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DEFENDANT TITLE INSURANCE COMPANY WAS ABLE TO DEMONSTRATE DEFENDANT AGENCY DID NOT HAVE ACTUAL AUTHORITY TO ISSUE THE TITLE INSURANCE POLICY TO PLAINTIFF; HOWEVER IT DID NOT DEMONSTRATE THE AGENCY DID NOT HAVE APPARENT AUTHORITY TO ISSUE THE POLICY; THEREFORE THE TITLE INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant WFG, a title insurance company, should not have been granted summary judgment on the “apparent authority” cause of action. WFG had terminated its agency relationship with NMR and had served a temporary restraining order on NMR prohibiting NMR from issuing any title insurance underwritten by WFG. The day after the restraining order was served, NMR issued a policy to plaintiff on property which turned out to have been encumbered with millions of dollars of liens. WFG was able to prove NMR did not have actual authority to issue the policy, but did not demonstrate NMR did not have apparent authority to issue the policy:

In the absence of actual authority, a principal may still be bound by the actions of a person who has apparent authority … . “Essential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction” … . The proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact … . Failure to make such a showing requires a denial of the motion, regardless of the sufficiency of the opposing papers … .

Here, WFG failed to establish, prima facie, that NMR Realty lacked apparent authority to issue the policy. WFG merely pointed to gaps in the plaintiff’s proof, which was insufficient to meet its prima facie burden as the party moving for summary judgment … . Schwartz v WFG Natl. Tit. Ins. Co., 2021 NY Slip Op 01279, Second Dept 3-3-21

 

DESPITE AMBIGUITIES IN THE DESCRIPTION OF THE EASEMENT, THE LOCATION CAN BE DETERMINED AND THE EASEMENT IS THEREFORE VALID (SECOND DEPT).

The Second Department, reversing Supreme Court (referee), determined the easement granted to defendants was valid. The easement related to an area which included a stucco wall and a covered wooden deck. The fact that the area may not have been accurately described by metes and bounds did not defeat the validity of the easement:

“In order to create an easement by express grant, plain and direct language must be used which evidences the grantor’s intention to permanently give a use of the servient estate to the dominant estate” … . The extent of an easement claimed under a grant is generally determined by the language of the grant … . The fact that the easement grant does not give the precise location of the easement is not fatal to a finding that an easement was intended … . Where the language of the grant is ambiguous or unclear, the court will consider surrounding circumstances tending to show the grantor’s intent in creating the easement … .

… [W]here, as here, the language was ambiguous, the Supreme Court should have considered “the surrounding circumstances and the situation of the parties when it was executed” … . The evidence presented at the hearing, which included the testimony of Emily Mazzuoccola [defendant], surveys, and photographs, demonstrated that the grantor intended to grant a perpetual easement with regard to the disputed area of land … containing improvements of a stucco wall and a covered wooden deck. The easement was specifically referenced on a survey dated July 2, 2002. Accordingly, the court should have determined that the subject easement was valid. Marino v Mazzuoccola, 2021 NY Slip Op 08176, Second Dept 2-24-21

 

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ONLY THE HUSBAND TOOK OUT A MORTGAGE AND DEFENDANTS DENIED THE ALLEGATION IN THE COMPLAINT THAT THE WIFE’S INTEREST WAS SUBJECT TO AN EQUITABLE MORTGAGE; THEREFORE THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED; THE COURT NOTED THAT “NEITHER ADMITTED NOR DENIED” IN AN ANSWER TO A COMPLAINT IS DEEMED AN ADMISSION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank did not demonstrate its foreclosure action could affect the wife’s (Gloria’s) interest in the property based on the husband’s (David’s) mortgage. It was not necessary for defendants to claim that Gloria’s interest was not subject to an equitable mortgage as an affirmative defense. [Although not related to the equitable mortgage issue, the Second Department noted that “Neither Admitted nor Denied” in an answer to an allegation in a complaint should be deemed to admit the allegation (see CPLR 3018[a] …)]:

