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GELINAS LLC v. Hayes, 2024 NY Slip Op 24273 - Bronx Supreme Court 2024:
"In accordance with CPLR 2219(a), the decision herein is made upon consideration of all of the papers filed by the parties in NYSCEF in connection with the motion of defendant JACQUELINE HAYES [Mot. Seq. 4], brought by Order to Show Cause, seeking an order pursuant to RPAPL § 993: 1) staying the partition sale of a property[1] in the Bronx located at 1453 Teller Avenue ("the Residential Property"); enjoining plaintiff GELINAS, LLC. ("Gelinas") from selling, transferring or encumbering the Residential Property; 2) vacating plaintiff's partial summary judgment of partition and sale order; 3) determining the value of the Residential Property under the Heirs Act; 4) permitting Hayes as a co-tenant to exercise co-tenant's buyout option as set forth under the Heirs Act; and 5) such other and further relief as to the court may deem just, equitable and proper.
The central issue on the motion is whether this action for partition is governed by the traditional legal principles of partition or is subject to the special protections and procedures of the relatively new Uniform Partition Heirs Property Act ("the Heirs Act"). In order to categorize a partition action as a traditional or an heirs proceeding, the court must review the source of the title ownership of each owner. If a proceeding includes an owner that obtained title through inheritance, the property must be partitioned pursuant to the mandates of the Heirs Act.
Of import, the legal procedures, protections, and rights of the parties vary greatly depending upon whether the action is a traditional partition action or is subject to the Heirs Act. Under the traditional legal principles of partition, as set forth in RPAPL §§901-992, there are rigid procedures for determining the value of the property and whether a property is appropriately subject to partition, among other relief. Importantly, a traditional partition action often results in the property being sold at auction, sometimes at a significantly discounted price.
In contrast, the Heirs Act includes additional procedures and protections that are imposed in partition actions that involve individuals who acquired title through inheritance[2]. These procedures are more stringent, grant the parties significant additional rights, and often provide for the sale of the partition property based on fair market value. Accordingly, in an action to partition a property like this one, the procedures and the rights of the parties differ dramatically based on whether or not the property is determined to be an heirs property.
According to an affidavit, defendant Jacqueline Hayes (Hayes) met and became friends with decedent Charlesanna Adams (Adams) approximately sixty years ago in 1963. Over time, the friendship between Adams and Hayes developed into a romantic relationship.[3]
In 1969, the women acquired the Residential Property as joint tenants, with each owing a 50% interest in the property.[4] The couple lived together in the house for over thirty-five (35) years until Adams died in June 2005. After Adams passed, Hayes remained in the home and continues to live there today. Hayes is now over 80 years old.
In addition to owning part of the Residential Property, in 1992, Adams purchased a two-family house located on the same block as the Residential Property at 1437 Teller Avenue ("the Rental Property"). The title to this property was solely in Adams' name.
The court notes that, at the time that the women began to co-habituate, and in fact for their entire life together, the women were not entitled under New York State law, as a same sex couple, to marry. In fact, same sex marriage did not become legal in New York State until June 2011, well after Adams died in 2005.
When Adams died on June 23, 2005, she passed without a Will. Hayes alleges in this action that during their life together, Adams never mentioned any family members, no Adams family members ever visited the couple's home or the hospital, and no family members attended Adams' funeral.
After Adams passed in 2005, Hayes continued to live alone in the Residential Property and she still resides there to date. Hayes also allegedly maintained the Rental Property. Thirteen years after Adams' death, in June 2018, Hayes pro se filed a petition with the Bronx County Surrogate's Court wherein Hayes sought appointment as the administrator of Adams' estate
Hayes alleges that about this time she learned for the first time that Adams had two heirs at law, a niece named Valerie Galloway (the Niece) and a nephew named John V. Galloway, Jr. (the Nephew). It is undisputed that, by operation of law, as the sole distributes of Adams, the Niece and the Nephew each inherited 25% of the Residential Property, although it is not clear when the heirs became aware of that fact.
In an affidavit from the Niece, submitted in support of Gelinas' Motion #3, the Niece claims that she telephoned Adams at least ten times during the two years prior to Adams' death (from 2003-2005). The Niece alleges that she spoke to Hayes on several of those occasions. While averring that she called Adams when Adams was ill in 2005, the Niece claims that she was "shocked" to learn, after Hayes commenced a Surrogate's Court proceeding in 2018, that her aunt had died fourteen years earlier in 2005.
The Niece admits that she was notified of her aunt's death "through a company that monitors Surrogate filings", although she does not specify which company or attorneys contacted her. The Niece immediately challenged Hayes' standing in the proceeding and Hayes subsequently withdrew the petition in November 2019.[5]
Fifteen years after the death of Adams, on May 15, 2020, plaintiff Gelinas bought the Nephew's 25% share of the Residential Property for $15,000. Gelinas is a limited liability company which is in the business of property development.
Almost immediately, about six months later, Gelinas commenced the instant action for the partition and sale of the Residential Property and filed a Notice of Pendency[6] on January 11, 2021. It is undisputed that on the date of the filing of this litigation by Gelinas, Gelinas only owned a 25% interest in the property (which it acquired for $15,000), Hayes owned 50% (and had been living in the house for over 50 years), and the Niece, a named party, was an owner of a 25% interest in the property that she acquired through inheritance. It is also undisputed that, at the time, the Residential Property was worth approximately $800,000.
The Court takes judicial notice that around the same time in 2021, a second litigation (Bronx County Index No. 808237/2021e) was filed involving a similar attempt to transfer or claim title to real property, contrary to Hayes' alleged ownership, based entirely on the Niece's and the Nephew's inherited interests ("the Second Action"). Promptly after the commencement of this action, Seabiscuit Realty, LLC., a real estate developer, bought the Niece's and the Nephew's interest in the Rental Property and the right to collect the rent paid by tenants on May 5, 2021.
One month later, on June 16, 2021, Seabiscuit commenced the Second Action against Hayes claiming fraud, negligent misrepresentation, unjust enrichment, and General Business Law 349. Of note, Seabiscuit is represented in the Second Action by the same attorneys that represent Gelinas in this action.
In opposition to the developers' claims of ownership in the Second Action, Hayes alleges that she solely maintained, paid taxes on, and rented the Rental Property to tenants over the years from the time of Adams' illness until June 2021. Hayes therefore seeks a declaration that she holds full ownership of title to the Rental Property based on principles of adverse possession. The case remains in litigation[7] before another justice, and accordingly Hayes is presently confronting two litigations regarding her interests in valuable real property that involve Adams' relatives and the laws of intestate.
In any event, in terms of this case, the original complaint filed by Gelinas named Hayes and the Niece as defendants. The pleading sets forth causes of action for: a declaration that it owns 25% of the property; a partition of sale of the property; and an accounting for rents, profits and sales proceeds. Gelinas seeks the forced the sale of the home and the pleading does not mention the Heirs Act, or its special procedures and protections. At the time of commencement, however, the Niece was indeed an heir as defined by the Act.
Hayes, represented by former counsel, filed an answer with counterclaims on March 18, 2021, denying the allegations, alleging affirmative defenses (lack of grounds for partition and right to first refusal to buy at fair market value), and asserting counterclaims (accounting of costs, maintenance and rental income, and right to purchase as majority owner). The right to purchase at fair market value, as opposed to auction, is a particular right under the Heirs Act. Gelinas filed a reply to the counterclaims on April 21, 2021, which included general denials of the allegations in the counterclaims.
Six days later, on April 27, 2021, which was only eleven months after Gelinas' purchase of the 25% interest in the Property, and one month after the joinder of issue, Gelinas moved for summary judgment [Mot. Seq. 1] ("the Motion for Summary Judgment of Partition"). In the notice of motion, Gelinas sought an order: granting summary judgment its favor; requiring Hayes to furnish Gelinas with an accounting of all rental income received with respect to the Residential Property; and, pursuant to traditional partition law RPAPL §911, appointing a Referee and directing the Referee to ascertain the rights, shares and interests of the parties in the property sought to be partitioned.
It is undisputed that on the date that the Motion for Summary Judgment for Partition was filed, the Niece, a named defendant, was an owner through inheritance, and therefore was an heir within the meaning of the Heirs Act.
Inexplicably, Hayes' attorney failed to oppose the motion.
On May 14, 2021, Gelinas acquired the Niece's share of the Property for $60,000.
