Real Property Law

Civil Ct., Richmond Cty.

(Straniere, J.)

In a special proceeding pursuant to RPAPL ' 1931, mortgagor sought to discharge a 40-year-old purchase-money mortgage. The court denied the petition, with leave to submit supplementary documentation, holding that mortgagor had not complied with the statutory requirements.

Mortgagor bought the property in 1970 from Vanleit, Inc. and Dickerson. When mortgagor sought to sell the property in 2011, a title search revealed the existence of a purchase-money mortgage in the amount of $6,700 that remained open on the record. As a result, some of the monies paid by purchaser were deposited into escrow pending discharge of the mortgage. Mortgagor then brought this proceeding to discharge the mortgage. The alleged mortgagees, Vanleit, Inc., Dickerson, and Frank, did not appear and did not submit any opposition. Mortgagor submitted a search from the state Division of Corporations revealing that Vanleit had a status of “Inactive ' Dissolution” as of 1979. Mortgagor exercised due diligence and was unable to locate Dickerson, but did not submit evidence of adequate efforts to locate Frank. Mortgagor also submitted an affidavit indicating from his personal knowledge the date the mortgage was due and that he had paid the mortgage in full.

The court nevertheless held that mortgagor had not complied with RPAPL ' 1931. The court noted that under a prior statute, a presumption of payment arose after a lapse of 20 years from the due date of a mortgage. But the court emphasized that the 20-year provision does not appear in the current statute, which repealed the prior statute in 1963. Moreover, the court indicated that in any event, the mortgage itself did not include a due date, and mortgagor had never presented evidence of a due date for the mortgage at issue. As a result, the court held that the applicable provision of the statute was ' 1931(2), which allows a mortgagor to petition for discharge 50 years after the mortgage was recorded. Because 50 years had not yet elapsed since the date of recording, mortgagor was not entitled to a presumption that the mortgage was paid. The court, however, suggested that mortgagor might pursue another avenue to clear the mortgage.

COMMENT

RPAPL ' 1931 provides for the discharge of ancient mortgages presumed paid. New York courts interpret ' 1931 to establish a presumption of payment after a lapse of 20 years from the due date of a mortgage. Section 1931's predecessor, Real Property Law ' 340, included a 20-year presumption of payment provision. Although the provision was omitted when ' 1931 was enacted, courts continue to apply the presumption. For example, in Matter of Grasso, 168 A.D.2d 713, the Third Department held that the mortgage was properly discharged under ' 1931 where it was due over 20 years ago and there was no evidence set forth to rebut presumption of payment. In holding so, the Third Department relied on Matter of Schwartz, 21 Misc.2d 845, an earlier case where petition was brought under Real Property Law ' 340.

When a mortgage does not include a due date on its face and a petitioner does not present extrinsic evidence of a due date, courts require 50 years to have elapsed since the date of recording, before discharging an ancient mortgage. Section 1931(2) gives courts discretion to proceed on a petition if petitioner is unable “with reasonable diligence to ascertain” facts required under the statute, but only if 50 years have passed since date of recording. Accordingly, when a petitioner is unable to ascertain the due date of his mortgage, courts impose the 50-year requirement. For example, in Matter of Zimmerman, 21 Misc.2d 1048, absent an allegation of when the mortgage became due, the mortgage could not be discharged, even though 30 years had elapsed since the date of recordation.

Where the strict pre-requisites of ' 1931 are not met, a mortgagor may alternatively pursue an action under RPAPL Article 15. Unlike a proceeding under ' 1931, an Article 15 action is not summary in nature. Service is required (although service by publication is permissible). Section 1501(4) provides that where the statute of limitations for commencement of a foreclosure action has expired, any person with an estate or interest in the property may maintain an action against other person(s), known or unknown, to cancel and discharge the mortgage. Under CPLR ' 213(4), the applicable statute of limitation for an action upon a mortgage of real property is six years, which begins to run from the due date for each unpaid installment (unless the debt is accelerated, in which case the statute of limitations begins to run on the entire mortgage). For example, in Albin v. Pearson, 266 A.D.2d 487, the Second Department affirmed summary judgment for mortgagor, since it was undisputed that mortgagee failed to commence an action to foreclose within six years of debt acceleration. In contrast, petitioner in Verderame would likely be unable to succeed in a ' 1501 action since it is not clear on the facts when the mortgage was due and therefore when the statute began to run.

