Real Property Law

Fee Owner Reaps Ad Revenues from Sign on His Side of Party Wall

Sakele Brothers, LLC v. Safdie

NYLJ 12/30/02, p. 18, col. 1

App.Div., First Dept.

(Friedman, J.)

In an action by owner of a building to enjoin neighboring owner from maintaining an advertising sign on a party wall, both owners appealed from a New York Supreme Court order denying both parties' summary judgment motions on the injunctive relief claim, and awarding plaintiff owner half of the licensing fees previously paid for advertising space on the wall. The Appellate Division modified to grant summary judgment to plaintiff owner and to award plaintiff owner all of the proceeds paid by the licensee, holding that the sign was on plaintiff landowner's property, and defendant landowner enjoyed an easement for support, and nothing more.

In 1868, the owners of property, now located at 183 Broadway and 187 Broadway in Manhattan, agreed that a party wall would be built directly over the property line, with a portion of the wall resting on each lot, and that each landowner would be entitled to use the wall for support of the respective buildings. The agreement provided that the conveyance should be treated as creating an easement that would continue forever. Five-story buildings were then built on each lot, and remained until 1979, when a fire at 187 Broadway resulted in razing of the top three stories, leaving a two-story building. The party wall was not disturbed by the fire or the reconstruction. Plaintiff, owner of 187 Broadway, resurfaced the exposed surface of the party wall, and maintained the surface at its own expense until May 1999, when neighboring owner of 183 Broadway licensed an advertising company to erect a billboard on the party wall. Plaintiff demanded removal of the sign, contending that the exposed wall was its sole property, and then brought this action. By August 2000, defendant-neighboring owner had collected licensing fees of $35,750. Since September 2000, all licensing fees have been placed in escrow pending resolution of the litigation. Supreme Court concluded that the placement of signs on the party wall was subject to the joint consent of both parties, held that plaintiff was entitled to an injunction against maintenance of the signs without its consent, but stayed the injunction pending expiration of the licensing agreement. In addition, Supreme Court held that plaintiff was entitled to one-half of all funds paid by the licensee. Both parties appealed.

In modifying to grant plaintiff the injunction and to award all of the escrow funds to plaintiff, the court started by noting that absent an agreement to the contrary, a party wall agreement leaves each of the adjoining owners with ownership of so much of the wall as stands upon his own lot, subject to an easement by the neighbor for support of the building. In this case, then, plaintiff landowner owned the portion of the wall to which the advertising sign was affixed. Hence, defendant's construction of the sign was a trespass, and plaintiff was entitled to an injunction. The court rejected defendant's argument that plaintiff's easement in the party wall terminated upon demolition of the upper stories of the building, noting that plaintiff never had an easement in the disputed face of the building wall; instead, plaintiff is the fee owner of that face. The court then concluded that as a result of defendant's trespass, plaintiff was entitled to the gain the trespasser has derived from its conduct ' here, the licensing fees paid. In addition, the court concluded that plaintiff was entitled to an immediate injunction, not one postponed until the expiration of the licensing agreement.

COMMENT

When adjoining neighbors share a party wall, each landowner has an easement onto the neighboring land for the purpose of structural support, and each owns the side of the party wall on his own land in fee simple. The party wall itself is for the common benefit of both parties, and neither may use the wall in a way that interferes with the other's enjoyment of the wall. Thus, in Varriale v. Brooklyn Edison Co., 252 N.Y. 222, a lessee of a building built upon its roof a large electric sign with beams resting on, and spanning the width of, the party wall, part of which lay on the land of the adjoining owner. ownership of that side which extended onto her land, and therefore had the exclusive In an opinion written by Judge Cardozo, the Court of Appeals held that this use of the wall was beyond the scope of the support easement, equating this use with projecting the beams into the space of the adjoining land.