By Decision and Order dated September 22, 2021, the Honorable Kenneth L Thompson, Jr. denied Gelinas' Motion for Summary Judgment of Partition [Mot. Seq. 1] on the grounds that Gelinas failed to submit proof of service of the motion upon Hayes. The decision also directed that Surrogate's Court proceedings be taken to identify the lawful heirs of Adams.
Rather than proceed to Surrogate's Court as directed, on October 7, 2021, Gelinas moved [Mot. Seq. 2] to renew and reargue the denial of the Motion for Summary Judgment for Partition ("the Renew and Reargue Motion"). Gelinas also sought to discontinue the action against the Niece after acquiring her share of the property. On the motion, Gelinas submitted new evidence in the form of an affidavit of service of the motion as well as a new affidavit by Hayes' brother stating that Hayes and Adams were not sisters. Gelinas also submitted a new affidavit from a genealogy expert opining that Hayes is not an heir of Adams.
Strikingly, Hayes' attorney did not submit opposition the motion [Mot. Seq. 2], which was marked submitted on November 21, 2021. This was the second time that the attorney failed to act to protect Hayes' rights and interests in the real property.
Hayes acquired new counsel in December, 2021.
On March 22, 2022, the Court issued a notice of a "Partition of Heirs Property Settlement Conference". This is a conference that is mandated by the Heirs Act. The Court scheduled the Partition of Heirs Property Settlement Conference for 10:00 a.m. on May 2, 2022.
On March 22, 2022, Gelinas' counsel filed a letter addressed to the referee with the Court. In the letter, Gelinas' counsel argued that a Partition of Heirs Property Settlement Conference was not required because neither Gelinas nor Hayes inherited title to the property from a relative. Gelinas maintained that, therefore, the Heirs Act is inapplicable and the proceeding should proceed as a standard partition action. Gelinas did not file a motion as to the issue.
Thirteen days later, and before a response to the letter was filed by Hayes, by Decision and Order dated April 4, 2022, the Honorable Kenneth L. Thompson, Jr., granted Gelinas' Renew and Reargue Motion [Mot. Seq. 2], which sought to renew and reargue Gelinas' denied Motion for Summary Judgment of Partition [Mot. Seq. 1]. Again, no opposition had been filed by Hayes' former attorney to the Renew and Reargue Motion and it was granted on default.
In its decision, the court determined, on default, that Hayes was not Adams' heir, and implicitly that the Heirs Act was inapplicable, and held that the previous court referral to Surrogate's Court was rendered moot. The court therefore granted Gelinas' underlying Motion for Summary Judgment for Partition [Mot. Seq.1] on default but did not dismiss Hayes' counterclaims. The matter was referred to a referee for a standard partition hearing[8].
Consequently, the Partition of Heirs Property Settlement Conference scheduled for May 2, 2022, was cancelled.
On June 28, 2022, Referee Joyce Brown, Esq., issued a traditional partition report finding inter alia that Gelinas and Hayes each owned 50% of the property and directing that the house be sold as a whole unit ("the Referee's Partition Report"). Immediately, on July 15, 2022, Gelinas moved [Mot. Seq. 3] for an order confirming the Referee's Partition Report and issuing a judgment of partition and sale.
Hayes, by new counsel, cross-moved for an order vacating the referee's report. In the motion papers, Hayes' attorney argued that former defense counsel was ineffective as a matter of law and challenged the report.
On January 6, 2023, the Honorable Kenneth L. Thompson issued a Decision and Order granting Gelinas' motion [Mot. Seq. 3] to confirm the Referee's Partition Report and denying Hayes' cross-motion. The Court directed the parties to Settle Order.
On January 12, 2023, Gelinas submitted a proposed Judgment of Partition and Sale to the Court which was unopposed. A few days later, on January 27, 2023, the Court issued the Judgment of Partition and Sale. Eleven days later, on February 9, 2023, plaintiff served Notice of Entry of the Judgment.
By email correspondence with the court attorney referee, starting on April 6, 2023, Gelinas' counsel communicated directly with the court referee to schedule some form of court conference. In the thread of emails, plaintiff's counsel twice asks whether the referee agreed that the Residential Property was not an heirs property. While Hayes' attorney was included on the email chain, Hayes' attorney did not respond to or affirm the contents of the emails by email or in the record.
On April 10, 2023, it appears that a court conference was held. In the relevant part of the email chain, on April 12, 2023, the referee states that "I recommended that the property is not heirs property and the auction date be set". The parties do not claim that the required procedures and considerations of the Heirs Act were a part of this court conference.
After Justice Thompson retired, this Court was assigned the action in late April 2023.
Two months later, on June 16, 2023, Gelinas filed a Notice of Sale. The Residential Property was noticed to be sold at auction on July 10, 2023. Based on the appraisal submitted by defendant dated June 24, 2023, the Residential Property had an appraised value of $805,000.
Before the sale date, on July 6, 2023, Hayes brought the instant motion [Motion Seq. 4] by Order to Show Cause. In this motion, Hayes seeks an Order staying the sale and an order, pursuant to RPAPL § 993 (the Heirs Act): vacating the judgment of partition and sale on the grounds that the Court failed to conduct a Partition of Heirs Property Settlement Conference and to provide other statutory protections, as is required by law; determining the value of the property; and allowing Hayes to exercise her buyout options under the provisions of the Heirs Act. The motion also sought "such other and further relief as to the court may deem just, equitable and proper".
On July 6, 2023, this Court signed Hayes' Order to Show Cause and issued a temporary restraining order staying the sale of the Residential Property pending the outcome of the instant motion. Gelinas opposes the motion. The action was conferenced by the court several time prior to the final submission of the motion.
At the heart of this case is the appropriate and fair disposition of the home of a same sex, unmarried couple that lived together in the house for almost 50 years. One challenging legal issue here is whether, based on the heirs relationship of an originally named party, the action falls within the special protections of the Heirs Act when, post-commencement, the originally named heir's interest was purchased by plaintiff.
As an initial matter, the Court finds that, although not explicitly labeled as such, the Notice of Motion and underlying motion papers [Mot. Seq. 4] give notice that Hayes seeks to vacate her former attorney's default on the Motion to Renew and Reargue [Mot. Seq. 2], and upon vacatur, seeks an order denying the motion.
Moreover, as the Notice of Motion and underlying papers include general prayers for relief, the motion is appropriately treated as such a motion to vacate. A court may grant relief not specifically requested in the notice of motion, pursuant to a general prayer for relief contained in the notice of motion or the papers, if the relief is warranted by the facts plainly appearing in the papers on both sides, and if the relief granted is not too dramatically unlike the relief sought, the proof offered supports it, and there is no prejudice to any party (see generally, Robert v. Azoulay Realty Corp., 209 AD3d 781 [2d Dept 2022]; see Caesar v. Metropolitan Transportation Authority, 229 AD3d 601 [2d Dept 2024]).
As Hayes' moving papers contain a general prayer for relief, this Court will, in its discretion, treat the motion as a motion to vacate a default. All of the relevant issues generated by this motion, the Motion to Renew and Reargue, and the underlying Motion for Summary Judgment of Partition are extensively briefed by the parties and were addressed at oral argument. Under the circumstances, based on the extensive litigation of the facts and legal arguments by the parties, the relief to be granted is not dramatically unlike the articulated relief sought. Importantly, as Hayes' former attorney defaulted on the previous motions [Mot. Seq. 1 and Mot. Seq. 2], the strong public policy in favor of resolution of a motion on the merits was not served.
Generally, to obtain vacatur of a default judgment under CPLR 5015(a)(1), a party must demonstrate a reasonable excuse for the default and the existence of a potentially meritorious defense or claim (Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., 67 NY2d 138 [1986]; see Kolodziejski v. Jen-Mar Electric Service Corp., 2024 NY Slip Op. 04815 [1st Dept 2024]; Li Fen Li v. Cannon, Co., 155 AD3d 858 [2d Dept 2017]).
