Real Property Law

Statute of Frauds Bars Mortgagee's Claim

Dahan v. Weiss

NYLJ 8/15/14, p. 30, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an alleged mortgagee's action to recover damages for breach of contract, alleged mortgagee appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, holding that the statute of frauds barred alleged mortgagee's claim.

Alaska Group sold seven properties in Far Rockaway to Gateever in 2009. Dahan alleged that Alaska Group had borrowed $650,000 from him, pursuant to an oral loan agreement secured by an oral mortgage. Dahan also alleged that when Gateever purchased the property, it orally agreed to assume the mortgage and repay the loan within four months. Based on these oral agreements, Dahan brought this action for breach of contract, and sought a preliminary injunction preventing Gateever from selling or mortgaging the properties. Gateever moved to dismiss the complaint, and Supreme Court granted Gateever's motion.

In affirming, the Appellate Division rejected Dahan's argument that a variety of handwritten statements and e-mail messages were sufficient evidence of a written agreement to satisfy the statute of frauds. The court conceded that a variety of documents, taken together, may sometimes be sufficient to satisfy the statute of frauds, but noted that the documents must be such that the full intention of the parties can be ascertained from the documents, without the aid of parol evidence. The documents in this case did not do that, and at best showed evidence of negotiations among the parties. The court also noted that Gateever could not be held liable on the mortgage because General Obligations Law section 5-705 precludes liability on a mortgage unless the grantee executes a writing before a notary.

COMMENT

Courts have found that separate writings satisfy the statute of frauds when: 1) the writings all refer to the same transaction and collectively contain all essential terms; and 2) at least one of the writings refers to the others and is signed by the party to be charged. For instance, in Suchin v. Frederick, 30 A.D.3d 503, 503-04, the court awarded specific performance of a contract for the sale of real property to the plaintiff buyer, despite the fact that no individual writing evidencing the agreement included all of the essential terms. The defendant seller signed a basement construction rider, which stated that the seller has entered into a contract of sale with the buyers to construct and sell to the buyers a one-family residence. Id. at 103. The contract itself was unsigned, but contained the essential terms of the agreement. The court nevertheless granted specific performance, because the signed rider clearly referred to the unsigned contract. Id.

In contrast, a group of writings, together, will not satisfy the statute of frauds when the evidence does not establish that the signed writing refers to other writings that impose contract obligations on the party to be charged. In Grimm v. Marine Midland Bank, N.A., 117 A.D.2d 901, 903, the court dismissed plaintiff borrower's breach of contract claim against a bank for breach of an alleged contract to underwrite loans when the only signed writing obligated the bank to prepare a loan package, but no signed writings obligated the bank to make a loan. The court rejected borrower's contention that the signed letter should be read together with other unsigned writings relating to a loan, emphasizing that no signed document obligated the bank to grant a loan commitment. Id. at 903.

Furthermore, a group of writings will not satisfy the statute of frauds where the documents, together, lack essential terms. In Nesbitt v. Penalver, 40 A.D.3d 596, the court awarded summary judgment to seller in buyer's action for specific performance of a real estate sales contract, where letters signed by the seller included a price term, but omitted the manner of payment and financing, the closing date, and the quality of title to be transferred. Id. at 598. The court conceded that omission of any of these terms, alone, might not have been fatal to the breach of contract claim, but held that the omission of so many material terms underscores the conclusion that the letters were not intended to be a complete contract containing all essential terms. Id.

Referee Properly Refused To Permit Bid

T10 Funding v. Chavez

NYLJ 8/20/14, p. 21, col. 3

Supreme Ct., Westchester Cty.

(Giacomo, J.)

In a mortgage foreclosure action, an unsuccessful bidder at the foreclosure sale moved to set aside the sale. The court denied the motion, holding that the referee had properly refused to allow bidder to bid with double-endorsed checks, and that the price paid by the successful bidder was not unconscionably low.

When mortgagee obtained a judgment of foreclosure on the subject condominium unit and advertised the sale, unsuccessful bidder appeared at the sale with two bank checks for a total of $70,000, made out to himself. He allegedly intended to endorse the two checks over to the referee in connection with his bid. He placed the highest bid, but the referee rejected the bank checks, informing him that the checks had to be made payable to the referee. The referee gave the bidder time to obtain checks in the correct form, but the bidder never informed the referee whether he intended to do so. The referee then awarded the property to mortgagee, who bid $10,000 at the sale. Unsuccessful bidder then moved to set aside the sale.

