Real Property Law

Tender of Payment Before Execution Sale Discharges Judgment Lien

Rondack Construction Services Inc. v. Kaatsbaan International Dance Center Inc.

NYLJ 12/16/09, p. 39, col. 1

Court of Appeals

(Opinion by Graffeo, J.)

In an action by judgment debtor to vacate an execution sale, purchaser at the sale appealed from the Appellate Division's reversal of Supreme Court's grant of purchaser's motion requiring the sheriff to executed and deliver the deed. The Court of Appeals affirmed, holding that a tender of payment by judgment debtor before the execution sale discharged the judgment lien.

In 2006, judgment creditor obtained a default judgment for $105,631.05. When judgment debtor did not pay, judgment creditor delivered an execution directing the sheriff to sell a 53-acre parcel owned by judgment debtor. The sheriff scheduled a judicial auction and sale. On the day of the sale, and before bidding began, judgment debtor offered the sheriff's representative a cashier's check for $116,754.15, an amount sufficient to satisfy the judgment, together with interest and other fees. The sheriff's representative, after receiving instructions from the County Attorney's office, refused the tender and proceeded with the sale. Judgment sale purchaser's $118,000 bid was accepted as the highest bid. Judgment debtor then brought his action to vacate the sale and to compel the sheriff to accept its check. Purchaser cross-moved to direct the sheriff to execute and deliver the deed. Supreme Court granted purchaser's cross-motion, but the Appellate Division reversed and vacated the sale, holding that judgment debtor's tender discharged the execution lien. Purchaser appealed.

In affirming, the Court of Appeals relied on its 1875 decision in Tiffany v. St. John, 65 NY 314, for the proposition that tender to the sheriff is the equivalent of payment and discharges an execution lien. The court rejected purchaser's argument that the CPLR abrogates the common law rule, noting that although CPLR 5236 abolishes a debtor's right to redeem property after an execution sale, the statute does not affect the debtor's right to redeem by tendering full payment before the property is sold at auction. The court also held that CPLR 5240, which gives courts discretionary power to regulate enforcement of a money judgment, does not abrogate a debtor's common law right to redeem property before sale without judicial intervention.

Deposit of Check with County Clerk Does Not Constitute Tender

NYCTL 1999-1 Trust v. 573 Jackson Avenue Realty Corp.

NYLJ 12/16/09, p. 39, col. 1

Court of Appeals

(Opinion by Graffeo, J.)

In an action to foreclose a real property tax lien, property owner appealed from the Appellate Division's affirmance of Supreme Court's denial of owner's motion to cancel the foreclosure sale. The Court of Appeals affirmed, holding that property owner's deposit of a check with the county clerk did not constitute tender of payment.

After landowner failed to pay property taxes, the trust acquired a tax lien from the City of New York. Later, owner paid the amount of the tax lien, but the amount was not discharged because of the owner's failure to pay interest that had accrued. Subsequently, the trust obtained a judgment of foreclosure to cover both the interest and an award of attorney's fees. Owner appealed the judgment, contending that the amount had been improperly computed, but in the meantime, a foreclosure sale was scheduled. A week before the sale, the trust wrote a letter to owner indicating that the sum of $19,070.74 could be paid to redeem the property. Owner instead deposited a check with the Bronx County Clerk, indicating that the purpose of the deposit was “to be determined” and that the persons to be benefited were “to be determined.” The day before the sale, owner informed the trust that it had filed an undertaking that “stayed” the foreclosure sale. Nevertheless, the sale proceeded as planned and a third party bought the property for $160,000. Owner then moved to cancel the foreclosure sale and to enjoin the referee from conveying title. Supreme Court denied the motion, and the Appellate Division affirmed both the judgment of foreclosure and Supreme Court's denial of the motion. Owner appealed.

