Real Property Law

AppDiv, Second Dept.

(memorandum opinion)

In a legal malpractice action, property seller appealed from Supreme Court's grant of summary judgment to seller's lawyer. The Appellate Division reversed, holding that seller had raised questions of fact about whether lawyer had breached his duty of care.

Lawyer represented seller in connection with sale of real property, previously used as an auto salvage business, for $1.9 million. In an earlier version of the deal, seller was to sell to developer for $2.5 million, $700,000 down with sellers providing a purchase money mortgage for the rest. The deal was later modified so that seller would take an equity stake in developer and would be paid the $1.9 million purchase price from the profits of the development. The project faltered, the developer filed for bankruptcy protection, and sellers were never paid the purchase price. Sellers then brought this malpractice action, alleging that the lawyer never explained the risks of the transaction, and should not have recommended continuing with the equity transaction in light of the existence of another all-cash offer for the property. Sellers contended that the lawyer had an undisclosed conflict of interest in that he represented the developer with regard to zoning and financing issues, and with respect to acquisition of other parcels. Sellers alleged that they would not have entered into the transaction had it not been for the lawyer's malpractice. Supreme Court granted the lawyer's summary judgment motion.

In reversing, the Appellate Division held that Supreme Court had improperly rejected sellers' contentions based on that court's assessment of sellers' credibility. Sellers had disputed the lawyer's contentions that he had fully explained the transaction and its risks, and that sellers had consented to his representation of the developer. Although Supreme Court concluded that sellers' contentions were not credible, the Appellate Division held that on a motion for summary judgment, the court is not to determine issues of credibility. In addition, the court held that the lawyer had failed to meet his prima facie burden of establishing that malpractice was not the proximate cause of sellers' losses. The court noted that the government and market-related issues that beset the project were inherent in the project, and not a superseding cause of sellers' damages. The court remanded to Supreme Court with direction that further proceedings be held before a different justice.

'

Questions of Fact About Broker ' s Entitlement to'a Commission

Saunders Ventures, Inc. v. Morrow

NYLJ 11/5/15, p. 25, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action to recover a brokerage commission, defendant exclusive broker appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division affirmed, holding that plaintiff broker had raised questions of fact about whether it had created an amicable atmosphere that led to the sale.

Plaintiff broker alleged that it had procured a ready, willing and able purchaser who ultimately purchased the subject real property, and that he had brought that customer to the seller's broker, who held an exclusive on the property. Plaintiff broker was not involved in the negotiations leading to the sale of the property. At closing, the exclusive broker received the entire commission, and plaintiff broker brought this action to recover a share of the commission. Supreme Court denied exclusive broker's summary judgment motion.

In affirming, the Appellate Division emphasized that the exclusive broker's own evidence demonstrated that the plaintiff broker's agent had discussed the availability of the property with the eventual purchaser, provided the purchaser with data necessary to make an offer, and put the purchaser in touch with the exclusive broker because the latter was the only broker entitled to contact the seller. Based on this evidence, exclusive broker had not demonstrated its right to judgment as a matter of law.

'

Adverse Possession Claim Prevails with Respect to Boundary Strip

Warren v. Carreras

NYLJ 11/6/15, p. 23, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action to establish title by adverse possession, true owner appealed from Supreme Court's grant of summary judgment to adverse possessors. The Appellate Division affirmed, holding that true owner had failed to raise questions of fact to rebut the adverse possessor's prima facie case.

Adverse possessors' predecessor built a chain link fence between his parcel and true owner's parcel in 1991. The chain link fence did not run the entire length of the boundary, but a chicken wire fence, already in place before 1991, completed the separation between the two parcels. Adverse possessors acquired title from their predecessors in 2002, and continued to maintain the grass on their side of the fence; the strip on true owner's side was wooded and uncultivated. In 2010, true owner commissioned a survey which revealed that the fence encroached on true owner's land. When true owner attempted to remove the fence and reclaim her land, adverse possessors brought this action, and Supreme Court awarded summary judgment to adverse possessors.

In affirming, the Appellate Division started by noting that adverse possessors' claim had vested no later than 2002, and was therefore governed by the prior adverse possession statute, before the legislature amended the statute in 2008. Under the prior statute, adverse possessors had to establish that the strip they claimed was “usually cultivated or improved.” Here, the adverse possessors established a prima facie case of possession within the meaning of the statute, and true owners did not rebut that case. As a result, adverse possessors were entitled to summary judgment.

