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Court Discusses Procedural History of Case



A the outset, the Court would like to clarify some of the procedural history of this case which is related to the action Aurora v. Loan Services LLC v. BOM, et al., Index Number 22937/2009, a residential foreclosure proceeding.

Originally the undersigned under the mistaken impression that all papers had been fully submitted on the applications decided herein before these matters were reassigned to this part, issued decisions without the parties’ complete submissions. As a result, the Court vacated the decisions under motion sequence numbers 001 and 002 and, at a conference, counsel and the pro se defendants were informed of a new submission date and told to bring to the Court’s attention any additional arguments they deemed appropriate.

After the new applications appeared on the calendar and were submitted for decision, the undersigned learned that instead of returning motions sequence numbers 001 and 002 to the calendar for a new submission date, the motion and cross-motion had been assigned new sequence numbers and the order of the motions had been reversed, i.e., motion sequence 001 was now sequence 004 as a cross-motion and cross-motion sequence 002 was now motion sequence 004.

The Court addresses this unusual situation because, subsequent to the submission dated, the parties continued to send correspondence to chambers containing legal argument.

Consequently, as a matter of judicial discretion and in the interests of justice, the Court shall consider all such correspondence which will be preserved for the record over objection.

In addition, the Court considers first the cross-motion of Aurora Loan Services, LLC to intervene as a party defendant in the action at bar (CPLR 1012 (a) (2) and (3)). That application is granted and its answer is deemed served.

Aurora is the purported current assignee of the note and mortgage to the subject property and is the plaintiff in the companion foreclosure matter in which plaintiff herein is a named defendant.

There is no other party to the instant action that may adequately represent the interests of Aurora as assignee. The only party defendant that might be able to is Geneva Mortgage Corp., the original holder of the note and mortgage. However Geneva has not answered the complaint and is the subject of a default application, part of plaintiff’s omnibus motion that will be addressed below.

CPLR Section 1012 (a) (2) and (3) allows intervention as of right when the action involves a disposition of property and the proposed intervener may be adversely affected, which is certainly the case here. Moreover, movant’s application is timely (see Nor star Apartments, Inc. v. Town of Clay, 112 AD2d 750; compare Jiggetts v. Bowling, 21 AD3d 178).

Since the question on Aurora’s cross-motion is not whether it will ultimately be successful in the action but if it should be heard in the first instance, Aurora is now considered a party defendant.

Now, upon the foregoing papers, plaintiff’s motion for summary judgment pursuant to CPLR 3212 against defendants DG a/k/a David DGe and Halli DGe is granted as set forth below and its motion for a default judgment pursuant to CPLR 3215 (a) against defendants BOM, Geneva Mortgage Corp., Velocity Investment, LLC, Horizon Shores Condominium, Merrill Lynch Equity Management, Inc. and Bank of American, N.A. as successor by merger to Fleet National Bank is likewise granted. The remainder of the application is determined as follows:

Initially, the Court permits plaintiff’s application for default judgments to be heard because, although the complaint was filed on October 23, 2008 and service upon the defendants followed shortly thereafter, defendant Geneva filed for bankruptcy May 13, 2009 and the Chapter 7 petition was not closed until July 14, 2010. Moreover, with the exception of defendants Geneva and BOM, the remaining defaulting defendants appear to have had previous liens against the property that were presumably satisfied. In any event, defendants’ objections in this regard are without merit.

The Clerk is directed to enter a default judgment against the defendants listed above.

Plaintiff’s motion for summary judgment against the DG defendants stems from an action to foreclose on a lien totaling $64,597.60 created by a judgment recorded in Nassau County on September 17, 2007. The underlying proceeding which lead to the judgment is not at issue in this application.

In this action, plaintiff asserts defendant DG fraudulently concealed his assets to appear judgment-proof. Toward that end, it is alleged that DG and a non-party “cohort” AJ secured two mortgages from defaulting defendant Geneva totaling $558,000. to be used to purchase property located at 31 Barnes Street, Long Beach, New York.

Allegedly, AJ’s role was to employ a power of attorney on behalf of defaulting defendant BOM, who had an excellent credit rating and agreed to assist DG in obtaining the necessary mortgages to purchase the property.

The property was then purchased and the deed recorded in both DG’s and BOM’s name. About one month later DG’s interest was transferred to his daughter Halli without consideration so it would appear that he had no recorded interest in the Property.

