Real Property Law

AppDiv, Second Dept.

(memorandum opinion)

In an action to quiet title to real property, subsequent purchaser and mortgagee appealed from Supreme Court's denial of their motion to dismiss the complaint as time-barred. The Appellate Division affirmed, holding that the prior owner's forgery claim was not time-barred, even though the alleged forgery took place in 1998.

Stevens acquired the subject property in 1980. In 1998, a deed from Stevens to Communicare Properties, LLC was recorded. After a series of conveyances, Purchaser Uddin acquired title by a referee's deed dated Nov. 18, 2003, and recorded Feb. 3, 2004. Uddin obtained a mortgage loan from BNY. Then, in 2010, Stevens brought this action to quiet title, contending that the 1998 deed to Communicare had been forged. Uddin and BNY moved to dismiss the complaint as time-barred, but Supreme Court denied their motion.

In affirming, the Appellate Division noted that, pursuant to CPLR 212(a), a 10-year statute of limitations applies to quiet title actions. The court indicated that the statute bars claims by persons who have not been in possession within the preceding 10 years. Here, however, Stevens' deed created a presumption of possession, and that presumption remained in effect based on Stevens' allegation that the deed to Communicare was forged, and that all subsequent deeds were void. As a result, the action remained timely.

COMMENT

Because RPAPL section 311 creates a presumption that the legal titleholder is in possession of the premises he or she owns, the titleholder's claim against a person claiming under' a forged deed is never time-barred ' despite the language of CPLR 212, which provides that an action to quiet title may not be maintained unless the plaintiff or his predecessors had possession of the premises within 10 years prior to commencing the action.

A claimant relying on a forged deed can only prevail if he can establish an independent claim of prescriptive easement or adverse possession sufficient to defeat the presumption of possession afforded the owner of a valid deed. RPAPL section 311 explicitly provides that occupation by a person other than the legal titleholder is deemed to be in subordination to the legal title “unless the premises have been held and possessed adversely to the legal title for ten years ' ” While a forged deed cannot establish title, it could be useful evidence of the owner's reasonable belief that the property belonged to him, satisfying the requirement under New York Adverse Possession Statute that a possessor take under a claim of right. McKinney's R.P.A.P.L. ' 501, N.Y. R.P. ACT & PRO ' 501(3).

A purchaser who buys in reasonable reliance on forged deed, unlike a person relying on a fraudulent deed, can never invoke the normal protections given to a bona fide good-faith purchaser. In Field v. Field, 130 Misc. 2d 751, 754, the court held that the subsequent purchasers, though they had no knowledge of the forgery, were not protected against a deed in which a wife forged her husband's signature because “a person cannot be a bona fide purchaser under a forged deed.”

Part Performance Exception

Kurlandski v. Kim

NYLJ 11/15/13, p. 29, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an action for a judgment declaring that claimant owns an undivided one-half interest in a condominium unit, claimant appealed from Supreme Court's denial of a preliminary injunction restraining record owner from removing or evicting claimant from the unit.

Claimant and record owner had a 10-year relationship during which they moved into the disputed condominium. When the condominium was purchased, the deed listed record owner as the sole owner. Claimant, however, contends that the parties orally agreed to purchase the unit as tenants-in-common, and alleges that he made a payment of $29,800 that was used for closing costs and adjustments, that he made improvements to the unit, paid common charges, and made monthly payments to record owner in amounts totaling $150,000. When the relationship between the parties ended, record owner moved out and claimant remained in the apartment. In this action, he sought to establish that he own a 50% interest in the unit as a tenant in common, and sought a preliminary injunction to prevent his removal from the apartment. Supreme Court denied the preliminary injunction.

In affirming, the Appellate Division noted that the statute of frauds prohibits conveyance of real property without a written contract, and noted that the part performance exception requires that the part performance must be unequivocally referable to the alleged oral agreement. In this case, the court concluded that claimant had not demonstrated that the payments he made or work he did was unequivocally referable to an agreement to make him half owner of the unit. As a result, he failed to demonstrate a likelihood of success on the merits.

