Real Property Law

Supreme Court then held a hearing to consider whether sanctions should be imposed. After several additional settlement conferences, delayed by mortgagee's request for yet additional documents after previously asserting that a fully submitted HAMP application was under review, mortgagee denied the application for loan modification. Supreme Court concluded that mortgagee had not been acting in good faith, and tolled all interest, costs, and attorneys' fees that had accrued between March 1, 2010 and Oct. 27, 2014. Mortgagee appealed.

In affirming, the Appellate Division concluded that the record established mortgagee's use of dilatory tactics that reflected a lack of good faith. The court then concluded that the sanctions imposed were a provident exercise of Supreme Court's discretion and would have been mandated under CPLR 3408's most recent amendment, which was not applicable at the time of mortgagee's actions in this case.

Easement Location
Rosen v. Mosby
2017 WL 807016, 3/2/17
App Div, Third Dept.
(Opinion by Clark, J.)

In landowner's action to enjoin a neighbor's alleged interference with landowner's easement rights, landowner appealed from Supreme Court's grant of partial summary judgment to neighbor. The Appellate Division affirmed, holding that a maintenance agreement had altered the location of the easement.

When developer sold a parcel to landowner in 1989, the deed included a grant of a right of ingress and egress over a 50-foot-wide roadway described by metes and bounds. The deed also provided that the easement was subject to a road maintenance agreement dated Aug. 16, 1988. That agreement, which was recorded, provided that the cost of maintaining the road would be shared by owners in the subdivision, that each owner of a lot in a subdivision would have a right of way across the road “for ingress and egress by motor vehicle or otherwise,” and that the agreement could be amended by written agreement signed and acknowledged by a requisite number of owners. In March 1990, the owners amended the maintenance agreement because the roadway the developer had laid out on the ground varied from the roadway depicted on the map. Plaintiff landowner agreed to and executed the amendment.

In 2011, neighbor bought a parcel located across the road from landowner's parcel and, the following year, installed a stockade fence along the private road. The fence blocked access to a portion of the roadway described in landowner's initial deed, but did not block any part of the roadway as actually laid out. Landowner brought this action to enjoin the alleged encroachment. Supreme Court awarded partial summary judgment to neighbor.

In affirming, the Appellate Division relied on the maintenance agreement modifying the location of the easement, noting both that landowner's deed was subject to that maintenance agreement and that landowner had signed the maintenance agreement. Because landowner did not allege that neighbor's fence blocked the modified roadway or impeded landowner's access to the public road, neighbor was entitled to partial summary judgment.

COMMENT

Where a right-of-way is not described by specific metes and bounds in the instrument granting the easement, the servient-tenement owner may unilaterally relocate the easement at its own expense, so long as the easement-holder's right is not impaired. Lewis v. Young, 92 N.Y.2d 443, illustrates both the rule and the balancing test. In Lewis, where the dominant-tenement owner sought to preclude the servient-tenement owner from relocating an easement described as the “main driveway, running in a generally southwesterly direction between South Ferry Road and [Mr. Brown's] residence premises,” the court held that the servient-tenement owner would be entitled to move the right-of-way at the owner's expense if the relocation would not diminish the easement-holder's right of ingress and egress. In reaching its decision, the court concluded that the language of the grant did not reflect an intent to preclude the servient-tenement owner's right to relocate the right-of-way, and remanded for resolution of questions of fact about whether the relocation of the easement would significantly lessen the utility of the right-of-way and whether the relocation would increase the burden on the easement-holder. The AppellateDivision in Mackinnon v. Croyle, 72 A.D.3d 1356 cited the utility factor of the Lewis balancing test, in affirming the Supreme Court's finding that the easement-holder's right-of-way was impaired when the relocated easement included sharp turns and was narrower than the state in which the easement in use prior to relocation. The court in Mackinnon held that the servient-tenement owner was not entitled to relocate the easement under the circumstances, but noted that the servient-tenement owner may relocate the right-of-way upon a showing that a proposed relocation would not impair the easement-holder's right of ingress and egress. Neither a servient-tenement owner nor an easement-holder may unilaterally relocate a right-of-way if the instrument creating the easement specifies a definitive location. In Estate Court, LLC v. Schnall, 49 A.D.3d 1076, the servient-tenement owner was not entitled to unilaterally relocate an easement where the judgment awarding the easement to the dominant-tenement owner expressly defined it by reference to a survey map showing the fixed and definitive course of the easement.