Of import, the grounds set forth in CPLR 5015 are not exclusive and courts retain inherent discretionary power to vacate their own judgments for sufficient reason and in the interests of substantial justice (Woodson v. Mendon Leasing Corp., 100 NY2d 62, 68 [2003]; NYCTL 1998-2 Trust v. Bronx County Public Administrator, 213 AD3d 614 [1st Dept 2023]; Joyner v. City Carter Leasing Inc., 211 AD3d 406 [1st Dept 2022]; Inwald Enters., LLC. v. Aloha Energy, 153 AD3d 1008 [3d Dept 2017]; Gurin v. Pogge, 112 AD3d 1028 [3d Dept 2013]; see generally MTGLQ Investors, L.P. v. Vazquez, 2024 NY Slip Op. 05059 [1st Dept 2024]). This discretion is applicable in situations that involve "unique or unusual" circumstances that warrant such action (Matter of Cassini, 182 AD3d 13 [2d Dept 2020]; see NYCTL 1998-2 Trust v. Bronx County Public Administrator, supra; Joyner v. City Carter Leasing Inc., supra; Wade v. Village of Whitehall, 46 AD3d 1302 [3d Dept 2007]; Soldovieri v. Flack, 106 AD3d 717 [2d Dept 2013]; Soggs v. Crocco, 247 AD2d 887 [4th Dept 1998]; see also Go Sweat, LLC v. GRA Legal Title Trust 2013-1, U.S. Bank, National Association, 225 AD3d 486 [1st Dept 2024]; Cox v. Marshall, 161 AD3d 1140 [2d Dept 2018]).
The determination of whether to vacate a default judgment rests within the sound discretion of the Supreme Court, although a disposition on the merits is strongly favored (Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., supra; Woodson v. Mendon Leasing Corp., supra; SOS Capital v. Recycling Paper Partners of PA, LLC, 220 AD3d 25 [1st Dept 2023]; Gerdes v. Canales, 74 AD3d 1017 [2d Dept 2010]; Inwald Enterprises, LLC v. Aloha Energy, supra). Accordingly, a motion to vacate a prior judgment is addressed to the court's sound discretion subject to reversal only where there has been a clear abuse of discretion (Inwald Enterprises, LLC v. Aloha Energy, supra) and actions should be resolved on the merits when circumstances justify the same (see generally Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., supra; Gerdes v. Canales, supra).
Initially, the court finds that under the facts presented, Hayes demonstrates a reasonable excuse for the default on the Motion to Renew and Reargue. Whether there is a reasonable excuse for a default is a discretionary, sui generis determination to be made by the court based on all relevant factors, including the extent of the delay, whether there has been prejudice to the opposing party, whether there has been willfulness, and the strong public policy in favor of resolving cases on the merits (Singh v. Sukhu, 180 AD3d 837 [2d Dept 2020]; Inwald Enterprises LLC v. Aloha Energy, supra).
Here, for reasons that cannot be explained, Hayes' former counsel failed to oppose two critical motions which resulted in depriving Hayes of significant real property rights on default. While there indeed may be instances where counsel's inaction or dilatory conduct may be imputed to the client (see e.g. Carillon Nursing & Rehabilitation Ctr., LLP v. Fox, 118 AD3d 933 [2d Dept 2014]; Gutman v. A to Z Holding Corp., 91 AD3d 718 [2d Dept 2012]), a review of the moving and opposition papers, together with the supporting documentation, reveals that Hayes never intended to abandon the defense to the case or her commitment to asserting her rights in this action (Singh v. Sukhu, supra; Inwald Enterprises, LLC v. Aloha Energy, supra; see e.g. Puchner v. Nastke, 91 AD3d 1262 [3d Dept 2012]). Rather, Hayes reasonably believed that her attorney was actively pursuing and properly defending her valuable and important real property interests in the context thereof (Singh v. Sukhu, supra; Inwald Enterprises, LLC v. Aloha Energy, supra; Gage v. Village of Catskill, 144 AD3d 1365 [3d Dept 2016]; see also Rekhtman v. Clarendon Holding Co., Inc., 165 AD3d 856 [2d Dept 2018]; Abel v. Estate of Collins, 73 AD3d 1423 [3d Dept 2010]).
In addition, while Gelinas has litigated this action at an aggressive pace, there is no showing that undue delay or prejudice will result from the vacatur of the default (see Zoom Tan, Inc. v. Monforte, 227 AD3d 1237 [3d Dept 2024]; DaimlerChrysler Ins. v. Seck, 82 AD3d 581 [1st Dept 2011]). In fact, there is no allegation of any prejudice to plaintiff and the strong public policy in favor of resolving cases on the merits is served by vacating the default (Singh v. Sukhu, supra; Inwald Enterprises LLC v. Aloha Energy, supra; Abel v. Estate of Collins, supra; Gross v. Johnson, 102 AD3d 921 [2d Dept 2013]).
As for the second element of a meritorious defense, it is noted that the quantum of proof required in support of a motion to vacate a default judgment is not as great as that which is required to oppose a motion for summary judgment (see Williams v. City of New York, 71 AD3d 605 [1st Dept 2010]; Zoom Tan, Inc. v. Monforte, supra). A movant need only show a potential meritorious defense (DaimlerChrysler Ins. Co. v. Seck, supra).
Here, the multiple affirmative defenses alleged in the proposed answer and the legal arguments in the papers with regards to the potential applicability of the Heirs Act generate numerous relevant issues that, if resolved in defendant's favor, would sustain the alleged defenses. Of import, the argument that the Residential Property is, as a matter of law, subject to the Heirs Act's procedures and protections has been consistently raised and argued and, if correct, serves as a defense to the traditional partitioning of the Residential Property granted on default. Hence, Hayes' motion to vacate the default on the Motion to Renew and Reargue is appropriately granted.
In any event, the court finds that, the under the constellation of circumstances presented in this case, this action involves "unique or usual" facts that warrant the vacatur of the default judgment in the interests of substantial justice (Matter of Cassini, supra; Woodson v. Mendon Leasing Corp., supra; NYCTL 1998-2 Trust v. Bronx County Public Administrator, supra; Joyner v. City Carter Leasing Inc., supra; Wade v. Village of Whitehall, supra; Soldovieri v. Flack, supra; Soggs v. Crocco, supra; Inwald Enters., LLC. v. Aloha Energy, supra; Gurin v. Pogge, supra). Specifically, Hayes, who is 80 years old, was served with two lawsuits filed by significant real estate development companies within one year regarding property that was maintained by her with her life partner for decades and which she managed on her own for years after her partner's death. It is undisputed that Hayes has lived in the couple's residential home for over 50 years and the property is her home.
Faced with the lawsuit by property developers to force the sale of her home, Hayes hired an attorney to protect her interests who undisputedly completely abandoned her defense. Furthermore, the intense pace of the litigation fostered by plaintiff limited the time in which Hayes could even learn of and understand her counsel's repeated defaults. At the same time, Hayes' interests in the Rental Property were being aggressively challenged in another litigation that is also in an expedited litigation posture. Finally, as the central issue here is the value of real property, an irreplaceable asset, justice requires a determination of rights based on the law, not an attorney's malpractice or a default. Accordingly, the court finds that the interests of substantial justice weigh heavily in favor of vacating the default on the motion (Matter of Cassini, supra).
At its essence, the motion [Mot. Seq. 2] that was granted on default was founded in renewal. On the renewal motion, Gelinas submitted new evidence as to Hayes' ancestry and argued that it established, as a matter of law, entitlement to summary judgment and the partition of the Residential Property under traditional, and not Heirs Act, partition procedures.
On this motion, Hayes once again argues that the Heirs Act governs and the existing order of partition violates that law. In opposition, Gelinas contends that the Heirs Act is inapplicable because, as of now, none of the parties are "heirs" within the meaning of that statute.
As stated, the central issue to be determined here is whether RPAPL § 993 requires that the Residential Property be treated as an heirs property which is subject to the special rules and procedures of the Heirs Act or whether the traditional principles of partition govern the parties' rights. A joint tenant or tenant-in-common to real property may maintain an action to partition of the property. The interest may be "an estate of inheritance, or for life, or for years." (Donlon v. Diamico, 33 AD3d 841 [2d Dept 2006]). Importantly, in all circumstances, the right to partition is not absolute and the remedy is always subject to the equities between the parties (Clarke v. Clarke, 227 AD3d 659 [2d Dept 2024]).
RPAPL §§991-992 outline the procedures for a traditional partition. As relevant here, a traditional partition permits the sale of the property at auction, includes a standard partition settlement conference, does not include a priority right to purchase others' interests, and does not require a fair market sale.
RPAPL § 993, known as "the Heirs Act", was passed in 2019 to amend these traditional partition proceedings. This new law was intended to protect individuals who hold real estate held as tenants-in-common from predatory real estate speculators (Senate Mem in Support, New York Bill Jacket, 2019 S.B. 4865 Ch 596). The legislature memorandum provides:
"In recent years, predatory real estate speculators have taken advantage of New York's laws governing partition actions by purchasing a stake in a residential property — usually after a number of family members have inherited the property — and then using that ownership stake to file a partition action to dispossess the family of the property through a forced sale, often for pennies on the dollar relative to the actual value of the property. Lower- and middle-class families are particularly susceptible to these types of schemes, as they often do not engage in the kind of sophisticated estate planning that could prevent predatory partitioning actions." (id.).
