Real Property Law

AppDiv, Second Dept.

(memorandum opinion)

In an action by buyer's broker for a real estate commission, buyers appealed from Supreme Court's judgment, after a nonjury trial, awarding broker $18,750. The Appellate Division reversed and dismissed the complaint, holding that the brokerage agreement did not give broker a right to recover a commission from the buyer.

Buyers engaged a broker to help them buy a weekend house in the Hamptons. They signed an “Exclusive Buyer Broker Agreement,” which provided that “BUYER agrees to pay the BROKER a commission of SBC.” Buyer agreed to buy a house owned by seller. The broker sent an e-mail to seller confirming that broker would be receiving a 3% commission. Buyer and seller entered into an agreement stipulating that seller would pay broker any commission. At closing, the broker, who was not present, did not receive any commission. Broker then brought this action against buyer and seller.

At trial, the broker testified that she informed buyer that seller would pay the commission and that she negotiated the 3% commission rate with seller. Broker's principal also testified that the term “SBC” refers to “seller broker compensation” and meant that the seller would pay any commission to the broker. Supreme Court nevertheless held that buyer was liable for the brokerage commission.

In reversing, the Appellate Division emphasized that the evidence at trial failed to establish that buyers had expressly or impliedly agreed to be responsible for the brokerage commission. As a result, the court reversed on the law and the facts, and dismissed the complaint.

Broker States Claim for Commission

Coldwell Banker Commercial Hunter Realty v. Rainbow Holding Co., LLC

NYLJ 7/8/14, p. 25, col. 5

AppDiv, First Dept.

(memorandum opinion)

In an action by broker for breach of contract, seller appealed from Supreme Court's denial of its motion to dismiss. The Appellate Division modified, holding that broker had stated a cause of action for breach of contract and breach of the implied covenant of fair dealing, but that broker's unjust enrichment claim should have been dismissed.

Broker and seller entered into a brokerage agreement, and broker alleged that it had procured three ready, willing, and able buyers for the property. Broker alleged that seller failed to provide information needed by the buyers, and allowed its principal to make himself unavailable to those buyers. Broker's contention was that seller never intended to sell to any clients procured by broker, but instead was using the brokerage agreement to obtain a better deal from a third party. On these allegations, Supreme Court denied seller's motion to dismiss.

In modifying, the Appellate Division held that broker's allegations were sufficient to withstand a motion to dismiss the breach of contract claims. The court held, however, that because the parties had entered into an enforceable written agreement, the broker's relief was limited to claims for breach of that agreement. As a result, the unjust enrichment claim should have been dismissed.

Mortgagee Entitled to Notice Before City Demolishes Building

First National Acceptance Co v. City of Utica

NYLJ 6/25/14

U.S. Dist Ct., NDNY

(McAvoy, J.)

In mortgagee's action against the City of Utica for wrongful destruction of a building on which it held a mortgage, both parties sought summary judgment. The court granted summary judgment to mortgagee on its procedural due process claim, and to the city on the substantive due process claim.

Mortgagee held a properly recorded mortgage on a multiple dwelling in the City of Utica. A city housing inspector, conducting a drive-by inspection of the building, concluded that it was unoccupied, unsecured, and contained combustibles. She prepared a notice and order citing these conditions and directing the fee owner to remediate the conditions prior to a reinspection. The order did not state that the building was unsafe, and did not order demolition. She did not post a copy of the notice and order on the property and did not file it with the County Clerk ' both requirements of the building code. She sent a copy to the fee owner, but it was returned as undeliverable. No copy was sent to mortgagee.

Months later, after a reinspection, the city filed a proceeding in Utica City Court seeking an order to demolish the building. In that proceeding, the housing inspector swore that the fee owner had received an order directing him to repair and demolish the building. The City Court ordered demolition, and the city demolished the building. Mortgagee never received any notice. Fee owner continued to make mortgage payments, but when those payments started to arrive late, mortgagee conducted an inspection and discovered the building had been demolished. After fee owner stopped making mortgage payments, mortgagee brought this action against the city, because fee owner can no longer be found and foreclosure against a demolished building would not provide mortgagee with any meaningful remedy. Mortgagee alleged violations of its procedural and substantive due process rights.

In awarding mortgagee summary judgment on its procedural due process claim, the court analogized to tax foreclosure sales, where the Supreme Court has held that a duly recorded mortgage entitles the mortgagee not notice and an opportunity to be heard before a tax sale can occur. The court concluded that demolition of a building, making the mortgage essentially worthless, could not be accomplished without providing the mortgagee with notice and an opportunity to be heard. The court rejected the city's argument that mortgagee had identified no city policy that led to mortgagee's injury, noting that the city's code provisions make it clear that the city's policy does not require notice to mortgagee's ' the very problem that led to this mortgagee's injury.

