Real Property Law

Plaintiff possessors contend that they and their predecessors have occupied the disputed strip, approximately three-feet wide by seventy-six feet long, since at least 1995. The strip includes a barbecue, plants, trees, and shrubbery, and is walled off from true owner's adjacent property by a stucco wall that extends alongside true owner's parcel. Adverse possessors argue that they acquired title to the strip no later than 2005. The difficulty with their claim is that in 2008, RPAPL 542(1) was enacted, and the new statute deems certain encroachments, including plantings and non-structural walls, as non-adverse. Moreover, the statute provides that it applies to all claims filed on or after July 7, 2008, the statute's effective date.

In granting the preliminary injunction to adverse possessors, the court held that the new statute could not constitutionally be applied to deprive a claimant of a property right which vested before the statute's enactment. In light of that holding, the court concluded that adverse possessor had established a likelihood of success on the merits, justifying a preliminary injunction precluding true owner from taking any action to remove the barbecue or the plantings.

Subsequent Purchaser Not Protected Because It Did Not Record First

ABN Mortgage Group, Inc. v. Pantoja
NYLJ 1/9/12, p. 19, col. 1
AppDiv, First Dept.
(memorandum opinion)

In an action by mortgagee for a declaration that it holds a first mortgage lien against the subject premises, mortgagee appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division modified to grant the declaration, holding that a subsequent mortgagee could not obtain priority because it failed to record before the prior mortgage was recorded.

Rapsil, prior owner of the property, conveyed to Pantoja by deed dated July 27,2001. On the same date, Pantoja executed a first mortgage to plaintiff ABN to secure a loan in the amount of $274,900. Part of the proceeds was used to satisfy an earlier Chase mortgage, recorded in 1998. Both the deed to Pantoja and the mortgage to ABN were recorded on Oct. 5, 2001. Meanwhile, Rapsil conveyed the property a second time, this time to First Home. The latter reconveyed the property to defendant Salazar and others on Sept. 21, 2001, and on the same day, Salazar and the others delivered a mortgage to MERS as nominee for defendant Saxon Equities. The Salazar deed and the MERS mortgage were not recorded until Feb. 13, 2002. When ABN brought this action to establish its priority over the second mortgage, Supreme Court denied its summary judgment motion. ABN appealed.

The Appellate Division started by citing RPL section 291, noting that to cut off a prior mortgage, a purchaser must have no knowledge of the prior mortgage and must win the race to the recording office. In this case, the Salazar deed and the MERS mortgage were not recorded until after the prior ABM mortgage. As a result, the ABN mortgage enjoys priority. The court also noted that, in any event, ABM was subrogated to the earlier Chase mortgage, which was recorded at the time of the transfer to Salazar. As a result, Salazar and the subsequent mortgagee were on constructive notice of the Chase mortgage, and their interests were therefore subordinate to that mortgage, and therefore to the ABM mortgage.

COMMENT

New York's race-notice statute awards priority to subsequent purchasers or mortgagees who take in good faith, without actual or constructive notice of a prior purchaser or mortgagee's interest, if and only if the subsequent purchaser or mortgagee wins the race to the recording office. For example, in Lend-Mor Mtge. Bankers Corp. v Nicholas, 69 A.D.3d 680, a lender received a mortgage on property to secure a loan. Before the lender recorded, a subsequent lender received and recorded a mortgage on the same property. Applying the race-notice provisions in Real Prop. L. ' 291, the court held that the subsequent lender's mortgage had priority
because it was received in good faith, without knowledge of the original lender's mortgage interest, and recorded first.

The court in ABN v. Pantoja suggests that the Salazar deed and the MERS mortgage could not obtain priority over the prior ABN mortgage because they were not recorded until after the ABN mortgage. But the court appears to have overlooked an essential issue: Did First Home, Salazar's predecessor, record its deed before Pantoja recorded its deed and ABN recorded its mortgage? If First Home had in fact recorded first, without any knowledge of Pantoja's deed and ABN's mortgage interest, then First Home would have had superior title under RPL ' 291. If that were so, then First Home's successors-in-interest would also have priority over ABN. Pinnock v. Rush, 2011 WL 2552332, illustrates the principle. In Pinnock, the court granted subsequent purchasers superior title against an earlier-recorded deed, even though they had notice of that earlier-recorded deed, because the purchasers took title as successors-in-interest to even earlier-recorded deeds. Id. The ABN decision would appear to be inconsistent with Pinnock if ABN is read to hold that ABN prevails regardless of the date on which First Home recorded its deed. But, as it turns out, First Home recorded on Nov. 1, 2001, almost a month after the Pantoja-ABN instruments were recorded. See Reel 1924 Page 110. The result the court reached in ABN, therefore, is entirely consistent with Pinnock and established law, although the court's failure to discuss First Home's late recordation could lead to confusion.