Hence, the Heirs Act is designed to protect family-held lands from speculators who acquire properties by leveraging minority interests to force a partition sale. The intent is to allow relatives holding fractional interests to acquire full ownership or receive full value of their interest in legacy real property through additional service requirements, court conferencing, and appraisal requirements. The Heirs Act permits partition by sale only after all of the heirs have an opportunity to purchase the interests of the selling co-tenants. Only then may the court direct commercially reasonable sale, which need not be by auction.
So, in furtherance of these public policy concerns, the Heirs Act, among other things, specifically imposes procedural safeguards to protect tenants-in-common of heirs property. The statute requires that: 1) the court shall determine, after notice and the right to be heard, whether the property is heirs property and if the property is heirs property it shall be partitioned in accordance with the Act; 2) within sixty days of the filing of the RJI, a mandatory partition settlement conference be held; 3) the co-owner requesting partition must give notice to all of the other co-owners; 4) the court must order an independent appraisal to determine the property's fair market value; 5) any co-owner may exercise a right of first refusal to buy out the interest of the co-owner seeking partition for a proportional share of the court-determined fair market value; 6) if no co-owner elects to buy out the co-owner seeking partition, the court must first consider ordering a partition-in-kind if the property can be physically divided; and 7) if a partition-in-kind would be inappropriate, and the court orders a partition-by-sale, the property must be offered for sale on the open market at a price no lower than the court-determined value for a reasonable period of time and in a commercially reasonable manner (RPAPL § 993). The law contains additional service (posting) requirements, and additional court conferencing (the Partition of Heirs Property Settlement Conference), akin to the settlement conferences in mortgage foreclosure actions (see CPLR 3408).
Importantly by its express terms, the Heirs Act does not apply in all cases where individuals own real estate as tenants-in-common. In relevant part, the Heirs Act only protects "Heirs property" as expressly defined by its provisions:
(e) "Heirs property" means real property held in tenancy in common which satisfies all of the following requirements as of the filing of a partition action:
(i) there is no agreement in a record binding all of the co-tenants which governs the partition of the property;
(ii) any of the co-tenants acquired title from a relative, whether living or deceased;
(iii) the property is used for residential or agricultural purposes; and
(iv) any of the following applies:
(A) twenty percent or more of the interests are held by co-tenants who are relatives;
(B) twenty percent or more of the interests are held by an individual who acquired title from a relative, whether living or deceased;
(C) twenty percent or more of the co-tenants are relatives of each other; or
(D) any co-tenant who acquired title from a relative resides in the property.
(RPAPL § 993[2][e] [emphasis added]). In other words, the law applies to a limited class of partition actions where, on the date of commencement, a tenant-in-common has inherited his or her share of a property from a co-tenant that passed away.[9]
Applying the express language of the Heirs Act to the facts presented here, it is clear that the Residential Property qualifies as heirs property under the Act because the Niece was an heir at the time of the commencement of the partition action. When presented with a question of statutory interpretation, a court's primary consideration is to ascertain and give effect to the intention of the Legislature. The text of the statute is the clearest indicator of legislative intent and the court should construe unambiguous language to give effect to its plain meaning (Nadkos, Inc. v. Preferred Contrs. Ins. Co. Risk Retention Group LLC, 34 NY3d 1, 7 [2019]; Smith as Trustee of Jay and Patricia Smith Irrevocable Trust v. Smith as Trustee of Theodore, PS, 217 AD3d 1484 [4th Dept 2023]). It is also a well-established rule that statutory language should be harmonized, giving effect to each component and avoiding a construction that treats a word or phrase as superfluous (Nadkos, Inc. v. Preferred Contrs. Ins. Co. Risk Retention Group, LLC, supra).
Here, the Heirs Act expressly defines the meaning of the term "Heirs property" to include "real property held in tenancy in common which satisfies all of the following requirements as of the filing of a partition action", and where "any of the co-tenants acquired title from a relative, whether living or deceased" and "twenty percent or more of the interests are held by an individual who acquired title from a relative, whether living or deceased".
Thus, contrary to plaintiff's contention, a partition action falls within the Heirs Act if, on the date of commencement of the action, any of the co-tenants acquired title from a relative, whether living or deceased (RPAPL § 933[2][e] [iii]; Smith as Trustee of Jay and Patricia Smith Irrevocable Trust v. Smith as Trustee of Theodore, PS, 217 AD3d 1484 [4th Dept 2023]). By specific statutory language, the categorization of the relevant property to be partitioned as a "Heirs Property" is determined on the date of the filing of the partition petition.
Here, Gelinas acquired the Nephew's 25% stake in the property for $15,000 and then filed the instant action against Hayes and the Niece seeking to force the sale of the home by partition. Based on the express language of the statute, therefore, this action falls within the purview of the Heirs Act because, at the time that the partition action was commenced, the named defendant Niece was a heir with a 25% of the ownership interest in the property. Accordingly, the partition action was required to proceed under the procedures set forth in the Heirs Act and the failure to follow said procedures was a violation of the statute that must be remedied.
To the extent that Gelinas may argue that its later, post-commencement, purchase of the Niece's interest removed the action from the Heirs Act's sphere, such a conclusion is in direct conflict with the express language of the law, and the express language will govern. There is no mechanism within the Heirs Act for the release of an action from its procedures whenever, sometime post-commencement, a party sells his or her interest.
In addition, any argument that the April 2023 court conference somehow satisfied the Heirs Act is without merit. Among other deficiencies under the Act, the conference was held after the entry of judgment and well beyond 60 days from the filing of the RJI.
Importantly, this interpretation of the express language of the Heirs Act and the legal consequences thereof are consistent with the recent amendment to the statute. Although not applicable to this proceeding, in July 2024, the Heirs Act was amended to add additional protections for tenants-in-common of heirs property. Effective July 19, 2024, subd. 12 and 13 were added prohibiting the purchaser from a protected heir from commencing a partition action (subd. 12) and establishing a hierarchical right of first refusal against any purchase offer (subd. 13), giving heirs in possession as a residence first right. Practice Commentaries, NY RP Act & Pro 993 (July 19, 2024). The provisions make clear that, under the Heirs Act, a purchaser such as Gelinas lacks standing to even commence a partition proceeding because the property was owned by an heir, and Gelinas acquired its shares "by means other than inheritance".[10]
Of note, this interpretation of the Heirs Act also serves the parties' interest in stability in litigation. To conclude the contrary would create uncertainty as to the procedures and the legal protections provided to the parties in an Heirs Act partition as the nature and governing law of the proceeding could be altered at any time during the ongoing litigation simply by a party's sale of its rights. Certainly, the application of the Heirs Act may affect the value of the property, the parties' decision to sell their interest, or even the decision to seek partition at all.
Accordingly, based on the express language of the Heirs Act, the court finds, after notice and the right to be heard was afforded to each party, that the Residential Property is heirs property subject to the procedures and protections of the Heirs Act. The property shall be therefore partitioned in accordance with guidelines and procedures set forth in the Act beginning with the prompt scheduling of a Partition of Heirs Property Settlement Conference.
Significantly, much of the narrative in this case resembles the type of unjust circumstances that the Heirs Act is designed to remedy. Hayes, lifetime partner to Adams, faces the forced sale of their family home due the purchase, at a nominal price, of distant relatives' interests in the home by a property developer. Gelinas, a real estate company, now seeks to use these relatively inexpensive purchased interests to force the property through a traditional partition proceeding to auction sale, a situation that is rife with the potential abuses specifically sought to be prevented by the Heirs Act. Hence, while Hayes is not strictly an heir under law, the application of the Heirs Act to the circumstances will not result in injustice, but will, in fact, serve the intention of the legislation.
