Real Property Law

The parties disputed the right to use a pedestrian walkway that leads to Sam's Creek in Bridgehampton. The immediate deeds to several neighbors purport to give them a right to “the benefits of a pedestrian walkway as set forth in a deed … dated 11/13/72.” That walkway crosses landowners' land, which fronts on the creek. When some of the neighbors began to clear the walkway in 2013, landowners objected, and contended that the easements were invalid.

The court traced the title back to the common owners, tenants in common Runnels, Neville and Marechal. In 1970, the cotenants conveyed the supposedly servient land to Runnels individually, with a deed that did not mention an easement. At the same time, the cotenants conveyed the supposedly dominant land to themselves as cotenants, again without mentioning any easement. Runnels conveyed the servient land to Peconic in 1971 pursuant to a deed that made no mention of the easement. Then, in April 1972, Runnels executed a corrective deed to Peconic, reserving an easement in favor of the dominant land. In November of that year, the cotenants conveyed the dominant land to neighbors' predecessors. That deed purported to grant an easement over the pedestrian way.

In awarding summary judgment to the supposedly servient landowners, the court held that the stranger to the deed rule barred enforcement of the easement. Even if the April 1972 deed was an otherwise valid corrective deed, it could not convey a valid easement to the cotenants, because they were not parties to the deed between Runnels and Peconic (even though one of the cotenants, Runnels, was a party to the deed). As a result, the cotenants did not have an easement in April 1972, and could not convey a valid easement to neighbors' predecessors in November of that year. The court also rejected neighbors' easement by estoppel claim, finding in the record no record of a representation by landowners as to an existing easement. As a result, landowners were not estopped from denying the existence of an easement.

COMMENT

Under the “stranger to the deed” rule, a grantor of land may not reserve an easement in favor of a person who is not a party to the grant. In Estate of Thomson v. Wade, 69 N.Y.2d 570, the court held that the owner of riverfront property did not acquire an easement of access to a road when the grantor of a deed to property fronting on the road purported to reserve an easement for the benefit of the riverfront land. Because the grantor had sold the riverfront land prior to creating the purported easement in the deed to the land fronting on the road, the owner of the riverfront land was considered a third-party, or “stranger to the deed,” and no valid easement was created. See also Dichter v. Devers, 68 A.D.3d 805 (applying the stranger to the deed rule).

Garson v. Tarmy extends the stranger to the deed rule to a case in which the grantor was a co-tenant of the benefited land at the time the grantor transferred the burdened land. The court held that because the other co-tenants were strangers to the deed of the servient property, the grantor could not create a valid easement in favor of the benefited land, even though the grantor held an ownership interest in that land.

Courts have not applied the stranger to the deed rule to restrictive covenants or negative easements. In Nature Conservancy v Congel, 253 A.D.2d 248 (4th Dept 1999), landowners were entitled to enforce a restrictive covenant requiring an adjacent parcel of land remain in its “natural state,” despite the fact that the landowners were third-party beneficiaries of the original restriction. The court distinguished Estate of Thomson in holding that the stranger to the deed rule does not apply to restrictive covenants, or negative easements.

Mortgagee Was a Bona Fide Encumbrancer

Citimortgage v. Caldaro
NYLJ 12/23/16, p. 29, col. 5 AppDiv, Second Dept. (memorandum opinion)

In an action for a judgment declaring a mortgage valid, mortgagor's predecessor in interest appealed from Supreme Court's order declaring the mortgage valid and ordering the predecessor to execute a new deed to mortgagor. The Appellate Division modified to deny summary judgment on the obligation of mortgagor to execute a new deed, but otherwise affirmed, holding that mortgagee was a bona fide encumbrancer for value.

In 2006, Vicky Caldero, as a member of RVP Associates LLC, executed a deed from RVP to herself and Kenneth Caldero. The Calderos then borrowed $233,000 from Quicken Loans, and gave Quicken a mortgage on the property. Quicken recorded the mortgage, but the deed to the Calderos and the accompanying registration and tax forms were not recorded, and the original signed deed was lost. Quicken later assigned its mortgage to Citimortgage. In 2011, Citimortgage brought this action for a judgment declaring its mortgage valid, and for an order compelling RVP to execute a duplicate original deed to the Calderos. RVP counterclaimed for a judgment vacating the mortgage. RVP contended that Vicky Caldero did not have authority to execute the deed. RVP noted that the property had originally been owned by Buonviaggio, and that Buonviaggio's will had left Caldero with a 25% interest in the property. Although Buonviaggio's executor had executed a deed to RVP, RVP noted that in its 2008 income tax return, it had stated that Caldero and two other will beneficiaries were partners in RVP. Supreme Court awarded summary judgment to Citimortgage, declaring the mortgage valid and ordering RVP to execute and record a new deed to the Calderos. RVP appealed.

