Real Property Law

AppDiv, Second Dep

(memorandum opinion)

In an action by a contract vendee for a judgment declaring the rights and obligations of the parties, the seller appealed from Supreme Court's denial of its motion for summary judgment dismissing contract vendee's cause of action for specific performance. The Appellate Division reversed and granted the summary judgment motion, holding that the seller had effectively cancelled the contract.

The seller contracted to sell vacant land, consisting primarily of tidal wetlands, to the contract vendee. By the terms of the contract, the seller was to apply for and obtain necessary approvals for constructing a single-family dwelling. If one or more relevant government agencies denied a permit, or if required approvals were not obtained by the expiration of the contract's contingency period, either party had the right to cancel the contract, terminating all obligations between them. The contract also provided that the contract vendee had a right to waive the contingencies at any time and proceed to closing. The seller obtained various approvals, but then the village board filed a notice that it was in the process of obtaining the parcel by negotiation. The zoning board of appeals then denied seller's application based on a provision authorizing denial of a wetlands special permit when a governmental entity files a notice that it is in the process of acquiring the wetland. The contract vendee then brought this action against the seller, the village board, and the board of zoning appeals, asserting that the various parties had schemed to terminate the contract. The contract vendee sought specific performance. The seller then exercised his option to cancel the contract based on the denial of the wetlands permit. He then moved for summary judgment dismissing the complaint, asserting that its cancellation terminated any obligations between the parties. While that motion was pending, the contract vendee sought summary judgment on his claim for specific performance, indicating for the first time that he was willing to waive the contingencies and proceed to closing without a permit. The Supreme Court granted the contract vendee's motion, and denied the seller's motion, concluding that the contract vendee had the right to waive the contract's contingencies.

In reversing, the Appellate Division noted that the contract gave either party the right to cancel if an application was denied. Here, once the board of zoning appeals denied the permit, the seller was entitled to cancel. When the seller cancelled, the contract vendee lost the right to waive contingencies. Moreover, the court rejected the contract vendee's argument that his original complaint exercised the right to waive contingencies, noting that even a liberal reading of the complaint did not reveal an attempt to exercise contract vendee's right waive the contract's contingencies.

Option Holder Can Waive Hud Approval

Suburban Housing Development & Research, Inc. v. Island Properties & Equities, LLC

NYLJ 4/9/04, p. 27, col. 4

AppDiv, Second Dept

(memorandum opinion)

In an action by a tenant for specific performance of an option to purchase real property, the tenant appealed from the Supreme Court's award of summary judgment dismissing the complaint. The Appellate Division modified to reinstate the complaint, holding that the tenant was entitled to waive a lease provision subjecting the option to approval of the federal Department of Housing and Urban Development [HUD].

In 2001, a tenant and landlord entered into a residential lease agreement with option to purchase in connection with a two-family house. The lease agreement gave the tenant an option to purchase at a price of $155,000 payable in cash by giving the landlord 30-days' notice. By the terms of the agreement, the tenant would purchase the premises by Oct. 31, 2002, but the landlord agreed to extend the closing date by 6 months if the tenant were unable to close due to no fault of tenant. The agreement also provided that “[t]he entire option to purchase will be subject to the … final approval of [HUD] of the premises in relation to the HUD grant obtained by Tenant.” In 2002, after obtaining a conditional approval from HUD, the tenant notified the landlord of its intent to exercise the option. The landlord rejected the notice for failure to obtain final approval from HUD, and declared the option void. The tenant then brought this action, and the Supreme Court granted summary judgment to the landlord.

In modifying to deny the landlord's summary judgment motion, the Appellate Division held that because the clause subjecting the sale to HUD approval was entirely for the benefit of the tenant, it was entitled to waive the clause. At the same time, however, because the tenant did not show that it was ready, willing and able to close, it was not entitled to summary judgment either.

Statute of Frauds Voids Sale Contract

Friedman v. Nichols

NYLJ 4/5/04, p. 19, col. 1

Supreme Ct., Kings Cty

(Lewis, J.)

In an action by a contract vendee for damages for breach of contract, the contract vendee sought summary judgment, and the seller and his mother, named as defendants, moved to vacate the notice of pendency. The court granted the seller's motion, holding that the purported sale contract failed to comply with the statute of frauds.

