Real Property Law

Squatters Cannot Establish Adverse Possession over City-Owned Building

Akbar Self Help, Inc. v. City of New York

NYLJ 3/23/09, p. 21., col. 1

Supreme Ct., Kings Cty

(Miller, J.).

In adverse possessor's action for a determination of title to real property, the City of New York moved for dismissal of the complaint. The court granted the motion, holding that collateral estoppel precluded consideration of the adverse possession claim, and that, in any event, landowner could not establish adverse possession against the city.

Adverse possessor contends that in about 1980, Bamberg and Walker entered into possession or the subject, vacant, building, and began using it to provide employment and child development services to neighborhood residents. Adverse possessor claims that Bamberg and Walker transferred title to it in 1999. The city, however, contends that the parcel has been dedicated for public purposes since 1967, when it was made part of the Brownsville Urban Renewal Project. The city argued that adverse possessor never established that Bamberg and Walker had a claim of title, never established privity with Bamberg and Walker, and that the adverse possession claim was barred because adverse possessor had unsuccessfully asserted it as a defense in a 2002 holdover proceeding brought by the city. In addition, the city contended that because the property had been used for public or governmental purposes, no adverse possession claim could succeed.

In dismissing the complaint, the court first indicated that adverse possessor's allegations would have stated a cause of action were it not barred by collateral estoppel and by the city's alleged public use. In particular, the court held that the allegations of open use since 1980, combined with a transfer in 1999, were sufficient to state a claim. The court nevertheless dismissed the complaint, holding that even though Civil Court did not have authority to determine claims of title, adverse possessor's unsuccessful invocation of adverse possession as a defense in the holdover proceeding enabled the city to invoke collateral estoppel to bar the current adverse possession claim. Finally, the court held that “public use” should be broadly defined for adverse possession purposes, and the city's ownership of the property for urban renewal purposes provided an additional bar to the adverse possession claim.

COMMENT

Where, as in Akbar, the record owner is a municipality and the property is held for public or governmental purposes or is made inalienable by grant or statute, an adverse possession claim will not lie. Thus, in Litwin v. Town of Huntington, 208 A.D.2d 905, 906, the court denied a nursery owner's adverse possession claim, holding that the nursery owner could not use the period after December 1987 to support its claim to municipally-owned land because during that month, the town board adopted a resolution dedicating the property to the public purpose of low income housing. However, where a municipality holds property in a merely proprietary capacity ' that is, where the property is held for the purpose of sale or other disposition ' and upon which there is no prohibition as to alienability, the property is subject to claims of adverse possession. Thus, in City of Tonawanda v. Ellicott Creek Homeowners Assn., 86 A.D.2d 118, 125, the City sought to eject individuals from creek front property, but because it did not offer proof that it attempted to put the land to public use before the relevant date, its motion for summary judgment against two of the defendants failed.

On July 7, 2008, the New York State Legislature amended the adverse possession statute by requiring a possessor to establish a claim of right, and defining a claim of right as “a reasonable basis for the belief that the property belongs to the adverse possessor.” L.2008, c. 269. If the would-be adverse possessor should know that the land being occupied belongs to someone else, then under the reasonableness standard, landowner cannot prevail on an adverse possession claim. The amendment thus overturned Walling v. Przybylo, 7 N.Y.3d 228 , to the extent that Walling held that actual occupation by itself is enough to establish the claim of right element of an adverse possession claim.

The amendment applies only to complaints filed on or after July 7, 2008, L.2008, c. 269, so it did not affect the outcome in Akbar. The change in the statute makes it more difficult for a squatter to establish a claim of adverse possession. For example, if Walling were still good law, then a squatter ' a person who settles on the property without any legal claim or title ' who acted as though he or she was the owner of the property for the duration of the statutory period could thereby establish a claim of right. But after the amendment to the statute, a squatter who knows the land belongs to the city, or to another landowner, would never have a reasonable basis for believing the land is his own, and thus could never establish title by adverse possession.

Renovation of Park Structure to Include Restaurant Does Not Constitute Alienation of Parkland

Union Square Community Coalition v. New York City
Department of Parks and Recreation

NYLJ 4/3/09, p. 29., col. 1

Supreme Ct., N.Y. Cty

(Solomon, J.)

In an action by a community group for a judgment declaring that plans to locate a restaurant in Union Square Park would constitute an unlawful alienation of parkland, would violate SEQRA due to failure to prepare an environmental impact statement, and would require a zoning amendment, the municipal defendants moved for summary judgment. The court granted the motion, holding that renovation of an existing structure to include a restaurant would not constitute alienation of parkland.

