Real Property Law

NYLJ 6/21/13, p. 31, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action for return of a down payment, seller appealed from Supreme Court's denial of its motion for summary judgment dismissing the complaint. The Appellate Division reversed, holding that purchaser had failed to raise questions of fact about the enforceability of a stipulation of settlement.

Seller had contracted to sell the premises to purchaser, but purchaser had refused to close, alleging that a deed restriction limiting the premises to a single-family home made the title unmarketable and uninsurable. After litigation over the issue, the parties entered into a stipulation of settlement under the terms of which seller agreed to reduce the purchase price, but purchaser agreed to entry of judgment against purchaser in the amount of the adjusted price ($1,502,500), which seller was entitled to immediately execute without notice if purchaser failed to close.

The stipulation provided that the premises were being sold for the purpose of demolishing the existing structure, and were being conveyed “as is.” On the scheduled closing day, the purchaser appeared with a list of demands about the condition of the premises, contending that seller had trashed the premises and removed fixtures after execution of the stipulation of settlement. When seller refused to accede to the demands, purchaser refused to close and seller executed on the money judgment. Purchaser then brought this action seeking enforcement of the stipulation in conformance with various conditions, and also sought return of its downpayment. Supreme Court denied seller's summary judgment motion, and seller appealed.

In reversing, the Appellate Division held that seller had established his prima facie entitlement to dismissal of the complaint based on documentary evidence, and that purchaser's opposition to seller's summary judgment motion was based on hearsay. The court emphasized the language of the stipulation, which provided that purchaser would accept the premises without any representation as to its condition. The court held that seller was entitled to execute on the money judgment and recover the damages provided in the stipulation.'

'

Questions of Fact Remain About Seller's Failure to Cooperate

Green Complex, Inc. v. Smith

NYLJ 6/21/13, p. 29, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action for breach of a contract of sale, purchaser appealed from Supreme Court's grant of summary judgment to seller. The Appellate Division modified, holding that questions of fact precluded award of summary judgment to either party.

Seller contracted to sell the subject property for $4,300,000 in 2007. The parties twice signed amendments to the agreement, and under the terms of the latest amendment, dated in February 2008, purchaser agreed to release the $500,000 in down payment money in return for seller's agreement to extend the closing date for two years. Subsequently, the parties' relationship soured, and purchaser contended that seller did not cooperate with its need to perform borings on the site to qualify for financing. In 2009, purchaser requested return of its down payment, and then brought this action for breach, seeking return of its down payment. Supreme Court awarded summary judgment to seller, dismissing the complaint and declaring that seller was entitled to retain the down payment. Purchaser appealed.

In modifying, the Appellate Division emphasized that questions of fact remained about whether seller had failed to cooperate by refusing to permit test borings. As a result, neither part was entitled to summary judgment.'

'

Statute of Limitations Bars Flooding Claim

Carbonaro v. Town of North Hempstead

NYLJ 6/21/13, p. 30, col. 3

AppDiv, Second Dept.

(memorandum opinion)

'

In an action by homeowners against the town for damages to their property caused by flooding, homeowners appealed from Supreme Court's dismissal of the complaint as time-barred. The Appellate Division affirmed, holding that homeowners had not included any equitable causes of action or continuing wrongs that would remove the case from the otherwise applicable statute of limitations.

Homeowners' property was damaged as a result of flooding on Aug. 22, 2010. Homeowners allege that the flooding was the result of negligent design and maintenance of the town's storm water drainage systems. Homeowners served timely notices of claim on the town, but did not bring this action until January 2012, more than one year and 90 days after the flooding. Supreme Court held the claim time-barred.

In affirming, the Appellate Division noted that the complaint did not allege a continuing nuisance or trespass, because the allegations are all predicated on the flooding that took place on a single day. As a result, General Municipal Law section 50-i barred the claim, which was primarily a claim for money damages.

'

Tax Lien Superior to Mortgage

Matter of Foreclosure of Tax Liens v. Putnam County National Bank

NYLJ 6/28/13, p. 29, col. 5,

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose tax liens, mortgagee bank appealed from Supreme Court's award of possession to Dutchess County. The Appellate Division affirmed, holding that the bank's failure to redeem during the redemption period entitled the county to possession.

