Real Property Law

AppDiv, First Dept.

(Opinion by Acosta, J.)

In an action by real estate broker for a commission, buyers appealed from Supreme Court's denial of buyer's motion to dismiss. The Appellate Division affirmed, holding that whether a broker who showed an apartment to buyers was the procuring cause of the purchase of a different apartment two years later was a question of fact to be decided based on evidence.

In 2006, buyers retained broker to help them purchase a luxury apartment in Manhattan. In October 2007, broker introduced buyers to a development under construction on West 12th Street. Broker negotiated with the developer for the purchase of two units for a total price of $11.5 million. By July 2008, lawyers for developer and buyers exchanged and reviewed contracts of sale for the two units, but in August 2008, buyers pulled out, deciding that they were no longer in the market for a new home. Then, in February 2010, buyers purchased two different units in the same building for a purchase price of $6.5 million. Broker was not involved in that transaction, but broker nevertheless brought this action to recover a commission. Supreme Court denied buyers' motion to dismiss, and buyers appealed.

In affirming, the Appellate Division indicated that to recover a commission, a broker must do more than create an amicable atmosphere or amicable frame of mind in order to be entitled to a commission. Although the broker need not negotiate the transaction's final terms, the broker must demonstrate a “direct and proximate link” between the broker's introduction of the parties and the consummation of the ultimate transaction. In this case, the court held that the broker's introduction of the parties, review of floor plans with the buyers on the original units, preparation of a deal sheet, and connection of the buyers with an architect were sufficient to create a question of fact about whether broker was the procuring cause of the ultimate transaction. The court also held that the broker had raised questions of fact about whether the buyer terminated the broker in bad faith in order to avoid paying a commission, and whether the broker had earned a commission on the first, aborted transaction, because the buyer had arbitrarily refused to enter into a contract of sale.

COMMENT

A broker may be treated as the procuring cause of a sale of property it never showed to the buyer if the buyer's introduction of buyer and seller led the buyer to purchase a similar property from the seller. For instance, in Salzano v. Pellillo, 4 A.D.2d 789, the court reversed the trial court's dismissal of broker's complaint when the buyer bought a to-be-constructed house from a developer after the broker had shown the buyer several already built homes in the same development. The court noted that when a developer sells both existing homes and custom homes, the broker who introduced the parties may be entitled to a commission even if the broker did not participate in subsequent negotiations because it is “logical” that buyer and seller might complete negotiations without the aid of the broker.

Even if the broker does not have a contract right to a commission because the agreement includes a time limit on the broker's term, the broker may be entitled to a commission based on the bad faith of the principals in attempting to avoid the commission. For example, in Di Stefano v. Rosetti-Falvey Real Estate, Inc., 270 A.D.2d 631, the court held that seller was not entitled to dismissal of broker's claim even though the sale had occurred outside the time frame delineated in the brokerage agreement. The agreement gave the broker a two-year exclusive right to sell or lease, and provided that broker earned a commission if, within six months after the two-year period expired, the property was sold or leased to a party to whom the broker had offered the property. The seller leased to such a party shortly after the six-month period expired, and, in refusing to dismiss the cause of action, the court emphasized that even when a broker is not the procuring cause of a transaction, the broker may be entitled to a commission when an owner terminates a broker's efforts in bad faith in order to avoid paying a commission. Similarly, in Winick Realty Group, LLC v. Austin & Assoc., 8 51 N.Y.S.2d 75, aff'd 51 A.D.3d 408, the court invoked the bad-faith exception in refusing to dismiss the claim of a broker against a seller who had allegedly terminated the broker's efforts in order to avoid paying the broker a commission.

Finally, even if no sale at all results from the broker's efforts, the broker may be able to recover from its principal if the principal arbitrarily refused to enter into a sale contract after the broker had arranged a deal that was apparently acceptable to all parties. In Duross Co. v. Evans, 22 A.D.2d 573, the court held that a broker stated a claim against its principal the buyer, when the buyer authorized the broker to submit an offer, the seller accepted the offer and had a sales contract prepared, and the buyer then backed out of the deal.