… [W]e disagree with the plaintiff’s contention that the defendants, by not pleading it as an affirmative defense, waived their defense to the cause of action relating to the alleged equitable mortgage on Gloria Saff’s interest in the subject property. “CPLR 3018, which governs responsive pleadings, draws a distinction between denials and affirmative defenses” … . “Denials generally relate to allegations setting forth the essential elements that must be proved in order to sustain the particular cause of action” and “[t]hus a mere denial of one or more elements of the cause of action will suffice to place them in issue” … . A defendant, however, must plead, as an affirmative defense, “all matters which, if not pleaded, would be likely to take the adverse party by surprise or would raise issues of fact not appearing on the face of a prior pleading” … . Here, the defendants, in their answer, denied the allegations in the complaint relating to the existence of an equitable mortgage on Gloria Saff’s interest in the subject property. As the denials of an equitable mortgage were in response to allegations in the complaint, they would not take the plaintiff by surprise. * * *

Where spouses own property as tenants by the entirety, a conveyance by one spouse, to which the other has not consented, cannot bind the entire fee … . The mortgage executed by David Saff did not encumber Gloria Saff’s interest in the subject property, and the plaintiff failed to submit evidence demonstrating that it held an equitable mortgage on Gloria Saff’s interest in the subject property. Thus, the Supreme Court should have denied those branches of the plaintiff’s motion which were for summary judgment on the causes of action to foreclose the mortgage and for a judgment declaring that the plaintiff has an equitable mortgage against the interest of Gloria Saff in the subject property. U.S. Bank N.A. v Saff, 2021 NY Slip Op 00590, Second Dept 2-3-21

 

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THE ESTATE OF THE HUSBAND WAS NOT A NECESSARY PARTY IN THIS FORECLOSURE ACTION; THE PROPERTY PASSED TO THE WIFE UPON THE HUSBAND’S DEATH (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the husband’s (Thomas’s) estate was not a necessary party in this foreclosure action because the property passed to the decedent’s wife (Judy) upon Thomas’s death:

… [T]he plaintiff’s submission of the deed and Thomas’s death certificate established prima facie that Thomas and Judy had held the subject property as a married couple, and that they remained married at the time of his death. Therefore, Thomas’s death “result[ed] in the defeasance of the deceased spouse’s coextensive interest in the property” … , and the surviving spouse automatically inherited his ownership interest in the property. Moreover, the plaintiff explicitly provided that it would not seek a deficiency judgment against Thomas’s estate … . Based upon the foregoing, the plaintiff established that Thomas’s estate was not a necessary party to foreclosure and the plaintiff was entitled to discontinue the action against Thomas, remove his name from the caption, and to vacate the stay which arose upon Thomas’s death … . U.S. Bank N.A. v Auteri, 2021 NY Slip Op 00588, Second Dept 2-3-21

 

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HOMEOWNERS’ ASSOCIATIONS IN THE HAMPTONS DEMONSTRATED OWNERSHIP OF THE BEACH TO THE HIGH WATER MARK; THE TOWNS THEREFORE COULD NOT ISSUE PERMITS ALLOWING VEHICLES ON THE BEACH (SECOND DEPT).

The Second Department, reversing Supreme Court in this action to quiet title pursuant to RPAPL Article 15,, determined the homeowners’ associations demonstrated ownership of about 4000 feet of beach in the Hamptons on Long Island. Therefore the towns could not allow vehicles to park on the beach:

In an action pursuant to RPAPL article 15, the plaintiff bears the burden of demonstrating, inter alia, the boundaries of the subject property with “common certainty” (see RPAPL 1515[2] … ). Here, contrary to the Supreme Court’s determination, we find that Seaview, Dunes, Tides, and Whalers established their title claims by a preponderance of the evidence, and that Ocean established its title claim by a preponderance of the evidence with respect to the westernmost portion of its property. At trial, the plaintiffs produced a land title expert who testified to the homeowners associations’ chains of title to their respective properties. Specifically, that expert testified, based on documentary evidence, that Seaview, Dunes, Tides, and Whalers owned fee simple title to their respective properties, extending to the mean high-water mark of the Atlantic Ocean. The expert also testified, in relevant part, that Ocean owned fee simple title extending to the mean high-water mark of the Atlantic Ocean, as to the westernmost 400 linear feet of its property. The plaintiffs produced all of the deeds in those respective chains of title, beginning with the Benson Deed, which is common to all of the homeowners associations’ chains of title. Based on the foregoing evidence, the homeowners associations established, to the extent previously indicated, that they owned title in fee simple absolute to the disputed portion of their respective properties (see RPAPL 1515[2] … ). Seaview at Amagansett, Ltd. v Trustees of Freeholders & Commonalty of Town of E. Hampton, 2021 NY Slip Op 00584, Second Dept 2-3-21