In affirming, the Court of Appeals first held that the deposit did not trigger an automatic stay, because CPLR 5519(a)(2) applies only when a judgment or order directs the payment of a sum of money, and has no application to judgments of foreclosure and sale. Moreover, CPLR 5519(a)(6) was unavailing because the undertaking was not “in a sum fixed by the court.” The Court of Appeals then held that owner's reliance on RPAPL 1341 was misplaced. That statute permits a court to stay proceedings if payment is made after judgment, but the Court of Appeals held that the statute applies only when the entire amount of a mortgage has not yet come due ' unlike this case, which did not involve a partial foreclosure. Finally, the court held that the deposit did not constitute a tender of the amount due. No person was identified as the recipient of the funds when they were deposited, and the owner itself informed the trust that the deposit had merely “stayed” the proceedings, not that the payment had been made in satisfaction of the underlying debt. As a result, the property was properly sold at auction.

Mortgagee's Lien Enjoys Priority over Mechanics Lien

Arbor Realty Funding LLC v. East 51st Street Development Co.

NYLJ 12/21/09, p. 19., col. 1

Supreme Ct., N.Y. Cty.

(Edmead, J.)

In a mortgage foreclosure action, mortgagee moved for a declaration that insurance proceeds be paid to mortgagee as sole payee, while mechanics lienors cross-moved for a declaration that the insurance proceeds are trust funds for the benefit of unpaid subcontractors. The court denied all motions because the parties had failed to seek declaratory relief in their pleadings, but held that the mortgagee's equitable lien on the insurance proceeds had a claim superior to the mechanics lien.

Mortgagee has four mortgages on the property with a principal balance in excess of $70 million. Those mortgages were recorded between May and July, 2007. On March 15, 2008, a crane collapsed during construction, killing two people. Mechanics lienors performed word on the premises after the crane collapse, and filed mechanics liens between March and June of 2008. Mortgagor had procured insurance on the premises before the crane collapse. The building loan agreement between mortgagee and mortgagor required mortgagor to obtain builder's risk insurance, and required that the policy indicate that the lender was a named insured, and that any loss shall be payable to lender notwithstanding any act or negligence of borrower that might otherwise result in forfeiture of the policy. It is not clear whether the policy itself included the required provisions. After the collapse, the court, on mortgagee's motion, appointed a receiver to receive rents and collect profits from tenants or occupants of the premises. In the foreclosure action, mortgagee sought a declaration that the insurance proceeds should be paid to mortgagee, and mechanics lienors cross-moved, asserting that the proceeds should be treated as trust funds pursuant to article 3-A of the Lien Law.

The court started by noting that the building loan agreement, which required mortgagor to name mortgagee as beneficiary of the insurance policy, conferred on mortgagee an equitable lien in the insurance proceeds even if the insurance policy did not include the language required by the agreement. The court then noted that mortgagee's interest, which was recorded before the mechanics liens were acquired,
enjoyed priority over those mechanics liens. Finally, the court concluded that paying the proceeds to mortgagee would not violate article 3-A of the Lien Law because the mortgagee was not an owner, contractor, or subcontractor, so that proceeds the mortgagee would receive would not constitute trust funds within the meaning of Lien Law section 70(1). The court noted that if the owner were entitled to any insurance proceeds after mortgagee's interest had been satisfied, those proceeds would become trust assets. The court closed by noting that mortgagee had not sought declaratory relief in its pleadings, so the court denied mortgagee's motion without prejudice, “to be granted upon application of plaintiff seeking leave to amend its Complaint to add a claim for the declaratory relief sought herein.”

No Easement by Prescription Over Particular Path

Ryan v. Posner

NYLJ 12/22/09, p. 39, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by easement holder to enforce the easement and for a determination of claims to real property, easement holder appealed from Supreme Court's order granting servient owner summary judgment on easement holder's claim to use a particular path to obtain access to a spring on servient owner's property, while servient owner cross-appealed from Supreme Court's declaration that easement holder had a continued right to use the easement. The Appellate Division affirmed, holding that easement holder had not acquired an easement to use any particular path, while servient owner had come forward with no evidence to support its abandonment claim.

Easement holder had acquired an express easement for “egress and ingress” to cross servient owner's property to obtain access to a spring on that property. Easement holder had long used a particular path to obtain access to the spring. When a dispute arose over the easement, easement holder brought this action, claiming, in the alternative, an express easement over the path, and a prescriptive easement over the path. Servient owner, by contrast, contended that the easement had been extinguished by abandonment. Supreme Court rejected the easement by prescription claim, and held that the express easement did not specify any particular path. At the same time, Supreme Court granted easement holder summary judgment on servient owner's claim that the easement had been extinguished. Both parties appealed.

