State of New York

Supreme Court, Appellate Division

Third Judicial Department

Decided and Entered: July 17, 2014 517271 

________________________________

AGILITY FUNDING, LLC,

Respondent,

v

DOUGLAS WHOLEY et al., MEMORANDUM AND ORDER

Appellants,

et al.,

Defendants.

________________________________

Calendar Date: June 6, 2014

Before: Lahtinen, J.P., Stein, Egan Jr., Devine and Clark, JJ.

__________

Newell & Klingebiel, Glens Falls (Mark C. Rehm of counsel),

for appellants.

Nolan & Heller, LLP, Albany (Justin A. Heller of counsel),

for respondent.

__________

Egan Jr., J.

Appeal from an order of the Supreme Court (McKeighan, J.),

entered March 15, 2013 in Warren County, which, among other

things, granted plaintiff's motion for partial summary judgment.

In August 2005, plaintiff made certain loans to Rolf

Ronning in connection with his attempts to, insofar as is

relevant here, develop a subdivision known as the "Saddlebrook

Property" in the Town of Bolton, Warren County. The property,

which consisted mostly of vacant land, was improved by a singlefamily residence located on lot No. 3 thereof. Thereafter, in

December 2006, defendants Douglas Wholey and Pamela Wholey

(hereinafter collectively referred to as defendants) entered into
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a contract with Ronning to purchase lot Nos. 3 and 4 in the

planned subdivision for $675,000. In conjunction therewith,

defendants gave Ronning a deposit in the amount of $33,750;

Ronning, in turn, allegedly granted defendants the right to

occupy a portion of the premises prior to closing. When the

property failed to close due to an apparent lack of subdivision

approval, defendants entered into a second contract with Ronning

in September 2008, which was merged with the prior contract. 

Pursuant to the terms of this latter agreement, the purchase

price was reduced to $660,000, and defendants tendered an

additional $100,000 deposit.

Ronning defaulted on his loans and, in October 2008,

plaintiff commenced a foreclosure action against him and others;

as defendants' contracts with Ronning were not duly recorded in

the Warren County Clerk's office, defendants were not named as

parties to the foreclosure action. Nonetheless, in April 2009,

during the pendency of the foreclosure action, plaintiff,

defendants, Ronning and another entered into an agreement

permitting defendants to purchase lot Nos. 3 and 4 upon approval

of a short sale from IndyMac Federal Bank, which held a prior

mortgage on the property, subject to various terms and

conditions. This transaction, however, was not realized and, in

June 2009, plaintiff was granted a judgment of foreclosure and

sale. Plaintiff purchased the property at the ensuing

foreclosure sale, satisfied the prior IndyMac mortgage and

pursued various approvals for the subdivision.

In November 2009, defendants advised Ronning that they were

terminating "any and all contracts" relative to lot Nos. 3 and 4

and demanded a return of their deposit moneys. Thereafter, in

March 2010, plaintiff informed defendants that it had acquired

subdivision approval for the Saddlebrook development and inquired

as to whether they were still interested in purchasing the

subject lots. Defendants, through their attorney, indicated that

they would not be proceeding with the transaction.

Despite the underlying judgment of foreclosure, plaintiff's

resulting acquisition of the property, defendants' termination of

their contracts with Ronning and their corresponding rejection of

plaintiff's offer to sell them the lots at issue, defendants
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continued to assert an interest in the property and, indeed,

apparently continued to occupy the improved premises until such

time as plaintiff succeeded in having them evicted in September

2010. As a result, plaintiff commenced this strict foreclosure

action (see RPAPL 1352) against, among others, defendants in

August 2012. Defendants answered, counterclaimed and raised

various affirmative defenses. Plaintiff thereafter moved for,

among other things, summary judgment on its strict foreclosure

cause of action against defendants and dismissal of defendants'

affirmative defenses and counterclaim. Supreme Court granted

plaintiff's motion in this regard finding, in essence, that

defendants' own conduct deprived them of any right of redemption

that they otherwise may have possessed in the subject lots. This

appeal by defendants ensued.

We affirm. To the extent that defendants contend that

plaintiff's motion for summary judgment was untimely, we note

that this issue is unpreserved for our review (cf. Finsel v

Wachala, 79 AD3d 1402, 1403 n 2 [2010]) and, in any event, is

lacking in merit. Plaintiff moved for summary judgment after

issue was joined and prior to the filing of the note of issue;

hence, its motion was timely (see CPLR 3212 [a]; Oakes v Muka, 56

AD3d 1057, 1058 [2008]).

Turning to the merits, plaintiff commenced the underlying

strict foreclosure action to extinguish defendants' claimed right

of redemption in the subject parcels (see RPAPL 1352; Bass v D.

Ragno Realty Corp., 111 AD3d 863, 864-865 [2013]). In support of

their subsequent motion for summary judgment, plaintiff tendered,

among other things, the underlying judgment of foreclosure and

sale, the referee's deed transferring the property – including

the subject lots – to plaintiff and documentation evidencing

defendants' termination of "any and all contracts" with Ronning

relative to the lots at issue, their subsequent rejection of

plaintiff's offer to sell them such lots and their eventual

eviction therefrom. Such proof, in our view, was more than

sufficient to discharge plaintiff's initial burden on the motion

for summary judgment. In opposition, defendants tendered the

affidavit of Douglas Wholey, wherein he conceded that defendants

terminated their contract with Ronning and thereafter rejected

plaintiff's offer to sell them the lots at issue, thereby – as
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Supreme Court found – effectively extinguishing any possessory

interest that they otherwise may have had in the property. Under

these circumstances, Supreme Court properly granted plaintiff

summary judgment on its strict foreclosure cause of action

against defendants. In light of this conclusion, it necessarily

follows that Supreme Court also properly dismissed defendants'

first and second affirmative defenses for failure to state a

cause of action.

As for defendants' third affirmative defense, "[a]ssuming,

without deciding, that the defense of unclear hands is applicable

to a mortgage foreclosure action, defendants failed to present

evidence of immoral or unconscionable conduct by plaintiff, or

that any such conduct was directly related to or caused"

defendants' inability to purchase the subject lots (PHH Mtge.

Corp. v Davis, 111 AD3d 1110, 1112 [2013], lv dismissed 23 NY3d

940 [2014] [internal quotation marks and citations omitted]). 

Accordingly, Supreme Court properly dismissed this affirmative

defense. We reach a similar conclusion with regard to

defendants' counterclaim for fraud, as the record fails to

demonstrate, among other things, that plaintiff made a knowing

misrepresentation regarding its willingness to sell the subject

lots to defendants. Further, defendants' claimed injuries –

whether in the form of the failed real estate transaction or the

loss of their deposit moneys – are not the product of any action

undertaken or representation made by plaintiff but, rather, are

directly attributable to the alleged misdeeds perpetrated by

Ronning.1 For all these reasons, defendants' counterclaim was

properly dismissed. Defendants' remaining arguments, to the

extent not specifically addressed, have been examined and found

to be lacking in merit.

Lahtinen, J.P., Stein, Devine and Clark, JJ., concur.

1 Defendants assert that Ronning appropriated the deposit

moneys that were supposed to be held in the escrow account

established under the purchase and sale contract and spent such

funds prior to his death.
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ORDERED that the order is affirmed, with costs.

ENTER:

Robert D. Mayberger

Clerk of the Court