New York law does not simply prevent use of party walls in a fashion that interferes with the adjoining landowner's enjoyment of his own wall; instead, the part of the party wall on each side of the boundary belongs to that landowner in fee simple. In Mileage Gas Corporation v. Kushner, 245 A.D. 836, defendant-building owner attempted to put an advertisement (sign) on plaintiff's side of a party wall that jutted approximately 9 inches onto plaintiff's property. This was a party wall that had supported plaintiff's structure until that was demolished and the plaintiff built a gas station with independent walls. The Second Department held that as long as the defendant maintains the wall, including the portion that juts into plaintiff's land, for the benefit of its building, plaintiff has the right to use the side of the wall that enters its property. Because the party wall extended into the plaintiff's land, plaintiff enjoyed sole right to maintain an advertising sign on the wall.

In Kushner, as in Sakele Brothers v. Safdie, the court concluded that a landowner was entitled to enjoin his neighbor from erecting an advertising sign on landowner's side of the party wall. One court agreed that erection of such a sign would constitute a legal wrong, but suggested that landowner's remedy would be an award of money damages. In Berk-Fink Realty Co. v. Ershowsky, 116 NYS2d 529, a landowner in a building higher than that of the adjoining building painted an advertising sign on the party wall. Although the court found a legal wrong, the court held that the non-owner could continue to use the wall upon payment of the advertising proceeds to the owner.

In Kushner, Sakele Brothers, and Berk-Fink, landowner's use of the neighbor's side of the party wall deprived the neighbor of a revenue source: the neighbor could have maintained an advertising sign if the landowner had not erected its own sign. By contrast, when a landowner uses his neighbor's side of the party wall for purposes other than support, but does not deprive the neighbor of any prospective use of the wall, courts are more likely to treat the trespass as 'technical' and to deny equitable relief. Thus, in Spring Realty Corporation v. Ryan, 206 Misc. 37, the plaintiff sought an injunction requiring defendants to remove steel beams running within the party wall for the purpose of air conditioning the defendant's restaurant. The beams did not penetrate the wall on the plaintiff's side, although the plaintiff's wall did support the defendant's beams. The court dismissed plaintiff's complaint, noting that the 'technical trespass' was not detrimental plaintiff's enjoyment of the wall.

Lending to Low-Income Buyers Unable to Repay Loans Does Not Violate Equal Credit Opportunity Act

Equicredit Corp of NY v. Turcios

NYLJ 12/16/02, p. 26, col. 3

App. Div., Second Dept.

(memorandum opinion)

In an action to foreclose a mortgage, mortgagees appealed from a New York Supreme Court order denying their motions for summary judgment dismissing mortgagor's counterclaims. The Appellate Division modified to dismiss the counterclaims alleging violations of three federal statutes, but otherwise affirmed, finding questions of fact precluded summary judgment on mortgagors' other fraud and discrimination claims.

On October 22, 1999, mortgagees took a mortgage from mortgagors to secure a $130,500 loan in connection with purchase of a home. Mortgagors had limited ability to speak, write, or understand English. They admitted defaulting on mortgage payments. When mortgagees brought this foreclosure action, mortgagors counterclaimed, contending that they were the victims of a lending scheme whereby the lender offers loans to low-income minority borrowers at exorbitant rates, knowing that the borrowers cannot repay the loans, with the expectation that the borrower will default, resulting in foreclosure. Mortgagors contended that this practice, labeled 'reverse redlining,' constituted fraud and discrimination in violation of state and federal banking regulations. Supreme Court denied mortgagees' motion to dismiss the counterclaims. Mortgagees appealed.

In modifying, the Appellate Division agreed with mortgagees that the claims based on the federal Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Truth in Lending Act (TILA) should be dismissed. The court noted that to prevail on a claim under ECOA or FHA, mortgagor would have to prove they qualified for the loans in question, while the mortgagors' claim in this case rests on the opposite premise ' that they did not qualify for the loans. With respect to the TILA claim, the court rejected mortgagors' claim that lenders were obligated to make disclosures in Spanish rather than English. The court noted that regulations enacted pursuant to the statute authorize, but do not require, disclosure in Spanish. As to the remaining counterclaims, the court held that mortgagors had met their burden of demonstrating that material issues of fact preclude summary relief.

Replacement for Erroneously Discharged Mortgage Enjoys Priority
Citibank, N.A. v. Kenney

NYLJ 12/16/02, p. 33, col. 1

Supreme Ct., Nassau City

(Winslow, J.)

