Arch Assets, Inc. v. AL & LP Realty Co.

Order, Supreme Court, New York County (Walter Tolub, J.), entered March 24, 1995, which, inter alia, denied defendant HEM Realty & Equity Corp.’s motion to vacate the judgment of foreclosure and sale and to dismiss the action as against it for. lack of personal jurisdiction, or, alternatively, for leave to serve an answer raising the defense of merger, and vacated the sale of the subject property with leave to plaintiff to schedule a new sale, unanimously affirmed, with costs.

We agree with the IAS Court that HEM Realty & Equity Corp., as junior mortgagee, was not prejudiced by the failure of the plaintiff first mortgagee to serve the required papers and orders in the foreclosure proceeding on it. By allowing defendant-appellant to participate in the eventual foreclosure sale, any prejudice arising from the failure to effectuate such service was cured.

The doctrine of merger of the two estates — fee and first mortgagee — is not favored. On this record, it is clear that plaintiff did not merge its first mortgage in the deed which the record owner tendered pursuant to a stipulation in a bankruptcy proceeding (see, 200 E. 64th St. Corp. v Manley, 44 AD2d 11, 15-16, mod 37 NY2d 744). Concur — Murphy, P. J., Wallach, Ross, Nardelli and Williams, JJ.