In any event, the right to partition is not absolute and the partition remedy is always subject to the equities between the parties, and the court finds that the result reached herein serves equitable interests (Clarke v. Clarke, supra). As discussed herein, the facts of the case generate significant questions of equity and fairness. Hayes and Adams acquired a house and resided in it together for over 50 years as a couple until Adams passed away. Hayes, who is in her eighties, continued to live alone in the home for over a decade more. It is undisputed that Adams' relatives never visited the home, visited Adams in the hospital or attended the funeral, and inherited their aunt's share of the property without ever having seen it. The low price paid by Gelinas ($75,000) for the right to partition a property that is worth over a $800,000, combined with the expedited pace of litigation of the case by Gelinas, raise concerns of inequity and unfairness. This constellation of circumstances generates concerns of whether a fair price would be obtained and equity would be served by an immediate traditional auction. Hence, based on the unique facts presented, even if the proceeding were to proceed as a traditional partition, a balancing of equities would weigh in Hayes' favor and would warrant additional safeguards to ensure that the parties receive a proper share of the property and its benefits (see Conroy v. Conroy, 215 AD3d 630 [2d Dept 2023]; Lauriello v. Gallotta, 70 AD3d 1009 [2d Dept 2010]; Colley v. Romas, 50 AD3d 1338 [3d Dept 2008]; Haines v. Haines, 254 AD2d 516 [3d Dept 1998]; Stressler v. Stressler, 193 AD2d 728 [2d Dept 1993]; Ripp v. Ripp, 38 AD2d 65 [2d Dept 1971], aff'd, 32 NY2d 755 [1975]; see generally, Coston v. Greene, 188 AD3d 1147 [2d Dept 2020]; Tsoukas v. Tsoukas, 107 AD3d 879 [2d Dept 2013]; Arata v. Behling, 57 AD3d 925 [2d Dept 2008]).
The Court has considered the additional contentions of the parties not specifically addressed herein. To the extent that any contention raised by the parties is not addressed by the Court, it is hereby rejected.
Accordingly, it is hereby
ORDERED that the part of the motion of defendant JACQUELINE HAYES [Mot. Seq. 4], brought by Order to Show Cause, that, in essence, seeks an order vacating the court's Decision and Order dated April 4, 2022 ("the Prior Decision") which granted, on default, plaintiff GELINIS LLC's Motion to Renew and Reargue [Mot. Seq. 2] is granted; and it is further
ORDERED that the Prior Decision is vacated; and it is further
ORDERED that, upon vacatur, the Motion to Renew and Reargue [Mot. Seq. 2] is denied to the extent that the court finds that this partition action is subject to the Heirs Act and its mandated legal procedures; and it is further
ORDERED that, in light of the court's finding that the action is subject to the Heirs Act, this partition action shall now proceed in accordance with the procedures outlined in the Heirs Act; and it is further
ORDERED that the Judgment of Partition and Sale dated January 27, 2023, is vacated and the Clerk shall mark the Judgment of Partition and Sale vacated in all court records; and it is further
ORDERED that this partition action shall promptly proceed to a Partition of Heirs Property Settlement Conference; and it is further
ORDERED that plaintiff shall serve a copy of this order with notice of entry on the Clerk managing Partition of Heirs Property Settlement Conferences by November 25, 2024, and upload an affidavit of service demonstrating said service by November 30, 2024, and said conference shall be promptly scheduled; and it is further
ORDERED that the court's Stay on the sale of the Residential Property pending the outcome of the instant motion shall be lifted upon the completion of the Partition of Heirs Property Settlement Conference; and it is further
ORDERED that defendant shall serve a copy of this order with notice of entry on the Judgment Clerk by November 25, 2024, and upload an affidavit of service by November 30, 2024; and it is further
ORDERED that the remaining part of the motion [Mot. Seq. 4] that seeks an order determining the value of the Residential Property under the Heirs Act and permitting a co-tenant to exercise co-tenant's buyout option as set forth under the Heirs Act and other relief is granted only to the extent that the action shall procced in accordance with the procedures of the Heirs Act; and it is further
ORDERED that the Clerk shall mark motion sequence 4 as decided in all court records.
The foregoing constitutes the Decision, Order Judgment of the court.
[1] Plaintiff's moving papers (Motion #1) describe the residence as a two-family house; however, the referee's report describes the property as a single-family residence.
[2] The Heirs Act supplements the general partition law (RPAPL §§901-992) and if a partition action is governed by the Act, the Act will replace the provision of the general partition statute that are inconsistent with the Act. RPAPL§§ 993(3)(a);(3)(b) and 993(3)(c).
[3] Hayes describes the relationship between the deceased and Hayes in an affidavit submitted in connection with Motion #2.
[4] Hayes describes the circumstances surrounding the purchase of the Residential Property in an affidavit submitted in support of the instant motion (Motion #4).
[5] In a decision dated September 16, 2021, Justice Thompson found that: "Hayes withdrew her petition in Surrogate's Court on the return date of a revocation proceeding. Plaintiff contends that Hayes' petition was fraudulent which led to the withdrawal. However, the order of Justice Nelida Malave-Gonzalez dated November 26, 2019, merely memorializes the withdrawal of the petition on the return date of a revocation proceeding. This Court cannot speculate as to the reason for the withdrawal of the petition and dismissal of Hayes' claim to being a distribute".
[6] The Notice of Pendency states that it is filed by "plaintiff Lightcap1, LLC.". There is no such party in this action.
[7] In the Second Action, third-party defendant YSLW Teller LLC, allegedly purchased the Rental Property from Seacrest taking out a 1.5 million-dollar mortgage and a 2.4 million dollar Building Loan Mortgage on the Rental Property, evidence that the rental property has significant value. As an alleged subsequent purchaser, YSLW is impleaded.
[8] On May 18, 2022, the court issued an amended Order to correct a typographical error in the April 4, 2022, decision.
[9] Effective July 19, 2024, subd. 12 and 13 were added to the Heirs Act prohibiting the purchaser from a protected heir from commencing a partition action (subd. 12) and establishing a hierarchical right of first refusal against any purchase offer (subd. 13), giving heirs in possession as a residence first right. Practice Commentaries, NY RP Act & Pro 993 (July 19, 2024).
[10] "12. Prohibition on initiation of a partition action. No partition action related to an heirs property may be initiated by a party that purchased or otherwise acquired their share or shares by means other than inheritance, and who did not inherit their share or shares directly from a person who was a co-tenant prior to the property becoming heirs property or from a co-tenant who was an heir thereto."
"The New York State Real Property Law has been amended by adding Section 424. This new section approves the use of a Transfer on Death Deed (TOD) and this new statute took effect on 7/19/24.
The main benefit of the TOD deed is to transfer the real property of the owner without having to probate the owner’s Last Will and Testament or administer the estate of the owner who dies intestate. The owner maintains full ownership and control of the property during his lifetime and can change the grantees on the TOD at any time. The transfer of title by a TOD deed only becomes effective upon the death of the owner.
One of the requirements is that the TOD deed be witnessed by 2 people who were present when the owner signed the TOD deed.
If the owner wants to revoke the TOD deed, the owner can simply record a new deed to replace the earlier deed. Please note that the TOD deed cannot be revoked by the owner’s Last Will & Testament and a new deed is therefore required to revoke the earlier deed. Since the owner can revoke the transfer at any time, the owner has not completed a gift to the grantee and there is no gift tax.
While all other deeds require delivery by the grantor with the intention to convey title and acceptance by the grantee, the TOD deed does not require acceptance by the grantee. The grantee has the right to renounce all or part of their interest in the TOD deed in the same manner as if the interest was included in the owner’s Last Will & Testament.
If the grantee in a TOD deed dies before the owner, then the transfer lapses and title remains in the owner’s estate. The grantee’s interest is contingent on surviving the transferring owner. The owner may want to designate an alternate grantee to avoid probate or administration if the original grantee predeceases the owner.
The owner retains full control over the property and can sell or mortgage the property during his lifetime without the consent of the grantee since the transfer only takes effect upon the death of the owner. The grantee’s creditors cannot enforce their judgment or lien against the property since the grantee has no interest in the property until the owner dies. This differs from a life estate deed where the remainderman has a vested interest that will allow creditors to collect their judgment or lien against their vested interest in the property.
Upon the owner’s death, the grantee takes title subject to all liens and encumbrances.
The TOD deed may be signed and witnessed prior to the 7/19/24 effective date of the statute. However, if the owner died prior to 7/19/24, then no transfer occurred and title remains in the owner’s estate. The TOD deed must be recorded prior to the death of the owner to be effective.
If the owner designates multiple grantees, then all of the grantees will become the new owners of the property and they may disagree on whether to sell or retain the property which may result in a partition action that is more expensive than probate. There is no fiduciary to sell the property with a TOD deed as there is with probate, estate administration or trusts.