Exclusive Easement Confers Right to Obstruct Servient Owner's Use

Iorfida v. Stamos
NYLJ 1/3/12, p. 20, col. 1.
AppDiv, Second Dept.
(memorandum opinion)

In an action to enjoin dominant owner from interfering with servient owner's quiet enjoyment of an easement, dominant owner appealed from Supreme Court's judgment directing dominant owner to cease appropriation of servient owner's property and to remove obstructions from the easement. The Appellate Division modified, holding that the exclusive easement gave dominant owner the right to obstruct servient owner's use of the easement.

In 1985, the common grantor sold off the servient parcel, retaining the adjacent dominant parcel, and reserving an easement over a 5 foot by 50 foot strip of the servient parcel. The easement strip was separated from the rest of the servient parcel by a 3-foot-high retaining wall running the length of the easement. The instrument creating the easement denominated the easement as “permanent and exclusive,” and provided that it would be for the free and uninterrupted use by the dominant owners. The instrument also provided that the servient owner would not remove the retaining wall without the consent of the dominant owner, its heirs or assigns. In 1988, the common grantor sold the dominant parcel to its current owner. To resolve subsequent disputes over the easement, the parties entered into a stipulation, in 2005, requiring dominant owner to remove cultivation from the roots, sheds, debris, and other obstructions, and to cease fixing trees and shrubs on the easement. The stipulation also provided that the servient owner could replace or repair the retaining wall as it deemed appropriate. The stipulation further provided that in the event of conflict between the stipulation and the easement, and the stipulation would control. In 2007, the current dispute arose, with the servient owner complaining that the dominant owner had trespassed by placing obstructions on the easement in violation of the easement and stipulation. The dominant owner counterclaimed, contending that servient owner had violated the easement and stipulation by removing the retaining wall. Supreme Court directed dominant owner to remove pots, bushes, trees, and other obstructions, and directed the dominant owner to cease appropriating the property as its own. Dominant owner appealed.

In modifying, the Appellate Division held that the easement document made it unequivocally clear that the parties intended to create an “exclusive” easement. The court also held that the stipulation gave the servient owner no right to enter or use the easement area, and gave the servient owner no right to cease maintaining the retaining wall. The court held that dominant owner had the right to maintain potted plants on the easement, but did not have the right to plant trees or bushes in a way that encroached on land not encumbered by the easement. As a result, the court directed dominant owner to remove trees and shrubs from the portion of the servient parcel not encumbered by the easement.

Mortgage Satisfaction Properly Cancelled

Deutsche Bank Trust Co. v. Stathakis
NYLJ 1/3/12, p. 23, col. 2
AppDiv, Second Dept.
(memorandum opinion)

In an action to foreclose a mortgage, mortgagor appealed from Supreme Court's grant of a motion by non-party assignee to cancel a satisfaction of the mortgage, and from Supreme Court's denial of mortgagor's motion to cancel accrued interest and penalties. The Appellate Division modified, holding that Supreme Court had providently cancelled the satisfaction, but that mortgagor should be relieved from interest and penalties.

Mortgagee Deutsche Bank brought this foreclosure action and obtained a judgment of foreclosure and sale. On Jan. 21, 2007, the bank assigned its mortgage to Dafni. Upon receiving payment from Dafni, the bank executed and recorded a satisfaction of the mortgage although the mortgage had not, in fact been satisfied. Dafni then moved to cancel the erroneous satisfaction, and Supreme Court granted the motion. Mortgagor appealed, and also moved for relief from interest and penalties. Supreme Court canceled the mortgage, and declined to provide any relief to mortgagor.

In modifying, the Appellate Division started by noting that a mortgagee can cancel an erroneously issued discharge of the mortgage when there has not been detrimental reliance on the erroneous recording.

Here, although the mortgagor alleges that he contracted for renovations in June 2008, that contract did not qualify as detrimental reliance on the satisfaction, because mortgagee had moved to vacate the satisfaction in November 2007, seven months earlier, putting mortgagor on notice of the error. The court held, however, that mortgagor should not be liable for interest or penalties accruing after March 1, 2007, the date the satisfaction was erroneously recorded, because Deutsche Bank's error had caused significant delay in the litigation.

New Adverse Possession Statute Cannot Apply to Rights Previously Vested

Meron v. Schepsman
NYLJ 12/27/11
Supreme Ct., Nassau Cty.
(Feinman, J.)

