Dispute Over Amount Owed No Defense to Foreclosure Action

On March 12, 2021, Justice Knipel of the Kings County Commercial Division issued a decision in VGM, LLC v. ISY Realty, LLC, 2021 NY Slip Op. 30749(U), holding that a dispute over the amount owed is not a defense to a foreclosure action, explaining:

Turning first to the consideration of VGM's motion for summary judgment and other relief, the Court notes that the crux of the parties' dispute is the amount of the outstanding indebtedness due and owing to VGM under the note. Regardless of how much VGM alleges it is owed under the note, ISY concedes in its opposition papers that it owes VGM at least $66,138.88 under the note. Further, the parties do not dispute that the note has matured. Nothing in the record indicates that the terms of the note and mortgage have been modified or extended in writing.

In moving for summary judgment in an action to foreclose a mortgage, a plaintiff establishes its prima facie case through the production of the mortgage, the unpaid note, and evidence of default. Where, as here, a plaintiff's standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief.

Here, VGM has established its prima facie entitlement to judgment as a matter of law by producing copies of the unpaid note, the mortgage, and evidence of default. In addition, VGM has established, prima facie, that it had standing to commence this action by demonstrating that it was in physical possession of the note, which is annexed to the complaint, at the time the action was commenced. Likewise, the affidavit of VGM's managing member has established that VGM had physical possession of the note when it commenced this action.

In opposition, defendants have failed to raise a triable issue of fact. A dispute as to the exact amount owed by the mortgagor to the mortgagee may be resolved after a reference pursuant to RPAPL 1321, and the existence of such a dispute does not preclude the issuance of summary judgment directing the sale of the mortgaged property. Pursuant to CPLR 4311, an order of reference shall direct the referee to determine specific issues, to report issues, to perform particular acts, or to receive and report evidence only. In addition, an order of reference may specify the powers of the referee and the time for the filing of his or her report and may fix a time and place for the hearing. Consequently, defendants' fifth and seventh affirmative defenses, together with their second and third counterclaims, asserting that the note indebtedness is subject to various offsets in their favor, are preserved and will be considered in the first instance by the referee at a hearing.

(Internal quotations and citations omitted).

We frequently litigate disputes over the sale or leasing of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.