Plaintiff maintains that the power of attorney from defendant BOM was forged using a fake notary stamp; therefore her initial purchase of the property should be deemed void ab initio. Likewise, with respect to the Halli transfer which relied upon the same fake notary stamp, plaintiff argues the conveyance must be set aside in its entirety as a fraudulent conveyance under the Debtor and Creditor Law.

Plaintiff’s Exhibit 19 purports to be a copy of the power of attorney dated February 19, 2007 from BOM to AJ signed before notary BK, #01KA3156492, whose commission was to expire September 30, 2009. The signature of BOM appears to be the same as that on the copy of the driver’s license issued on July 19, [200 digit illegible] and expiring November 26, 2010, with her date of birth as November 26, 19 [digit illegible] 6.

Plaintiff seeks to have this Court conclude that the signature of BK as a notary was a forgery as a matter of law. Exhibit 33, a print-out of a notary list from the Department of State Division of Licensing seven months before Kaye’s commission was to expire, does not contain the name of any BK or anyone assigned the identification number 01KA3156492.

First, the Court must emphasize that the decision in a summary judgment motion may not be based upon the credibility of any party. Only if plaintiff can demonstrate as a matter of law that it is entitled to judgment on the question of creditor fraud and the responding defendants fail to offer proof sufficient to raise a question of fact may the application be granted.

Plaintiff’s assertions against the DG/BOM/Geneva mortgage transaction and the subsequent DG/Halli intra/family transfer without consideration by the use of forged instruments is demonstrated by sufficient proof including that the notary stamp is fictitious or a forgery.

The only opposition to plaintiff’s application for a declaratory judgment on these causes of action is from defendants DG and Halli, and to some extent, Aurora.

Defendant DG explains that although he did not have the necessary credit history he wanted to buy the subject property because he and Halli were about to be evicted from their apartment in a landlord/tenant proceeding. His “good friend” AJ, who DG told about the problem, arranged to have BOM, who had a credit rating high enough to receive no-document 100% financing, to assist in obtaining the loans for a fee.

According to DG, he found a better deal with Geneva Mortgage Corp. than the company originally suggested by the mortgage broker. He then asked AJ to cancel his first application where BOM allegedly had appeared in person in Brooklyn and signed all the required documents.

Defendant DG describes that subsequently, he and AJ met at BOM’s apartment in the Bronx and she agreed to give Geneva’s representative her personal and credit information by telephone. She also provided AJ with a power of attorney so she would not have to attend the closing in person. He admits there was no notary present at the meeting.

Nevertheless, AJ appeared at the closing with a notarized power of attorney which he and DG used to close the sale.

Concerning the first recorded transfer to Halli which also relied upon the false notary signature, defendant DG claims that on June 3, 2009 he, along with BOM in a person, accompanied by a mutual friend Vita Guzmand and AJ, who waited in the car, executed a corrected deed transfer to Halli sworn to before a clerk of the Bronx County Court who was a notary. That transfer is declared void since it was allegedly attempted after defendants DG and Halli answered the complaint in this action.

However, other than his self-serving affidavit describing these events, defendant DG provides no corrobating affidavits or admissible evidence whatsoever from AJ, BOM, BK, the first mortgage broker or anyone else who could raise a material, genuine issue of fact contesting plaintiff’s evidence. Moreover, defendant DG fails to establish that the so-called “corrected” deed to Halli made after this action was commenced was even filed and recorded in the Bronx or elsewhere.

Debtor and Creditor Law Section 273 provides that “every conveyance made and every obligation incurred by a person who is insolvent is fraudulent as to creditors without regard to his actual intent if the conveyance is made or the obligation is made or the obligation is incurred without fair consideration.” Case law holds that where a transfer is made without consideration, the defendant is presumed to be insolvent at the time of transfer. The defendant may rebut that presumption of insolvency by admissible evidence.

A claim under DCL Section 273 does not require proof of intent to deceive or other elements required under traditional fraud actions. If the conveyance is made without fair consideration while the transferor is a defendant in an action for money damages or a judgment has been docketed against him, it is fraudulent without regard to his actual intent if he fails to satisfy the judgment (DCL 273-a).

In the case at bar there is no question that a New York County judgment was docketed in Nassau County. Even if DG, as he claims, was unaware of the judgment, as a matter of law DG knew that he was a defendant in an action for money damages that had been pending for a considerable amount of time and in fact at one point had signed a stipulation of settlement.

Furthermore, the defendants do not claim that Halli was a bona fide purchaser of her father’s one-half interest in the property or of BOM’s, for that matter.

