Real Property Law

In reversing, the Appellate Division emphasized that the email exchanges left for future negotiations a number of essential terms, including the down payment, the closing date, the quality of title to be conveyed, and the risk of loss during the sale period. The court concluded that the email exchanges contemplated execution of a more formal sale contract. As a result, seller was entitled to dismissal of the complaint. The court concluded, however, that buyer's action was not completely without merit, so that seller was not entitled to attorney's fees or sanctions.

Mortgagee's Claim on Accelerated Mortgage
U.S. Bank, N.A. v. Barnett
NYLJ 6/9/17, p. 33, col. 3
AppDiv, Second Dept.
(memorandum opinion)

In mortgagee's action to foreclose a mortgage, mortgagor appealed from Supreme Court's grant of summary judgment to mortgagee. The Appellate Division reversed and granted mortgagor's motion for summary judgment, concluding that the statute of limitations barred the foreclosure action.

On May 15, 2007, mortgagee brought an action to foreclose the mortgage, alleging that mortgagor had defaulted by failing to make the monthly payment due on Feb. 1, 2007. Mortgagee obtained a judgment of foreclosure, but Supreme Court vacated that judgment in 2010 based on inadequate service of process.

On July 9, 2013, mortgagee brought this instant foreclosure action, and mortgagor contended the action was time-barred. Supreme Court disagreed, and awarded summary judgment to mortgagee.

In reversing, the Appellate Division concluded that mortgagee had accelerated the debt when it brought the foreclosure action in May 2007. Because mortgagee never revoked its acceleration of the mortgage debt, during the six-year statute of limitations period, the statute of limitations expired in May 2013, two months before mortgagee brought this foreclosure action. As a result, the action was time-barred.

COMMENT

Although a mortgagee may revoke the acceleration of a mortgage through an affirmative act, such as providing the mortgagor with a written notice of its intent to revoke, simply accepting additional payments after the mortgagor has defaulted is insufficient to revoke the acceleration. For instance, in Lavin v. Elmakiss, 302 A.D.2d 638, after the mortgagor brought an action seeking to declare the mortgage to be unenforceable, the Third Department held that the acceptance of payments following the default did not revoke the acceleration of the mortgage and that the six-year statute of limitation barred the mortgagee from bringing a foreclosure action. Id.

Furthermore, a written revocation notice is ineffective if mortgagee sends it to an address it knows the mortgagor had vacated. For example, in Wells Fargo Bank, N.A. v. Machell, 55 Misc.3d 1214(A), the court held the mortgagee's foreclosure action to be time-barred, because the mortgagee's revocation of acceleration was inadequate to provide the mortgagor with actual notice. The mortgagee had sent the revocation notice to the mortgaged premises even though it was aware that the mortgagors had vacated the mortgaged premises, and it had served the mortgagors at different addresses for prior actions. The court found that the mortgagee failed to provide actual notice of de-acceleration because the notices were mailed to addresses the mortgagors no longer occupied.

Additionally, when a court dismisses an action to foreclose brought by a mortgagee, the dismissal of the action is insufficient to revoke an acceleration of the mortgage. For instance, in EMC Mortgage Corp. v. Patella, 279 A.D.2d 604, the Second Department dismissed the mortgagee's foreclosure action as time-barred because the mortgagee failed to revoke the acceleration of the mortgage. After a court had dismissed a prior foreclosure action because the mortgagee's predecessor failed to appear at a certification conference, a subsequent mortgagee brought a foreclosure action more than six years after the predecessor had accelerated the mortgage. The court held the foreclosure action time-barred becausedismissal of the initial foreclosure action was inadequate to revoke the acceleration of the mortgage.

Mortgagee Revoked Election to Accelerate Mortgage
NMNT Realty Corp. v. Knoxville 2012 Trust
NYLJ 6/30/17, p. 37, col. 2
AppDiv, Second Dept.
(memorandum opinion)

In action by fee owner to cancel and discharge a mortgage of record, fee owner appealed from Supreme Court's denial of its summary judgment motion. The Appellate Division affirmed, holding that questions of fact remained about whether mortgagee had revoked its election to accelerate the mortgage, thus tolling the statute of limitations.