The court then held, however, that mortgagee had not produced evidence of a culpable state of mind that could lead a reasonable juror to conclude that the city had violated mortgagee's substantive due process rights.

Statute of Limitations Did Not Run on Forgery Claim

Matter of Marini

NYLJ 7/7/14, p. 22, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an estate administrator's proceeding to quiet title to property previously owned by the administrator's parents, mortgagee HSBC appealed from Supreme Court's denial of its motion to dismiss the petition with respect to HSBC. The Appellate Division affirmed, holding that the statute of limitations had not run on administrator's forgery claim.

Administrator's parents bought the subject property as tenants by the entirety in 1980. They lived on the property, which also produced income. Administrator's mother died intestate in 2004, and his father died intestate in 2009, survived by their two sons, administrator and his brother Richard. After the father's death, administrator learned of a deed from the parents to Richard's daughter Jennifer, for no consideration, in 1999, a subsequent deed, also for no consideration, from Jennifer to Richard in 2003, and a deed from Richard to Giuliano in 2006, for $800,000. Giuliano financed the purchase with a mortgage from HSBC. Upon discovering these deeds, administrator brought this action to determine claims to the real property, alleging that the 1999 deed was forged, and that the mortgage to HSBC should be discharged because title never vested in Giuliano, who was allegedly aware of the forgery. Supreme Court denied HSBC's motion to dismiss.

In affirming, the Appellate Division started by noting that a deed based on forgery is void ab initio , and a mortgage based on that deed is also invalid. As a result, administrator's claim that the 1999 deed was void was sufficient to withstand a motion to dismiss. The court then rejected HSBC's contention that the administrator's claim was untimely. The court noted that during their lifetimes, the parents had paid all expenses associated with the property. The court held, therefore, that the 10-year statute of limitations on quiet title actions did not start to run until the father died in 2009.

COMMENT

A person who is in possession of land, or who has been in possession within the preceding 10 years, may generally bring an action to invalidate or reform a deed no matter when the disputed deed was executed. For example, in Hart v. Blabey, 287 N.Y. 257, the court held that the statute of limitations did not bar an action to reform a deed executed 25 years earlier brought by a landowner who had been in possession within the last 10 years. The court applied the same approach to a forgery case in Stevens v. Communicare Property, LLC, 111 A.D.3d 614, where the court held that the statute of limitations did not bar a quiet title action brought in 2010 by a claimant who alleged a 1998 forgery. The court emphasized that the claimant had sufficiently alleged that he had been in possession of the property within 10 years before bringing the claim.

When a person who has not been in possession within the preceding 10 years contends that a deed has been forged and is therefore invalid, a number of courts have suggested in dictum that the statue of limitations would run on the forgery claim if the alleged forger has been in possession for the 10 year statutory period under CPLR ' 212. In Fan-Dorf Properties, Inc. v. Classic Brownstones Unlimited, LLC, 103 A.D.3d 589, the court suggested that the statute of limitations would bar the claim of an owner seeking to quiet title if the alleged forger was in possession of the property for the 10-year period. The court in Elam v. Altered Ego Realty Holding Corp., 114 A.D.3d 901, also suggested that if the claimant had not been in possession for 10 years prior to bringing the claim, the forgery claim would be time-barred.

Much may depend, however, on whether the person alleging a forgery had notice of the forgery. For example, in Budhu v. Budhu, 33 Misc.3d 398, the court held that a forgery claim by an owner who had not been in possession for 23 years was not time-barred because the owner brought the action within two years of receiving actual notice of the forgery. The claimant, who held a 50% interest in property as a tenant in common, alleged that after a falling out with other family members, those family members had forged a deed conveying her interest to her father and her sister. Even though the alleged forgers continued to live on the premises, the court emphasized that the daughter had no knowledge of the forged deed. By contrast, when a claimant who has not been in possession has actual or constructive notice that someone has forged a deed allegedly executed by claimant, courts have analogized to fraud claims and held that the claim is barred if not brought within two years of discovery. Thus, in Piedra v. Vanover, 174 A.D.2d 191, the court held that CPLR 203(f) barred an alleged owner's forgery claim when it was clear that the alleged owner knew of the forgery and did not act for many years.

In extreme cases, when the claimant brings a forgery claim within two years after learning of the forgery, laches may bar the claim if asserted against a bona fide purchaser for value. In Stein v. Doukas, 98 A.D. 3d 1026, an owner was barred from bringing a claim against the transferee of an allegedly forged deed, because the transferee was able to show the owner had notice and failed to act for over a year while the transferee (who had no knowledge of the owner) expended millions to purchase the property from the alleged forger. Although the court applied the doctrine of laches, or equitable estoppels to bar the owner from bringing an action against the transferee, the court held that laches would not bar the claim against the alleged forger/transferor.

