Adam Pl0tch LLC v. World Savings Bank, FSB et al
MEMORANDUM and ORDER: The motion 31 to dismiss is GRANTED for the reasons stated in the attached Memorandum and Order. Ordered by Judge Frederic Block on 1/8/2018. (Innelli, Michael)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
ADAM PLOTCH LLC,
-againstWORLD SAVINGS BANK, FSB, WELLS
FARGO BANK, N.A.,
Case No. 15-cv-06142 (FB)
THOMAS J. FINN
Law Offices of Thomas J. Finn, Esq.
67-12 Yellowstone Blvd., Suite E12
Forest Hills, NY 11375
JACQUELINE DELLA CHIESA
LISA M. CONFUSIONE
Stagg, Terenzi, Confusione & Wabnik LLP
401 Franklin Avenue, Suite 300
Garden City, NY 11530
CHRISTOPHER P. KOHN
Frenkel Lambert Weiss Weisman & Gordon,
One Whitehall Street, 20th Floor
New York, NY 10004
BLOCK, Senior District Judge:
Adam Plotch LLC (“APL”) sued Wells Fargo Bank, N.A. (“Wells Fargo”) and
World Savings Bank, FSB (“WSB”) (collectively, “Wells Fargo”) under New York State
property law seeking a declaration of its interest in a condominium unit and to cancel a
mortgage held by WSB and its successor in interest, Wells Fargo. Wells Fargo moves
to dismiss the Amended Complaint under Federal Rules of Civil Procedure 12(b)(6) and
12(b)(1), arguing that its mortgage has priority over APL’s interest in the unit and is not
subject to cancellation. Wells Fargo also argues that APL lacks standing to challenge
the mortgage and that its claims do not satisfy the amount-in-controversy requirement
to invoke federal diversity jurisdiction. Although Wells Fargo’s arguments regarding
the amount in controversy and standing are without merit, the Court agrees with its
remaining contentions. The motion to dismiss is granted.
On a motion to dismiss under Rule 12(b)(6) and 12(b)(1), the Court accepts factual
allegations in the complaint as true and draws all reasonable inferences in the plaintiff’s
favor. See Town of Babylon v. Fed. Hous. Fin. Agency, 699 F.3d 221, 227 (2d Cir.
2012). However, the requirement to accept factual allegations as true is “inapplicable
to legal conclusions,” Krys v. Pigott, 749 F.3d 117, 128 (2d Cir. 2014, and to matters that
are “contradicted by more specific allegations or documentary evidence,” L-7 Designs,
Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir. 2011). The Court limits its
consideration “to facts stated on the face of the complaint, in documents appended to the
complaint or incorporated in the complaint by reference, and to matters of which judicial
notice may be taken.” Leonard F. v. Israel Disc. Bank of New York, 199 F.3d 99, 107
(2d Cir. 1999). “To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)).
In its Amended Complaint, APL alleged as follows. APL is a New York limited
liability company with its principal place of business in New York. Defendant Wells
Fargo has its principal place of business in San Francisco, CA. It acquired WSB in 2006.
See Am. Compl. at ¶¶ 4-5.
APL owns condominium unit 32-2 at Mirador Estates Condominium I in Staten
Island, NY (“the Property”). See id. at ¶¶ 8, 27-30.1 The Property includes an undivided
interest in the common areas of the condominium buildings and land. See Am. Compl.
Ex. A (Legal Description of Property). Each condominium owner at Mirador Estates
covenants to pay monthly “common charges” to a Board of Managers of Mirador (“the
Board”). Id. ¶¶ 12-19. The Board may file a lien and foreclose against a unit if the
owner fails to pay the common charges. Id.
From 1992 to 2009, non-party Kauser Khan (“Khan”) owned the Property. Id. ¶
9. By 2003, he had fallen behind in common charge payments, and, on June 2, 2003, the
Board recorded a lien (the “2003 Common Charge Lien”) on the Property. Id. ¶ 19.
In July 2003, Khan granted a mortgage to WSB for $135,000. Id. ¶ 21. That
mortgage was satisfied in April 2006. Id. ¶ 31. In March 2006, Khan granted WSB a
second mortgage for $195,000 (“2006 Mortgage”). Id. ¶¶ 22-23; id. Ex. D. The first
paragraph of the property description attached to the 2006 Mortgage read as follows:
THE REAL PROPERTY ABOVE DESCRIBED IS A UNIT(S)
The street address of the Property is 7 Lamped Loop, Unit 32-2, Staten Island, NY.