The contract vendee entered into a written agreement with Nichols, as seller, to purchase two parcels for $682,000. The agreement provided that Nichols solely owned the two parcels. Upon execution of the agreement, the contract vendee paid a $1000 deposit. In fact, Nichols' mother owned one of the two parcels. After Nichols accepted the deposit, the parcel owned by his mother was transferred to a third party. When the contract vendee brought this action, Nichols contended that the provision, asserting that he was the sole owner of both parcels, was inserted by the contract vendee's agent after execution of the agreement. Moreover, Nichols asserted that once the contract vendee abandoned his specific performance claim, the basis for the notice of pendency disappeared, and the notice should therefore be cancelled.

In denying the contract vendee's summary judgment motion, the court noted that the statute of frauds requires agreements to be signed by the party to be charged. Because Nichols' mother was a party to be charged with respect to one of the parcels, the agreement did not comply with the statute. Moreover, because title to the parcel was a matter of public record, contract vendee could not succeed on a fraud claim, which requires that the misleading statement be on a matter peculiarly within the knowledge of the party who perpetrated the alleged fraud. As a result, the court held that contract vendee was not entitled to summary judgment, and that the notice of pendency should be vacated.

Mortgagee Estopped to Deny Forgery

Altegra Credit Co. v. Chu

NYLJ 4/22/04, p. 21, col. 1

Supreme Ct., Kings Cty

(Demarest, J.)

In a mortgage foreclosure action, the intervenor sought summary judgment dismissing the complaint against her, contending that a criminal conviction collaterally estopped mortgagee from asserting the validity of the deed on which the mortgage was based. The court granted intervenor's motion, holding that because mortgagee's predecessor was a named complainant in the criminal action, the mortgagee was estopped to deny that the deed was forged.

The intervenor and her husband acquired title to the subject property as tenants by the entirety. When her husband died in 1994, the intervenor became sole owner. In 1999, the intervenor's son executed a mortgage on the property to mortgagee's predecessor after displaying to the predecessor an instrument, acknowledged by a notary, purporting to be a deed from intervenor to her son. When intervenor learned of the purported transfer, she approached the district attorney's office, and her son was indicted for grand larceny, forgery, and filing a false instrument. Mortgagee's predecessor was a named complainant in the action. Although both the district attorney's office and the court in the criminal prosecution sought plaintiff-mortgagee's active participation in the criminal proceeding, mortgagee did not appear in the proceeding, ignoring a direct order from the court to appear. Ultimately, the son was convicted on the grand larceny and forgery charges. Meanwhile, the mortgagee had commenced this foreclosure action against the son. The mother intervened, and, after her son's criminal conviction, sought summary judgment, contending that the criminal judgment collaterally estopped mortgagee from denying the forgery. The mortgagee's position has been that the son and mother colluded to defraud the mortgagee of funds.

In granting the intervenor-mother's summary judgment motion, the court rejected the mortgagee's argument that collateral estoppel was inapplicable because the mortgagee was not in privity with any party to the criminal proceeding. The court acknowledged that privity does not have a well-defined meaning, but held that mortgagee was in privity with its predecessor, a named complainant in the criminal proceeding who was ably represented in that proceeding by the district attorney. The court noted that collateral estoppel is an equitable doctrine, and concluded that the mortgagee should not be rewarded for its tactical decision not to take a greater role in the criminal proceeding.

Deeds Reinstate Extinguished Covenants

Realis Development LLC v. Neuberger

NYLJ 4/23/04, p. 28, col. 3

AppDiv, Second Dept

(memorandum opinion).

In an action for a judgment declaring restrictive covenants unenforceable, the plaintiff developer appealed from a Supreme Court order awarding summary judgment to defendant lot owners. The Appellate Division affirmed, holding that deeds conveying the parcels subject to restrictions of record operated to reinstate restrictions that might have been extinguished by prior single ownership of the parcels.