In modifying, the Appellate Division first held that Vicky Caldero had apparent authority to execute the deed to RVP and the mortgage to Quicken. Because Quicken had no notice of any fraud by Vicky Caldero, Citimortgage was a bona fide encumbrancer for value protected by the recording act. But the court also held that questions of fact remained about whether Caldero had actual authority to execute a deed on behalf of RVP. As a result, Supreme Court erred in granting summary judgment compelling execution of a new deed. The court remitted to Supreme Court for further proceedings on that issue.

COMMENT

Although a mortgagee can acquire bona fide encumbrancer status if the underlying deed was procured by fraud, a mortgagee cannot become a bona fide encumbrancer if the underlying deed was forged. In Faison v. Lewis, 25 N.Y.3d 220, the Court of Appeals, in holding that the statute of limitations could not bar a forgery victim's suit to cancel a mortgage executed by the perpetrator of the forgery, reaffirmed the long-standing rule that a forged deed is void ab initio and cannot confer bona fide purchaser status on a subsequent mortgagee, even one who had no notice of the forgery. Id. at 225-226.

Courts have treated a document as a forged deed even when the document contains the owner's genuine signature, so long as the owner affixed that signature without knowing that the document was a deed. For instance, in Marden v. Dorthy, 160 N.Y. 39 (1899), the New York Court of Appeals affirmed the lower court's decision to set aside a deed and two mortgages because the original owner signed a piece of paper without knowledge that the paper would affect her title in the property. In holding that the deed was forged, the court emphasized the findings of fact that the genuine signature was procured “by some trick or artifice” and that the owner had never appeared before the notary who had signed the certificate of acknowledgment. The court distinguished between a forged deed and one that is merely fraudulent, noting that a fraudulently procured deed is merely voidable, and can still protect a mortgagee as a bona fide encumbrancer for value. Id. at 43.

Although a deed executed on behalf of a corporation by a person without authority to bind the corporation is not a forged deed, courts often indicate that a mortgagee relying on a deed executed on behalf of a corporation has a duty to inquire about the authority of the person signing the deed. For instance, in LaSalle Bank Nat. Ass'n v. Ally, 39 A.D.3d 597, the court rejected a subsequent mortgagee's claim that it had acquired bona fide purchaser status, holding that the subsequent mortgagee had acted imprudently by failing to investigate the corporate status of the person who had signed a deed on the corporation's behalf. Before reaching that conclusion, however, the court opined that a deed executed by a person without authority is not a forged deed. (The LaSalle court ultimately held that even though the subsequent mortgagee did not qualify for bona fide purchaser status, the subsequent mortgagee was equitably subrogated to a first mortgage that was satisfied with funds advanced by the subsequent mortgagee.)

Landowner Does Not Establish Sewer Line Easement

Courtney v. 18th & 8th LLC
NYLJ 12/7/16, p. 23, col. 6 AppDiv, First Dept. (memorandum opinion)

In landowner's action to establish the right to an easement over a neighbor's land, both parties appealed from Supreme Court's grant of summary judgment to neighbor on some, but not all, causes of action. The Appellate Division modified to grant summary judgment to neighbor on all causes of action, holding that landowner had not established the right to run a sewer line across the neighbor's land.

When neighbor excavated its property, it discovered a sewer pipe that was discharging sewage onto its property. When neighbor discovered that the sewer pipe ran from landowner's parcel, neighbor requested that landowner remove the sewer pipe. The Department of Health and Mental Hygiene issued a violation and assessed a fine, and the Department of Environmental Protection described the condition as creating a nuisance and health hazard. When landowner did not remove the pipe, neighbor resorted to self-help to abate the nuisance. Landowner responded by bringing this action.