In affirming, the Appellate Division noted that the easement itself did not grant a right to cross via a specified path, and noted that servient owner had submitted extrinsic evidence tending to show that the parties did not intent for easement holder to have such a right. Because easement holder had come forward with no evidence to raise a triable issue of fact, Supreme Court had properly granted summary judgment to servient owner on easement holder's express easement claim. The Appellate Division then rejected easement holder's prescription claim, noting that servient owner had come forward with evidence that easement holder's long-time use of the path was a matter of neighborly accommodation, and therefore insufficient to establish the hostility necessary to support a prescriptive easement. Once again, easement holder had come forward with no evidence to raise a triable question of fact. Conversely, the Appellate Division also held that servient owner had come forward with no evidence sufficient to raise a triable issue of fact on its claim that easement holder had abandoned the easement. As a result, the court affirmed Supreme Court's order.

Easement for Ingress and Egress Includes Right to Use Pier and Dock

Sassouni v. Krim

NYLJ 12/22/09, p. 39, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action by servient owner to establish that an easement agreement does not permit easement holder to use a pier and dock constructed on servient owner's property, servient owner appealed from Supreme Court's grant of summary judgment to easement holder. The Appellate Division affirmed, holding that the easement's grant of a right to egress and ingress “for any purpose” included a right to use the pier and dock.

In 1998, easement holder signed an agreement with servient owner's predecessor. By the terms of the agreement, servient owner's predecessor granted easement holder, her heirs, and assigns, a right of way across a 22-foot wide strip of land for “ingress and egress for any purpose along said right-of-way and to the pier that is presently constructed or which may hereafter be constructed.” The easement, which was to run with the land, was properly recorded. The pier and dock had long been used by easement holder and her husband, who were close friends of servient owner's predecessor and her husband. Before the grant of the easement, easement holder, with the knowledge and consent of servient owner's predecessor, had spent $160,000 reconstructing the pier following a storm. In 2005, the servient parcel was sold to current servient owner, who brought this action to establish that the agreement did not confer on easement holder a right to use the dock. Supreme Court awarded summary judgment to easement holder, and servient owner appealed.

In affirming, the Appellate Division emphasized that the language of the easement, which gave easement holder the right to use the strip “for any purpose” and which included no limiting language, established the easement holder's right to use the dock and pier. The court went on to hold that even if there were any ambiguity in the language, the surrounding circumstances made the purpose of the easement clear. Finally, the court noted that servient owner had record notice of the easement when it purchased the servient land.

Bank Entitled to Cancellation Of Erroneously Recorded Satisfaction

New York Community Bank v. Vermonty

NYLJ 1/4/10, p. 29, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose a mortgage, record owner appealed from Supreme Court's denial of its motion to dismiss the complaint. The Appellate Division affirmed, holding that the mortgagee bank was entitled to cancellation of an erroneously recorded satisfaction of its mortgage.

Current owner was a judgment creditor of mortgagor. When owner sought to execute against the subject property, the proceeds of the execution sale were to satisfy the bank's mortgage before satisfying two judgments against mortgagor. The bank sent a payoff letter to the sheriff indicating that the amount necessary to satisfy the mortgage lien was $105,751.29, but the sheriff paid the bank only the principal balance on the mortgage, which was $95,054.47. Current owner was the successful purchaser at the sale. A letter from the sheriff was then recorded, indicating that the bank's mortgage had been satisfied by payment. Subsequently, the bank brought the current action to foreclose, seeking the remaining balance after payment of $95,054.47, and seeking to cancel discharge of its mortgage. Current owner moved to dismiss the complaint. Supreme Court denied the motion. Current owner then failed to serve an answer, and Supreme Court issued a default judgment in favor of the bank. Current owner appealed.

In affirming, the Appellate Division held that if a mortgage has not been satisfied, the mortgage lien takes priority over the interest of a purchaser at an execution sale. Because the bank's lien was not extinguished at the execution sale, the bank was entitled to foreclose. Because there had been no detrimental reliance on the discharge, the bank was entitled to cancellation of that discharge.

