Landlord seeks to void $2.65M in Castellan-provided debt citing “defective” mortgage
By Adam Pincus
A multifamily landlord, Emmanuel Ku, is asking a New York State Supreme Court judge to void a $2.65 million loan because it claims the Castellan Real Estate Partners entity that sued to foreclose on it was not the valid note holder due to a “defective” assignment of mortgage. The loans were secured by two apartment buildings, one at 159 East 106th Street in Manhattan and the other at 414 Melrose Street in Brooklyn.
The case is small in terms of the amount of the loan but could have a large impact if a judge were to discharge a $2.65 million debt because of an error in an assignment of mortgage.
The case is also interesting because landlord Ku is claiming that Castellan is unfairly leveraging its power as lender in an effort to gain control of the properties. As evidence, the suit cites four other foreclosure cases Castellan entities have brought in New York county since 2018. The suit uses the word “predatory” four times.
Castellan and Ku have both been accused of being aggressive landlords. In 2018, the U.S. Department of Housing and Urban Development terminated a contract with Ku in Connecticut and in 2014, New York Governor Cuomo appointed an independent monitor to oversee a portfolio of Castellan properties.
Ku, through its attorney Gary Rosen, filed the suit on Friday but it is related to a foreclosure case Castellan brought in December 2020 against Ku to foreclose on the $2.65 million in debt.
In the new case, Ku argued that the entity that filed to foreclose did not have standing because it was the holder of only a collateral assignment of loan, and not a full assignment of loan.
“Defendant CREIF II (Lender), LLC cannot enforce the terms of the Mortgage and the Court should declare that the Mortgage is void, and not due and owing to any defendant,” the filing says.
Castellan executed a corrected assignment of mortgage on January 11, 2021, which was filed with the court.
In an email to PincusCo, Rosen said this legal tactic has been successful in other cases.
“We also had this in a case in Supreme Court New York County two years ago where the lender said that there was no way we could win, until the Judge decided in our favor, prompting the lender’s law firm to petition the judge to seal the case so others could not find out. We believe that if the loan documents are not correct, the courts will void mortgage documents,” he said.
Eric Sadkin, an attorney for Castellan, wrote in an email to PincusCo that, “The Borrower defaulted under the Loan, the Lender made a host of attempts to work with the Borrower.”
“Given the ongoing and continuing Event of Default under the Loan, the Lender is able to avail themselves of any and all rights and remedies under those Loan Documents, and that is all the Lender is doing, while being well within their rights to do the same.”
Sadkin added, “My client strongly denies any accusation that suggests they are an ‘aggressive landlord’, as it simply isn’t true.”