Real Property Law

Physical Access to Public Street

43 Park Owners Group, LLC v. Commonwealth Land Title Ins. Co.

NYLJ 10/24/14, p. 30, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an action by landowner against its title insurer for damages suffered from lack of access to a public street, landowner appealed from Supreme Court's grant of summary judgment to title insurer. The Appellate Division affirmed, holding that the insurance policy covered only the right to access to a street, not the means to obtain physical access.

In 2005, landowner acquired the subject parcel on Wadsworth Terrace in upper Manhattan, and purchased a title insurance policy from insurer. The parcel lies on a steep slope, with a portion of the parcel located 30 feet below street level, while a higher portion of the parcel is only four feet below street level. The New York City Department of Transportation (DOT) has built a retaining wall along the sidewalk, extending from 30 feet below street level to four feet above street level. When landowner proposed a high-end residential building for the property, the Department of Buildings (DOB) approved a project that called for removal of the portion of the retaining wall above street level to provide street access to the building. Landowner began construction and removed part of the wall. At that point, DOT became concerned about the integrity of the retaining wall, and construction halted for a substantial period. Later, landowner and DOT reached an agreement permitting demolition of the above-grade portion in a way that maintained the wall's structural integrity. Landowner then brought this action against its title insurer for breach of its agreement to insure against lack of access to the land. Supreme Court granted summary judgment to title insurer, and landowner appealed.

In affirming, the Appellate Division emphasized that the title insurance policy only insured against the lack of a right of access. Landowner's parcel did abut a public street, and therefore had a legal right to access. The title insurance policy did not cover the lack of an existing means of physical access to a street. As a result, Supreme Court properly granted summary judgment to insurer.

Buyer Has Fraud Claim Against Title Company

JP Morgan Chase Bank, N.A. v. Drummond

NYLJ 11/7/14, p. 28, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose a mortgage in existence at the time of mortgagor's purchase, mortgagor cross-claimed against, among others, subsequent mortgagees who financed the purchase, and a title abstract company that had provided an abstract to seller's lawyer. Mortgagor appealed from Supreme Court's dismissal of its cross claim against the mortgagees, and from dismissal of its fraud claim against the abstract company, while the abstract company appealed from Supreme Court's denial of its motion to dismiss mortgagor's claims for negligence and negligent misrepresentation. The Appellate Division modified to reinstate the fraud claims against the abstract company, and otherwise affirmed.

In 2008, mortgagor bought the subject residential property from Amir Properties. Mortgagor financed the property with a mortgage loan from Residential Home Funding (RHF). RHF later transferred the mortgage to Wells Fargo. Mortgagor alleges that at the time of closing, she was assured that there were no outstanding liens on the property. A title abstract company had issued a report to Amir's lawyer confirming that there were no outstanding liens. In fact, however, JP Morgan Chase held an unsatisfied mortgage. When Chase brought this foreclosure action, mortgagor cross-claimed against RHF, Wells Fargo, Amir's lawyer, and the title abstract company. Supreme Court dismissed the claims against RHF and Wells Fargo, and dismissed the fraud claim against the title abstract company, but denied the abstract company's motion to dismiss the negligence and negligent misrepresentation claims against the abstract company.

In modifying, the Appellate Division emphasized the difficulty a plaintiff has in alleging, with specificity, the circumstances constituting fraud when the material facts are within the peculiar knowledge of a defendant. As a result, the court held that the complaint against the abstract company should not have been dismissed because, even in the absence of specific details, the complaint included sufficient allegations to create an inference that the abstract company was aware of a fraudulent scheme and intended to aid in the commission of the fraud. The court also rejected the abstract company's contention that all claims against it should have been dismissed because it was not in privity with mortgagor, and therefore owed no duty to mortgagor. The court emphasized that, if the complaint's allegations were true, the abstract company knew that mortgagor was a member of a definable class who would rely on its certification. The court also noted that there was conduct suggesting that the abstract company knew of mortgagor's reliance on the certification. By contrast, RHF and Wells Fargo owed no duty to mortgagor, and Supreme Court had properly dismissed the negligent misrepresentation claims against them.