When the county filed its tax foreclosure petition, it served mortgagee bank with notice. The bank filed an answer in the foreclosure proceeding, but did not redeem the property before expiration of the redemption period. Supreme Court concluded that the bank's answer lacked merit, holding that the tax lien was superior to the bank's mortgage lien. As a result, Supreme Court awarded possession to the county.

The Appellate Division affirmed. Justice Leventhal, concurring in result, highlighted a problem with the petition served by the county. The notice, in accordance with statutory language, recited that in the event of a “failure to redeem or answer,” a person served would be barred and foreclosed from right, title, or equity of redemption. Justice Leventhal observed that an uncounseled mortgagee or fee owner, served with such a notice, might conclude that serving an answer would be sufficient to preserve a right to redeem, and recommended legislative clarification of the statutory notice. However, because mortgagee in this case was a sophisticated party represented by counsel, he saw no merit in the claim that the notice misled the mortgagee bank.

'

Seller's Principal Personally Liable for Brokerage Commission

Island Assoc. Real Estate v. Doukas

NYLJ 7/3/13, p. 21, col. 1

Supreme Ct., Suffolk Cty.

(Emerson, J.)

In an action to recover a brokerage commission, defendant, the principal of the seller, moved to vacate the jury verdict, and also sought leave to renew a prior motion for judgment notwithstanding the verdict. The court denied the motions, holding that even if the facts were as seller's principal alleged, those facts would not excuse the principal from its obligation to pay the commission.

The subject property was owned by an LLC in which defendant was a principal. Seller, through defendant, orally agreed to pay a brokerage commission. When he refused to pay the commission, the broker sued, and principal defended on the ground that he was not personally liable for the commission because the LLC was the seller. Both the jury and the court rejected that argument. On the motion to renew, seller's principal seeks to offer evidence that the broker's principal, contrary to his trial testimony, knew that the LLC owned the property at the time the agreement was made.

In denying the motion to renew, the court emphasized that even if the broker's principal knew that seller's principal did not own the property in his individual capacity, the seller would still be liable on the brokerage agreement. One can obligate oneself to pay commissions on a sale of property that one does not own. As a result, the facts alleged by seller's principal did not support a motion to renew.'

'

Party Seeking Foreclosure

Rose v. Levine

NYLJ 6/28/13, p. 33, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose three mortgages, mortgagee appealed from Supreme Court's order granting summary judgment to fee owners releasing the property of all but about $9,000 of the mortgages. The Appellate Division modified to reinstate the mortgages, holding that the mortgages were valid even if the mortgagee did not personally provide consideration for them, but also holding that the mortgages bound only the interest of the co-tenant mortgagee, and not the interest of the other co-tenant, who was not a party to the mortgage.

Robert and Julie Levine owned the subject property as tenants by the entirety. During the pendency of their divorce action, Julie borrowed large sums of money from her boyfriend, Steven Rose. These loans were secured by three mortgages on the property, executed only by Julie. At the conclusion of the divorce action, Robert was awarded title to the property, and the amount due on the three mortgages ($1,050,000) was deducted from Julie's share of the equitable distribution award. Rose then brought this action to foreclose on the mortgages. Robert challenged the foreclosure on the ground that the mortgages were invalid because all but $9,000 of the proceeds had been advanced not by Rose, but by a corporation of which Rose was the sole owner. Robert contended that the remaining balance of the mortgages was not supported by consideration. Supreme Court granted summary judgment to Robert, and Rose appealed.

In modifying, the Appellate Division held that even if consideration is required to uphold the underlying obligation secured by the mortgage, the consideration need not be provided by the party seeking to foreclose the mortgage. Once a party lawfully holds both the mortgage and the note, the party has standing to foreclose the mortgage. But the court also held that Julie's unilateral conveyance of the mortgage was insufficient to bind Robert's half-interest in the property. As a result, when the parties were divorced, and the property was converted into a tenancy in common, Rose retained a security interest in Julie's half of the property. That security interest remained even though the equitable distribution award divested Julie of the monetary equivalent of her interest in the property.