The court did conclude, however, that claimant had demonstrated a likelihood of success on the merits of an unjust enrichment claim based on the money he paid toward closing costs and adjustments, but noted that money damages would be sufficient to compensate him on that claim. As a result, even on that claim, claimant could not demonstrate a likelihood of success on the merits.

COMMENT

General Obligations Law section 5-703(4) explicitly preserves “the powers of courts of equity to compel the specific performance of agreements in case of part performance.” The statute in effect codifies the common law's part performance exception to the statute of frauds. The Court of Appeals applied the exception in Freeman v. Freeman, 43 N.Y. 34, and ordered specific performance of a landowner's oral agreement to convey a life estate where the promisee subsequently took possession of and made improvements with the landowner's knowledge. However, in recent years, courts have consistently held the part performance doctrine inapplicable to alleged oral contracts made by owners of real property, concluding either that the alleged promisee has not adequately pleaded that his actions were unequivocally referable to the alleged oral agreement or that the promisee's actions were consistent with some explanation other than enforcing the oral agreement. Thus, in MessnerVetere Berger McNamee Schmetterer Euro RSCG v. Aegis Group, 93 NY2d 229, the Court of Appeals refused to enforce a promisor's alleged oral agreement to assume a tenant's obligations under a commercial lease even though the promisor had made all rent and tax payments for 28 months, payments the tenant alleged constituted part performance of the oral agreement. The court rejected tenant's argument, holding that tenant was not entitled to specific performance because it did not adequately plead that any of its own actions were “unequivocally referable” to the alleged oral agreement and that it relied on the agreement to its detriment.'

Even when the pleading is adequate, courts have almost invariably found the part performance doctrine inapplicable because the promisee's alleged performance does not unequivocally establish the existence of an oral agreement. For instance, in Anostario v. Vincinanzo, 59 N.Y.2d 662, the Court of Appeals held that an alleged purchaser who had signed a bank note and made arrangements to provide management for the building was not entitled to specific performance of an alleged oral agreement to convey a one-half interest in the building to him. The court conceded that purchaser's actions were explainable by an oral agreement to purchase, but emphasized that the same actions were also consistent with preparation for a future agreement. As a result, the court refused to remove the agreement from the bar of the statue of frauds. See also Tress v. Hunte, 41 Misc.3d 1204(A) (holding that a contract vendee's acts of negotiating with the DOB, securing a title report, hiring an engineer, paying legal fees for an Operating Agreement and securing financial means are not unequivocally referable to an oral agreement with a developer to jointly own and manage the property because the vendee's actions could be explainable as the preparatory steps performed in anticipation of consummation of a future agreement).

The rule from Anostario also governs claims brought by entities claiming rights to an easement based on an oral contract. Thus, in Town of Oyster Bay v. Doremus, 94 A.D.3d 867 the Second Department refused to order specific performance of the town's alleged oral agreement to buy a conservation easement over a portion of landowners' property even though the town had purchased an adjoining parcel. The court held that' purchase of the adjoining parcel might well have reflected the town's own plan to develop the parcel rather than a binding agreement to acquire an easement from landowners.

'

Specific Peformance

3801 Review Realty Co., LLC v. Review Realty Company, LLC

NYLJ 11/21/13, p. 22, col. 1

AppDiv, First Dept.

(memorandum opinion)

In purchaser's action for specific performance of a contract to sell real property, and for money damages and return of its down payment, purchaser appealed from Supreme Court's award of summary judgment to seller. The Appellate Division modified to reinstate the claims for return of the escrowed and released portions of the down payment, holding that even if purchaser was not ready, willing, and able to close, questions of fact about seller's ability to close precluded summary judgment.

Upon contracting to purchase the subject property, purchaser paid a down payment that seller was entitled to retain if purchaser defaulted and seller was ready, willing and able to close. A subsequent amendment to the contract released a portion of the down payment to seller. The contract obligated seller to remediate an oil spill and to provide specified documentation to purchaser at closing. When the contract did not close, purchaser brought this action for specific performance.

Supreme Court awarded summary judgment to seller, acknowledging that questions of fact existed about seller's ability to remediate and to provide the documentation, but holding that purchaser's action was barred by its concession that it did not have the balance of the purchase price in its possession at closing. Purchaser appealed.