Substantial Completion of Home in Violation of Restrictive Covenant

Hidalgo v. Bryant

NYLJ 5/19/14, p. 28, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by neighbor to enforce a restrictive covenant, landowner appealed from Supreme Court's award of summary judgment to neighbor. The Appellate Division modified to correct errors in form, but otherwise affirmed, holding that landowner's substantial completion of a home in violation of the covenant did not preclude a grant of injunctive relief to neighbor.

Landowner and neighbor own adjoining parcels in an area subdivided by a developer into four separate lots. The deeds to lots 1 through 3 (which included neighbor's lot) included a covenant requiring the owner to obtain approval from the developer regarding building height, design and location. The deed to lot 4 ' landowner's lot ' included a different restriction, requiring that any house be “located per attached plan.” The plan, which was recorded with the deed, provided for a setback of 45 feet from neighbor's lot line. When landowner obtained a building permit and staked out the location for the foundation, neighbor notified both landowner and the building inspector that the proposed location did not comply with the restrictive covenant. The building inspector issued an advisory notice indicating that the building was only 33 feet from the lot line, and that any construction by landowner would be at her own risk. When landowner continued to build, the building inspector issued a stop work order, and neighbor brought this action to enjoin construction of the house in violation of the covenant. In 2008, the building inspector issued a new building permit, and neighbor's article 78 proceeding to annul the permit was dismissed. Meanwhile, in this action, Supreme Court denied landowner's motion for summary judgment and granted neighbor's motion. Landowner appealed.

In affirming the grant of summary judgment to neighbor, the court first rejected landowner's argument that neighbor lacked standing to enforce the covenant. The court concluded that the restrictive covenant was part of a common development scheme for the benefit of all owners within the subdivision. As a result, the neighbor, as one of those owners, had standing. The court then rejected landowner's argument that the case was now academic because the house had been substantially completed. The court emphasized that neighbor had promptly brought this action to enforce the covenant, putting landowner on notice that if she proceeded with construction, she did so at her own risk. Here, neighbor established that landowner's covenant violated the side setback restrictions, and landowner failed to raise any issue of fact in opposition to neighbor's showing.

Mortgagee Entitled to Prevail on Equitable Lien Claim

Harris v. Thompson

NYLJ 5/19/14, p. 29, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In prior owner's action to quiet title to real property, subsequent mortgagee appealed from Supreme Court's order denying its motion for summary judgment on its counterclaim for an equitable lien in its favor. The Appellate Division modified, holding that mortgagee was entitled to summary judgment on its equitable lien claim with respect to monies advanced to pay off prior owner's mortgage.

Prior owner acquired title to the subject property in 1970. In 2005, the property was encumbered by two mortgages held by Emigrant. On Oct. 31, 2005, prior owner executed a deed to the property, transferring title to Leslie, who financed the purchase with two mortgages in favor of defendant AmTrust. The monies advanced by AmTrust were used first to pay off the Emigrant mortgages, and Emigrant issued satisfactions. Later, Leslie conveyed the property to Thompson, who also financed through AmTrust. The AmTrust funds were used to pay off the mortgage loans to Leslie. When Thompson defaulted, AmTrust brought a foreclosure action, and obtained a judgment of foreclosure and sale. Prior owner then brought this action to quiet title, contending that the deed to Leslie (and therefore the deed to Thompson) was invalid because it was procured by misrepresenting the transaction as a refinance prior owner's mortgage. Defendant AmTrust counterclaimed, asserting that even if prior owner were to prevail, AmTrust would be entitled to an equitable lien for the amounts it had advanced. Supreme Court denied AmTrust's motion.

In modifying, the Appellate Division emphasized the documentary evidence mortgagee AmTrust had advanced establishing that part of its loan money had been used to pay off the Emigrant loans. The court emphasized that when AmTrust paid off the Emigrant loans, AmTrust became subrogated to the rights Emigrant had against prior owner. Because it was clear that Emigrant had lent money to prior owner, AmTrust was entitled to an equitable lien for the amount of its loan that had been used to pay off the Emigrant mortgage. But the court held that questions of fact remain about whether Emigrant was entitled to an equitable lien with respect to funds not used to pay off the Emigrant mortgage.