Deed Is Not Enough to Establish Hostility When Adverse Possessor Originally Entered As Tenant

Hogan v. Kelly

NYLJ 7/25/11, p. 20, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In an action by administrator of deceased owner of real property for a determination that the estate owns the property, the administrator appealed from Supreme Court's award of summary judgment to current occupants, who claim title by adverse possession. The Appellate Division modified, concluding that because the occupants had initially written checks denominated as “rent,” triable issues of fact remained about whether they had acquired title by adverse possession.

Powell, former owner of the property, became a widower in 1992. The Kellys then moved into the premises with him to assist with age and health problems. They wrote checks to Powell denominated “rent” from May 1994 through March 1995 (the month Powell died). In 1996, Powell's brother executed a deed to Dorothy Kelly, and the deed was promptly recorded. The Kellys lived on the property without incident until 2008, when Powell's daughter, a Panamanian citizen, discovered that Powell had owned real property in the United States. The following year, Hogan was appointed administrator of Powell's estate, and brought this action to determine title to the property. Supreme Court held that the Kellys had acquired title by adverse possession.

In modifying, the Appellate Division first concluded that the 2008 adverse possession statute, which requires a reasonable basis for the belief that the property belongs to the adverse possessor, does not apply to adverse possession claims that had vested before 2008, even if the litigation was brought after 2008. Under prior law, it was clear that the Kellys had established the requisite claim of right, even if they had knowledge that Powell's daughter was the true owner. But the court held that the Kellys were not entitled to summary judgment because of their 1994-95 checks denominated as “rent.” Because RPAPL ' 531 provides that where the relation of landlord and tenant has existed, the possession of the tenant is deemed the possession of the landlord until the expiration of 10 years after termination of the tenancy, the court held that the papers raised questions of fact about whether the Kellys originally occupied as tenants, which would raise a presumption of nonadversity for the first 10 years of their possession. In that case, the Kellys could not acquire title by adverse possession until 20 years after their initial occupation.

COMMENT

RPAPL ' 531 provides explicitly that the presumption of non-adversity created when possession originates in a landlord-tenant relationship applies “notwithstanding that the tenant has acquired another title.” RPAPL ' 531 was enacted to enable title by an adverse possession to vest more easily in occupants whose initial entry was by permission under a lease. Prior to the statute, a tenant could not hold land adversely to the landlord until a clear break in the tenancy relationship occurred and the landlord was put on sufficient notice of tenant's adverse claim. As the Court of Appeals noted in Gallea v. Hess, 71 N.Y.2d 999, “[b]ecause it was uncertain whether specific acts were sufficient to constitute a clear repudiation of permission ' it was difficult to determine when, or if adverse possession commenced. Many land titles were thus rendered unmarketable by the presumption of nonadverse possession even after many years of exclusive occupancy by a tenant.” RPAPL ' 531 provides a balance by creating a presumption of permission for the first 10 years after expiration of a lease, but by reversing the presumption once 10 years have passed.

Hogan, however, is the first case to apply RPAPL ' 531 to a situation where the adverse possessor received a deed after the termination of the tenancy. Although the deed was executed by a third party, not by the landlord, the adverse possessor relied upon it when remaining on the property. Whether receipt of this invalid deed and subsequent recording would have constituted a clear break in the tenancy relationship under prior law is unclear, because the true owner was unaware of its execution. The statute, however, makes such a determination unnecessary by providing that the 10-year statutory period applies “notwithstanding that the tenant has acquired another title.” The statute does not indicate what facts, if any, would rebut the presumption of permission. By contrast, where a tenant in common claims title by adverse possession against another tenant in common, RPAPL ' 541 creates a similar presumption against hostile possession, but provides that the presumption can be rebutted if the occupying co-tenant establishes ouster. Had the legislature intended to permit a tenant to rebut the presumption of permission in RPAPL ' 531 it could have drafted the statute in a similar manner as RPAPL ' 541.

