Real Property Law

Court of Appeals

(Opinion by Kaye, Ch. J.)

In a malpractice action by property owners against their lawyer, the United States Court of Appeals for the Second Circuit certified questions to the New York Court of Appeals about the correct construction of the Onondaga County Tax Act. The Court of Appeals construed the statute to limit an owner's right to redeem to 2 years.

The Carneys owned the subject parcel, on which they operated a nursing home and adult home. In 1993, they failed to pay real estate taxes, leading Onondaga County to proceed with a tax sale pursuant to the Onondaga County Tax Act. On Oct. 1 of that year, the county sold and itself purchased a tax sale certificate, which entitled the county to a tax deed and possession of the property upon expiration of the owner's redemption period. The county then resold the certificate to TCA. In 1994, the Carneys borrowed money from ACM, secured by a mortgage on the subject parcel. When the Carneys defaulted on the mortgage, they delivered a deed to the parcel to ACM, to be held in escrow as security against further defaults. Then, in 1996, after another default on the ACM mortgage, the Carneys retained lawyer Philippone to assist them in litigation with ACM. In the same year, the tax certificate holder, TCA, sent the Carneys a 6-month notice to redeem pursuant to the Onondaga County Tax Act. To protect their interests, the Corvettis (principals of ACM) purchased the tax sale certificates, and on Dec, 24, 1996, sent the Carneys a similar 6-month notice to redeem. On June 26, 1997, the Corvettis asked the county to issue them the deed. A month later, Philippone advised the Carneys to seek Chapter 11 bankruptcy protection, which triggered an automatic stay and prevented the county from issuing the deed to the Corvettis. The bankruptcy court lifted the stay, concluding that the Carneys' 2-year redemption period had expired on Oct. 1, 1995, long before they filed their bankruptcy proceeding. As a result, the Carneys had no further interest in the parcel.

Three years later, the Carneys' Chapter 11 trustee brought a malpractice action against Philippone, contending that he should have sought Chapter 11 protection earlier, before the redemption period had expired. Philippone defended the action by contending that the redemption period had expired before he was retained. A federal district judge granted summary judgment to Philippone, and when the case reached the Second Circuit, that court certified questions of statutory construction to the New York Court of Appeals.

In resolving those questions, the Court of Appeals noted the ambiguity in the Onondaga County Tax Act. The statute permits an owner to redeem within 2 years of a tax sale, and an occupant to redeem within 3 years, but also provides that a certificate holder must serve a notice that gives the owner 6 months to redeem. The court held, however, that the 2- and 3-year limits are absolute, causing the redemption period to expire even if the certificate holder has not been served with notice. The court also held that the 3-year period for occupants applied only to occupants who were not also owners. As a result, in this case, the redemption period had expired by Oct. 1, 1995, before Philippone was retained as counsel. The court, however, suggested that the legislature redraft the statute to eliminate the ambiguities.

Private Restrictive Covenant Bars Construction of Cell Phone Tower

Chambers v. Old Stone Hill Road Associates

NYLJ 2/25/04, p. 23, col. 4

Court of Appeals (6-1 decision)

(Majority opinion by Kaye, Ch. J; dissenting opinion by Read, J.)

In an action by neighbors to enforce a restrictive covenant against landowner who had leased land for construction of a cell phone tower, landowner appealed from the Appellate Division's affirmance of Supreme Court's issuance of a permanent injunction against violation of the covenant. The Court of Appeals affirmed, holding that neither public policy nor RPAPL 1951 justified refusal to enforce the restrictive covenant.

In 1957, owner of a large tract of land began conveying parcels with covenants limiting development to single-family homes and prohibiting use for trade or business purposes. The deed to the subject parcel included such a restriction. In 1998, current owner of the parcel leased 2000 square feet, together with access over an adjacent lot, to Verizon Wireless for construction of a 120-foot monopole, together with an equipment storage shed to be disguised as a barn. Landowner then sought a special permit for construction of the facility. After rejecting a number of alternative sites, in part because adequate cell phone coverage could not be obtained by use of any other single site, the town granted the special permit. Landowner then began construction. Neighbors then brought two lawsuits, the current action to enjoin violation of the restrictive covenant, and an article 78 proceeding to challenge the town's grant of the special permit. Although construction of the tower was largely completed during the course of the litigation, Supreme Court granted the neighbors an injunction. At the same time, Supreme Court dismissed the article 78 proceeding, holding that the town had acted properly because no other site reviewed could provide adequate cell phone capacity. Landowner appealed grant of the injunction, and the Appellate Division affirmed and held the covenant enforceable.

