Real Property Law

Agreement Does Not Preclude Partition

Graffeo v. Paciello

NYLJ 12/17/07, p. 32, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In a brother's action against his sister for partition of property owned as tenants-in-common, brother appealed from Supreme Court's denial of his summary judgment motion. The Appellate Division reversed, holding that the brother was entitled to partition despite an agreement requiring the sister's consent to sale of the property.

The parties' grandmother conveyed the property, a three-family house, to the sister as sole-fee owner. In 1978, sister conveyed the property to herself and her brother as tenants in common. The deed included a provision prohibiting sale before the death of the parties' mother, and provided that 'then the above property may only be sold, encumbered or transferred with the written consent of both grantees.' In 2000, the sister brought an action to set aside the 1978 deed, claiming that her mother had forged her signature on the deed. That action was ultimately dismissed for lack of proof. Then, in 2003, the brother brought this action seeking partition by sale, contending that the mother had died, removing any restrictions on sale. The Supreme Court denied brother's summary judgment motion, and brother appealed.

In reversing, the court noted that sister's argument that the restrictive language in the 1978 deed prohibits alienation without the consent of the parties was not raised at the Supreme Court except in an improper sur-reply affirmation. The court then concluded that in any event, the deed language does not expressly preclude commencement of a partition action if a party unreasonably withholds consent to sale or alienation of the property. Hence, the court concluded that the brother was entitled to sale when he showed his ownership interest and that the physical partition could not be accomplished without great prejudice to the owner.

COMMENT

When tenants in common have previously entered into a written agreement not to sell the subject property, none of the parties to the agreement is entitled to partition by sale. In Buschmann v. McDermott, 154 A.D. 515, the court disallowed partition by sale because all tenants in common had previously agreed not to sell the property without unanimous consent, and the party seeking partition had not obtained unanimous consent. By contrast, in Casolo v. Nardella, 275 A.D. 502, where the tenants in common entered into an oral agreement restricting their rights to sell the subject property, the court nonetheless held that a party to the alleged agreement was entitled to partition by sale. The court reasoned that such an agreement surrenders one's valuable vested interest in real property and, under the Statute of Frauds, must be in writing. If a restriction on sale of property purports to extend beyond the lifetime of the parties to the agreement, courts limit the duration of such restrictions to the length of the lives of a particular person. Thus, in Ostrager v. Alpert, 177 A.D.2d 287, the court enforced an agreement not to partition made by two co-tenants, even though language in the agreement might have been construed to bind the successors-in-interest of the parties to the agreement. The trial court had granted partition, holding that the agreement was invalid as an unreasonable restraint on alienation, but the Appellate Division construed the restriction as terminating upon the death of either of the parties to the agreement. By construing the restriction on sale as limited in duration, the court held that the agreement did not suspend the power of alienation for an unreasonable time.

 

Remedies for Failure of Seller To Convey Clear Title

Mehlman v. 592-600 Union Avenue Corp.

NYLJ 12/20/07, p. 35, col. 2

AppDiv, First Dept.

(memorandum opinion)

In an action by buyer for specific performance of a contract to sell real property, seller appealed from the Supreme Court's award of summary judgment to buyer. The Appellate Division reversed and awarded summary judgment to seller, relying on contract provisions limiting buyer's remedies if seller could not convey clear title.

Buyer contracted to purchase the property for nearly $1.9 million. The sale contract provided that if seller would be unable to convey title in accordance with the provisions of the contract, buyer would be entitled to elect to accept such title as seller might be able to convey. If buyer did not so elect, the contract provided that 'Purchaser may terminate this contract and the sole liability of the Seller shall be to refund the Down payment to Purchaser and to reimburse Purchaser for the net cost of title examination … ' The contract made it clear that seller would not be obligated to incur any expense in excess of one-half of one percent of the Purchaser Price to cure any title defect.

A title report ordered by the buyer revealed three judgments against seller for a total of more than $675,000, and an outstanding mortgage in the sum of $550,000. Seller managed to eliminate the largest judgment, but was left with two judgments totaling over $200,000. After two adjournments of the closing, seller's lawyer sent buyer a letter indicating a readiness to close because the title insurer had agreed to a two-year escrow for the two judgments. Nevertheless, the judgments were not paid, and seller then advised the buyer that it had expended the contractually required sum to clear up the judgments, and that buyer's options were not to cancel the contract or to take the property subject to the title defects. The buyer rejected this letter and unilaterally set a closing date. Although both parties appeared at the closing site, seller's counsel refused to close, relying on the contract provision limiting liability. Buyer then brought this action for specific performance, and the Supreme Court granted buyer's motion. Seller appealed.