In a foreclosure action, various parties sought a determination as to the validity and priority of mortgages. The court held that a mortgage granted to replace an erroneously discharged mortgage enjoyed priority over a mortgage granted before the erroneous discharge.

This action was brought to foreclose a $113,150.95 first mortgage held by Citibank. The priority of that mortgage is not in dispute. In 1987, however, Citibank took a second $750,000 mortgage. Then, Renate Kenney took a $170,000 mortgage dated January 18, 1993 and recorded March 10, 1993. On March 5, 1993, the Small Business Association (SBA) took two mortgages in the amounts of $20,000 and $143,400, respectively. Those mortgages were recorded on April 29 and June 6, 1994. On the same day, a Citibank agent discharged and canceled the $750,000 mortgage. The discharge was in error; it is undisputed that the debt had not been paid. Three years later, on April 29, 1997, a new mortgage was executed in Citibank's favor, in the amount of $750,000, to replace the erroneously discharged mortgage. The replacement mortgage was recorded on May 12, 1997. Finally, on January 18, 2001, the SBA mortgages were assigned to Beal Bank.

When Citibank foreclosed on the first mortgage, it named Kenney as a defendant in the action, but did not name itself or the Beal Bank as defendants. In effect, Citibank sought a judgment ordering a sale subject to the Citibank replacement mortgage and subject to the SBA mortgages, which had been assigned to Beal Bank. Kenney objected, contending that Citibank's action effectively deprived her mortgage of the priority it enjoyed over the replacement mortgage and the SBA mortgages. The court rejected Kenney's argument, concluding that the replacement mortgage was executed to correct an erroneous discharge. Because Kenney took her mortgage at a time when the discharged mortgage was still a mortgage of record, she was not prejudiced by correction of the error; she stood in the same position she enjoyed at the time she took her mortgage.

At the same time, however, the court concluded that Beal Bank enjoyed priority over the replacement mortgage because when Beal Bank took its assignment of the SBA mortgages, the replacement mortgage appeared, from the record, to be junior to the SBA mortgages. The court recognized that this conclusion appeared to reverse the priority of the Kenney mortgage and the SBA mortgages, but concluded that Kenney was not prejudiced because the foreclosure sale would be unlikely, in any event, to bring enough to generate a surplus to pay off the Kenney mortgage. As a result, the court permitted Citibank to proceed with the foreclosure sale on the understanding that any surplus would be applied first to pay off the $143,400 SBA mortgage (Citibank had apparently paid off the smaller SBA mortgage), and second to pay off the replacement mortgage.

9-11 Aftermath: Contract Vendee Excused When Seller Does Not Respond

Siegel v. Luk

NYLJ ?/03, p. 18, col. 2

Supreme Ct., N.Y. City

(Braun, J.)

In an action by contract vendee for return of a down payment, contract vendee sought summary judgment. The court granted the summary judgment motion, holding that contract vendee was excused from performance as a result of seller's failure to provide notice of her intention to restore the apartment in light of the events of September 11, 2001.

On June 27, 2001, contract vendee contracted to purchase the subject apartment, which is located in Battery Park City. At the time, contract vendee lived in another apartment in the same building. Contract vendee paid into escrow a $33,500 deposit. By the terms of the contract, seller assumed the risk of loss or damage to the apartment, and seller was under no obligation to repair unless seller elected to do so. If seller elected to repair, seller was obligated to notify contract vendee of that election by the earlier of the date of closing or the tenth day after the date of loss. The original closing date was August 30 or 31, but was adjourned to September 12. Seller never provided purchaser with any notice of election. On September 20, purchaser's lawyer requested cancellation of the contract and return of the deposit. On October 22, seller's lawyer rejected that request, but still did not give notice of its intentions about repair. Not until a November 20 letter to contract vendee's attorney did seller attempt to set a new closing date. As a result, contract vendee brought this action seeking return of the down payment together with a declaration that the sale contract was canceled.

In granting summary judgment to contract vendee, the court relied on the notice provision in the sale contract, and concluded that seller's failure to provide the requisite notice precluded seller from enforcing the contract's terms. As a result, the court ordered return of the down payment.

