Real Property Law

(memorandum opinion)

In easement holder's action against servient owner for interference with the easement, easement holder appealed from Supreme Court's grant of summary judgment to servient owner. The Appellate Division reversed, concluding that easement holder had raised questions of fact about whether hedges planted across the easement were de minimis encroachments insufficient to extinguish the easement by adverse possession.

Easement holder's deed conveyed a right of way “for ingress and egress, and for all other purposes” over a 30-foot strip running from easement holder's lot to Gin Lane. Part of the strip is located on servient owner's land. In 1999, servient owner's predecessor planted an eight-foot wide mature hedge on the portion of the right of way located on her lot. Easement holder objected to no avail. When the current servient owner purchased the lot in 2006, current owner also refused to remove the hedge. In 2010, easement holder brought this action seeking injunctive relief, and Supreme Court granted summary judgment to servient owner.

In reversing, the Appellate Division indicated that an action for a continuing trespass would not be time-barred unless the easement had been extinguished by adverse possession. The court then turned to RPAPL 543(1), enacted in 2008, which provides that “the existence of de [ minimis ] non-structural encroachments including, but not limited to, fences, hedges ' shall be deemed to be permissive and non-adverse.” The court rejected easement holder's argument that the statute deemed all hedges to be de minimis non-structural encroachments, incapable of supporting an adverse possession claim. But the court did hold that easement holder had raised a question of fact about whether the actual hedges planted on the servient land were de minimis encroachments. As a result, servient owner was not entitled to summary judgment.

COMMENT

Although the court in Wright acknowledged RPAPL ' 543's exemption of “de minimis nonstructural encroachments including but not limited to, fences, hedges, shrubbery, plantings, sheds and non-structural walls,” the court concluded that not all of the listed encroachments are “de minimis” per se. Wright marked a departure from other courts that have read the statute to preclude all possessors who conduct any of the listed activities from establishing an adverse possession claim because the activities are, per se, de minimis nonstructural encroachments. Thus, in Hartman v. Goldman, 84 A.D.3d 734, the Second Department affirmed an order granting summary judgment to a true owner, holding that the possessor's plantings of foliage and shrubbery, and landscaping and lawn maintenance were, “under the plain terms of RPAPL 543″ de minimis, and “deemed permissive and nonadverse.”

Although several provisions of the amended adverse possession statute provide that the statute applies to all adverse possession claims initiated after the statute's July 7, 2008 enactment, the Second, Third and Fourth Departments have held that provision unconstitutional stating that the statute cannot apply to a right that vested before the statute's effective date. Thus, in Franza v. Olin, 73 A.D.3d 44, the Fourth Department held where title to the disputed property vests before the 2008 amendments were enacted, courts must apply the former version of RPAPL. In Franza, the landowner allegedly possessed the land for 10 years prior to 1985, leading the court to remand to determine whether the possession was sufficiently adverse under the old statute. See also Quinlan v. Doe, 107 A.D.3d 1373 (Third Department); Hogan v. Kelly, 86 A.D.3d 590 (Second Department).

Although the First Department has not definitively determined whether the statute may be applied retroactively, lower courts have applied the amendments to rights that vested before the amendments took effect. For example, in Neighborhood Eighth Ave., LLC v. 454-458 W. 128th Street Co., LLC., 2010 WL 2023345, the court applied the new state of mind requirements of the 2008 amendments and dismissed a landowner's adverse possession claim under RPAPL ' 501, even though title allegedly vested by adverse possession in 2006.

Adverse Possession of Mapped Streets

Waterview Towers, Inc. v. 2610 Cropsey Development Corp.

NYLJ 10/23/13, p. 17, col. 3
Supreme Ct., Kings Cty.

(Bunyan, J.0.)

In an action to determine competing claims to a strip of property 50 feet wide by 181 feet long, current occupant of the strip moved for summary judgment. The court denied the motion, concluding that questions of fact about whether the strip constitutes a mapped street precluded an award of summary judgment.

Current occupant of the strip, a co-op housing corporation with 325 resident shareholders, has been using the disputed strip, known as “Centre Place,” as a driveway and parking lot, without objection since 1989. The corporation's predecessor used the strip without objection from 1976 to 1989. As a result, the co-op corporation asserts that it has acquired title by adverse possession. The owner of the adjacent parcel, however, contends that it is the rightful owner of the strip by virtues of deeds dating back to the 1857 subdivision of the block. In response to the adverse possession claim, the record owner sought to establish that Centre Place has been a mapped paper street, over which occupant cannot establish an adverse possession claim.