The court first rejected unsuccessful bidder's argument that the sale should be set aside for failure to name the condominium association as a necessary party. The court noted that the condominium was not an indispensable party, because failure to name the party left the condominium's lien unaffected by the foreclosure. As a result, the successful bidder took subject to the condominium's lien. The court then held that a referee appointed to conduct a judicial sale has discretion to address circumstances that arise in the context of the sale. In this case, the evidence established that the referee appropriately exercised that discretion by giving the bidder time to obtain proper checks. Finally, the court held that the sale price did not shock the conscience because the successful bidder was taking the property subject to prior liens totaling about $200,000. In light of unsuccessful bidder's testimony that the value of the property was in the range of $225,000-$250,000, the price did not shock the conscience of the court.

Fraud Claim Against Broker Dismisssed

Katehis v. Sovereign Associates, Inc.

NYLJ 8/21/14, p. 21, col. 3

Supreme Ct., N.Y. Cty.

(Edmead, J.)

In an action by apartment tenant against her real estate broker for breach of contract, fraud, negligence, and infliction of emotional distress, broker moved to dismiss the complaint. The court granted broker's motion, holding that the agreement between the broker and the tenant controlled and precluded tenant's claims.

In 2011, tenant executed a one-year lease for a Manhattan apartment at a monthly rent of $2,500. Broker assisted tenant in procuring the apartment, and tenant paid broker $3,600. Later, tenant and her relatives were bitten or scratched by bats in the apartment, requiring a series of rabies shots and causing anxiety and distress. Tenant then brought this action against broker, alleging that the latter should have been aware of the bat infestation and should have warned tenant of the infestation before permitting her to sign the lease. Tenant argued that the agreement between the parties obligated broker to obtain a habitable apartment for tenant.

In dismissing tenant's complaint, the court first noted that the agreement tenant signed with broker did not mention habitability, and included a merger clause indicating that the written agreement set forth the entire agreement between the parties and superseded all other oral and written agreements between the parties. In light of the merger clause, and tenant's execution of a rider indicating that she would take the apartment in “as is” condition and “not sanitized,” the court concluded that tenant could not prevail on a breach of contract claim. The court then dismissed the fraud claim because there was no allegation that the broker made any misrepresentation regarding the presence or absence of bats in the apartment. The court also could find no plausible allegations of negligence by the broker, and no conduct outrageous enough to support an emotional distress claim.

COMMENT

New York law imposes no duty on a seller's broker to disclose property defects to the purchaser. In Daly v. Kochanowicz, 67 A.D.3d 78, the court affirmed a judgment dismissing a complaint alleging a breach of fiduciary duty complaint against the seller's broker for failing to disclose the water intrusion history of the property. The buyer purchased the home, which was later “catastrophically flooded,” causing severe damage to the property and forcing the purchaser to relocate. Id. at 82. The court held that the seller's broker only has a duty to act in the best interest of its principal, which in this case was the seller. Since the broker owes no duty towards the buyer, the broker did not breach a fiduciary duty by failing to disclose information to the buyer about the water intrusion history. Id. at 98.

However, all brokers have a duty not to participate in active concealment of material facts that may hinder a buyer's efforts to investigate the property fully before purchase. In Jablonski v. Rapalje, 14 A.D.3d 484, the court affirmed the denial of seller's broker's summary judgment motion when the broker aided the owner in cleaning bat guano and taking other steps to conceal bat infestation. The buyer's search of the premises yielded no results because of the broker and seller's active concealment of the bats. The court held that there were triable issues of fact as to whether the plaintiff reasonably relied on the real estate agent's active concealment.

Prescriptive Easement Claim Likely to Succeeed

Denmark v. Shamah

NYLJ 9/0/14, p. 21, col. 1

Supreme Ct., Kings Cty.

(Schack, J.)

In an action by landowners for a declaration that they have an easement to use an alleyway between their home and their neighbors' home, landowners sought a preliminary injunction requiring neighbors to remove obstacles obstructing the alleyway. The court granted the preliminary injunction, concluding that landowners had demonstrated a likelihood of success on their prescriptive easement claim.