Although ' 9 of the 2008 Act (L 2008, ch 269, ' 8) states that “[t]his act shall take effect immediately, and shall apply to claims filed on or after such effective date, two appellate courts have held it unconstitutional to apply the 2008 amendments when property rights acquired by adverse possession have vested or ripened prior to the July 7, 2008 effective date. In Franza v. Olin, 73 A.D.3d 44, the Fourth Department held that the application of the 2008 Act to the occupant was unconstitutional because it deprived occupant of a vested property right. The court noted that title to property vests in the adverse possessor once the statutory period expires, not when judicial relief is sought by the filing of a claim and adjudication by the court. Similarly, the Third Department held in Barra v. Norfolk Southern Railway Co., 75 A.D.3d 821, that if title vests prior to the effective date of the amendment, it “may not be disturbed retroactively by newly-enacted or amended legislation.” Hogan now brings the Second Department in line with the Third and Fourth Departments by holding that the new statutory definition of “claim of right,” under RPAPL ' 501 as amended in 2008, is not controlling when title vested prior to the enactment of the 2008 amendments.

Federal Government Not Bound by New York Statute Of Limitations on Fraudulent Transfers

Ceperano v. United States

NYLJ 8/10/11, U.S. Dist. Ct., EDNY

(Spatt, J.)

In an action by former landowner to quiet title to the proceeds from the sale of property, the U.S. government moved to dismiss for failure to state a claim. The court granted the government's motion, holding that the federal government was not bound by the New York statute of limitations on challenges to fraudulent transfers.

Landowner's husband transferred the family home to landowner in 1990. Subsequently, the husband pleaded guilty to conspiracy to commit money laundering, and was sentenced to pay $385,000 in restitution to two private parties. The government sought to examine the 1990 transfer to see whether it was fraudulent. Meanwhile, landowner sold the home for $450,000 and placed the proceeds in a bank account. In this action, she sought to quiet title to the proceeds, contending that the government's effort to invalidate the 1990 transfer was barred by the statute of limitations.

In granting the government's motion to dismiss, the court with landowner that the government could not use the Federal Debt Collection Procedures Act to undo the 1990 transfer. But the court held that the government was entitled to void the transfer under state fraudulent transfers law, and also held that the state statute of limitations did not bar the government's claim because the government was acting in a governmental capacity. The court rejected landowner's argument that the government was merely vindicating the rights of the private parties who had allegedly been defrauded ' rights long ago extinguished by the statute of limitations. The court held that even though the private parties might ultimately benefit from the restitution, the government was not acting as their agent when it made efforts to collect restitution. Instead, the government was pursuing its independent sovereign interest.

Mortgagor Failed to Satisfy Statutory Requirements for Discharge of 40-Year-Old Mortgage

Verderame v. Vanleit, Inc.

NYLJ 8/3/11

Civil Ct., Richmond Cty.

(Straniere, J.)

In a special proceeding pursuant to RPAPL ' 1931, mortgagor sought to discharge a 40-year-old purchase-money mortgage. The court denied the petition, with leave to submit supplementary documentation, holding that mortgagor had not complied with the statutory requirements.

Mortgagor bought the property in 1970 from Vanleit, Inc. and Dickerson. When mortgagor sought to sell the property in 2011, a title search revealed the existence of a purchase-money mortgage in the amount of $6,700 that remained open on the record. As a result, some of the monies paid by purchaser were deposited into escrow pending discharge of the mortgage. Mortgagor then brought this proceeding to discharge the mortgage. The alleged mortgagees, Vanleit, Inc., Dickerson, and Frank, did not appear and did not submit any opposition. Mortgagor submitted a search from the state Division of Corporations revealing that Vanleit had a status of “Inactive ' Dissolution” as of 1979. Mortgagor exercised due diligence and was unable to locate Dickerson, but did not submit evidence of adequate efforts to locate Frank. Mortgagor also submitted an affidavit indicating from his personal knowledge the date the mortgage was due and that he had paid the mortgage in full.

The court nevertheless held that mortgagor had not complied with RPAPL ' 1931. The court noted that under a prior statute, a presumption of payment arose after a lapse of 20 years from the due date of a mortgage. But the court emphasized that the 20-year provision does not appear in the current statute, which repealed the prior statute in 1963. Moreover, the court indicated that in any event, the mortgage itself did not include a due date, and mortgagor had never presented evidence of a due date for the mortgage at issue. As a result, the court held that the applicable provision of the statute was ' 1931(2), which allows a mortgagor to petition for discharge 50 years after the mortgage was recorded. Because 50 years had not yet elapsed since the date of recording, mortgagor was not entitled to a presumption that the mortgage was paid. The court, however, suggested that mortgagor might pursue another avenue to clear the mortgage.