Union Square Park includes an historic pavilion. A seasonal, commercial, restaurant operated south of the pavilion from 1994 through 2007. The Department of Parks and Recreation now proposes to move the restaurant into the pavilion. A neighborhood group brought this action challenging the proposal, and sought a declaratory judgment.

In awarding summary judgment to the municipal defendants, the court first rejected the community group's contention that municipal defendants were seeking carte blanche to establish private commercial restaurants in city parks. The court noted that in this case, a restaurant had been operation near the site for 13 years, and that renewal of a permit to operate in that space indicates that an eating establishment in this park, at this location, is consistent with public purposes. The court then concluded that the proposed new construction encompassed fewer than 4,000 feet, and was therefore an exempt “type II” action for SEQRA purposes, and did not require preparation of an EIS. The court then rejected the argument that a zoning amendment was necessary before the city could obtain a building permit, noting that district designations on zoning maps do not apply to public parks, and that any claim that the city would relinquish control of the restaurant area was premature and therefore unripe.

No Equitable Lien Without Evidence of an Ownership Interest

M & B Joint Venture, Ltd. v. Laurus Master Fund, Ltd.

NYLJ 4/8/09, p. 28., col. 5

Court of Appeals

(memorandum opinion)

In an action to impose an equitable lien on real property, mortgagee and current fee owner appealed from the Appellate Division's order holding that the Supreme Court had properly denied their motion to dismiss the equitable lien claim and to cancel the notice of pendency. The Court of Appeals modified to hold that the complaint should have been dismissed in its entirety because the plaintiff never submitted any evidence to establish that it had an ownership interest in the supposed equitable lien.

Owner of a New York City townhouse conveyed a mortgage to mortgagee Laurus in return for a $24 million loan. Owner then transferred the townhouse to P.H. Realty, a holding company in which owner had a 99 percent ownership interest. Owner then defaulted on the loan, and mortgagee foreclosed. The townhouse was then transferred to 14-16 East 67th Street, an entity wholly owned by mortgagee. 14-16 East 67th Street is the current fee owner of the parcel. Plaintiff, however, contends that, before any default on the mortgage, it loaned $400,000 to P.H. Realty on the understanding that it would receive a security interest in the property. Plaintiff contends that it sent a letter to Penthouse's escrow agent instructing him that the loan amount was not to be released until the agent received a fully-executed promissory note, and a second mortgage in favor of 21st Century Technologies. Plaintiff brought this action against Laurus as mortgagee and 14-16 East 67th Street as fee owner, contending that plaintiff had acquired an equitable lien when the escrow agent released the funds without securing the note or mortgage. The Supreme Court denied defendants' motion to dismiss, and the Appellate Division modified to dismiss plaintiff's unjust enrichment claim, but otherwise affirmed. Fee owner and mortgagee appealed.

In modifying to dismiss the complaint and cancel plaintiff's notice of pendency, the Court of Appeals emphasized that imposition of an equitable lien requires an express or implied agreement that there shall be a lien on specific property. In this case, the only agreement stated that the mortgage was to be in favor of 21st Century, not plaintiff. Moreover, plaintiff submitted no proof that the alleged lien had been assigned to it, or that it otherwise acquired an ownership interest in the lien. Because the evidentiary submissions conclusively established that plaintiff had no cause of action, the court dismissed the complaint and cancelled the notice of pendency.

Village's Purchase-Money Mortgage Does Not Create Unconstitutional Loan

Matter of 10 East Realty, LLC v. Incorporated Village of
Valley Stream

NYLJ 4/1/09, p. 30., col. 3

Court of Appeals

(Opinion by Jones, J.)

In an article 78 proceeding by a civic association to set aside the village's sale of property on the ground that the state constitution prevented the village from taking back a purchase money mortgage on the property, the village appealed from the Appellate Division's determination that the mortgage was a loan prohibited by the constitution's gift or loan clause. The Court of Appeals reversed and dismissed the petition, holding that the transaction did not involve an impermissible loan.

The village contracted to sell the disputed parcel for $275,000. Payment was to be made over 15 years with an interest rate of 5%. To secure payment, the village took back a purchase money mortgage. Article VIII, Section 1, of the state constitution provides that “[n]o county, city, town, village, or school district shall give or loan any money or property to or in aid of any individual, or private corporation or association ' ” The civic association sought to prevent the village from closing on the contract, arguing that the purchase money mortgage involved a loan of money or property in violation of the state constitution. The Supreme Court dismissed the proceeding, but the Appellate Division modified and held that the mortgage was a prohibited loan.

In reversing, the Court of Appeals held that this transaction was one for consideration, and did not, therefore, involve an impermissible loan. The court held that the fact that the consideration mentions an interest rate and a term of payment does not make the deferred payment plan an impermissible loan.