SHOWN ON THE PLAN OF A CONDOMINIUM PREPARED AND
CERTIFIED BY EDWARD LURIA, A.I.A./ AND FILED IN THE
OFFICE OF REGISTER OF THE BOROUGH OF STATEN ISLAND,
RICHMOND COUNTY IN THE 23RD DAY OF JULY, 1984, AS FILE
NO. C-54 AS DEFINED IN THE DECLARATION OF
CONDOMINIUM ENTITLED MIRADOR ESTATES
CONDOMINIUM I MADE BY AMOUR ESTATES, INC. UNDER
ARTICLE 9-B OF THE NEW YORK REAL PROPERTY LAW
DATED MAY 31, 1984, AND RECORDED IN THE OFFICE OF THE
REGISTER OF RICHMOND COUNTY, ON THE 23RD DAY OF
JULY, 1984, IN REEL 29 AT PAGE 9586 COVERING THE
PROPERTY THEREIN DESCRIBED.
Am. Compl. Ex. D at 19 (Ex. A to 2006 Mortgage). The remainder of the description
specified the Property in metes and bounds using terms nearly identical to those
contained in the Legal Description attached to APL’s Amended Complaint.2 Compare
Am. Compl. Ex. A with Am. Compl. Ex. D at 19-20. The property description in the
2006 Mortgage concluded with the following: “BEING THE SAME PROPERTY
CONVEYED TO KAUSAR KHAN BY DEED FROM GUL ZAMIN AND KAUSAR
KHAN RECORDED 11/03/2003 IN DEED BOOK 16325 PAGE 266, RECORDED IN
THE RICHMOND COUNTY, NEW YORK.” Am. Compl. Ex. D at 20. The 2006
Mortgage was recorded in April 2006. See Am. Compl. Ex. D (Recording and
Endorsement Cover Page).
In 2007, the Board initiated foreclosure proceedings against Khan, resulting in a
state court Judgment of Foreclosure entered on July 1, 2009. See Am. Compl. ¶ 28.
Two discrepancies make the language nearly, rather than entirely, identical: (1) the substitution
in the 2006 Mortgage of 375.76 for 375.75 and of 275.62 for 278.62.
WSB was not a party to the foreclosure proceedings, nor was Wells Fargo. See Am.
Compl. at ¶¶ 32-34, Ex. E. APL purchased the Property at public auction in September
2009 for $16,000. See Am. Compl. ¶ 30, Ex. F.
APL claims that the 2006 Mortgage is fraudulent, void, and unrecordable under
N.Y. Real Property Law (“RPL”) § 329 because its legal description of the Property
contradicted public records by omitting the condominium common elements. Am.
Compl. ¶¶ 24-26, 47-53. APL further claims that, because WSB was not named as a
defendant in the state foreclosure action, the 2006 Mortgage is subject to reforeclosure
under N.Y. Real Property Actions and Proceedings Law (“RPAPL”) §§ 1503, 1505,
1521, 1523, 1531, and 1541. Am. Compl. ¶¶ 32-36, 54-59. APL seeks: (1) a declaration
that the 2006 Mortgage is subject to cancellation and removal from public record; (2) an
order canceling and removing the 2006 Mortgage from the public record; (3) a
declaration that the Defendants have a valid interest in the property resulting from the
2006 Mortgage; (4) an order fixing a time for Defendants to redeem their interest in the
Property, fixing a value for such redemption not less than $300,000, and barring future
claims against the Property; and (5) a declaration that APL is the sole and lawful owner
of the Property.
Wells Fargo moves to dismiss the Amended Complaint under Rules 12(b)(1) and
12(b)(6), arguing that (1) the 2006 Mortgage is not subject to reforeclosure, (2) the
property description in the 2006 Mortgage was sufficient, (3) APL lacks standing to
challenge the 2006 Mortgage because it was not a party to it or a third-party beneficiary,
and (4) the case does not meet the amount-in-controversy requirement for federal
diversity jurisdiction. The Court agrees with Wells Fargo’s first two contentions.
The Court first considers Wells Fargo’s jurisdictional arguments. See Steel Co.
v. Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998) (requiring that jurisdiction be
established as a threshold matter). Both are without merit.
Wells Fargo’s standing argument does not warrant extensive analysis. APL
asserts no contractual rights under the 2006 Mortgage. On the contrary, it asserts a
statutory right under N.Y. RPL § 329 as “[a]n owner of real property . . . to have any
recorded instrument in writing relating to such real property . . . declared void or invalid,
or to have the same canceled of record as to said real property[.]” It is therefore
irrelevant that APL is not a party or third-party beneficiary to the 2006 Mortgage. Cf.
