Summary
The Appellate Division, Second Department affirmed an order granting summary judgment dismissing several causes of action in a dispute involving alleged breach of fiduciary duty and mortgagee-in-possession liability. The court determined that the defendant did not take full possession of the mortgaged property, as she only collected residential rents while the corporate entity retained possession of the commercial unit. Because she lacked consent to possess the entire property, she did not assume the legal duties of a mortgagee in possession, and the plaintiff failed to raise a triable issue of fact.
Topics
Practice areas
Questions Presented
- Whether the order denying reargument is appealable.
- Whether the court has jurisdiction to reconsider its prior determination beyond the 30‑day statutory limit.
- Whether Caputo qualifies as a mortgagee in possession for purposes of summary judgment.
Holdings
- The order is appealable.
- The court may entertain a motion for reargument even when filed after the 30‑day period.
- Caputo is not a mortgagee in possession; therefore the summary‑judgment motion is proper and the claims are dismissed.
Key quotations
“By definition, a mortgagee in possession is '[a] mortgagee who takes control of mortgaged land by agreement with the mortgagor, usu[ally] upon default of the loan secured by the mortgage'” (201 AD3d at 644)
“Taking possession of the property means acquiring the benefits of possession, including the value of use, rents, and profits, as well as assuming all the legal duties and obligations that flow from possession” (201 AD3d at 646)
“[A] mortgagee cannot be in possession without consent of the mortgagor” (201 AD3d at 644)
Factual background
Caputo retired in 2004 and, in exchange for a promissory note secured by a mortgage on a Brooklyn building, transferred ownership interests to her partners. The mortgagor, Circles Bay Ridge Realty Corp. (CBRRC), later faced financial difficulties; Caputo provided funds and later received a second mortgage that was consolidated with the first. After CBRRC was dissolved in 2011, Caputo collected residential rents and applied them to the note, while CBRRC retained possession of the property. In 2016, 6901, LLC purchased all shares of CBRRC and sued Caputo, alleging she was a mortgagee in possession who breached fiduciary duties.
Procedural history
The plaintiff appealed the Supreme Court, Kings County's order dated July 20, 2020 (which adhered to an earlier November 18, 2019 order) granting summary judgment dismissing the first‑through‑sixth and ninth causes of action. The Appellate Division affirmed the order.