Real Property Law

Court of Appeals

(Opinion by Chief Judge Lippman)

In landowner's action for trespass and nuisance resulting from developer's intentional diversion of storm water onto his land, developer appealed from the Appellate Division's affirmance of Supreme Court's award of punitive damages to landowner. The Court of Appeals reversed, holding that developer's behavior did not exhibit the moral turpitude necessary to support an award of punitive damages.

Developer submitted a plan for a residential subdivision that required storm water to flow into a storm sewer and ditch, which was to create a mitigation pond on part of his land. The town approved the plan based on the erroneous belief that the ditch was on developer's land while, in fact, the ditch was on landowner's neighboring parcel. Moreover, the mitigation pond was insufficient to handle the flow of water, so developer installed drainage pipes that routed the water onto landowner's neighboring parcel, creating 30 acres of flooded wetland, which resulted in breeding of mosquitos and frogs. (Landowner apparently had a phobia about frogs, and often called family and friends to remove them from his driveway).

Developer took no action in response to complaints from landowner personally and from landowner's lawyer, indicating to landowner that the flooding was not his problem. When the town attempted to clean the ditch, landowner became enraged and would not allow town officials to enter his property. Landowner then brought this action against developer and the town. A jury awarded landowner compensatory damages against both developer (in the amount of $328,400) and the town (in the amount of $1,313,600), and also awarded $250,000 in punitive damages against developer. The parties then settled all but the punitive damages claim, but developer appealed the latter. A divided Appellate Division affirmed, and developer again appealed.

In reversing, the Court of Appeals concluded that the trial judge had properly charged the jury that punitive damages may be awarded only for conduct that “shows such wanton dishonesty as to imply a criminal indifference to civil obligations.” The court held, however, that evidence did not support a conclusion that developer's conduct met that standard. The court emphasized that developer had secured all required permits and approvals, and had hired experts to assist in planning the development. The court concluded that even if developer's acts were legally intentional, they were not undertaken with malice or gross indifference to landowner's rights. As a result, the court vacated the punitive damages award.

COMMENT

Although awarded only in exceptional circumstances, punitive damages will most often be granted if a plaintiff proves the trespasser committed trespass with conscious disregard of the plaintiff's objections. For example, in Western New York Land Conservatory, Inc. v. Cullen, 66 A.D.3d 1461, the court sustained a punitive damages award against a trespasser who cut down trees to make a path through landowner's property after landowner had blocked access to an earlier path cut by trespasser. The facts indicated that trespasser was fully aware of landowner's objections, and, indeed, when a contractor refused to enlarge a pond in a way that would encroach on landowner's property, the trespasser informed the contractor that if landowner became aware, trespasser had an attorney to “drag it out for awhile.” The court had no difficulty awarding punitive damages when trespasser subsequently hired a different contractor to perform the work. Id. Similarly, the court in Ironwood, L.L.C. v. JGB Properties, L.L.C., 99 A.D.3d 1192, held punitive damages appropriate when defendant landowner removed a railroad spur track for which plaintiff held an easement, even after receiving explicit written instructions from the easement holder that the track should not be removed, together with letter drawings filed with the county clerk clearly depicting the right of way. In cases like these, punitive damages are designed to act as a deterrent. See Western New York Land Conservatory at 1463.

Although punitive damages are not generally available in cases where trespasser has reason to believe that the land on which he trespasses is his own, courts may award punitive damages if, in the course of the trespass, the trespasser destroys property he knows belongs to someone else. For example, in West v. Hogan, 88 A.D.3d 1247, the court held punitive damages appropriate when a trespasser entered an area that was in an ownership dispute and desecrated a memorial to landowners' father, prevented cellar access to landowners' house, and destroyed plumbing fixtures that belonged to landowners.