If multiple owners sign a TOD deed, then the last one surviving can revoke the deed or change the grantees against the wishes of the other deceased owners. If there are multiple owners as tenants in common, all owners should sign the TOD deed and the transfer will take effect upon the death of the last tenant in common. If the TOD deed is only signed by one owner and that owner predeceased the other tenants in common, then no transfer takes place upon the death of the grantor since there are other surviving owners. The transfer will only be effective if the grantor is the last of the tenants in common to die."
Plaintiff supports his motion with numerous documents. One is a certified report from the federal government of his passport record information, which indicates that he was not in the United States when the deed was allegedly executed. The notary indicated on the deed from plaintiff to ZBT Holdings Inc. was deposed [Doc 398] and testified that the signature on the deed is not his. He testified that he does not know the plaintiff, but he did know defendant Farhad Homayoonfar, who was a mortgage broker, and that he had notarized many documents involving mortgages provided by First United Mortgage Banking, the company Mr. Homayoonfar worked for. The documents connected with the 2005 deed indicate that the transfer was made without payment of any consideration. Plaintiff has provided at least one affidavit of the facts as he understands them, at Document 95.
Defendant Bank of America responded to this motion [Doc 451] on May 12, 2022, and states in counsel's affirmation that "To the extent that Plaintiff seeks to have the mortgage on the premises discharged, BANA [Bank of America N.A.] does not contest that relief. Said mortgage was dated March 14, 2006, and recorded March 21, 2006, in CRFN XXXXXXXXXXXXX, in the Office of City Register for the County of Kings and was as assigned by Mortgage Electronic Registration Systems on February 12, 2010." Bank of America concludes that they do not oppose the plaintiff's motion, but ask that the court not construe the motion to "seek a money judgment from Bank of America."
The court finds that plaintiff has brought this action against all necessary parties, that plaintiff makes a prima facie case for the relief requested, and thus plaintiff is entitled to a declaratory judgment that the deed dated 8/5/2005 is void and should be cancelled of record. This deed conveyed the property at issue to ZBT Holdings, Inc., which, according to the NYS Department of State Division of Corporations' website, was formed in February of 2005, and decedent is listed as the CEO. Then, according to the copies of the deeds provided by plaintiff, Farhad Homayoonfar as principal of ZBT Holdings Inc. executed a deed to himself alone in 2006, and subsequently, his wife, as executor, executed a deed from his estate to herself alone in 2017, and then, a few weeks later, executed a deed to defendant 131 Vernon LLC for no consideration. All of these people and entities have been named and served and have answered the complaint. The mailing address for 131 Vernon LLC on the NYS Department of State Division of Corporations' website is Ms. Homayoonfar's home address in Great Neck, NY. This is the address she listed on the 2017 deeds she executed. This is also the address she indicated on her October 2022 multiple dwelling registration for the property with NYC HPD, according to their public website, which indicates that she is the managing agent for the premises, a four-family multiple dwelling.
The court notes that a forged deed is void ab initio, and, as such, any mortgage or encumbrance on real property based on a forged deed is also void. (see Faison v Lewis, 25 NY3d 220 [2015]).
The effect of the orders precluding the defendants from "offering evidence, testifying at trial or submitting an affidavit in response to any dispositive motion" requires the court to disregard the affidavit [Doc 472] provided by Ms. Homayoonfar in opposition to the motion and in support of the defendants' cross-motion (Motion Sequence #16) to amend their answer.
In conclusion, plaintiff has established, with uncontroverted evidence in admissible form, that the deed dated August 5, 2005 and recorded on January 27, 2006, was forged. Therefore, he is entitled to summary judgment and a declaratory judgment on his first cause of action, that that deed, as well as the subsequent deeds, are void and should be cancelled of record. The defendants have failed to overcome the motion and raise any triable issues of fact with regard to the plaintiff's first cause of action to quiet title.
In addition, plaintiff has established that he is entitled to summary judgment and a declaratory judgment on his third cause of action, that that mortgage executed by defendant Farhad Homayoonfar when he did not have valid title to the premises should be declared to be void and should be cancelled of record. Bank of America, the holder of the mortgage, does not oppose this branch of the motion. The defendants' counterclaim for equitable subrogation is hereby dismissed. They do not have standing to assert such a claim.
With regard to the plaintiff's second cause of action, for an accounting, the court finds that the money judgment for the sum requested by plaintiff cannot be granted. An inquest must be held to determine the amount due to plaintiff. There are the issues of the rents and profits, expenses, mortgage payments, and the like, which must be ascertained. However, there are other facts to be determined. In Document 95, plaintiff's affidavit alleges that he did not apply to the NYC Department of Buildings in 2007 for a Building Permit. Thus, he presumably did not oversee the renovation work or pay for it. To be clear, defendants have asserted a counterclaim for unjust enrichment. The preclusion order does not apply to their counterclaim. They are entitled to testify and submit evidence in support of the counterclaim. While the court could sever the counterclaim, so plaintiff could have an inquest, and defendants could have a trial, this would not serve the interests of judicial economy. Therefore, the court finds that both of these proceedings should take place before a justice, pursuant to the note of issue requesting a bench trial filed by plaintiff in 2022. The court will need to ascertain the net amount plaintiff is entitled to, after deducting any sums defendants establish they are entitled to be reimbursed for."
Licht v. Rosenberg, Date filed: 2022-03-11, Court: Supreme Court, New York, Judge: Justice Louis Nock, Case Number: 000624-20/HE:
"DECISION + ORDER ON MOTION Upon the foregoing documents, it is ordered that plaintiffs’ motion for summary judgment is determined as follows. BACKGROUND
Defendants DANIEL B. ROSENBERG and IRINA ROSENBERG a/k/a IRINA GABICHVADE (the “Sellers”), are the owners of 154 shares of 40 E. 9th St. Owners Corp. and the proprietary lease associated with Unit 5A (the “Unit”) of the property located at 40 East 9th Street, New York, New York 10003 (the “Premises”). On or about February 28, 2020, the Plaintiffs, LAURIE LICHT, MARK SMITH, and ANDREW SMITH (the “Purchasers”), and Sellers entered into a contract for the purchase and sale of the Unit of the Cooperative located at 40 East 96th Street, New York, New York 10003 (the “Contract” [NYSCEF Doc. No. 2]). Pursuant to the Contract, Purchasers delivered $175,000.00 as a contract deposit (the “Contract Deposit”), which was paid to Seller’s Attorney, as Escrowee, by wire transfer on February 28, 2020. Purchasers tendered $175,000.00 for the Contract Deposit, and Escrowee confirmed receipt of the Contract Deposit into Seller Attorney’s escrow account at Citibank, N.A., (the “Escrow Account”) (see, NYSCEF Doc. No. 3)
Paragraph 6.1 of the Contract of Sale provides that the “sale is subject to the unconditional consent of the Corporation.” Purchasers prepared and submitted a comprehensive board application (the “Board Application”) (NYSCEF Doc. No. 4) and, as requested, attended an interview before the Corporation’s Board of Directors, which was held on May 11, 2020, (the “Board Interview”). The Contract of Sale and Board Application are entirely consistent, with both naming all three Plaintiffs herein as the sole purchasers and applicants.
On May 20, 2020, the Corporation issued a decision on the Purchasers’ Board Application which was communicated to Purchasers’ real estate agent by e-mail from an employee at the managing agent’s office, Hoffman Management, named Gordon Noah (NYSCEF Doc. No. 5). The e-mail stated that “the Board will approve the application subject to the son [Andrew Smith] as the sole holder of shares with the parents [Laurie Licht and Mark Smith] as guarantors. Please let me know if they wish to move forward.” Upon receipt of the such conditional approval issued by the Corporation’s Board of Directors, the Purchasers elected to terminate the Contract in accordance with paragraph 6.3 of the Contract of Sale and requested the return of the Contract Deposit (see, NYSCEF Doc. No. 6). Per paragraph 6.3 of the Contract of Sale: “Either Party, after learning of the Corporation’s decision, shall promptly advise the other Party thereof…. If such consent is refused at any time, either Party may cancel this Contract by Notice. In the event of cancellation pursuant to this
6.3, the Escrowee shall refund the Contract Deposit to Purchaser.” Purchasers have demanded the return of their Contract Deposit, which Sellers and Escrowee have refused to do.
This action was commenced by summons and complaint filed June 25, 2020, asserting causes of action against Sellers for breach of the Contract of Sale and for related declaratory relief, and causes of action against Escrowee — defendant Law Offices of Nathaniel Muller, P.C. — for related declaratory relief. All causes of action are imbued with the purpose of obtaining a return of the Contract Deposit in accordance with the Contract of Sale on account of the absence of unconditional approval to the sale by the Cooperative Corporation’s Board.