 

 

Fee Owner Reaps Ad Revenues from Sign on His Side of Party Wall

Sakele Brothers, LLC v. Safdie

NYLJ 12/30/02, p. 18, col. 1

App.Div., First Dept.

(Friedman, J.)

In an action by owner of a building to enjoin neighboring owner from maintaining an advertising sign on a party wall, both owners appealed from a New York Supreme Court order denying both parties' summary judgment motions on the injunctive relief claim, and awarding plaintiff owner half of the licensing fees previously paid for advertising space on the wall. The Appellate Division modified to grant summary judgment to plaintiff owner and to award plaintiff owner all of the proceeds paid by the licensee, holding that the sign was on plaintiff landowner's property, and defendant landowner enjoyed an easement for support, and nothing more.

In 1868, the owners of property, now located at 183 Broadway and 187 Broadway in Manhattan, agreed that a party wall would be built directly over the property line, with a portion of the wall resting on each lot, and that each landowner would be entitled to use the wall for support of the respective buildings. The agreement provided that the conveyance should be treated as creating an easement that would continue forever. Five-story buildings were then built on each lot, and remained until 1979, when a fire at 187 Broadway resulted in razing of the top three stories, leaving a two-story building. The party wall was not disturbed by the fire or the reconstruction. Plaintiff, owner of 187 Broadway, resurfaced the exposed surface of the party wall, and maintained the surface at its own expense until May 1999, when neighboring owner of 183 Broadway licensed an advertising company to erect a billboard on the party wall. Plaintiff demanded removal of the sign, contending that the exposed wall was its sole property, and then brought this action. By August 2000, defendant-neighboring owner had collected licensing fees of $35,750. Since September 2000, all licensing fees have been placed in escrow pending resolution of the litigation. Supreme Court concluded that the placement of signs on the party wall was subject to the joint consent of both parties, held that plaintiff was entitled to an injunction against maintenance of the signs without its consent, but stayed the injunction pending expiration of the licensing agreement. In addition, Supreme Court held that plaintiff was entitled to one-half of all funds paid by the licensee. Both parties appealed.

In modifying to grant plaintiff the injunction and to award all of the escrow funds to plaintiff, the court started by noting that absent an agreement to the contrary, a party wall agreement leaves each of the adjoining owners with ownership of so much of the wall as stands upon his own lot, subject to an easement by the neighbor for support of the building. In this case, then, plaintiff landowner owned the portion of the wall to which the advertising sign was affixed. Hence, defendant's construction of the sign was a trespass, and plaintiff was entitled to an injunction. The court rejected defendant's argument that plaintiff's easement in the party wall terminated upon demolition of the upper stories of the building, noting that plaintiff never had an easement in the disputed face of the building wall; instead, plaintiff is the fee owner of that face. The court then concluded that as a result of defendant's trespass, plaintiff was entitled to the gain the trespasser has derived from its conduct ' here, the licensing fees paid. In addition, the court concluded that plaintiff was entitled to an immediate injunction, not one postponed until the expiration of the licensing agreement.

COMMENT

When adjoining neighbors share a party wall, each landowner has an easement onto the neighboring land for the purpose of structural support, and each owns the side of the party wall on his own land in fee simple. The party wall itself is for the common benefit of both parties, and neither may use the wall in a way that interferes with the other's enjoyment of the wall. Thus, in Varriale v. Brooklyn Edison Co., 252 N.Y. 222, a lessee of a building built upon its roof a large electric sign with beams resting on, and spanning the width of, the party wall, part of which lay on the land of the adjoining owner. ownership of that side which extended onto her land, and therefore had the exclusive In an opinion written by Judge Cardozo, the Court of Appeals held that this use of the wall was beyond the scope of the support easement, equating this use with projecting the beams into the space of the adjoining land.