In awarding summary judgment to neighbor on all causes of action, the court emphasized that landowners had had two months to take action before neighbor resorted to self-help. In light of the absence of any documentary evidence that landowner had acquired an express easement, neighbor was justified in using self-help. The court rejected landowner's contention that he had obtained an easement by prescription, noting that because the sewer pipe was underground, it was not open and notorious.

Spreader Mortgage Had Been Satisfied

Reale v. Tsoukas
NYLJ 1/13/17, p. 27, col. 5 AppDiv, Second Dept. (memorandum opinion)

In an action to foreclose a spreader mortgage, mortgagee appealed from Supreme Court's grant of summary judgment to purchasers from the original mortgagor. The Appellate Division affirmed, holding that purchasers had established that the spreader mortgage had been satisfied.

Original mortgagor had borrowed $110,000 from mortgagee, secured by a spreader mortgage covering two separate properties, the Nicolosi property and the Richmond property. In 2008, mortgagor refinanced the Nicolosi property for $1,500,000. Mortgagee received a total of $1,381,429.26 from the refinance, and issued satisfactions of two mortgages he held on the Nicolosi property, one of which was the spreader mortgage at issue. The satisfaction of the spreader mortgage, however, stated that it was “given only to the extent that the Mortgage affects ” the Nicolosi property. Subsequently, purchasers bought the Richmond property from the original mortgagor, and obtained a new mortgage from Everbank. Purchasers purportedly relied on the recorded satisfaction of the spreader mortgage. The original mortgagee then brought this foreclosure action against the Richmond property, contending that the payments made at the 2008 refinancing did not satisfy the debt with respect to the $110,000 loan. Supreme Court awarded summary judgment to purchasers and their new mortgagee.

In affirming, the Appellate Division held that purchasers had submitted evidence sufficient to establish that the debt underlying the mortgage was paid in full at the 2008 refinance. The court noted that once the debt was paid in full, mortgagee would not be entitled to foreclose. The court then held that mortgagee's own affidavit, together with a spreadsheet allegedly showing how the monies received in 2008 were used to pay debts other than the $110,000 mortgage, were insufficient to defeat summary judgment.

Stranger to the Deed Rule Precludes Easement Claim

Garson v. Tarmy
NYLJ 11/18/16, Supreme Ct. Suffolk Cty. (Pitts, J.)

In an action for a declaration that neighbors had no right to use a pedestrian walkway over landowners' land, all parties sought summary judgment. The court awarded summary judgment to landowners, holding that the stranger to the deed rule rendered the alleged easement unenforceable.

The parties disputed the right to use a pedestrian walkway that leads to Sam's Creek in Bridgehampton. The immediate deeds to several neighbors purport to give them a right to “the benefits of a pedestrian walkway as set forth in a deed … dated 11/13/72.” That walkway crosses landowners' land, which fronts on the creek. When some of the neighbors began to clear the walkway in 2013, landowners objected, and contended that the easements were invalid.

The court traced the title back to the common owners, tenants in common Runnels, Neville and Marechal. In 1970, the cotenants conveyed the supposedly servient land to Runnels individually, with a deed that did not mention an easement. At the same time, the cotenants conveyed the supposedly dominant land to themselves as cotenants, again without mentioning any easement. Runnels conveyed the servient land to Peconic in 1971 pursuant to a deed that made no mention of the easement. Then, in April 1972, Runnels executed a corrective deed to Peconic, reserving an easement in favor of the dominant land. In November of that year, the cotenants conveyed the dominant land to neighbors' predecessors. That deed purported to grant an easement over the pedestrian way.

In awarding summary judgment to the supposedly servient landowners, the court held that the stranger to the deed rule barred enforcement of the easement. Even if the April 1972 deed was an otherwise valid corrective deed, it could not convey a valid easement to the cotenants, because they were not parties to the deed between Runnels and Peconic (even though one of the cotenants, Runnels, was a party to the deed). As a result, the cotenants did not have an easement in April 1972, and could not convey a valid easement to neighbors' predecessors in November of that year. The court also rejected neighbors' easement by estoppel claim, finding in the record no record of a representation by landowners as to an existing easement. As a result, landowners were not estopped from denying the existence of an easement.