Easement of Way May Not Be Reserved in Favor of Third Party

Dichter v. Devers

NYLJ 12/14/09, p. 30, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In servient owner's action for a declaration that a purported easement or right of way is ineffective, dominant owner appealed from Supreme Court's grant of summary judgment to servient owner. The Appellate Division affirmed, holding that an easement may not be reserved in favor of a third party.

When servient owner's predecessor in title transferred title to servient owner's parcel, the deed reserved an easement for the benefit of dominant owner's adjoining parcel ' a parcel the predecessor did not then own. Dominant owner in this case succeeded to ownership of the adjoining parcel. In this action, servient owner sought a declaration that dominant owner had no right to use the easement. Supreme Court granted the declaration, and dominant owner appealed.

In affirming, the Appellate Division relied on the New York rule that a deed with a reservation by the grantor in favor of a third party does not create a valid interest in favor of that third party. Because servient owner established that, at the time the easement was purportedly created, the predecessor did not own the dominant land, servient owner was entitled to a declaration that no valid easement had ever been reserved.

COMMENT

The court in Dichter v. Devers applied the common law rule, reaffirmed by the Court of Appeals in Estate of Thomson v. Wade, 69 NY2d 570, that a landowner cannot create an easement benefiting land he does not own. In Thomson, the court acknowledged that “the stranger-to-the-deed rule may, at times, frustrate a grantor's intent,” but declined to abandon the rule because a grantor can avoid the rule so easily by retaining an easement in favor of himself, and then transferring the easement directly to the easement's intended beneficiary. The court emphasized the need to promote certainty in title, although it is somewhat difficult to imagine how much uncertainty would be promoted by overturning an intent-defeating rule that can so easily be avoided by competent conveyancing.

Both the Restatement and a number of high state courts have abandoned the common law rule, emphasizing that a rule can serve no significant policy if it can be evaded by using two pieces of paper instead of one. See Restatement (Third) of Property, Servitudes, section 2.6(2); Willard v. First Church of Christ, Scientist, 498 P.2d 987 (Cal.Supreme Ct).

Tender of Payment Before Execution Sale Discharges Judgment Lien

Rondack Construction Services Inc. v. Kaatsbaan International Dance Center Inc.

NYLJ 12/16/09, p. 39, col. 1

Court of Appeals

(Opinion by Graffeo, J.)

In an action by judgment debtor to vacate an execution sale, purchaser at the sale appealed from the Appellate Division's reversal of Supreme Court's grant of purchaser's motion requiring the sheriff to executed and deliver the deed. The Court of Appeals affirmed, holding that a tender of payment by judgment debtor before the execution sale discharged the judgment lien.

In 2006, judgment creditor obtained a default judgment for $105,631.05. When judgment debtor did not pay, judgment creditor delivered an execution directing the sheriff to sell a 53-acre parcel owned by judgment debtor. The sheriff scheduled a judicial auction and sale. On the day of the sale, and before bidding began, judgment debtor offered the sheriff's representative a cashier's check for $116,754.15, an amount sufficient to satisfy the judgment, together with interest and other fees. The sheriff's representative, after receiving instructions from the County Attorney's office, refused the tender and proceeded with the sale. Judgment sale purchaser's $118,000 bid was accepted as the highest bid. Judgment debtor then brought his action to vacate the sale and to compel the sheriff to accept its check. Purchaser cross-moved to direct the sheriff to execute and deliver the deed. Supreme Court granted purchaser's cross-motion, but the Appellate Division reversed and vacated the sale, holding that judgment debtor's tender discharged the execution lien. Purchaser appealed.

In affirming, the Court of Appeals relied on its 1875 decision in Tiffany v. St. John , 65 NY 314, for the proposition that tender to the sheriff is the equivalent of payment and discharges an execution lien. The court rejected purchaser's argument that the CPLR abrogates the common law rule, noting that although CPLR 5236 abolishes a debtor's right to redeem property after an execution sale, the statute does not affect the debtor's right to redeem by tendering full payment before the property is sold at auction. The court also held that CPLR 5240, which gives courts discretionary power to regulate enforcement of a money judgment, does not abrogate a debtor's common law right to redeem property before sale without judicial intervention.

