The Powerful Impact of the Non-Foreclosure Notice of Pendency

Also, a court must vacate a Notice if the time to appeal from a final judgment against the plaintiff who filed the Notice has expired or enforcement of such a judgment has not been stayed pending its appeal.

Validity and Renewal of a Notice

A Notice is valid for 3 years, unless renewed before its expiry. CPLR 6513. Unlike a foreclosure action in which a plaintiff may file a new RPAPL ' 1331 notice of pendency if the first lapsed without renewal or was vacated by reason of a dismissal without prejudice of the action (e.g., Bankers Trust Co. of California, N.A. v. Lifson, 5 A.D.3d 710; NYCTL 1997-1 Trust v. Oneg Shabbos, Inc., 5 A.D.3d 568], the rule is different regarding CPLR Article 65 Notices. A plaintiff-claimant is barred from re-filing another Notice whether the first one lapsed without renewal or the underlying action was discontinued without prejudice. Matter of Sakow, 97 N.Y.2d 436, 442.

A diligent plaintiff either will timely renew its Notice or, if the IAS Court directs dismissal, immediately appeal and seek a stay of the dismissal pending appeal. e.g., ' 600.2(a)(7) of the Rules of the Appellate Division, First Department. But, if the plaintiff is not vigilant and later files a new Notice, it must be vacated. See, MCK Building Assocs., Inc. v. St. Lawrence University, 5 A.D.3d 911 (Lien Law foreclosure; expired Notice could not be renewed or refiled; foreclosure claim dismissed); Cohen v. Elul Diamonds, Inc., ___ Misc.3d ___, N.Y.L.J., 6/9/04, p. 23, col. 1 (Sup., Kings Co.) (canceling the third notice of pendency filed by plaintiffs because successive filings are prohibited by Article 65).

Striking a Notice

If the action has not been commenced or prosecuted in good faith, a court may strike a Notice. CPLR 6514(b). The court also has discretion to cancel a Notice under CPLR 6515, pursuant to a “double-bonding” scenario: “upon such terms as are just … if the moving party [usually, the defendant owner] shall give an undertaking in an amount to be fixed by the court, if:

• the court finds that adequate relief can be secured to the plaintiff (the Notice filer) by the giving of such undertaking; or
• in such action, the plaintiff fails to give an undertaking, in an amount to be fixed by the court, that the plaintiff will indemnify the moving party for the damages that he may incur if the notice is not canceled.”

Cases in Point

Thus, absent a stipulation or other voluntary action by a claimant, if the Notice was filed in an appropriate action and process promptly served, the realty will be tied up for at least several years. Three recent cases underscore this dilemma to the defendant-owner.

Evangelista v. VSL Enterprises Corp., ____ Misc.3d _____, N.Y.L.J., 1/21/04, p. 19, col. 3 (Sup., Nass. Co.). Plaintiff commenced what essentially was a fraudulent conveyance action. The defendant transferee unsuccessfully: 1) disputed timely service, and 2) asked the court to compel plaintiff to post a $500,000 bond.

Regarding CPLR 6515, the court held:

“[CPLR 6515] addresses an application by a defendant to vacate a lis pendens [sic] in exchange for posting a bond. Vacatur of the lis pendens [sic] is conditioned upon posting a bond [by the defendant-owner], and the plaintiff may prevent vacatur by also giving an undertaking to indemnify the defendant for continuing the notice of pendency. The double bonding procedure of CPLR 6515 does not admit of an undertaking imposed upon the plaintiff only, which is improper as 'CPLR 6515 requires that the moving party, the defendant [-owner], post an undertaking' (Andesco, Inc. v. Page, 137 A.D.2d 349, 354). Accordingly, the motion is denied.”

Ungureanu v. Battaglia, ____ Misc.3d ____, NYLJ, 1/21/04, p. 19, col. 1 (Sup., Q. Co.), concerned an alleged encroaching fence. Plaintiff asserted trespass and nuisance, and wanted the fence removed. The court denied the defendant's motion to vacate the Notice filed against his property. The defendant asserted that if there was an encroachment, it was upon the plaintiff's property and did not affect his. The court disagreed: “the essence of plaintiff's complaint involves a claim to possession of defendant's premises and is not, as claimed by defendant, merely an encroachment or wrong perpetrated by defendant upon plaintiff's property that cannot form the basis for the filing of a notice of pendency.”