COMMENT

RPAPL ' 1931 provides for the discharge of ancient mortgages presumed paid. New York courts interpret ' 1931 to establish a presumption of payment after a lapse of 20 years from the due date of a mortgage. Section 1931's predecessor, Real Property Law ' 340, included a 20-year presumption of payment provision. Although the provision was omitted when ' 1931 was enacted, courts continue to apply the presumption. For example, in Matter of Grasso, 168 A.D.2d 713, the Third Department held that the mortgage was properly discharged under ' 1931 where it was due over 20 years ago and there was no evidence set forth to rebut presumption of payment. In holding so, the Third Department relied on Matter of Schwartz, 21 Misc.2d 845, an earlier case where petition was brought under Real Property Law ' 340.

When a mortgage does not include a due date on its face and a petitioner does not present extrinsic evidence of a due date, courts require 50 years to have elapsed since the date of recording, before discharging an ancient mortgage. Section 1931(2) gives courts discretion to proceed on a petition if petitioner is unable “with reasonable diligence to ascertain” facts required under the statute, but only if 50 years have passed since date of recording. Accordingly, when a petitioner is unable to ascertain the due date of his mortgage, courts impose the 50-year requirement. For example, in Matter of Zimmerman, 21 Misc.2d 1048, absent an allegation of when the mortgage became due, the mortgage could not be discharged, even though 30 years had elapsed since the date of recordation.

Where the strict pre-requisites of ' 1931 are not met, a mortgagor may alternatively pursue an action under RPAPL Article 15. Unlike a proceeding under ' 1931, an Article 15 action is not summary in nature. Service is required (although service by publication is permissible). Section 1501(4) provides that where the statute of limitations for commencement of a foreclosure action has expired, any person with an estate or interest in the property may maintain an action against other person(s), known or unknown, to cancel and discharge the mortgage. Under CPLR ' 213(4), the applicable statute of limitation for an action upon a mortgage of real property is six years, which begins to run from the due date for each unpaid installment (unless the debt is accelerated, in which case the statute of limitations begins to run on the entire mortgage). For example, in Albin v. Pearson, 266 A.D.2d 487, the Second Department affirmed summary judgment for mortgagor, since it was undisputed that mortgagee failed to commence an action to foreclose within six years of debt acceleration. In contrast, petitioner in Verderame would likely be unable to succeed in a ' 1501 action since it is not clear on the facts when the mortgage was due and therefore when the statute began to run.

Deed Is Not Enough to Establish Hostility When Adverse Possessor Originally Entered As Tenant

Hogan v. Kelly

NYLJ 7/25/11, p. 20, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In an action by administrator of deceased owner of real property for a determination that the estate owns the property, the administrator appealed from Supreme Court's award of summary judgment to current occupants, who claim title by adverse possession. The Appellate Division modified, concluding that because the occupants had initially written checks denominated as “rent,” triable issues of fact remained about whether they had acquired title by adverse possession.

Powell, former owner of the property, became a widower in 1992. The Kellys then moved into the premises with him to assist with age and health problems. They wrote checks to Powell denominated “rent” from May 1994 through March 1995 (the month Powell died). In 1996, Powell's brother executed a deed to Dorothy Kelly, and the deed was promptly recorded. The Kellys lived on the property without incident until 2008, when Powell's daughter, a Panamanian citizen, discovered that Powell had owned real property in the United States. The following year, Hogan was appointed administrator of Powell's estate, and brought this action to determine title to the property. Supreme Court held that the Kellys had acquired title by adverse possession.

In modifying, the Appellate Division first concluded that the 2008 adverse possession statute, which requires a reasonable basis for the belief that the property belongs to the adverse possessor, does not apply to adverse possession claims that had vested before 2008, even if the litigation was brought after 2008. Under prior law, it was clear that the Kellys had established the requisite claim of right, even if they had knowledge that Powell's daughter was the true owner. But the court held that the Kellys were not entitled to summary judgment because of their 1994-95 checks denominated as “rent.” Because RPAPL ' 531 provides that where the relation of landlord and tenant has existed, the possession of the tenant is deemed the possession of the landlord until the expiration of 10 years after termination of the tenancy, the court held that the papers raised questions of fact about whether the Kellys originally occupied as tenants, which would raise a presumption of nonadversity for the first 10 years of their possession. In that case, the Kellys could not acquire title by adverse possession until 20 years after their initial occupation.

