Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Real Property Law

By ssalkin
November 01, 2018
|

Broker Entitled to Commission Even Without Contract

Gluck & Company Realtors, LLC v. Burger King Corp. NYLJ 8/10/18, p. 27, col. 3 AppDiv, Second Dept. (memorandum opinion)

In an action for a brokerage commission, seller appealed from Supreme Court's judgment, after nonjury trial, awarding a commission to the broker. The Appellate Division affirmed, holding that even in the absence of a brokerage contract, the broker had established its entitlement to a commission.

The broker's president testified that she was negotiating the terms of a lease to a franchisee of Burger King. When she asked the owner to sign a commission agreement, the seller's principal terminated the broker's services and subsequently entered into a lease with a Burger King franchisee. Seller contended that the lease was negotiated by a different broker and refused to pay a commission to plaintiff broker. Supreme Court concluded that the broker was entitled to a commission of $55,810.08.

In affirming, the Appellate Division held that a broker is entitled to recover a commission when it establishes that is duly licensed, had an express or implied contract with the party to be charged with paying the commission, and was the procuring cause of the transaction. In this case, the court rejected seller's argument that an unlicensed employee performed brokerage service, noting that credible evidence established that the employee did not act as a broker. The court also concluded that there was an express or implied contract, that broker had established that it had created an “amicable atmosphere in which negotiations proceeded” and that the broker generated a chain of circumstances that proximately led to the transaction. Moreover, the court held that even if the broker was not the procuring cause, seller's termination in bad faith was enough to entitle the broker to a commission. Finally, the court held that even in the absence of a contract between the parties, broker would be entitled to recover for its services in quantum meruit to avoid unjust enrichment by the seller.

|

Questions of Fact Remain About Standing to De-Accelerate Mortgage Debt

Milone v. U.S. Bank National Association NYLJ 8/17/18, p. 23, col. 2 AppDiv, Second Dept. (Opinion by Dillon, J.P.)

In mortgagor's action to cancel a mortgage, mortgagor appealed from Supreme Court's dismissal of the complaint. The Appellate Division modified, holding that questions of fact remained about whether mortgagee band had standing to de-accelerate the mortgage debt.

In 2004, mortgagor borrowed $1,235,000 to finance purchase of her home, giving WSMB a mortgage to secure the loan. In 2007, MERS, as nominee for WSMB, assigned the mortgage to US Bank. Mortgagor defaulted on the loan on Oct. 1, 2008. On Nov. 16, 2008, the loan services notified mortgagor that if the delinquency was not paid within 30 days, the circumstances would result in acceleration of the mortgage note. Mortgagor did not pay, and US Bank brought a foreclosure action on Jan. 13, 2009. The foreclosure action languished, apparently because of questions about the standing of US Bank. Supreme Court had ordered US Bank to produce the mortgage note, and when the bank did not produce, Supreme Court dismissed the foreclosure action on Feb. 29, 2012. On Oct. 21, 2014, Wells Fargo, acting as US Bank's loan services, sent mortgagor a notice purporting to de-accelerate the maturity of the mortgage loan, and to re-institute the loan as an installment loan. Four months later, mortgagor brought this action to cancel and discharge the mortgage, alleging that more than six years had passed since the November 2008 letter accelerating the mortgage note, and that as a result, the statute of limitations barred any claim for the mortgage principal. US Bank moved to dismiss, relying on the de-acceleration notice, which had been sent less than six years after the 2008 letter. Supreme Court granted US Bank's motion, and mortgagor appealed.