The court also held: “the current state of the law is that such a possibility [trespass affecting defendant's realty] is sufficient to justify the filing of a notice of pendency”. After reviewing relevant precedent (e.g., compare, Lafayette Forwarding Co., Inc. v. Rothbart Garage Operators, Inc., 205 App. Div. 247 (sustaining a Notice where defendant's construction invaded plaintiff's land) with, Braunston v. Anchorage Woods, Inc., 10 N.Y.2d 302 (an action to abate a nuisance of run-off rain water; Notice vacated), and 5303 Realty Corp. v. O&Y Equity Corp., 65 N.Y.2d 313 (an action regarding sales of shares, ie, personalty, of a real estate owning entity; Notice vacated), the court ruled:

“Plaintiff's claim involves defendant's impermissible use of plaintiff's property by erecting a fence upon land plaintiff claims is hers. Defendants' application indicates that he claims that the fence was built on his land. Consequently, the nature of this dispute involves plaintiff seeking to protect his right, title or interest in property that defendant claims to possess. Clearly, if the plaintiff is correct, the boundary lines of defendant's property would be changed and defendant's use or enjoyment would be affected. This interest in the disputed property might be lost in the transfer of defendant's property to a buyer for value without notice of the claim. As such, plaintiff was entitled to file the instant Notice of Pendency.” [Citations omitted]

Nastasi v. Nastasi, ____ Misc.3d ____, NYLJ, 1/02/04, p. 19, col. 1 (Sup., Q. Co.). The dispute concerned a purported breach of agreements regarding transfer of corporate shares. Land was sold pursuant to one of the agreements. The conveyor sued for damages and either the imposition of a constructive trust upon or reconveyance to her of the realty. While damages were legally insufficient to sustain the Notice, the claims to the land were adequate.

Contractual clauses required arbitration. Defendants sought arbitration. And, since a Notice is not allowed in arbitration, see, CPLR 7502 (c), and 5303 Realty, supra, 64 N.Y.2d at 324, defendants sought to vacate the Notice. Arbitration was directed but the Notice was not vacated. It was validly filed in a plenary action asserting a claim to realty; ergo, CPLR 6514 was inapplicable:

“[T]here is little a court may do to provide relief to the property owner if the procedures described in article 65 have been followed or if the action has been commenced or prosecuted in good faith.”

And, insofar as CPLR 7502 was concerned, the court held that there “is nothing [in article 75] to suggest that an existing Notice of Pendency [filed in an action] must be canceled while the [latter commenced] arbitration is pending.”

The rationale was implicitly based upon the technicality that the plenary suit is stayed, not discontinued, during arbitration. But the court's holding invites unscrupulous litigants who agreed to arbitrate instead to sue, file a Notice and thereafter sit back and wait for the defendant-owner, whose land has been unilaterally restrained, to seek arbitration. The Notice remains even if the parties arbitrate.

Of course, the defendant owner could seek CPLR 6514(b) relief, asserting that the claimant acted in bad faith by opting for an action, instead of arbitrating, simply for the purpose of filing a Notice that could not have been filed if the claimant had initially complied with its obligation to arbitrate. Regrettably, any such CPLR 6514(b) motion invites additional litigation while the parties also are involved in the arbitration proceeding.

Conclusion

A properly filed ex parte CPLR Article 65 Notice of Pendency is a powerful provisional remedy for a plaintiff who promptly effects service and, if need be, timely renewal of the Notice. And, this is true even if the parties wind up arbitrating. Notwithstanding CPLR 6514 and 6515, defendant-owners of unilaterally restrained land face sizable hurdles, arguably inscalable heights, when seeking to vacate validly filed Notices.

RPAPL ' 1331 and RPAPL ' 1403 Notices of Pendency are requisite elements for foreclosing a mortgage. See, Chiarelli v. Kotsifos , 5 A.D.3d 345 (a notice of pendency is a prerequisite to obtaining a judgment in a mortgage foreclosure action); Campbell v. Smith, 309 A.D.2d 581, 582 (a notice of pendency is required in a foreclosure action under RPAPL Article 13). In contrast, an ex parte CPLR Article 65 Notice of Pendency (the “Notice”) is not required but it is a significant tool in an action claiming title to, or an interest in or the use or enjoyment of, another's land. The filer does not have to make a meritorious showing or post a bond. Article 65 provides mechanisms for the defendant-owner to vacate the Notice that caused an unilaterally imposed restraint on its realty. But, recent case law establishes the near futility of such efforts if the plaintiff has satisfied the minimal statutory requisites for filing the Notice.

