RL 900 Park, LLC v. Ender

Background

RL 900 Park, LLC sought to foreclose a mortgage and collect the amounts due after Simone Ender stopped making payments in 2018. The mortgage covered a condominium at 900 Park Avenue, Unit 6A, in New York, New York. Rok Lending, LLC later assigned the mortgage and promissory note to RL.

While the case was pending, Ender transferred title to the property to Central Park Partners NY LLC (CPP) on March 3, 2020. The transfer was recorded, and CPP acquired the property with notice of the mortgage but, according to the undisputed facts relied on by the court, without notice of the foreclosure action. RL did not file and index an effective notice of pendency against the property until July 2, 2020, after CPP acquired and recorded its interest. A notice of pendency is a recorded document that gives later purchasers constructive notice that a lawsuit may affect property rights.

All defendants other than CPP had either defaulted or stipulated to judgment. RL and CPP filed cross-motions for summary judgment. RL sought a final foreclosure judgment and asked the court to reject CPP’s defenses. CPP sought dismissal of the case. Both parties also moved for sanctions under Rule 11.

Subject-Matter Jurisdiction

The court held that RL failed to establish diversity jurisdiction. Because RL is a limited liability company, its citizenship depends on the citizenship of all of its members, including the members of any member LLCs. RL did not provide the membership and citizenship information for R&L Ocean Towers, LLC. RL also did not adequately establish the citizenship of the condominium board or the New York City Department of Finance.

The court had ordered RL to provide additional information about jurisdiction, but concluded that RL still had not met its burden. The court therefore granted CPP’s motion on the ground that the court lacked subject-matter jurisdiction. Because subject-matter jurisdiction defines the court’s power to decide the case, the court stated that it could not enter a foreclosure judgment against the defaulting or consenting defendants or order a foreclosure sale.

CPP’s Contract and Note-Ownership Defenses

RL argued that CPP could not raise defenses based on the mortgage because CPP did not sign the mortgage or promissory note. The court rejected RL’s request for a ruling barring those defenses. Under New York law, a purchaser that merely takes property subject to a mortgage generally does not assume personal liability and may be a stranger to the contract, while a purchaser that assumes the mortgage may acquire related rights and obligations. The parties had not clearly established which arrangement applied to CPP, and the transfer documents were not provided. The court therefore denied RL’s motion to the extent it sought to prevent CPP from asserting contract-based defenses.

CPP also argued that RL had not shown that it possessed the original promissory note before filing the foreclosure case. The court found that RL’s manager, Bryan Morjain, provided affidavits stating that the note had been transferred to RL before the case began and that RL possessed it. The court held that these statements and the assignment document were sufficient at the summary-judgment stage to establish RL’s ownership and possession of the mortgage and note. RL’s motion to dismiss CPP’s defenses based on this issue was granted, and CPP’s cross-motion on this ground was denied.

Notice of Pendency and CPP’s Property Interest

The court ruled that CPP could not be bound by the foreclosure because RL did not file and index a notice of pendency before CPP acquired the property. The notice filed on the court’s electronic docket at the beginning of the case was never filed with the New York County clerk or indexed against the property, so it did not provide constructive notice. The later notice, filed and indexed on July 2, 2020, became effective only after CPP had acquired and recorded its interest.

The court rejected RL’s argument that New York law allowed the later notice to cure the earlier failure. It interpreted the statute as requiring at least twenty days between an effective notice of pendency and a foreclosure judgment, not as making a later notice retroactively effective against a purchaser who acquired the property without notice. The court also noted that RL had not asserted facts showing that CPP had actual knowledge of the foreclosure before purchasing the property.

The court granted CPP’s motion for summary judgment dismissing the claims against CPP on this ground. It further held that CPP was a necessary party because it was the current title holder. As a result, even if the jurisdictional problem could be cured, CPP could not be bound by the foreclosure in this action.

Disposition

The court denied RL’s motion for summary judgment, granted CPP’s cross-motion for summary judgment, and denied both parties’ sanctions motions. The court dismissed the case in its entirety because RL failed to establish subject-matter jurisdiction. The court directed the Clerk to enter judgment for CPP against RL and close the case. The opinion stated that RL might be able to seek foreclosure in a new action consistent with New York law and in a court with jurisdiction, but it did not decide whether such a future action would succeed.