In modifying, the Appellate Division first held that the Nov. 16, 2008 letter was not sufficiently unequivocal to accelerate the mortgage debt, since it was merely an expression of future intent to accelerate. The January 2009 foreclosure action itself, however, was effective to accelerate the mortgage, unless US Bank lacked standing to bring the foreclosure action. The court then turned to the de-acceleration notice, and rejected mortgagor's claim that because the mortgage note did not explicitly mention de-acceleration, mortgagee had no contractual right to de-accelerate once the mortgagee had already taken steps to accelerate the mortgage. But the court held that any de-acceleration must be unambiguous, and must not be a mere pretext to avoid the statute of limitations. In this case, US Bank's notice contained an express demand for monthly payments which, on the court's analysis, was sufficient to demonstrate that the lender was truly seeking to de-accelerate. Similarly, the court indicated, if the notice is accompanied by monthly invoices to the homeowner, the notice would suffice to avoid a claim that de-acceleration was mere pretext. But the court nevertheless held that the bank was not entitled to dismissal of the complaint, because questions remained about whether US Bank had standing to de-accelerate. The court cited US Bank's failure to produce the mortgage note or other documentary evidence establishing its standing to accelerate or de-accelerate the note.

Comment

When a mortgagee who has previously accelerated a mortgage later attempts to revoke the acceleration in order to toll the running of the statute of limitations, the attempt will generally be ineffective unless the mortgagee has provided clear notice to the mortgagor that the mortgagor has been restored to its pre-foreclosure position. New York courts will find a mortgagee's letter insufficient to revoke a previous acceleration letter if the letter fails to adequately evidence the mortgagee's authority to revoke the acceleration. In Deutsche Bank Nat'l Trust Co. v. Bernal, 56 Misc. 3d 915, the court found that mortgagee's claim was time-barred despite its servicer's letter purporting to de-accelerate the loan. The mortgagee had acquired the mortgage note from a previous note holder, and the court reasoned in part that the mortgagee had not demonstrated that the mortgagor should have known from the letter that the servicer was authorized to bind the note holder.

As in Milone, other New York courts have refused to recognize a revocation of an acceleration where mortgagee had not made clear that it would resume accepting monthly payments. In Freedom Mortgage Corporation v. Engel, 163 A.D.3d 631, the Second Department held that mortgagor was entitled to summary judgement dismissing mortgagee's claim as time-barred where, after mortgagee had accelerated the loan by bringing a foreclosure action, mortgagor and mortgagee had agreed to a settlement. The court rejected mortgagee's claim that the settlement constituted a revocation of the acceleration in part because the settlement did not indicate that mortgagee would accept monthly payments from the mortgagor.

At least one court has held that whether the mortgagee's de-acceleration letter is sufficiently specific to be effective is a question of fact. In Bank of America, N.A. v. Fachlaev, 55 Misc.3d 1204[A], the court denied mortgagor's summary judgment motion, holding held that the mortgagee's de-acceleration letter sufficiently raised an issue of fact whether the statute of limitation was tolled. And one federal bankruptcy court held that a de-acceleration letter tolled the statute of limitations without close examination of the letter's content. See, In re Taylor, 584 B.R. 590.

A voluntary discontinuance, but not an involuntary discontinuance, of a prior foreclosure action may constitute an affirmative act of revocation of an acceleration of the loan. In NMNT Realty Corp. v. Knoxville 2012 Trust, 151 A.D.3d 1068, the Second Department held that a voluntary discontinuance raised a triable issue of fact about whether mortgagee affirmatively revoked the acceleration, thereby reinstating monthly payments that had not yet been extinguished by the statute of limitations. The court therefore denied mortgagor's motion for summary judgment based on the statute of limitations, but the court's opinion did not clarify what facts were to be considered in the determination of whether there was an affirmative act of revocation. However, if a court dismisses a foreclosure action sua sponte, the dismissal will not constitute a revocation of the acceleration. In Federal Nat'l Mortg. Ass'n v. Mebane, 208 A.D.2d 892, the Second Department granted mortgagor's motion for summary judgement based on the statute of limitations and found that a dismissal initiated by a court, and not by the mortgagee, did not constitute a de-acceleration as to keep the claims within the six-year statute of limitations.

|

Installment Seller Cannot Enforce Forfeiture Clause in Ejectment Action

Russell v. Pisana NYLJ 8/17/18, p. 28, col. 4 AppDiv, Second Dept. (memorandum opinion)

In seller's action for breach of contract, purchaser appealed from Supreme Court's grant of summary judgment to seller on the claim alleging breach of contract. The Appellate Division reversed, holding that purchaser's acquisition of equitable title limited the remedies available to seller.