In modifying, the Appellate Division agreed that purchaser's specific performance and money damages claims were barred by its failure to be ready, willing, and able to close.' But the Appellate Division held that the claim for return of the deposit was not barred because the contract conditioned seller's entitlement to keep the deposit on seller's own ability to close ' an issue that raised issues of fact. The Appellate Division held that questions of fact remained both with respect to the downpayment still held in escrow and the portion released to seller, because it remained unclear whether the release was unconditional or was conditioned on an event that may not have occurred (such as remediation of the oil spill).

'

Unrecorded Sale Contract

141 Sunnyside v. Zoarez

NYLJ 11/25/13

Supreme Ct., Kings Cty.

(Schmidt, J.)

In an action by contract vendee for specific performance of a contract to purchase real property, subsequent purchaser moved to cancel contract vendee's notice of pendency and to dismiss the specific performance claim against subsequent purchaser. The court granted subsequent purchaser's motion, holding that subsequent purchaser was a bona fide purchaser for value not bound by the terms of contract vendee's contract with seller.

On Aug. 24, 2011, seller contracted to sell the subject property to contract vendee for $300,000. The contract provided a “time of the essence” closing date of Oct. 5, 2011. Contract vendee paid a $15,000 deposit at the time of contracting. In an e-mail dated Aug. 31, seller's lawyer informed contract vendee that the Oct. 5 date was an error, and that the correct closing date was Sept. 5. The e-mail informed contract vendee that because Sept. 5 was a holiday, seller was scheduling the closing for Sept. 6. Contract vendee did not appear on that date, and on Sept. 7 seller's lawyer informed contract vendee that seller would not proceed with the sale. Seller returned the down payment. Also on Sept. 7, seller executed a deed to subsequent purchaser. That deed was recorded on Sept. 26. Meanwhile, on Sept. 15, contract vendee brought this specific performance action against seller and filed a notice of pendency. Subsequent purchaser intervened in the action and moved for cancellation of the notice and dismissal of the claim for specific performance.

In granting subsequent purchaser's motion, the court noted that contract vendee had come forward with no evidence to establish that subsequent purchaser knew of the prior contract, or that subsequent purchaser did not pay valuable consideration. Testimony by subsequent purchaser's principal and lawyer established that subsequent purchaser paid $320,000 for the property ' $20,000 more than the purchase price agreed to by contract vendee. In addition, neither the speedy closing nor the fact that seller failed to sign a sale contract before closing was sufficient to impute to subsequent purchaser any knowledge of the prior sale contract. Moreover, the court held that the notice of pendency provided no protection to the contract vendee because it was not filed until after the date of the conveyance to the subsequent purchaser.

'

Third-Party Beneficiary

Encore Lake Grove Homeowners Assoc v. Cashin Associates, P.C.

NYLJ 12/12/13, p. 32, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by homeowners associations against a village engineer for breach of contract and negligence, the associations appealed from Supreme Court's dismissal of the associations' causes of action for breach of contract and negligence. The Appellate Division modified to reinstate the breach of contract claim, holding that documentary evidence could not conclusively establish that the associations were not third-party beneficiaries of the contract between the village and the engineer.

The village retained the engineering firm as village engineer in August 2005, and the firm remained village engineer until 2008. In November 2005, the village authorized the engineering firm to perform building inspections for the Encore Lake Grove Community, which included two condominium communities. The village issued certificates of occupancy based on those inspections. After purchasing condominium units, homeowners discovered alleged construction defects, including the absence of firewalls in the two buildings. Homeowners associations for the two communities, and a joint association, then brought this action alleging breach of contract and professional malpractice. Supreme Court dismissed both claims, holding that the associations were not third party beneficiaries of the contract between the village and the engineer.

In reinstating the breach of contract claim, the court held that the obligation to perform for the benefit of a third-party beneficiary need not be expressly stated in the contract, but may be inferred from surrounding circumstances. As a result, Supreme Court improperly granted the engineer's motion to dismiss based on documentary evidence. The court then held that Supreme Court had properly dismissed the malpractice claim because where a party is seeking to enforce a bargain, a tort claim will not lie.