 

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THE REAL PROPERTY PASSED TO THE BENEFICIARY IN THE WILL UPON DEATH, NOT UPON SUBSEQUENT PROBATE; THEREFORE THE CONVEYANCE WAS VALID AND THE DEED SHOULD NOT HAVE BEEN DEEMED VOID (SECOND DEPT).

The Second Department, reversing Surrogate’s Court, determined plaintiff’s deed inherited the real property upon decedent’s death, not after probate. Therefore the conveyance of the property by the beneficiary, McKenzie, to plaintiff was valid:

… [T]he decedent’s will, unequivocally and without limitation, devised McKenzie one third of the residuary estate, and this interest vested in McKenzie at the moment of the decedent’s death … . Although the vesting of McKenzie’s interest was “subject to the executor[‘s] duty to ensure that all debts and obligations of the estate[ ] were met” … , the defendants failed to establish, prima facie, that McKenzie’s conveyance of her interest impeded the executor’s duties, and thus, failed to establish, prima facie, that McKenzie’s interest had not yet vested when she conveyed it to the plaintiff after the decedent’s death … .  72634552 Corp. v Okon, 2020 NY Slip Op 07845, Second Dept 12-23-20

 

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PLAINTIFFS’ MOTIONS FOR SUMMARY JUDGMENT ON THEIR ADVERSE POSSESSION AND TRESPASS CAUSES OF ACTION SHOULD HAVE BEEN GRANTED; A DEFENDANT’S MISTAKEN BELIEF HE OR SHE HAD A RIGHT TO ENTER DOES NOT DEFEAT LIABILITY FOR TRESPASS (SECOND DEPT).

The Second Department, reversing Supreme Court in this adverse possession and trespass action, determined plaintiffs were entitled to summary judgment on their adverse possession and trespass actions. With regard to trespass, the court noted that liability is not defeated by a defendant’s belief he or she has a right to enter the property:

The Supreme Court also should have granted that branch of the plaintiffs’ cross motion which was, in effect, for summary judgment on the issue of liability on the trespass cause of action. To meet their prima facie burden, the plaintiffs were required to demonstrate that the defendant intentionally entered onto the land belonging to the plaintiffs without justification or permission … . “‘Liability may attach regardless of defendant’s mistaken belief that he or she had a right to enter'” … . Here, the plaintiffs established their prima facie entitlement to judgment as a matter of law on the trespass cause of action by submitting the affidavit of the plaintiff Jamie Montanaro, who averred that, in December 2016, the defendant removed a portion of the retaining wall on the disputed property and built a garage which encroaches upon the disputed property … . The plaintiffs also submitted the affidavit of a land surveyor who averred that the new garage encroached upon the disputed property … . Montanaro v Rudchyk, 2020 NY Slip Op 07560, Second Dept 12-16-20

 

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IN THE CONTEXT OF A LAWSUIT BY THE BOARD MEMBERS OF AN UNINCORPORATED CONDOMINIUM ASSOCIATION AGAINST THE FORMER PRESIDENT OF THE BOARD, NEITHER THE REAL PROPERTY LAW (RPL) NOR THE BUSINESS CORPORATION LAW (BCL) APPLIES TO THE FORMER PRESIDENT’S DEMAND FOR ATTORNEY’S FEES ASSOCIATED WITH DEFENDING THE ACTION; THE BY-LAWS AND THE COMMON LAW RULE THAT THE PARTIES ARE RESPONSIBLE FOR THEIR OWN ATTORNEY’S FEES CONTROL (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Gische, reversing Supreme Court, in a matter of first impression, determined the defendant, the former president of the condominium board, is not entitled to indemnification (attorney’s fees) for her costs in defending a lawsuit brought by the board of managers of the unincorporated condominium association. The lawsuit alleged defendant misappropriated the insurance proceeds paid after a fire in the condominium building. The First Department held the by-laws and the common law rule that the parties are responsible for their own attorney’s fees control. The court rejected the application of provisions of the Real Property Law (RPL) and the Business Corporation Law (BCL) with respect to indemnification in the context of an unincorporated condominium association:

