SGR's Sean A. Altschul and Victor M. Metsch of our New York Real Estate and Litigation Practice Groups represented the Developer in the first case reported in the article below published in the New York Law Journal.
PLAINTIFFS, THE NEW YORK STATE Dormitory Authority (DASNY) and City University of New York (CUNY), moved for a preliminary injunction to enjoin the defendants, a Roman Catholic Church (church) and a developer, from further construction along a property line between real property owned by the plaintiffs and the adjacent real property owned by the defendants. The defendants cross-moved, inter alia, to dismiss the complaint pursuant to CPLR §§3211(a)(7) and 6514.
This action was commenced pursuant to Real Property Actions and Proceedings Law (RPAPL) Article 15. DASNY is the fee owner of certain real property (school property). CUNY occupies a school on the DASNY property. The church owns adjacent property and had leased its property to the developer (development property). Title to the subject properties was derived from one common owner, a preparatory school (prep school). On June 30, 1927, the prep school had conveyed property to the church pursuant to a deed which contained "an express covenant that the property was conveyed free from encumbrances." On July 20, 1971, the prep school had conveyed property to DASNY. No express easements had been recorded against the "development property" in the 1971 deed.
The two properties had a common north-south boundary (property line). There is a four-story building on the school property (school building), which has existed since the development property had been conveyed from the prep school to the church in 1927. A wall of the school building abuts the property line between school property and the development property. "There are windows along the... wall of the school building and a cornice on the west wall of the school building that extends approximately one foot, nine and one-half inches over the property line onto the development property. There is also a door along the...wall of the school building that opens onto the development property." The defendants are constructing a new building on the development property. "The new building abuts the property line."
The plaintiffs assert that the defendants' new building project will obstruct "the use of an emergency egress door in the school building that opens onto the property line and the adjoining development property; will demolish the cornice of the school building; and will obstruct the windows and air vents on the wall of the school buildingwhich impairs plaintiffs' enjoyment of light and air." The plaintiffs also claim that the new building will "obstruct the right of way enjoyed by plaintiffs over [a] portion of the public property."
The plaintiffs sought a declaratory judgment that the school property had an "easement by implication" over that part of the development property that is necessary to permit the continued existence of the cornice; "an easement by implication over so much of the development property as to permit the continued use of the egress door, and...'an easement by implication over so much of the development property as necessary to continue to enjoy light and air from the school windows.'" The plaintiffs also sought a declaratory judgment that the school property had an easement by implication over part of the development property so as to permit the continued use of the right of way. They also sought to prohibit the defendants from blocking the egress door. The plaintiffs had referred to the door as an "emergency egress door" or "egress door." The defendants, however, had referred to such door as a "side door."
The plaintiffs argued, inter alia, that the egress door will be obstructed and they will be unable to use the door as an emergency fire exit for a day care center in the school building, the cornice on the school building will be damaged, school windows will be obstructed, resulting in loss of light and air and access to the right of way will be impeded. The plaintiffs claimed that the balance of equities weighed in their favor because the defendants commenced construction with knowledge of the subject claims and of a notice of pendency.
The defendants argued that there was no evidence that the alleged easements "existed prior to the separation of the lots on June 30, 1927," "there is no showing that the use of said easements were so obvious to show it was intended to be permanent or that the use of said easements was necessary for the beneficial use of plaintiffs' property" and there was no evidence as to when the side door facing defendants property had been built. They also argued that the plaintiffs had failed to show that money damages would not "adequately compensate them under the facts of this case."
The court found that the plaintiffs failed to demonstrate a likelihood of success on the merits. "In order to establish an easement by implication based upon pre-existing use, three elements must be present: (1) unity and subsequent separation of title, (2) the claimed easement must have, prior to separation, been so long continued and obvious or manifest as to show that it was meant to be permanent, and (3) the use must be necessary for the beneficial enjoyment of the land retained. An easement by implication must be established by clear and convincing evidence of each element...and each element must be present at the time the unitary parcel, or part of it, is sold...."
The court found that the plaintiffs failed to submit "dispositive evidence that the implied easements over defendants' property existed prior to the separation of the lots on June 30, 1927, and had so long continued before that period and had been so obvious to be permanent, or that the use of said easements was necessary for the beneficial use of plaintiffs' property." The court further found that an affidavit submitted by the plaintiffs was "conclusory in nature," and had "little probative value" and that the unverified complaint was "equally lacking in probative value," since it was unverified and "based largely on information and belief without reference to the source of information."