An answer with counterclaims was filed by Sellers on August 4, 2020 (NYSCEF Doc. No. 11). The counterclaims seek, in effect, a declaration that they are entitled to receive and keep the Contract Deposit, and for $65,000 in attorneys’ fees, and for punitive damages in an amount of $50,000.
Escrowee filed an answer on August 4, 2020 (NYSCEF Doc. No. 16), which seeks an order allowing it to deposit the Contract Deposit with the County Clerk and asserting a counterclaim for legal fees.
Purchasers now move for summary judgment on the complaint. The motion is opposed by Sellers. Escrowee opposes the motion only to the extent that it seeks interest on the escrowed Contract Deposit.
DISCUSSION
“To obtain summary judgment it is necessary that the movant establish his cause or defense sufficiently to warrant the court as a matter of law in directing judgment; in is favor, and he must do so by tender of evidentiary proof in admissible form” (Zuckerman v. City of N.Y., 49 NY2d 557, 562 [1980]). To defeat summary judgment, “the opposing party must assemble and lay bare its affirmative proof to demonstrate that genuine triable issues of fact exist.” (Kornfeld v. NRX Technologies, Inc., 93 AD2d 772, 773 [1st Dept 1983], affd 62 NY2d 686 [1984]). “Similarly, the issues must be shown to be real, not feigned since a sham or frivolous issue will not preclude summary relief” (id.). Mere conclusions or unsubstantiated allegations will not defeat the moving party’s right to summary judgment (Zuckerman, supra).
Summary judgment is appropriate here because there is no credible dispute that the Corporation’s approval was expressly conditional upon the use of a guarantor. Paragraph 6.1 of the Contract clearly states that “[t]his sale is subject to the unconditional consent of the Corporation.” Paragraph 6.3 further provides that: “Either Party, after learning of the Corporation’s decision, shall promptly advise the other Party thereof. If the corporation has not made a decision on or before the Scheduled closing date, the Closing shall be adjourned for 30 business days for the purpose of obtaining such consent. If such consent is not given by such adjourned date, either Party may cancel this contract by Notice, provided that the Corporation’s consent is not issued before such Notice of cancellation is given. If such consent is refused at any time, either Party may cancel this contract by Notice. In the event of cancellations pursuant to this
6.3, the Escrowee shall refund the contract Deposit to Purchaser.” (Id.)
A contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four comers of the document itself. Consequently, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms (Obstfeld v. Thermo Niton Analyzers, LLC, 112 AD3d 895, 897 [2d Dept 2013] [citing MHR Capital Partners LP v. Presstek Inc., 12 NY3d 640, 645 [2009]).
Binding First Department precedent instructs that a contract for the sale of a cooperative apartment may be terminated upon the co-op board’s conditional approval of the sale (see, e.g., Lovelace v. Krauss, 60 AD3d 579, 579-80 [1st Dept] [affirming motion court's declaration that contract of sale had been cancelled and directing escrowee to return plaintiff's deposit where only a conditional approval was granted to the purchaser of a co-op apartment], lv denied 12 NY3d 714 [2009]). The Appellate Division noted that “[c]o-op board approval was required as a condition precedent to defendants’ sale of these premises to plaintiff,” and “where there was still an area of disagreement to be resolved, there was no unconditional approval of the Board” (id.). As is the case here, “[t]he plain language of the contract permitted either party to cancel if unconditional approval was not obtained” (id.; see also, Albert & Kimmel v. Herman, 276 AD2d 413, 413-14 [1st Dept 2000] (affirming return of escrowed money to purchaser where buyer declined to meet conditions requested by co-op board]).
Here, the Board voted and granted conditional approval, requiring a personal guarantor of plaintiff Andrew Smith’s obligations (see, NYSCEF Doc. No. 5), and were clearly material. That condition to Board approval constituted a refusal to provide “unconditional consent” pursuant to section 6.1 of the Contract of Sale, giving rise to the plaintiffs’ unequivocal right to terminate the Contract of Sale “at any time” (id.). The plaintiffs promptly provided formal notice of cancellation to Sellers and Escrowee (NYSCEF Doc. No. 23). Consistent with the plain terms of the Contract of Sale, the plaintiffs properly exercised their right to terminate and are entitled to return of their Contract Deposit (see also, Moran v. Erk, 11 NY3d 452, 456 [2008] ["We do not ordinarily read implied limitations into unambiguously worded contractual provisions designed to protect contracting parties]).
Sellers, in opposition, point to the Board Application, which contains an answer by Purchasers to question 7 thereof, asking whether any part of the purchase price will be borrowed. Said plaintiff answered “Yes, a $300,000 mortgage will be taken by Andrew Smith. The remaining $1,450,000 will be paid in cash from Andrew Smith’s bank accounts.” (NYSCEF Doc. No. 21.) Sellers also point to a letter from Andrew Smith to the Board, dated April 5, 2020, stating that he would “be responsible for the mortgage and maintenance payments….” (NYSCEF Doc. No. 39.) However, the Contract of Sale does not contain any term of sale, or condition of sale, requiring a guaranty by any of the Purchasers. Nor is the Board Application or any other extrinsic document referenced in, or incorporated into, the Contract of Sale. Where the Contract of Sale found it useful or necessary to make extrinsic reference, or to incorporate a separate document, it was perfectly able to do so as it did concerning its Riders (contained in NYSCEF Doc. No. 2) which are “Attached to and Forming a Part of Contract of Sale” (the “Purchaser’s Rider”) and which make it clear that in the event of “any inconsistency or conflict between the terms of the printed portion of the Contract, Seller’s Rider, and this Rider (collectively referred to as this ‘Contract’), the terms and provisions of this Rider shall govern and be binding” (id.). Considering that all three plaintiffs are designated in the Contract of Sale, and in all other relevant documents (i.e., both Riders, and the Board Application), as the Purchaser, and, indisputably, all three plaintiffs would be the shareholders of the Cooperative shares underlying the Contract of Sale (see, Contract of Sale and Board Application), the unambiguous clause in the Contract of Sale making “[t]his sale subject to the unconditional consent of the Corporation” (Contract of Sale
6.1) applied equally to all three plaintiffs. The Corporation’s May 2020 insistence that the deal be different than that set forth in the February 2020 Contract of Sale (to wit: “the Board will approve the application subject to the son as the sole shareholder of shares with the parents as guarantors”) is, most decidedly, a condition which is inconsistent with the Contract of Sale. Purchasers had every right to cancel the Contract of Sale at that point and seek restitution of their Contract Deposit. Therefore, plaintiffs are entitled to summary judgment on their complaint, seeking restitution out of escrow of their Contract Deposit, to the extent set forth hereinbelow, and defendants’ counterclaims are dismissed.
As for plaintiff’s request for a sanction against defendants, it is denied. Although this court has recognized plaintiffs’ substantive position in this lawsuit to be imbued with merit, defendants’ point of view in opposition does not rise to the level of “frivolous conduct” (22 NYCRR §130-1.1). Escrowee’s opposition to the motion for summary judgment is limited to that part of the motion that seeks interest on the Contract Deposit. Escrowee has also asked for an order requiring plaintiffs to cover its legal costs in defending this matter. The Contract of Sale, at paragraph 1.24, specifically states that the parties agree that the contract deposit will be held in a non-interest bearing IOLA account. Therefore, no interest is due on the Contract Deposit.
Escrowee’s counterclaim seeks an award of the reasonable value of its efforts expended in defending plaintiffs’ claim against it for release from escrow, to plaintiffs, of the Contract Deposit. That counterclaim finds its grounding in a thoroughly unambiguous provision in the Contract of Sale stating:
Escrowee will serve without compensation. Escrowee is acting solely as a stakeholder at the Parties’ request and for their convenience. Escrowee shall not be liable to either Party for any act or omission unless it involves bad faith, willful disregard of this Contract or gross negligence. In the event of any dispute, Seller and Purchaser shall jointly and severally (with right of contribution) defend (by attorneys elected by Escrowee), indemnify and hold harmless Escrowee from and against any claim, judgment, loss, liability, cost and expenses incurred in connection with the performance of Escrowee’s acts or omissions not involving bad faith, willful disregard of this Contract or gross negligence. This indemnity includes, without limitation, reasonable attorneys’ fees either paid to retain attorneys or representing the fair value of legal services rendered by Escrowee to itself and disbursements, court costs and litigation expenses.
(NYSCEF Doc. No. 2
27.3 [emphasis added].)