Mortgagors had defaulted on monthly mortgage payments starting on Dec. 1, 2003. WAMU, the original mortgagee, assigned the mortgage to Homecomings in 2004, and Homecomings brought a foreclosure action on July 27, 2006. The foreclosure complaint stated that Homecomings elected “to declare immediately due and payable the entire unpaid balance.” After Homecomings obtained a judgment of foreclosure and sale, it moved to dismiss the action and vacate the judgment. In 2011, Supreme Court granted that motion.

In 2012, current fee owner purchased the property from mortgagors. Homecomings subsequently assigned the mortgage, which is now held by Knoxville. In May 2013, fee owners brought this action to cancel and discharge the mortgage on the ground that any action to foreclose was then barred by the statute of limitations. Both parties moved for summary judgment, and Supreme Court denied both motions.

In affirming, the Appellate Division started with the principle that some affirmative act by the mortgagee is necessary to revoke an election to accelerate a mortgage. The court held that questions of fact remained about whether Homecomings' motion to discontinue the foreclosure proceeding, cancel the notice of pendency, and vacate the judgment of foreclosure and sale was sufficient to constitute an affirmative act of revocation.

Presumption of Tenancy By the Entirety
Cormack v. Burks
NYLJ 6/2/17, p. 34, col. 1
AppDiv, Second Dept.
(memorandum opinion)

In an action to quiet title by purchasers from a surviving co-tenant, daughter of the deceased co-tenant appealed from Supreme Court's declaration that purchasers were vested with unencumbered fee title. The Appellate Division affirmed, holding that daughter of deceased co-tenant had not raised triable issues of fact to question the conclusion that the co-tenants held the property as tenants by the entirety.

On May 8, 1972, the subject property was conveyed to Edwin and Bertha Ramsey, who were married at the time. The deed was silent about the type of co-tenancy the Ramseys acquired. Bertha died in 2012, survived by Edwin and by her daughter. Edwin then conveyed the property to the Cormacks, who brought this quiet title proceeding because the property had been listed in Surrogate's Court as an asset of Bertha's estate. Supreme Court awarded summary judgment to the Cormacks, and Bertha's daughter appealed.

In affirming, the Appellate Division emphasized EPTL section 6-2.2(b), which provides that a disposition to husband and wife creates a tenancy by the entirety unless expressly declared to be a joint tenancy or tenancy in common. In this case, there was no express declaration, so that upon Bertha's death, Edwin succeeded to the property and was free to transfer it to the Cormacks. Although Bertha's daughter alleged that Edwin and Bertha had agreed to maintain separate ownership stakes, she presented nothing other than unsubstantiated hearsay to support that contention. As a result, Supreme Court properly declared the Cormacks to be the fee owners.

Tail Provision in Brokerage Agreement
Saunders Ventures, Inc. v. Catcove Group, Inc.
NYLJ 6/23/17, p. 30, col. 2
AppDiv, Second Dept
(memorandum opinion)

In an action for a brokerage commission, broker appealed from Supreme Court's dismissal of the complaint. The Appellate Division modified to reinstate the broker's breach of contract claim, holding that questions of fact remained about the meaning of the agreement's tail provision and about whether sellers had terminated the broker's activities in bad faith.

In July 2009, broker and sellers entered into a 120-day nonexclusive brokerage agreement concerning sale of the subject property at a price of $8 million. The agreement called for a 6% commission, and included a tail provision providing that at the end of the 120-day term, either sellers would extend the agreement, or broker would provide a written list of actively interested buyers and would “be protected for a period of one year thereafter should a closing take place with [broker's] registered client.” Before expiration of the brokerage agreement, broker had arranged a meeting with representatives of seller, the Nature Conservancy, and the County of Suffolk to discuss the County's acquisition of the property, using the Nature Conservancy as an intermediary. Sellers would convey to the County at a below-market price, and then take a tax deduction for the difference between the market price and the sale price. The Nature Conservancy would then sell to the County. The county made a formal offer to purchase, and contracts were drafted.

In January 2010, broker provided sellers with two lists of prospective purchasers. The lists included the County, the Nature Conservancy, and the Peconic Land Trust. Broker also signed a document indicating its willingness to accept a 4% commission. In September 2010, sellers contracted to sell the property to the Peconic Land Trust as an intermediary. The contract was amended in January 2011 and again in June 2011, and finally closed on Aug. 31, 2011. One week later, the Peconic Land Trust conveyed the land to the County for $2,432,955. Broker then brought this action for a 4% commission, relying both on the contract and on an unjust enrichment theory. Supreme Court awarded summary judgment to sellers, and broker appealed.

