Real Property Law

AppDiv, Second Dept

(memorandum opinion)

In an action to foreclose a mortgage, the purchaser from the mortgagor appealed from the Supreme Court's denial of his motion to intervene. The Appellate Division affirmed, holding that the mortgagee had established that the conveyance to intervenor was fraudulent, eliminating any basis to permit intervention.

The mortgagee brought the foreclosure action against the mortgagor, who did not answer the complaint. After a judgment of foreclosure was entered, the intervenor moved to intervene, contending that the mortgagor had conveyed the subject property to him by quitclaim deed. The Supreme Court denied the motion, concluding that the conveyance was fraudulent.

In affirming, the Appellate Division noted first that the mortgagee had established that the mortgagor had made the conveyance at a time when the mortgagor was insolvent. The mortgagee also proved several indicia of fraudulent intent: The mortgagor knew he owed a substantial debt to the mortgagee, the real property was the only asset sufficient to satisfy the debt, the transfer was without considerations, the transfer was made in violation of the mortgage terms, and the mortgagor and purchaser shared the same real estate lawyer. On these facts, the court held that the mortgagee had established entitlement to judgment as a matter of law that the quitclaim deed effected a fraudulent conveyance.

Owner of Landlocked Parcel Acquired Easement By Necessity

Bogart v. Roven

NYLJ 7/9/04, p. 2., col. 5

AppDiv, Second Dept

(memorandum opinion)

In an action to compel determination of claims to real property, the servient owner appealed from the Supreme Court's judgment concluding that the dominant owner enjoyed full access across the disputed easement. The Appellate Division affirmed, holding that the dominant owner had obtained an easement by necessity.

The dominant owner owns a landlocked parcel, while the servient owner owns the adjacent parcel, which fronts on a road. The two parcels were owned jointly by three siblings until April 20, 1866. On that day, two of the siblings conveyed the servient parcel to the third sibling, Hedges, reserving “the privilege of crossing … with teams or trams the said premises … for the purpose of drawing wood for themselves, their heirs and assigns.” On the same day, two of the siblings conveyed the dominant, landlocked parcel to sibling Onderdonk, together with the privilege “to cross and recross the lands of … Hedges to get to the said wood lot at all time or times.” The deed to Onderdonk included no other limitations on the access right. Successors-in-interest of Onderdonk brought this action to establish an unlimited right of access to their parcel. After a jury trial, Supreme Court held that the dominant owner's access right was not limited to any particular purpose.

In affirming, the Appellate Division first concluded that the two deeds did not conflict. The right granted in the Hedges deed was not a right of way appurtenant to the Onderdonk parcel, but was instead a reservation of timber rights in the Hedges parcel. Nevertheless, the court noted that the easement created in the Onderdonk deed did not appear in the Hedges deed or in any other deed in that chain of title. That omission might have been troublesome in other circumstances, but in this case the Onderdonk parcel became landlocked as a result of the 1866 separation of the parcels. As a result, dominant owner acquired an easement by necessity, regardless of whether the easement appeared in the chain of title of the servient parcel.

Right of First Refusal Unenforceable As Unreasonable Restraint

Hermann v. AMD Realty, Inc.

NYLJ 7/9/04, p. 30, col. 4

AppDiv, Second Dept

(memorandum opinion)

In a landowners' action for a judgment declaring a right of first refusal null and void, the holder of the right appealed from the Supreme Court's grant of summary judgment to the landowners. The Appellate Division affirmed, holding that the right had expired and that it was in any event unenforceable as an unreasonable restraint on alienation.

In 1988, the landowners' father devised to them an unimproved parcel. In May, 2002, when the landowners entered into a contract to sell the parcel, a title report revealed the existence of a right of first refusal created in a 1982 agreement executed in connection with surrender of a lease on an adjacent parcel. The surrender agreement granted a right of first refusal with respect to the subject parcel at a price of $75,000. The agreement also provided that it would remain in effect “until such time as Herbert R. Herman [landowners' father] divests himself of the ownership” of the parcel. Upon learning of the right of first refusal, landowners brought this action for a judgment that it terminated upon their father's death — at which time the father had divested himself of ownership. Assignees of the original holder of the right of first refusal contended that the right had not expired upon the father's death. The Supreme Court granted summary judgment to the landowners.

In affirming, the Appellate Division noted that the surrender agreement did not limit the means by which the father could divest himself of ownership. As a result, the court concluded that the father's death constituted a divestiture of ownership, even if it was an involuntary one. The court then noted that in any event, once the landowners demonstrated the $75,000 predetermined price was substantially below the property's current market value, the right of first refusal was invalid as an unreasonable restraint on alienation because the holder of the right did not present evidence that the price served a reasonable business purpose.

