Real Property Law

AppDiv, Second Dept.

(memorandum opinion)

In a partition action brought by the estate of a deceased tenant-in-common, the surviving tenant-in-common appealed from Supreme Court's confirmation of a referee's report denying her a credit for amounts she paid after decedent's death. The Appellate Division modified to award her the credit because the estate was never ousted from the subject premises.

Surviving tenant-in-common occupied the subject premises after decedent's death, apparently unaware that decedent had an interest in the property that survived his death. As a result, surviving tenant-in-common made payments for maintenance, upkeep, and repair of the premises, in addition to making tax, insurance, and mortgage payments. Long after decedent tenant-in-common's death, the estate brought this partition action. The premises were sold, and a referee issued a report awarding the estate $35,897.27, representing reduction in the principal amount of the mortgage after decedent's death, and also denying surviving tenant-in-common a credit for amounts she paid for maintenance of the premises after decedent's death. Supreme Court confirmed the report, and surviving tenant-in-common appealed.

In modifying, the Appellate Division rejected the referee's conclusion that surviving co-tenant bore sole responsibility for maintenance, tax, and mortgage payments made while she was the sole occupant of the premises. The court noted that each tenant-in-common has the right to occupy the whole, without liability for use and occupancy, so long as she does not interfere with the right of other co-tenants to occupy the premises. During the tenancy-in-common, each co-tenant bears equal costs incurred in maintenance, absent ouster. Here, the fact that the surviving co-tenant was unaware of decedent's interest did not establish ouster. As a result, she was entitled to a credit for one half of the payments she made after decedent's death. The court remanded for a computation of the appropriate credit.

COMMENT

In cases where a co-tenant maintains exclusive possession of jointly owned property for a substantial period of time without making any demand for rent or contribution, New York courts, in partition actions, have sometimes, but not always, awarded the tenant in possession credit for maintenance expenses. In Freigang v Freigang, 256 AD2d 539, 540, the court held, in an action to partition real property, that husband co-tenant was entitled to obtain a credit for half of the expenses made to maintain real property after wife co-tenant abandoned their marital house. The court noted it would be “highly inequitable” to permit the wife, who did not contribute to the maintenance expenses of the property, to receive half of the partition sale proceeds when there was no evidence that the husband precluded her from the premises.

By contrast, in other cases, courts have disallowed a credit by inferring an implied agreement between co-tenants, under the terms of which one co-tenant impliedly waived his right to contributions for maintenance expenses in return for the other co-tenant's waiver of a right to rent. For example, in Lang v Lang, 2 70 AD2d 463, defendant co-tenant could not credit maintenance expenses because plaintiff co-tenant moved out 25 years prior to the partition sale and neither party provided any evidence of rent or contribution payment demands. Id. at 464. Also, in Jemzura v. Jemzura, 36 N.Y.2d 496 ' a case not involving a partition sale, but cited by subsequent courts dealing with credits in partition action ' the Court of Appeals affirmed a finding that the occupant co-tenant had impliedly agreed to pay taxes and maintenance in return for exclusive possession of property.

A tenant in common who enters into an express agreement to cover maintenance expenses cannot obtain a credit for those expenditures later in a partition sale. In Oliva v. Oliva, 136 AD2d 611, 612, an action for the partition of real property between co-tenant spouses, the court affirmed the denial for maintenance credits because the parties stipulated in a prior divorce proceeding that plaintiff co-tenant would contribute the total cost of maintaining defendant co-tenant and children in their home.

Even when no express or implied agreement precludes award of a credit, the co-tenant seeking a credit must provide expenditure receipts and demonstrate that the expenses were necessary to protect or preserve the premises. Degliuomini v. Degliuomini, 45 AD3d 626, 630. In Degliuomini, an action to partition real property between two sisters-in-law, the co-tenant in possession sought a credit for payments for mortgage payments, real estate taxes, repairs, utilities, and insurance, and the court awarded credit only for taxes an mortgage payments, both of which were supported with evidence and proven necessary to prevent default and liens. By contrast, the court denied the credit for repairs and insurance because the co-tenant could not provide records or other admissible evidence to substantiate those expenses, and denied the credit for utilities because the defendant's business operated on the premises and paid for the utilities for its own benefit and not for building upkeep.

Deed Void; Intended to Convey Only a Security Interest

Stahl v. SPEC Homes, Inc.

NYLJ 9/25/14, p. 21, col. 3

Supreme Ct., Suffolk Cty.

(Spinner, J.)

In an action by transferor's estate to set aside a deed, transferee's successor moved to dismiss the complaint. The court denied transferee's motion and declared the deed void based on transferor's allegation that the deed was intended only to convey a security interest and not a fee interest.