Prior Fraud
Stout Street Fund L.P. v. Halifax Group, LLC
NYLJ 3/3/17, p. 34, col. 1
AppDiv, Second Dept.
(memorandum opinion)

In an action to foreclose a mortgage, a judgment creditor of mortgagor's predecessor in interest appealed from Supreme Court's order striking the judgment creditor's defenses and dismissing the judgment creditor's counterclaim. The Appellate Division reversed, holding that judgment creditor had alleged facts that, if true, would have been sufficient to place mortgagee on a duty to inquire about fraud in the transaction from mortgagor's predecessor to mortgagor.

On Feb. 25, 2010, mortgagee Stout acquired mortgages on seven properties to secure loans from Stout to mortgagor Halifax. The mortgages were recorded on April 29, 2010. On April 12, 2010, DLJ filed notices of pendency against five of the properties in an action contending that mortgagor Halifax had participated in a fraud that included conveyance of the subject property from mortgagor's predecessor, Loring, to mortgagor Halifax. Ultimately, DLJ prevailed in the action and obtained a judgment awarding DLJ damages, setting aside the conveyances from Loring to Halifax, and transferring the property back to Loring. When Stout brought the instant action to foreclose on its mortgages from Halifax, DLJ challenged the validity of the mortgages, and, in a counterclaim, sought to set aside the Stout mortgages as fraudulent conveyances. Supreme Court dismissed DLJ's affirmative defenses and counterclaims, and DLJ appealed.

In reversing, the Appellate Division noted that DLJ had alleged that Stout's own underwriting files included indicia of fraud sufficient to place Stout on inquiry notice of the fraud. The court held that if those allegations were true, DLJ stated valid affirmative defenses and a counterclaim based on Stout's lack of bona fide encumbrancer status. As a result, Supreme Court improperly dismissed DLJ's affirmative defenses and counterclaims. The court also held that DLJ had stated a cause of action on the theory that Stout's mortgages themselves were actual and fraudulent conveyances pursuant to Debtor and Creditor Law section 273 and 275.

The court observed that the statutes make a conveyance fraudulent when the conveyance is made without fair consideration at a time when the person making the conveyance believes that he or she will incur debts beyond his or her ability to pay. In this case, the court held that DLJ had effectively alleged lack of fair consideration because more than half of the funds lent by Stout were to be paid to Loring rather than to Halifax, leaving the latter with a disproportionately small share of the loan proceeds.

Broker Regulation
Matter of Arash Real Estate and Management Co. v. New York City Department of Consumer Affairs
NYLJ 3/31/17, p. 29, col. 3
AppDiv, Second Dept.
(memorandum opinion)

In a hybrid action and article 78 proceeding, real estate broker appealed from Supreme Court's confirmation of a fine imposed by the Department of Consumer Affairs and grant of the Department's motion for dismissal of the causes of action asserting that a Department regulation was pre-empted and unconstitutional. The Appellate Division reversed the confirmation of the fine, holding that by the terms of the regulation, the broker was not required to post a sign on its premises.

Broker is a residential real estate brokerage company, but its primary business focuses on sales, not rentals. Section 28-809(a) of the New York City Administrative Code provides that “[a]ny person requesting application information from a prospective tenant shall post a sign … in any location at which the principal purpose is conducting business transactions pertaining to the rental of residential properties.” The sign must advise consumers of their rights concerning tenant screening reports. The Department of Consumer Affairs fined broker $500 for failure to have a sign posted at its place of business. Broker then brought this combined action/proceeding challenging the fine, and contending that the city had no power to impose the sign requirement because it was pre-empted by the Real Property Law's regulation of brokers. Supreme Court upheld the fine and dismissed broker's petition and action.

In reversing, the Appellate Division emphasized that, by its terms, the regulation required posting a sign only in a location whose principal purpose is conducting business pertaining to the rental of real property. Because broker's principal purpose focused on sales, not rentals, broker was not required to post the sign. As a result, the court vacated the fine. The court then concluded that the RPL did not pre-empt the Administrative Code provision because the code provision does not prohibit what would be permissible under the state statute, nor does it impose additional restrictions on rights granted under state law.

Mortgagee Bad Faith
Aurora Loan Services, LLC v. Diakite
NYLJ 3/3/17, p. 38, col. 4
AppDiv, Second Dept.
(memorandum opinion)

In a residential foreclosure action, mortgagee appealed from Supreme Court's order tolling interest, costs and attorneys' fees as a result of mortgagee's failure to negotiate in good faith. The Appellate Division affirmed, holding that mortgagee had not negotiated in good faith and that the sanction imposed was warranted by the mortgagee's actions.