Ambiguity in Use of Word 'Abut' Precludes Summary Judgment in Dispute Between Neighbors

Helena Realty, Inc. v. Impala Associates, L.P.

NYLJ 7/14/04, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Cahn, J.)

In a landowner's action for specific performance of an agreement not to install windows on a wall abutting landowner's building, both parties sought summary judgment. The court denied both summary judgment motions, holding that questions of fact remained about the meaning of the agreement between the parties.

The landowner owns a three-story residential building an a neighboring one-story commercial building on East 75th Street in Manhattan. The landowner entered into an agreement selling air rights over the buildings to a developer constructing a neighboring high-rise building. The developer covenanted that it would not install apartment windows below the landowner's maximum height “on that portion of the westerly and southerly walls of Transferee's New Building that abut the Transferor's Premises.” The westerly wall of the new building is separated from the landowner's buildings by a building owned by a third party. The developer then installed windows on the southerly wall across a courtyard from the landowner's buildings, and the landowner brought this action for specific performance of the agreement. The developer sought summary judgment, contending that because of the intervening courtyard, the wall did not abut the landowner's building.

In denying summary judgment to both parties, the court cited dictionary definitions of the word “abut,” and noted the landowner's argument that if “abut” were to mean “directly touching,” the prohibition on windows on the westerly wall would be meaningless, because that wall did not directly touchthe landowner's parcel. In light of the ambiguity, the court concluded that the parties' intent in using the word “abut” presented a question of fact. The court referred the case to a referee for a report on that issue.

Notice of Cure Rider Does Not Apply to Breach of 'Time-Is-of-the Essence' Provision of Sale Contract

Belle Harbor Washington Hotel, Inc. v. Jefferson Omega Corp.

NYLJ 7/14/04, p. 19, col. 3

Supreme Ct., Queens Cty

(Taylor, J.)

In an action by sellers for a declaration that purchasers had breached the sale contract and that the sellers were entitled to retain the down payment, the sellers moved for summary judgment. The court granted the sellers' motion, holding that the purchasers were bound by the terms of the sale contract, and had breached the “time-is-of the-essence” provision in the sale contract.

On June 23, 2003, the parties entered into a contract for the sale of three parcels of real property. The main contract called for a purchase price of $2,450,000, and a rider called for an additional payment of $950,000 to one of the sellers in consideration for surrender of her option to purchase the same parcel from the other sellers. Later, by letter agreement dated Aug. 31, the parties increased the total purchase price to $3,500,000. The purchasers made a down payment of $350,000. The sale contract also provided that time was of the essence, and that closing was to occur no later than Feb. 10, 2004. A rider to the sale contract required the sellers to provide the purchasers with a 15-day notice to cure as a condition to contract termination.

On Jan. 26, the sellers' lawyer notified the purchasers that time was of the essence and that closing would be held no later than Feb. 10. At the request of the purchasers' lawyer, the closing date was advanced to Feb. 9. On that day, the purchasers appeared, but refused to pay the contract balance of $3,150,000, contending instead that they were liable for only $2,200,000. Their position was that they were not liable for the $950,000 payment for surrender of the option. The sellers deemed the purchasers in default, but advised the purchasers that they could cure the default by appearing and tendering the full balance on the next day. The purchasers failed to appear, and sellers brought this action seeking a declaration of breach and seeking release of the down payment.

In awarding summary judgment to the sellers, the court first rejected the purchasers' contention that they were not bound to pay the $950,000. One of the purchasers had submitted an affidavit indicating that he had not agreed to pay the money, and the purchasers' lawyer had submitted an affidavit indicating that the rider was not “known to me, nor reviewed by me.”

The purchasers contended that the rider was a fiction designed to extract an additional cash payment from them. The court, however, noted that neither affidavit denied that the purchasers' principal had in fact signed the rider, and cited the affidavit by the sellers' lawyer that the principal had executed the contract in the rider in his presence and the presence of purchasers' lawyer. Because nothing in the purchasers' affidavit contradicted those statements, the court concluded that no question of fact remained for resolution.

The court then turned to the purchasers' reliance on a rider provision requiring a 15-day notice to cure. The court held the purchasers' construction of that provision would render the time-is-of-the-essence provision a nullity, because the seller would not be able to serve the purchaser with the notice to cure until the date scheduled for closing. Here, the sellers notified the purchasers of default as soon as practicable, and gave the purchasers until the following day to cure the default. On these facts, the court concluded that the sellers were entitled to release of the down payment from escrow.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.