In 1965, Abe Farber Associates conveyed the subject residential real property to the Stulzafts for $20,900. The Stulzafts executed a purchase money mortgage in favor of a bank to secure a $17,000 loan. Later that year, the Stulzafts executed a deed to Spec Homes, an entity owned and controlled by Abe Farber, for consideration of $2,200. In 1971, Spec Homes transferred the property to Selwyn Farber for no consideration. The Stulzafts divorced, Mr. Stulzaft moved to California, where he died, and, in 2007, Mrs. Stulzaft died. The property is now occupied by the couple's son. Mrs. Stulzaft's executor brought this action, in equity, to set aside the deed. The complaint alleged that the deed was intended to serve as security for a loan by Farber to the Stulzafts to enable the Stulzafts to avoid default on their bank mortgage. The complaint also alleged that both the loan to Farber and the bank loan have been repaid in full. Selwyn Farber moved to dismiss the complaint.

In declaring that the deed was intended to serve as a mortgage and in setting aside the deed, the court observed that in equity, a deed purporting to convey a fee interest will be treated as a mortgage if the deed was delivered as security for a debt. The court noted that extrinsic evidence , including parol evidence, is admissible to prove that a deed, absolute on its face, is intended to secure repayment of a debt. Here, the court relied on the sworn statement in the executor's application for relief as a basis for holding that the deed was intended as security.

Fraud Claim Against Agent Not Duplicative of Breach Of Contract Claim

Fidelity National Title Insurance Co. v. NY Land Title Agency, LLC

NYLJ 10/6/14, p. 18, col. 1

AppDiv, First Dept.

(memorandum opinion)

In an action by title insurance company against its policy-issuing agent and the entity that ordered or obtained the title search, title insurance company appealed from Supreme Court's dismissal of title insurer's claims for fraud against the agent, negligent misrepresentation against the company that did the search, and unjust enrichment against both entities. The Appellate Division modified to reinstate the fraud claim, holding that it was not duplicative of title insurer's breach of contract claim.

Fidelity employed NY Land Title to act as its agent in issuing a title insurance policy, and relied on Land Title Associates to ascertain whether any pre-existing encumbrances on the property would affect issuance of a policy. Neither NY Land Title nor Land Title Associates informed Fidelity of a pre-existing mortgage before NY Land Title, acting as Fidelity's agent, issued a policy on a subsequent mortgage. The title policy did not except the pre-existing mortgage, and when the holder of that mortgage foreclosed, Fidelity became obligated to insure against the loss. Fidelity then brought this action against NY Land Title and Land Title Associates, alleging breach of contract, fraud, negligent misrepresentation, and unjust enrichment. Supreme Court dismissed the fraud, negligent misrepresentation, and unjust enrichment claims, and Fidelity appealed.

In modifying to reinstate the fraud claim against NY Land Title, the Appellate Division concluded that the fraud claim is not duplicative of the breach of contract claim because Fidelity alleged that NY Land Title made fraudulent representations in the title policy and certificate of title that the insured mortgage would be a first lien despite NY Land Title's actual knowledge of the prior mortgage.

The court, however, dismissed the negligent misrepresentation claim against Land Title because the complaint did not allege any special relationship between the parties (and therefore no duty beyond contract duties). The court dismissed the unjust enrichment claims for failure to prove that NY Land Title and Land Title were enriched at Fidelity's expense, because it was the insured, and not Fidelity, who paid premiums to the two entities.

COMMENT

A title insurance agent is liable to the title insurer for negligence when the agent fails to use reasonable care performing a duty. In Stewart Title Ins. Co. v. Equitable Land Services, Inc., 207 A.D.2d 880, the court affirmed the grant of summary judgment to title insurer in its action alleging that its agent committed negligence by failing to report a lien the agent found during a title search. The agent had found a release of the lien, but failed to notice that the release was ineffective against the insured premises because it omitted the description of the property. Because the agent's counsel admitted that she was unaware that the description of the property was not typed on the release of judgment, the court held that there were no questions of fact about the agent's negligence. Although there does not appear to be any prior case law about the right of a title insurer to maintain simultaneous breach of contract and negligence actions against an agent, courts have refused to permit claimants to maintain multiple claims against title insurers when the damages recoverable on the claims would be duplicative. In Polanco v. Indymac Bank, 2009 N.Y. Misc. Lexis 3933, the court dismissed an insured's bad faith claim against a title insurer as duplicative of the insured's breach of contract claim. Insured's bad faith claim asserted that the title insurer failed to perform its obligations under the insurance contract and falsely represented that a prior lien would be paid off at closing. Insured's breach of contract claim alleged that insurer failed to pay for loss or damages sustained by insured. The court held that insured could not maintain the bad faith claim because it arose from the same set of facts as the breach of contract claim, and alleged the same damages that would be recoverable through the breach of contract claim.