COMMENT

RPAPL ' 531 provides explicitly that the presumption of non-adversity created when possession originates in a landlord-tenant relationship applies “notwithstanding that the tenant has acquired another title.” RPAPL ' 531 was enacted to enable title by an adverse possession to vest more easily in occupants whose initial entry was by permission under a lease. Prior to the statute, a tenant could not hold land adversely to the landlord until a clear break in the tenancy relationship occurred and the landlord was put on sufficient notice of tenant's adverse claim. As the Court of Appeals noted in Gallea v. Hess, 71 N.Y.2d 999, “[b]ecause it was uncertain whether specific acts were sufficient to constitute a clear repudiation of permission ' it was difficult to determine when, or if adverse possession commenced. Many land titles were thus rendered unmarketable by the presumption of nonadverse possession even after many years of exclusive occupancy by a tenant.” RPAPL ' 531 provides a balance by creating a presumption of permission for the first 10 years after expiration of a lease, but by reversing the presumption once 10 years have passed.

Hogan, however, is the first case to apply RPAPL ' 531 to a situation where the adverse possessor received a deed after the termination of the tenancy. Although the deed was executed by a third party, not by the landlord, the adverse possessor relied upon it when remaining on the property. Whether receipt of this invalid deed and subsequent recording would have constituted a clear break in the tenancy relationship under prior law is unclear, because the true owner was unaware of its execution. The statute, however, makes such a determination unnecessary by providing that the 10-year statutory period applies “notwithstanding that the tenant has acquired another title.” The statute does not indicate what facts, if any, would rebut the presumption of permission. By contrast, where a tenant in common claims title by adverse possession against another tenant in common, RPAPL ' 541 creates a similar presumption against hostile possession, but provides that the presumption can be rebutted if the occupying co-tenant establishes ouster. Had the legislature intended to permit a tenant to rebut the presumption of permission in RPAPL ' 531 it could have drafted the statute in a similar manner as RPAPL ' 541.

Although ' 9 of the 2008 Act (L 2008, ch 269, ' 8) states that “[t]his act shall take effect immediately, and shall apply to claims filed on or after such effective date, two appellate courts have held it unconstitutional to apply the 2008 amendments when property rights acquired by adverse possession have vested or ripened prior to the July 7, 2008 effective date. In Franza v. Olin, 73 A.D.3d 44, the Fourth Department held that the application of the 2008 Act to the occupant was unconstitutional because it deprived occupant of a vested property right. The court noted that title to property vests in the adverse possessor once the statutory period expires, not when judicial relief is sought by the filing of a claim and adjudication by the court. Similarly, the Third Department held in Barra v. Norfolk Southern Railway Co., 75 A.D.3d 821, that if title vests prior to the effective date of the amendment, it “may not be disturbed retroactively by newly-enacted or amended legislation.” Hogan now brings the Second Department in line with the Third and Fourth Departments by holding that the new statutory definition of “claim of right,” under RPAPL ' 501 as amended in 2008, is not controlling when title vested prior to the enactment of the 2008 amendments.

Federal Government Not Bound by New York Statute Of Limitations on Fraudulent Transfers

Ceperano v. United States

NYLJ 8/10/11, U.S. Dist. Ct., EDNY

(Spatt, J.)

In an action by former landowner to quiet title to the proceeds from the sale of property, the U.S. government moved to dismiss for failure to state a claim. The court granted the government's motion, holding that the federal government was not bound by the New York statute of limitations on challenges to fraudulent transfers.

Landowner's husband transferred the family home to landowner in 1990. Subsequently, the husband pleaded guilty to conspiracy to commit money laundering, and was sentenced to pay $385,000 in restitution to two private parties. The government sought to examine the 1990 transfer to see whether it was fraudulent. Meanwhile, landowner sold the home for $450,000 and placed the proceeds in a bank account. In this action, she sought to quiet title to the proceeds, contending that the government's effort to invalidate the 1990 transfer was barred by the statute of limitations.

In granting the government's motion to dismiss, the court with landowner that the government could not use the Federal Debt Collection Procedures Act to undo the 1990 transfer. But the court held that the government was entitled to void the transfer under state fraudulent transfers law, and also held that the state statute of limitations did not bar the government's claim because the government was acting in a governmental capacity. The court rejected landowner's argument that the government was merely vindicating the rights of the private parties who had allegedly been defrauded ' rights long ago extinguished by the statute of limitations. The court held that even though the private parties might ultimately benefit from the restitution, the government was not acting as their agent when it made efforts to collect restitution. Instead, the government was pursuing its independent sovereign interest.