New York law does not simply prevent use of party walls in a fashion that interferes with the adjoining landowner's enjoyment of his own wall; instead, the part of the party wall on each side of the boundary belongs to that landowner in fee simple. In Mileage Gas Corporation v. Kushner, 245 A.D. 836, defendant-building owner attempted to put an advertisement (sign) on plaintiff's side of a party wall that jutted approximately 9 inches onto plaintiff's property. This was a party wall that had supported plaintiff's structure until that was demolished and the plaintiff built a gas station with independent walls. The Second Department held that as long as the defendant maintains the wall, including the portion that juts into plaintiff's land, for the benefit of its building, plaintiff has the right to use the side of the wall that enters its property. Because the party wall extended into the plaintiff's land, plaintiff enjoyed sole right to maintain an advertising sign on the wall.

In Kushner, as in Sakele Brothers v. Safdie, the court concluded that a landowner was entitled to enjoin his neighbor from erecting an advertising sign on landowner's side of the party wall. One court agreed that erection of such a sign would constitute a legal wrong, but suggested that landowner's remedy would be an award of money damages. In Berk-Fink Realty Co. v. Ershowsky, 116 NYS2d 529, a landowner in a building higher than that of the adjoining building painted an advertising sign on the party wall. Although the court found a legal wrong, the court held that the non-owner could continue to use the wall upon payment of the advertising proceeds to the owner.

In Kushner, Sakele Brothers, and Berk-Fink, landowner's use of the neighbor's side of the party wall deprived the neighbor of a revenue source: the neighbor could have maintained an advertising sign if the landowner had not erected its own sign. By contrast, when a landowner uses his neighbor's side of the party wall for purposes other than support, but does not deprive the neighbor of any prospective use of the wall, courts are more likely to treat the trespass as 'technical' and to deny equitable relief. Thus, in Spring Realty Corporation v. Ryan, 206 Misc. 37, the plaintiff sought an injunction requiring defendants to remove steel beams running within the party wall for the purpose of air conditioning the defendant's restaurant. The beams did not penetrate the wall on the plaintiff's side, although the plaintiff's wall did support the defendant's beams. The court dismissed plaintiff's complaint, noting that the 'technical trespass' was not detrimental plaintiff's enjoyment of the wall.

Lending to Low-Income Buyers Unable to Repay Loans Does Not Violate Equal Credit Opportunity Act

Equicredit Corp of NY v. Turcios

NYLJ 12/16/02, p. 26, col. 3

App. Div., Second Dept.

(memorandum opinion)

In an action to foreclose a mortgage, mortgagees appealed from a New York Supreme Court order denying their motions for summary judgment dismissing mortgagor's counterclaims. The Appellate Division modified to dismiss the counterclaims alleging violations of three federal statutes, but otherwise affirmed, finding questions of fact precluded summary judgment on mortgagors' other fraud and discrimination claims.

On October 22, 1999, mortgagees took a mortgage from mortgagors to secure a $130,500 loan in connection with purchase of a home. Mortgagors had limited ability to speak, write, or understand English. They admitted defaulting on mortgage payments. When mortgagees brought this foreclosure action, mortgagors counterclaimed, contending that they were the victims of a lending scheme whereby the lender offers loans to low-income minority borrowers at exorbitant rates, knowing that the borrowers cannot repay the loans, with the expectation that the borrower will default, resulting in foreclosure. Mortgagors contended that this practice, labeled 'reverse redlining,' constituted fraud and discrimination in violation of state and federal banking regulations. Supreme Court denied mortgagees' motion to dismiss the counterclaims. Mortgagees appealed.

In modifying, the Appellate Division agreed with mortgagees that the claims based on the federal Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Truth in Lending Act (TILA) should be dismissed. The court noted that to prevail on a claim under ECOA or FHA, mortgagor would have to prove they qualified for the loans in question, while the mortgagors' claim in this case rests on the opposite premise ' that they did not qualify for the loans. With respect to the TILA claim, the court rejected mortgagors' claim that lenders were obligated to make disclosures in Spanish rather than English. The court noted that regulations enacted pursuant to the statute authorize, but do not require, disclosure in Spanish. As to the remaining counterclaims, the court held that mortgagors had met their burden of demonstrating that material issues of fact preclude summary relief.

Replacement for Erroneously Discharged Mortgage Enjoys Priority
Citibank, N.A. v. Kenney

NYLJ 12/16/02, p. 33, col. 1

Supreme Ct., Nassau City

(Winslow, J.)