W. Everett Orser's predecessor had filed a subdivision map for a residential subdivision. Predecessor then conveyed one lot in the subdivision to W. Everett Orser, subject to a restrictive covenant limiting use of the property to “one residence.” Subsequently, the predecessor conveyed the remaining 31 lots to Orser subject to the same covenant. Orser or his executor then conveyed the lots, and current plaintiff, a developer, obtained title to 19 of the lots. All of the deeds, except for two, recited that they were “subject to covenants and restrictions of record.” Developer plans to construct multi-family attached residences on the parcels, and sought a declaration that the restrictive covenants were unenforceable. The developer argued that when Orser acquired title to all of the lots, the restrictive covenants were effectively extinguished. Both the developer and the the individual lot owners sought summary judgment, and Supreme Court granted summary judgment to the lot owners. The developer appealed.

In affirming, the Appellate Division first agreed with developer that the restrictions had been extinguished when Orser acquired title to all of the parcels. But the court concluded that when Orser reconveyed the parcel subject to covenants and restrictions of record, he had reinstated the covenants. The court concluded that omission of the language from two of the deeds was of no consequence, especially because all of the deeds to developer included the restriction. As a result, the lot owners were entitled to summary judgment.

No Damages Available When Covenants Extinguished

Angerman v. City of White Plains

NYLJ 4/23/04, p. 32, col. 6

AppDiv, Second Dept

(memorandum opinion)

In the landowner's action for a declaration that restrictive covenants were unenforceable, it appealed from a Supreme Court order granting defendant city an inquest on damages to the city as a result of extinguishment of the covenants. The Appellate Division reversed, holding that the city was not entitled to damages.

The landowner's deed to his property includes a restriction prohibiting construction of any structure on the property, and eliminating any duty by the city to pave the paper streets on which the property is located. The landowner sought extinguishment of the covenants pursuant to RPAPL 1951 (2) on the ground that, due to changed conditions, the covenants were of no actual and substantial benefit to the city, the beneficiary of the covenants. The Supreme Court granted the declaration, but also granted the city's request for an inquest to determine damages as a result of extinguishment of the covenant. The landowner appealed.

In reversing the order for an inquest on damages, the Appellate Division acknowledged that under RPAPL 1951(2), upon extinguishment, a person seeking to enforce a covenant is entitled to “such damages, if any” that they would suffer as a result of the extinguishment. In this case, however, the city had been afforded an opportunity to present proof of damages it would suffer as a result of the extinguishment, but failed to establish any damages in quantifiable terms. As a result, the court concluded that the city was not entitled to an inquest, and the landowner was not liable for payment of damages.

Writ of Assistance Within Court's Discretion

Morgan v. Morgan

NYLJ 4/28/04, p. 19, col. 1

Supreme Ct., Kings Cty

(Schack, J.)

In a real property action, Kay Morgan, adjudicated the owner of the disputed premises, sought a writ of assistance to remove defendant Gallup. The court denied the motion, holding that grant of a writ of assistance was within the court's discretion, and that the writ should not issue against a long-time occupant pending appeal, so long as occupant posted an adequate undertaking.

In December 2003, the Supreme Court determined that plaintiff Kay Morgan owned the disputed parcel in fee simple absolute, and awarded defendant Gallup a judgment of $9736.48 against Morgan. Gallup and the co-defendant filed a notice of appeal on Jan. 8, 2004, and Kay Moran served the defendants with a 20-day notice to deliver possession on Jan. 20. When Gallup failed to vacate, Morgan sought a writ of assistance. Defendant Gallup cross-moved for an automatic stay of enforcement pending appeal, without filing any undertaking.

The court started its analysis by referring to RPAPL section 221, which gives the court power to issue a writ of assistance after a judgment determines that a party owns a distinct parcel of real property. The statute, however, makes such writs discretionary, and the court concluded that a writ was inappropriate in this case because defendant Gallup had lived in the premises since 1995, had maintained the property, and had paid real estate taxes. On the other hand, the court rejected Gallup's contention that a stay should be issued without payment of any undertaking. The court relied upon CPLR 5519(a)(6), which calls for an undertaking if a losing party in an action affecting real property is to be granted a stay pending appeal. The court rejected Gallup's argument that a naked promise constituted an undertaking, and scheduled a hearing to determine a fair sum for the undertaking to be given by defendant Gallup.