The claimant need only: 1) sue and assert an interest in a defendant's land, 2) unilaterally file a Notice setting forth the names of the parties, the action's relief and designation of the property, and 3) promptly effect service. The defendant will be hard pressed to free up the realty while the lawsuit is pending.

CPLR 6514(a) provides that, upon motion, a court is required to set aside a Notice if service of process has not been made upon at least one defendant within thirty (30) days of filing the Notice. Otherwise, it continues until the case settles, discontinues or abates. A prudent plaintiff will effect timely service, mooting this mandatory vacatur basis.

Also, a court must vacate a Notice if the time to appeal from a final judgment against the plaintiff who filed the Notice has expired or enforcement of such a judgment has not been stayed pending its appeal.

Validity and Renewal of a Notice

A Notice is valid for 3 years, unless renewed before its expiry. CPLR 6513. Unlike a foreclosure action in which a plaintiff may file a new RPAPL ' 1331 notice of pendency if the first lapsed without renewal or was vacated by reason of a dismissal without prejudice of the action ( e.g., Bankers Trust Co. of California, N.A. v. Lifson , 5 A.D.3d 710; NYCTL 1997-1 Trust v. Oneg Shabbos, Inc. , 5 A.D.3d 568], the rule is different regarding CPLR Article 65 Notices. A plaintiff-claimant is barred from re-filing another Notice whether the first one lapsed without renewal or the underlying action was discontinued without prejudice. Matter of Sakow, 97 N.Y.2d 436, 442.

A diligent plaintiff either will timely renew its Notice or, if the IAS Court directs dismissal, immediately appeal and seek a stay of the dismissal pending appeal. e.g., ' 600.2(a)(7) of the Rules of the Appellate Division, First Department. But, if the plaintiff is not vigilant and later files a new Notice, it must be vacated. See, MCK Building Assocs., Inc. v. St. Lawrence University , 5 A.D.3d 911 (Lien Law foreclosure; expired Notice could not be renewed or refiled; foreclosure claim dismissed); Cohen v. Elul Diamonds, Inc. , ___ Misc.3d ___, N.Y.L.J., 6/9/04, p. 23, col. 1 (Sup., Kings Co.) (canceling the third notice of pendency filed by plaintiffs because successive filings are prohibited by Article 65).

Striking a Notice

If the action has not been commenced or prosecuted in good faith, a court may strike a Notice. CPLR 6514(b). The court also has discretion to cancel a Notice under CPLR 6515, pursuant to a “double-bonding” scenario: “upon such terms as are just … if the moving party [usually, the defendant owner] shall give an undertaking in an amount to be fixed by the court, if:

• the court finds that adequate relief can be secured to the plaintiff (the Notice filer) by the giving of such undertaking; or
• in such action, the plaintiff fails to give an undertaking, in an amount to be fixed by the court, that the plaintiff will indemnify the moving party for the damages that he may incur if the notice is not canceled.”

Cases in Point

Thus, absent a stipulation or other voluntary action by a claimant, if the Notice was filed in an appropriate action and process promptly served, the realty will be tied up for at least several years. Three recent cases underscore this dilemma to the defendant-owner.

Evangelista v. VSL Enterprises Corp., ____ Misc.3d _____, N.Y.L.J., 1/21/04, p. 19, col. 3 (Sup., Nass. Co.). Plaintiff commenced what essentially was a fraudulent conveyance action. The defendant transferee unsuccessfully: 1) disputed timely service, and 2) asked the court to compel plaintiff to post a $500,000 bond.

Regarding CPLR 6515, the court held:

“[CPLR 6515] addresses an application by a defendant to vacate a lis pendens [sic] in exchange for posting a bond. Vacatur of the lis pendens [sic] is conditioned upon posting a bond [by the defendant-owner], and the plaintiff may prevent vacatur by also giving an undertaking to indemnify the defendant for continuing the notice of pendency. The double bonding procedure of CPLR 6515 does not admit of an undertaking imposed upon the plaintiff only, which is improper as 'CPLR 6515 requires that the moving party, the defendant [-owner], post an undertaking' ( Andesco, Inc. v. Page , 137 A.D.2d 349, 354). Accordingly, the motion is denied.”