Polanco reflects a broader principle, routinely applied in cases that do not involving title insurers, that tort claims should be dismissed when all recoverable damages are duplicative of damages recoverable under breach of contract claims. For instance, in Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, the Court of Appeals affirmed dismissal of a contractor ' s negligence claim in an action alleging that the railroad entered into a contract with full knowledge of problems that would delay construction. The court held that the negligence claim was duplicative of contractor's breach of contract claim because contractor did not allege violations of a legal duty independent of the contract, and because the damages sustained were all contemplated by the contract and recoverable in a breach of contract action.

Title Insurance Policy Excludes Charges on Water Meter

Timac Realty v. G & E Tremont LLC

NYLJ 10/14/14, p. 18, col. 3

AppDiv, First Dept.

(memorandum opinion)

In an action by insured against title insurer, insurer's agent, and preparer of a title report for losses suffered when insured was required to pay charges on a water meter not disclosed in the title report, insured appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, relying on an express exclusion in the title policy.

When insured purchased the subject premises, insured was apparently unaware of one of the water meters on the property, and as a result, incurred charges for water use predating the closing. Insured sought to hold its title insurer liable on the title insurance policy, and sought to hold the preparer of a title report liable for providing a negligent survey that did not reveal the existence of the unknown water meter. Supreme Court dismissed the complaint.

In affirming, the Appellate Division held that the title insurer was not liable on the title insurance policy because the policy expressly excluded “water rates ' which are not shown as existing liens by the public record.” The disputed charges were not reflected in the records of New York City's Department of Environmental Protection until after the closing and the issuance of the title insurance policy. The court then held that insured could not recover from the preparer of the title report, because the report itself provided that the “certificate shall be null and void ' upon the delivery of the policy.” The court went on to emphasize that title reports function to apprise title insurers of defects in title, but do not serve to warn prospective purchasers of all risks facing the property.

'

Co-Tenant in Possession Entitled to Credit

Klein v. Dooley

NYLJ 9/22/14, p. 21, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In a partition action brought by the estate of a deceased tenant-in-common, the surviving tenant-in-common appealed from Supreme Court's confirmation of a referee's report denying her a credit for amounts she paid after decedent's death. The Appellate Division modified to award her the credit because the estate was never ousted from the subject premises.

Surviving tenant-in-common occupied the subject premises after decedent's death, apparently unaware that decedent had an interest in the property that survived his death. As a result, surviving tenant-in-common made payments for maintenance, upkeep, and repair of the premises, in addition to making tax, insurance, and mortgage payments. Long after decedent tenant-in-common's death, the estate brought this partition action. The premises were sold, and a referee issued a report awarding the estate $35,897.27, representing reduction in the principal amount of the mortgage after decedent's death, and also denying surviving tenant-in-common a credit for amounts she paid for maintenance of the premises after decedent's death. Supreme Court confirmed the report, and surviving tenant-in-common appealed.

In modifying, the Appellate Division rejected the referee's conclusion that surviving co-tenant bore sole responsibility for maintenance, tax, and mortgage payments made while she was the sole occupant of the premises. The court noted that each tenant-in-common has the right to occupy the whole, without liability for use and occupancy, so long as she does not interfere with the right of other co-tenants to occupy the premises. During the tenancy-in-common, each co-tenant bears equal costs incurred in maintenance, absent ouster. Here, the fact that the surviving co-tenant was unaware of decedent's interest did not establish ouster. As a result, she was entitled to a credit for one half of the payments she made after decedent's death. The court remanded for a computation of the appropriate credit.

COMMENT

In cases where a co-tenant maintains exclusive possession of jointly owned property for a substantial period of time without making any demand for rent or contribution, New York courts, in partition actions, have sometimes, but not always, awarded the tenant in possession credit for maintenance expenses. In Freigang v Freigang, 256 AD2d 539, 540, the court held, in an action to partition real property, that husband co-tenant was entitled to obtain a credit for half of the expenses made to maintain real property after wife co-tenant abandoned their marital house. The court noted it would be “highly inequitable” to permit the wife, who did not contribute to the maintenance expenses of the property, to receive half of the partition sale proceeds when there was no evidence that the husband precluded her from the premises.