Deposit of Check with County Clerk Does Not Constitute Tender

NYCTL 1999-1 Trust v. 573 Jackson Avenue Realty Corp.

NYLJ 12/16/09, p. 39, col. 1

Court of Appeals

(Opinion by Graffeo, J.)

In an action to foreclose a real property tax lien, property owner appealed from the Appellate Division's affirmance of Supreme Court's denial of owner's motion to cancel the foreclosure sale. The Court of Appeals affirmed, holding that property owner's deposit of a check with the county clerk did not constitute tender of payment.

After landowner failed to pay property taxes, the trust acquired a tax lien from the City of New York. Later, owner paid the amount of the tax lien, but the amount was not discharged because of the owner's failure to pay interest that had accrued. Subsequently, the trust obtained a judgment of foreclosure to cover both the interest and an award of attorney's fees. Owner appealed the judgment, contending that the amount had been improperly computed, but in the meantime, a foreclosure sale was scheduled. A week before the sale, the trust wrote a letter to owner indicating that the sum of $19,070.74 could be paid to redeem the property. Owner instead deposited a check with the Bronx County Clerk, indicating that the purpose of the deposit was “to be determined” and that the persons to be benefited were “to be determined.” The day before the sale, owner informed the trust that it had filed an undertaking that “stayed” the foreclosure sale. Nevertheless, the sale proceeded as planned and a third party bought the property for $160,000. Owner then moved to cancel the foreclosure sale and to enjoin the referee from conveying title. Supreme Court denied the motion, and the Appellate Division affirmed both the judgment of foreclosure and Supreme Court's denial of the motion. Owner appealed.

In affirming, the Court of Appeals first held that the deposit did not trigger an automatic stay, because CPLR 5519(a)(2) applies only when a judgment or order directs the payment of a sum of money, and has no application to judgments of foreclosure and sale. Moreover, CPLR 5519(a)(6) was unavailing because the undertaking was not “in a sum fixed by the court.” The Court of Appeals then held that owner's reliance on RPAPL 1341 was misplaced. That statute permits a court to stay proceedings if payment is made after judgment, but the Court of Appeals held that the statute applies only when the entire amount of a mortgage has not yet come due ' unlike this case, which did not involve a partial foreclosure. Finally, the court held that the deposit did not constitute a tender of the amount due. No person was identified as the recipient of the funds when they were deposited, and the owner itself informed the trust that the deposit had merely “stayed” the proceedings, not that the payment had been made in satisfaction of the underlying debt. As a result, the property was properly sold at auction.

Mortgagee's Lien Enjoys Priority over Mechanics Lien

Arbor Realty Funding LLC v. East 51st Street Development Co.

NYLJ 12/21/09, p. 19., col. 1

Supreme Ct., N.Y. Cty.

(Edmead, J.)

In a mortgage foreclosure action, mortgagee moved for a declaration that insurance proceeds be paid to mortgagee as sole payee, while mechanics lienors cross-moved for a declaration that the insurance proceeds are trust funds for the benefit of unpaid subcontractors. The court denied all motions because the parties had failed to seek declaratory relief in their pleadings, but held that the mortgagee's equitable lien on the insurance proceeds had a claim superior to the mechanics lien.

Mortgagee has four mortgages on the property with a principal balance in excess of $70 million. Those mortgages were recorded between May and July, 2007. On March 15, 2008, a crane collapsed during construction, killing two people. Mechanics lienors performed word on the premises after the crane collapse, and filed mechanics liens between March and June of 2008. Mortgagor had procured insurance on the premises before the crane collapse. The building loan agreement between mortgagee and mortgagor required mortgagor to obtain builder's risk insurance, and required that the policy indicate that the lender was a named insured, and that any loss shall be payable to lender notwithstanding any act or negligence of borrower that might otherwise result in forfeiture of the policy. It is not clear whether the policy itself included the required provisions. After the collapse, the court, on mortgagee's motion, appointed a receiver to receive rents and collect profits from tenants or occupants of the premises. In the foreclosure action, mortgagee sought a declaration that the insurance proceeds should be paid to mortgagee, and mechanics lienors cross-moved, asserting that the proceeds should be treated as trust funds pursuant to article 3-A of the Lien Law.