COMMENT

Under the pre-2008 adverse possession statute, an adverse possessor had to demonstrate either that the possessor had “usually cultivated or improved” the parcel or that the possessor had substantially enclosed the parcel. An adverse possessor who maintained grass sufficiently established the “cultivation or improvement” requirement. In Walling v. Pryzbylo, 7 N.Y.3d 228 (2006), the court held that because adverse possessor installed topsoil and continuously mowed, graded, raked, planted, and watered grass on the disputed parcel for the required period of time, he established title by adverse possession. The parties owned adjacent properties and the adverse possessor maintain the grass on a portion of the true owner's parcel without objection from the true owner. Only when the true owner had the land surveyed, after the statutory period had expired, did true owner raise any objection.

The 2008 amendment replaced the statute's “usually cultivated or improved” language with more general language requiring “acts sufficiently open to put a reasonably diligent owner on notice.” At the same time, the amendment explicitly provided, in RPAPL ' 543, that “acts of lawn mowing or similar maintenance across [a] boundary line” are permissive and non-adverse. The practical effect of this is that Walling a nd cases with similar facts, where the adverse possession claim was based on the maintenance of grass, would be decided differently. For instance in Hartman v. Goldman, 84 A.D.3d 734 (2011), the court held that possessors' planting of foliage and shrubbery, landscaping and lawn maintenance were de minimus under a plain language reading of the RPAPL ' 543, and therefore permissive and non-adverse. Possessors installed a drainage system beneath the land, planted new foliage and shrubbery, and maintained and landscaped the lawn of disputed parcel.

The amended adverse possession statute purports to apply to all claims commenced after its enactment, so unless a party objects, courts will apply the amended statute, as was the case in Hartman. If there is an objection, courts have held it unconstitutional to apply the current statute when title vested prior to the effective date of the 2008 amendment. In Franza v. Olin, 73 A.D. 3d 44 (2010), the court held that the lower court's application of the amended adverse possession statute, when the claim to the disputed parcel allegedly ripened prior to the enactment of the amendments, was unconstitutional. Adverse possessor had submitted evidence showing that even though she commenced the action after the 2008 amendments, she had acquired title to the property in 1985 by adverse possession. However, courts have yet to decide what version of the adverse possession law applies when the possessor's occupation started before 2008, but where the claim had not completely ripened before enactment of the amended statute.

'

Deed to Parties As Husband and Wife Created Tenancy by the Entirety

LaCroix v. Limogene

NYLJ 10/23/15, p. 36, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action for a judgment declaring that daughter of a co-owner inherited a 50% share in the disputed property, co-owner's husband appealed from Supreme Court's judgment declaring the daughter a co-owner. The Appellate Division reversed and remanded to Supreme Court for a declaration that the daughter does not own a 50% interest in the property because her mother and the mother's husband held title as tenants by the entirety.

In 1988, a third party transferred title to the property to Andre and Jeanne Limogene, “husband and wife.” In 2013, Jeanne Limogene died, her will providing that “[i]n the event that [the subject property] is held as tenants in common, I give, bequeath, and devise all my interest in the real property ' to my daughter Sherlly Lacroix.” After Jeanne's death, Andre entered into a contract to sell the property, prompting Sherlly to bring this declaratory judgment action. Andre moved to dismiss, but Supreme Court denied the motion and in effect declared that Sherlly was a 50% owner of the property. Andre appealed.

In reversing, the Appellate Division held that the conveyance to Andre and Jeanne, “husband and wife” created a tenancy by the entirety. As a result, when Jeanne died, Andre acquired fee title to the entire parcel. The court noted that although the daughter asserted that Andre and Jeanne lived separate lives, she made no allegation of a separation decree or of an agreement to alterr the form of ownership that would have terminated the tenancy by the entirety.

'

Cancellation of Notices Of Pendency Filed in Bad Faith

Knopf v. Meister, Seelig & Fein

NYLJ 10/22/15, p. 17, col. 1

U.S. Dist. Ct., EDNY

(Cote, J)

Owner of several properties sought to cancel notices of pendency filed by the Knopfs, who contend that the owner had made a fraudulent conveyance of one of the properties, and who sought to prevent transfer of the property. The federal court cancelled the notices, invoking the power of discretionary cancellation when a party has filed a notice of pendency in bad faith.