'

Forgery Claim

Stevens v. Communicare Properties, LLC

NYLJ 11/8/13, p. 28, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action to quiet title to real property, subsequent purchaser and mortgagee appealed from Supreme Court's denial of their motion to dismiss the complaint as time-barred. The Appellate Division affirmed, holding that the prior owner's forgery claim was not time-barred, even though the alleged forgery took place in 1998.

Stevens acquired the subject property in 1980. In 1998, a deed from Stevens to Communicare Properties, LLC was recorded. After a series of conveyances, Purchaser Uddin acquired title by a referee's deed dated Nov. 18, 2003, and recorded Feb. 3, 2004. Uddin obtained a mortgage loan from BNY. Then, in 2010, Stevens brought this action to quiet title, contending that the 1998 deed to Communicare had been forged. Uddin and BNY moved to dismiss the complaint as time-barred, but Supreme Court denied their motion.

In affirming, the Appellate Division noted that, pursuant to CPLR 212(a), a 10-year statute of limitations applies to quiet title actions. The court indicated that the statute bars claims by persons who have not been in possession within the preceding 10 years. Here, however, Stevens' deed created a presumption of possession, and that presumption remained in effect based on Stevens' allegation that the deed to Communicare was forged, and that all subsequent deeds were void. As a result, the action remained timely.

COMMENT

Because RPAPL section 311 creates a presumption that the legal titleholder is in possession of the premises he or she owns, the titleholder's claim against a person claiming under' a forged deed is never time-barred ' despite the language of CPLR 212, which provides that an action to quiet title may not be maintained unless the plaintiff or his predecessors had possession of the premises within 10 years prior to commencing the action.

A claimant relying on a forged deed can only prevail if he can establish an independent claim of prescriptive easement or adverse possession sufficient to defeat the presumption of possession afforded the owner of a valid deed. RPAPL section 311 explicitly provides that occupation by a person other than the legal titleholder is deemed to be in subordination to the legal title “unless the premises have been held and possessed adversely to the legal title for ten years ' ” While a forged deed cannot establish title, it could be useful evidence of the owner's reasonable belief that the property belonged to him, satisfying the requirement under New York Adverse Possession Statute that a possessor take under a claim of right. McKinney's R.P.A.P.L. ' 501, N.Y. R.P. ACT & PRO ' 501(3).

A purchaser who buys in reasonable reliance on forged deed, unlike a person relying on a fraudulent deed, can never invoke the normal protections given to a bona fide good-faith purchaser. In Field v. Field, 130 Misc. 2d 751, 754, the court held that the subsequent purchasers, though they had no knowledge of the forgery, were not protected against a deed in which a wife forged her husband's signature because “a person cannot be a bona fide purchaser under a forged deed.”

Part Performance Exception

Kurlandski v. Kim

NYLJ 11/15/13, p. 29, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an action for a judgment declaring that claimant owns an undivided one-half interest in a condominium unit, claimant appealed from Supreme Court's denial of a preliminary injunction restraining record owner from removing or evicting claimant from the unit.

Claimant and record owner had a 10-year relationship during which they moved into the disputed condominium. When the condominium was purchased, the deed listed record owner as the sole owner. Claimant, however, contends that the parties orally agreed to purchase the unit as tenants-in-common, and alleges that he made a payment of $29,800 that was used for closing costs and adjustments, that he made improvements to the unit, paid common charges, and made monthly payments to record owner in amounts totaling $150,000. When the relationship between the parties ended, record owner moved out and claimant remained in the apartment. In this action, he sought to establish that he own a 50% interest in the unit as a tenant in common, and sought a preliminary injunction to prevent his removal from the apartment. Supreme Court denied the preliminary injunction.

In affirming, the Appellate Division noted that the statute of frauds prohibits conveyance of real property without a written contract, and noted that the part performance exception requires that the part performance must be unequivocally referable to the alleged oral agreement. In this case, the court concluded that claimant had not demonstrated that the payments he made or work he did was unequivocally referable to an agreement to make him half owner of the unit. As a result, he failed to demonstrate a likelihood of success on the merits.