In denying summary judgment to current occupant, the court noted evidence that the length of Centre Place has changed over 150 years, leading to the inference that portion of the driveway have been de-mapped over time, which could only happen if Centre Place had been a mapped street to begin with. As a result, the court held that questions of fact remained about whether current occupant could establish an adverse possession claim.

COMMENT

The presence of a paper street on a recorded map does not foreclose claimants from successfully asserting adverse possession claims for property located on a paper street. In DMPM Property Mgt. v. Mastroianni, 82 A.D.3d 1332, the adverse possessors prevailed on a claim to disputed property located on a paper street running between their adjacent lots. The adverse possessors operated a sports center and used the area of the mapped street for parking and as a means of obtaining access to the public highway. In another case, Guardino v. Colangelo, 262 A.D.2d 777, the adverse possessors' claim prevailed against a developer who had purchased neighboring, undeveloped lots several years after the adverse possessors had mistakenly built their house on part of a paper street.

Adverse possession claims like those in DMPM and Guardino can prevail only when no abutting owners enjoy an implied easement to use the paper street. In Guardino, t he court emphasized that the developer and other landowners in the subdivision held fee title to the paper street as tenants in common, and thus had no implied easement to use the mapped street. Id. at 779. In contrast, the “paper street rule” generally provides that where a deed conveys property in reference to a filed map, the deed creates an implied easement to use streets located on the map, none of the owners of land on the map may extinguish the easement by adverse possession; instead, the easement may only be extinguished by the united action of the benefited landowners. Thus, in O'Hara v. Wallace, 83 Misc.2d 383, 387, mod, on other grounds, 52 A.D.2d 622, holders of an easement in a paper street prevailed against neighbor claiming adverse possession by growing trees and placing other obstructions in the area of the paper street. The court emphasized that when a possessor's deed described his property by plat reference, and thus gave him the benefit of an implied easement over roads in the plat, his entry onto the roads is presumed to be made in subordination to the servitude, and therefore not hostile.

Even when neighboring owners have no implied easement over a paper street, once a municipality accepts the dedication of a mapped street, the municipality holds the street in trust for the public and it is generally not subject to adverse possession claims. In West Center Congregational Church v. Efstathiou, 215 A.D.2d 753, the court denied the church's adverse possession claim for a portion of an unimproved, paper street present on a filed subdivision map. The church had maintained playground on the portion of the mapped street since 1953. The court denied the adverse possession claim because the municipality had accepted dedication of the street through a general ordinance in 1966 and again in 1984 (though had not improved the street), and adverse possession claims are prohibited against land held by a municipality for public purposes. Land held by a municipality in a proprietary capacity, however, does not enjoy such immunity from adverse possession claims. See, e.g., Casini v. Sea Gate Ass'n, 262 A.D.2d 593 (not-for-profit corporation, whose purpose was to own and operate streets in private community, prevailed against municipality on adverse possession claim for traffic island located on private property, where municipality only owned the traffic island due to a tax foreclosure of the private property and court found this to be proprietary ownership and not protected against adverse possession claims).

No Punitive Damages Against Title Insurer

Levi v. Commonwealth Land Title Ins. Co.

U.S. Dist Ct., SDNY

(Stein, J.)

In an action by insured against its title insurer, the insurer sought summary judgment on its third-party claim against the assignor of a fraudulent mortgage. The court awarded summary judgment to the insurer, but denied its punitive damages claim, holding that punitive damages are available on a fraud claim only when the fraud is directed at the public at large.

In 2007, Vargas contracted to buy the subject property, then owned by an LLC. Vargas never completed the purchase, but instead represented that he was the managing member of the LLC, and executed a fraudulent mortgage to Skyllas for $1 million. Skyllas then transferred to mortgage to Levi, who bought title insurance from Commonwealth. When it became clear that Vargas did not own the property, Levi sued on the title policy, and obtained summary judgment for the policy amount, which title insurer paid. Meanwhile, title insurer brought a third party claim against Vargas, alleging fraud. Title insurer moved for summary judgment.

