Real Property Law

In affirming, the Second Circuit first held that temporary works could constitute works of recognized stature, and then concluded that the artists had established that the works in question qualified as works of recognized stature. The court then upheld the district court's statutory damage award, holding that the destruction of the works was willful. The court then concluded that especially in light of the building owner's conduct in whitewashing the walls before adjudication was complete and before necessary for construction of the apartments, the statutory damage award would serve as an appropriate deterrent.

Comment

VARA entitles an artist of a work of "recognized stature" to injunctive relief (to prevent destruction of their works) or money damages (if the work has already been destroyed). 17 U.S.C. §106A(a)(3)(B); 504(b) and (c). If the work is incorporated into a building, and cannot be removed without destruction of the work, the artist's rights may only be waived if the building owner obtains a written instrument — signed by both the owner and the artist — specifying that the work's installation may subject it to destruction or mutilation. If the artist consented to the installation prior to the effective date of VARA, the work is not protected under the statute. 17 U.S.C. 113(d)(1)(B).

17 U.S.C. 113(b)(2) provides that if a work of recognized stature can be removed from a building without being destroyed , the owner is liable for destruction of the work (absent waiver) unless the owner made a good faith attempt to notify the artist — in writing — of the work's destruction, and the artist fails to remove, or pay for the work's removal, within 90 days of receipt of the notice. 17 U.S.C. 113(d)(2). An owner can create a presumption of a diligent, good-faith attempt of notice by sending notice by registered mail to the most recent address of the artist registered at the Register of Copyrights. 17 U.S.C. 113(3).

VARA only protects works on a building that were initially sanctioned by the building owner. In English v. BFC&R East 11th Street LLC, the Southern District granted summary judgment dismissing a claim for injunctive relief and damages by artists who had trespassed onto owner's property to paint murals on a building without the owner's consent. 97 CIV. 7446 (HB), 1997 WL 746444 (S.D.N.Y. Dec. 3, 1997), aff'd sub nom. English v. BFC Partners, 198 F.3d 233 (2d Cir. 1999). In holding that VARA is inapplicable to works illegally placed on others' property, the court reasoned that a contrary result would allow artists to effectively halt development of vacant lots simply by placing art there without permission.

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Sale Contract Bars Action for Fraudulent Misrepresentation, Concealment, and Inducement

116 Waverly Place LLC v. Spruce 116 Waverly LLC NYLJ 1/21/20, p. 27, col. 5 AppDiv, First Dept. (memorandum opinion)

In buyer's action for fraudulent misrepresentation, fraudulent concealment, and fraudulent inducement, buyer appealed from Supreme Court's grant of seller's summary judgment motion. The Appellate Division affirmed, holding that the parties' agreement barred such claims.

Disclaimers in the relevant sales agreement provided that seller made no representations or warranties concerning the building's condition, that buyer would purchase the building as is, and that buyer had the right to inspect the premises before closing and was "entering into this contract based solely upon such inspection and investigation." After closing buyer brought this action, contending that seller had fraudulently concealed information about the building's condition that was peculiarly within the seller's knowledge. Supreme Court granted seller's summary judgment motion.

In affirming, the Appellate Division held that the contract language rendered untenable purchaser's claim that information about the building's condition was peculiarly within the seller's knowledge. The court concluded that when a buyer has the means to discover the quality of the subject of a representation, the buyer cannot complain that he was induced to enter into the transaction by a misrepresentation.

Comment

Real estate contracts that specifically disclaim representations as to all physical conditions are sufficient to bar fraudulent action for misrepresentation and active concealment of those physical conditions. For example, in Comora v. Franklin, 171 A.D.3d 851, the disclaimers, which provided that the buyers were fully aware of the physical conditions based on their own inspection and would not rely on any representation given by the seller, were sufficient to bar buyer's action for active concealment of mold-causing conditions. Similarly, in Couch v. Schmidt, 204 A.D.2d 951, the court held that disclaimers, which provided that the seller made no representations as to physical conditions except those itemized, and that the buyer had inspected and was acquainted with the building conditions, foreclosed the buyer's claim that the seller fraudulently misrepresented a flooding problem.