By contrast, in other cases, courts have disallowed a credit by inferring an implied agreement between co-tenants, under the terms of which one co-tenant impliedly waived his right to contributions for maintenance expenses in return for the other co-tenant's waiver of a right to rent. For example, in Lang v Lang, 2 70 AD2d 463, defendant co-tenant could not credit maintenance expenses because plaintiff co-tenant moved out 25 years prior to the partition sale and neither party provided any evidence of rent or contribution payment demands. Id. at 464. Also, in Jemzura v. Jemzura, 36 N.Y.2d 496 ' a case not involving a partition sale, but cited by subsequent courts dealing with credits in partition action ' the Court of Appeals affirmed a finding that the occupant co-tenant had impliedly agreed to pay taxes and maintenance in return for exclusive possession of property.

A tenant in common who enters into an express agreement to cover maintenance expenses cannot obtain a credit for those expenditures later in a partition sale. In Oliva v. Oliva, 136 AD2d 611, 612, an action for the partition of real property between co-tenant spouses, the court affirmed the denial for maintenance credits because the parties stipulated in a prior divorce proceeding that plaintiff co-tenant would contribute the total cost of maintaining defendant co-tenant and children in their home.

Even when no express or implied agreement precludes award of a credit, the co-tenant seeking a credit must provide expenditure receipts and demonstrate that the expenses were necessary to protect or preserve the premises. Degliuomini v. Degliuomini, 45 AD3d 626, 630. In Degliuomini, an action to partition real property between two sisters-in-law, the co-tenant in possession sought a credit for payments for mortgage payments, real estate taxes, repairs, utilities, and insurance, and the court awarded credit only for taxes an mortgage payments, both of which were supported with evidence and proven necessary to prevent default and liens. By contrast, the court denied the credit for repairs and insurance because the co-tenant could not provide records or other admissible evidence to substantiate those expenses, and denied the credit for utilities because the defendant's business operated on the premises and paid for the utilities for its own benefit and not for building upkeep.

Deed Void; Intended to Convey Only a Security Interest

Stahl v. SPEC Homes, Inc.

NYLJ 9/25/14, p. 21, col. 3

Supreme Ct., Suffolk Cty.

(Spinner, J.)

In an action by transferor's estate to set aside a deed, transferee's successor moved to dismiss the complaint. The court denied transferee's motion and declared the deed void based on transferor's allegation that the deed was intended only to convey a security interest and not a fee interest.

In 1965, Abe Farber Associates conveyed the subject residential real property to the Stulzafts for $20,900. The Stulzafts executed a purchase money mortgage in favor of a bank to secure a $17,000 loan. Later that year, the Stulzafts executed a deed to Spec Homes, an entity owned and controlled by Abe Farber, for consideration of $2,200. In 1971, Spec Homes transferred the property to Selwyn Farber for no consideration. The Stulzafts divorced, Mr. Stulzaft moved to California, where he died, and, in 2007, Mrs. Stulzaft died. The property is now occupied by the couple's son. Mrs. Stulzaft's executor brought this action, in equity, to set aside the deed. The complaint alleged that the deed was intended to serve as security for a loan by Farber to the Stulzafts to enable the Stulzafts to avoid default on their bank mortgage. The complaint also alleged that both the loan to Farber and the bank loan have been repaid in full. Selwyn Farber moved to dismiss the complaint.

In declaring that the deed was intended to serve as a mortgage and in setting aside the deed, the court observed that in equity, a deed purporting to convey a fee interest will be treated as a mortgage if the deed was delivered as security for a debt. The court noted that extrinsic evidence , including parol evidence, is admissible to prove that a deed, absolute on its face, is intended to secure repayment of a debt. Here, the court relied on the sworn statement in the executor's application for relief as a basis for holding that the deed was intended as security.

Fraud Claim Against Agent Not Duplicative of Breach Of Contract Claim

Fidelity National Title Insurance Co. v. NY Land Title Agency, LLC

NYLJ 10/6/14, p. 18, col. 1

AppDiv, First Dept.

(memorandum opinion)

In an action by title insurance company against its policy-issuing agent and the entity that ordered or obtained the title search, title insurance company appealed from Supreme Court's dismissal of title insurer's claims for fraud against the agent, negligent misrepresentation against the company that did the search, and unjust enrichment against both entities. The Appellate Division modified to reinstate the fraud claim, holding that it was not duplicative of title insurer's breach of contract claim.