In reversing, the Appellate Division concluded that the Supreme Court had improperly relied on another provision of the contract, which made seller responsible, to a maximum of $10,000, for liens, fines, interest, and penalties arising out of violations issued against the premises. The provision gave seller two options if the total amount exceeded $10,000: pay the balance or cancel the contract by providing written notice to the purchaser. Buyer had argued, and had persuaded Supreme Court, that because seller did not cancel the contract by providing written notice to buyer, buyer was entitled to specific performance. The Appellate Division disagreed, concluding that this $10,000 limit did not apply to judgments obtained against seller by private parties, but rather to violations issued by government entitles. As a result, the general limitation of seller's liability was applicable, and buyer was limited to two courses of action: take the property subject to title defects, or cancel the contract. Buyer was not, therefore, entitled to specific performance, and seller was entitled to summary judgment.

 

Subdivision Approval Condition Not Waivable

Israel v. Charnews

NYLJ 12/28/07, p. 38, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an action by purchaser for specific performance of a contract to sell real property, purchaser appealed from the Supreme Court's grant of summary judgment to seller. The Appellate Division affirmed, concluding that a condition of the contract requiring purchaser to obtain subdivision approval was for the benefit of the seller as well as the purchaser, and was not therefore waivable by the purchaser.

Seller's decedent owned a 23-acre parcel, and, on Aug. 15, 2001, contracted to sell 20 of the acres to the purchaser. The contract was conditioned on purchaser obtaining, within four years, final approval from the Planning Board to subdivide the parcel into 37 lots. The three-acre parcel to be retained by seller was one of the 37 lots. Closing was to occur on or about 30 days after Planning Board approval. Shortly after the parties entered into the contract, the town imposed a moratorium on subdivision which extended until February 2005. At that time, purchaser applied to the Planning Board for a simplified two-lot subdivision in order to obtain approval within the contract's four-year period. The seller's decedent's three-acre parcel would be one of the two lots. In June 2005, seller's decedent notified planning board that he had not authorized the application to subdivide into two lots. Purchaser then brought this action for specific performance of the contract, contending that seller's decedent had an obligation to consent to the subdivision. Supreme Court awarded summary judgment to seller.

In affirming, the Appellate Division conceded that when a seller's obligation to convey is conditioned on the buyer's obtaining subdivision approval, the condition is generally for the benefit of the buyer, who can waive the condition. But the court held that the rule is different when the seller is to retain one of the parcels in the subdivision. In that event, the condition is for the benefit of both parties, and purchaser cannot unilaterally waive the condition. Here, purchaser had not demonstrated that seller had waived the contract condition about subdivision approval, and purchaser was not, therefore, entitled to specific performance. Accordingly, the Supreme Court properly awarded summary judgment to seller.

Agreement Does Not Preclude Partition

Graffeo v. Paciello

NYLJ 12/17/07, p. 32, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In a brother's action against his sister for partition of property owned as tenants-in-common, brother appealed from Supreme Court's denial of his summary judgment motion. The Appellate Division reversed, holding that the brother was entitled to partition despite an agreement requiring the sister's consent to sale of the property.

The parties' grandmother conveyed the property, a three-family house, to the sister as sole-fee owner. In 1978, sister conveyed the property to herself and her brother as tenants in common. The deed included a provision prohibiting sale before the death of the parties' mother, and provided that 'then the above property may only be sold, encumbered or transferred with the written consent of both grantees.' In 2000, the sister brought an action to set aside the 1978 deed, claiming that her mother had forged her signature on the deed. That action was ultimately dismissed for lack of proof. Then, in 2003, the brother brought this action seeking partition by sale, contending that the mother had died, removing any restrictions on sale. The Supreme Court denied brother's summary judgment motion, and brother appealed.

In reversing, the court noted that sister's argument that the restrictive language in the 1978 deed prohibits alienation without the consent of the parties was not raised at the Supreme Court except in an improper sur-reply affirmation. The court then concluded that in any event, the deed language does not expressly preclude commencement of a partition action if a party unreasonably withholds consent to sale or alienation of the property. Hence, the court concluded that the brother was entitled to sale when he showed his ownership interest and that the physical partition could not be accomplished without great prejudice to the owner.

COMMENT

When tenants in common have previously entered into a written agreement not to sell the subject property, none of the parties to the agreement is entitled to partition by sale. In Buschmann v. McDermott, 154 A.D. 515, the court disallowed partition by sale because all tenants in common had previously agreed not to sell the property without unanimous consent, and the party seeking partition had not obtained unanimous consent. By contrast, in Casolo v. Nardella, 275 A.D. 502, where the tenants in common entered into an oral agreement restricting their rights to sell the subject property, the court nonetheless held that a party to the alleged agreement was entitled to partition by sale. The court reasoned that such an agreement surrenders one's valuable vested interest in real property and, under the Statute of Frauds, must be in writing. If a restriction on sale of property purports to extend beyond the lifetime of the parties to the agreement, courts limit the duration of such restrictions to the length of the lives of a particular person. Thus, in Ostrager v. Alpert, 177 A.D.2d 287, the court enforced an agreement not to partition made by two co-tenants, even though language in the agreement might have been construed to bind the successors-in-interest of the parties to the agreement. The trial court had granted partition, holding that the agreement was invalid as an unreasonable restraint on alienation, but the Appellate Division construed the restriction as terminating upon the death of either of the parties to the agreement. By construing the restriction on sale as limited in duration, the court held that the agreement did not suspend the power of alienation for an unreasonable time.