The Appellate Division, First Department, in the highly instructive case of Breed, Abbott & Morgan v. Hulko (139 AD2d 71 [1st Dept 1988], affirmed 74 NY2d 686 [1989]), dealt with the question whether escrowee indemnification clauses in real estate sales contracts were exclusively limited to third party actions against the escrowee or, as in the present case, an action brought by one of the parties (in this case, the Purchasers). After noting an argument that such a clause only “relates to actions by third parties, and that somehow a different rule applies where the promise to indemnify is sought to be applied to recover legal expenses incurred in defending against an action brought by the promisor itself[,]” that court stated that “ [n]o plausible reason for such a distinction has been presented. Indeed, it is a curious notion that a broad indemnification clause will be interpreted to embrace counsel fees…where the action is brought by third parties, but will not be so interpreted where the action is brought by the promisor.” (Id., at 74-75.)
According to the foregoing appellate sentiment, Escrowee’s counterclaim herein, seeking an award from plaintiffs of the reasonable value of its efforts in defending this action, possesses theoretical merit. However, the analysis does not end there. The Appellate Division in that case made clear that the party which should bear the responsibility of such an indemnification clause must “sens[ibly be]” the unsuccessful party in the action (id., at 76).1 Naturally, in view of the within disposition granting Purchasers’ motion for summary judgment and dismissing Sellers’ counterclaims, Purchasers should not be the parties responsible for the escrow indemnification clause pertinent to this case. Therefore, Escrowee’s counterclaim seeking the reasonable value of its efforts herein from Purchasers is dismissed.2
Accordingly, it is
ORDERED and ADJUDGED that plaintiffs motion for summary judgment on their complaint is granted to the extent that defendant Office of Nathaniel Muller, P.C., shall release from escrow, to counsel for the plaintiffs, the sum of $175,000.00 escrowed in connection with the contract of sale that is the subject of this action, no later than ten business days from the date of filing hereof; and it is further
ORDERED that the part of plaintiffs’ motion seeking a sanction is denied; and it is further
ORDERED that the defendants’ counterclaims are dismissed.
This will constitute the decision and order of the court.
CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION GRANTED DENIED X GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
Dated: April 12, 2022
Footnotes
1. The appellate articulation was: "We should have supposed that common sense and familiar, universally accepted indemnification principles would make it undisputably clear that as between the two parties to the transaction, the ultimate responsibility for indemnification of litigation expenses would rest on the party whose unjustified lawsuit gave rise to those expenses." (139 AD2d at 77.) As noted earlier in this decision, this court has not found defendants' unsuccessful position to rise to the level of "frivolous conduct" within the meaning of the sanction regulation (22 NYCRR §130-1.1). Thus, this court's application of the foregoing appellate articulation to the outcome of this matter, in which defendants did not ultimately succeed, should not be construed to imply anything beyond the ultimate finding herein that defendants' position was incorrect.
2. The court takes note of the fact that Escrowee has not asserted a cross-claim against Sellers --- its co-defendants --- in this action. Thus, nothing has been presented by Escrowee to this court which could possibly result in an order granting its requested fee relief as against Sellers."
XING NG v. NG, 2021 NY Slip Op 31289 - Kings Co. Supreme Court 2021:
"It is well-settled that one who holds an interest in real property as a tenant in common may maintain an action for the partition of the property and for a sale, if it appears that a partition alone would greatly prejudice the owners of the premises. See Real Property Actions and Proceedings Law (hereinafter RPAPL) § 901(1); see also Tsoukas v Tsoukas, 107 AD3d 879 (2d Dept 2013); Donlon v Diamico, 33 AD3d 841 (2d Dept 2006). However, before a partition or sale may be directed, a determination must be made as to the rights, shares or interests of the parties and where a sale is demanded, whether the property or any part thereof is so circumstanced that a partition cannot be made without great prejudice to the owners. See RPAPL § 915. Such determinations must be included in the interlocutory judgment contemplated by RPAPL § 915 along with either a direction to sell at public auction or a direction to physically partition the premises. See RPAPL § 911; § 915; Hales v Ross, 89 AD3d 1261 (2d Dept 2011); see also Lauriello v Gallotta, 70 AD3d 1009 (2d Dept 2010).
Determinations of the rights and shares of the parties must be made by declaration of the court directly or after a reference to take proof and report. See RPAPL § 911; § 907; see also Mary George, D.M.D. & Ralph Epstein, D.D.S., P.C. v J. William, 113 AD2d 869 (2d Dept 1985). Moreover, because of the equitable nature of a partition action, an accounting by and between the parties is necessary, and should be done as a matter of right before entry of an interlocutory or final judgment, and before any division of funds between the parties is adjudicated. See Donlon v Diamico, 33 AD3d 841. The Court has the authority to adjudicate the rights of the parties "so each receives his or her proper share of the property and its benefits." See Brady v Varrone, 65 AD3d 600, 602 (2d Dept 2009).
Here, the plaintiffs have demonstrated their entitlement to maintain this action for partition by providing a certified copy of the deed indicating that the plaintiffs hold an undivided one-third interest in the property, and that the defendant holds an undivided two-thirds interest in the property as tenants in common, which is not disputed by the defendant. The defendant has failed to raise a triable issue of fact that a physical partition of the property can be accomplished without great prejudice to the owners. The unsworn and uncertified construction invoice submitted by the defendant which ostensibly provides an estimate of the cost of physically partitioning the premises to permit the plaintiffs access to the common areas, is insufficient to support a showing that partitioning is possible or even plausible. In light of the foregoing, the plaintiffs' motion seeking partition and sale of the property is granted.
The plaintiffs have also established their entitlement to dismissal of the defendant's first counterclaim seeking a declaratory judgment permitting her exclusive use and enjoyment of the first and second floor of the premises, including the backyard, basement, first floor backroom and storage area; that the plaintiffs have no legal entitlement to partition and sale of the property; and that the plaintiffs are not entitled to an accounting from the defendant. A tenancy in common represents a form of ownership which provides for the "right of each cotenant to use and enjoy the entire property as would a sole owner. This undivided interest is a right enjoyed by all the cotenants whether or not they are in actual possession of the premises." See Butler v Rafferty, 100 NY2d 265, 269 (2003). Therefore, the plaintiffs and the defendant each have the right to use and enjoy all parts of the premises, and contrary to the defendant's assertions, she is not entitled to exclusive use and occupancy of specific sections of the property. Moreover, the defendant has failed to demonstrate that there was a binding agreement between the parties concerning her right to exclusive use and occupancy of those particular areas of the premises. The alleged oral agreement falls within the purview of the Statute of Frauds, which holds that "[a]n oral agreement to convey an estate or interest in real property ... is nugatory and unenforceable," and "[a] party to the agreement may legally and rightfully refuse to recognize or perform it." See Pattelli v Bell, 187 Misc.2d 275, 278, 2001 NY Slip Op 21098 (Sup Ct, Richmond County 2001), quoting Woolley v Stewart, 222 NY 347, 350-351 (1918) (internal quotation marks omitted).
As to the defendant's cross-motion, she has not tendered admissible evidence establishing her entitlement to summary judgment on her second and third counterclaims which seek damages based on the plaintiffs' alleged failure to pay for the expenses, utilities, mortgage, insurance and taxes on the property. As such, that prong of the defendant's cross motion is denied. However, the defendant's motion seeking an accounting is granted, as it is a necessary requisite to a partition of sale. See Donlon v Diamico, 33 AD3d 841.
Finally, the defendant's request for dismissal of the plaintiffs' second, third, fifth, seventh and eighth causes of action based on CPLR § 3212(b) is denied. Section 3212(b) provides, in pertinent part, that "[e]xcept as provided in subdivision (c) of this rule the motion shall be denied if any party shall show facts sufficient to require a trial of any issue of fact." The plaintiffs' second, third, fifth, seventh and eighth causes of action involve allegations that the defendant prevented the plaintiffs from use and occupancy of the entire premises; that the defendant ejected the plaintiffs in a "forcible and unlawful manner"; that the defendant destroyed and demolished areas of the premises; that the defendant has improperly exercised exclusive use and occupancy of the common areas of the premises; and that the defendant deliberately inflicted harm upon the plaintiffs. In the case at bar, the defendant has failed to submit admissible evidence, other than her own conclusory affidavit, demonstrating her entitlement to summary judgment as a matter of law that no genuine issue of fact exists concerning these causes of action. See Zuckerman v City of New York, 49 NY2d 557 (1980)."
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