'

Buyer Broker Agreement Does Not Obligate Buyer to Pay Commission

Cusomano Associates Inc. v. Politoski

NYLJ 6/27/14, p. 34, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an action by buyer's broker for a real estate commission, buyers appealed from Supreme Court's judgment, after a nonjury trial, awarding broker $18,750. The Appellate Division reversed and dismissed the complaint, holding that the brokerage agreement did not give broker a right to recover a commission from the buyer.

Buyers engaged a broker to help them buy a weekend house in the Hamptons. They signed an “Exclusive Buyer Broker Agreement,” which provided that “BUYER agrees to pay the BROKER a commission of SBC.” Buyer agreed to buy a house owned by seller. The broker sent an e-mail to seller confirming that broker would be receiving a 3% commission. Buyer and seller entered into an agreement stipulating that seller would pay broker any commission. At closing, the broker, who was not present, did not receive any commission. Broker then brought this action against buyer and seller.

At trial, the broker testified that she informed buyer that seller would pay the commission and that she negotiated the 3% commission rate with seller. Broker's principal also testified that the term “SBC” refers to “seller broker compensation” and meant that the seller would pay any commission to the broker. Supreme Court nevertheless held that buyer was liable for the brokerage commission.

In reversing, the Appellate Division emphasized that the evidence at trial failed to establish that buyers had expressly or impliedly agreed to be responsible for the brokerage commission. As a result, the court reversed on the law and the facts, and dismissed the complaint.

Broker States Claim for Commission

Coldwell Banker Commercial Hunter Realty v. Rainbow Holding Co., LLC

NYLJ 7/8/14, p. 25, col. 5

AppDiv, First Dept.

(memorandum opinion)

In an action by broker for breach of contract, seller appealed from Supreme Court's denial of its motion to dismiss. The Appellate Division modified, holding that broker had stated a cause of action for breach of contract and breach of the implied covenant of fair dealing, but that broker's unjust enrichment claim should have been dismissed.

Broker and seller entered into a brokerage agreement, and broker alleged that it had procured three ready, willing, and able buyers for the property. Broker alleged that seller failed to provide information needed by the buyers, and allowed its principal to make himself unavailable to those buyers. Broker's contention was that seller never intended to sell to any clients procured by broker, but instead was using the brokerage agreement to obtain a better deal from a third party. On these allegations, Supreme Court denied seller's motion to dismiss.

In modifying, the Appellate Division held that broker's allegations were sufficient to withstand a motion to dismiss the breach of contract claims. The court held, however, that because the parties had entered into an enforceable written agreement, the broker's relief was limited to claims for breach of that agreement. As a result, the unjust enrichment claim should have been dismissed.

Mortgagee Entitled to Notice Before City Demolishes Building

First National Acceptance Co v. City of Utica

NYLJ 6/25/14

U.S. Dist Ct., NDNY

(McAvoy, J.)

In mortgagee's action against the City of Utica for wrongful destruction of a building on which it held a mortgage, both parties sought summary judgment. The court granted summary judgment to mortgagee on its procedural due process claim, and to the city on the substantive due process claim.

Mortgagee held a properly recorded mortgage on a multiple dwelling in the City of Utica. A city housing inspector, conducting a drive-by inspection of the building, concluded that it was unoccupied, unsecured, and contained combustibles. She prepared a notice and order citing these conditions and directing the fee owner to remediate the conditions prior to a reinspection. The order did not state that the building was unsafe, and did not order demolition. She did not post a copy of the notice and order on the property and did not file it with the County Clerk ' both requirements of the building code. She sent a copy to the fee owner, but it was returned as undeliverable. No copy was sent to mortgagee.

Months later, after a reinspection, the city filed a proceeding in Utica City Court seeking an order to demolish the building. In that proceeding, the housing inspector swore that the fee owner had received an order directing him to repair and demolish the building. The City Court ordered demolition, and the city demolished the building. Mortgagee never received any notice. Fee owner continued to make mortgage payments, but when those payments started to arrive late, mortgagee conducted an inspection and discovered the building had been demolished. After fee owner stopped making mortgage payments, mortgagee brought this action against the city, because fee owner can no longer be found and foreclosure against a demolished building would not provide mortgagee with any meaningful remedy. Mortgagee alleged violations of its procedural and substantive due process rights.

In awarding mortgagee summary judgment on its procedural due process claim, the court analogized to tax foreclosure sales, where the Supreme Court has held that a duly recorded mortgage entitles the mortgagee not notice and an opportunity to be heard before a tax sale can occur. The court concluded that demolition of a building, making the mortgage essentially worthless, could not be accomplished without providing the mortgagee with notice and an opportunity to be heard. The court rejected the city's argument that mortgagee had identified no city policy that led to mortgagee's injury, noting that the city's code provisions make it clear that the city's policy does not require notice to mortgagee's ' the very problem that led to this mortgagee's injury.