Subsequent Recorded Mortgage Enjoys Priority

Carrion v. 162 Pulaski, LLC

NYLJ 5/19/14, p. 30, col. 5

AppDiv, Second Dept.

(memorandum opinion)

In an action by former owner to foreclose a purchase money mortgage, former owner appealed from Supreme Court's grant of a subsequent mortgagee's motion to dismiss the complaint against it. The Appellate Division affirmed, holding that the subsequent mortgage, which was properly recorded, enjoyed priority over the unrecorded purchase money mortgage.

In 2002, former owner sold the property to 162 Pulaski for $350,000. A portion of the purchase price ' $195,000 ' was financed by a purchase money mortgage Pulaski executed in favor of former owner. Former owner did not record the mortgage. Then, in 2004, Pulaski executed a mortgage to Astoria Federal, which subsequently assigned to Washington Mutual. Both the mortgage and the assignment were recorded in 2005. When Pulaski defaulted on the purchase money mortgage, former owner brought this foreclosure action. Washington Mutual asserted priority over the purchase money mortgage, and moved to dismiss. Supreme Court granted the motion to dismiss against Washington Mutual, and prior owner appealed.

In affirming, the Appellate Division relied on the recording act (Real Property Law section 291), and held that a mortgage loses its priority to a subsequent mortgage when the subsequent mortgagee is a good faith lender who records first. The court held that a purchase money mortgage is as much subject to the recording act as any other mortgage. Because the complaint did not allege that Astoria Federal or Washington Mutual had actual or constructive notice or acted in bad faith, the subsequent mortgage was entitled to priority over the purchase money mortgage.

COMMENT

At common law, a vendor's purchase money mortgage enjoyed priority over all rights or liens that arose against a vendee. However, New York courts are in disagreement on whether the recording acts subordinate the interest of an unrecorded purchase money mortgage to the interest of a subsequent mortgagee or purchaser who first records. In Ebling Brewing Co. v. Gennaro, 189 AD 782, the Second Department expressly held that an unrecorded vendor's purchase money mortgage, was subject to the recording act, and therefore subordinate to the subsequent mortgage of a good-faith third-party lender who had recorded first. Similarly, in Merritt v. Dansmith Corp., 240 AD 338, the Third Department held that a vendor's purchase money mortgage lost its priority to a subsequent materials lien that was first recorded. The court emphasized that the vendor's purchase money mortgage did not become a lien on the property until recording, and was subject to previously recorded liens. Conversely, in Giragosian v. Clement, 199 AD2d 656, the Third Department, without citing Merritt, held that an unrecorded vendor's purchase money mortgage had priority over a subsequent third party mortgage that was first recorded. See also In re Smith, 288 BR 675, (holding that a vendor's purchase money mortgage had priority over a third party mortgage that was recorded first.)

The disagreement appears to stem from differing readings of dicta from early Court of Appeals decisions. In Boies v. Benham, 127 NY 620, the court suggested that a when a vendor conveys subject to a purchase money mortgage, the vendor's equitable lien becomes a legal lien “perfected by the mortgage to him for the balance of the purchase money.” The court's language suggests that perfection by recording is unnecessary with respect to a purchase money mortgage, although in Boies itself, the vendor's purchase money mortgage and the third party mortgage were executed and recorded simultaneously, making it impossible for the court to resolve the case by reference to the recording act. Conversely, in Dusenbury v. Hulbert, 5 9 N.Y. 541, the court stated that a vendor's purchase money mortgage could lose its priority if the third party lender qualifies for protection of the recording act. But the court's discussion was dictum because the court found that the third-party lender was not a purchaser for valuable consideration and thus not protected by the recording act. Thus, Dusenbury and Boies left room for the two contrary interpretations adopted by New York courts.

Delay in Asserting Ownership Interest

Jean v. Joseph

NYLJ 5/30/14, p. 30, col. 3

AppDiv, Second Dept.

