Court Opinion

ID: 2800729
Source: CourtListenerOpinion
Date Created: 2015-05-14 14:09:44.62447+00
Date Added: 2024-06-11T11:12:20.345746
License: Public Domain

State of New York
                    Supreme Court, Appellate Division
                       Third Judicial Department
Decided and Entered: May 14, 2015                       519162
________________________________

WELLS FARGO BANK, N.A., as
   Trustee for OPTION ONE
   MORTGAGE LOAN TRUST 2006-2
   ASSET-BACKED CERTIFICATES,
   SERIES 2006-2,
                    Respondent,
      v                                      MEMORANDUM AND ORDER

HENRY C. ROTTNER et al.,
                    Defendants,
      and

KEVIN P. CONROY,
                    Appellant.
________________________________

Calendar Date:    March 26, 2015

Before:    Peters, P.J., Lahtinen, Rose and Devine, JJ.

                              __________

      Bartlett, Pontiff, Stewart & Rhodes, PC, Glens Falls (Karla
Williams Buettner of counsel), for appellant.

      Delbello Donnellan Weingarten & Wiederkehr, LLP, White
Plains (Frank J. Haupel of counsel), for respondent.

                              __________

Rose, J.

      Appeal from an order of the Supreme Court (Muller, J.),
entered April 7, 2014 in Essex County, which denied defendant
Kevin P. Conroy's motion for partial summary judgment on his
counterclaim.
                              -2-                519162

      Defendants Henry C. Rottner and Leslie Rottner (hereinafter
collectively referred to as defendants) entered into a loan
agreement with Option One Mortgage Corporation in 2006.
Defendants' loan was secured with a purchase money mortgage on
their second home in the Town of North Elba, Essex County, and
the mortgage was later assigned to plaintiff. It was not,
however, recorded until December 6, 2007. In the meantime,
defendants obtained additional loans from their brother-in-law,
defendant Kevin P. Conroy. Conroy delegated the handling of
these loans to his chief financial officer, and this employee
later arranged with defendants to secure the loans that Conroy
had made with a mortgage on the Town of North Elba property.
Pursuant to the terms of this mortgage, Conroy also agreed to
advance additional loans in the future, although the agreement
provided that he was not obligated to do so. Conroy's mortgage
was recorded in August 2007, more than four months before the
December 2007 recording of plaintiff's mortgage.

      In March 2008, plaintiff commenced this action seeking a
judgment of foreclosure on its mortgage, and Conroy asserted a
counterclaim alleging that his mortgage had priority. When
Conroy moved for partial summary judgment on his counterclaim,
Supreme Court denied the motion, finding that plaintiff's
mortgage had priority by virtue of being a purchase-money
mortgage. The court also concluded that, in any event, issues of
fact existed as to whether Conroy's mortgage was given for
valuable consideration and whether Conroy was aware of
plaintiff's mortgage because of his relationship with defendants
and his knowledge of their financial difficulties. Conroy
appeals.

      We agree with Conroy that Supreme Court erred by finding
that plaintiff's mortgage is entitled to priority based on its
status as a purchase-money mortgage. In reaching that
conclusion, Supreme Court relied on Giragosian v Clement (199
AD2d 656 [1993], lv denied 83 NY2d 756 [1994]). The facts of
Giragosian, however, are distinguishable, inasmuch as it involved
two contemporaneously executed purchase-money mortgages, one
given to the vendors and the other given to a third party (id. at
656). Even though the vendors recorded their mortgage second,
they were entitled to priority under the theory that their
                              -3-                519162