Lacking consideration, the transfer from DG to Halli under these undisputed facts was a fraudulent conveyance and thus void as a matter of law.

Accordingly, plaintiff’s motion for summary judgment against defendants DG and Halli, is granted only to the extent that DG’s conveyance of one-half of his property interest to Halli constituted a fraudulent conveyance under DCL 273-a; therefore Halli’s ownership interest in that one-half portion of the property is declared null and void and that one-half interest reverts back to DG.

Plaintiff also seeks to have DG declared the sole titled owner of the property by setting aside the interests of both BOM and Geneva, two of the defaulting defendants.

With respect to BOM, there is no admissible evidence opposing plaintiff’s assertions that the first transfer to Halli by BOM of her one-half interest on April 1, 2007 was void able, being based upon the fictitious notarization by BK. Thus, the Court concludes the original deed recorded with DG and BOM still stands.

Concerning defendant Geneva, plaintiff’s motion for summary judgment pursuant to DCL 272 and 276 must be denied based upon the questions of fact raised by defendant Aurora, its successor in interest.

The Court keeps in mind that by the time this action was commenced, Geneva had already assigned the note and mortgage and subsequently filed for bankruptcy.

Also, defendant DG states in his affidavit that BOM spoke to the Geneva agent on the telephone and he heard her provide Geneva with her credit information, which is corroborated within plaintiff’s Exhibit 16 and signed by her purported attorney in fact, AJ, on February 27, 2007.

Therefore, the Court cannot determine as a matter of law that Geneva’s mortgages are void pursuant to DCL Sections 272 and 276 as alleged in the third cause of action, nor for that matter conclude as a matter of law that Geneva acted with either constructive or actual knowledge of any fraudulent scheme.

With no admissible evidence before the Court that Geneva was acting in bad faith at the time of these transactions, that the subsequent assignments are void as a matter of law, or that defendant Aurora’s interest in the note and mortgage occurring over two and one-half years after Geneva’s first assignment was obtained in an illegal or fraudulent manner, plaintiff has failed to prove in the first instance an interest superior to Aurora’s senior secured rights as a matter of law thereby shifting the burden to defendants Geneva and Aurora.

As to the remaining applications, plaintiff’s motion with respect to the fourth cause of action against Merrill Lynch Equity Management, Inc. and the fifth cause of action against Bank of America, N.A. as successor by merger to the Fleet National Bank is granted.

It is declared that these mortgages no longer constitute liens on the property and will be disposed of at the conclusion of the companion foreclosure action when the clerk shall make all appropriate entries.

Plaintiff’s sixth cause of action for attorney’s fees shall be held in abeyance pending the conclusion of these matters.

The motion for judgement on the seventh cause of action for damages to an apartment in Manhattan, the subject of the action that resulted in the DG/Halli judgment filed in Nassau County, in the amount of approximately $15,000. is denied. Defendants have raised issues of fact in their affidavits.

In any event, the Court sua sponte severs this cause of action for money damages which is unrelated to the remaining causes of action and the companion case sounding in equity in that it does not involve a judgment or a foreclosure of property occurring in Nassau County.

Furthermore, both plaintiff and the DG defendants reside for venue purposes in New York County and the property that was allegedly damaged is located in New York County.

In order to expedite both main actions, the Court will entertain a motion on notice from defendant Aurora to transfer this seventh cause of action to New York County.

Finally, plaintiff’s motion with regard to the eight cause of action is also denied. The priority of all liens and judgments shall be determined in the companion action.

In conclusion, the Court acknowledges the validity of plaintiff’s Nassau County lien filed by virtue of the judgment rendered in New York County, which at this point attaches to one-half the debtor’s interest in the subject property. That judgment may not be collaterally attacked in Nassau County; consequently the DG defendants’ submissions in that regard will not be considered in the action at bar.

Nevertheless, at this juncture based upon the determination as noted above with reference to BOM’s and Geneva’s interests, plaintiff has not established that it has priority over Aurora’s apparently secured lien.

This question is a troublesome one which the undersigned would prefer addressing separately from the myriad issues raised in plaintiff’s instant application and upon defendant Aurora’s own motion to dismiss should it choose to bring one at this time.

To the extent that discovery may have been suspended pending this decision, the parties are to resume joint disclosure and depositions may be taken under both actions.

Accordingly, plaintiff’s motion is granted in part and denied in part as set forth above.

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