After mortgagor defaulted on the mortgage loan, mortgagor applied for and completed a trial modification under the Home Affordable Modification Program. Nevertheless, mortgagee did not offer a loan modification to mortgagor. The latter then made additional payments, but mortgagee declined and returned the payments. After that time, mortgagee made numerous requests for additional documentation, including requests for documents that had already been provided. Mortgagee also, on multiple occasions, failed to comply with a referee's directives to appear by counsel with knowledge of documents upon which mortgagee purported to rely. Based on these facts, the referee concluded that mortgagee was not negotiating in good faith.

Supreme Court then held a hearing to consider whether sanctions should be imposed. After several additional settlement conferences, delayed by mortgagee's request for yet additional documents after previously asserting that a fully submitted HAMP application was under review, mortgagee denied the application for loan modification. Supreme Court concluded that mortgagee had not been acting in good faith, and tolled all interest, costs, and attorneys' fees that had accrued between March 1, 2010 and Oct. 27, 2014. Mortgagee appealed.

In affirming, the Appellate Division concluded that the record established mortgagee's use of dilatory tactics that reflected a lack of good faith. The court then concluded that the sanctions imposed were a provident exercise of Supreme Court's discretion and would have been mandated under CPLR 3408's most recent amendment, which was not applicable at the time of mortgagee's actions in this case.

Easement Location
Rosen v. Mosby
2017 WL 807016, 3/2/17
App Div, Third Dept.
(Opinion by Clark, J.)

In landowner's action to enjoin a neighbor's alleged interference with landowner's easement rights, landowner appealed from Supreme Court's grant of partial summary judgment to neighbor. The Appellate Division affirmed, holding that a maintenance agreement had altered the location of the easement.

When developer sold a parcel to landowner in 1989, the deed included a grant of a right of ingress and egress over a 50-foot-wide roadway described by metes and bounds. The deed also provided that the easement was subject to a road maintenance agreement dated Aug. 16, 1988. That agreement, which was recorded, provided that the cost of maintaining the road would be shared by owners in the subdivision, that each owner of a lot in a subdivision would have a right of way across the road “for ingress and egress by motor vehicle or otherwise,” and that the agreement could be amended by written agreement signed and acknowledged by a requisite number of owners. In March 1990, the owners amended the maintenance agreement because the roadway the developer had laid out on the ground varied from the roadway depicted on the map. Plaintiff landowner agreed to and executed the amendment.

In 2011, neighbor bought a parcel located across the road from landowner's parcel and, the following year, installed a stockade fence along the private road. The fence blocked access to a portion of the roadway described in landowner's initial deed, but did not block any part of the roadway as actually laid out. Landowner brought this action to enjoin the alleged encroachment. Supreme Court awarded partial summary judgment to neighbor.

In affirming, the Appellate Division relied on the maintenance agreement modifying the location of the easement, noting both that landowner's deed was subject to that maintenance agreement and that landowner had signed the maintenance agreement. Because landowner did not allege that neighbor's fence blocked the modified roadway or impeded landowner's access to the public road, neighbor was entitled to partial summary judgment.

COMMENT

Where a right-of-way is not described by specific metes and bounds in the instrument granting the easement, the servient-tenement owner may unilaterally relocate the easement at its own expense, so long as the easement-holder's right is not impaired. Lewis v. Young, 9 2 N.Y.2d 443, illustrates both the rule and the balancing test. In Lewis, where the dominant-tenement owner sought to preclude the servient-tenement owner from relocating an easement described as the “main driveway, running in a generally southwesterly direction between South Ferry Road and [Mr. Brown's] residence premises,” the court held that the servient-tenement owner would be entitled to move the right-of-way at the owner's expense if the relocation would not diminish the easement-holder's right of ingress and egress. In reaching its decision, the court concluded that the language of the grant did not reflect an intent to preclude the servient-tenement owner's right to relocate the right-of-way, and remanded for resolution of questions of fact about whether the relocation of the easement would significantly lessen the utility of the right-of-way and whether the relocation would increase the burden on the easement-holder. The Appellate Division in Mackinnon v. Croyle, 72 A.D.3d 1356 cited the utility factor of the Lewis balancing test, in affirming the Supreme Court's finding that the easement-holder's right-of-way was impaired when the relocated easement included sharp turns and was narrower than the state in which the easement in use prior to relocation. The court in Mackinnon held that the servient-tenement owner was not entitled to relocate the easement under the circumstances, but noted that the servient-tenement owner may relocate the right-of-way upon a showing that a proposed relocation would not impair the easement-holder's right of ingress and egress. Neither a servient-tenement owner nor an easement-holder may unilaterally relocate a right-of-way if the instrument creating the easement specifies a definitive location. In Estate Court, LLC v. Schnall, 49 A.D.3d 1076, the servient-tenement owner was not entitled to unilaterally relocate an easement where the judgment awarding the easement to the dominant-tenement owner expressly defined it by reference to a survey map showing the fixed and definitive course of the easement.