The court did conclude, however, that claimant had demonstrated a likelihood of success on the merits of an unjust enrichment claim based on the money he paid toward closing costs and adjustments, but noted that money damages would be sufficient to compensate him on that claim. As a result, even on that claim, claimant could not demonstrate a likelihood of success on the merits.

COMMENT

General Obligations Law section 5-703(4) explicitly preserves “the powers of courts of equity to compel the specific performance of agreements in case of part performance.” The statute in effect codifies the common law's part performance exception to the statute of frauds. The Court of Appeals applied the exception in Freeman v. Freeman, 43 N.Y. 34, and ordered specific performance of a landowner's oral agreement to convey a life estate where the promisee subsequently took possession of and made improvements with the landowner's knowledge. However, in recent years, courts have consistently held the part performance doctrine inapplicable to alleged oral contracts made by owners of real property, concluding either that the alleged promisee has not adequately pleaded that his actions were unequivocally referable to the alleged oral agreement or that the promisee's actions were consistent with some explanation other than enforcing the oral agreement. Thus, in MessnerVetere Berger McNamee Schmetterer Euro RSCG v. Aegis Group, 93 NY2d 229, the Court of Appeals refused to enforce a promisor's alleged oral agreement to assume a tenant's obligations under a commercial lease even though the promisor had made all rent and tax payments for 28 months, payments the tenant alleged constituted part performance of the oral agreement. The court rejected tenant's argument, holding that tenant was not entitled to specific performance because it did not adequately plead that any of its own actions were “unequivocally referable” to the alleged oral agreement and that it relied on the agreement to its detriment.'

Even when the pleading is adequate, courts have almost invariably found the part performance doctrine inapplicable because the promisee's alleged performance does not unequivocally establish the existence of an oral agreement. For instance, in Anostario v. Vincinanzo, 59 N.Y.2d 662, the Court of Appeals held that an alleged purchaser who had signed a bank note and made arrangements to provide management for the building was not entitled to specific performance of an alleged oral agreement to convey a one-half interest in the building to him. The court conceded that purchaser's actions were explainable by an oral agreement to purchase, but emphasized that the same actions were also consistent with preparation for a future agreement. As a result, the court refused to remove the agreement from the bar of the statue of frauds. See also Tress v. Hunte, 41 Misc.3d 1204(A) (holding that a contract vendee's acts of negotiating with the DOB, securing a title report, hiring an engineer, paying legal fees for an Operating Agreement and securing financial means are not unequivocally referable to an oral agreement with a developer to jointly own and manage the property because the vendee's actions could be explainable as the preparatory steps performed in anticipation of consummation of a future agreement).

The rule from Anostario also governs claims brought by entities claiming rights to an easement based on an oral contract. Thus, in Town of Oyster Bay v. Doremus, 94 A.D.3d 867 the Second Department refused to order specific performance of the town's alleged oral agreement to buy a conservation easement over a portion of landowners' property even though the town had purchased an adjoining parcel. The court held that' purchase of the adjoining parcel might well have reflected the town's own plan to develop the parcel rather than a binding agreement to acquire an easement from landowners.

'

Specific Peformance

3801 Review Realty Co., LLC v. Review Realty Company, LLC

NYLJ 11/21/13, p. 22, col. 1

AppDiv, First Dept.

(memorandum opinion)

In purchaser's action for specific performance of a contract to sell real property, and for money damages and return of its down payment, purchaser appealed from Supreme Court's award of summary judgment to seller. The Appellate Division modified to reinstate the claims for return of the escrowed and released portions of the down payment, holding that even if purchaser was not ready, willing, and able to close, questions of fact about seller's ability to close precluded summary judgment.

Upon contracting to purchase the subject property, purchaser paid a down payment that seller was entitled to retain if purchaser defaulted and seller was ready, willing and able to close. A subsequent amendment to the contract released a portion of the down payment to seller. The contract obligated seller to remediate an oil spill and to provide specified documentation to purchaser at closing. When the contract did not close, purchaser brought this action for specific performance.

Supreme Court awarded summary judgment to seller, acknowledging that questions of fact existed about seller's ability to remediate and to provide the documentation, but holding that purchaser's action was barred by its concession that it did not have the balance of the purchase price in its possession at closing. Purchaser appealed.