The Knopfs have been engaged in state court litigation with property owner for six years. They asserted breach of loan agreements entitling them to mortgages on the premises. In 2014, the Appellate Division held that owner was entitled to summary judgment, emphasizing that the Knopfs had made no evidentiary showing that money damages would be inadequate as a remedy for any wrong suffered by the Knopfs. Supreme Court then cancelled the Knopfs' notices of pendencey. The Knopfs then filed the instant case in federal court against both the owner and the owner's counsel in the state court litigation, alleging that owner had conveyed a mortgage on one of the properties to counsel to secure payment of legal fees, and contending that the mortgage was a fraudulent conveyance. Subsequently, they filed new notices of pendency. Owner and counsel then sought to cancel the notices of pendency.

In cancelling the notices of pendency, the court started by noting that owner had conveyed a mortgage on only one of the subject properties, so there was no claim of fraudulent transfer with respect to the other property. As a result, no notice of pendency was warranted. With respect to the property subjected to counsel's mortgage, the court emphasized that the Knopfs had not demonstrated why they could not have previously raised in state court any arguments they have now made to support the notice of pendency. The court concluded that the notice of pendency was filed in bad faith. The court therefore cancelled both notices.

'

Mortgagee Had No Standing to Establish That it Had Commenced Foreclosure Action

Deutsche Bank National Trust Co. v. Weiss

NYLJ 11/20/15, p. 35, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In a mortgage foreclosure action, mortgagor appealed from Supreme Cout's grant of summary judgment to mortgagee bank. The Appellate Division reversed, holding that mortgagee had failed to establish that it had standing to commence the foreclosure action.

In support of its foreclosure action, mortgagee produced an affidavit from an assistant secretary of its loan servicer containing conclusory assertions that mortgagee possessed the note without factual details about the note's delivery. The assistant secretary never stated that mortgagee was in possession of the note at the time the foreclosure action was commenced, and never included facts to support the position that mortgagee was in possession of the note at that time. Mortgagee submitted a copy of the note with an undated endorsement to another institution, and then an undated indorsement in blank, neither of which was sufficient to establish standing. Finally, mortgagee submitted a written assignment of the mortgage to mortgagee

The Appellate Division held that these submissions were insufficient to establish that it had been the holder of the note at the time the foreclosure action was commenced. The written assignment of the mortgage did not establish assignment of the note, and the assistant secretary's affidavit did not include enough facts to establish standing.

'

Questions of Fact About Malpractice Claim

Esposito v. Noto

NYLJ 10/30/15, p. 28, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In a legal malpractice action, property seller appealed from Supreme Court's grant of summary judgment to seller's lawyer. The Appellate Division reversed, holding that seller had raised questions of fact about whether lawyer had breached his duty of care.

Lawyer represented seller in connection with sale of real property, previously used as an auto salvage business, for $1.9 million. In an earlier version of the deal, seller was to sell to developer for $2.5 million, $700,000 down with sellers providing a purchase money mortgage for the rest. The deal was later modified so that seller would take an equity stake in developer and would be paid the $1.9 million purchase price from the profits of the development. The project faltered, the developer filed for bankruptcy protection, and sellers were never paid the purchase price. Sellers then brought this malpractice action, alleging that the lawyer never explained the risks of the transaction, and should not have recommended continuing with the equity transaction in light of the existence of another all-cash offer for the property. Sellers contended that the lawyer had an undisclosed conflict of interest in that he represented the developer with regard to zoning and financing issues, and with respect to acquisition of other parcels. Sellers alleged that they would not have entered into the transaction had it not been for the lawyer's malpractice. Supreme Court granted the lawyer's summary judgment motion.

In reversing, the Appellate Division held that Supreme Court had improperly rejected sellers' contentions based on that court's assessment of sellers' credibility. Sellers had disputed the lawyer's contentions that he had fully explained the transaction and its risks, and that sellers had consented to his representation of the developer. Although Supreme Court concluded that sellers' contentions were not credible, the Appellate Division held that on a motion for summary judgment, the court is not to determine issues of credibility. In addition, the court held that the lawyer had failed to meet his prima facie burden of establishing that malpractice was not the proximate cause of sellers' losses. The court noted that the government and market-related issues that beset the project were inherent in the project, and not a superseding cause of sellers' damages. The court remanded to Supreme Court with direction that further proceedings be held before a different justice.

'

Questions of Fact About Broker ' s Entitlement to'a Commission

Saunders Ventures, Inc. v. Morrow

NYLJ 11/5/15, p. 25, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action to recover a brokerage commission, defendant exclusive broker appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division affirmed, holding that plaintiff broker had raised questions of fact about whether it had created an amicable atmosphere that led to the sale.