In an action to establish title by adverse possession, plaintiff possessors sought a preliminary injunction. The court granted the injunction, concluding that the 2008 amendments to New York's adverse possession statute could not apply to rights that had vested before the statute's enactment.

Plaintiff possessors contend that they and their predecessors have occupied the disputed strip, approximately three-feet wide by seventy-six feet long, since at least 1995. The strip includes a barbecue, plants, trees, and shrubbery, and is walled off from true owner's adjacent property by a stucco wall that extends alongside true owner's parcel. Adverse possessors argue that they acquired title to the strip no later than 2005. The difficulty with their claim is that in 2008, RPAPL 542(1) was enacted, and the new statute deems certain encroachments, including plantings and non-structural walls, as non-adverse. Moreover, the statute provides that it applies to all claims filed on or after July 7, 2008, the statute's effective date.

In granting the preliminary injunction to adverse possessors, the court held that the new statute could not constitutionally be applied to deprive a claimant of a property right which vested before the statute's enactment. In light of that holding, the court concluded that adverse possessor had established a likelihood of success on the merits, justifying a preliminary injunction precluding true owner from taking any action to remove the barbecue or the plantings.

Subsequent Purchaser Not Protected Because It Did Not Record First

ABN Mortgage Group, Inc. v. Pantoja
NYLJ 1/9/12, p. 19, col. 1
AppDiv, First Dept.
(memorandum opinion)

In an action by mortgagee for a declaration that it holds a first mortgage lien against the subject premises, mortgagee appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division modified to grant the declaration, holding that a subsequent mortgagee could not obtain priority because it failed to record before the prior mortgage was recorded.

Rapsil, prior owner of the property, conveyed to Pantoja by deed dated July 27,2001. On the same date, Pantoja executed a first mortgage to plaintiff ABN to secure a loan in the amount of $274,900. Part of the proceeds was used to satisfy an earlier Chase mortgage, recorded in 1998. Both the deed to Pantoja and the mortgage to ABN were recorded on Oct. 5, 2001. Meanwhile, Rapsil conveyed the property a second time, this time to First Home. The latter reconveyed the property to defendant Salazar and others on Sept. 21, 2001, and on the same day, Salazar and the others delivered a mortgage to MERS as nominee for defendant Saxon Equities. The Salazar deed and the MERS mortgage were not recorded until Feb. 13, 2002. When ABN brought this action to establish its priority over the second mortgage, Supreme Court denied its summary judgment motion. ABN appealed.

The Appellate Division started by citing RPL section 291, noting that to cut off a prior mortgage, a purchaser must have no knowledge of the prior mortgage and must win the race to the recording office. In this case, the Salazar deed and the MERS mortgage were not recorded until after the prior ABM mortgage. As a result, the ABN mortgage enjoys priority. The court also noted that, in any event, ABM was subrogated to the earlier Chase mortgage, which was recorded at the time of the transfer to Salazar. As a result, Salazar and the subsequent mortgagee were on constructive notice of the Chase mortgage, and their interests were therefore subordinate to that mortgage, and therefore to the ABM mortgage.

COMMENT

New York's race-notice statute awards priority to subsequent purchasers or mortgagees who take in good faith, without actual or constructive notice of a prior purchaser or mortgagee's interest, if and only if the subsequent purchaser or mortgagee wins the race to the recording office. For example, in Lend-Mor Mtge. Bankers Corp. v Nicholas, 69 A.D.3d 680, a lender received a mortgage on property to secure a loan. Before the lender recorded, a subsequent lender received and recorded a mortgage on the same property. Applying the race-notice provisions in Real Prop. L. ' 291, the court held that the subsequent lender's mortgage had priority
because it was received in good faith, without knowledge of the original lender's mortgage interest, and recorded first.

The court in ABN v. Pantoja suggests that the Salazar deed and the MERS mortgage could not obtain priority over the prior ABN mortgage because they were not recorded until after the ABN mortgage. But the court appears to have overlooked an essential issue: Did First Home, Salazar's predecessor, record its deed before Pantoja recorded its deed and ABN recorded its mortgage? If First Home had in fact recorded first, without any knowledge of Pantoja's deed and ABN's mortgage interest, then First Home would have had superior title under RPL ' 291. If that were so, then First Home's successors-in-interest would also have priority over ABN. Pinnock v. Rush, 2011 WL 2552332, illustrates the principle. In Pinnock, the court granted subsequent purchasers superior title against an earlier-recorded deed, even though they had notice of that earlier-recorded deed, because the purchasers took title as successors-in-interest to even earlier-recorded deeds. Id. The ABN decision would appear to be inconsistent with Pinnock if ABN is read to hold that ABN prevails regardless of the date on which First Home recorded its deed. But, as it turns out, First Home recorded on Nov. 1, 2001, almost a month after the Pantoja-ABN instruments were recorded. See Reel 1924 Page 110. The result the court reached in ABN, therefore, is entirely consistent with Pinnock and established law, although the court's failure to discuss First Home's late recordation could lead to confusion.