The court started by noting that the building loan agreement, which required mortgagor to name mortgagee as beneficiary of the insurance policy, conferred on mortgagee an equitable lien in the insurance proceeds even if the insurance policy did not include the language required by the agreement. The court then noted that mortgagee's interest, which was recorded before the mechanics liens were acquired,
enjoyed priority over those mechanics liens. Finally, the court concluded that paying the proceeds to mortgagee would not violate article 3-A of the Lien Law because the mortgagee was not an owner, contractor, or subcontractor, so that proceeds the mortgagee would receive would not constitute trust funds within the meaning of Lien Law section 70(1). The court noted that if the owner were entitled to any insurance proceeds after mortgagee's interest had been satisfied, those proceeds would become trust assets. The court closed by noting that mortgagee had not sought declaratory relief in its pleadings, so the court denied mortgagee's motion without prejudice, “to be granted upon application of plaintiff seeking leave to amend its Complaint to add a claim for the declaratory relief sought herein.”

No Easement by Prescription Over Particular Path

Ryan v. Posner

NYLJ 12/22/09, p. 39, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by easement holder to enforce the easement and for a determination of claims to real property, easement holder appealed from Supreme Court's order granting servient owner summary judgment on easement holder's claim to use a particular path to obtain access to a spring on servient owner's property, while servient owner cross-appealed from Supreme Court's declaration that easement holder had a continued right to use the easement. The Appellate Division affirmed, holding that easement holder had not acquired an easement to use any particular path, while servient owner had come forward with no evidence to support its abandonment claim.

Easement holder had acquired an express easement for “egress and ingress” to cross servient owner's property to obtain access to a spring on that property. Easement holder had long used a particular path to obtain access to the spring. When a dispute arose over the easement, easement holder brought this action, claiming, in the alternative, an express easement over the path, and a prescriptive easement over the path. Servient owner, by contrast, contended that the easement had been extinguished by abandonment. Supreme Court rejected the easement by prescription claim, and held that the express easement did not specify any particular path. At the same time, Supreme Court granted easement holder summary judgment on servient owner's claim that the easement had been extinguished. Both parties appealed.

In affirming, the Appellate Division noted that the easement itself did not grant a right to cross via a specified path, and noted that servient owner had submitted extrinsic evidence tending to show that the parties did not intent for easement holder to have such a right. Because easement holder had come forward with no evidence to raise a triable issue of fact, Supreme Court had properly granted summary judgment to servient owner on easement holder's express easement claim. The Appellate Division then rejected easement holder's prescription claim, noting that servient owner had come forward with evidence that easement holder's long-time use of the path was a matter of neighborly accommodation, and therefore insufficient to establish the hostility necessary to support a prescriptive easement. Once again, easement holder had come forward with no evidence to raise a triable question of fact. Conversely, the Appellate Division also held that servient owner had come forward with no evidence sufficient to raise a triable issue of fact on its claim that easement holder had abandoned the easement. As a result, the court affirmed Supreme Court's order.

Easement for Ingress and Egress Includes Right to Use Pier and Dock

Sassouni v. Krim

NYLJ 12/22/09, p. 39, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action by servient owner to establish that an easement agreement does not permit easement holder to use a pier and dock constructed on servient owner's property, servient owner appealed from Supreme Court's grant of summary judgment to easement holder. The Appellate Division affirmed, holding that the easement's grant of a right to egress and ingress “for any purpose” included a right to use the pier and dock.

In 1998, easement holder signed an agreement with servient owner's predecessor. By the terms of the agreement, servient owner's predecessor granted easement holder, her heirs, and assigns, a right of way across a 22-foot wide strip of land for “ingress and egress for any purpose along said right-of-way and to the pier that is presently constructed or which may hereafter be constructed.” The easement, which was to run with the land, was properly recorded. The pier and dock had long been used by easement holder and her husband, who were close friends of servient owner's predecessor and her husband. Before the grant of the easement, easement holder, with the knowledge and consent of servient owner's predecessor, had spent $160,000 reconstructing the pier following a storm. In 2005, the servient parcel was sold to current servient owner, who brought this action to establish that the agreement did not confer on easement holder a right to use the dock. Supreme Court awarded summary judgment to easement holder, and servient owner appealed.