In affirming, the Court of Appeals first rejected landowner's argument that enforcement of the covenant would contravene public policy, in particular, the policy behind the federal Telecommunications Act of 1996, which was designed to reduce state regulation of telecommunications technologies. The court concluded that enforcement of the covenants would not prohibit provision of wireless telecommunications services in the town; even if other sites were less desirable, the desirability of this site did not justify setting aside the private covenants. The court then held inapplicable RPAPL 1951, which provides for denial of an injunction to enforce a restrictive covenant when the restriction “is of no actual and substantial benefit to the persons seeking its enforcement.” The court noted that in this case, the covenant remained of benefit to the neighbors. Moreover, the court emphasized that any hardship to landowner was self-created because it had constructed the facility with knowledge of the restrictive covenant and neighbors' intention to enforce it.

Judge Read, dissenting, noted that the result of the court's decision would be multiple cell phone towers when only one was necessary. She would have held that the covenant violated public policy and was therefore invalid and unenforceable.

COMMENT

See article by Stewart Sterk on page 1.

Specific Performance Available When Seller Has Not Acted Diligently

Lambert v. Schreiber

NYLJ 2/24/04, p. 20, col. 1

Supreme Ct., Suffolk Cty

(Pitts, J.)

In an action for breach of contract to sell real property, purchaser sought specific performance. After trial, the court awarded purchaser specific performance, and gave seller 18 months to comply with conditions in the sale contract.

The subject commercial property has been used as a landfill. In 1986, seller agreed to sell the parcel to purchaser. The sale contract included a rider conditioning the contract on seller obtaining, at his sole cost and expense, subdivision approval for the parcel within 1 year from the date of the contract. By the terms of the rider, seller agreed to pursue subdivision application “promptly and diligently.” The contract also provided that if seller “cannot obtain Land Division after a diligent and proper application for same,” he would return purchaser's down payment. The closing never took place, but purchaser took possession of the premises, conducted business there, and leased the property to a third party from 1990 to 1996, when the tenant vacated because of the property's environmental condition. Purchaser brought this action for specific performance in 1999. Purchaser contended that seller had made only half-hearted and dilatory attempts to obtain subdivision approval. Documentary evidence establishes that for long stretches of time, nothing was done to move the application along.

In awarding specific performance to purchaser, the court first concluded that the contract imposed on seller a greater responsibility than the good faith effort implied in all contracts. The court then held that purchaser was entitled to specific performance, and held that seller was entitled to 18 months to resolve any aspects of the plan required to close the landfill, and to make and complete a subdivision application with the town. The court then retained jurisdiction for the purposes of awarding damages for breach in the event that no closing ever takes place.

COMMENT

New York courts grant specific performance to a real estate purchaser when a seller is able but unwilling to convey the subject property, to obtain necessary zoning approvals, or to clear title. Thus, in Barnett v. Star Mechanical 171 A.D.2d. 142, the court held that purchaser was entitled to specific performance when seller had failed to obtain a mortgage discharge after paying off the mortgage in full. The court concluded that seller had various options for clearing title, and ordered the seller to clear the outstanding title issue, making title marketable and enabling the deal to close. Similarly, when seller manages to clear a title defect, even after the time initially specified for closing, the purchaser is entitled to specific performance as long as the defect is removed before trial. Thus, in both Haffey v. Lynch 143 N.Y. 241 and S.E.S. Importers v. Pappalardo 53 N.Y.2d. 455, the Court of Appeals awarded specific performance because clouds that hung over title at the time for closing eventually cleared, leaving the seller no excuse but to convey the deed.

The presence of a liquidated damages clause in a sale contract does not prevent purchaser from obtaining specific performance in cases where seller is able, but unwilling, to convey. For example, in Barnett, the court held the contract's liquidated damages clause inapplicable, directing instead specific performance on grounds the seller was unwilling — yet able — to make title marketable and proceed with the deal. Lambert v. Schreiber, like Barnett, awards specific performance against a seller not “diligent” in seeing to a deed's marketability. Though Lambert orders the seller to take steps necessary to tender marketable title, it remains to be seen whether this grant of specific performance will lead to the seller's actual conveyance of the land with the bargained-for subdivision approvals.