COMMENT

In the absence of a contractual relationship, a party who relies on a negligently or fraudulently prepared title report can recover from the abstract or title insurance company that prepared the report if the party is a member of a fixed, definite, and identifiable class of persons, who the insurer or abstract company knew was likely to rely on the accuracy of that report. In Kidd v. Havens, 171 A.D. 2d 336, the court held that an abstract company was not entitled to summary judgment dismissing the claim of a purchaser who had relied on a title report the abstract company had prepared for the seller. The court held that because the abstract company had to have been aware that the abstract and title reports it provided were going to be used by the purchaser to secure a mortgage, relationship between the two parties was the “functional equivalent” of contractual privity. The court emphasized that the purchaser's reliance on the accuracy of the report was the “end aim of the transaction.”

Before New York courts had fully articulated the “equivalent to privity rule” rule a non-contracting party's claim for negligence would fail due to a lack of privity; however the absence of privity did not inevitably bar a claim of fraud. The court in Goodman v. Title Guarantee & Trust Co., 11 A.D. 2d 1003 granted sellers leave to amend their complaint to include an action for fraud against a title insurer engaged by potential purchasers after the court determined that a claim of negligence could not stand due to lack of privity. The report incorrectly declared that an easement was not insurable, prompting purchasers to rescind their offer. The court determined that because the insurer knew the purposes for which its report would be used, the insurer must have known that the sellers would be damaged if the report were incorrect. On these facts, the court determined that the seller could plead an action for fraud.

Doctrine of Practical Location of Boundaries

Gibbs v. Porath

NYLJ 10/28/14, p. 21, col. 3

AppDiv, Third Dept.

(Opinion by Egan, J.)

In an action by plaintiff landowner to determine the location of a boundary line, defendant neighbor appealed from Supreme Court's determination locating the boundary line in accordance with landowner's survey and awarding landowner damages in excess of $40,000. The Appellate Division modified and remanded for a redetermination of damages, but otherwise affirmed, holding that Supreme Court had properly employed the doctrine of practical location of boundaries.

In 1975, landowner, his brother, and his brother-in-law acquired 20 acres of land in Franklin County. Landowner and his brother-in-law built homes on the parcel and, in 1981 or 1982, built a shared pond (the Upper Pond) on the parcel. Landowner then built another pond (the Lower Pond). Not until 1997 did the three parties formally subdivide the land. In that year, they had a map prepared, and based on the map, landowner acquired what appeared to be a 5.1-acre parcel between the 5.94-acre parcel transferred to his brother and the 8.6-acre parcel transferred to his brother-in-law. The map, however, was imprecise about where the boundaries were actually located. According to landowner, he and the other two parties to the subdivision understood that landowner's home, his fire pit, his bird houses, a portion of the upper pond and all of the lower pond were located on landowner's parcel. The brother-in-law's parcel changed hands twice before current neighbor acquired title. Neighbor then hired a surveyor, who concluded that the boundary line extended onto what was believed to be landowner's parcel, encompassing all of both ponds and landowner's home. When neighbor began making changes to the ponds, landowner hired his own surveyor, who prepared a map consistent with landowner's understanding of the boundaries. When landowner brought this action, Supreme Court relied on the doctrine of practical location of boundaries and awarded judgment based on the map prepared by landowner's surveyor, and also awarded $40,000 in damages.

In modifying, the Appellate Division emphasized that the subdivision deeds contained only a vague description of the boundary line without any specific bearings or directional calls. The conduct of the parties, however, established that they had accepted landowner's understanding of the boundaries. Neighbor had asked landowner to identify the boundary, and asked whether landowner was willing to share expenses of reviving the Upper Pond, a tacit admission of shared ownership. Moreover, when landowner indicated that he would repair the Lower Pond if neighbor repaired the upper pond, neighbor acquiesced, again suggesting a mutual understanding of the boundaries. The Appellate Division, however, concluded that Supreme Court's damage award was excessive because it required neighbor to rebuild the Lower Pond and reforest the area landowner himself had cleared when constructing the Lower Pond. As a result, the court remanded for a redetermination of damages.