Prior Fraud
Stout Street Fund L.P. v. Halifax Group, LLC
NYLJ 3/3/17, p. 34, col. 1
AppDiv, Second Dept.
(memorandum opinion)

In an action to foreclose a mortgage, a judgment creditor of mortgagor's predecessor in interest appealed from Supreme Court's order striking the judgment creditor's defenses and dismissing the judgment creditor's counterclaim. The Appellate Division reversed, holding that judgment creditor had alleged facts that, if true, would have been sufficient to place mortgagee on a duty to inquire about fraud in the transaction from mortgagor's predecessor to mortgagor.

On Feb. 25, 2010, mortgagee Stout acquired mortgages on seven properties to secure loans from Stout to mortgagor Halifax. The mortgages were recorded on April 29, 2010. On April 12, 2010, DLJ filed notices of pendency against five of the properties in an action contending that mortgagor Halifax had participated in a fraud that included conveyance of the subject property from mortgagor's predecessor, Loring, to mortgagor Halifax. Ultimately, DLJ prevailed in the action and obtained a judgment awarding DLJ damages, setting aside the conveyances from Loring to Halifax, and transferring the property back to Loring. When Stout brought the instant action to foreclose on its mortgages from Halifax, DLJ challenged the validity of the mortgages, and, in a counterclaim, sought to set aside the Stout mortgages as fraudulent conveyances. Supreme Court dismissed DLJ's affirmative defenses and counterclaims, and DLJ appealed.

In reversing, the Appellate Division noted that DLJ had alleged that Stout's own underwriting files included indicia of fraud sufficient to place Stout on inquiry notice of the fraud. The court held that if those allegations were true, DLJ stated valid affirmative defenses and a counterclaim based on Stout's lack of bona fide encumbrancer status. As a result, Supreme Court improperly dismissed DLJ's affirmative defenses and counterclaims. The court also held that DLJ had stated a cause of action on the theory that Stout's mortgages themselves were actual and fraudulent conveyances pursuant to Debtor and Creditor Law section 273 and 275.

The court observed that the statutes make a conveyance fraudulent when the conveyance is made without fair consideration at a time when the person making the conveyance believes that he or she will incur debts beyond his or her ability to pay. In this case, the court held that DLJ had effectively alleged lack of fair consideration because more than half of the funds lent by Stout were to be paid to Loring rather than to Halifax, leaving the latter with a disproportionately small share of the loan proceeds.

Broker Regulation
Matter of Arash Real Estate and Management Co. v. New York City Department of Consumer Affairs
NYLJ 3/31/17, p. 29, col. 3
AppDiv, Second Dept.
(memorandum opinion)

In a hybrid action and article 78 proceeding, real estate broker appealed from Supreme Court's confirmation of a fine imposed by the Department of Consumer Affairs and grant of the Department's motion for dismissal of the causes of action asserting that a Department regulation was pre-empted and unconstitutional. The Appellate Division reversed the confirmation of the fine, holding that by the terms of the regulation, the broker was not required to post a sign on its premises.

Broker is a residential real estate brokerage company, but its primary business focuses on sales, not rentals. Section 28-809(a) of the New York City Administrative Code provides that “[a]ny person requesting application information from a prospective tenant shall post a sign … in any location at which the principal purpose is conducting business transactions pertaining to the rental of residential properties.” The sign must advise consumers of their rights concerning tenant screening reports. The Department of Consumer Affairs fined broker $500 for failure to have a sign posted at its place of business. Broker then brought this combined action/proceeding challenging the fine, and contending that the city had no power to impose the sign requirement because it was pre-empted by the Real Property Law's regulation of brokers. Supreme Court upheld the fine and dismissed broker's petition and action.

In reversing, the Appellate Division emphasized that, by its terms, the regulation required posting a sign only in a location whose principal purpose is conducting business pertaining to the rental of real property. Because broker's principal purpose focused on sales, not rentals, broker was not required to post the sign. As a result, the court vacated the fine. The court then concluded that the RPL did not pre-empt the Administrative Code provision because the code provision does not prohibit what would be permissible under the state statute, nor does it impose additional restrictions on rights granted under state law.