Right to Redeem Limited to 2 Years Under Onondaga Tax Act

Carney v. Philippone

NYLJ 2/17/04, p. 18, col. 1

Court of Appeals

(Opinion by Kaye, Ch. J.)

In a malpractice action by property owners against their lawyer, the United States Court of Appeals for the Second Circuit certified questions to the New York Court of Appeals about the correct construction of the Onondaga County Tax Act. The Court of Appeals construed the statute to limit an owner's right to redeem to 2 years.

The Carneys owned the subject parcel, on which they operated a nursing home and adult home. In 1993, they failed to pay real estate taxes, leading Onondaga County to proceed with a tax sale pursuant to the Onondaga County Tax Act. On Oct. 1 of that year, the county sold and itself purchased a tax sale certificate, which entitled the county to a tax deed and possession of the property upon expiration of the owner's redemption period. The county then resold the certificate to TCA. In 1994, the Carneys borrowed money from ACM, secured by a mortgage on the subject parcel. When the Carneys defaulted on the mortgage, they delivered a deed to the parcel to ACM, to be held in escrow as security against further defaults. Then, in 1996, after another default on the ACM mortgage, the Carneys retained lawyer Philippone to assist them in litigation with ACM. In the same year, the tax certificate holder, TCA, sent the Carneys a 6-month notice to redeem pursuant to the Onondaga County Tax Act. To protect their interests, the Corvettis (principals of ACM) purchased the tax sale certificates, and on Dec, 24, 1996, sent the Carneys a similar 6-month notice to redeem. On June 26, 1997, the Corvettis asked the county to issue them the deed. A month later, Philippone advised the Carneys to seek Chapter 11 bankruptcy protection, which triggered an automatic stay and prevented the county from issuing the deed to the Corvettis. The bankruptcy court lifted the stay, concluding that the Carneys' 2-year redemption period had expired on Oct. 1, 1995, long before they filed their bankruptcy proceeding. As a result, the Carneys had no further interest in the parcel.

Three years later, the Carneys' Chapter 11 trustee brought a malpractice action against Philippone, contending that he should have sought Chapter 11 protection earlier, before the redemption period had expired. Philippone defended the action by contending that the redemption period had expired before he was retained. A federal district judge granted summary judgment to Philippone, and when the case reached the Second Circuit, that court certified questions of statutory construction to the New York Court of Appeals.

In resolving those questions, the Court of Appeals noted the ambiguity in the Onondaga County Tax Act. The statute permits an owner to redeem within 2 years of a tax sale, and an occupant to redeem within 3 years, but also provides that a certificate holder must serve a notice that gives the owner 6 months to redeem. The court held, however, that the 2- and 3-year limits are absolute, causing the redemption period to expire even if the certificate holder has not been served with notice. The court also held that the 3-year period for occupants applied only to occupants who were not also owners. As a result, in this case, the redemption period had expired by Oct. 1, 1995, before Philippone was retained as counsel. The court, however, suggested that the legislature redraft the statute to eliminate the ambiguities.

Private Restrictive Covenant Bars Construction of Cell Phone Tower

Chambers v. Old Stone Hill Road Associates

NYLJ 2/25/04, p. 23, col. 4

Court of Appeals (6-1 decision)

(Majority opinion by Kaye, Ch. J; dissenting opinion by Read, J.)

In an action by neighbors to enforce a restrictive covenant against landowner who had leased land for construction of a cell phone tower, landowner appealed from the Appellate Division's affirmance of Supreme Court's issuance of a permanent injunction against violation of the covenant. The Court of Appeals affirmed, holding that neither public policy nor RPAPL 1951 justified refusal to enforce the restrictive covenant.

In 1957, owner of a large tract of land began conveying parcels with covenants limiting development to single-family homes and prohibiting use for trade or business purposes. The deed to the subject parcel included such a restriction. In 1998, current owner of the parcel leased 2000 square feet, together with access over an adjacent lot, to Verizon Wireless for construction of a 120-foot monopole, together with an equipment storage shed to be disguised as a barn. Landowner then sought a special permit for construction of the facility. After rejecting a number of alternative sites, in part because adequate cell phone coverage could not be obtained by use of any other single site, the town granted the special permit. Landowner then began construction. Neighbors then brought two lawsuits, the current action to enjoin violation of the restrictive covenant, and an article 78 proceeding to challenge the town's grant of the special permit. Although construction of the tower was largely completed during the course of the litigation, Supreme Court granted the neighbors an injunction. At the same time, Supreme Court dismissed the article 78 proceeding, holding that the town had acted properly because no other site reviewed could provide adequate cell phone capacity. Landowner appealed grant of the injunction, and the Appellate Division affirmed and held the covenant enforceable.