Wellington v. Fin. Freedom Acquisition LLC ex rel. Structured Asset Sec. Corp. Reverse
Mortg. Loan Tr. 1999-RMI, 18 N.Y.S.3d 33 (N.Y. App. Div. 2015) (“Defendant’s
reliance on the principle of contract law that a person who was not a party to the contract
or a third-party beneficiary thereof cannot assert a claim for breach of that contract . . .
is misplaced since plaintiffs’ claim seeking to determine adverse claims to real property
is expressly authorized by statute (RPAPL 1501).”).
B. Amount in Controversy
Where, as here, federal subject matter jurisdiction is based on diversity of
citizenship, the amount in controversy must exceed $75,000. 28 U.S.C. § 1332(a). “In
actions seeking declaratory or injunctive relief, it is well established that the amount in
controversy is measured by the value of the object of the litigation.” Hunt v. Washington
State Apple Advert. Comm’n, 432 U.S. 333, 347 (1977). “[A] plaintiff invoking federal
jurisdiction must demonstrate a ‘reasonable probability’ that the amount-in-controversy
requirement is satisfied.” Pyskaty v. Wide World of Cars, LLC, 856 F.3d 216, 223 (2d
Cir. 2017) (quoting Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d
Cir. 1994)). The Court recognizes a “rebuttable presumption that the face of the
complaint is a good faith representation of the actual amount in controversy.” Id.
(internal quotation marks omitted). To rebut that presumption and justify dismissal, the
defendant must show “to a legal certainty” that the actual amount in controversy is less
than the claimed amount. See Pyskaty, 856 F.3d at 223; St. Paul Mercury Indem. Co. v.
Red Cab Co., 303 U.S. 283, 288-89 (1938).
Here, APL seeks injunctive relief canceling the 2006 Mortgage, related
declaratory relief, an order setting the redemption value of the Property at no less than
$300,000, and an order giving it quiet title to the Property. The objects of these requests
for declaratory and injunctive relief are the 2006 Mortgage and the Property itself.
According to the allegations in the Amended Complaint and documentary evidence
attached to it, the 2006 Mortgage was for $195,000. Well Fargo does not dispute that
amount, much less show “to a legal certainty” that it is incorrect. See Pyskaty, 856 F.3d
at 223. This alone is therefore sufficient to satisfy the amount in controversy, and the
Court can properly exercise supplemental jurisdiction over APL’s remaining claims
under 28 U.S.C. § 1367. See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546,
559-61 (2005) (rejecting argument that every claim must satisfy the amount-incontroversy requirement).
Wells Fargo’s contention that the amount in controversy requirement is not
satisfied is therefore without merit.
C. Reforeclosure of the 2006 Mortgage
Under RPAPL § 1503, when a foreclosure judgment is void or voidable as to any
person, the property purchaser may maintain a reforeclosure action “to determine the
right of any person to set aside such judgment, sale or conveyance or to enforce an equity
of redemption or to recover possession of the property, or the right of any junior
mortgagee to foreclose a mortgage.” RPAPL § 1503; Bass v. D. Ragno Realty Corp.,
976 N.Y.S.2d 118, 120 (N.Y. App. Div. 2d Dep’t 2013). Thus, RPAPL § 1503 allows
a property purchaser to reforeclose against anyone “who may set aside the judgment, sale
or conveyance of the foreclosed property, has a junior mortgage, or has an equity of
redemption.” Bass, 976 N.Y.S.2d at 120. Final judgment in an action under § 1503 may
include a declaration of any party’s rights in the property and an injunction directing the
cancellation of an invalid mortgage and possession of the property. RPAPL § 1521(1).
Here, the Judgment of Foreclosure was void as to WSB because WSB was not
named a party in the foreclosure action. See Am. Compl. ¶ 34; Bd. of Managers of
Parkchester N. Condo. v. Alaska Seaboard Partners Ltd. P’ship, 831 N.Y.S.2d 370, 371
(N.Y. App. Div. 1st Dep’t 2007). However, APL is not entitled to relief under RAPL
§ 1503 because WSB’s 2006 Mortgage has priority over the common charge lien that
gave rise to the Judgment of Foreclosure.
Although a common charge lien generally takes priority over other liens, RPL §
339-z provides that a common charge lien does not take priority over “all sums unpaid
on a first mortgage of record.” The 2006 Mortgage became the “first mortgage of
record” when the 2003 Mortgage was satisfied. See Plotch v. Citibank, N.A., 27 N.Y.3d
477, 483, reargument denied, 28 N.Y.3d 945 (2016) (stating that a condominium owner
may satisfy a first mortgage and obtain another prioritized “first mortgage” within the
meaning of § 339-z). Moreover, the Judgment of Foreclosure stated that the Property
would be sold “subject to . . . the first mortgage on the premises,” Am. Compl. Ex. E at
6, and the Referee’s Deed confirmed that the foreclosure sale was subject to the 2006
Mortgage, id. Ex. F.