(memorandum opinion); and

Deutsche Bank National Trust Co. v. Joseph

NYLJ 5/30/14, p. 31, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In these two related proceedings involving two different properties, children of deceased owners appealed from Supreme Court orders holding that their ownership claims were barred by equitable estoppel and laches. In both cases, the Appellate Division affirmed, holding that the children's delay in asserting an ownership interest, and the subsequent change of position by other parties, estopped the children from asserting their ownership claims.

Zaphely and Ena Joseph owned the two disputed properties as tenants by the entirety. Zaphely obtained an ex parte divorce in Haiti in 1986. Two years later, Ena died. Then, in 1989, Zaphely conveyed the property located at 225 Franklin Avenue, Brooklyn, to a third party. After a number of intervening conveyances, Lucas Joseph obtained title, and defaulted on a mortgage held by Deutsche Bank. In 2004, Zaphely conveyed the other parcel, located at 1392 Lincoln Place, Brooklyn, to a third party, and after a series of conveyances, Knop acquired a deed to the property. Now, in these proceedings ' one a foreclosure action by Deutsche Bank and the other a quiet title action brought by the children of Zaphely and Ena ' the children assert that they acquired title at Ena's death, and that their title is superior to that of subsequent purchasers or mortgagees claiming through Zaphely. Supreme Court rejected their claims, and they appealed.

In affirming, the Appellate Division emphasized that in order for laches or equitable estoppel to bar a claim, the party claiming laches must show delay in asserting the otherwise valid claim, lack of knowledge by the party claiming laches that the valid claimant would assert any claim for relief, and injury or prejudice if the laches doctrine is not applied. In these cases, the court emphasized the delay by the children in asserting their claim, and detrimental reliance by the parties claiming through Zaphely's deed. (If the Haitian divorce did not appear on the public records in New York, there would have been no easy way for claimants through Zaphely to learn that Zaphely had anything other than full title to convey as the surviving tenant by the entirety).

'

Whether Broker Was Procuring Clause Is Question of Fact

SPRE Realty, Ltd. v. Dienst

NYLJ 5/22/14, p. 22, col. 1

AppDiv, First Dept.

(Opinion by Acosta, J.)

In an action by real estate broker for a commission, buyers appealed from Supreme Court's denial of buyer's motion to dismiss. The Appellate Division affirmed, holding that whether a broker who showed an apartment to buyers was the procuring cause of the purchase of a different apartment two years later was a question of fact to be decided based on evidence.

In 2006, buyers retained broker to help them purchase a luxury apartment in Manhattan. In October 2007, broker introduced buyers to a development under construction on West 12th Street. Broker negotiated with the developer for the purchase of two units for a total price of $11.5 million. By July 2008, lawyers for developer and buyers exchanged and reviewed contracts of sale for the two units, but in August 2008, buyers pulled out, deciding that they were no longer in the market for a new home. Then, in February 2010, buyers purchased two different units in the same building for a purchase price of $6.5 million. Broker was not involved in that transaction, but broker nevertheless brought this action to recover a commission. Supreme Court denied buyers' motion to dismiss, and buyers appealed.

In affirming, the Appellate Division indicated that to recover a commission, a broker must do more than create an amicable atmosphere or amicable frame of mind in order to be entitled to a commission. Although the broker need not negotiate the transaction's final terms, the broker must demonstrate a “direct and proximate link” between the broker's introduction of the parties and the consummation of the ultimate transaction. In this case, the court held that the broker's introduction of the parties, review of floor plans with the buyers on the original units, preparation of a deal sheet, and connection of the buyers with an architect were sufficient to create a question of fact about whether broker was the procuring cause of the ultimate transaction. The court also held that the broker had raised questions of fact about whether the buyer terminated the broker in bad faith in order to avoid paying a commission, and whether the broker had earned a commission on the first, aborted transaction, because the buyer had arbitrarily refused to enter into a contract of sale.

