Mendoza v Sterling Properties, Inc.
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Attorneys and Parties
Brief Summary
Real estate and mortgage priority dispute involving whether a lender that took an assigned mortgage on property subject to a specific-performance action was bound by the plaintiff's claim through constructive or actual notice.
The Supreme Court, Kings County, denied Kearny Bank's motion under CPLR 3211(a) [rule permitting dismissal based on defenses including documentary evidence and failure to state a cause of action] to dismiss the second amended complaint insofar as asserted against it.
The Appellate Division reversed the order insofar as appealed from and granted dismissal of the second amended complaint against Kearny Bank.
The plaintiff's notice of pendency was indexed against the wrong parcel, so under CPLR 6501 [notice of pendency must be indexed in a block index] it did not provide constructive notice as to the subject property. The bank's documentary submissions established that defect, and the plaintiff's allegations that Kearny Bank had actual notice were merely conclusory.
Background
Jose Mendoza sued Sterling Properties, Inc. seeking, among other relief, specific performance of a contract to purchase Brooklyn real property. Although he filed a notice of pendency at the outset, it was indexed against a different parcel rather than the subject property. Sterling later sold the subject property to Buffalo Plaza, LLC, which then gave a mortgage on the property to a nonparty lender. That mortgage was later assigned to Kearny Bank. Mendoza then added Kearny Bank as a defendant and asserted claims against it in a second amended complaint.
Lower Court Decision
The Supreme Court, Kings County, denied the branch of Kearny Bank's motion seeking dismissal under CPLR 3211(a). As a result, the claims against Kearny Bank remained pending despite its argument that it lacked notice of Mendoza's claimed interest in the property.
Appellate Division Reversal
The Appellate Division held that Kearny Bank's documentary evidence established that no notice of pendency had been properly filed against the subject property because the filing was indexed against the wrong parcel. Since an indexing error prevents constructive notice while the error remains uncorrected, Kearny Bank was not charged with notice of Mendoza's claims when the mortgage was assigned to it. The court further held that Mendoza's assertions of actual notice were too conclusory to survive dismissal. It therefore reversed and granted dismissal of the second amended complaint as against Kearny Bank.
Legal Significance
The decision reinforces that a notice of pendency is effective only if properly indexed against the correct property. A misindexed filing does not give constructive notice to later purchasers or mortgagees. It also underscores that, on a motion to dismiss, bare allegations of actual notice will not substitute for a properly filed notice of pendency or defeat documentary evidence showing the absence of constructive notice.
In New York real estate litigation, a plaintiff seeking to protect a claimed interest in property must ensure the notice of pendency is indexed against the correct parcel; otherwise, a later lender or assignee may take free of constructive notice, and conclusory claims of actual notice will not save the case.