'

Physical Access to Public Street

43 Park Owners Group, LLC v. Commonwealth Land Title Ins. Co.

NYLJ 10/24/14, p. 30, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In an action by landowner against its title insurer for damages suffered from lack of access to a public street, landowner appealed from Supreme Court's grant of summary judgment to title insurer. The Appellate Division affirmed, holding that the insurance policy covered only the right to access to a street, not the means to obtain physical access.

In 2005, landowner acquired the subject parcel on Wadsworth Terrace in upper Manhattan, and purchased a title insurance policy from insurer. The parcel lies on a steep slope, with a portion of the parcel located 30 feet below street level, while a higher portion of the parcel is only four feet below street level. The New York City Department of Transportation (DOT) has built a retaining wall along the sidewalk, extending from 30 feet below street level to four feet above street level. When landowner proposed a high-end residential building for the property, the Department of Buildings (DOB) approved a project that called for removal of the portion of the retaining wall above street level to provide street access to the building. Landowner began construction and removed part of the wall. At that point, DOT became concerned about the integrity of the retaining wall, and construction halted for a substantial period. Later, landowner and DOT reached an agreement permitting demolition of the above-grade portion in a way that maintained the wall's structural integrity. Landowner then brought this action against its title insurer for breach of its agreement to insure against lack of access to the land. Supreme Court granted summary judgment to title insurer, and landowner appealed.

In affirming, the Appellate Division emphasized that the title insurance policy only insured against the lack of a right of access. Landowner's parcel did abut a public street, and therefore had a legal right to access. The title insurance policy did not cover the lack of an existing means of physical access to a street. As a result, Supreme Court properly granted summary judgment to insurer.

Buyer Has Fraud Claim Against Title Company

JP Morgan Chase Bank, N.A. v. Drummond

NYLJ 11/7/14, p. 28, col. 1

AppDiv, Second Dept.

(memorandum opinion)

In an action to foreclose a mortgage in existence at the time of mortgagor's purchase, mortgagor cross-claimed against, among others, subsequent mortgagees who financed the purchase, and a title abstract company that had provided an abstract to seller's lawyer. Mortgagor appealed from Supreme Court's dismissal of its cross claim against the mortgagees, and from dismissal of its fraud claim against the abstract company, while the abstract company appealed from Supreme Court's denial of its motion to dismiss mortgagor's claims for negligence and negligent misrepresentation. The Appellate Division modified to reinstate the fraud claims against the abstract company, and otherwise affirmed.

In 2008, mortgagor bought the subject residential property from Amir Properties. Mortgagor financed the property with a mortgage loan from Residential Home Funding (RHF). RHF later transferred the mortgage to Wells Fargo. Mortgagor alleges that at the time of closing, she was assured that there were no outstanding liens on the property. A title abstract company had issued a report to Amir's lawyer confirming that there were no outstanding liens. In fact, however, JP Morgan Chase held an unsatisfied mortgage. When Chase brought this foreclosure action, mortgagor cross-claimed against RHF, Wells Fargo, Amir's lawyer, and the title abstract company. Supreme Court dismissed the claims against RHF and Wells Fargo, and dismissed the fraud claim against the title abstract company, but denied the abstract company's motion to dismiss the negligence and negligent misrepresentation claims against the abstract company.

In modifying, the Appellate Division emphasized the difficulty a plaintiff has in alleging, with specificity, the circumstances constituting fraud when the material facts are within the peculiar knowledge of a defendant. As a result, the court held that the complaint against the abstract company should not have been dismissed because, even in the absence of specific details, the complaint included sufficient allegations to create an inference that the abstract company was aware of a fraudulent scheme and intended to aid in the commission of the fraud. The court also rejected the abstract company's contention that all claims against it should have been dismissed because it was not in privity with mortgagor, and therefore owed no duty to mortgagor. The court emphasized that, if the complaint's allegations were true, the abstract company knew that mortgagor was a member of a definable class who would rely on its certification. The court also noted that there was conduct suggesting that the abstract company knew of mortgagor's reliance on the certification. By contrast, RHF and Wells Fargo owed no duty to mortgagor, and Supreme Court had properly dismissed the negligent misrepresentation claims against them.