The court then held, however, that mortgagee had not produced evidence of a culpable state of mind that could lead a reasonable juror to conclude that the city had violated mortgagee's substantive due process rights.

Statute of Limitations Did Not Run on Forgery Claim

Matter of Marini

NYLJ 7/7/14, p. 22, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an estate administrator's proceeding to quiet title to property previously owned by the administrator's parents, mortgagee HSBC appealed from Supreme Court's denial of its motion to dismiss the petition with respect to HSBC. The Appellate Division affirmed, holding that the statute of limitations had not run on administrator's forgery claim.

Administrator's parents bought the subject property as tenants by the entirety in 1980. They lived on the property, which also produced income. Administrator's mother died intestate in 2004, and his father died intestate in 2009, survived by their two sons, administrator and his brother Richard. After the father's death, administrator learned of a deed from the parents to Richard's daughter Jennifer, for no consideration, in 1999, a subsequent deed, also for no consideration, from Jennifer to Richard in 2003, and a deed from Richard to Giuliano in 2006, for $800,000. Giuliano financed the purchase with a mortgage from HSBC. Upon discovering these deeds, administrator brought this action to determine claims to the real property, alleging that the 1999 deed was forged, and that the mortgage to HSBC should be discharged because title never vested in Giuliano, who was allegedly aware of the forgery. Supreme Court denied HSBC's motion to dismiss.

In affirming, the Appellate Division started by noting that a deed based on forgery is void ab initio , and a mortgage based on that deed is also invalid. As a result, administrator's claim that the 1999 deed was void was sufficient to withstand a motion to dismiss. The court then rejected HSBC's contention that the administrator's claim was untimely. The court noted that during their lifetimes, the parents had paid all expenses associated with the property. The court held, therefore, that the 10-year statute of limitations on quiet title actions did not start to run until the father died in 2009.

COMMENT

A person who is in possession of land, or who has been in possession within the preceding 10 years, may generally bring an action to invalidate or reform a deed no matter when the disputed deed was executed. For example, in Hart v. Blabey, 287 N.Y. 257, the court held that the statute of limitations did not bar an action to reform a deed executed 25 years earlier brought by a landowner who had been in possession within the last 10 years. The court applied the same approach to a forgery case in Stevens v. Communicare Property, LLC, 111 A.D.3d 614, where the court held that the statute of limitations did not bar a quiet title action brought in 2010 by a claimant who alleged a 1998 forgery. The court emphasized that the claimant had sufficiently alleged that he had been in possession of the property within 10 years before bringing the claim.

When a person who has not been in possession within the preceding 10 years contends that a deed has been forged and is therefore invalid, a number of courts have suggested in dictum that the statue of limitations would run on the forgery claim if the alleged forger has been in possession for the 10 year statutory period under CPLR ' 212. In Fan-Dorf Properties, Inc. v. Classic Brownstones Unlimited, LLC, 103 A.D.3d 589, the court suggested that the statute of limitations would bar the claim of an owner seeking to quiet title if the alleged forger was in possession of the property for the 10-year period. The court in Elam v. Altered Ego Realty Holding Corp., 114 A.D.3d 901, also suggested that if the claimant had not been in possession for 10 years prior to bringing the claim, the forgery claim would be time-barred.

Much may depend, however, on whether the person alleging a forgery had notice of the forgery. For example, in Budhu v. Budhu, 33 Misc.3d 398, the court held that a forgery claim by an owner who had not been in possession for 23 years was not time-barred because the owner brought the action within two years of receiving actual notice of the forgery. The claimant, who held a 50% interest in property as a tenant in common, alleged that after a falling out with other family members, those family members had forged a deed conveying her interest to her father and her sister. Even though the alleged forgers continued to live on the premises, the court emphasized that the daughter had no knowledge of the forged deed. By contrast, when a claimant who has not been in possession has actual or constructive notice that someone has forged a deed allegedly executed by claimant, courts have analogized to fraud claims and held that the claim is barred if not brought within two years of discovery. Thus, in Piedra v. Vanover, 174 A.D.2d 191, the court held that CPLR 203(f) barred an alleged owner's forgery claim when it was clear that the alleged owner knew of the forgery and did not act for many years.

In extreme cases, when the claimant brings a forgery claim within two years after learning of the forgery, laches may bar the claim if asserted against a bona fide purchaser for value. In Stein v. Doukas, 98 A.D. 3d 1026, an owner was barred from bringing a claim against the transferee of an allegedly forged deed, because the transferee was able to show the owner had notice and failed to act for over a year while the transferee (who had no knowledge of the owner) expended millions to purchase the property from the alleged forger. Although the court applied the doctrine of laches, or equitable estoppels to bar the owner from bringing an action against the transferee, the court held that laches would not bar the claim against the alleged forger/transferor.

'