mortgage was a substitute for their equitable lien on the
property (id. at 657; see Boies v Benham, 127 NY 620, 624
[1891]). Giragosian thus determined the priority of the vendors'
purchase-money mortgage with respect to a contemporaneously
executed purchase-money mortgage given to a third party, and it
should not be interpreted to stand for a general proposition that
purchase-money mortgages always have priority, regardless of the
recording act (see Real Property Law § 291). Rather, "'a
mortgage loses its priority to a subsequent mortgage where the
subsequent mortgagee is a good-faith lender for value, and
records its mortgage first without actual or constructive
knowledge of the prior mortgage'" (Carrion v 162 Pulaski, LLC,
117 AD3d 767, 768-769 [2014], quoting Washington Mut. Bank, FA v
Peak Health Club, Inc., 48 AD3d 793, 797 [2008], lv dismissed 10
NY3d 911 [2008]; see Merritt v Dansmith Corp., 240 App Div 338,
339-340 [1934]). Accordingly, "plaintiff's purchase money
mortgage 'is as much subject to the Recording Act as any other'"
(Carrion v 162 Pulaski, LLC, 117 AD3d at 769, quoting Ebling
Brewing Co. v Gennaro, 189 App Div 782, 786 [1919]).

      Nor can we agree with Supreme Court that issues of fact
exist as to whether Conroy had notice of plaintiff's mortgage.
Conroy established that neither he nor his employee had actual
knowledge of plaintiff's mortgage at the time when defendants
granted a mortgage to him. Although Conroy had a relationship
with defendants in that he was married to Leslie Rottner's
sister, he unequivocally testified that he had no knowledge of a
prior mortgage, and – significantly – Henry Rottner testified
that he never told Conroy or his employee, with whom he primarily
dealt, about the prior mortgage. In response, plaintiff offered
no evidence of any fact that would support a conclusion that
Conroy should have known of its mortgage. Accordingly, no issues
of fact exist as to whether Conroy had actual or constructive
notice of the prior mortgage (see Rite Capital Group, LLC v LMAG,
LLC, 91 AD3d 741, 743 [2012], lvs dismissed 19 NY3d 834, 992
[2012]; Washington Mut. Bank, FA v Peak Health Club, Inc., 48
AD3d at 798).

      We agree with Supreme Court, however, that issues of fact
exist as to whether Conroy's mortgage was supported by valid
consideration. In support of his claim that he received value
                              -4-                519162

for the mortgage, Conroy relies on the extension of time to repay
the antecedent debt secured by the mortgage as well as the
promise to advance additional funds in the future. While the
mortgage did indeed purport to extend the time for repayment of
the antecedent debt, we note that Conroy also retained the right
to demand payment at anytime. Accordingly, he did not establish
that the antecedent debt was valid consideration as a matter of
law (see O'Brien v Fleckenstein, 180 NY 350, 353 [1905]; De
Lancey v Stearns, 66 NY 157, 161-162 [1876]; Cary v White, 52 NY
138, 142 [1873]).

      Conroy likewise failed to provide proof in admissible form
establishing that he advanced defendants additional funds in
accordance with the mortgage agreement after his mortgage was
executed and prior to the time that plaintiff recorded its
mortgage (see Zuckerman v City of New York, 49 NY2d 557, 562
[1980]). Generally, a mortgage will not secure future advances
until they are actually made (see Kommel v Herb-Gner Constr. Co.,
256 NY 333, 337 [1931]; compare Kawai Am. Corp. v Hilton, 205
AD2d 1021, 1022 [1994], lv dismissed 87 NY2d 968 [1996]). Conroy
only generally alleges that he advanced loans over the amount of
the antecedent debt, and he does not adequately establish the
timing or nature of any of the claimed advances. Moreover, the
record suggests that not all of the sums given to defendants by
Conroy after his mortgage was recorded were considered to be
secured by the mortgage. Inasmuch as Conroy failed to establish
that his mortgage was given for valid consideration, we cannot
conclude that Supreme Court erred in denying his motion for
partial summary judgment.

     Peters, P.J., Lahtinen and Devine, JJ., concur.
                        -5-                  519162

ORDERED that the order is affirmed, with costs.

                       ENTER:

                       Robert D. Mayberger
                       Clerk of the Court