Real Property Law

AppDiv, Second Dept. (memorandum opinion)

In an action by commercial landowner for a judgment declaring that a neighbor did not have an easement over landowner's parcel, the neighbor appealed from Supreme Court's judgment granting landowner the requested declaration. The Appellate Division affirmed, holding that neighbor's past use of the parcel for access was permissive and did not create an easement by prescription.

Landowner and neighbor own adjacent retail buildings, each of which is subdivided into five rental spaces. Landowner has a private parking lot for 32 cars; neighbor has a small parking area behind its building with room for six or seven cars. The only access to neighbor's parking area is through landowner's parking lot. In 2011, neighbor sought zoning approval to build a 45-seat pizza restaurant in one of its storefronts. Landowner unsuccessfully fought the zoning approval all the way to the Court of Appeals. After losing in that litigation, landowner brought this action. Neighbor defended, contending that it had obtained an easement by prescription over landowner's parking lot. Supreme Court granted a declaratory judgment to landowner, and neighbor appealed.

In affirming, the Appellate Division acknowledged that when the party claiming a prescriptive easement demonstrates that the use has been continuous and open and notorious, a presumption arises that the use has been hostile, shifting the burden to the alleged servient owner to show that the use was permissive. But the court then held that the presumption is inapplicable when the claimant's use is made in connection with the use of the owner and the general public, and that the presumption is also inapplicable when the use arises out of the parties' neighborly cooperation or accommodation. In this case, the court noted that the trial court had credited testimony by landowner's manager that he had permitted the neighbor and the public at large to use the parking lot as a matter of neighborly accommodation, and that he had protected landowner's commercial interest when others abused the permission. The Appellate Division saw no basis for upsetting the trial court's determination.

COMMENT

The Appellate Division will not generally disturb a trial court finding of “neighborly accommodation” that negates the element of hostility required to establish an easement by prescription, so long as the record includes testimony or other evidence that the relationship between the dominant and servient owner was friendly and cooperative. In Duckworth v. Ning Fun Chiu, 33 A.D.3d 583, the Appellate Division held that there was no basis to disturb Supreme Court's finding of neighborly accommodation where the record indicated that the children of the dominant and servient owner frequently played together, and the owners themselves often exchanged pleasantries. Similarly, in Ward v. Murariu Bros. Inc., 100 A.D.3d 1084, the Appellate Division affirmed the findings of the Supreme Court, where the alleged servient owner submitted an affidavit from its predecessor's property manager indicating the predecessor's policy that neighbors could freely use the driveway. The court found that the affidavit provided evidence of neighborly accommodation, and absent any proof to contradict the statements, Supreme Court acted properly in dismissing the prescriptive easement claim. Other instances in which Appellate Divisions have deferred to trial court findings of neighborly accommodation include 316 Main Street Poughkeepsie LLC v. WA 319 Main LLC, 62 A.D.3d 690; Allen v. Mastrianni, 2 A.D.3d 1023; Hassinger v. Kline, 91 A.D.2d 988; Ryan v. Posner, 68 A.D.3d 963; and McNeill v. Shutts, 258 A.D.2d 695.

If, however, the record is devoid of testimony or evidence of neighborly accommodation, the Appellate Division is likely to overturn a trial court finding of neighborly accommodation. Thus, in Reed v. Piedimonte, 138 A.D.2d 937, the Appellate Division reversed Supreme Court's judgment, where the record contained only naked, unsupported assertions by the current servient owner that his predecessor had granted permission to use the disputed driveway. The court found that the evidence instead demonstrated hostility, particularly due to the fact that the predecessor had erected temporary barriers to prevent the dominant owners from using the driveway.

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No Adverse Possession When Encroachments Were De Minimis

Reyes v. Carroll

NYLJ 3/11/16, p. 30, col. 6

AppDiv, Second Dept. (memorandum opinion)

In an action to determine claims to real property, adverse possessors and true owners both appealed from Supreme Court's orders dismissing adverse possessor's complaint and dismissing true owner's counterclaim for trespass. The Appellate Division modified to reinstate the trespass counterclaim, but otherwise affirmed, holding that adverse possessor had failed to raise a question of fact about whether the encroachments were not de minimis, deemed by the statute to be non-adverse.

In 2000, when adverse possessors purchased their lot, they built a stockade fence that encroached on neighboring land. In 2006, when the owners of the neighboring land wanted to sell the land to current owners, they requested removal of the stockade fence to facilitate the sale. Adverse possessors removed the fence, but then rebuilt it after the sale was completed. In 2013, the current owners of the neighboring land removed the stockade fence and the boundary landscaping. Adverse possessors then brought this action, claiming both that they had acquired title by adverse possession and that they had an express easement over the disputed land. Neighboring owners counterclaimed for trespass. Supreme Court dismissed adverse possessors' claims, and dismissed the trespass counterclaims as academic.