In 2013, the parties entered into a contract for the sale of real property for the purchase prices of $625,000. Purchaser paid $160,000 as a down payment, and the contract provided for payment of the remaining balance, plus the cost of property insurance and property taxes, over a 30-year period. The contract provided that seller would deliver a warranty deed when seller had received all payments. A rider provided that if purchaser should default in making payments and failed to cure, and that default resulted in seller's inability to pay an existing mortgage on the property, purchaser would forfeit all moneys paid as liquidated damages, the contract was to be deemed void, and purchaser would vacate the premises in good condition. In 2015, seller learned that purchaser was using the premises to grow marijuana illegally. Seller contends that there was extensive damage to the premises requiring seller to incur expenses. Seller brought this action for breach of contract. In June 2016, purchaser ceased making monthly payments, prompting seller to send a notice to cure. When purchaser failed to cure, seller sought summary judgment on the issue of liability on its breach of contract claim base on the default provision in the rider. Supreme Court awarded summary judgment to seller, and purchaser appealed.

In reversing, the Appellate Division started by noting that when parties execute a contract for the purchase of real estate, the making of a partial payment gives the purchaser equitable title to the property. The court held that once the purchaser acquires equitable title, the seller may not enforce contract rights entitling seller to a return of possession by bringing an action in ejectment. Instead, the seller must first foreclose its equable lien or bring an action at law for the purchase price. As a result, the court held that seller in this case was not entitled to summary judgment on its claim based on the rider to the contract calling for forfeiture of all monies paid and requiring purchaser to vacate the premises.

Comment

Courts will not enforce a forfeiture provision in an installment sale contract when the vendee has made substantial payments in excess of the vendor's probable damages as a result of the breach. In this situation, courts have held that an ejectment action is unavailable to the vendor, and that the vendor's remedy is to enforce its equitable lien through foreclosure. For instance, in Bean v. Walker, 95 A.D.2d 70, the Fourth Department held that vendor was not entitled to use an ejectment action to enforce a forfeiture provision against a contract vendee who had completed 8 years of installment payments totaling almost one-half of the purchase price. The court held that the vendor was instead limited to foreclosing its equitable lien. Similarly, in Hudson v. Matter, 219 A.D. 252, in refusing to allow a vendor to repossess property after vendee had made extensive improvements and significant payments, the court held that a foreclosure sale was the only proper remedy to lead to an equitable result.

By contrast, a vendor may prevail in an ejectment action against a vendee who has not made any payment towards the purchase price in an installment sale contract. In Murray v. Breski, 277 A.D.2d 867, when vendee failed to pay the down payment, monthly installments, taxes, insurance and construction fees on the property after entering into a contract, the Third Department upheld vendor's action for ejectment, emphasizing that in light of vendee's failure to perform, vendor should have “the benefit of every possible favorable inference.” Id. at 869. Murray appears to outline a basic rule that when there has been no performance of payment by vendee in an installment sale contract, forfeiture may compensate the vendor for potential damages without significant unfairness to the vendee.

In at least one case, a court has held that forfeiture is available to the vendor when the sale contract provides that the vendee does not acquire an equitable interest until the vendee has paid one-fourth of the purchase price. In McLacklan v. Thompson, 122 Misc.2d 239, where vendee made payments totaling less than one-fourth of the purchase price before entering default, the court looked to the language of the contract to uphold the cause of action for ejectment. The court found this provision to be reasonable as it stipulated that if vendee defaulted prior to paying one-fourth of the purchase price, vendor would have the right to repossess the property and retain the payments made as rent. Id. at 241.

|

Seasonal Use Sufficient to Establish Prescriptive Easement

Auswin Realty Corp. v. Klondike Ventures, Inc. 163 A.D.3d 1107 App Div, Third Dept., 7/5/18 (Opinion by Lynch, J.)

