Commonwealth Land Title Ins. Co. v. Prado

• Decision Date: 30 October 2019
• Docket Number: 2017–03973,Index No. 517463/16
• Citation: 111 N.Y.S.3d 619,176 A.D.3d 1164
• Parties: COMMONWEALTH LAND TITLE INSURANCE COMPANY, Respondent, v. Valdemar PRADO, Appellant.
• Court: New York Supreme Court — Appellate Division

176 A.D.3d 1164
111 N.Y.S.3d 619

COMMONWEALTH LAND TITLE INSURANCE COMPANY, Respondent,
v.
Valdemar PRADO, Appellant.

2017–03973
Index No. 517463/16

Supreme Court, Appellate Division, Second Department, New York.

Argued—January 10, 2019
October 30, 2019

DECISION & ORDER

176 A.D.3d 1164

In an action to recover on a promissory note, commenced by motion for summary judgment in lieu of complaint pursuant to CPLR 3213, the defendant appeals from an order of the Supreme Court, Kings County (Leon Ruchelsman, J.), dated March 7, 2017. The order granted the plaintiff's motion and, in effect, denied the defendant's cross motion for summary judgment dismissing the action.

ORDERED that the order is modified, on the law, by deleting the provision thereof granting the plaintiff's motion for summary judgment in lieu of complaint, and substituting therefor a provision denying the motion and deeming the motion and answering papers to be the complaint and answer, respectively; as so modified, the order is affirmed, with costs to the defendant.

In October 2005, the defendant, Valdemar Prado, the president of nonparty Solar Line, Universal Great Brotherhood, Inc. (hereinafter Solar Line), a not-for-profit

111 N.Y.S.3d 621

corporation, executed a deed conveying to himself certain real property owned by Solar Line. Simultaneously with the transfer, Prado executed a note in favor of Accredited Home Lenders, Inc. (hereinafter AHL), which was secured by a mortgage on that property. By Assignment of Mortgage dated May 15, 2009, Mortgage Electronic Registration Systems, Inc., as nominee for AHL, purportedly assigned the mortgage to GMAC Mortgage, LLC (hereinafter

176 A.D.3d 1165

GMAC). On or about May 19, 2009, GMAC, as the alleged holder of the note, commenced an action to foreclose the mortgage against Prado and Solar Line, among others (hereinafter the 2009 action).

In April 2010, in a separate action, the Supreme Court determined that the deed conveying the subject property to Prado was void inasmuch as the transfer violated Not–For–Profit Corporation Law §§ 510 and 511, and that the mortgage, which was based on the void deed, was also void. This Court upheld that determination (see Solar Line, Universal Great Bhd., Inc. v. Prado, 100 A.D.3d 862, 863, 955 N.Y.S.2d 96 ). In July 2012, the Supreme Court granted a cross motion to dismiss the 2009 action on default "upon [GMAC's] failure to appear on this matter."

In October 2016, the plaintiff herein, Commonwealth Land Title Insurance Company (hereinafter Commonwealth), as the alleged holder of the subject note, commenced this action against Prado by motion for summary judgment in lieu of complaint pursuant to CPLR 3213 to recover on the note. Prado opposed the plaintiff's motion and cross-moved for summary judgment dismissing the action, inter alia, on the ground that Commonwealth lacked standing, arguing that the note was never validly assigned to GMAC, and that the failure to assign the note nullified the subsequent assignments of the note, including the ultimate assignment to Commonwealth. Prado also argued, among other things, that the action was time-barred. In the order appealed from, the Supreme Court granted Commonwealth's motion and, in effect, denied Prado's cross motion. Prado appeals.

"To establish prima facie entitlement to judgment as a matter of law on the issue of liability with respect to a promissory note, a plaintiff must show the existence of a promissory note executed by the defendant and the failure of the defendant to pay in accordance with the note's terms" ( Griffon V, LLC v. 11 E. 36th, LLC, 90 A.D.3d 705, 706, 934 N.Y.S.2d 472 ; see Jin Sheng He v. Sing Huei Chang, 83 A.D.3d 788, 789, 921 N.Y.S.2d 128 ). "Once the plaintiff submits evidence establishing these two elements, the burden then shifts to the defendant to submit evidence establishing the existence of a triable issue with respect to a bona fide defense" ( Jin Sheng He v. Sing Huei Chang, 83 A.D.3d at 789, 921 N.Y.S.2d 128 ; see Roopchand v. Mohammed, 154 A.D.3d 986, 988, 62 N.Y.S.3d 514 ).

Here, Commonwealth made a prima facie showing of its entitlement to judgment as a matter of law by submitting the promissory note, which contains an unconditional obligation to pay, and evidence of Prado's failure to make payments on the

176 A.D.3d 1166

note according to its terms (see Banco Popular N. Am. v. Victory Taxi Mgt., 1 N.Y.3d 381, 383, 774 N.Y.S.2d 480, 806 N.E.2d 488 ; Ahmad v. Luce, 147 A.D.3d 888, 46 N.Y.S.3d 805 ; Jason J. Weindorf, CPA, P.C. v. Wightman, 133 A.D.3d 822, 19 N.Y.S.3d 431 ). However, the evidence submitted by Prado in opposition to the motion and in support of his cross motion, while insufficient to establish his prima facie entitlement to judgment as a matter of law, was sufficient to raise triable issues of fact as to whether Commonwealth lacked standing to commence

111 N.Y.S.3d 622

this action (see Deutsche Bank Natl. Trust Co. v. Idarecis, 133 A.D.3d 702, 703–704, 21 N.Y.S.3d 261 ), and whether this action is time-barred. With respect to the timeliness issue, the record reveals the existence of triable issues of fact as to whether GMAC was the holder of the note when it commenced the 2009 action and whether it had authority to accelerate the debt at that time (cf. Deutsche Bank Natl. Trust Co. v. Gambino, 153 A.D.3d 1232, 1234, 61 N.Y.S.3d 299 ; EMC Mtge. Corp. v. Suarez, 49 A.D.3d 592, 593, 852 N.Y.S.2d 791 ).

However, contrary to Prado's contention and the position of our concurring colleague, the nullification of the mortgage did not, as matter of law, invalidate GMAC's election to exercise its right to accelerate the maturity of debt. The note and the mortgage are separate instruments; "[t]he note represents the primary personal obligation of the mortgagor, and the mortgage is merely the security for such obligation" ( Copp v. Sands Point Mar., 17 N.Y.2d 291, 293, 270 N.Y.S.2d 599, 217 N.E.2d 654 ; see Corey v. Collins, 10 A.D.3d 341, 343, 782 N.Y.S.2d 51 ). Although the mortgage was deemed void, acceleration was permitted under the terms of the subject note. Further "[t]he fact of election should not be confused with the notice or manifestation of such election" ( Albertina Realty Co. v. Rosbro Realty Corp., 258 N.Y. 472, 476, 180 N.E. 176 ). The nullification of the mortgage subsequent to the commencement of the 2009 action did not, as a matter of law, destroy the effect of the statement in the complaint in that action that GMAC had elected to accelerate the debt (cf. Albertina Realty Co. v. Rosbro Realty Corp., 258 N.Y. at 476, 180 N.E. 176 ; Beneficial...