In modifying, the Appellate Division first held that the current New York adverse possession statute applies because adverse possessors' rights had not vested by 2008, when the current statute was enacted. The court then held that the removal of the fence in 2006, at the request of the then-neighbor, established that adverse possessors' use was not under a claim of right for the statutory 10-year period. In addition, the court invoked RPAPL 543(1), which provides that certain de minimis boundary line encroachments are deemed permissive, and indicated that adverse possessors had not raised a triable issue of fact disputing the applicability of section 543(1). The court then reinstated true owners' counterclaim for trespass, noting that a party who cannot establish title by adverse possession is responsible to the true owner for any damages caused by the possessor's trespass.

COMMENT

Although the legislature provided that the 2008 amendments to the adverse possession article of the RPAPL apply to all claims filed after July 7, 2008, (L. 2008 ch. 269), all the Departments presented with the question have held it unconstitutional to apply the amendments retroactively to a claim of adverse possession that vested before that date. In Hogan v. Kelly, 86 A.D.3d 590 (2nd Dept 2011), the court held that the statute's new and stricter definition of “claim of right” was inapplicable to adverse possessors who had occupied the property for the statutorily required period of 10 years before 2008. The adverse possessors had occupied the disputed property beginning in 1995, when the prior owner died. In 2009 when the decedent's sole heir, a daughter, discovered the existence of the property, she sought judgment declaring her the rightful owner of the property. Id. at 591. The adverse possessors alleged “claim of right” to the property because in 1996, despite decedent's death and the daughter's inheritance of the property, the decedent's brother had executed and recorded a deed transferring title to the adverse possessors. Id. The daughter sought to rely on RPAPL 501(3), added in 2008, which defines “claim of right” as being “a reasonable basis for the belief that the property belongs to the adverse possessor.” She claimed that the adverse possessors could not have a reasonable basis for their belief that they owned the property because the adverse possessors knew that the daughter was the rightful owner of the property. Hogan at 592. The court, however, did not reach the question, and instead applied the long standing pre-2008 decisional law holding that knowledge of the rightful owner does not negate a “claim of right.” Id. See also Franza v. Olin, 7 3 A.D.3d 44 (4th Dept 2010) (holding that it unconstitutional to retroactively apply post-2008 law to an adverse possessor whose rights vested prior to the 2008 amendments); Barra v. Norfolk S. Ry. Co., 7 5 A.D.3d 821 70 (3rd Dept 2010) (same).

When, however, the adverse possessor has not occupied the property for the complete period of 10 years before 2008, at least one court has implicitly assumed that the 2008 amendments apply. In Wright v. Sokoloff, 110 A.D.3d 989 (2nd Dept 2013) the court, without discussion, applied RPAPL 543, enacted as part of the 2008 amendments, to an adverse possessor who had adversely possessed the property for nine years prior to 2008. The owner of a lot, in 1999, planted an eight-foot-wide row of hedges on the portion of his lot over which his neighbor had a right-of-way; in 2010, the neighbor sought a judgment directing the owner to remove the hedges as they interfered with his right-of-way. Id. The owner argued that he had adversely possessed the right-of-way for more than 10 years, thereby extinguishing the neighbor's right-of-way. Id. T he neighbor's defense relied on section RPAPL 543, which provides that “the existence of de minimis non-structural encroachments including ' hedges ' shall be deemed to be permissive and non-adverse.” The court ordered a remand to determine whether the owner's hedges were de minimis within the meaning of RPAPL 543. Id. at 991.

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Questions of Fact About Notice of Foreclosure Sale

'McCauley v. Holser

136 AD3d 1256, 2/25/16

AppDiv, Third Dept. (Opinion by Garry, J.)

In an action to quiet title, successors in interest to purchasers at a tax foreclosure sale appealed from Supreme Court's denial of their summary judgment motion. The Appellate Division affirmed, holding that prior owner's son had raised questions of fact about whether prior owner had received adequate notice of the foreclosure sale.

Prior owner acquired eight parcels, totaling 72 acres, in 1955. The county tax authorities subsequently established new tax parcels with boundaries that did not correspond to the boundaries set forth in the 1955 deed. Prior owner continued to receive and pay tax bills for much of the land, but by 1983, the county had begun to list the owner for one of prior owner's parcels (Parcel One) as “unknown.” In 1985, the county sent letters to the owners of land adjacent to Parcel One, including prior owner, asking if the adjacent owners knew who owned the parcel. A similar letter was sent in 1987, and notes indicate that prior owner responded by saying he was paying taxes on only 24 acres while he owned 72 acres. He provided an address and telephone number at which he could be reached. Another adjacent owner also reported that prior owner might own Parcel One, and recommended sending a letter to prior owner's son. The county sent such a letter indicating that the property was tax delinquent and subject to immediate foreclosure. The records do not indicate whether the son responded.