In record owner's action for trespass, record owner appealed from Supreme Court's judgment, after non-jury trial, determining that neighbor had acquired a prescriptive easement over record owner's property. The Appellate Division modified to limit the scope of the easement, but otherwise affirmed, holding that seasonal use was sufficient to establish the continuity necessary for a prescriptive easement.

A “skidder trail” begins and ends on neighbor's parcel and extends along the border with record owner's parcel but, at two places, crosses over onto record owner's parcel. In 2013, record owner brought this trespass action, contending that neighbor had trespassed and removed trees from its parcel. Neighbor asserted a prescriptive easement defense, relying on testimony by a predecessor in interest that he had regularly used the trail from 1982 to 2002 to access a tree stand during hunting season. The predecessor also testified that his older brother had performed a major overhaul of the trail during the 1980s, and that he and his brother maintained the trail as necessary. He testified that whenever he and his brother used the trail, they believed they were on their own land, although on a survey map, he identified the areas on which the trail crossed the border onto record owner's parcel. Based on predecessor's testimony, Supreme Court concluded that predecessor had acquired a prescriptive easement.

In modifying, the Appellate Division started by noting that deference to Supreme Court's fact findings and credibility determinations was appropriate. Accordingly, the court concluded that predecessor's testimony established the existence of a prescriptive easement. Use during the hunting season was seasonal use sufficient to establish continuous possession. Moreover, the court concluded that failure to use the skidder trail from 2003 to 2007, while predecessor was in the military, was insufficient to constitute abandonment because there was no intent to abandon the easement. The court modified because undisputed evidence established that current neighbor had substantially widened the trail. Noting that the right to a prescriptive easement is measured by the extent of the use, the court held that current neighbor should have been directed to restore the crossover areas to their original eight-foot width.

Comment

Because a principal purpose served by the requirement of continuous use is to give notice to the landowner that a user is asserting a hostile claim, seasonal use is typically sufficient if the claimant's use of the property is reasonably consistent with the acts of use that true owners of similar properties would undertake. For instance, in Epstein v. Rose, 101 A.D.2d 646, the Third Department held that an adjoining landowner's maintenance, repair and seasonal use of a rural roadway about 100 times a year for hunting and hauling firewood was sufficiently continuous to establish a prescriptive easement. Repair and maintenance would have put any owner on notice of a claim by the prescriptive user for over 10 years was sufficient to establish a right-of-way over the record owner's land. The fact that the landowner's use was strictly limited to this seasonal activity did not make it any less adverse, open, continuous or uninterrupted. Id. at 647. Use of land for certain activities during the corresponding season will meet the requirement of continuous possession, since the seasonal use is that for which the property was intended. Id. For example, large tracts of undeveloped rural land might typically be used only for pasturing animals during certain seasons and, therefore, one who uses the land in such a way for the prescriptive period has “continuously” used the land. Similarly, in Beutler v. Maynard, 80 A.D.2d 982, affd, 56 N.Y.2d 538, the court held that a group of landowners were entitled to an easement by prescription over a neighbor's land to access their summer cabin even though they only used the roadway each summer. The court reasoned that the presence of the summer cabin, although not constantly inhabited or utilized, was a clear expression of the intention to continue using the right-of-way and provided a true owner with sufficient notice of the use.

Although regular summertime use of a seasonal property can be sufficient and substantial, irregular or infrequent summertime use would not be regarded as continuous because it would not provide adequate notice to the property's owner. For instance, in Kerryville Props. v. Buvis, 240 A.D.2d 898, 900, the court held that occasional use of various old logging trails over plaintiff's property came far short of the required continuity. Similarly, in Alexy v. Salvador, 217 A.D.2d 877, the court held that generalized and conclusory testimony concerning visits by certain relatives one or two weekends each year was insufficient to demonstrate employment of beach property commensurate with existing seasonal uses.

|

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
How Secure Is the AI System Your Law Firm Is Using? Image

In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.

COVID-19 and Lease Negotiations: Early Termination Provisions Image

During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.

Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support Image

The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.

The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies Image

Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.

Authentic Communications Today Increase Success for Value-Driven Clients Image

As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.