Landowners acquired title to their Brooklyn home in 1986. Their deed and the deed of the abutting homeowner each include reciprocal easements for light and air over a three-foot by 100-foot strip of each other's property. The three-foot strip of the neighbors' land has no structures on it. On landowner's three-foot strip, the kitchen has a bay window that extends to the property line, obstructing what would otherwise be a six-foot alleyway between the two parcels. Nevertheless, from the time landowners moved into their home, they used the alleyway between the two houses to obtain access to their backyard; their home has no rear door that opens to the rear yard, and no door on the other side of the house. In 2011, current neighbors acquired title to the adjacent house, and subsequently erected a chain-link fence on the boundary line, effectively making it impossible for landowners to reach their backyard because the fence abutted landowners' kitchen bay window. Neighbors contend that landowners had asked their permission in 2012, but landowners disputed that allegation. Landowners then brought this action for a declaration that they had an easement to use the entire alleyway, and sought a preliminary injunction.

In granting the preliminary injunction, the court relied on testimony at a hearing establishing that landowners had continuously used the strip since 1986 without either permission or explicit objection from the prior owners of the neighboring parcel. The court noted that when use of neighboring property is open and notorious, continuous, and uninterrupted for the prescriptive period, a presumption arises that the use was hostile. In this case court concluded that landowners had made a prima facie showing of entitlement to the prescriptive easement, and had demonstrated irreparable harm in the inability to use their backyard. As a result, landowners were entitled to a preliminary injunction.

COMMENT

Although, as the court in Denmark indicates, New York courts presume hostile use when a prescriptive easement claimant can establish that their use was open, notorious and adverse for at least 10 years, the owner of the alleged servient estate can defeat the presumption by establishing that the land in question was not used exclusively by the claimant, or by establishing that the claimant's use was the product of “neighborly accommodation.”

A landowner can typically rebut the presumption of hostility by showing that members of the public used the alleged easement along with claimant. Once the presumption has been rebutted, claimant can prevail only by demonstrating that claimant took actions ' such as making expenditures ' that would make sense only if claimant held a permanent easement over the landowner's parcel. In Tulley v. Bayfront North, Ltd., 286 A.D.2d 873, landowners overcame the presumption of hostile use by showing the parking lot over which claimants asserted an easement was used by the general public. Because claimants failed to make an affirmative showing of hostility, the court granted the landowners summary judgment. By contrast, inCole v. Rothe, 18 A.D.3d 1058, even though landowner rebutted the presumption of hostile use by demonstrating that the road in question was used by the general public, the court granted summary judgment to the prescriptive easement claimants because their action ' bulldozing to widen the road and change its height ' would indicate to the landowner that the claimants' use of the road was pursuant to a claim of right.

A servient landowner can also rebut the presumption of hostile use by showing that the relationship between the parties is one of neighborly accommodation from which permissive use can be inferred. For instance, in Allen v. Mastrianni, 2 A.D.3d 1023, the court held that landowner had rebutted the presumption of hostility when claimant himself testified that all of the families in the area understood that they had “free range” to use the alleged easement. The court held that this testimony established” a history of accommodation and accommodation”, and precluded a finding of hostility. The fact that landowner and neighbors were friends, however, does not by itself establish neighborly accommodation and rebut the presumption of hostility. For instance, the landowners in Sleasman v. Williams, 187 A.D.2d 852, failed to establish neighborly accommodation when the court determined that, although the parties had a friendly relationship, the claimant did not establish that use of a strip of land on landowners ' property arose out of the friendly relationship.

Although an express grant of permission would rebut the presumption of hostility, courts do not typically infer permission from landowner's warnings not to intrude on landowner's rights ' especially if the warning does not refer explicitly to the area of the alleged easement. For instance, in Solimini v. Pytlovany, 144 A.D.2d 80, the court upheld an award of summary judgment to prescriptive easement claimants when landowner had warned claimants to keep their children away from the eaves of the house, and had requested that claimant not heap snow at their basement windows. The land surrounding the landowner's house was not the land for which the claimants were asserting a prescriptive easement. The court held that, as a matter of law, these statements were insufficient to establish that landowner had impliedly granted claimants permission to use the easement area.