In 1989, the county obtained a judgment of tax foreclosure. After the auction sale, the county deeded the property to Clements, who conveyed the property to his son, Edward, and Edwards' wife, in 1997. In 2003, Edward and his wife conveyed the property by warranty deed to the current plaintiffs, the McCauleys. In 2013, they brought this quiet title action. Prior owner's son, who had taken title by inheritance, moved for summary judgment dismissing the complaint against him, and the McCauleys cross-moved for summary judgment. Supreme Court denied both motions, and the McCauleys appealed.

In affirming, the Appellate Division held that prior owner's son had raised issues of fact about whether prior owner had received constitutionally sufficient notice that the property was subject to tax foreclosure proceedings. Those questions of fact precluded a determination that challenge to the validity of the tax sale was time-barred as a matter of law. The court concluded that because examination of the county's land records would have revealed that prior owner had owned the underlying property since 1955, there were issues of fact about whether the county could have determined, with due diligence, that prior owner owned the property and was entitled to notice of the 1989 foreclosure. The court also concluded that in light of confusion in the county's tax maps, there were questions of fact about whether prior owner should have known that his property was being foreclosed upon. Finally, the court concluded that the letters the county sent to prior owner and his son were not constitutionally sufficient substitutes for notice of the foreclosure sale.

COMMENT

RPTL ' 1137 provides that a tax foreclosure sale deed is presumptive evidence of the sale's legitimacy and that the presumption becomes conclusive two years following the proceeding, barring challenge to its validity. The Court of Appeals has established, however, that due process limits the legislature's power to bar claims by parties who have not received adequate notice of the foreclosure proceedings. In Matter of ISCA Enters. v. City of New York, 77 NY2d 688, the court, while reversing the First Department and granting the City's summary judgment motion dismissing the case due to the existence of sufficient notice under the Administrative Code, rejected the City's claim that the statute of limitations barred the due process challenge of a prior owner who claimed that it had no notice of a tax foreclosure proceeding based on a lack of notice. In ISCA, t he property owner's challenge came six years after the deeds were recorded, but the court emphasized the absence of evidence that the party had actual notice of the foreclosure proceeding. On the merits, however, the court rejected the prior owner's challenge because the city had provided adequate procedures for the owner to obtain notice.

Before ISCA, at least one court had concluded that the statute of limitations does bar a due process claim. In Biuso v. Kurkill, 157 A.D.2d 72, the Third Department dismissed a party's due process challenge to a sale as untimely despite evidence of lack of notice. In Biuso, 1 6 years after the tax foreclosure sale, a party holding the original mortgage on the property sought to foreclose and quite title to the parcels, claiming inadequate notice of the prior proceeding.

Since ISCA, however, the Appellate Departments have consistently held that the statute of limitations does not bar bars due process challenges to a tax foreclosure proceeding based on lack of notice. In Meadow Farm Realty Corp. v. Pekich, 251 A.D.2d 634, the Second Department granted plaintiff's motion for summary judgment vacating a seven-year old tax sale, holding that the statue of limitations does not bar a challenge by a party lacking notice of the proceeding. See also Byrnes v. County of Saratoga, 251 A.D.2d 795 (3d Dept. 1998) (holding that county's failure to provide taxpayer with notice of the tax sale was a violation of taxpayer's due process rights, and county did not have legal title to convey to a third party).

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Minority Partners' Derivative Action Reinstated

Pokoik v. Norsel Realties

NYLJ 4/13/16, p. 24, col. 1

AppDiv, First Dept. (memorandum opinion)

In a breach of fiduciary duty action by minority partners against managing partners and affiliated entities, minority partners appealed from Supreme Court's dismissal of the complaint. The Appellate Division modified to reinstate the complaint against the managing partners and the partnership, concluding that the allegations of conflict of interest removed the case from the business judgment rule.

The partnership, Norsel Realties, owns a commercial office building at 575 Madison Avenue, and leases the property to 575 Realties, which, in turn net leases the property to 575 Associates, an affiliated operating company. By the terms of Norsel's lease to 575 Realties, the lease for the renewal term is to be 5% of the appraised value of the land. The minority partners brought this action against the managing partners, and against Norsel, 575 Realties and 575 Associates, alleging that the managing partners, who also have an interest in 575 Realties and 575 Associates, violated their fiduciary duties by soliciting artificially low appraisals to advance “personal estate tax strategies.” Supreme Court dismissed the complaint.

In modifying to reinstate the complaint against the managing partners and the partnership, the Appellate Division focused on the allegation that the managing partners stood to benefit personally, other than as shareholders of Norsel, from a low appraisal. That, in the court's view, removed the case from the purview of the business judgment rule, and the alleged personal benefit was sufficient to state a claim for breach of fiduciary duty. The court concluded, however, that Supreme Court had properly dismissed the complaint against 575 Realties and 575 Associates because there was no allegation that those entities owed the minority partners any fiduciary duty, and no allegation that they engaged in any misconduct.