In granting summary judgment to title insurer, the court emphasized that Vargas' criminal conviction precluded Vargas from challenging his admission that he knowingly designated himself as majority owner of the LLC. The court then rejected Vargas' argument that his fraudulent statements were not made with the intent that they be communicated to the person claiming fraud. The court noted that Vargas had prepared an affidavit stating, in bold letters, that the affidavit was executed to induce Commonwealth to issue its policy. In addition, the court rejected the argument that Commonwealth's reliance was unreasonable because further investigation would have revealed the fraud, concluding that Commonwealth's reliance on Vargas' affidavit was reasonable. But the court rejected Commonwealth's claim for punitive damages, concluding that a fraud claim can only support punitive damages when the fraud is aimed at the general public.

COMMENT

The Court of Appeals in Rocanova v. Equitable Life Assurance Soc'y of U.S., 83 N.Y.2d 603 held that when an alleged fraud arises from a contractual relationship, punitive damages can only be awarded if the fraudulent conduct was directed at the public. The court dismissed an insured plaintiff's punitive damages claim against an insurance company who limited his disability compensation, and found that plaintiff's evidence of over 100 instances of the insurance company's questionable dealings with former clients did not rise to the level of fraudulent intent aimed at the public.

Since Rocanova, federal courts have generally enforced the requirement that fraud be directed at the general public. For instance, in Topps Co., Inc. v. Cadbury Stani S.A.I.C., 380 F. Supp. 2d 250, the Southern District denied punitive damages to a trademark owner who had sued a former licensee for breach of contract, fraudulent inducement, and trade secret misappropriation of chewing gum technology. The court found no harm directed at the public generally, distinguishing between “a gross and wanton fraud upon the public” and “an isolated transaction incident to an otherwise legitimate business.”

Despite Rocanova, one unreported Southern District case awarded punitive damages in a case arising from a contractual dispute without finding public harm. In Jones v. Dana, 2006 WL 1153358, the court awarded punitive damages to a financially naive widow who brought suit against the defendant for fraudulently misrepresenting her status as a registered financial advisor and her past history of success in order to convert nearly $2.2 million of the plaintiff ' s funds to her own use. The court relied on Giblin v. Murphy 73 N.Y.2d 769 and Borkowski v. Borkowski, 39 N.Y.2d 982, which both predated Rocanova, i n concluding that punitive damages were available when a “very high threshold of moral culpability is satisfied” without any need to show “that the fraud was aimed at the public generally.”

Not All Hedges Are De Minimis for Adverse Possession Purposes

Wright v. Sokoloff

NYLJ 10/25/13, p. 23, col. 2
AppDiv, Second Dept.

(memorandum opinion)

In easement holder's action against servient owner for interference with the easement, easement holder appealed from Supreme Court's grant of summary judgment to servient owner. The Appellate Division reversed, concluding that easement holder had raised questions of fact about whether hedges planted across the easement were de minimis encroachments insufficient to extinguish the easement by adverse possession.

Easement holder's deed conveyed a right of way “for ingress and egress, and for all other purposes” over a 30-foot strip running from easement holder's lot to Gin Lane. Part of the strip is located on servient owner's land. In 1999, servient owner's predecessor planted an eight-foot wide mature hedge on the portion of the right of way located on her lot. Easement holder objected to no avail. When the current servient owner purchased the lot in 2006, current owner also refused to remove the hedge. In 2010, easement holder brought this action seeking injunctive relief, and Supreme Court granted summary judgment to servient owner.

In reversing, the Appellate Division indicated that an action for a continuing trespass would not be time-barred unless the easement had been extinguished by adverse possession. The court then turned to RPAPL 543(1), enacted in 2008, which provides that “the existence of de [ minimis ] non-structural encroachments including, but not limited to, fences, hedges ' shall be deemed to be permissive and non-adverse.” The court rejected easement holder's argument that the statute deemed all hedges to be de minimis non-structural encroachments, incapable of supporting an adverse possession claim. But the court did hold that easement holder had raised a question of fact about whether the actual hedges planted on the servient land were de minimis encroachments. As a result, servient owner was not entitled to summary judgment.

COMMENT

Although the court in Wright acknowledged RPAPL ' 543's exemption of “de minimis nonstructural encroachments including but not limited to, fences, hedges, shrubbery, plantings, sheds and non-structural walls,” the court concluded that not all of the listed encroachments are “de minimis” per se. Wright marked a departure from other courts that have read the statute to preclude all possessors who conduct any of the listed activities from establishing an adverse possession claim because the activities are, per se, de minimis nonstructural encroachments. Thus, in Hartman v. Goldman, 84 A.D.3d 734, the Second Department affirmed an order granting summary judgment to a true owner, holding that the possessor's plantings of foliage and shrubbery, and landscaping and lawn maintenance were, “under the plain terms of RPAPL 543″ de minimis, and “deemed permissive and nonadverse.”