Exclusive Easement Confers Right to Obstruct Servient Owner's Use

Iorfida v. Stamos
NYLJ 1/3/12, p. 20, col. 1.
AppDiv, Second Dept.
(memorandum opinion)

In an action to enjoin dominant owner from interfering with servient owner's quiet enjoyment of an easement, dominant owner appealed from Supreme Court's judgment directing dominant owner to cease appropriation of servient owner's property and to remove obstructions from the easement. The Appellate Division modified, holding that the exclusive easement gave dominant owner the right to obstruct servient owner's use of the easement.

In 1985, the common grantor sold off the servient parcel, retaining the adjacent dominant parcel, and reserving an easement over a 5 foot by 50 foot strip of the servient parcel. The easement strip was separated from the rest of the servient parcel by a 3-foot-high retaining wall running the length of the easement. The instrument creating the easement denominated the easement as “permanent and exclusive,” and provided that it would be for the free and uninterrupted use by the dominant owners. The instrument also provided that the servient owner would not remove the retaining wall without the consent of the dominant owner, its heirs or assigns. In 1988, the common grantor sold the dominant parcel to its current owner. To resolve subsequent disputes over the easement, the parties entered into a stipulation, in 2005, requiring dominant owner to remove cultivation from the roots, sheds, debris, and other obstructions, and to cease fixing trees and shrubs on the easement. The stipulation also provided that the servient owner could replace or repair the retaining wall as it deemed appropriate. The stipulation further provided that in the event of conflict between the stipulation and the easement, and the stipulation would control. In 2007, the current dispute arose, with the servient owner complaining that the dominant owner had trespassed by placing obstructions on the easement in violation of the easement and stipulation. The dominant owner counterclaimed, contending that servient owner had violated the easement and stipulation by removing the retaining wall. Supreme Court directed dominant owner to remove pots, bushes, trees, and other obstructions, and directed the dominant owner to cease appropriating the property as its own. Dominant owner appealed.

In modifying, the Appellate Division held that the easement document made it unequivocally clear that the parties intended to create an “exclusive” easement. The court also held that the stipulation gave the servient owner no right to enter or use the easement area, and gave the servient owner no right to cease maintaining the retaining wall. The court held that dominant owner had the right to maintain potted plants on the easement, but did not have the right to plant trees or bushes in a way that encroached on land not encumbered by the easement. As a result, the court directed dominant owner to remove trees and shrubs from the portion of the servient parcel not encumbered by the easement.

Mortgage Satisfaction Properly Cancelled

Deutsche Bank Trust Co. v. Stathakis
NYLJ 1/3/12, p. 23, col. 2
AppDiv, Second Dept.
(memorandum opinion)

In an action to foreclose a mortgage, mortgagor appealed from Supreme Court's grant of a motion by non-party assignee to cancel a satisfaction of the mortgage, and from Supreme Court's denial of mortgagor's motion to cancel accrued interest and penalties. The Appellate Division modified, holding that Supreme Court had providently cancelled the satisfaction, but that mortgagor should be relieved from interest and penalties.

Mortgagee Deutsche Bank brought this foreclosure action and obtained a judgment of foreclosure and sale. On Jan. 21, 2007, the bank assigned its mortgage to Dafni. Upon receiving payment from Dafni, the bank executed and recorded a satisfaction of the mortgage although the mortgage had not, in fact been satisfied. Dafni then moved to cancel the erroneous satisfaction, and Supreme Court granted the motion. Mortgagor appealed, and also moved for relief from interest and penalties. Supreme Court canceled the mortgage, and declined to provide any relief to mortgagor.

In modifying, the Appellate Division started by noting that a mortgagee can cancel an erroneously issued discharge of the mortgage when there has not been detrimental reliance on the erroneous recording.

Here, although the mortgagor alleges that he contracted for renovations in June 2008, that contract did not qualify as detrimental reliance on the satisfaction, because mortgagee had moved to vacate the satisfaction in November 2007, seven months earlier, putting mortgagor on notice of the error. The court held, however, that mortgagor should not be liable for interest or penalties accruing after March 1, 2007, the date the satisfaction was erroneously recorded, because Deutsche Bank's error had caused significant delay in the litigation.