In modifying, the Appellate Division rejected Supreme Court's conclusion that, under the tail provision, the closing had to take place by November 2010, one year after the expiration of the original brokerage period. Instead, the court found ambiguity about whether the commission was to be earned when the contract of sale was executed, or only if closing occurred within the one year period. The court also concluded that questions of fact remained about whether sellers had terminated broker's activities in bad faith in order to avoid payment of the commission. As a result, the court reinstated the breach of contract claim. The court upheld Supreme Court's dismissal of the unjust enrichment claim, concluding that the existence of the written contract precluded that claim.

Secretary Sells Property of Dissolved Corporation
Heights Properties 1388, LLC v. Make Realty Corp.
NYLJ 6/15/17, p. 29, col. 1
AppDiv, Second Dept.
(memorandum opinion)

In an action by contract vendee for breach of a contract to purchase real property, contract vendee appealed from Supreme Court's grant of summary judgment to seller. The Appellate Division modified, concluding that neither party should have been awarded summary judgment because questions of fact remained about the apparent authority of the corporate secretary of the seller, a dissolved corporation.

Seller Make Realty was incorporated in 1981 and dissolved in 1994. Nearly 20 years later, in 2013, Make's corporate secretary, on behalf of Make, contracted to sell one parcel to contract vendee and to give contract vendee a right of first refusal to an adjacent parcel. When Make refused to close, contract vendee brought this action for breach and filed a notice of pendency. Supreme Court denied contract vendee's summary judgment motion and, after searching the record, granted summary judgment to seller Make. Supreme Court concluded that Make had failed to comply with the shareholder voting requirements set forth in section 909(a) of the Business Corporation Law. Contract vendee appealed.

In modifying, the Appellate Division started by noting that section 1005, not section 909, governs corporate procedures when the company has been dissolved by proclamation. That statute gives the corporation power to sell its assets for cash without seeking shareholder authorization. As a result, the remaining question is whether the corporate secretary had apparent authority to bind Make. Although the court noted that ordinarily the president's apparent authority does not devolve on a secretary or treasurer, those officers do have apparent authority if they have actually been managing the corporate business. In this case, on the pre-discovery record, the court concluded that it was impossible to determine, as a matter of law, whether the corporate secretary had actual or apparent authority.

Notarized Power of Attorney Presumed Valid
Kanterakis v. Minos Realty I, LLC
NYLJ 6/23/17, p. 33, col. 2
AppDiv, Second Dept.
(memorandum opinion)

In an action for a judgment invalidating a power of attorney and a resulting transfer and mortgage, mortgagee appealed from Supreme Court's judgment, after a nonjury trial, declaring the power of attorney void as a forgery, and directing the county register to vacate the subsequent deed and mortgage. The Appellate Division reversed and declared that the power of attorney is not invalid because the plaintiff former owner did not overcome the presumption created by a certificate of acknowledgment.

Plaintiff, former owner, alleged that his wife forged a power of attorney in her favor, and then used the power of attorney to obtain a mortgage on real property owned by plaintiff. Wife later used the power of attorney to transfer title to an LLC owned by plaintiff. The complaint alleged that the wife subsequently received an ownership share in the LLC and was appointed managing member. The LLC then obtained a mortgage loan for $1.375 million, and used the loan to repay the earlier mortgage. The mortgage was then assigned to current mortgagee. Plaintiff then brought this action, contending that the power of attorney was a forgery, and that all subsequent transfers were therefore invalid. After a nonjury trial, Supreme Court agreed, and mortgagee appealed.

In reversing, the Appellate Division held that testimony by plaintiff's handwriting expert was insufficient to rebut the presumption of regularity created by the acknowledgment on the power of attorney. The court noted that the exemplars relied upon by the expert were not authenticated and that plaintiff's own denial that he signed the power of attorney was not sufficient to overcome the presumption. None of the other witnesses testified to any express admission of forgery by the wife. As a result, the court declared that the plaintiff was not the sole owner of the property.