Fidelity employed NY Land Title to act as its agent in issuing a title insurance policy, and relied on Land Title Associates to ascertain whether any pre-existing encumbrances on the property would affect issuance of a policy. Neither NY Land Title nor Land Title Associates informed Fidelity of a pre-existing mortgage before NY Land Title, acting as Fidelity's agent, issued a policy on a subsequent mortgage. The title policy did not except the pre-existing mortgage, and when the holder of that mortgage foreclosed, Fidelity became obligated to insure against the loss. Fidelity then brought this action against NY Land Title and Land Title Associates, alleging breach of contract, fraud, negligent misrepresentation, and unjust enrichment. Supreme Court dismissed the fraud, negligent misrepresentation, and unjust enrichment claims, and Fidelity appealed.

In modifying to reinstate the fraud claim against NY Land Title, the Appellate Division concluded that the fraud claim is not duplicative of the breach of contract claim because Fidelity alleged that NY Land Title made fraudulent representations in the title policy and certificate of title that the insured mortgage would be a first lien despite NY Land Title's actual knowledge of the prior mortgage.

The court, however, dismissed the negligent misrepresentation claim against Land Title because the complaint did not allege any special relationship between the parties (and therefore no duty beyond contract duties). The court dismissed the unjust enrichment claims for failure to prove that NY Land Title and Land Title were enriched at Fidelity's expense, because it was the insured, and not Fidelity, who paid premiums to the two entities.

COMMENT

A title insurance agent is liable to the title insurer for negligence when the agent fails to use reasonable care performing a duty. In Stewart Title Ins. Co. v. Equitable Land Services, Inc., 207 A.D.2d 880, the court affirmed the grant of summary judgment to title insurer in its action alleging that its agent committed negligence by failing to report a lien the agent found during a title search. The agent had found a release of the lien, but failed to notice that the release was ineffective against the insured premises because it omitted the description of the property. Because the agent's counsel admitted that she was unaware that the description of the property was not typed on the release of judgment, the court held that there were no questions of fact about the agent's negligence. Although there does not appear to be any prior case law about the right of a title insurer to maintain simultaneous breach of contract and negligence actions against an agent, courts have refused to permit claimants to maintain multiple claims against title insurers when the damages recoverable on the claims would be duplicative. In Polanco v. Indymac Bank, 2009 N.Y. Misc. Lexis 3933, the court dismissed an insured's bad faith claim against a title insurer as duplicative of the insured's breach of contract claim. Insured's bad faith claim asserted that the title insurer failed to perform its obligations under the insurance contract and falsely represented that a prior lien would be paid off at closing. Insured's breach of contract claim alleged that insurer failed to pay for loss or damages sustained by insured. The court held that insured could not maintain the bad faith claim because it arose from the same set of facts as the breach of contract claim, and alleged the same damages that would be recoverable through the breach of contract claim.

Polanco reflects a broader principle, routinely applied in cases that do not involving title insurers, that tort claims should be dismissed when all recoverable damages are duplicative of damages recoverable under breach of contract claims. For instance, in Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d 382, the Court of Appeals affirmed dismissal of a contractor ' s negligence claim in an action alleging that the railroad entered into a contract with full knowledge of problems that would delay construction. The court held that the negligence claim was duplicative of contractor's breach of contract claim because contractor did not allege violations of a legal duty independent of the contract, and because the damages sustained were all contemplated by the contract and recoverable in a breach of contract action.

Title Insurance Policy Excludes Charges on Water Meter

Timac Realty v. G & E Tremont LLC

NYLJ 10/14/14, p. 18, col. 3

AppDiv, First Dept.

(memorandum opinion)

In an action by insured against title insurer, insurer's agent, and preparer of a title report for losses suffered when insured was required to pay charges on a water meter not disclosed in the title report, insured appealed from Supreme Court's dismissal of the complaint. The Appellate Division affirmed, relying on an express exclusion in the title policy.

When insured purchased the subject premises, insured was apparently unaware of one of the water meters on the property, and as a result, incurred charges for water use predating the closing. Insured sought to hold its title insurer liable on the title insurance policy, and sought to hold the preparer of a title report liable for providing a negligent survey that did not reveal the existence of the unknown water meter. Supreme Court dismissed the complaint.

In affirming, the Appellate Division held that the title insurer was not liable on the title insurance policy because the policy expressly excluded “water rates ' which are not shown as existing liens by the public record.” The disputed charges were not reflected in the records of New York City's Department of Environmental Protection until after the closing and the issuance of the title insurance policy. The court then held that insured could not recover from the preparer of the title report, because the report itself provided that the “certificate shall be null and void ' upon the delivery of the policy.” The court went on to emphasize that title reports function to apprise title insurers of defects in title, but do not serve to warn prospective purchasers of all risks facing the property.

'