'

Stipulation of Settlement

Enforced Against Purchaser

Management Corp. v. Benitez

NYLJ 6/21/13, p. 31, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action for return of a down payment, seller appealed from Supreme Court's denial of its motion for summary judgment dismissing the complaint. The Appellate Division reversed, holding that purchaser had failed to raise questions of fact about the enforceability of a stipulation of settlement.

Seller had contracted to sell the premises to purchaser, but purchaser had refused to close, alleging that a deed restriction limiting the premises to a single-family home made the title unmarketable and uninsurable. After litigation over the issue, the parties entered into a stipulation of settlement under the terms of which seller agreed to reduce the purchase price, but purchaser agreed to entry of judgment against purchaser in the amount of the adjusted price ($1,502,500), which seller was entitled to immediately execute without notice if purchaser failed to close.

The stipulation provided that the premises were being sold for the purpose of demolishing the existing structure, and were being conveyed “as is.” On the scheduled closing day, the purchaser appeared with a list of demands about the condition of the premises, contending that seller had trashed the premises and removed fixtures after execution of the stipulation of settlement. When seller refused to accede to the demands, purchaser refused to close and seller executed on the money judgment. Purchaser then brought this action seeking enforcement of the stipulation in conformance with various conditions, and also sought return of its downpayment. Supreme Court denied seller's summary judgment motion, and seller appealed.

In reversing, the Appellate Division held that seller had established his prima facie entitlement to dismissal of the complaint based on documentary evidence, and that purchaser's opposition to seller's summary judgment motion was based on hearsay. The court emphasized the language of the stipulation, which provided that purchaser would accept the premises without any representation as to its condition. The court held that seller was entitled to execute on the money judgment and recover the damages provided in the stipulation.'

'

Questions of Fact Remain About Seller's Failure to Cooperate

Green Complex, Inc. v. Smith

NYLJ 6/21/13, p. 29, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In purchaser's action for breach of a contract of sale, purchaser appealed from Supreme Court's grant of summary judgment to seller. The Appellate Division modified, holding that questions of fact precluded award of summary judgment to either party.

Seller contracted to sell the subject property for $4,300,000 in 2007. The parties twice signed amendments to the agreement, and under the terms of the latest amendment, dated in February 2008, purchaser agreed to release the $500,000 in down payment money in return for seller's agreement to extend the closing date for two years. Subsequently, the parties' relationship soured, and purchaser contended that seller did not cooperate with its need to perform borings on the site to qualify for financing. In 2009, purchaser requested return of its down payment, and then brought this action for breach, seeking return of its down payment. Supreme Court awarded summary judgment to seller, dismissing the complaint and declaring that seller was entitled to retain the down payment. Purchaser appealed.

In modifying, the Appellate Division emphasized that questions of fact remained about whether seller had failed to cooperate by refusing to permit test borings. As a result, neither part was entitled to summary judgment.'

'

Statute of Limitations Bars Flooding Claim

Carbonaro v. Town of North Hempstead

NYLJ 6/21/13, p. 30, col. 3

AppDiv, Second Dept.

(memorandum opinion)

'

In an action by homeowners against the town for damages to their property caused by flooding, homeowners appealed from Supreme Court's dismissal of the complaint as time-barred. The Appellate Division affirmed, holding that homeowners had not included any equitable causes of action or continuing wrongs that would remove the case from the otherwise applicable statute of limitations.

Homeowners' property was damaged as a result of flooding on Aug. 22, 2010. Homeowners allege that the flooding was the result of negligent design and maintenance of the town's storm water drainage systems. Homeowners served timely notices of claim on the town, but did not bring this action until January 2012, more than one year and 90 days after the flooding. Supreme Court held the claim time-barred.

In affirming, the Appellate Division noted that the complaint did not allege a continuing nuisance or trespass, because the allegations are all predicated on the flooding that took place on a single day. As a result, General Municipal Law section 50-i barred the claim, which was primarily a claim for money damages.

'

Tax Lien Superior to Mortgage

Matter of Foreclosure of Tax Liens v. Putnam County National Bank

NYLJ 6/28/13, p. 29, col. 5,

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose tax liens, mortgagee bank appealed from Supreme Court's award of possession to Dutchess County. The Appellate Division affirmed, holding that the bank's failure to redeem during the redemption period entitled the county to possession.

