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Development Strategies Company, LLC, Respondent v. Astoria Equities

SUPREME COURT OF THE STATE OF NEW YORK APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS


February 14, 2011

DEVELOPMENT STRATEGIES COMPANY, LLC, RESPONDENT,
v.
ASTORIA EQUITIES, INC. AND DITMARS ROOFING AND SHEETMETAL CONTRACTORS, INC., APPELLANTS,
v.
ANTHONY DESABATO, BEATRICE DESABATO, JR FACTORS, INC. AND "JANE DOE", OCCUPANTS.

Appeal from a final judgment and two orders of the District Court of Suffolk County, Second District (C. Stephen Hackeling, J.), entered September 2, 2008, October 14, 2008, and November 12, 2008,

Development Strategies Co., LLC v Astoria Equities, Inc.

Appellate Term, Second Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 14, 2011

PRESENT: NICOLAI, P.J., LaCAVA and IANNACCI, JJ

respectively. The final judgment, insofar as appealed from, awarded possession to petitioner as against occupants Astoria Equities, Inc. and Ditmars Roofing and Sheetmetal Contractors, Inc., in a summary proceeding brought pursuant to RPAPL 713 (5). The order entered October 14, 2008, insofar as appealed from, denied a motion by occupants Astoria Equities, Inc. and Ditmars Roofing and Sheetmetal Contractors, Inc. for a stay. The order entered November 12, 2008, insofar as appealed from, denied a motion by occupants Astoria Equities, Inc. and Ditmars Roofing and Sheetmetal Contractors, Inc. seeking, in essence, to vacate the final judgment of possession.

ORDERED that the final judgment, insofar as appealed from, is reversed, without costs, and the matter is remitted to the District Court for trial on so much of the petition as is against occupants Astoria Equities, Inc. and Ditmars Roofing and Sheetmetal Contractors, Inc.; and it is further,

ORDERED that so much of the appeal as is from the orders entered October 14, 2008 and November 12, 2008 is dismissed as moot.

Petitioner brought this summary proceeding pursuant to RPAPL 713 (5), alleging that it is the purchaser of the subject premises after a foreclosure sale. As relevant to this appeal, on the return date of the petition, occupants Astoria Equities, Inc. and Ditmars Roofing and Sheetmetal Contractors, Inc. (appellants) attempted to orally assert their defenses, including a defense by appellant Ditmars Roofing and Sheetmetal Contractors, Inc. (Ditmars) that it was a tenant in possession, pursuant to a lease, at the time of the foreclosure action and that it had not been named or served in that action, and thus its rights under the lease had not been affected, as well as a defense that petitioner is not the entity which purchased in foreclosure. Without affording appellants a trial, the District Court awarded petitioner a final judgment of possession. We reverse the final judgment and remit the matter for trial on so much of the petition as is against appellants.

Because the notice of petition in this proceeding did not demand that an answer be made three days before the return date of the petition, appellants were entitled, on the return date of the petition, to orally assert any defenses they had (RPAPL 743). Thus, to the extent that, on the return date of the petition, the District Court may have refused to allow appellants to answer, this was error. To the extent that the District Court may have allowed appellants to answer but found, without holding a trial, that there was no merit to any of their proposed defenses, this was also error, as appellants raised triable issues and were thus entitled to a trial (RPAPL 745; Concord Mgt. Ltd. v Kaplan, 2002 NY Slip Op 50599[U] [App Term, 9th & 10th Jud Dists 2002]).

A tenant is a necessary party in a foreclosure action (RPAPL 1311), and the absence of such a necessary party in a foreclosure action "leaves that party's rights unaffected by the judgment and sale, and the foreclosure sale may be considered void as to the omitted party" (6820 Ridge Realty v Goldman, 263 AD2d 22, 26 [1999]; see also 1426 46 St., LLC v Klein, 60 AD3d 740 [2009]; Zuk v Budka, 2002 NY Slip Op 50022[U] [App Term, 1st Dept 2002]). Therefore, where a tenant who was in possession pursuant to a lease is not made a party to the foreclosure action, that tenant "cannot be dispossessed by the purchaser at the foreclosure sale" (6820 Ridge Realty, 263 AD2d at 26; see also 1426 46 St., LLC, 60 AD3d at 742-743; Zuk, 2002 NY Slip Op 50022[U]). Here, Ditmars claims that it was such a tenant, and it has submitted a copy of its lease, and its claim, if established, would constitute a meritorious defense to this proceeding. The fact that Ditmars's lease was not recorded would not defeat that defense, if Ditmars was, as it claims to have been, in actual possession at the time of the foreclosure action (see Real Property Law § 291; 1426 46 St., LLC, 60 AD3d at 743).

Consequently, the District Court should have allowed Ditmars to present its defense that it was not made a party to the foreclosure action and that therefore its rights have not been extinguished. In addition, appellants should have been allowed to assert their defense that petitioner is not the entity which purchased in foreclosure and does not have standing to bring this proceeding, as well as their other defenses.

Accordingly, we reverse the final judgment of possession insofar as it is against appellants and remit the matter to the District Court for a trial on so much of the petition as is against appellants.

Nicolai, P.J., LaCava and Iannacci, JJ., concur. Decision Date: February 14, 2011

20110214

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