Plaintiff broker alleged that it had procured a ready, willing and able purchaser who ultimately purchased the subject real property, and that he had brought that customer to the seller's broker, who held an exclusive on the property. Plaintiff broker was not involved in the negotiations leading to the sale of the property. At closing, the exclusive broker received the entire commission, and plaintiff broker brought this action to recover a share of the commission. Supreme Court denied exclusive broker's summary judgment motion.

In affirming, the Appellate Division emphasized that the exclusive broker's own evidence demonstrated that the plaintiff broker's agent had discussed the availability of the property with the eventual purchaser, provided the purchaser with data necessary to make an offer, and put the purchaser in touch with the exclusive broker because the latter was the only broker entitled to contact the seller. Based on this evidence, exclusive broker had not demonstrated its right to judgment as a matter of law.

'

Adverse Possession Claim Prevails with Respect to Boundary Strip

Warren v. Carreras

NYLJ 11/6/15, p. 23, col. 4

AppDiv, Second Dept.

(memorandum opinion)

In an action to establish title by adverse possession, true owner appealed from Supreme Court's grant of summary judgment to adverse possessors. The Appellate Division affirmed, holding that true owner had failed to raise questions of fact to rebut the adverse possessor's prima facie case.

Adverse possessors' predecessor built a chain link fence between his parcel and true owner's parcel in 1991. The chain link fence did not run the entire length of the boundary, but a chicken wire fence, already in place before 1991, completed the separation between the two parcels. Adverse possessors acquired title from their predecessors in 2002, and continued to maintain the grass on their side of the fence; the strip on true owner's side was wooded and uncultivated. In 2010, true owner commissioned a survey which revealed that the fence encroached on true owner's land. When true owner attempted to remove the fence and reclaim her land, adverse possessors brought this action, and Supreme Court awarded summary judgment to adverse possessors.

In affirming, the Appellate Division started by noting that adverse possessors' claim had vested no later than 2002, and was therefore governed by the prior adverse possession statute, before the legislature amended the statute in 2008. Under the prior statute, adverse possessors had to establish that the strip they claimed was “usually cultivated or improved.” Here, the adverse possessors established a prima facie case of possession within the meaning of the statute, and true owners did not rebut that case. As a result, adverse possessors were entitled to summary judgment.

COMMENT

Under the pre-2008 adverse possession statute, an adverse possessor had to demonstrate either that the possessor had “usually cultivated or improved” the parcel or that the possessor had substantially enclosed the parcel. An adverse possessor who maintained grass sufficiently established the “cultivation or improvement” requirement. In Walling v. Pryzbylo, 7 N.Y.3d 228 (2006), the court held that because adverse possessor installed topsoil and continuously mowed, graded, raked, planted, and watered grass on the disputed parcel for the required period of time, he established title by adverse possession. The parties owned adjacent properties and the adverse possessor maintain the grass on a portion of the true owner's parcel without objection from the true owner. Only when the true owner had the land surveyed, after the statutory period had expired, did true owner raise any objection.

The 2008 amendment replaced the statute's “usually cultivated or improved” language with more general language requiring “acts sufficiently open to put a reasonably diligent owner on notice.” At the same time, the amendment explicitly provided, in RPAPL ' 543, that “acts of lawn mowing or similar maintenance across [a] boundary line” are permissive and non-adverse. The practical effect of this is that Walling a nd cases with similar facts, where the adverse possession claim was based on the maintenance of grass, would be decided differently. For instance in Hartman v. Goldman, 84 A.D.3d 734 (2011), the court held that possessors' planting of foliage and shrubbery, landscaping and lawn maintenance were de minimus under a plain language reading of the RPAPL ' 543, and therefore permissive and non-adverse. Possessors installed a drainage system beneath the land, planted new foliage and shrubbery, and maintained and landscaped the lawn of disputed parcel.

The amended adverse possession statute purports to apply to all claims commenced after its enactment, so unless a party objects, courts will apply the amended statute, as was the case in Hartman. If there is an objection, courts have held it unconstitutional to apply the current statute when title vested prior to the effective date of the 2008 amendment. In Franza v. Olin, 73 A.D. 3d 44 (2010), the court held that the lower court's application of the amended adverse possession statute, when the claim to the disputed parcel allegedly ripened prior to the enactment of the amendments, was unconstitutional. Adverse possessor had submitted evidence showing that even though she commenced the action after the 2008 amendments, she had acquired title to the property in 1985 by adverse possession. However, courts have yet to decide what version of the adverse possession law applies when the possessor's occupation started before 2008, but where the claim had not completely ripened before enactment of the amended statute.