'

Statute of Frauds Bars Mortgagee's Claim

Dahan v. Weiss

NYLJ 8/15/14, p. 30, col. 6

AppDiv, Second Dept.

(memorandum opinion)

In an alleged mortgagee's action to recover damages for breach of contract, alleged mortgagee appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, holding that the statute of frauds barred alleged mortgagee's claim.

Alaska Group sold seven properties in Far Rockaway to Gateever in 2009. Dahan alleged that Alaska Group had borrowed $650,000 from him, pursuant to an oral loan agreement secured by an oral mortgage. Dahan also alleged that when Gateever purchased the property, it orally agreed to assume the mortgage and repay the loan within four months. Based on these oral agreements, Dahan brought this action for breach of contract, and sought a preliminary injunction preventing Gateever from selling or mortgaging the properties. Gateever moved to dismiss the complaint, and Supreme Court granted Gateever's motion.

In affirming, the Appellate Division rejected Dahan's argument that a variety of handwritten statements and e-mail messages were sufficient evidence of a written agreement to satisfy the statute of frauds. The court conceded that a variety of documents, taken together, may sometimes be sufficient to satisfy the statute of frauds, but noted that the documents must be such that the full intention of the parties can be ascertained from the documents, without the aid of parol evidence. The documents in this case did not do that, and at best showed evidence of negotiations among the parties. The court also noted that Gateever could not be held liable on the mortgage because General Obligations Law section 5-705 precludes liability on a mortgage unless the grantee executes a writing before a notary.

COMMENT

Courts have found that separate writings satisfy the statute of frauds when: 1) the writings all refer to the same transaction and collectively contain all essential terms; and 2) at least one of the writings refers to the others and is signed by the party to be charged. For instance, in Suchin v. Frederick, 30 A.D.3d 503, 503-04, the court awarded specific performance of a contract for the sale of real property to the plaintiff buyer, despite the fact that no individual writing evidencing the agreement included all of the essential terms. The defendant seller signed a basement construction rider, which stated that the seller has entered into a contract of sale with the buyers to construct and sell to the buyers a one-family residence. Id. at 103. The contract itself was unsigned, but contained the essential terms of the agreement. The court nevertheless granted specific performance, because the signed rider clearly referred to the unsigned contract. Id.

In contrast, a group of writings, together, will not satisfy the statute of frauds when the evidence does not establish that the signed writing refers to other writings that impose contract obligations on the party to be charged. In Grimm v. Marine Midland Bank, N.A., 117 A.D.2d 901, 903, the court dismissed plaintiff borrower's breach of contract claim against a bank for breach of an alleged contract to underwrite loans when the only signed writing obligated the bank to prepare a loan package, but no signed writings obligated the bank to make a loan. The court rejected borrower's contention that the signed letter should be read together with other unsigned writings relating to a loan, emphasizing that no signed document obligated the bank to grant a loan commitment. Id. at 903.

Furthermore, a group of writings will not satisfy the statute of frauds where the documents, together, lack essential terms. In Nesbitt v. Penalver, 40 A.D.3d 596, the court awarded summary judgment to seller in buyer's action for specific performance of a real estate sales contract, where letters signed by the seller included a price term, but omitted the manner of payment and financing, the closing date, and the quality of title to be transferred. Id. at 598. The court conceded that omission of any of these terms, alone, might not have been fatal to the breach of contract claim, but held that the omission of so many material terms underscores the conclusion that the letters were not intended to be a complete contract containing all essential terms. Id.

Referee Properly Refused To Permit Bid

T10 Funding v. Chavez

NYLJ 8/20/14, p. 21, col. 3

Supreme Ct., Westchester Cty.

(Giacomo, J.)

In a mortgage foreclosure action, an unsuccessful bidder at the foreclosure sale moved to set aside the sale. The court denied the motion, holding that the referee had properly refused to allow bidder to bid with double-endorsed checks, and that the price paid by the successful bidder was not unconscionably low.

When mortgagee obtained a judgment of foreclosure on the subject condominium unit and advertised the sale, unsuccessful bidder appeared at the sale with two bank checks for a total of $70,000, made out to himself. He allegedly intended to endorse the two checks over to the referee in connection with his bid. He placed the highest bid, but the referee rejected the bank checks, informing him that the checks had to be made payable to the referee. The referee gave the bidder time to obtain checks in the correct form, but the bidder never informed the referee whether he intended to do so. The referee then awarded the property to mortgagee, who bid $10,000 at the sale. Unsuccessful bidder then moved to set aside the sale.