Neither the common law, nor BCL § 624(e) by analogy, provide the right to recoup attorney’s fees to a board member successfully defending against a derivative action. BCL § 626(e) is not an indemnification provision. Rather, it permits legal fees to be paid to an owner who successfully asserts the interest of an entity “when the management of the entity fails to act to protect that interest” … . Consequently, “an award of attorneys’ fees in a shareholders’ derivative suit is to reimburse the plaintiff for expenses incurred on the corporation’s behalf” … . The corporation is responsible for paying the legal fees, but only where the corporation benefits from the litigation … . Neither the BCL nor the common law provide a board member with a reciprocal right to recover legal fees for defending against an unsuccessful derivative action, at least not in the absence of such authorization in the bylaws or some other statutory authority. In this respect, …

In the absence of any authority permitting [defendant] to recoup her legal fees, the general common law rule applies, that “attorney’s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule” … . [Defendant], alone, is responsible for her legal fees. Board of Mgrs. of the 28 Cliff St. Condominium v Maguire, 2020 NY Slip Op 06844, First Dept 11-19-20

 

THE SATISFACTION OF MORTGAGE ON RECORD WHEN DEFENDANT BANK ISSUED A LOAN SECURED BY THE PROPERTY WAS FORGED AND THEREFORE VOID; DEFENDANT BANK, THEREFORE, WAS NOT PROTECTED AS A BONA FIDE ENCUMBRANCER FOR VALUE PURSUANT TO REAL PROPERTY LAW 266 (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined Flagstar Bank was not protected as a bona fide encumbrancer for value under Real Property Law 266. The satisfaction of mortgage that was on record when Flagstar issue a loan secured by the property was forged and therefore void, not voidable:

We disagree with the Supreme Court’s determination that Flagstar’s interest in the subject property was protected by its status as a bona fide encumbrancer for value under Real Property Law § 266, since the satisfaction of mortgage executed and recorded before Flagstar’s issuance of a loan with respect to the subject property was determined to have been forged and was void, not merely voidable. A discharge or satisfaction of a mortgage is void at its inception when it is executed and recorded by one who has no interest in the mortgage … . Accordingly, the forged satisfaction of mortgage in this case was not entitled to any legal effect, and Flagstar’s encumbrance based on it is not protected … . JPMorgan Chase Bank, N.A. v Aspilaire, 2020 NY Slip Op 06510, Second Dept 11-12-20

 

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ALLEGED CONTRACTS FOR THE SALE OF REAL PROPERTY DID NOT SATISFY THE STATUTE OF FRAUDS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the alleged agreements to sell real property did not satisfy the statute of frauds:

“Pursuant to General Obligations Law § 5-703(2), a contract for the sale of real property ‘is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing'” … . “A writing satisfies the statute of frauds if it identifies the parties to the transaction, describes the properties to be sold with sufficient particularity, states the purchase price and the down payment required, and is subscribed by the party to be charged” … . Moreover, “‘a memorandum evidencing a contract and subscribed by the party to be charged must designate the parties, identify and describe the subject matter, and state all of the essential terms of a complete agreement'” … . “In a real estate transaction, the essential terms of a contract typically include the purchase price, the time and terms of payment, the required financing, the closing date, the quality of title to be conveyed, the risk of loss during the sale period, and adjustments for taxes and utilities”… .

… [T]he alleged contract did not satisfy the statute of frauds, as it did not contain the essential terms typically included in a contract for the sale of real property, including the purchase price, the time and terms of payment, the required financing, the closing date, the risk of loss during the sale period, and adjustments for taxes and utilities … . Additionally, the alleged contract was not signed by the defendant Michael Israel, and it indicated that several of the properties were co-owned by other individuals who also were not signatories to the document … .

Further, the emails relied upon by the plaintiff to demonstrate that the parties reached a complete agreement were between the parties’ attorneys, and there was neither an allegation in the complaint nor any evidence in the record that the attorneys were authorized in writing to bind the parties to a contract of sale … . Ehrenreich v Israel, 2020 NY Slip Op 06499, Second Dept 11-12-20

 

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