Although several provisions of the amended adverse possession statute provide that the statute applies to all adverse possession claims initiated after the statute's July 7, 2008 enactment, the Second, Third and Fourth Departments have held that provision unconstitutional stating that the statute cannot apply to a right that vested before the statute's effective date. Thus, in Franza v. Olin, 73 A.D.3d 44, the Fourth Department held where title to the disputed property vests before the 2008 amendments were enacted, courts must apply the former version of RPAPL. In Franza, the landowner allegedly possessed the land for 10 years prior to 1985, leading the court to remand to determine whether the possession was sufficiently adverse under the old statute. See also Quinlan v. Doe, 107 A.D.3d 1373 (Third Department); Hogan v. Kelly, 86 A.D.3d 590 (Second Department).

Although the First Department has not definitively determined whether the statute may be applied retroactively, lower courts have applied the amendments to rights that vested before the amendments took effect. For example, in Neighborhood Eighth Ave., LLC v. 454-458 W. 128th Street Co., LLC., 2010 WL 2023345, the court applied the new state of mind requirements of the 2008 amendments and dismissed a landowner's adverse possession claim under RPAPL ' 501, even though title allegedly vested by adverse possession in 2006.

Adverse Possession of Mapped Streets

Waterview Towers, Inc. v. 2610 Cropsey Development Corp.

NYLJ 10/23/13, p. 17, col. 3
Supreme Ct., Kings Cty.

(Bunyan, J.0.)

In an action to determine competing claims to a strip of property 50 feet wide by 181 feet long, current occupant of the strip moved for summary judgment. The court denied the motion, concluding that questions of fact about whether the strip constitutes a mapped street precluded an award of summary judgment.

Current occupant of the strip, a co-op housing corporation with 325 resident shareholders, has been using the disputed strip, known as “Centre Place,” as a driveway and parking lot, without objection since 1989. The corporation's predecessor used the strip without objection from 1976 to 1989. As a result, the co-op corporation asserts that it has acquired title by adverse possession. The owner of the adjacent parcel, however, contends that it is the rightful owner of the strip by virtues of deeds dating back to the 1857 subdivision of the block. In response to the adverse possession claim, the record owner sought to establish that Centre Place has been a mapped paper street, over which occupant cannot establish an adverse possession claim.

In denying summary judgment to current occupant, the court noted evidence that the length of Centre Place has changed over 150 years, leading to the inference that portion of the driveway have been de-mapped over time, which could only happen if Centre Place had been a mapped street to begin with. As a result, the court held that questions of fact remained about whether current occupant could establish an adverse possession claim.

COMMENT

The presence of a paper street on a recorded map does not foreclose claimants from successfully asserting adverse possession claims for property located on a paper street. In DMPM Property Mgt. v. Mastroianni, 82 A.D.3d 1332, the adverse possessors prevailed on a claim to disputed property located on a paper street running between their adjacent lots. The adverse possessors operated a sports center and used the area of the mapped street for parking and as a means of obtaining access to the public highway. In another case, Guardino v. Colangelo, 262 A.D.2d 777, the adverse possessors' claim prevailed against a developer who had purchased neighboring, undeveloped lots several years after the adverse possessors had mistakenly built their house on part of a paper street.

Adverse possession claims like those in DMPM and Guardino can prevail only when no abutting owners enjoy an implied easement to use the paper street. In Guardino, t he court emphasized that the developer and other landowners in the subdivision held fee title to the paper street as tenants in common, and thus had no implied easement to use the mapped street. Id. at 779. In contrast, the “paper street rule” generally provides that where a deed conveys property in reference to a filed map, the deed creates an implied easement to use streets located on the map, none of the owners of land on the map may extinguish the easement by adverse possession; instead, the easement may only be extinguished by the united action of the benefited landowners. Thus, in O'Hara v. Wallace, 83 Misc.2d 383, 387, mod, on other grounds, 52 A.D.2d 622, holders of an easement in a paper street prevailed against neighbor claiming adverse possession by growing trees and placing other obstructions in the area of the paper street. The court emphasized that when a possessor's deed described his property by plat reference, and thus gave him the benefit of an implied easement over roads in the plat, his entry onto the roads is presumed to be made in subordination to the servitude, and therefore not hostile.