APL argues that RPL § 339-z does not apply because the 2003 Common Charge
Lien was filed before the 2006 Mortgage. Its argument is premised on its allegation that
the Judgment of Foreclosure related to the 2003 Common Charge Lien. APL is correct
that a common charge lien takes priority over a first mortgage of record when the
common charge lien was recorded first in time. See Foxwood Run Condo. v. Goller
Place Corp., 642 N.Y.S.2d 758 (Sup. Ct. Richmond Cty. 1995). However, the Court is
not required to accept as true APL’s allegation regarding the subject of the Judgment of
Foreclosure because that allegation is “contradicted by . . . documentary evidence”
attached to the Amended Complaint: The Referee’s Deed states that the Judgment of
Foreclosure related not to the 2003 Common Charge Lien but to a common charge lien
recorded on December 12, 2006 under Land Doc number 167120 (the “2006 Common
Charge Lien”). See Am. Compl. Ex. F. Similarly, the complaint that resulted in the
Judgment of Foreclosure names the same 2006 Common Charge Lien. See Mot. to
Dismiss, Chiesa Decl. Ex. B.3
APL further argues that, regardless of this documentary evidence, filing the 2003
Common Charge Lien established priority over the 2006 Mortgage because a
condominium lien creates a “continuing obligation to pay common charges, and
incorporates all post-recording common charges owed to the condominium as they come
due.” Pl.’s Reply at 8. By APL’s reasoning, the 2006 common charge lien did not
The Court relies on the complaint in the foreclosure action not for its truth but to ascertain the
subject of the foreclosure action. Moreover, APL repeatedly refers to the foreclosure action in
the Amended Complaint. The document is therefore properly before the Court on a motion to
dismiss. Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991) (“[C]ourts routinely
take judicial notice of documents filed in other courts, again not for the truth of the matters
asserted in the other litigation, but rather to establish the fact of such litigation and related
secure a distinct monetary obligation—it simply “updated” the amount owed on unpaid
common charges. Id. at 8-9. However, the only case APL cites in support of that
position involved the amount due under a particular common charge lien, not the order
of priority between a common charge lien and a first mortgage. See Reply at 8 (citing
Bd. of Managers of Netherlands Condo. v. Trencher, 9 N.Y.S.3d 213, 214 (N.Y. App.
Div. 1st Dep’t 2015). Moreover, under RPL § 339-aa, a common charge lien expires
after six years or full satisfaction, whichever comes first. When the state court entered
its Judgment of Foreclosure on July 1, 2009, it had been more than six years since the
Board recorded the 2003 Common Charge Lien. And, unlike a statute of limitations, the
filing of a foreclosure action does not toll the expiration of a common charge lien. See
Chem. Bank v. Levine, 91 N.Y.2d 738, 741 (1998) (“The statute does not refer to the time
for commencing an action on the lien, but rather to the duration of the lien itself.”).4 The
Judgment of Foreclosure could not have related to the 2003 Common Charge lien
because it was no longer in effect.
In sum, the Amended Complaint and the documents attached to it show that the
April 2006 Mortgage had priority over the December 2006 Common Charge Lien
The New York Court of Appeals in Chemical Bank was ultimately concerned with whether a
foreclosure action by a third party tolled the expiration of a common charge lien. See 91 N.Y.2d
at 742. Its conclusion that a common charge lien would not be extended by the initiation of a
foreclosure action by the lien holder is therefore arguably dicta. However, given such a clear
statement by the New York Court of Appeals, this Court is persuaded that it would apply that
rule to the facts of this case. See State of N.Y. v. Blank, 27 F.3d 783, 788 (2d Cir. 1994) (stating
that a federal court sitting in diversity jurisdiction must predict how the highest court of the state
would resolve an unsettled question of law).
underlying the foreclosure sale. APL therefore bought the Property subject to the 2006
Mortgage and has no right to reforeclose against WSB under RPAPL § 1503. See Plotch
v. US Bank Nat. Ass’n, 971 N.Y.S.2d 74 (N.Y. Sup. Ct. 2013), aff’d sub nom. Plotch v.
U.S. Bank Nat. Ass’n, 13 N.Y.S.3d 102 (N.Y. App. Div. 2015). APL’s reforeclosure
claim is therefore dismissed.