'

Deed to Parties As Husband and Wife Created Tenancy by the Entirety

LaCroix v. Limogene

NYLJ 10/23/15, p. 36, col. 2

AppDiv, Second Dept.

(memorandum opinion)

In an action for a judgment declaring that daughter of a co-owner inherited a 50% share in the disputed property, co-owner's husband appealed from Supreme Court's judgment declaring the daughter a co-owner. The Appellate Division reversed and remanded to Supreme Court for a declaration that the daughter does not own a 50% interest in the property because her mother and the mother's husband held title as tenants by the entirety.

In 1988, a third party transferred title to the property to Andre and Jeanne Limogene, “husband and wife.” In 2013, Jeanne Limogene died, her will providing that “[i]n the event that [the subject property] is held as tenants in common, I give, bequeath, and devise all my interest in the real property ' to my daughter Sherlly Lacroix.” After Jeanne's death, Andre entered into a contract to sell the property, prompting Sherlly to bring this declaratory judgment action. Andre moved to dismiss, but Supreme Court denied the motion and in effect declared that Sherlly was a 50% owner of the property. Andre appealed.

In reversing, the Appellate Division held that the conveyance to Andre and Jeanne, “husband and wife” created a tenancy by the entirety. As a result, when Jeanne died, Andre acquired fee title to the entire parcel. The court noted that although the daughter asserted that Andre and Jeanne lived separate lives, she made no allegation of a separation decree or of an agreement to alterr the form of ownership that would have terminated the tenancy by the entirety.

'

Cancellation of Notices Of Pendency Filed in Bad Faith

Knopf v. Meister, Seelig & Fein

NYLJ 10/22/15, p. 17, col. 1

U.S. Dist. Ct., EDNY

(Cote, J)

Owner of several properties sought to cancel notices of pendency filed by the Knopfs, who contend that the owner had made a fraudulent conveyance of one of the properties, and who sought to prevent transfer of the property. The federal court cancelled the notices, invoking the power of discretionary cancellation when a party has filed a notice of pendency in bad faith.

The Knopfs have been engaged in state court litigation with property owner for six years. They asserted breach of loan agreements entitling them to mortgages on the premises. In 2014, the Appellate Division held that owner was entitled to summary judgment, emphasizing that the Knopfs had made no evidentiary showing that money damages would be inadequate as a remedy for any wrong suffered by the Knopfs. Supreme Court then cancelled the Knopfs' notices of pendencey. The Knopfs then filed the instant case in federal court against both the owner and the owner's counsel in the state court litigation, alleging that owner had conveyed a mortgage on one of the properties to counsel to secure payment of legal fees, and contending that the mortgage was a fraudulent conveyance. Subsequently, they filed new notices of pendency. Owner and counsel then sought to cancel the notices of pendency.

In cancelling the notices of pendency, the court started by noting that owner had conveyed a mortgage on only one of the subject properties, so there was no claim of fraudulent transfer with respect to the other property. As a result, no notice of pendency was warranted. With respect to the property subjected to counsel's mortgage, the court emphasized that the Knopfs had not demonstrated why they could not have previously raised in state court any arguments they have now made to support the notice of pendency. The court concluded that the notice of pendency was filed in bad faith. The court therefore cancelled both notices.

'

Mortgagee Had No Standing to Establish That it Had Commenced Foreclosure Action

Deutsche Bank National Trust Co. v. Weiss

NYLJ 11/20/15, p. 35, col. 3

AppDiv, Second Dept.

(memorandum opinion)

In a mortgage foreclosure action, mortgagor appealed from Supreme Cout's grant of summary judgment to mortgagee bank. The Appellate Division reversed, holding that mortgagee had failed to establish that it had standing to commence the foreclosure action.

In support of its foreclosure action, mortgagee produced an affidavit from an assistant secretary of its loan servicer containing conclusory assertions that mortgagee possessed the note without factual details about the note's delivery. The assistant secretary never stated that mortgagee was in possession of the note at the time the foreclosure action was commenced, and never included facts to support the position that mortgagee was in possession of the note at that time. Mortgagee submitted a copy of the note with an undated endorsement to another institution, and then an undated indorsement in blank, neither of which was sufficient to establish standing. Finally, mortgagee submitted a written assignment of the mortgage to mortgagee

The Appellate Division held that these submissions were insufficient to establish that it had been the holder of the note at the time the foreclosure action was commenced. The written assignment of the mortgage did not establish assignment of the note, and the assistant secretary's affidavit did not include enough facts to establish standing.

'