Real Property Law

In affirming, the Appellate Division emphasized that once an easement for ingress and egress is definitively located by grant, neither party is free to unilaterally change the easement, and the servient owner is not free to unilaterally designate the particular path that can be used. As a result, Supreme Court properly awarded summary judgment to dominant owner.

Comment

A servient landowner may unilaterally move the location of an easement when the document creating the easement does not explicitly fix its location by metes or bounds, and where the servient landowner's movement of the easement does not substantially impair the dominant landowner's use and enjoyment. In Lewis v. Young, the Court of Appeals held that the servient owner's movement of an existing easement in order to make room for a tennis court did not substantially impair dominant owner's right of ingress and egress where the granting document merely required the easement to, "run in a generally southwesterly direction" through servient owner's property. Lewis v. Young, 92 N.Y.2d 443. The court held that dominant owner's 37-year use of the easement in question was not sufficient to fix its location, and the dominant owner did not meet its burden of proof in establishing that the easement's new location substantially impaired its use and enjoyment of the easement. The Court's analysis requires the value of a dominant landowner's estate to decline as a result of a servient landowner's unilateral relocation of a non-fixed easement before the servient landowner is burdened with the cost of reverting an easement back to its original location and condition.

However, a servient landowner will be held liable for damages if servient owner unilaterally move the location of an unfixed easement in a manner that substantially impairs the dominant landowner's use and enjoyment. In MacKinnon v. Croyle, 72 A.D.3d 1356, 899 N.Y.S.2d 422 (2010), the Third Department granted the dominant owner summary judgment, and ordered the servient owner to restore the original location and condition of the easement at its own expense. The court found that the relocated easement presented a path so narrow as to impair the dominant owner's access to its parcels, as well as that of garbage and delivery trucks.

Where the location of an easement is fixed by metes and bounds, a servient landowner may not unilaterally relocate the easement. In Estate Court, LLC v. Schnall, 49 A.D.3d 1076, 856 N.Y.S.2d 251 (2008), the Third Department upheld a grant of summary judgment to dominant owner precluding servient owner from relocating a prescriptive easement without dominant owner's consent. The court distinguished Lewis v. Young, noting that a servient owner may not relocate a prescriptive easement because prescriptive easements, unlike the easement in Lewis, had a location that was fixed by judgment.

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Referee Must Be Appointed Before Partition

Wardally v. Wardally NYLJ 8/7/20, p. 20, col. 1 AppDiv, Second Dept. (memorandum opinion)

In an action for partition brought by two out of three cotenants, plaintiff cotenants appealed from Supreme Court's denial of their motion for appointment of a referee to ascertain the rights, shares and interests of the parties. The Appellate Division reversed and directed Supreme Court to appoint a referee.

Plaintiff cotenants sought a partition and sale of the subject property, which they own as tenants in common with defendant cotenant. Each cotenant owns a one-third interest in the property. Nevertheless, when plaintiff cotenants moved for a determination of their rights and interests, Supreme Court denied motion.

In reversing, the Appellate Division held that plaintiff cotenants were entitled, prima facie, to partition, and defendant cotenants did not raise a triable issue of fact challenging plaintiff cotenants' right to possession. But the court did concede that before partition may be ordered, the court must determine whether any creditors have liens on the subject property. As a result, before ordering partition, Supreme Court was obligated to appoint a referee to determine whether any such creditors exist and have liens.

Comment

Although RPAPL §901 entitles co-owners to partition, a court may deny partition in at least two circumstances, and may delay partition in a third. First, courts enforce contract among cotenants to prohibit or restrict partition. In Leonardo v. Leonardo, 297 A.D.2d 416, the Third Department affirmed dismissal of a partition action based on an agreement among three brothers restricting alienation of the property by any of the partners "during the lifetime" of the others. The court held that by signing the agreement, each party waived the equitable right of partition.