COMMENT

A broker may be treated as the procuring cause of a sale of property it never showed to the buyer if the buyer's introduction of buyer and seller led the buyer to purchase a similar property from the seller. For instance, in Salzano v. Pellillo, 4 A.D.2d 789, the court reversed the trial court's dismissal of broker's complaint when the buyer bought a to-be-constructed house from a developer after the broker had shown the buyer several already built homes in the same development. The court noted that when a developer sells both existing homes and custom homes, the broker who introduced the parties may be entitled to a commission even if the broker did not participate in subsequent negotiations because it is “logical” that buyer and seller might complete negotiations without the aid of the broker.

Even if the broker does not have a contract right to a commission because the agreement includes a time limit on the broker's term, the broker may be entitled to a commission based on the bad faith of the principals in attempting to avoid the commission. For example, in Di Stefano v. Rosetti-Falvey Real Estate, Inc., 270 A.D.2d 631, the court held that seller was not entitled to dismissal of broker's claim even though the sale had occurred outside the time frame delineated in the brokerage agreement. The agreement gave the broker a two-year exclusive right to sell or lease, and provided that broker earned a commission if, within six months after the two-year period expired, the property was sold or leased to a party to whom the broker had offered the property. The seller leased to such a party shortly after the six-month period expired, and, in refusing to dismiss the cause of action, the court emphasized that even when a broker is not the procuring cause of a transaction, the broker may be entitled to a commission when an owner terminates a broker's efforts in bad faith in order to avoid paying a commission. Similarly, in Winick Realty Group, LLC v. Austin & Assoc., 8 51 N.Y.S.2d 75, aff'd 51 A.D.3d 408, the court invoked the bad-faith exception in refusing to dismiss the claim of a broker against a seller who had allegedly terminated the broker's efforts in order to avoid paying the broker a commission.

Finally, even if no sale at all results from the broker's efforts, the broker may be able to recover from its principal if the principal arbitrarily refused to enter into a sale contract after the broker had arranged a deal that was apparently acceptable to all parties. In Duross Co. v. Evans, 22 A.D.2d 573, the court held that a broker stated a claim against its principal the buyer, when the buyer authorized the broker to submit an offer, the seller accepted the offer and had a sales contract prepared, and the buyer then backed out of the deal.

Substantial Completion of Home in Violation of Restrictive Covenant

Hidalgo v. Bryant

NYLJ 5/19/14, p. 28, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action by neighbor to enforce a restrictive covenant, landowner appealed from Supreme Court's award of summary judgment to neighbor. The Appellate Division modified to correct errors in form, but otherwise affirmed, holding that landowner's substantial completion of a home in violation of the covenant did not preclude a grant of injunctive relief to neighbor.

Landowner and neighbor own adjoining parcels in an area subdivided by a developer into four separate lots. The deeds to lots 1 through 3 (which included neighbor's lot) included a covenant requiring the owner to obtain approval from the developer regarding building height, design and location. The deed to lot 4 ' landowner's lot ' included a different restriction, requiring that any house be “located per attached plan.” The plan, which was recorded with the deed, provided for a setback of 45 feet from neighbor's lot line. When landowner obtained a building permit and staked out the location for the foundation, neighbor notified both landowner and the building inspector that the proposed location did not comply with the restrictive covenant. The building inspector issued an advisory notice indicating that the building was only 33 feet from the lot line, and that any construction by landowner would be at her own risk. When landowner continued to build, the building inspector issued a stop work order, and neighbor brought this action to enjoin construction of the house in violation of the covenant. In 2008, the building inspector issued a new building permit, and neighbor's article 78 proceeding to annul the permit was dismissed. Meanwhile, in this action, Supreme Court denied landowner's motion for summary judgment and granted neighbor's motion. Landowner appealed.

In affirming the grant of summary judgment to neighbor, the court first rejected landowner's argument that neighbor lacked standing to enforce the covenant. The court concluded that the restrictive covenant was part of a common development scheme for the benefit of all owners within the subdivision. As a result, the neighbor, as one of those owners, had standing. The court then rejected landowner's argument that the case was now academic because the house had been substantially completed. The court emphasized that neighbor had promptly brought this action to enforce the covenant, putting landowner on notice that if she proceeded with construction, she did so at her own risk. Here, neighbor established that landowner's covenant violated the side setback restrictions, and landowner failed to raise any issue of fact in opposition to neighbor's showing.