COMMENT

In the absence of a contractual relationship, a party who relies on a negligently or fraudulently prepared title report can recover from the abstract or title insurance company that prepared the report if the party is a member of a fixed, definite, and identifiable class of persons, who the insurer or abstract company knew was likely to rely on the accuracy of that report. In Kidd v. Havens, 171 A.D. 2d 336, the court held that an abstract company was not entitled to summary judgment dismissing the claim of a purchaser who had relied on a title report the abstract company had prepared for the seller. The court held that because the abstract company had to have been aware that the abstract and title reports it provided were going to be used by the purchaser to secure a mortgage, relationship between the two parties was the “functional equivalent” of contractual privity. The court emphasized that the purchaser's reliance on the accuracy of the report was the “end aim of the transaction.”

Before New York courts had fully articulated the “equivalent to privity rule” rule a non-contracting party's claim for negligence would fail due to a lack of privity; however the absence of privity did not inevitably bar a claim of fraud. The court in Goodman v. Title Guarantee & Trust Co., 11 A.D. 2d 1003 granted sellers leave to amend their complaint to include an action for fraud against a title insurer engaged by potential purchasers after the court determined that a claim of negligence could not stand due to lack of privity. The report incorrectly declared that an easement was not insurable, prompting purchasers to rescind their offer. The court determined that because the insurer knew the purposes for which its report would be used, the insurer must have known that the sellers would be damaged if the report were incorrect. On these facts, the court determined that the seller could plead an action for fraud.

Doctrine of Practical Location of Boundaries

Gibbs v. Porath

NYLJ 10/28/14, p. 21, col. 3

AppDiv, Third Dept.

(Opinion by Egan, J.)

In an action by plaintiff landowner to determine the location of a boundary line, defendant neighbor appealed from Supreme Court's determination locating the boundary line in accordance with landowner's survey and awarding landowner damages in excess of $40,000. The Appellate Division modified and remanded for a redetermination of damages, but otherwise affirmed, holding that Supreme Court had properly employed the doctrine of practical location of boundaries.

In 1975, landowner, his brother, and his brother-in-law acquired 20 acres of land in Franklin County. Landowner and his brother-in-law built homes on the parcel and, in 1981 or 1982, built a shared pond (the Upper Pond) on the parcel. Landowner then built another pond (the Lower Pond). Not until 1997 did the three parties formally subdivide the land. In that year, they had a map prepared, and based on the map, landowner acquired what appeared to be a 5.1-acre parcel between the 5.94-acre parcel transferred to his brother and the 8.6-acre parcel transferred to his brother-in-law. The map, however, was imprecise about where the boundaries were actually located. According to landowner, he and the other two parties to the subdivision understood that landowner's home, his fire pit, his bird houses, a portion of the upper pond and all of the lower pond were located on landowner's parcel. The brother-in-law's parcel changed hands twice before current neighbor acquired title. Neighbor then hired a surveyor, who concluded that the boundary line extended onto what was believed to be landowner's parcel, encompassing all of both ponds and landowner's home. When neighbor began making changes to the ponds, landowner hired his own surveyor, who prepared a map consistent with landowner's understanding of the boundaries. When landowner brought this action, Supreme Court relied on the doctrine of practical location of boundaries and awarded judgment based on the map prepared by landowner's surveyor, and also awarded $40,000 in damages.

In modifying, the Appellate Division emphasized that the subdivision deeds contained only a vague description of the boundary line without any specific bearings or directional calls. The conduct of the parties, however, established that they had accepted landowner's understanding of the boundaries. Neighbor had asked landowner to identify the boundary, and asked whether landowner was willing to share expenses of reviving the Upper Pond, a tacit admission of shared ownership. Moreover, when landowner indicated that he would repair the Lower Pond if neighbor repaired the upper pond, neighbor acquiesced, again suggesting a mutual understanding of the boundaries. The Appellate Division, however, concluded that Supreme Court's damage award was excessive because it required neighbor to rebuild the Lower Pond and reforest the area landowner himself had cleared when constructing the Lower Pond. As a result, the court remanded for a redetermination of damages.

'