Second, a judgment of divorce or a separation agreement may deprive a cotenant of the right to partition even if the agreement never mentions partition rights. For instance, in Ayers v. Ayers, 274 A.D.2d 352, the court dismissed an action by husband (non-possessing cotenant) for partition when a prior divorce decree had awarded the wife exclusive possession of the property. The court indicated that an out-of-possession spouse cannot obtain partition until a divorce court exercises its discretion to determine whether to allow partition by examining the circumstances of the case and equities among the parties. A separation agreement, too, may preclude a partition action, but only if the agreement is for a reasonable duration. Thus, in Surlak v. Fulfree, 145 A.D.2d 79, the Second Department held that the husband was entitled to partition, despite a separation agreement granting the wife unconditional exclusive occupancy of property, because the reasonable duration of the wife's exclusive occupancy had expired when the couple's children were emancipated. RPAPL §911 authorizes a court to postpone a partition order where the "the rights, shares and interests" of the parties are in dispute. In Wolfe v. Wolfe, 187 A.D.2d 628, the Second Department concluded that an order for partition by sale was "premature" where no accounting had occurred and the rights of parties remained unresolved. And, in an action for partition by sale, the court in Dunning v. Dunning, 200 Misc. 775, denied a co-tenant spouse judgment on the pleadings in a partition action, opining that in addition to an accounting to establish the interests of parties, a separate creditor's reference, or compilation of creditor's liens, on the property must be ascertained preceding an interlocutory judgment for sale of subject property RPAPL §913 codifies that requirement.

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Sale of Shares In Corporate Owner Did Not Trigger Right of First Refusal

Cypress Medical Surgical Services, LLC v. Jodol Realty Corp. NYLJ 8/21/20, p. 25, col. 2 AppDiv. Second Dept. (memorandum opinion)

In an action for breach of contract brought by the holder of an option to purchase, option holder appealed from Supreme Court's grant of summary judgment to corporate owner and its principal. The Appellate Division affirmed, holding that sale of shares in the corporate owner did not trigger the purchase option.

Plaintiff tenant entered into an agreement with corporation owner to lease a portion of the subject property. The lease contained a "first option to buy" in favor of a non-party to the instant action, and a "second option to buy" in favor of plaintiff tenant. Subsequently, corporate owner's sole shareholder sold her shares in the corporation to a third party. Before selling her shares, she offered plaintiff tenant the option to purchase those shares on the same terms as the ultimate purchaser. Plaintiff tenant declined, and then brought this action for breach of contract and fraudulent misrepresentation. Supreme Court granted summary judgment to corporate owner and it's principal.

In affirming, the Appellate Division emphasized that the sale of shares was not equivalent to a sale of the subject property, and did not trigger the right of refusal under the lease. The court concluded that plaintiff tenant did not establish any bad faith by the corporate owner.

Comment

Although a few cases have indicated that a transfer of shares in the corporate landlord does not trigger a tenant's leasehold right of first refusal, the facts in those cases make it difficult to determine whether the rule would be applied more generally to a case in which, during the term of the lease, a corporate landlord voluntarily transfers all of its shares to an unrelated entity. For instance, in Power Test Petroleum Distributors, Inc. v. Baker-Tripi Realty Corp., 190 A.d.2d 845, the Second Department held that a transfer of stock in the corporate landlord, made after the expiration of the lease, did not infringe on tenant's right of first refusal. In that case, corporate landlord had made several attempts to sell the property to the tenant during the last year of the lease, and when landlord did not receive a satisfactory offer, it notified tenant of the lease's impending expiration. Several days after the expiration of the lease — and the first refusal right — corporate landlord's principals sold their share in landlord to a subtenant of the premises. And in Torrey Delivery, Inc. v. Chautauqua Truck Sales and Service, Inc., 47 A.D.2d 279, the Fourth Department held that a transfer of shares precipitated by the death of the corporate landlord's sole shareholder did not trigger the tenant's first refusal right. In that case, decedent owned all of the shares in the corporate landlord and in a related entity. When decedent died, the executors sold the shares of both companies to the same individual, who then merged the two companies into one. Although both Power Test and Torrey Delivery invoked the principle that a sale of shares does not constitute a sale of property, neither case involved sale of a corporate owner's shares, during the lifetime of the shareholder, to an unrelated entity.

If the sole shareholder in a corporate landlord did attempt to transfer all of the shares to an unrelated entity during the term of the lease, the tenant might prevail on a claim that landlord's transfer constituted an invalid bad-faith attempt to avoid tenant's first refusal right. Indeed, the court in Baker-Tripi itself conceded that if the transfer had been made in bad faith, the transfer might have triggered tenant's first refusal right. And, in cases not involving the sale of shares, courts have invoked bad faith to permit exercise of a right of first refusal after its supposed expiration. Thus, in Quigley v. Capolongo, 53 A.D.2d 714, the Third Department awarded specific performance to the holder of a first refusal right that, by its terms, expired after five years, when it was clear that the owner had acted to subvert that right within the five year period. Within the first year of the five year period, owner contracted to sell the property to a third party, but the third party balked when it learned of the first refusal right. Owner and the third party then negotiated a lease to commence after expiration of the first refusal right, and to give the third party an option to purchase the property during that lease. In granting specific performance to the holder of the first refusal right, the court emphasized that the owner had breached its obligation to act in good faith.