The court first rejected unsuccessful bidder's argument that the sale should be set aside for failure to name the condominium association as a necessary party. The court noted that the condominium was not an indispensable party, because failure to name the party left the condominium's lien unaffected by the foreclosure. As a result, the successful bidder took subject to the condominium's lien. The court then held that a referee appointed to conduct a judicial sale has discretion to address circumstances that arise in the context of the sale. In this case, the evidence established that the referee appropriately exercised that discretion by giving the bidder time to obtain proper checks. Finally, the court held that the sale price did not shock the conscience because the successful bidder was taking the property subject to prior liens totaling about $200,000. In light of unsuccessful bidder's testimony that the value of the property was in the range of $225,000-$250,000, the price did not shock the conscience of the court.

Fraud Claim Against Broker Dismisssed

Katehis v. Sovereign Associates, Inc.

NYLJ 8/21/14, p. 21, col. 3

Supreme Ct., N.Y. Cty.

(Edmead, J.)

In an action by apartment tenant against her real estate broker for breach of contract, fraud, negligence, and infliction of emotional distress, broker moved to dismiss the complaint. The court granted broker's motion, holding that the agreement between the broker and the tenant controlled and precluded tenant's claims.

In 2011, tenant executed a one-year lease for a Manhattan apartment at a monthly rent of $2,500. Broker assisted tenant in procuring the apartment, and tenant paid broker $3,600. Later, tenant and her relatives were bitten or scratched by bats in the apartment, requiring a series of rabies shots and causing anxiety and distress. Tenant then brought this action against broker, alleging that the latter should have been aware of the bat infestation and should have warned tenant of the infestation before permitting her to sign the lease. Tenant argued that the agreement between the parties obligated broker to obtain a habitable apartment for tenant.

In dismissing tenant's complaint, the court first noted that the agreement tenant signed with broker did not mention habitability, and included a merger clause indicating that the written agreement set forth the entire agreement between the parties and superseded all other oral and written agreements between the parties. In light of the merger clause, and tenant's execution of a rider indicating that she would take the apartment in “as is” condition and “not sanitized,” the court concluded that tenant could not prevail on a breach of contract claim. The court then dismissed the fraud claim because there was no allegation that the broker made any misrepresentation regarding the presence or absence of bats in the apartment. The court also could find no plausible allegations of negligence by the broker, and no conduct outrageous enough to support an emotional distress claim.

COMMENT

New York law imposes no duty on a seller's broker to disclose property defects to the purchaser. In Daly v. Kochanowicz, 67 A.D.3d 78, the court affirmed a judgment dismissing a complaint alleging a breach of fiduciary duty complaint against the seller's broker for failing to disclose the water intrusion history of the property. The buyer purchased the home, which was later “catastrophically flooded,” causing severe damage to the property and forcing the purchaser to relocate. Id. at 82. The court held that the seller's broker only has a duty to act in the best interest of its principal, which in this case was the seller. Since the broker owes no duty towards the buyer, the broker did not breach a fiduciary duty by failing to disclose information to the buyer about the water intrusion history. Id. at 98.

However, all brokers have a duty not to participate in active concealment of material facts that may hinder a buyer's efforts to investigate the property fully before purchase. In Jablonski v. Rapalje, 14 A.D.3d 484, the court affirmed the denial of seller's broker's summary judgment motion when the broker aided the owner in cleaning bat guano and taking other steps to conceal bat infestation. The buyer's search of the premises yielded no results because of the broker and seller's active concealment of the bats. The court held that there were triable issues of fact as to whether the plaintiff reasonably relied on the real estate agent's active concealment.

Prescriptive Easement Claim Likely to Succeeed

Denmark v. Shamah

NYLJ 9/0/14, p. 21, col. 1

Supreme Ct., Kings Cty.

(Schack, J.)

In an action by landowners for a declaration that they have an easement to use an alleyway between their home and their neighbors' home, landowners sought a preliminary injunction requiring neighbors to remove obstacles obstructing the alleyway. The court granted the preliminary injunction, concluding that landowners had demonstrated a likelihood of success on their prescriptive easement claim.