Even when neighboring owners have no implied easement over a paper street, once a municipality accepts the dedication of a mapped street, the municipality holds the street in trust for the public and it is generally not subject to adverse possession claims. In West Center Congregational Church v. Efstathiou, 215 A.D.2d 753, the court denied the church's adverse possession claim for a portion of an unimproved, paper street present on a filed subdivision map. The church had maintained playground on the portion of the mapped street since 1953. The court denied the adverse possession claim because the municipality had accepted dedication of the street through a general ordinance in 1966 and again in 1984 (though had not improved the street), and adverse possession claims are prohibited against land held by a municipality for public purposes. Land held by a municipality in a proprietary capacity, however, does not enjoy such immunity from adverse possession claims. See, e.g., Casini v. Sea Gate Ass'n, 262 A.D.2d 593 (not-for-profit corporation, whose purpose was to own and operate streets in private community, prevailed against municipality on adverse possession claim for traffic island located on private property, where municipality only owned the traffic island due to a tax foreclosure of the private property and court found this to be proprietary ownership and not protected against adverse possession claims).

No Punitive Damages Against Title Insurer

Levi v. Commonwealth Land Title Ins. Co.

U.S. Dist Ct., SDNY

(Stein, J.)

In an action by insured against its title insurer, the insurer sought summary judgment on its third-party claim against the assignor of a fraudulent mortgage. The court awarded summary judgment to the insurer, but denied its punitive damages claim, holding that punitive damages are available on a fraud claim only when the fraud is directed at the public at large.

In 2007, Vargas contracted to buy the subject property, then owned by an LLC. Vargas never completed the purchase, but instead represented that he was the managing member of the LLC, and executed a fraudulent mortgage to Skyllas for $1 million. Skyllas then transferred to mortgage to Levi, who bought title insurance from Commonwealth. When it became clear that Vargas did not own the property, Levi sued on the title policy, and obtained summary judgment for the policy amount, which title insurer paid. Meanwhile, title insurer brought a third party claim against Vargas, alleging fraud. Title insurer moved for summary judgment.

In granting summary judgment to title insurer, the court emphasized that Vargas' criminal conviction precluded Vargas from challenging his admission that he knowingly designated himself as majority owner of the LLC. The court then rejected Vargas' argument that his fraudulent statements were not made with the intent that they be communicated to the person claiming fraud. The court noted that Vargas had prepared an affidavit stating, in bold letters, that the affidavit was executed to induce Commonwealth to issue its policy. In addition, the court rejected the argument that Commonwealth's reliance was unreasonable because further investigation would have revealed the fraud, concluding that Commonwealth's reliance on Vargas' affidavit was reasonable. But the court rejected Commonwealth's claim for punitive damages, concluding that a fraud claim can only support punitive damages when the fraud is aimed at the general public.

COMMENT

The Court of Appeals in Rocanova v. Equitable Life Assurance Soc'y of U.S., 83 N.Y.2d 603 held that when an alleged fraud arises from a contractual relationship, punitive damages can only be awarded if the fraudulent conduct was directed at the public. The court dismissed an insured plaintiff's punitive damages claim against an insurance company who limited his disability compensation, and found that plaintiff's evidence of over 100 instances of the insurance company's questionable dealings with former clients did not rise to the level of fraudulent intent aimed at the public.

Since Rocanova, federal courts have generally enforced the requirement that fraud be directed at the general public. For instance, in Topps Co., Inc. v. Cadbury Stani S.A.I.C., 380 F. Supp. 2d 250, the Southern District denied punitive damages to a trademark owner who had sued a former licensee for breach of contract, fraudulent inducement, and trade secret misappropriation of chewing gum technology. The court found no harm directed at the public generally, distinguishing between “a gross and wanton fraud upon the public” and “an isolated transaction incident to an otherwise legitimate business.”

Despite Rocanova, one unreported Southern District case awarded punitive damages in a case arising from a contractual dispute without finding public harm. In Jones v. Dana, 2006 WL 1153358, the court awarded punitive damages to a financially naive widow who brought suit against the defendant for fraudulently misrepresenting her status as a registered financial advisor and her past history of success in order to convert nearly $2.2 million of the plaintiff ' s funds to her own use. The court relied on Giblin v. Murphy 73 N.Y.2d 769 and Borkowski v. Borkowski, 39 N.Y.2d 982, which both predated Rocanova, i n concluding that punitive damages were available when a “very high threshold of moral culpability is satisfied” without any need to show “that the fraud was aimed at the public generally.”