If the trespass is committed without plaintiff's objections, or does not rise to the level of malicious conduct evidenced in West v. Hogan, only compensatory damages are available. Thus, in Warm v. State, 308 A.D.2d 534, the court denied punitive damages to a landowner whose property was damaged when developer of neighboring property failed to comply with a work permit requiring the construction of drainage facilities, resulting in erosion on landowner's property. Id. The court found the office park developer liable for trespass, but concluded that developer had not acted in willful or wanton disregard of landowner's rights.

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Ninety-Day Period for Obtaining Deficiency Judgment

M & T Real Estate Trust v. Doyle

NYLJ 3/27/13, p. 22, col. 5

Court of Appeals

(Opinion by Read, J.)

In a foreclosure action, mortgagee appealed from the Appellate Division's reversal of County Court's order granting mortgagee a deficiency judgment against mortgagor. The Court of Appeals reversed and reinstated the deficiency judgment, holding that the 90-day period for seeking a deficiency judgment runs from the time the deed was delivered to the purchaser.

In 2009, mortgagee obtained a judgment of foreclosure for the sum of $1,101,942.97 against mortgagor. At a public auction held in September, mortgagee was the highest bidder at a price of $890,000. Mortgagee then informed the referee that mortgagee would be assigning its bid to an affiliate, which would entail a delay because the affiliate was going to conduct a sealed bid sale of the foreclosure bid. On May 10, 2010, mortgagee's lawyer sent the referee a proposed deed naming the affiliate as grantee, and requested that the referee return the documents. The referee executed the document and put them into the mail on May 11. On May 13, before receiving the deed, mortgagee's lawyer told the referee that the assignee was not yet prepared to accept the deed because it had just identified a prospectice purchaser.

On May 17, the lawyer sent the executed papers back to the referee, indicating that the affiliate was not yet ready to accept the deed. Then, on Aug. 6, the lawyer requested that the referee execute the deed. The referee delivered the deed on Aug. 9, and the deed was recorded on Aug. 17. On Sept. 3, mortgagee sought entry of a deficiency judgment against mortgagor, and mortgagor opposed the motion, contending that 90 days had passed since delivery of the proper deed of conveyance, making the motion untimely under RPAPL section 1371(2). Supreme Court rejected mortgagor's argument and directed entry of a deficiency judgment, but the Appellate Division reversed, holding the motion untimely. Mortgagee appealed.

In reversing, the Court of Appeals relied on RPL section 244, which provides that a grant takes effect from its delivery. The court concluded that the refusal of mortgagee's lawyer to accept or retain possession of the deed dated May 11 rebutted any presumption of delivery in May. As a result, delivery occurred on Aug. 9, less than 90 days before mortgagee moved for a deficiency judgment. The motion was therefore timely.

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Buyers Entitled to Return Of Down Payment

Ettienne v. Hochman

NYLJ 4/12/13, p. 25, col. 5

AppDiv, Second Dept.

(memorandum opinion)

In buyers' action to recover a down payment, sellers appealed from Supreme Court's denial of their summary judgment motion and grant of summary judgment to buyers. The Appellate Division affirmed, holding that buyers had sufficiently complied with the obligations imposed on them by the mortgage contingency clause in the sale contract.

Three days before executing the sale contract, buyers applied to an institutional lender for a mortgage loan. A rider to the sale contract required buyers to apply for a no-income-check mortgage, but buyers did not make a second mortgage application. When the original institutional lender denied buyers' application, buyers immediately exercised their right to cancel the sale contract and sought return of their down payment. Sellers rejected their request. Buyers then brought this action, and Supreme Court awarded summary judgment to buyers.

In affirming, the Appellate Division held that buyers' evidentiary submissions demonstrated that it would have been futile for them to apply for a no-income-check mortgage. In particular, because the institutional lender concluded that because of buyers' credit history they were not eligible for a mortgage of any kind, the court held that sellers had failed to raise an issue of fact about whether buyers had acted in good faith.