Purchaser Cannot Waive Contingencies After Seller Cancels

Eckel v. Francis

NYLJ 4/2/04, p. 33, col. 4

AppDiv, Second Dep

(memorandum opinion)

In an action by a contract vendee for a judgment declaring the rights and obligations of the parties, the seller appealed from Supreme Court's denial of its motion for summary judgment dismissing contract vendee's cause of action for specific performance. The Appellate Division reversed and granted the summary judgment motion, holding that the seller had effectively cancelled the contract.

The seller contracted to sell vacant land, consisting primarily of tidal wetlands, to the contract vendee. By the terms of the contract, the seller was to apply for and obtain necessary approvals for constructing a single-family dwelling. If one or more relevant government agencies denied a permit, or if required approvals were not obtained by the expiration of the contract's contingency period, either party had the right to cancel the contract, terminating all obligations between them. The contract also provided that the contract vendee had a right to waive the contingencies at any time and proceed to closing. The seller obtained various approvals, but then the village board filed a notice that it was in the process of obtaining the parcel by negotiation. The zoning board of appeals then denied seller's application based on a provision authorizing denial of a wetlands special permit when a governmental entity files a notice that it is in the process of acquiring the wetland. The contract vendee then brought this action against the seller, the village board, and the board of zoning appeals, asserting that the various parties had schemed to terminate the contract. The contract vendee sought specific performance. The seller then exercised his option to cancel the contract based on the denial of the wetlands permit. He then moved for summary judgment dismissing the complaint, asserting that its cancellation terminated any obligations between the parties. While that motion was pending, the contract vendee sought summary judgment on his claim for specific performance, indicating for the first time that he was willing to waive the contingencies and proceed to closing without a permit. The Supreme Court granted the contract vendee's motion, and denied the seller's motion, concluding that the contract vendee had the right to waive the contract's contingencies.

In reversing, the Appellate Division noted that the contract gave either party the right to cancel if an application was denied. Here, once the board of zoning appeals denied the permit, the seller was entitled to cancel. When the seller cancelled, the contract vendee lost the right to waive contingencies. Moreover, the court rejected the contract vendee's argument that his original complaint exercised the right to waive contingencies, noting that even a liberal reading of the complaint did not reveal an attempt to exercise contract vendee's right waive the contract's contingencies.

Option Holder Can Waive Hud Approval

Suburban Housing Development & Research, Inc. v. Island Properties & Equities, LLC

NYLJ 4/9/04, p. 27, col. 4

AppDiv, Second Dept

(memorandum opinion)

In an action by a tenant for specific performance of an option to purchase real property, the tenant appealed from the Supreme Court's award of summary judgment dismissing the complaint. The Appellate Division modified to reinstate the complaint, holding that the tenant was entitled to waive a lease provision subjecting the option to approval of the federal Department of Housing and Urban Development [HUD].

In 2001, a tenant and landlord entered into a residential lease agreement with option to purchase in connection with a two-family house. The lease agreement gave the tenant an option to purchase at a price of $155,000 payable in cash by giving the landlord 30-days' notice. By the terms of the agreement, the tenant would purchase the premises by Oct. 31, 2002, but the landlord agreed to extend the closing date by 6 months if the tenant were unable to close due to no fault of tenant. The agreement also provided that “[t]he entire option to purchase will be subject to the … final approval of [HUD] of the premises in relation to the HUD grant obtained by Tenant.” In 2002, after obtaining a conditional approval from HUD, the tenant notified the landlord of its intent to exercise the option. The landlord rejected the notice for failure to obtain final approval from HUD, and declared the option void. The tenant then brought this action, and the Supreme Court granted summary judgment to the landlord.

In modifying to deny the landlord's summary judgment motion, the Appellate Division held that because the clause subjecting the sale to HUD approval was entirely for the benefit of the tenant, it was entitled to waive the clause. At the same time, however, because the tenant did not show that it was ready, willing and able to close, it was not entitled to summary judgment either.

Statute of Frauds Voids Sale Contract

Friedman v. Nichols

NYLJ 4/5/04, p. 19, col. 1

Supreme Ct., Kings Cty

(Lewis, J.)