The court explained that the "best evidence of any encumbrances on the school property would be the 1927 deed from [the prep school] to [the church]." However, that deed expressly conveyed the property "free from encumbrances." Although the 1971 Deed from the prep school to DASNY expressly permitted continuance of an existing encroachment upon DASNY's property for the benefit of the adjoining property owned by the church, the deed was "silent as to any easement of encumbrance for the benefit of DASNY upon the development property." Thus, the court found that the plaintiffs' failed to demonstrate "a likelihood of success on the merits as to a grant of an easement by implication as to the cornice, school windows and right of way."
The plaintiffs had also failed to demonstrate a likelihood of success on the merits, that "the door located on the west wall of the school building was, in fact, a fire exit for the child care center." Although the plaintiffs "self-characterized the door...as an 'emergency egress door,' they made no evidentiary showing 'as to when it was built or its intended purpose.'" A developer executive's affidavit stated that he had been given a tour of the property and he had not seen an "exit" sign on the door in the day care center. Rather, he saw evacuation instructions stating that the door was "not an exit" and "directing students not to use that door in case of an emergency."
Additionally, documentary evidence, i.e., floor plans for the childcare center showed "three other exits at the school building" which provided "alternative means of egress and ingress other than the egress door." Although the floor plan clearly showed that the west side of the school building abuts the property line "the floor plans did not show the door located on the west wall of the school building as an exit."
Moreover, the court held that the plaintiffs' argument that an easement by implication exists as to the cornice and school windows along the west wall of the school building because they provide light and air, was "without merit, since it is settled in New York that easements for light, air and view cannot be acquired by implication, but must be expressly granted...." The 1927 deed which conveyed the property to DASNY, embodied "no express grant to impose a servitude on defendants' property preserving light and air." The court concluded that the plaintiffs failed to demonstrate a likelihood of success on the merits and denied the plaintiffs' motion in its entirety.
The court granted the defendants' cross motion to dismiss to the extent that the plaintiffs claim for a declaratory judgment seeking an easement by implication for the cornice and school windows along the west wall of the school was dismissed. In all other respects, the cross motion was denied. The court explained that "[a]ccording to plaintiffs every possible and favorable inference of the facts contained in [their supporting affidavit]," the plaintiffs had set forth a cause of action for an "easement by implication for the door on the westerly wall of the school building and the right of way."
Dormitory Authority of the State of New York v. Roman Catholic Church of Saint Ignatius, Sup. Ct., Kings Co., Index No. 504285/2015 , King, J.
Foreclosures—Although RPAPL 1301 Bars Lenders for Pursuing a Foreclosure Action and a Suit On the Note at the Same Time, It is Inapplicable Where the Mortgaged Property is Located Outside New York—However, the Court Followed the 1301(3) Approach and Stayed a Lender From Simultaneously Proceeding With an Action on a Note and Guaranty, While Pursuing a New Jersey Foreclosure Action
THIS IS AN ACTION by the plaintiff bank to recover payment on two promissory notes (notes) against the defendants. The defendants moved to dismiss the complaint with prejudice, or in the alternative, to stay the action pending the outcome of a New Jersey foreclosure action commenced against them by the plaintiff.
A defendant (borrower) had borrowed money for the purchase of commercial property located in New Jersey and had executed promissory notes in connection therewith. Another defendant had guaranteed the notes (guarantor). The plaintiff thereafter notified the borrower that she had defaulted on the loan. After payment was not received, the plaintiff commenced a mortgage foreclosure action in New Jersey.
The New Jersey complaint sought, inter alia, "a judgment against defendants fixing the amount due on the mortgage, barring and foreclosing defendants and all other parties having an interest in the mortgaged property of all equity of redemption in and to the mortgaged property, terminating all leasehold or possessory interests in the mortgaged property, directing plaintiff be paid the amount due on [the mortgages], and adjudging that the mortgaged property be sold according to law to satisfy the amount due to plaintiff on the mortgages."
The plaintiff thereafter commenced the subject action against the defendants, seeking to collect on the notes from the borrower and the guarantor.
The defendants had sought to dismiss the complaint on the grounds, inter alia, that it was barred by Real Property Actions and Proceedings Law (RPAPL) 1301(3). That statute provides that "while a foreclosure action 'is pending...no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.'" The election of remedies principle applies to an action to recover under the guaranty of a note.
Prior case law held that "[a]lthough RPAPL 1301(3) prohibits a mortgage lender seeking repayment of a loan from simultaneously prosecuting an action at law to recover upon a promissory note and an action in equity to foreclose the mortgage, the prohibition does not apply where...the property securing the loan is located outside of New York State...." Since the subject mortgaged property is located in New Jersey, RPAPL 1301(3) is inapplicable.