COMMENT

Under the “stranger to the deed” rule, a grantor of land may not reserve an easement in favor of a person who is not a party to the grant. In Estate of Thomson v. Wade, 69 N.Y.2d 570, the court held that the owner of riverfront property did not acquire an easement of access to a road when the grantor of a deed to property fronting on the road purported to reserve an easement for the benefit of the riverfront land. Because the grantor had sold the riverfront land prior to creating the purported easement in the deed to the land fronting on the road, the owner of the riverfront land was considered a third-party, or “stranger to the deed,” and no valid easement was created. See also Dichter v. Devers, 68 A.D.3d 805 (applying the stranger to the deed rule).

Garson v. Tarmy extends the stranger to the deed rule to a case in which the grantor was a co-tenant of the benefited land at the time the grantor transferred the burdened land. The court held that because the other co-tenants were strangers to the deed of the servient property, the grantor could not create a valid easement in favor of the benefited land, even though the grantor held an ownership interest in that land.

Courts have not applied the stranger to the deed rule to restrictive covenants or negative easements. In Nature Conservancy v Congel, 253 A.D.2d 248 (4th Dept 1999), landowners were entitled to enforce a restrictive covenant requiring an adjacent parcel of land remain in its “natural state,” despite the fact that the landowners were third-party beneficiaries of the original restriction. The court distinguished Estate of Thomson in holding that the stranger to the deed rule does not apply to restrictive covenants, or negative easements.

Mortgagee Was a Bona Fide Encumbrancer

Citimortgage v. Caldaro
NYLJ 12/23/16, p. 29, col. 5 AppDiv, Second Dept. (memorandum opinion)

In an action for a judgment declaring a mortgage valid, mortgagor's predecessor in interest appealed from Supreme Court's order declaring the mortgage valid and ordering the predecessor to execute a new deed to mortgagor. The Appellate Division modified to deny summary judgment on the obligation of mortgagor to execute a new deed, but otherwise affirmed, holding that mortgagee was a bona fide encumbrancer for value.

In 2006, Vicky Caldero, as a member of RVP Associates LLC, executed a deed from RVP to herself and Kenneth Caldero. The Calderos then borrowed $233,000 from Quicken Loans, and gave Quicken a mortgage on the property. Quicken recorded the mortgage, but the deed to the Calderos and the accompanying registration and tax forms were not recorded, and the original signed deed was lost. Quicken later assigned its mortgage to Citimortgage. In 2011, Citimortgage brought this action for a judgment declaring its mortgage valid, and for an order compelling RVP to execute a duplicate original deed to the Calderos. RVP counterclaimed for a judgment vacating the mortgage. RVP contended that Vicky Caldero did not have authority to execute the deed. RVP noted that the property had originally been owned by Buonviaggio, and that Buonviaggio's will had left Caldero with a 25% interest in the property. Although Buonviaggio's executor had executed a deed to RVP, RVP noted that in its 2008 income tax return, it had stated that Caldero and two other will beneficiaries were partners in RVP. Supreme Court awarded summary judgment to Citimortgage, declaring the mortgage valid and ordering RVP to execute and record a new deed to the Calderos. RVP appealed.

In modifying, the Appellate Division first held that Vicky Caldero had apparent authority to execute the deed to RVP and the mortgage to Quicken. Because Quicken had no notice of any fraud by Vicky Caldero, Citimortgage was a bona fide encumbrancer for value protected by the recording act. But the court also held that questions of fact remained about whether Caldero had actual authority to execute a deed on behalf of RVP. As a result, Supreme Court erred in granting summary judgment compelling execution of a new deed. The court remitted to Supreme Court for further proceedings on that issue.

COMMENT

Although a mortgagee can acquire bona fide encumbrancer status if the underlying deed was procured by fraud, a mortgagee cannot become a bona fide encumbrancer if the underlying deed was forged. In Faison v. Lewis, 25 N.Y.3d 220, the Court of Appeals, in holding that the statute of limitations could not bar a forgery victim's suit to cancel a mortgage executed by the perpetrator of the forgery, reaffirmed the long-standing rule that a forged deed is void ab initio and cannot confer bona fide purchaser status on a subsequent mortgagee, even one who had no notice of the forgery. Id. at 225-226.

Courts have treated a document as a forged deed even when the document contains the owner's genuine signature, so long as the owner affixed that signature without knowing that the document was a deed. For instance, in Marden v. Dorthy, 160 N.Y. 39 (1899), the New York Court of Appeals affirmed the lower court's decision to set aside a deed and two mortgages because the original owner signed a piece of paper without knowledge that the paper would affect her title in the property. In holding that the deed was forged, the court emphasized the findings of fact that the genuine signature was procured “by some trick or artifice” and that the owner had never appeared before the notary who had signed the certificate of acknowledgment. The court distinguished between a forged deed and one that is merely fraudulent, noting that a fraudulently procured deed is merely voidable, and can still protect a mortgagee as a bona fide encumbrancer for value. Id. at 43.

