board of Educ. of City School Dist. of City of N.Y., 24 AD3d 458, 459	Same as Everhart, regarding leave to reargue.	Reinforced the denial of leave to reargue absent mistake or oversight.
Daluise v Sottile, 15 AD3d 609, 609	Same as Everhart and Williams on leave to reargue.	Confirmed that leave to reargue was improvidently granted.

Court's Reasoning and Analysis

The court began by reiterating the standard for summary judgment in foreclosure actions: the plaintiff must establish prima facie entitlement by submitting the mortgage, unpaid note, and evidence of default. Once established, the burden shifts to the defendant to present triable issues of fact based on bona fide defenses such as waiver, estoppel, fraud, or unconscionable conduct.

Capstone, as the assignee of the first mortgage, met its prima facie burden by submitting the required documents and evidence of default. The defendants failed to raise any triable issues of fact to oppose summary judgment, thus the court concluded that summary judgment on the foreclosure complaint should have been granted.

Regarding the seventh cause of action, Capstone showed that the defendant/third-party plaintiff had sold his interest in Imperia Brothers, Inc. before asserting the claim for alleged waste of corporate assets, depriving him of standing. The defendant failed to raise a triable issue of fact on this point, warranting dismissal of that claim.

The court found that the Supreme Court abused its discretion by granting leave to reargue the defendant/third-party plaintiff’s opposition to the summary judgment motion related to the eleventh cause of action seeking to declare the mortgage null and void. The court held that the Supreme Court did not overlook or misapprehend the facts or law in its original decision, so leave to reargue was unwarranted.

Finally, the court rejected the remaining contentions of Capstone as without merit.

Holding and Implications

The court DISMISSED the appeal from the October 15, 2008 order denying summary judgment on the foreclosure complaint as superseded by the February 10, 2009 order.

The court MODIFIED the October 15, 2008 order by granting summary judgment dismissing the seventh cause of action for alleged corporate waste against Capstone, and affirmed the order as modified.

The court MODIFIED the February 10, 2009 order by granting summary judgment on the foreclosure complaint and denying the defendant/third-party plaintiff’s cross motion for leave to reargue, and affirmed the order as modified.

One bill of costs was awarded to the plaintiff third-party defendant.

The decision results in summary judgment in favor of Capstone on the foreclosure complaint and dismissal of the corporate waste claim against it. The defendant’s attempt to reargue and dismiss the mortgage as null and void was denied. No new legal precedent was established; the ruling applies existing summary judgment standards and procedural rules on leave to reargue.

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CAPSTONE BUSINESS CREDIT, LLC, Plaintiff/Third-Party Defendant-Appellant, v. IMPERIA FAMILY REALTY, LLC, et al., Respondents, and ENIO IMPERIA, Defendant/Third-Party Plaintiff-Respondent, et al., Third-Party Defendants.

Ordered that the appeal from so much of the order entered October 15, 2008, as denied that branch of the motion of the plaintiff/third-party defendant which was for summary judgment on the complaint to foreclose the subject mortgage is dismissed, as that portion of the order was superseded by the order entered February 10, 2009, made upon reargument; and it is further,

Ordered that the order entered October 15, 2008, is modified, on the law, by deleting the provision thereof denying that branch of the motion of the plaintiff/third-party defendant which was for summary judgment dismissing so much of the seventh cause of action in the third-party complaint which was to recover damages on behalf of Imperia Brothers, Inc., for the alleged waste of its corporate assets, and substituting therefor a provision granting that branch of the motion; as so modified, the order entered October 15, 2008, is affirmed insofar as reviewed; and it is further,

Ordered that the order entered February 10, 2009, is modified, on the law, the facts, and in the exercise of discretion, (1) by deleting the provision thereof which, upon reargument, adhered to the original determination in the order entered October 15, 2008, denying that branch of the plaintiff/third-party defendant's motion which was for summary judgment on the complaint to foreclose the subject mortgage, and substituting therefor a provision, upon reargument, vacating that portion of the order dated October 15, 2008, and granting that branch of the motion for summary judgment, and (2) by deleting the provision thereof granting the cross motion of the defendant/third-party plaintiff for leave to reargue his opposition to that branch of the plaintiff/third-party defendant's motion which was for summary judgment, in effect, dismissing so much of the eleventh cause of action in the third-party complaint as sought a judgment declaring that the subject mortgage is null and void, and substituting therefor a provision denying the cross motion; as so modified, the order entered February 10, 2009, is affirmed insofar as appealed from; and it is further,

Ordered that one bill of costs is awarded to the plaintiff third-party defendant.

In order to establish prima facie entitlement to summary judgment in a foreclosure action, a plaintiff must submit the mortgage and unpaid note, along with evidence of default ( see U.S. Bank Natl. Assn. TR U/S 6/01/98 [Home Equity Loan Trust 1998-2] v Alvarez, 49 AD3d 711, 712; Hoffman v Kraus, 260 AD2d 435, 436). The burden then shifts to the defendant to demonstrate "the existence of a triable issue of fact as to a bona fide defense to the action, such as waiver, estoppel, bad faith, fraud, or oppressive or unconscionable conduct on the part of the plaintiff' ( Mahopac Natl. Bank v Baisley, 244 AD2d 466, 467; see Nassau Trust Co. v Montrose Concrete Prods. Corp., 56 NY2d 175, 183).

The plaintiff/third-party defendant, Capstone Business Credit, LLC (hereinafter Capstone), the assignee of the first mortgage executed by the defendant Imperia Family Realty, LLC, established, prima facie, its entitlement to judgment as a matter of law ( see EMC Mtge. Corp. v Riverdale Assoc., 291 AD2d 370). In opposition, the defendants failed to raise a triable issue of fact ( see Alvarez v Prospect Hosp., 68 NY2d 320; State of New York Mtge. Agency v Lang, 250 AD2d 595, 595-596). Accordingly, the Supreme Court should have granted that branch of Capstone's motion which was for summary judgment on the complaint in the foreclosure action.

In addition, the Supreme Court should have granted that branch of Capstone's motion which was for summary judgment dismissing so much of the seventh cause of action in the third party complaint which was to recover damages on behalf of Imperia Brothers, Inc., for the alleged waste of its corporate assets. In response to its prima facie showing that the defendant/third-party plaintiff sold his interest in that entity prior to interposing that cause of action, and thus had no standing to pursue it ( cf. Artigas v Renewal Arts Realty Corp., 22 AD3d 327, 328), the defendant/third-party plaintiff failed to raise a triable issue of fact ( see generally Alvarez v Prospect Hosp., 68 NY2d 320).

The Supreme Court improvidently exercised its discretion in granting that branch of the defendant/third-party plaintiffs cross motion which was for leave to reargue his opposition to that branch of Capstone's motion which was for summary judgment, in effect, dismissing so much of the eleventh cause of action in the third-party complaint as sought a judgment declaring that its first mortgage is null and void, which had been granted in the order entered October 15, 2008. The Supreme Court did not overlook or misapprehend the facts or law, or mistakenly arrive at its earlier decision ( see Everhart v County of Nassau, 65 AD3d 1277, 1278; Matter of Williams v Board of Educ. of City School Dist. of City of N.Y., 24 AD3d 458, 459; Daluise v Sottile, 15 AD3d 609, 609).

Capstone's remaining contentions are without merit.