When the county filed its tax foreclosure petition, it served mortgagee bank with notice. The bank filed an answer in the foreclosure proceeding, but did not redeem the property before expiration of the redemption period. Supreme Court concluded that the bank's answer lacked merit, holding that the tax lien was superior to the bank's mortgage lien. As a result, Supreme Court awarded possession to the county.

The Appellate Division affirmed. Justice Leventhal, concurring in result, highlighted a problem with the petition served by the county. The notice, in accordance with statutory language, recited that in the event of a “failure to redeem or answer,” a person served would be barred and foreclosed from right, title, or equity of redemption. Justice Leventhal observed that an uncounseled mortgagee or fee owner, served with such a notice, might conclude that serving an answer would be sufficient to preserve a right to redeem, and recommended legislative clarification of the statutory notice. However, because mortgagee in this case was a sophisticated party represented by counsel, he saw no merit in the claim that the notice misled the mortgagee bank.

'

Seller's Principal Personally Liable for Brokerage Commission

Island Assoc. Real Estate v. Doukas

NYLJ 7/3/13, p. 21, col. 1

Supreme Ct., Suffolk Cty.

(Emerson, J.)

In an action to recover a brokerage commission, defendant, the principal of the seller, moved to vacate the jury verdict, and also sought leave to renew a prior motion for judgment notwithstanding the verdict. The court denied the motions, holding that even if the facts were as seller's principal alleged, those facts would not excuse the principal from its obligation to pay the commission.

The subject property was owned by an LLC in which defendant was a principal. Seller, through defendant, orally agreed to pay a brokerage commission. When he refused to pay the commission, the broker sued, and principal defended on the ground that he was not personally liable for the commission because the LLC was the seller. Both the jury and the court rejected that argument. On the motion to renew, seller's principal seeks to offer evidence that the broker's principal, contrary to his trial testimony, knew that the LLC owned the property at the time the agreement was made.

In denying the motion to renew, the court emphasized that even if the broker's principal knew that seller's principal did not own the property in his individual capacity, the seller would still be liable on the brokerage agreement. One can obligate oneself to pay commissions on a sale of property that one does not own. As a result, the facts alleged by seller's principal did not support a motion to renew.'

'

Party Seeking Foreclosure

Rose v. Levine

NYLJ 6/28/13, p. 33, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose three mortgages, mortgagee appealed from Supreme Court's order granting summary judgment to fee owners releasing the property of all but about $9,000 of the mortgages. The Appellate Division modified to reinstate the mortgages, holding that the mortgages were valid even if the mortgagee did not personally provide consideration for them, but also holding that the mortgages bound only the interest of the co-tenant mortgagee, and not the interest of the other co-tenant, who was not a party to the mortgage.

Robert and Julie Levine owned the subject property as tenants by the entirety. During the pendency of their divorce action, Julie borrowed large sums of money from her boyfriend, Steven Rose. These loans were secured by three mortgages on the property, executed only by Julie. At the conclusion of the divorce action, Robert was awarded title to the property, and the amount due on the three mortgages ($1,050,000) was deducted from Julie's share of the equitable distribution award. Rose then brought this action to foreclose on the mortgages. Robert challenged the foreclosure on the ground that the mortgages were invalid because all but $9,000 of the proceeds had been advanced not by Rose, but by a corporation of which Rose was the sole owner. Robert contended that the remaining balance of the mortgages was not supported by consideration. Supreme Court granted summary judgment to Robert, and Rose appealed.

In modifying, the Appellate Division held that even if consideration is required to uphold the underlying obligation secured by the mortgage, the consideration need not be provided by the party seeking to foreclose the mortgage. Once a party lawfully holds both the mortgage and the note, the party has standing to foreclose the mortgage. But the court also held that Julie's unilateral conveyance of the mortgage was insufficient to bind Robert's half-interest in the property. As a result, when the parties were divorced, and the property was converted into a tenancy in common, Rose retained a security interest in Julie's half of the property. That security interest remained even though the equitable distribution award divested Julie of the monetary equivalent of her interest in the property.

'