Squatters Cannot Establish Adverse Possession over City-Owned Building

Akbar Self Help, Inc. v. City of New York

NYLJ 3/23/09, p. 21., col. 1

Supreme Ct., Kings Cty

(Miller, J.).

In adverse possessor's action for a determination of title to real property, the City of New York moved for dismissal of the complaint. The court granted the motion, holding that collateral estoppel precluded consideration of the adverse possession claim, and that, in any event, landowner could not establish adverse possession against the city.

Adverse possessor contends that in about 1980, Bamberg and Walker entered into possession or the subject, vacant, building, and began using it to provide employment and child development services to neighborhood residents. Adverse possessor claims that Bamberg and Walker transferred title to it in 1999. The city, however, contends that the parcel has been dedicated for public purposes since 1967, when it was made part of the Brownsville Urban Renewal Project. The city argued that adverse possessor never established that Bamberg and Walker had a claim of title, never established privity with Bamberg and Walker, and that the adverse possession claim was barred because adverse possessor had unsuccessfully asserted it as a defense in a 2002 holdover proceeding brought by the city. In addition, the city contended that because the property had been used for public or governmental purposes, no adverse possession claim could succeed.

In dismissing the complaint, the court first indicated that adverse possessor's allegations would have stated a cause of action were it not barred by collateral estoppel and by the city's alleged public use. In particular, the court held that the allegations of open use since 1980, combined with a transfer in 1999, were sufficient to state a claim. The court nevertheless dismissed the complaint, holding that even though Civil Court did not have authority to determine claims of title, adverse possessor's unsuccessful invocation of adverse possession as a defense in the holdover proceeding enabled the city to invoke collateral estoppel to bar the current adverse possession claim. Finally, the court held that “public use” should be broadly defined for adverse possession purposes, and the city's ownership of the property for urban renewal purposes provided an additional bar to the adverse possession claim.

COMMENT

Where, as in Akbar, the record owner is a municipality and the property is held for public or governmental purposes or is made inalienable by grant or statute, an adverse possession claim will not lie. Thus, in Litwin v. Town of Huntington, 208 A.D.2d 905, 906, the court denied a nursery owner's adverse possession claim, holding that the nursery owner could not use the period after December 1987 to support its claim to municipally-owned land because during that month, the town board adopted a resolution dedicating the property to the public purpose of low income housing. However, where a municipality holds property in a merely proprietary capacity ' that is, where the property is held for the purpose of sale or other disposition ' and upon which there is no prohibition as to alienability, the property is subject to claims of adverse possession. Thus, in City of Tonawanda v. Ellicott Creek Homeowners Assn., 86 A.D.2d 118, 125, the City sought to eject individuals from creek front property, but because it did not offer proof that it attempted to put the land to public use before the relevant date, its motion for summary judgment against two of the defendants failed.

On July 7, 2008, the New York State Legislature amended the adverse possession statute by requiring a possessor to establish a claim of right, and defining a claim of right as “a reasonable basis for the belief that the property belongs to the adverse possessor.” L.2008, c. 269. If the would-be adverse possessor should know that the land being occupied belongs to someone else, then under the reasonableness standard, landowner cannot prevail on an adverse possession claim. The amendment thus overturned Walling v. Przybylo, 7 N.Y.3d 228 , to the extent that Walling held that actual occupation by itself is enough to establish the claim of right element of an adverse possession claim.

The amendment applies only to complaints filed on or after July 7, 2008, L.2008, c. 269, so it did not affect the outcome in Akbar. The change in the statute makes it more difficult for a squatter to establish a claim of adverse possession. For example, if Walling were still good law, then a squatter ' a person who settles on the property without any legal claim or title ' who acted as though he or she was the owner of the property for the duration of the statutory period could thereby establish a claim of right. But after the amendment to the statute, a squatter who knows the land belongs to the city, or to another landowner, would never have a reasonable basis for believing the land is his own, and thus could never establish title by adverse possession.

Renovation of Park Structure to Include Restaurant Does Not Constitute Alienation of Parkland

Union Square Community Coalition v. New York City
Department of Parks and Recreation

NYLJ 4/3/09, p. 29., col. 1

Supreme Ct., N.Y. Cty

(Solomon, J.)

In an action by a community group for a judgment declaring that plans to locate a restaurant in Union Square Park would constitute an unlawful alienation of parkland, would violate SEQRA due to failure to prepare an environmental impact statement, and would require a zoning amendment, the municipal defendants moved for summary judgment. The court granted the motion, holding that renovation of an existing structure to include a restaurant would not constitute alienation of parkland.