Landowners acquired title to their Brooklyn home in 1986. Their deed and the deed of the abutting homeowner each include reciprocal easements for light and air over a three-foot by 100-foot strip of each other's property. The three-foot strip of the neighbors' land has no structures on it. On landowner's three-foot strip, the kitchen has a bay window that extends to the property line, obstructing what would otherwise be a six-foot alleyway between the two parcels. Nevertheless, from the time landowners moved into their home, they used the alleyway between the two houses to obtain access to their backyard; their home has no rear door that opens to the rear yard, and no door on the other side of the house. In 2011, current neighbors acquired title to the adjacent house, and subsequently erected a chain-link fence on the boundary line, effectively making it impossible for landowners to reach their backyard because the fence abutted landowners' kitchen bay window. Neighbors contend that landowners had asked their permission in 2012, but landowners disputed that allegation. Landowners then brought this action for a declaration that they had an easement to use the entire alleyway, and sought a preliminary injunction.

In granting the preliminary injunction, the court relied on testimony at a hearing establishing that landowners had continuously used the strip since 1986 without either permission or explicit objection from the prior owners of the neighboring parcel. The court noted that when use of neighboring property is open and notorious, continuous, and uninterrupted for the prescriptive period, a presumption arises that the use was hostile. In this case court concluded that landowners had made a prima facie showing of entitlement to the prescriptive easement, and had demonstrated irreparable harm in the inability to use their backyard. As a result, landowners were entitled to a preliminary injunction.

COMMENT

Although, as the court in Denmark indicates, New York courts presume hostile use when a prescriptive easement claimant can establish that their use was open, notorious and adverse for at least 10 years, the owner of the alleged servient estate can defeat the presumption by establishing that the land in question was not used exclusively by the claimant, or by establishing that the claimant's use was the product of “neighborly accommodation.”

A landowner can typically rebut the presumption of hostility by showing that members of the public used the alleged easement along with claimant. Once the presumption has been rebutted, claimant can prevail only by demonstrating that claimant took actions ' such as making expenditures ' that would make sense only if claimant held a permanent easement over the landowner's parcel. In Tulley v. Bayfront North, Ltd., 286 A.D.2d 873, landowners overcame the presumption of hostile use by showing the parking lot over which claimants asserted an easement was used by the general public. Because claimants failed to make an affirmative showing of hostility, the court granted the landowners summary judgment. By contrast, inCole v. Rothe, 18 A.D.3d 1058, even though landowner rebutted the presumption of hostile use by demonstrating that the road in question was used by the general public, the court granted summary judgment to the prescriptive easement claimants because their action ' bulldozing to widen the road and change its height ' would indicate to the landowner that the claimants' use of the road was pursuant to a claim of right.

A servient landowner can also rebut the presumption of hostile use by showing that the relationship between the parties is one of neighborly accommodation from which permissive use can be inferred. For instance, in Allen v. Mastrianni, 2 A.D.3d 1023, the court held that landowner had rebutted the presumption of hostility when claimant himself testified that all of the families in the area understood that they had “free range” to use the alleged easement. The court held that this testimony established” a history of accommodation and accommodation”, and precluded a finding of hostility. The fact that landowner and neighbors were friends, however, does not by itself establish neighborly accommodation and rebut the presumption of hostility. For instance, the landowners in Sleasman v. Williams, 187 A.D.2d 852, failed to establish neighborly accommodation when the court determined that, although the parties had a friendly relationship, the claimant did not establish that use of a strip of land on landowners ' property arose out of the friendly relationship.

Although an express grant of permission would rebut the presumption of hostility, courts do not typically infer permission from landowner's warnings not to intrude on landowner's rights ' especially if the warning does not refer explicitly to the area of the alleged easement. For instance, in Solimini v. Pytlovany, 144 A.D.2d 80, the court upheld an award of summary judgment to prescriptive easement claimants when landowner had warned claimants to keep their children away from the eaves of the house, and had requested that claimant not heap snow at their basement windows. The land surrounding the landowner's house was not the land for which the claimants were asserting a prescriptive easement. The court held that, as a matter of law, these statements were insufficient to establish that landowner had impliedly granted claimants permission to use the easement area.

'