Court Opinion

ID: 5986845
Source: CourtListenerOpinion
Date Created: 2022-01-13 08:42:00.481875+00
Date Added: 2024-06-11T08:49:40.756325
License: Public Domain

Spain, J. (dissenting).
We respectfully dissent. As the majority has stated, it is well-settled law that where a mortgagee successfully bids the full amount of the secured debt at a foreclosure sale, it loses its insurable interest in the premises and may not recover under the loss payable clause contained in the fire insurance policy (see, Whitestone Sav. & Loan Assn. v Allstate Ins. Co., 28 NY2d 332, 334-335; Sportsmen’s Park v New York Prop. Ins. Underwriting Assn., 97 AD2d 893, 894-895, affd 63 NY2d 998). The rationale expressed in Whitestone Sav. & Loan Assn. v Allstate Ins. Co. (supra), as determined by this Court, is based upon the principle "that the mortgagee has received a full return on its loan and the mortgage is discharged” (Morgan v Ellenville Sav. Bank, 55 AD2d 178, 180, lv denied 41 NY2d 803).
We conclude that CoreStates New Jersey National Bank (hereinafter the Bank) may not rely upon paragraph 13 to recover the insurance proceeds in its new capacity as purchaser. The foreclosure sale and acquisition of the mortgaged *90premises by the Bank extinguished the mortgage and effectively nullified the provisions of the mortgage (see, Bellusci v Citibank, 204 AD2d 843; Sportsmen’s Park v New York Prop. Ins. Underwriting Assn., supra). The provisions of the mortgage are no longer enforceable.* The Bank, "having purchased the damaged property for the full amount of the mortgage debt, has been made whole and would be unjustly enriched if allowed to retain the insurance proceeds” (Morgan v Ellenville Sav. Bank, supra, at 181).
The proper course for the Bank to take was to bid the fair market value of the damaged property and to obtain a deficiency judgment (see, RPAPL 1371). Furthermore, any device within the mortgage designed to circumvent the mechanics of RPAPL 1371 may be fatal to the Bank’s reliance upon paragraph 13 especially in light of RPAPL 1371 (3), which provides that if no motion for a deficiency judgment is made, as here, "the proceeds of the sale regardless of amount shall be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist” (RPAPL 1371 [3]; see, Morgan v Ellenville Sav. Bank, supra, at 180).
White and Yesawich Jr., JJ., concur with Crew III, J.; Spain, J., and Mikoll, J. P., dissent in a separate opinion by Spain, J.
Ordered that the order is modified, on the law, without costs, by reversing so much thereof as directed defendant to remit to CoreStates New Jersey National Bank the sum of $145,000; matter remitted to the Supreme Court for further proceedings not inconsistent with this Court’s decision; and, as so modified, affirmed.

 Of some significance is language in Real Property Law § 254, which states that certain covenants contained within a mortgage are enforceable until the time when "the money secured by the mortgage shall be fully paid and satisfied” (Real Property Law § 254 [4] [a], [b]).