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Punitive Damages Not Available Against Landowner Who Diverts Water onto Neighbor's Land

Marinaccio v. Town of Clarence

NYLJ 3/22/13, p. 22, col. 1

Court of Appeals

(Opinion by Chief Judge Lippman)

In landowner's action for trespass and nuisance resulting from developer's intentional diversion of storm water onto his land, developer appealed from the Appellate Division's affirmance of Supreme Court's award of punitive damages to landowner. The Court of Appeals reversed, holding that developer's behavior did not exhibit the moral turpitude necessary to support an award of punitive damages.

Developer submitted a plan for a residential subdivision that required storm water to flow into a storm sewer and ditch, which was to create a mitigation pond on part of his land. The town approved the plan based on the erroneous belief that the ditch was on developer's land while, in fact, the ditch was on landowner's neighboring parcel. Moreover, the mitigation pond was insufficient to handle the flow of water, so developer installed drainage pipes that routed the water onto landowner's neighboring parcel, creating 30 acres of flooded wetland, which resulted in breeding of mosquitos and frogs. (Landowner apparently had a phobia about frogs, and often called family and friends to remove them from his driveway).

Developer took no action in response to complaints from landowner personally and from landowner's lawyer, indicating to landowner that the flooding was not his problem. When the town attempted to clean the ditch, landowner became enraged and would not allow town officials to enter his property. Landowner then brought this action against developer and the town. A jury awarded landowner compensatory damages against both developer (in the amount of $328,400) and the town (in the amount of $1,313,600), and also awarded $250,000 in punitive damages against developer. The parties then settled all but the punitive damages claim, but developer appealed the latter. A divided Appellate Division affirmed, and developer again appealed.

In reversing, the Court of Appeals concluded that the trial judge had properly charged the jury that punitive damages may be awarded only for conduct that “shows such wanton dishonesty as to imply a criminal indifference to civil obligations.” The court held, however, that evidence did not support a conclusion that developer's conduct met that standard. The court emphasized that developer had secured all required permits and approvals, and had hired experts to assist in planning the development. The court concluded that even if developer's acts were legally intentional, they were not undertaken with malice or gross indifference to landowner's rights. As a result, the court vacated the punitive damages award.

COMMENT

Although awarded only in exceptional circumstances, punitive damages will most often be granted if a plaintiff proves the trespasser committed trespass with conscious disregard of the plaintiff's objections. For example, in Western New York Land Conservatory, Inc. v. Cullen, 66 A.D.3d 1461, the court sustained a punitive damages award against a trespasser who cut down trees to make a path through landowner's property after landowner had blocked access to an earlier path cut by trespasser. The facts indicated that trespasser was fully aware of landowner's objections, and, indeed, when a contractor refused to enlarge a pond in a way that would encroach on landowner's property, the trespasser informed the contractor that if landowner became aware, trespasser had an attorney to “drag it out for awhile.” The court had no difficulty awarding punitive damages when trespasser subsequently hired a different contractor to perform the work. Id. Similarly, the court in Ironwood, L.L.C. v. JGB Properties, L.L.C., 99 A.D.3d 1192, held punitive damages appropriate when defendant landowner removed a railroad spur track for which plaintiff held an easement, even after receiving explicit written instructions from the easement holder that the track should not be removed, together with letter drawings filed with the county clerk clearly depicting the right of way. In cases like these, punitive damages are designed to act as a deterrent. See Western New York Land Conservatory at 1463.

Although punitive damages are not generally available in cases where trespasser has reason to believe that the land on which he trespasses is his own, courts may award punitive damages if, in the course of the trespass, the trespasser destroys property he knows belongs to someone else. For example, in West v. Hogan, 88 A.D.3d 1247, the court held punitive damages appropriate when a trespasser entered an area that was in an ownership dispute and desecrated a memorial to landowners' father, prevented cellar access to landowners' house, and destroyed plumbing fixtures that belonged to landowners.