In an action by a contract vendee for damages for breach of contract, the contract vendee sought summary judgment, and the seller and his mother, named as defendants, moved to vacate the notice of pendency. The court granted the seller's motion, holding that the purported sale contract failed to comply with the statute of frauds.

The contract vendee entered into a written agreement with Nichols, as seller, to purchase two parcels for $682,000. The agreement provided that Nichols solely owned the two parcels. Upon execution of the agreement, the contract vendee paid a $1000 deposit. In fact, Nichols' mother owned one of the two parcels. After Nichols accepted the deposit, the parcel owned by his mother was transferred to a third party. When the contract vendee brought this action, Nichols contended that the provision, asserting that he was the sole owner of both parcels, was inserted by the contract vendee's agent after execution of the agreement. Moreover, Nichols asserted that once the contract vendee abandoned his specific performance claim, the basis for the notice of pendency disappeared, and the notice should therefore be cancelled.

In denying the contract vendee's summary judgment motion, the court noted that the statute of frauds requires agreements to be signed by the party to be charged. Because Nichols' mother was a party to be charged with respect to one of the parcels, the agreement did not comply with the statute. Moreover, because title to the parcel was a matter of public record, contract vendee could not succeed on a fraud claim, which requires that the misleading statement be on a matter peculiarly within the knowledge of the party who perpetrated the alleged fraud. As a result, the court held that contract vendee was not entitled to summary judgment, and that the notice of pendency should be vacated.

Mortgagee Estopped to Deny Forgery

Altegra Credit Co. v. Chu

NYLJ 4/22/04, p. 21, col. 1

Supreme Ct., Kings Cty

(Demarest, J.)

In a mortgage foreclosure action, the intervenor sought summary judgment dismissing the complaint against her, contending that a criminal conviction collaterally estopped mortgagee from asserting the validity of the deed on which the mortgage was based. The court granted intervenor's motion, holding that because mortgagee's predecessor was a named complainant in the criminal action, the mortgagee was estopped to deny that the deed was forged.

The intervenor and her husband acquired title to the subject property as tenants by the entirety. When her husband died in 1994, the intervenor became sole owner. In 1999, the intervenor's son executed a mortgage on the property to mortgagee's predecessor after displaying to the predecessor an instrument, acknowledged by a notary, purporting to be a deed from intervenor to her son. When intervenor learned of the purported transfer, she approached the district attorney's office, and her son was indicted for grand larceny, forgery, and filing a false instrument. Mortgagee's predecessor was a named complainant in the action. Although both the district attorney's office and the court in the criminal prosecution sought plaintiff-mortgagee's active participation in the criminal proceeding, mortgagee did not appear in the proceeding, ignoring a direct order from the court to appear. Ultimately, the son was convicted on the grand larceny and forgery charges. Meanwhile, the mortgagee had commenced this foreclosure action against the son. The mother intervened, and, after her son's criminal conviction, sought summary judgment, contending that the criminal judgment collaterally estopped mortgagee from denying the forgery. The mortgagee's position has been that the son and mother colluded to defraud the mortgagee of funds.

In granting the intervenor-mother's summary judgment motion, the court rejected the mortgagee's argument that collateral estoppel was inapplicable because the mortgagee was not in privity with any party to the criminal proceeding. The court acknowledged that privity does not have a well-defined meaning, but held that mortgagee was in privity with its predecessor, a named complainant in the criminal proceeding who was ably represented in that proceeding by the district attorney. The court noted that collateral estoppel is an equitable doctrine, and concluded that the mortgagee should not be rewarded for its tactical decision not to take a greater role in the criminal proceeding.

Deeds Reinstate Extinguished Covenants

Realis Development LLC v. Neuberger

NYLJ 4/23/04, p. 28, col. 3

AppDiv, Second Dept

(memorandum opinion).

In an action for a judgment declaring restrictive covenants unenforceable, the plaintiff developer appealed from a Supreme Court order awarding summary judgment to defendant lot owners. The Appellate Division affirmed, holding that deeds conveying the parcels subject to restrictions of record operated to reinstate restrictions that might have been extinguished by prior single ownership of the parcels.