Mortgagor's Fraudulent Conveyance Bars Intervention By Transferee

Citibank, N.A. v. Plagakis

NYLJ 7/9/04, p. 29, col. 1

AppDiv, Second Dept

(memorandum opinion)

In an action to foreclose a mortgage, the purchaser from the mortgagor appealed from the Supreme Court's denial of his motion to intervene. The Appellate Division affirmed, holding that the mortgagee had established that the conveyance to intervenor was fraudulent, eliminating any basis to permit intervention.

The mortgagee brought the foreclosure action against the mortgagor, who did not answer the complaint. After a judgment of foreclosure was entered, the intervenor moved to intervene, contending that the mortgagor had conveyed the subject property to him by quitclaim deed. The Supreme Court denied the motion, concluding that the conveyance was fraudulent.

In affirming, the Appellate Division noted first that the mortgagee had established that the mortgagor had made the conveyance at a time when the mortgagor was insolvent. The mortgagee also proved several indicia of fraudulent intent: The mortgagor knew he owed a substantial debt to the mortgagee, the real property was the only asset sufficient to satisfy the debt, the transfer was without considerations, the transfer was made in violation of the mortgage terms, and the mortgagor and purchaser shared the same real estate lawyer. On these facts, the court held that the mortgagee had established entitlement to judgment as a matter of law that the quitclaim deed effected a fraudulent conveyance.

Owner of Landlocked Parcel Acquired Easement By Necessity

Bogart v. Roven

NYLJ 7/9/04, p. 2., col. 5

AppDiv, Second Dept

(memorandum opinion)

In an action to compel determination of claims to real property, the servient owner appealed from the Supreme Court's judgment concluding that the dominant owner enjoyed full access across the disputed easement. The Appellate Division affirmed, holding that the dominant owner had obtained an easement by necessity.

The dominant owner owns a landlocked parcel, while the servient owner owns the adjacent parcel, which fronts on a road. The two parcels were owned jointly by three siblings until April 20, 1866. On that day, two of the siblings conveyed the servient parcel to the third sibling, Hedges, reserving “the privilege of crossing … with teams or trams the said premises … for the purpose of drawing wood for themselves, their heirs and assigns.” On the same day, two of the siblings conveyed the dominant, landlocked parcel to sibling Onderdonk, together with the privilege “to cross and recross the lands of … Hedges to get to the said wood lot at all time or times.” The deed to Onderdonk included no other limitations on the access right. Successors-in-interest of Onderdonk brought this action to establish an unlimited right of access to their parcel. After a jury trial, Supreme Court held that the dominant owner's access right was not limited to any particular purpose.

In affirming, the Appellate Division first concluded that the two deeds did not conflict. The right granted in the Hedges deed was not a right of way appurtenant to the Onderdonk parcel, but was instead a reservation of timber rights in the Hedges parcel. Nevertheless, the court noted that the easement created in the Onderdonk deed did not appear in the Hedges deed or in any other deed in that chain of title. That omission might have been troublesome in other circumstances, but in this case the Onderdonk parcel became landlocked as a result of the 1866 separation of the parcels. As a result, dominant owner acquired an easement by necessity, regardless of whether the easement appeared in the chain of title of the servient parcel.

Right of First Refusal Unenforceable As Unreasonable Restraint

Hermann v. AMD Realty, Inc.

NYLJ 7/9/04, p. 30, col. 4

AppDiv, Second Dept

(memorandum opinion)

In a landowners' action for a judgment declaring a right of first refusal null and void, the holder of the right appealed from the Supreme Court's grant of summary judgment to the landowners. The Appellate Division affirmed, holding that the right had expired and that it was in any event unenforceable as an unreasonable restraint on alienation.

In 1988, the landowners' father devised to them an unimproved parcel. In May, 2002, when the landowners entered into a contract to sell the parcel, a title report revealed the existence of a right of first refusal created in a 1982 agreement executed in connection with surrender of a lease on an adjacent parcel. The surrender agreement granted a right of first refusal with respect to the subject parcel at a price of $75,000. The agreement also provided that it would remain in effect “until such time as Herbert R. Herman [landowners' father] divests himself of the ownership” of the parcel. Upon learning of the right of first refusal, landowners brought this action for a judgment that it terminated upon their father's death — at which time the father had divested himself of ownership. Assignees of the original holder of the right of first refusal contended that the right had not expired upon the father's death. The Supreme Court granted summary judgment to the landowners.

In affirming, the Appellate Division noted that the surrender agreement did not limit the means by which the father could divest himself of ownership. As a result, the court concluded that the father's death constituted a divestiture of ownership, even if it was an involuntary one. The court then noted that in any event, once the landowners demonstrated the $75,000 predetermined price was substantially below the property's current market value, the right of first refusal was invalid as an unreasonable restraint on alienation because the holder of the right did not present evidence that the price served a reasonable business purpose.