In affirming, the Appellate Division emphasized that the language of the easement, which gave easement holder the right to use the strip “for any purpose” and which included no limiting language, established the easement holder's right to use the dock and pier. The court went on to hold that even if there were any ambiguity in the language, the surrounding circumstances made the purpose of the easement clear. Finally, the court noted that servient owner had record notice of the easement when it purchased the servient land.

Bank Entitled to Cancellation Of Erroneously Recorded Satisfaction

New York Community Bank v. Vermonty

NYLJ 1/4/10, p. 29, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose a mortgage, record owner appealed from Supreme Court's denial of its motion to dismiss the complaint. The Appellate Division affirmed, holding that the mortgagee bank was entitled to cancellation of an erroneously recorded satisfaction of its mortgage.

Current owner was a judgment creditor of mortgagor. When owner sought to execute against the subject property, the proceeds of the execution sale were to satisfy the bank's mortgage before satisfying two judgments against mortgagor. The bank sent a payoff letter to the sheriff indicating that the amount necessary to satisfy the mortgage lien was $105,751.29, but the sheriff paid the bank only the principal balance on the mortgage, which was $95,054.47. Current owner was the successful purchaser at the sale. A letter from the sheriff was then recorded, indicating that the bank's mortgage had been satisfied by payment. Subsequently, the bank brought the current action to foreclose, seeking the remaining balance after payment of $95,054.47, and seeking to cancel discharge of its mortgage. Current owner moved to dismiss the complaint. Supreme Court denied the motion. Current owner then failed to serve an answer, and Supreme Court issued a default judgment in favor of the bank. Current owner appealed.

In affirming, the Appellate Division held that if a mortgage has not been satisfied, the mortgage lien takes priority over the interest of a purchaser at an execution sale. Because the bank's lien was not extinguished at the execution sale, the bank was entitled to foreclose. Because there had been no detrimental reliance on the discharge, the bank was entitled to cancellation of that discharge.

Easement of Way May Not Be Reserved in Favor of Third Party

Dichter v. Devers

NYLJ 12/14/09, p. 30, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In servient owner's action for a declaration that a purported easement or right of way is ineffective, dominant owner appealed from Supreme Court's grant of summary judgment to servient owner. The Appellate Division affirmed, holding that an easement may not be reserved in favor of a third party.

When servient owner's predecessor in title transferred title to servient owner's parcel, the deed reserved an easement for the benefit of dominant owner's adjoining parcel ' a parcel the predecessor did not then own. Dominant owner in this case succeeded to ownership of the adjoining parcel. In this action, servient owner sought a declaration that dominant owner had no right to use the easement. Supreme Court granted the declaration, and dominant owner appealed.

In affirming, the Appellate Division relied on the New York rule that a deed with a reservation by the grantor in favor of a third party does not create a valid interest in favor of that third party. Because servient owner established that, at the time the easement was purportedly created, the predecessor did not own the dominant land, servient owner was entitled to a declaration that no valid easement had ever been reserved.

COMMENT

The court in Dichter v. Devers applied the common law rule, reaffirmed by the Court of Appeals in Estate of Thomson v. Wade, 69 NY2d 570, that a landowner cannot create an easement benefiting land he does not own. In Thomson, the court acknowledged that “the stranger-to-the-deed rule may, at times, frustrate a grantor's intent,” but declined to abandon the rule because a grantor can avoid the rule so easily by retaining an easement in favor of himself, and then transferring the easement directly to the easement's intended beneficiary. The court emphasized the need to promote certainty in title, although it is somewhat difficult to imagine how much uncertainty would be promoted by overturning an intent-defeating rule that can so easily be avoided by competent conveyancing.

Both the Restatement and a number of high state courts have abandoned the common law rule, emphasizing that a rule can serve no significant policy if it can be evaded by using two pieces of paper instead of one. See Restatement (Third) of Property, Servitudes, section 2.6(2); Willard v. First Church of Christ, Scientist, 498 P.2d 987 (Cal.Supreme Ct).