However, courts have not treated the existence of underground industrial waste as a physical condition, so that even a specific disclaimer of physical conditions will not shield a seller from fraud actions, For example, in Tahini Invest. Ltd. v. Bobrowsky, 99 A.D.2d 489, the buyer of a farm alleged that the seller misrepresented its use as a horse farm and concealed the underground drums containing industrial waste. The court allowed the action to proceed, even though the contract specifically disclaimed the buyer's reliance on representations of physical conditions. Relying on Tahini Invest. Ltd., the court in Hi Tor Industrial Park Inc. v. Chemical Bank, 114 A.D.2d 838, also held that a specific disclaimer of "physical nature of the premises," was insufficient to bar allegations with respect to underground tanks containing possibly toxic chemicals, concluding that the disclaimer could not fairly be said to refer to the tanks.

In contrast to a specific disclaimer, a general disclaimer or merger clause will not shield a seller from fraud allegations. For instance, in Schooley v. Mannion, 241 A.D.2d 677, the court held that the disclaimer which only stated the buyer will take the property "as is," was insufficient to bar the buyer's action for fraudulent misrepresentation with respect to an insulation system, because the disclaimer did not state that the buyer had inspected the property; nor did it disclaim the buyer's reliance on representations as to the physical condition.

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Ambiguity In Restrictive Covenant Limits Enforcement

Matter of Fiore v. Fabozzi NYLJ 2/7/20, p. 24, col. 6 AppDiv, Second Dept. (memorandum opinion)

In an action to enforce a restrictive covenant, both parties appealed from Supreme Court's order enjoining burdened party from building a chimney but denying an injunction against construction of a gazebo. The Appellate Division affirmed, holding that ambiguity in the covenant precluded enforcement against the gazebo.

In 2003, burdened party bought a house from a corporation owned by benefited party, who lived next door. At the time of the sale, the parties agreed to a restrictive covenant precluding burdened party from making any additions or alterations to his house which rose "above one story or 17 feet to the top of the roof of any structure as measured from the existing basement floor elevation." The covenant was designed to preserve the benefited party's view of the ocean from his house. In 2016, burdened party converted a gas fireplace to a wood-burning fireplace and added a chimney. Burdened party also began to build a gazebo in the back yard. Benefited party then brought this action to enforce the covenant by enjoining continued construction and by requiring removal of what burdened party had already constructed. Supreme Court concluded that the chimney, but not the gazebo, violated the covenant, and directed that the chimney be removed. Both parties appealed.

In affirming, the Appellate Division held that the provision prohibiting construction "above one story or 17 feet to the top of the roof" was ambiguous. Because a party seeking to enforce the covenant bears the burden of establishing the covenant's scope, the benefited party was not entitled to enforce the covenant with respect to the gazebo. On the other hand, the court concluded that Supreme Court had properly concluded that the covenant would unambiguously prohibit construction of the chimney.

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Constructive Trust Imposed Based On Alleged Oral Agreement

Reingold v. Bowins NYLJ 2/7/20, p. 27, col. 1 AppDiv, Second Dept. (memorandum opinion)

In an action by brother to impose a constructive trust and recover damages for unjust enrichment from his sister, sister appealed from Supreme Court's judgment for $107,662.15 in favor of brother, and imposition of a constructive trust in brother's favor. The Appellate Division affirmed, holding that brother had established all of the elements necessary for imposition of a constructive trust.

In 1985, brother purchased property in Greenlawn and allowed his sister to live in the home on the property. In 1990, sister purchased property in Ronkonkoma and allowed brother to live in the home on the property. In 1994, sister brought an action against brother to establish a constructive trust against the Greenlawn property. Brother failed to appear and, after an inquest, the court awarded judgment to sister awarding her title to the Greenlawn property. In 2002, brother brought the instant action against sister seeking imposition of a constructive trust on the Ronkonkoma property. Brother alleged an agreement whereby he would transfer title to the Greenlawn property and his sister would transfer title to the Ronkonkoma property, but sister had already acquired title to the Greenlawn property through her judgment in the prior proceeding, leaving her with title to both properties. During the pendency of the proceeding, the Ronkonkoma property was sold and a portion of the proceeds were put into escrow. After a nonjury trial, Supreme Court found in favor of brother in the sum of $107,662.15 and imposed a constructive trust on the proceeds held in escrow. Sister appealed.

In affirming, the Appellate Division noted that the evidence at trial established that brother had expended money towards the purchase of the Ronkonkoma property and had paid money towards it carrying charges and improvements in reliance on the agreement that sister would eventually transfer title to him. The evidence also established that sister breached the promise. On these facts, the court held that brother had established all of the necessary elements to support a constructive trust.