Ungureanu v. Battaglia, ____ Misc.3d ____, NYLJ, 1/21/04, p. 19, col. 1 (Sup., Q. Co.), concerned an alleged encroaching fence. Plaintiff asserted trespass and nuisance, and wanted the fence removed. The court denied the defendant's motion to vacate the Notice filed against his property. The defendant asserted that if there was an encroachment, it was upon the plaintiff's property and did not affect his. The court disagreed: “the essence of plaintiff's complaint involves a claim to possession of defendant's premises and is not, as claimed by defendant, merely an encroachment or wrong perpetrated by defendant upon plaintiff's property that cannot form the basis for the filing of a notice of pendency.”

The court also held: “the current state of the law is that such a possibility [trespass affecting defendant's realty] is sufficient to justify the filing of a notice of pendency”. After reviewing relevant precedent ( e.g., compare, Lafayette Forwarding Co., Inc. v. Rothbart Garage Operators, Inc. , 205 App. Div. 247 (sustaining a Notice where defendant's construction invaded plaintiff's land) with, Braunston v. Anchorage Woods, Inc., 10 N.Y.2d 302 (an action to abate a nuisance of run-off rain water; Notice vacated), and 5303 Realty Corp. v. O&Y Equity Corp., 65 N.Y.2d 313 (an action regarding sales of shares, ie, personalty, of a real estate owning entity; Notice vacated), the court ruled:

“Plaintiff's claim involves defendant's impermissible use of plaintiff's property by erecting a fence upon land plaintiff claims is hers. Defendants' application indicates that he claims that the fence was built on his land. Consequently, the nature of this dispute involves plaintiff seeking to protect his right, title or interest in property that defendant claims to possess. Clearly, if the plaintiff is correct, the boundary lines of defendant's property would be changed and defendant's use or enjoyment would be affected. This interest in the disputed property might be lost in the transfer of defendant's property to a buyer for value without notice of the claim. As such, plaintiff was entitled to file the instant Notice of Pendency.” [Citations omitted]

Nastasi v. Nastasi, ____ Misc.3d ____, NYLJ, 1/02/04, p. 19, col. 1 (Sup., Q. Co.). The dispute concerned a purported breach of agreements regarding transfer of corporate shares. Land was sold pursuant to one of the agreements. The conveyor sued for damages and either the imposition of a constructive trust upon or reconveyance to her of the realty. While damages were legally insufficient to sustain the Notice, the claims to the land were adequate.

Contractual clauses required arbitration. Defendants sought arbitration. And, since a Notice is not allowed in arbitration, see, CPLR 7502 (c), and 5303 Realty, supra, 64 N.Y.2d at 324, defendants sought to vacate the Notice. Arbitration was directed but the Notice was not vacated. It was validly filed in a plenary action asserting a claim to realty; ergo, CPLR 6514 was inapplicable:

“[T]here is little a court may do to provide relief to the property owner if the procedures described in article 65 have been followed or if the action has been commenced or prosecuted in good faith.”

And, insofar as CPLR 7502 was concerned, the court held that there “is nothing [in article 75] to suggest that an existing Notice of Pendency [filed in an action] must be canceled while the [latter commenced] arbitration is pending.”

The rationale was implicitly based upon the technicality that the plenary suit is stayed, not discontinued, during arbitration. But the court's holding invites unscrupulous litigants who agreed to arbitrate instead to sue, file a Notice and thereafter sit back and wait for the defendant-owner, whose land has been unilaterally restrained, to seek arbitration. The Notice remains even if the parties arbitrate.

Of course, the defendant owner could seek CPLR 6514(b) relief, asserting that the claimant acted in bad faith by opting for an action, instead of arbitrating, simply for the purpose of filing a Notice that could not have been filed if the claimant had initially complied with its obligation to arbitrate. Regrettably, any such CPLR 6514(b) motion invites additional litigation while the parties also are involved in the arbitration proceeding.

Conclusion

A properly filed ex parte CPLR Article 65 Notice of Pendency is a powerful provisional remedy for a plaintiff who promptly effects service and, if need be, timely renewal of the Notice. And, this is true even if the parties wind up arbitrating. Notwithstanding CPLR 6514 and 6515, defendant-owners of unilaterally restrained land face sizable hurdles, arguably inscalable heights, when seeking to vacate validly filed Notices.