Although a deed executed on behalf of a corporation by a person without authority to bind the corporation is not a forged deed, courts often indicate that a mortgagee relying on a deed executed on behalf of a corporation has a duty to inquire about the authority of the person signing the deed. For instance, in LaSalle Bank Nat. Ass'n v. Ally, 39 A.D.3d 597, the court rejected a subsequent mortgagee's claim that it had acquired bona fide purchaser status, holding that the subsequent mortgagee had acted imprudently by failing to investigate the corporate status of the person who had signed a deed on the corporation's behalf. Before reaching that conclusion, however, the court opined that a deed executed by a person without authority is not a forged deed. (The LaSalle court ultimately held that even though the subsequent mortgagee did not qualify for bona fide purchaser status, the subsequent mortgagee was equitably subrogated to a first mortgage that was satisfied with funds advanced by the subsequent mortgagee.)

Landowner Does Not Establish Sewer Line Easement

Courtney v. 18th & 8th LLC
NYLJ 12/7/16, p. 23, col. 6 AppDiv, First Dept. (memorandum opinion)

In landowner's action to establish the right to an easement over a neighbor's land, both parties appealed from Supreme Court's grant of summary judgment to neighbor on some, but not all, causes of action. The Appellate Division modified to grant summary judgment to neighbor on all causes of action, holding that landowner had not established the right to run a sewer line across the neighbor's land.

When neighbor excavated its property, it discovered a sewer pipe that was discharging sewage onto its property. When neighbor discovered that the sewer pipe ran from landowner's parcel, neighbor requested that landowner remove the sewer pipe. The Department of Health and Mental Hygiene issued a violation and assessed a fine, and the Department of Environmental Protection described the condition as creating a nuisance and health hazard. When landowner did not remove the pipe, neighbor resorted to self-help to abate the nuisance. Landowner responded by bringing this action.

In awarding summary judgment to neighbor on all causes of action, the court emphasized that landowners had had two months to take action before neighbor resorted to self-help. In light of the absence of any documentary evidence that landowner had acquired an express easement, neighbor was justified in using self-help. The court rejected landowner's contention that he had obtained an easement by prescription, noting that because the sewer pipe was underground, it was not open and notorious.

Spreader Mortgage Had Been Satisfied

Reale v. Tsoukas
NYLJ 1/13/17, p. 27, col. 5 AppDiv, Second Dept. (memorandum opinion)

In an action to foreclose a spreader mortgage, mortgagee appealed from Supreme Court's grant of summary judgment to purchasers from the original mortgagor. The Appellate Division affirmed, holding that purchasers had established that the spreader mortgage had been satisfied.

Original mortgagor had borrowed $110,000 from mortgagee, secured by a spreader mortgage covering two separate properties, the Nicolosi property and the Richmond property. In 2008, mortgagor refinanced the Nicolosi property for $1,500,000. Mortgagee received a total of $1,381,429.26 from the refinance, and issued satisfactions of two mortgages he held on the Nicolosi property, one of which was the spreader mortgage at issue. The satisfaction of the spreader mortgage, however, stated that it was “given only to the extent that the Mortgage affects ” the Nicolosi property. Subsequently, purchasers bought the Richmond property from the original mortgagor, and obtained a new mortgage from Everbank. Purchasers purportedly relied on the recorded satisfaction of the spreader mortgage. The original mortgagee then brought this foreclosure action against the Richmond property, contending that the payments made at the 2008 refinancing did not satisfy the debt with respect to the $110,000 loan. Supreme Court awarded summary judgment to purchasers and their new mortgagee.

In affirming, the Appellate Division held that purchasers had submitted evidence sufficient to establish that the debt underlying the mortgage was paid in full at the 2008 refinance. The court noted that once the debt was paid in full, mortgagee would not be entitled to foreclose. The court then held that mortgagee's own affidavit, together with a spreadsheet allegedly showing how the monies received in 2008 were used to pay debts other than the $110,000 mortgage, were insufficient to defeat summary judgment.