 

Remedies for Failure of Seller To Convey Clear Title

Mehlman v. 592-600 Union Avenue Corp.

NYLJ 12/20/07, p. 35, col. 2

AppDiv, First Dept.

(memorandum opinion)

In an action by buyer for specific performance of a contract to sell real property, seller appealed from the Supreme Court's award of summary judgment to buyer. The Appellate Division reversed and awarded summary judgment to seller, relying on contract provisions limiting buyer's remedies if seller could not convey clear title.

Buyer contracted to purchase the property for nearly $1.9 million. The sale contract provided that if seller would be unable to convey title in accordance with the provisions of the contract, buyer would be entitled to elect to accept such title as seller might be able to convey. If buyer did not so elect, the contract provided that 'Purchaser may terminate this contract and the sole liability of the Seller shall be to refund the Down payment to Purchaser and to reimburse Purchaser for the net cost of title examination … ' The contract made it clear that seller would not be obligated to incur any expense in excess of one-half of one percent of the Purchaser Price to cure any title defect.

A title report ordered by the buyer revealed three judgments against seller for a total of more than $675,000, and an outstanding mortgage in the sum of $550,000. Seller managed to eliminate the largest judgment, but was left with two judgments totaling over $200,000. After two adjournments of the closing, seller's lawyer sent buyer a letter indicating a readiness to close because the title insurer had agreed to a two-year escrow for the two judgments. Nevertheless, the judgments were not paid, and seller then advised the buyer that it had expended the contractually required sum to clear up the judgments, and that buyer's options were not to cancel the contract or to take the property subject to the title defects. The buyer rejected this letter and unilaterally set a closing date. Although both parties appeared at the closing site, seller's counsel refused to close, relying on the contract provision limiting liability. Buyer then brought this action for specific performance, and the Supreme Court granted buyer's motion. Seller appealed.

In reversing, the Appellate Division concluded that the Supreme Court had improperly relied on another provision of the contract, which made seller responsible, to a maximum of $10,000, for liens, fines, interest, and penalties arising out of violations issued against the premises. The provision gave seller two options if the total amount exceeded $10,000: pay the balance or cancel the contract by providing written notice to the purchaser. Buyer had argued, and had persuaded Supreme Court, that because seller did not cancel the contract by providing written notice to buyer, buyer was entitled to specific performance. The Appellate Division disagreed, concluding that this $10,000 limit did not apply to judgments obtained against seller by private parties, but rather to violations issued by government entitles. As a result, the general limitation of seller's liability was applicable, and buyer was limited to two courses of action: take the property subject to title defects, or cancel the contract. Buyer was not, therefore, entitled to specific performance, and seller was entitled to summary judgment.

 

Subdivision Approval Condition Not Waivable

Israel v. Charnews

NYLJ 12/28/07, p. 38, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an action by purchaser for specific performance of a contract to sell real property, purchaser appealed from the Supreme Court's grant of summary judgment to seller. The Appellate Division affirmed, concluding that a condition of the contract requiring purchaser to obtain subdivision approval was for the benefit of the seller as well as the purchaser, and was not therefore waivable by the purchaser.

Seller's decedent owned a 23-acre parcel, and, on Aug. 15, 2001, contracted to sell 20 of the acres to the purchaser. The contract was conditioned on purchaser obtaining, within four years, final approval from the Planning Board to subdivide the parcel into 37 lots. The three-acre parcel to be retained by seller was one of the 37 lots. Closing was to occur on or about 30 days after Planning Board approval. Shortly after the parties entered into the contract, the town imposed a moratorium on subdivision which extended until February 2005. At that time, purchaser applied to the Planning Board for a simplified two-lot subdivision in order to obtain approval within the contract's four-year period. The seller's decedent's three-acre parcel would be one of the two lots. In June 2005, seller's decedent notified planning board that he had not authorized the application to subdivide into two lots. Purchaser then brought this action for specific performance of the contract, contending that seller's decedent had an obligation to consent to the subdivision. Supreme Court awarded summary judgment to seller.

In affirming, the Appellate Division conceded that when a seller's obligation to convey is conditioned on the buyer's obtaining subdivision approval, the condition is generally for the benefit of the buyer, who can waive the condition. But the court held that the rule is different when the seller is to retain one of the parcels in the subdivision. In that event, the condition is for the benefit of both parties, and purchaser cannot unilaterally waive the condition. Here, purchaser had not demonstrated that seller had waived the contract condition about subdivision approval, and purchaser was not, therefore, entitled to specific performance. Accordingly, the Supreme Court properly awarded summary judgment to seller.