If the trespass is committed without plaintiff's objections, or does not rise to the level of malicious conduct evidenced in West v. Hogan, only compensatory damages are available. Thus, in Warm v. State, 308 A.D.2d 534, the court denied punitive damages to a landowner whose property was damaged when developer of neighboring property failed to comply with a work permit requiring the construction of drainage facilities, resulting in erosion on landowner's property. Id. The court found the office park developer liable for trespass, but concluded that developer had not acted in willful or wanton disregard of landowner's rights.

'

Ninety-Day Period for Obtaining Deficiency Judgment

M & T Real Estate Trust v. Doyle

NYLJ 3/27/13, p. 22, col. 5

Court of Appeals

(Opinion by Read, J.)

In a foreclosure action, mortgagee appealed from the Appellate Division's reversal of County Court's order granting mortgagee a deficiency judgment against mortgagor. The Court of Appeals reversed and reinstated the deficiency judgment, holding that the 90-day period for seeking a deficiency judgment runs from the time the deed was delivered to the purchaser.

In 2009, mortgagee obtained a judgment of foreclosure for the sum of $1,101,942.97 against mortgagor. At a public auction held in September, mortgagee was the highest bidder at a price of $890,000. Mortgagee then informed the referee that mortgagee would be assigning its bid to an affiliate, which would entail a delay because the affiliate was going to conduct a sealed bid sale of the foreclosure bid. On May 10, 2010, mortgagee's lawyer sent the referee a proposed deed naming the affiliate as grantee, and requested that the referee return the documents. The referee executed the document and put them into the mail on May 11. On May 13, before receiving the deed, mortgagee's lawyer told the referee that the assignee was not yet prepared to accept the deed because it had just identified a prospectice purchaser.

On May 17, the lawyer sent the executed papers back to the referee, indicating that the affiliate was not yet ready to accept the deed. Then, on Aug. 6, the lawyer requested that the referee execute the deed. The referee delivered the deed on Aug. 9, and the deed was recorded on Aug. 17. On Sept. 3, mortgagee sought entry of a deficiency judgment against mortgagor, and mortgagor opposed the motion, contending that 90 days had passed since delivery of the proper deed of conveyance, making the motion untimely under RPAPL section 1371(2). Supreme Court rejected mortgagor's argument and directed entry of a deficiency judgment, but the Appellate Division reversed, holding the motion untimely. Mortgagee appealed.

In reversing, the Court of Appeals relied on RPL section 244, which provides that a grant takes effect from its delivery. The court concluded that the refusal of mortgagee's lawyer to accept or retain possession of the deed dated May 11 rebutted any presumption of delivery in May. As a result, delivery occurred on Aug. 9, less than 90 days before mortgagee moved for a deficiency judgment. The motion was therefore timely.

'

Buyers Entitled to Return Of Down Payment

Ettienne v. Hochman

NYLJ 4/12/13, p. 25, col. 5

AppDiv, Second Dept.

(memorandum opinion)

In buyers' action to recover a down payment, sellers appealed from Supreme Court's denial of their summary judgment motion and grant of summary judgment to buyers. The Appellate Division affirmed, holding that buyers had sufficiently complied with the obligations imposed on them by the mortgage contingency clause in the sale contract.

Three days before executing the sale contract, buyers applied to an institutional lender for a mortgage loan. A rider to the sale contract required buyers to apply for a no-income-check mortgage, but buyers did not make a second mortgage application. When the original institutional lender denied buyers' application, buyers immediately exercised their right to cancel the sale contract and sought return of their down payment. Sellers rejected their request. Buyers then brought this action, and Supreme Court awarded summary judgment to buyers.

In affirming, the Appellate Division held that buyers' evidentiary submissions demonstrated that it would have been futile for them to apply for a no-income-check mortgage. In particular, because the institutional lender concluded that because of buyers' credit history they were not eligible for a mortgage of any kind, the court held that sellers had failed to raise an issue of fact about whether buyers had acted in good faith.

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