C. Validity of the 2006 Mortgage
RPL § 329 allows an owner of real property to maintain an action to have a
recorded instrument, such as a mortgage, “declared void or invalid, or to have the same
canceled of record . . . .” “[A] trial court is permitted to determine property ownership
issues as a matter of law based upon documentary evidence and its construction of deed
language.” Cornick v. Forever Wild Dev., 659 N.Y.S.2d 914, 915 (N.Y. App. Div. 3d
Dep’t 1997). APL fails to state a claim for a declaration or cancellation because the
2006 Mortgage is valid.
A mortgage is a conveyance of an interest in property. See W. L. Dev. Corp. v.
Trifort Realty, Inc., 44 N.Y.2d 489, 498 (N.Y. 1978). It therefore must be in writing and
contain a description of the premises conveyed. See N.Y. Gen. Oblig. Law § 5-703(1);
Hulburt v. Walker, 258 N.Y. 8, 20-21 (1931). The written instrument “must be
construed according to the intent of the parties, so far as such intent can be gathered from
the whole instrument, and is consistent with the rules of law.” RPL § 240(3).
The description contained in the 2006 Mortgage was sufficient. It included a
description of the Property in metes and bounds that was virtually identical to the one
contained in previous descriptions of record.
Although the description did not
specifically refer to the condominium unit or its common elements, Khan’s intent to
convey an interest in Unit 32-2 and its common elements is apparent from the
description’s reference to “a unit” and its use of the words “being the same property
conveyed to Kausar Khan by deed from Gul Zamin and Kausar Khan recorded
11/03/2003 in deed book 16325 page 266, recorded in Richmond County, New York.”
Am. Compl. Ex. D at 20. The referenced deed includes the common elements and the
unit number—each of the elements APL alleges was omitted from the property
description attached to the 2006 Mortgage.5 See Def.’s Chiesa Decl. Ex. G.
The description was thus sufficient to put APL on notice that the property was
encumbered by a mortgage, and APL is presumed to have performed the necessary
inquiry to discover that the unit referred to in the mortgage was Unit 32-2 with its
common elements. See Fairmont Funding, Ltd. v. Stefansky, 754 N.Y.S.2d 54, 56 (N.Y.
App. Div. 2d Dep’t 2003) (“If the purchaser fails to use due diligence in examining the
title, he or she is chargeable, as a matter of law, with notice of the facts which a proper
inquiry would have disclosed”).
In opposition, APL cites cases involving no property descriptions, see DLJ Mortg.
The deed is a publicly recorded document of which this Court may take judicial notice on a
motion to dismiss. Awan v. Ashcroft, 2010 WL 3924849, at *2 (E.D.N.Y. Sept. 28, 2010).
Moreover, its authenticity is not in dispute.
Capital, Inc. v. Cross Is. Plaza, Inc., 2015 Bankr. LEXIS 2543, at *27 (Bankr. E.D.N.Y.
July 30, 2015), or ones so vague that the property could not be identified, see Town of
Brookhaven v. Dinos, 431 N.Y.S.2d 567, 573 (N.Y. App. Div. 2d Dep’t 1980). Those
circumstances are not present here. In re Lawrence Ave. in New York, 163N.Y.S. 598,
600 (Sup. Ct. Kings Cty. 1917), is somewhat more relevant. The court there held that
the addition of “being the same premises as” language did not enlarge an otherwise
unambiguous property description. In re Lawrence Ave., 163N.Y.S. at 600. However,
as APL neglects to mention, that case was reversed on appeal, at least insofar as it
involved a purchase-money mortgage and the “same premises” language referred to the
deed of sale. See In re Lawrence Ave. in City of New York, 169 N.Y.S. 1018, 1019 (N.Y.
App. Div. 2d Dep’t 1918). Moreover, the Second Department later extended that
reasoning beyond the context of a purchase-money mortgage. See Shean v. Loening, 101
N.Y.S.2d 261, 262–63 (N.Y. App. Div. 2d Dep’t 1950) (holding that, although a
mortgage did not explicitly include an easement providing beach access, the easement
was included in a mortgage foreclosure sale because the mortgage referred to the deed,
which did mention the easement).
Because the Amended Complaint, exhibits, and public records show that the
property description in the 2006 Mortgage was valid, APL fails to state a claim to cancel
or declare the 2006 Mortgage void under RPL § 329.
For the foregoing reasons, the motion to dismiss is GRANTED.
Senior United States District Judge
Brooklyn, New York
January 8, 2017
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?