In modifying, the Appellate Division agreed that purchaser's specific performance and money damages claims were barred by its failure to be ready, willing, and able to close.' But the Appellate Division held that the claim for return of the deposit was not barred because the contract conditioned seller's entitlement to keep the deposit on seller's own ability to close ' an issue that raised issues of fact. The Appellate Division held that questions of fact remained both with respect to the downpayment still held in escrow and the portion released to seller, because it remained unclear whether the release was unconditional or was conditioned on an event that may not have occurred (such as remediation of the oil spill).

'

Unrecorded Sale Contract

141 Sunnyside v. Zoarez

NYLJ 11/25/13

Supreme Ct., Kings Cty.

(Schmidt, J.)

In an action by contract vendee for specific performance of a contract to purchase real property, subsequent purchaser moved to cancel contract vendee's notice of pendency and to dismiss the specific performance claim against subsequent purchaser. The court granted subsequent purchaser's motion, holding that subsequent purchaser was a bona fide purchaser for value not bound by the terms of contract vendee's contract with seller.

On Aug. 24, 2011, seller contracted to sell the subject property to contract vendee for $300,000. The contract provided a “time of the essence” closing date of Oct. 5, 2011. Contract vendee paid a $15,000 deposit at the time of contracting. In an e-mail dated Aug. 31, seller's lawyer informed contract vendee that the Oct. 5 date was an error, and that the correct closing date was Sept. 5. The e-mail informed contract vendee that because Sept. 5 was a holiday, seller was scheduling the closing for Sept. 6. Contract vendee did not appear on that date, and on Sept. 7 seller's lawyer informed contract vendee that seller would not proceed with the sale. Seller returned the down payment. Also on Sept. 7, seller executed a deed to subsequent purchaser. That deed was recorded on Sept. 26. Meanwhile, on Sept. 15, contract vendee brought this specific performance action against seller and filed a notice of pendency. Subsequent purchaser intervened in the action and moved for cancellation of the notice and dismissal of the claim for specific performance.

In granting subsequent purchaser's motion, the court noted that contract vendee had come forward with no evidence to establish that subsequent purchaser knew of the prior contract, or that subsequent purchaser did not pay valuable consideration. Testimony by subsequent purchaser's principal and lawyer established that subsequent purchaser paid $320,000 for the property ' $20,000 more than the purchase price agreed to by contract vendee. In addition, neither the speedy closing nor the fact that seller failed to sign a sale contract before closing was sufficient to impute to subsequent purchaser any knowledge of the prior sale contract. Moreover, the court held that the notice of pendency provided no protection to the contract vendee because it was not filed until after the date of the conveyance to the subsequent purchaser.

'

Third-Party Beneficiary

Encore Lake Grove Homeowners Assoc v. Cashin Associates, P.C.

NYLJ 12/12/13, p. 32, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by homeowners associations against a village engineer for breach of contract and negligence, the associations appealed from Supreme Court's dismissal of the associations' causes of action for breach of contract and negligence. The Appellate Division modified to reinstate the breach of contract claim, holding that documentary evidence could not conclusively establish that the associations were not third-party beneficiaries of the contract between the village and the engineer.

The village retained the engineering firm as village engineer in August 2005, and the firm remained village engineer until 2008. In November 2005, the village authorized the engineering firm to perform building inspections for the Encore Lake Grove Community, which included two condominium communities. The village issued certificates of occupancy based on those inspections. After purchasing condominium units, homeowners discovered alleged construction defects, including the absence of firewalls in the two buildings. Homeowners associations for the two communities, and a joint association, then brought this action alleging breach of contract and professional malpractice. Supreme Court dismissed both claims, holding that the associations were not third party beneficiaries of the contract between the village and the engineer.

In reinstating the breach of contract claim, the court held that the obligation to perform for the benefit of a third-party beneficiary need not be expressly stated in the contract, but may be inferred from surrounding circumstances. As a result, Supreme Court improperly granted the engineer's motion to dismiss based on documentary evidence. The court then held that Supreme Court had properly dismissed the malpractice claim because where a party is seeking to enforce a bargain, a tort claim will not lie.

'