Mortgagee Entitled to Prevail on Equitable Lien Claim

Harris v. Thompson

NYLJ 5/19/14, p. 29, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In prior owner's action to quiet title to real property, subsequent mortgagee appealed from Supreme Court's order denying its motion for summary judgment on its counterclaim for an equitable lien in its favor. The Appellate Division modified, holding that mortgagee was entitled to summary judgment on its equitable lien claim with respect to monies advanced to pay off prior owner's mortgage.

Prior owner acquired title to the subject property in 1970. In 2005, the property was encumbered by two mortgages held by Emigrant. On Oct. 31, 2005, prior owner executed a deed to the property, transferring title to Leslie, who financed the purchase with two mortgages in favor of defendant AmTrust. The monies advanced by AmTrust were used first to pay off the Emigrant mortgages, and Emigrant issued satisfactions. Later, Leslie conveyed the property to Thompson, who also financed through AmTrust. The AmTrust funds were used to pay off the mortgage loans to Leslie. When Thompson defaulted, AmTrust brought a foreclosure action, and obtained a judgment of foreclosure and sale. Prior owner then brought this action to quiet title, contending that the deed to Leslie (and therefore the deed to Thompson) was invalid because it was procured by misrepresenting the transaction as a refinance prior owner's mortgage. Defendant AmTrust counterclaimed, asserting that even if prior owner were to prevail, AmTrust would be entitled to an equitable lien for the amounts it had advanced. Supreme Court denied AmTrust's motion.

In modifying, the Appellate Division emphasized the documentary evidence mortgagee AmTrust had advanced establishing that part of its loan money had been used to pay off the Emigrant loans. The court emphasized that when AmTrust paid off the Emigrant loans, AmTrust became subrogated to the rights Emigrant had against prior owner. Because it was clear that Emigrant had lent money to prior owner, AmTrust was entitled to an equitable lien for the amount of its loan that had been used to pay off the Emigrant mortgage. But the court held that questions of fact remain about whether Emigrant was entitled to an equitable lien with respect to funds not used to pay off the Emigrant mortgage.

Subsequent Recorded Mortgage Enjoys Priority

Carrion v. 162 Pulaski, LLC

NYLJ 5/19/14, p. 30, col. 5

AppDiv, Second Dept.

(memorandum opinion)

In an action by former owner to foreclose a purchase money mortgage, former owner appealed from Supreme Court's grant of a subsequent mortgagee's motion to dismiss the complaint against it. The Appellate Division affirmed, holding that the subsequent mortgage, which was properly recorded, enjoyed priority over the unrecorded purchase money mortgage.

In 2002, former owner sold the property to 162 Pulaski for $350,000. A portion of the purchase price ' $195,000 ' was financed by a purchase money mortgage Pulaski executed in favor of former owner. Former owner did not record the mortgage. Then, in 2004, Pulaski executed a mortgage to Astoria Federal, which subsequently assigned to Washington Mutual. Both the mortgage and the assignment were recorded in 2005. When Pulaski defaulted on the purchase money mortgage, former owner brought this foreclosure action. Washington Mutual asserted priority over the purchase money mortgage, and moved to dismiss. Supreme Court granted the motion to dismiss against Washington Mutual, and prior owner appealed.

In affirming, the Appellate Division relied on the recording act (Real Property Law section 291), and held that a mortgage loses its priority to a subsequent mortgage when the subsequent mortgagee is a good faith lender who records first. The court held that a purchase money mortgage is as much subject to the recording act as any other mortgage. Because the complaint did not allege that Astoria Federal or Washington Mutual had actual or constructive notice or acted in bad faith, the subsequent mortgage was entitled to priority over the purchase money mortgage.