In a foreclosure action, various parties sought a determination as to the validity and priority of mortgages. The court held that a mortgage granted to replace an erroneously discharged mortgage enjoyed priority over a mortgage granted before the erroneous discharge.

This action was brought to foreclose a $113,150.95 first mortgage held by Citibank. The priority of that mortgage is not in dispute. In 1987, however, Citibank took a second $750,000 mortgage. Then, Renate Kenney took a $170,000 mortgage dated January 18, 1993 and recorded March 10, 1993. On March 5, 1993, the Small Business Association (SBA) took two mortgages in the amounts of $20,000 and $143,400, respectively. Those mortgages were recorded on April 29 and June 6, 1994. On the same day, a Citibank agent discharged and canceled the $750,000 mortgage. The discharge was in error; it is undisputed that the debt had not been paid. Three years later, on April 29, 1997, a new mortgage was executed in Citibank's favor, in the amount of $750,000, to replace the erroneously discharged mortgage. The replacement mortgage was recorded on May 12, 1997. Finally, on January 18, 2001, the SBA mortgages were assigned to Beal Bank.

When Citibank foreclosed on the first mortgage, it named Kenney as a defendant in the action, but did not name itself or the Beal Bank as defendants. In effect, Citibank sought a judgment ordering a sale subject to the Citibank replacement mortgage and subject to the SBA mortgages, which had been assigned to Beal Bank. Kenney objected, contending that Citibank's action effectively deprived her mortgage of the priority it enjoyed over the replacement mortgage and the SBA mortgages. The court rejected Kenney's argument, concluding that the replacement mortgage was executed to correct an erroneous discharge. Because Kenney took her mortgage at a time when the discharged mortgage was still a mortgage of record, she was not prejudiced by correction of the error; she stood in the same position she enjoyed at the time she took her mortgage.

At the same time, however, the court concluded that Beal Bank enjoyed priority over the replacement mortgage because when Beal Bank took its assignment of the SBA mortgages, the replacement mortgage appeared, from the record, to be junior to the SBA mortgages. The court recognized that this conclusion appeared to reverse the priority of the Kenney mortgage and the SBA mortgages, but concluded that Kenney was not prejudiced because the foreclosure sale would be unlikely, in any event, to bring enough to generate a surplus to pay off the Kenney mortgage. As a result, the court permitted Citibank to proceed with the foreclosure sale on the understanding that any surplus would be applied first to pay off the $143,400 SBA mortgage (Citibank had apparently paid off the smaller SBA mortgage), and second to pay off the replacement mortgage.

9-11 Aftermath: Contract Vendee Excused When Seller Does Not Respond

Siegel v. Luk

NYLJ ?/03, p. 18, col. 2

Supreme Ct., N.Y. City

(Braun, J.)

In an action by contract vendee for return of a down payment, contract vendee sought summary judgment. The court granted the summary judgment motion, holding that contract vendee was excused from performance as a result of seller's failure to provide notice of her intention to restore the apartment in light of the events of September 11, 2001.

On June 27, 2001, contract vendee contracted to purchase the subject apartment, which is located in Battery Park City. At the time, contract vendee lived in another apartment in the same building. Contract vendee paid into escrow a $33,500 deposit. By the terms of the contract, seller assumed the risk of loss or damage to the apartment, and seller was under no obligation to repair unless seller elected to do so. If seller elected to repair, seller was obligated to notify contract vendee of that election by the earlier of the date of closing or the tenth day after the date of loss. The original closing date was August 30 or 31, but was adjourned to September 12. Seller never provided purchaser with any notice of election. On September 20, purchaser's lawyer requested cancellation of the contract and return of the deposit. On October 22, seller's lawyer rejected that request, but still did not give notice of its intentions about repair. Not until a November 20 letter to contract vendee's attorney did seller attempt to set a new closing date. As a result, contract vendee brought this action seeking return of the down payment together with a declaration that the sale contract was canceled.

In granting summary judgment to contract vendee, the court relied on the notice provision in the sale contract, and concluded that seller's failure to provide the requisite notice precluded seller from enforcing the contract's terms. As a result, the court ordered return of the down payment.