W. Everett Orser's predecessor had filed a subdivision map for a residential subdivision. Predecessor then conveyed one lot in the subdivision to W. Everett Orser, subject to a restrictive covenant limiting use of the property to “one residence.” Subsequently, the predecessor conveyed the remaining 31 lots to Orser subject to the same covenant. Orser or his executor then conveyed the lots, and current plaintiff, a developer, obtained title to 19 of the lots. All of the deeds, except for two, recited that they were “subject to covenants and restrictions of record.” Developer plans to construct multi-family attached residences on the parcels, and sought a declaration that the restrictive covenants were unenforceable. The developer argued that when Orser acquired title to all of the lots, the restrictive covenants were effectively extinguished. Both the developer and the the individual lot owners sought summary judgment, and Supreme Court granted summary judgment to the lot owners. The developer appealed.

In affirming, the Appellate Division first agreed with developer that the restrictions had been extinguished when Orser acquired title to all of the parcels. But the court concluded that when Orser reconveyed the parcel subject to covenants and restrictions of record, he had reinstated the covenants. The court concluded that omission of the language from two of the deeds was of no consequence, especially because all of the deeds to developer included the restriction. As a result, the lot owners were entitled to summary judgment.

No Damages Available When Covenants Extinguished

Angerman v. City of White Plains

NYLJ 4/23/04, p. 32, col. 6

AppDiv, Second Dept

(memorandum opinion)

In the landowner's action for a declaration that restrictive covenants were unenforceable, it appealed from a Supreme Court order granting defendant city an inquest on damages to the city as a result of extinguishment of the covenants. The Appellate Division reversed, holding that the city was not entitled to damages.

The landowner's deed to his property includes a restriction prohibiting construction of any structure on the property, and eliminating any duty by the city to pave the paper streets on which the property is located. The landowner sought extinguishment of the covenants pursuant to RPAPL 1951 (2) on the ground that, due to changed conditions, the covenants were of no actual and substantial benefit to the city, the beneficiary of the covenants. The Supreme Court granted the declaration, but also granted the city's request for an inquest to determine damages as a result of extinguishment of the covenant. The landowner appealed.

In reversing the order for an inquest on damages, the Appellate Division acknowledged that under RPAPL 1951(2), upon extinguishment, a person seeking to enforce a covenant is entitled to “such damages, if any” that they would suffer as a result of the extinguishment. In this case, however, the city had been afforded an opportunity to present proof of damages it would suffer as a result of the extinguishment, but failed to establish any damages in quantifiable terms. As a result, the court concluded that the city was not entitled to an inquest, and the landowner was not liable for payment of damages.

Writ of Assistance Within Court's Discretion

Morgan v. Morgan

NYLJ 4/28/04, p. 19, col. 1

Supreme Ct., Kings Cty

(Schack, J.)

In a real property action, Kay Morgan, adjudicated the owner of the disputed premises, sought a writ of assistance to remove defendant Gallup. The court denied the motion, holding that grant of a writ of assistance was within the court's discretion, and that the writ should not issue against a long-time occupant pending appeal, so long as occupant posted an adequate undertaking.

In December 2003, the Supreme Court determined that plaintiff Kay Morgan owned the disputed parcel in fee simple absolute, and awarded defendant Gallup a judgment of $9736.48 against Morgan. Gallup and the co-defendant filed a notice of appeal on Jan. 8, 2004, and Kay Moran served the defendants with a 20-day notice to deliver possession on Jan. 20. When Gallup failed to vacate, Morgan sought a writ of assistance. Defendant Gallup cross-moved for an automatic stay of enforcement pending appeal, without filing any undertaking.

The court started its analysis by referring to RPAPL section 221, which gives the court power to issue a writ of assistance after a judgment determines that a party owns a distinct parcel of real property. The statute, however, makes such writs discretionary, and the court concluded that a writ was inappropriate in this case because defendant Gallup had lived in the premises since 1995, had maintained the property, and had paid real estate taxes. On the other hand, the court rejected Gallup's contention that a stay should be issued without payment of any undertaking. The court relied upon CPLR 5519(a)(6), which calls for an undertaking if a losing party in an action affecting real property is to be granted a stay pending appeal. The court rejected Gallup's argument that a naked promise constituted an undertaking, and scheduled a hearing to determine a fair sum for the undertaking to be given by defendant Gallup.