However, the court stated that although "RPAPL 1301(3) is not technically applicable to this case," the court would consider "its underlying legislative purpose and policy, to avoid the duplication of claims by the same party and multiple litigation simultaneously addressing the same issues...." The court also noted that "RPAPL 1301 seeks 'to protect the mortgagor "from the expense and annoyance" of simultaneously defending against two independent actions to recover the same mortgage debt.'" The court opined that such "policy would be contravened if this action were permitted to simultaneously proceed with the New Jersey action." Additionally, the court cited a desire to avoid the risk of "inconsistent rulings regarding the sums due on the notes."
The defendants had not sought to enjoin the pending foreclosure case in New Jersey, but sought to avoid duplicative litigation in New York. The foreclosure action, which named both the borrower and the guarantor as defendants, was continuing in New Jersey and the subject action had been brought against the defendants on the same debt that is the subject of the mortgage foreclosure action in New Jersey.
The defendants also sought to dismiss the instant action based on CPLR 3211(a)(4), i.e., on the ground that "another action is presently pending in New Jersey between the same parties based on the same debt." CPLR 3211(a)(4) provides that "the court need not dismiss upon this ground but may make such order as justice requires."
The court explained that:
Where there is a substantial identity of the parties, the two actions are sufficiently similar, and the relief sought is substantially the same, a court has broad discretion in determining whether an action should be dismissed pursuant to CPLR 3211 (a) (4) on the ground that there is another action pending.... Substantial, not complete, identity of parties is all that is required to invoke CPLR 3211(a)(4).
Here, the court was dealing with two actions that arose out of the same "alleged actionable wrong, defendants' failure to make payment on the notes and...the two actions are substantially identical, but for the remedy of the sale of the real property." Moreover, the relief sought in the New Jersey action included "a judgment directing that plaintiff be paid the amount due on the mortgages...." Thus, the court found that the relief sought in the New Jersey action was "substantially the same relief as sought in this New York action...."
The court held that CPLR 3211(a)(4) is applicable to the subject action since there is "a pending mortgage foreclosure action by plaintiff on the same debt." The court reasoned that the plaintiff made "a decision to foreclose on the mortgages and should not be permitted to commence a second simultaneous action attempting to recover the same debt before the New Jersey court has made a determination."
The plaintiff contended that the relief sought in the New Jersey action was different from the relief it sought in the New York action because the New Jersey action was "an in rem proceeding in which it seeks to foreclose on the mortgaged property and...it does not seek a monetary judgment against defendants in that action." The plaintiff cited a New Jersey court rule which governs joinder of claims in foreclosure which provided that except for good cause shown, "claims for foreclosure of mortgages shall not be joined with non-germane claims against the mortgagor or other persons liable on the debt. Only germane counterclaims and cross-claims may be pleaded in foreclosure actions without leave of court. Non-germane claims shall include, but not be limited to, claims on the instrument of obligation evidencing the mortgage debt, assumption agreements and guarantees."
The plaintiff argued that a claim on "the notes or the guaranty is not a germane claim which could be brought in the New Jersey action." However, the court found that although the New Jersey action was not an action to recover on the notes or guaranty, the plaintiff sought "to recover the same debt based upon, and secured by, the same notes." The court reasoned that "[t]o permit plaintiff to proceed simultaneously with both actions would result in duplicative litigation and a possible double recovery."
The court explained that although CPLR 3211(a)(4) applies to the subject action, the court "need not dismiss an action pursuant to this section, but may, instead, grant a stay." The court then explained that "the preferred course is to stay the New York action, pending a final determination of such prior action...."
Additionally, the court noted that "[i]n New York, 'a plaintiff in a foreclosure action may seek a deficiency judgment in the complaint, as incidental to the principal relief demanded.'" See RPAPL 1371(1) and (2). Here, the New Jersey mortgage foreclosure action and the allegations in the New Jersey complaint did not seek a deficiency judgment against the defendants, "although a declaration of total liability on the debt is sought."
The plaintiff argued that "it cannot or will not seek a deficiency judgment in the New Jersey action." The court stated that, although the New Jersey action "should resolve all issues between the parties," it is possible that upon the foreclosure and sale, the proceeds will be insufficient to satisfy the judgment. The plaintiff may not be able to obtain "a deficiency judgment against defendants sufficient to satisfy its judgment." Therefore, the court stayed the subject action in order to "allow plaintiff to proceed against [the defendant borrower] on the notes and...against [the guarantor]...." Accordingly, the court granted the defendants' motion to the extent of staying the instant action until the completion of the New Jersey action.
Wells Fargo Bank v. Pena, 500827/2015, NYLJ 1202747953185, at *1 (Sup., KI, Decided Jan. 6, 2016), Demarest, J.
Previously published in the March 30, 2016 edition of the New York Law Journal.
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