State of New York
Supreme Court : County of Monroe

American Financial Corp. Of Tampa
n/k/a Altegra Credit Corp.,

Petitioner,

For an Order pursuant to Article 78
of the Civil Practice Law and Rules,

- against -

Index No. 2002/3505

Respondents.
_______________________________

This opinion is uncorrected and is subject to revision in the official Reports

ANDREW V. SIRACUSE, J.

The myriad procedural issues in this case gave rise to a decision in June of this year. At this point the parties have joined issue on something approaching the merits; but the difficulties with the case remain procedural. Put briefly, the petitioner has brought an Article 78 proceeding in an attempt to set aside a tax foreclosure deed, on the grounds that its assignment of mortgage was improperly indexed and did not show up in a title search. No such proceeding lies, however, and even if it did it would likely be improper without jurisdiction over the purchasers. Instead, the petitioners should have commenced a plenary proceeding for money damages against the County Clerk under Real Property Law § 316.

Under CPLR 103 (c) courts have full power to convert proceedings to the appropriate form so long as jurisdiction over necessary parties has been obtained. In this case the Clerk has not been sued under Real Property Law § 316, but jurisdiction has been obtained and the Clerk has appeared, though with extremely limited answering papers. The court therefore orders this Article 78 proceeding converted into an action under the Real Property Law. The petition shall be deemed a motion for summary judgment in lieu of complaint under CPLR 3212, and the County Clerk will have an opportunity to serve responding papers. The petition, however, states no cause of action against the City of Rochester, and in the same order all proceedings against the city shall be dismissed.

The original mortgage in this matter was assigned to the petitioner, and its papers present ample documentation that it attempted to record the assignment; a receipt from the Clerk is among the papers. The assignment, however, appears to have been improperly indexed. When the City commenced a tax foreclosure proceeding against the property the assignment did not appear in the title search, and notices were therefore sent to the prior mortgagee. Even recently, the petitioner itself was unable to locate the recorded assignment in a title search.

Because it did not receive notice, the petitioner was deprived of the opportunity to protect its interest in the property. The County has as yet offered no refutation of the evidence provided by the petitioner, which by itself establishes that the petitioner took all necessary steps to have its interest recorded. (Ironically, the earlier decision in this case was required because the Clerk's office appears either to have misfiled the Article 78 petition or simply neglected to file it at all; this whole case seems to be ill starred.) Nonetheless, the court, in the interest of justice, holds that the Clerk should have the opportunity to address the merits of the case.

At oral argument counsel for the city suggested that the petitioner's proper recourse might by an action for damages against the Clerk, Surprisingly, though, none of the attorneys have discussed the import of Real Property Law § 316, although this statute clearly addresses the fact pattern here. Their silence may be due to the rarity of its citation and its legislative history, because the primary intent of the section is to hold that bona fide purchasers without actual notice of an improperly indexed security interest take without the lien. A 1924 enactment, it reversed earlier case law that held recordation by itself was constructive notice, and had therefore put the burden on purchasers (see, Baccari v De Santi, 70 AD2d 198, 202).

Under the pre-1924 law, then, the purchasers would be subject to the petitioner's lien regardless of errors on the part of the Clerk. Now, however, they take free and clear of the lien unless they had actual notice, an allegation not made by petitioners. This does not leave the petitioners without a remedy. If they themselves caused the misfiling, they bear the cost; but "a mistake in indexing not induced by the mortgagee does not invalidate the instrument but results in rendering the recorder liable for any loss the first to file mortgagee suffers on loss of priority" (Federal National Mortgage Association v Levine-Rodriguez, 153 Misc 2d 8, 15, citing Baccari v De Santi, supra).

The Supreme Court Justice in this last case suggested that the recording party should be required to "run an additional search as of the date of recordation to establish proper indexing" (153 Misc 2d, at 16) or lose any claim against the Clerk. This court declines to impose such a burden and the increased workloads and expense it would entail. As it noted in its earlier decision. "The practice of law is complicated enough; it would be unreasonable to make lawyers double-check every submission to the Clerk's office to ensure that the Clerk did what it was told." Presentation of a proper document, evidenced by a receipt from the Clerk, is sufficient to cast responsibility on the recording officer.

This is not to prejudge the factual issues presented, issues which the Clerk has yet to brief. It should, however, provide an appropriate framework for both argument and evidentiary showings. Counsel for petitioner shall prepare an order dismissing all causes of action against the city and converting the proceeding into an action under Real Property Law § 316. The Clerk will have 20 days after service of a copy of the order with notice of entry to respond. The court will then schedule further argument, and a hearing if one should be necessary. No costs or disbursements are granted.

DATED: Rochester, New York

September 23, 2002

Andrew V. Siracuse, J.S.C.

This opinion is not available for publication in any official or unofficial reports, except the New york Law journal, without the approval of the State Reporter or the Committee on Opinions (22 NYCRR 7300.1)

Design © 1997 Michael Steinberg. No copyright subsists in the decision texts, which are government documents.

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