COMMENT

At common law, a vendor's purchase money mortgage enjoyed priority over all rights or liens that arose against a vendee. However, New York courts are in disagreement on whether the recording acts subordinate the interest of an unrecorded purchase money mortgage to the interest of a subsequent mortgagee or purchaser who first records. In Ebling Brewing Co. v. Gennaro, 189 AD 782, the Second Department expressly held that an unrecorded vendor's purchase money mortgage, was subject to the recording act, and therefore subordinate to the subsequent mortgage of a good-faith third-party lender who had recorded first. Similarly, in Merritt v. Dansmith Corp., 240 AD 338, the Third Department held that a vendor's purchase money mortgage lost its priority to a subsequent materials lien that was first recorded. The court emphasized that the vendor's purchase money mortgage did not become a lien on the property until recording, and was subject to previously recorded liens. Conversely, in Giragosian v. Clement, 199 AD2d 656, the Third Department, without citing Merritt, held that an unrecorded vendor's purchase money mortgage had priority over a subsequent third party mortgage that was first recorded. See also In re Smith, 288 BR 675, (holding that a vendor's purchase money mortgage had priority over a third party mortgage that was recorded first.)

The disagreement appears to stem from differing readings of dicta from early Court of Appeals decisions. In Boies v. Benham, 127 NY 620, the court suggested that a when a vendor conveys subject to a purchase money mortgage, the vendor's equitable lien becomes a legal lien “perfected by the mortgage to him for the balance of the purchase money.” The court's language suggests that perfection by recording is unnecessary with respect to a purchase money mortgage, although in Boies itself, the vendor's purchase money mortgage and the third party mortgage were executed and recorded simultaneously, making it impossible for the court to resolve the case by reference to the recording act. Conversely, in Dusenbury v. Hulbert, 5 9 N.Y. 541, the court stated that a vendor's purchase money mortgage could lose its priority if the third party lender qualifies for protection of the recording act. But the court's discussion was dictum because the court found that the third-party lender was not a purchaser for valuable consideration and thus not protected by the recording act. Thus, Dusenbury and Boies left room for the two contrary interpretations adopted by New York courts.

Delay in Asserting Ownership Interest

Jean v. Joseph

NYLJ 5/30/14, p. 30, col. 3

AppDiv, Second Dept.

(memorandum opinion); and

Deutsche Bank National Trust Co. v. Joseph

NYLJ 5/30/14, p. 31, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In these two related proceedings involving two different properties, children of deceased owners appealed from Supreme Court orders holding that their ownership claims were barred by equitable estoppel and laches. In both cases, the Appellate Division affirmed, holding that the children's delay in asserting an ownership interest, and the subsequent change of position by other parties, estopped the children from asserting their ownership claims.

Zaphely and Ena Joseph owned the two disputed properties as tenants by the entirety. Zaphely obtained an ex parte divorce in Haiti in 1986. Two years later, Ena died. Then, in 1989, Zaphely conveyed the property located at 225 Franklin Avenue, Brooklyn, to a third party. After a number of intervening conveyances, Lucas Joseph obtained title, and defaulted on a mortgage held by Deutsche Bank. In 2004, Zaphely conveyed the other parcel, located at 1392 Lincoln Place, Brooklyn, to a third party, and after a series of conveyances, Knop acquired a deed to the property. Now, in these proceedings ' one a foreclosure action by Deutsche Bank and the other a quiet title action brought by the children of Zaphely and Ena ' the children assert that they acquired title at Ena's death, and that their title is superior to that of subsequent purchasers or mortgagees claiming through Zaphely. Supreme Court rejected their claims, and they appealed.

In affirming, the Appellate Division emphasized that in order for laches or equitable estoppel to bar a claim, the party claiming laches must show delay in asserting the otherwise valid claim, lack of knowledge by the party claiming laches that the valid claimant would assert any claim for relief, and injury or prejudice if the laches doctrine is not applied. In these cases, the court emphasized the delay by the children in asserting their claim, and detrimental reliance by the parties claiming through Zaphely's deed. (If the Haitian divorce did not appear on the public records in New York, there would have been no easy way for claimants through Zaphely to learn that Zaphely had anything other than full title to convey as the surviving tenant by the entirety).

'