In affirming, the Court of Appeals first rejected landowner's argument that enforcement of the covenant would contravene public policy, in particular, the policy behind the federal Telecommunications Act of 1996, which was designed to reduce state regulation of telecommunications technologies. The court concluded that enforcement of the covenants would not prohibit provision of wireless telecommunications services in the town; even if other sites were less desirable, the desirability of this site did not justify setting aside the private covenants. The court then held inapplicable RPAPL 1951, which provides for denial of an injunction to enforce a restrictive covenant when the restriction “is of no actual and substantial benefit to the persons seeking its enforcement.” The court noted that in this case, the covenant remained of benefit to the neighbors. Moreover, the court emphasized that any hardship to landowner was self-created because it had constructed the facility with knowledge of the restrictive covenant and neighbors' intention to enforce it.

Judge Read, dissenting, noted that the result of the court's decision would be multiple cell phone towers when only one was necessary. She would have held that the covenant violated public policy and was therefore invalid and unenforceable.

COMMENT

See article by Stewart Sterk on page 1.

Specific Performance Available When Seller Has Not Acted Diligently

Lambert v. Schreiber

NYLJ 2/24/04, p. 20, col. 1

Supreme Ct., Suffolk Cty

(Pitts, J.)

In an action for breach of contract to sell real property, purchaser sought specific performance. After trial, the court awarded purchaser specific performance, and gave seller 18 months to comply with conditions in the sale contract.

The subject commercial property has been used as a landfill. In 1986, seller agreed to sell the parcel to purchaser. The sale contract included a rider conditioning the contract on seller obtaining, at his sole cost and expense, subdivision approval for the parcel within 1 year from the date of the contract. By the terms of the rider, seller agreed to pursue subdivision application “promptly and diligently.” The contract also provided that if seller “cannot obtain Land Division after a diligent and proper application for same,” he would return purchaser's down payment. The closing never took place, but purchaser took possession of the premises, conducted business there, and leased the property to a third party from 1990 to 1996, when the tenant vacated because of the property's environmental condition. Purchaser brought this action for specific performance in 1999. Purchaser contended that seller had made only half-hearted and dilatory attempts to obtain subdivision approval. Documentary evidence establishes that for long stretches of time, nothing was done to move the application along.

In awarding specific performance to purchaser, the court first concluded that the contract imposed on seller a greater responsibility than the good faith effort implied in all contracts. The court then held that purchaser was entitled to specific performance, and held that seller was entitled to 18 months to resolve any aspects of the plan required to close the landfill, and to make and complete a subdivision application with the town. The court then retained jurisdiction for the purposes of awarding damages for breach in the event that no closing ever takes place.

COMMENT

New York courts grant specific performance to a real estate purchaser when a seller is able but unwilling to convey the subject property, to obtain necessary zoning approvals, or to clear title. Thus, in Barnett v. Star Mechanical 171 A.D.2d. 142, the court held that purchaser was entitled to specific performance when seller had failed to obtain a mortgage discharge after paying off the mortgage in full. The court concluded that seller had various options for clearing title, and ordered the seller to clear the outstanding title issue, making title marketable and enabling the deal to close. Similarly, when seller manages to clear a title defect, even after the time initially specified for closing, the purchaser is entitled to specific performance as long as the defect is removed before trial. Thus, in both Haffey v. Lynch 143 N.Y. 241 and S.E.S. Importers v. Pappalardo 53 N.Y.2d. 455, the Court of Appeals awarded specific performance because clouds that hung over title at the time for closing eventually cleared, leaving the seller no excuse but to convey the deed.

The presence of a liquidated damages clause in a sale contract does not prevent purchaser from obtaining specific performance in cases where seller is able, but unwilling, to convey. For example, in Barnett, the court held the contract's liquidated damages clause inapplicable, directing instead specific performance on grounds the seller was unwilling — yet able — to make title marketable and proceed with the deal. Lambert v. Schreiber, like Barnett, awards specific performance against a seller not “diligent” in seeing to a deed's marketability. Though Lambert orders the seller to take steps necessary to tender marketable title, it remains to be seen whether this grant of specific performance will lead to the seller's actual conveyance of the land with the bargained-for subdivision approvals.