Union Square Park includes an historic pavilion. A seasonal, commercial, restaurant operated south of the pavilion from 1994 through 2007. The Department of Parks and Recreation now proposes to move the restaurant into the pavilion. A neighborhood group brought this action challenging the proposal, and sought a declaratory judgment.

In awarding summary judgment to the municipal defendants, the court first rejected the community group's contention that municipal defendants were seeking carte blanche to establish private commercial restaurants in city parks. The court noted that in this case, a restaurant had been operation near the site for 13 years, and that renewal of a permit to operate in that space indicates that an eating establishment in this park, at this location, is consistent with public purposes. The court then concluded that the proposed new construction encompassed fewer than 4,000 feet, and was therefore an exempt “type II” action for SEQRA purposes, and did not require preparation of an EIS. The court then rejected the argument that a zoning amendment was necessary before the city could obtain a building permit, noting that district designations on zoning maps do not apply to public parks, and that any claim that the city would relinquish control of the restaurant area was premature and therefore unripe.

No Equitable Lien Without Evidence of an Ownership Interest

M & B Joint Venture, Ltd. v. Laurus Master Fund, Ltd.

NYLJ 4/8/09, p. 28., col. 5

Court of Appeals

(memorandum opinion)

In an action to impose an equitable lien on real property, mortgagee and current fee owner appealed from the Appellate Division's order holding that the Supreme Court had properly denied their motion to dismiss the equitable lien claim and to cancel the notice of pendency. The Court of Appeals modified to hold that the complaint should have been dismissed in its entirety because the plaintiff never submitted any evidence to establish that it had an ownership interest in the supposed equitable lien.

Owner of a New York City townhouse conveyed a mortgage to mortgagee Laurus in return for a $24 million loan. Owner then transferred the townhouse to P.H. Realty, a holding company in which owner had a 99 percent ownership interest. Owner then defaulted on the loan, and mortgagee foreclosed. The townhouse was then transferred to 14-16 East 67th Street, an entity wholly owned by mortgagee. 14-16 East 67th Street is the current fee owner of the parcel. Plaintiff, however, contends that, before any default on the mortgage, it loaned $400,000 to P.H. Realty on the understanding that it would receive a security interest in the property. Plaintiff contends that it sent a letter to Penthouse's escrow agent instructing him that the loan amount was not to be released until the agent received a fully-executed promissory note, and a second mortgage in favor of 21st Century Technologies. Plaintiff brought this action against Laurus as mortgagee and 14-16 East 67th Street as fee owner, contending that plaintiff had acquired an equitable lien when the escrow agent released the funds without securing the note or mortgage. The Supreme Court denied defendants' motion to dismiss, and the Appellate Division modified to dismiss plaintiff's unjust enrichment claim, but otherwise affirmed. Fee owner and mortgagee appealed.

In modifying to dismiss the complaint and cancel plaintiff's notice of pendency, the Court of Appeals emphasized that imposition of an equitable lien requires an express or implied agreement that there shall be a lien on specific property. In this case, the only agreement stated that the mortgage was to be in favor of 21st Century, not plaintiff. Moreover, plaintiff submitted no proof that the alleged lien had been assigned to it, or that it otherwise acquired an ownership interest in the lien. Because the evidentiary submissions conclusively established that plaintiff had no cause of action, the court dismissed the complaint and cancelled the notice of pendency.

Village's Purchase-Money Mortgage Does Not Create Unconstitutional Loan

Matter of 10 East Realty, LLC v. Incorporated Village of
Valley Stream

NYLJ 4/1/09, p. 30., col. 3

Court of Appeals

(Opinion by Jones, J.)

In an article 78 proceeding by a civic association to set aside the village's sale of property on the ground that the state constitution prevented the village from taking back a purchase money mortgage on the property, the village appealed from the Appellate Division's determination that the mortgage was a loan prohibited by the constitution's gift or loan clause. The Court of Appeals reversed and dismissed the petition, holding that the transaction did not involve an impermissible loan.

The village contracted to sell the disputed parcel for $275,000. Payment was to be made over 15 years with an interest rate of 5%. To secure payment, the village took back a purchase money mortgage. Article VIII, Section 1, of the state constitution provides that “[n]o county, city, town, village, or school district shall give or loan any money or property to or in aid of any individual, or private corporation or association ' ” The civic association sought to prevent the village from closing on the contract, arguing that the purchase money mortgage involved a loan of money or property in violation of the state constitution. The Supreme Court dismissed the proceeding, but the Appellate Division modified and held that the mortgage was a prohibited loan.

In reversing, the Court of Appeals held that this transaction was one for consideration, and did not, therefore, involve an impermissible loan. The court held that the fact that the consideration mentions an interest rate and a term of payment does not make the deferred payment plan an impermissible loan.