Changes in Lot Number: When Does a Purchaser Have a Duty to Inquire?

In 1999, Parking Lot Partnership conveyed 57 Crosby to Chatham. The deed, which was indexed against Lot 9, made no mention of the 1981 easement. Then, in 2011, Chatham conveyed 57 Crosby to its current owner, Akasa. The deed was recorded against Lot 9, and made no mention of the 1981 easement. Akasa purchased title insurance, and the title policy included an exception for an easement granted by Chatham in 1999, but made no reference to the 1981 easement, which the title insurer never discovered. At about the same time Akasa purchased 57 Crosby, it also purchased the co-op apartment occupying the bottom two floors of 55 Crosby. At the time of the purchase, two staircases and an elevator lift used to provide side access to 55 Crosby encroached on the 1981 easement.

214 Lafayette House took title to 214 Lafayette in 2012. Two years later, at the new owner's instance, the city register indexed the 1981 easement against Lot 9. The new owner of 214 Lafayette then requested that Akasa acknowledge, ratify, and reconfirm the terms of the 1981 easement. Akasa declined, and instead brought a quiet title action, contending that because Akasa purchased for value without notice of the easement, Akasa owned 57 Crosby free and clear of the easement. Akasa also sought an injunction restraining 214 Lafayette House from using the 1981 easement.

The Trial Court Opinion

Supreme Court granted summary judgment in favor of 214 Lafayette. The court framed the issue as one involving a ministerial error in the recording office, and held that a clerical error of nonfeasance — failure to index the 1981 conveyance against Lot 9 at the time of the 1984 subdivision — did not void the 1981 recording.

The Appellate Division Affirmed

The Appellate Division affirmed on different grounds, holding that Akasa was not a bona fide purchaser because it was on inquiry notice of the 1981 deed even if the deed was not in its direct chain of title and was not recorded against Lot 9, the lot Akasa purchased.

Akasa had argued that it was a bona fide purchaser because a title search of Lot 9 revealed a long history of conveyances — extending back well beyond 40 years — and no evidence of the 1981 easement. Akasa conceded that if the 1984 subdivision of Lot 30 into separate lots had designated 57 Crosby as a new lot, rather than the previous Lot 9, Akasa would have been obligated to trace title back to the "parent" lot — Lot 30 — because there would not have been a 40-year period of title records on the new lot. But, because a searcher would have discovered a long record of conveyances with respect to Lot 9, Akasa argued that it had no obligation to search beyond the deeds indexed against Lot 9.

In rejecting Akasa's argument, the court emphasized that an examination of the index for Lot 9 would have revealed a significant gap in title. The index would have shown a deed from Con Ed to the Epsteins in 1971, and a deed from parking Lot Partnership to Chatham in 1999, but no deed that connected the Epsteins to Parking Lot Partnership. In light of that gap, a prudent title searcher would have searched beyond Lot 9 to ascertain Parking Lot Partnership's source of title. That search would have taken the searcher to Lot 30, where search would have revealed the 1981 easement. Because Akasa (and its title insurer) failed to make the inquiry a prudent purchaser would have made, Akasa was not entitled to the protection afforded bona fide purchasers.

Implications

Akasa establishes that at least in some circumstances, a search limited to the current block and lot number will not protect the purchaser against transfers recorded against a different lot number — at least where the search reveals unexplained gaps in title. In Akasa, the gap was for a period within the past 40 years. Whether a court would reach the same conclusion with respect to an older gap is an issue the court did not have to address.

*****

Stewart E. Sterk is Mack Professor of Law at the Benjamin N. Cardozo School of Law.