Manhattan Mortgage

Dans Levi c. Commonwealth Land Titles Ins.cie, No. 09, Civ. shs 8012, 2011 wl 4542904 (s. d.n.y. 2011), claimant larry levi determined that a mortgage he had obtained through a number of complex incidents was void due to the initially deceptive nature fo the deal and that the security policies he had acquired to cover the mortgage included such incidents.

County Judge Sidney H. Stein disparaged the defendant's argument that it was the deficiencies in the mortgage-backed obligation and not the mortgage itself that made the mortgage inoperable and that the claimant may have been involved in the allegation of cheating. Vargas supposedly defrauded himself as an officers and 60% proprietor of 2141 MD Jr., LLC ("2141 MD"), a corporation that owns a business on 21-41 Lenox Avenue in Manhattan.

As part of this function, in May 2008 Vargas Pete Skyllas offered an options to buy its stake in 2141 MD. At 2141 MD, Vargas gave Skyllas a $1 million mortgage bill, backed by a mortgage on the Manhattan industrial building held by 2141 MD. Mortgage, promissory notes and related options agreements were entered into on 14 May 2008 and named MD 2141 as mortgage holder, Skyllas as mortgage holder and 21-41 Lenox Avenue as mortgage object.

Both the mortgage and the notice state that 2141 MD should be paying $1 million to Skyllas in a fixed amount on September 10, 2009. Skyllas Vargas announced on 14 July 2008 that it would not exercise the options to acquire Vargas' stake in 2141 MD under the terms of the options agreement.

The mortgage and the promissory notes were converted to 14 July 2008 in consultation with the contracting partners in order to take account of the premature cancellation of the option contract. Levi lodged a lawsuit for compensation from the Commonwealth in January 2009 after learning of the deceptive character of the deal from Skyllas and the Manhattan prosecution.

In September 2009, after month of alleged disregard of Levi's allegation and the document evidences Levi had provided to the Commonwealth, the Commonwealth lawyer notified Levi's attorney that he was ready to file a suit against Henry Vargas and the Vanguard Title Agency in Levi's name and on his name. Disappointed with the Commonwealth's reaction to his allegation, Levi instituted the suit.

Levi's principal action was that the Commonwealth had failed to fulfil its Treaty obligations towards Levi by not exempting it in accordance with the provisions of the Directive. Having made this allegation and argued that there was no question of substantive fact in the case, Levi requested an expeditious procedure in his favour.

Mr Levi claimed that'Vargas had exercised the pledge with fraudulent intent on name of a company he was not authorised to bind' and that, according to the terms of the premium line,'[a] the simply insured risks had clearly materialised. "The Commonwealth, on the other water, put forward two major reasons in support of its defence that it was not responsible for the cover:

1. Levi's damage was due to a mortgage default, not Vargas's defraud; and 2. Levi is not entitled to cover under the insurance disclaimer for "[d]efects, pledges, charges, ancillary charges or other things... established, incurred, accepted or approved by the Beneficiary.

" The Commonwealth also reasoned that Levi was violating the law by failing to work with the Commonwealth's effort to file a complaint against Vargas and the Vanguard Title Agency. However, the CFI quickly rejected this concept of non-cooperation because it was not applicable under State Farm Indem. Co. v. Moore, 58 A.D.3d 429, 430 (1st Dep't 2009), in order to refuse cover for non-compliance, the Insurer must make "conscientious efforts" which have been "reasonably calculated" to guarantee the co-operation of the Assured and that the Assured showed an attitudinal disability.

Moreover, the Commonwealth has not demonstrated that the supposed non-cooperation of Levi has led to an impairment of the Commonwealth, which it must do to refuse to cover according to this theorem. Mr Levi claimed that the Commonwealth had either abandoned its argument or, alternatively, was excluded from making it. Not agreeing, the Tribunal found that the renunciation principle was not applicable and that the conditions for forfeiture, that there was an act incompatible with insufficient cover by the insurance company and an adverse dependence of the policyholder, were not met.

It then turned to the Commonwealth's key selling points, which exclude responsibility. Courts went on to find that Since it was clear that there was no lack of indebtedness independently that was not due to the Vargas scam, the tribunal concluded that the Commonwealth could not refuse cover on this foundation. It also found the Commonwealth's reasoning that Levi's policies did not exclude losses convincingly.

However, this reasoning was founded on the idea that Levi, either directly or through Skyllas, was to blame for the shortcomings of the mortgage-loan. This point was addressed in the preceding case, since there was no lack of guilt other than Vargas's deception. The Commonwealth further reasoned that Levi knew or was guilty of Vargas' deception; Levi, however, stated in his statement that he had never been involved with Vargas and that the Commonwealth was not able to refute this with proof.

On the basis of the allegations of the parties as well as the submitted evidences, the Tribunal found that the Commonwealth was responsible for Levi's losses. It then turned to the question of compensation and found that the real amount lost by the owner of a junior mortgage, such as Levi, is less than'1) the amount of capital outstanding on the mortgage liability and 2) the mortgagee's own capital in the real estate.

" Mr. Levi provided undisputed proof that the capital amount of the bond was $1 million and the capital in the Lenox Avenue real estate was over $1 million. Therefore, the tribunal found that Levi's monetary compensation was $1 million. The Commonwealth reasoned that the following political proviso prevented it from having to foot prejudice interest:

However, the Tribunal did not agree with that part of the Police's definition of that rule because it found that it did not refer to preferential interests and that it determined the time and not the scope of liabilities. However, the CFI found that the Commonwealth was accountable to Levi for interest on damages from 11 September 2009, the date of Levi's effective forfeiture.

As the mortgage became due on 10 September 2009 and the losses could not materialise before the mortgage was in arrears, the Tribunal found that the losses arose on 11 September 2009. The attorneys' fee was not granted to the claimant because the courts determined that the Commonwealth had not acted with malicious intent.

It held that the insurer was responsible for the compensation if it was found that a mortgage was not enforceable due to frauds, without sound evidence that the mortgage was not enforceable regardless of the frauds. Clearly, ambiguous rules on the moment of responsibility, such as that in the policies at hand, will not necessarily preclude a tribunal from incorporating the interest of prejudice into a judgement.