Ambiguity in Use of Word 'Abut' Precludes Summary Judgment in Dispute Between Neighbors

Helena Realty, Inc. v. Impala Associates, L.P.

NYLJ 7/14/04, p. 18, col. 1

Supreme Ct., N.Y. Cty

(Cahn, J.)

In a landowner's action for specific performance of an agreement not to install windows on a wall abutting landowner's building, both parties sought summary judgment. The court denied both summary judgment motions, holding that questions of fact remained about the meaning of the agreement between the parties.

The landowner owns a three-story residential building an a neighboring one-story commercial building on East 75th Street in Manhattan. The landowner entered into an agreement selling air rights over the buildings to a developer constructing a neighboring high-rise building. The developer covenanted that it would not install apartment windows below the landowner's maximum height “on that portion of the westerly and southerly walls of Transferee's New Building that abut the Transferor's Premises.” The westerly wall of the new building is separated from the landowner's buildings by a building owned by a third party. The developer then installed windows on the southerly wall across a courtyard from the landowner's buildings, and the landowner brought this action for specific performance of the agreement. The developer sought summary judgment, contending that because of the intervening courtyard, the wall did not abut the landowner's building.

In denying summary judgment to both parties, the court cited dictionary definitions of the word “abut,” and noted the landowner's argument that if “abut” were to mean “directly touching,” the prohibition on windows on the westerly wall would be meaningless, because that wall did not directly touchthe landowner's parcel. In light of the ambiguity, the court concluded that the parties' intent in using the word “abut” presented a question of fact. The court referred the case to a referee for a report on that issue.

Notice of Cure Rider Does Not Apply to Breach of 'Time-Is-of-the Essence' Provision of Sale Contract

Belle Harbor Washington Hotel, Inc. v. Jefferson Omega Corp.

NYLJ 7/14/04, p. 19, col. 3

Supreme Ct., Queens Cty

(Taylor, J.)

In an action by sellers for a declaration that purchasers had breached the sale contract and that the sellers were entitled to retain the down payment, the sellers moved for summary judgment. The court granted the sellers' motion, holding that the purchasers were bound by the terms of the sale contract, and had breached the “time-is-of the-essence” provision in the sale contract.

On June 23, 2003, the parties entered into a contract for the sale of three parcels of real property. The main contract called for a purchase price of $2,450,000, and a rider called for an additional payment of $950,000 to one of the sellers in consideration for surrender of her option to purchase the same parcel from the other sellers. Later, by letter agreement dated Aug. 31, the parties increased the total purchase price to $3,500,000. The purchasers made a down payment of $350,000. The sale contract also provided that time was of the essence, and that closing was to occur no later than Feb. 10, 2004. A rider to the sale contract required the sellers to provide the purchasers with a 15-day notice to cure as a condition to contract termination.

On Jan. 26, the sellers' lawyer notified the purchasers that time was of the essence and that closing would be held no later than Feb. 10. At the request of the purchasers' lawyer, the closing date was advanced to Feb. 9. On that day, the purchasers appeared, but refused to pay the contract balance of $3,150,000, contending instead that they were liable for only $2,200,000. Their position was that they were not liable for the $950,000 payment for surrender of the option. The sellers deemed the purchasers in default, but advised the purchasers that they could cure the default by appearing and tendering the full balance on the next day. The purchasers failed to appear, and sellers brought this action seeking a declaration of breach and seeking release of the down payment.

In awarding summary judgment to the sellers, the court first rejected the purchasers' contention that they were not bound to pay the $950,000. One of the purchasers had submitted an affidavit indicating that he had not agreed to pay the money, and the purchasers' lawyer had submitted an affidavit indicating that the rider was not “known to me, nor reviewed by me.”

The purchasers contended that the rider was a fiction designed to extract an additional cash payment from them. The court, however, noted that neither affidavit denied that the purchasers' principal had in fact signed the rider, and cited the affidavit by the sellers' lawyer that the principal had executed the contract in the rider in his presence and the presence of purchasers' lawyer. Because nothing in the purchasers' affidavit contradicted those statements, the court concluded that no question of fact remained for resolution.

The court then turned to the purchasers' reliance on a rider provision requiring a 15-day notice to cure. The court held the purchasers' construction of that provision would render the time-is-of-the-essence provision a nullity, because the seller would not be able to serve the purchaser with the notice to cure until the date scheduled for closing. Here, the sellers notified the purchasers of default as soon as practicable, and gave the purchasers until the following day to cure the default. On these facts, the court concluded that the sellers were entitled to release of the down payment from escrow.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.