Scott E. Mollen

Development—RPAPL §881—Owner Awarded License To Enter Neighbor's Land and Building To Install and Maintain a Rear Yard Shed and Party Wall Tie-Backs—Respondent Claimed that Petitioner was Using Litigation To "Bully an Elderly Woman with Limited Resources"—Petitioner Alleged that Respondent was Using "Monetary Demands as an Excuse To Delay the Project"—License Fee of $1,500 Per Month—Legal Fee Request Reduced

The petitioner owns a building that abuts the respondent's building. The petitioner was in the process of demolishing its existing building and building an eight-story mixed use building (project). The petitioner had retained an architect, a structural engineer, a contractor and an additional architect to "advise of site safety measures." The DOB had approved the petitioner's demolition phase of the project. Thereafter, the petitioner commenced a special proceeding pursuant to RPAPL §881 (§881).

The petitioner argued that it met the requirements of §881 and it needed a license "for temporary access to respondent's building to install certain protection measures in order to comply with the buildings Code §3309" (§3309). The petitioner claimed a need to "install temporary overhead protection in the form of a rear yard shed in the rear yard of respondent's building" (shed). The petitioner asserted that the DOB permitted the shed to protect the respondent's building and it would "only have a small impact on respondent because the rear yard is unoccupied and the use of respondent's rear yard during winter will be minimal." The petitioner had offered a license fee of $1,500 per month for the shed.

The petitioner allegedly attempted to negotiate a license agreement with the respondent for several months and asserted that absent the requested access, "it will be impossible to continue with the project in a safe manner." The petitioner argued that if the project was delayed and the DOB classified the project as "unsafe," the petitioner will be subject to "exorbitant costs and expenses to make the building safe as well as violations, fines and penalties by the DOB." The petitioner contended that the respondent was "using monetary demands as an excuse to delay the project" and to date, it reimbursed the respondent more than $14,000 for professional fees.

The respondent countered that the petitioner's application for a license is "fatally deficient" and the petitioner had not been denied access pursuant to §881, but was "using litigation to bully an elderly woman with limited resources."

The respondent claimed that the petitioner sought to install "party wall tie-backs which are permanent encroachments" and the petitioner failed to "respond or address the comments of respondent's engineer on the tie-backs or the overhead protections in the rear yard." The respondent claimed that she was willing to enter into a license agreement.

881 provides:

When an owner or lessee seeks to make improvements or repairs to real property so situated that such improvements or repairs cannot be made by the owner or lessee without entering the premises of an adjoining owner or lessee, and permission so to enter has been refused, the owner or lessee seeking to make such improvements or repairs may commence a special proceeding for a license so to enter pursuant to article four of the civil practice law and rules. The petition and affidavits, if any, shall state the facts making such entry necessary and the date or dates on which entry is sought. Such license shall be granted by the court in an appropriate case upon such terms as justice requires. The licensee shall be liable in the adjoining owner or his lessee for actual damages occurring as a result of the entry.

The court explained that "§881 'does not direct the court to grant a license to every applicant.' …Under this provision, the petitioner must 'make a showing as to the reasonableness and necessity of the trespass.' …Indeed, courts are required to balance the interests of the parties and should issue a license 'when necessary, under reasonable conditions, and where the inconvenience to the adjacent property owner is relatively slight compared to the hardship of his neighbor if the license is refused….'" courts will "'consider the extent to which the access sought interferes with the owners use and enjoyment of the property, the risks it poses to the property, as well as the complexities which the access sought presents in drafting a license agreement….'"

New York courts have "interpreted §881 to allow for an encroachment as justice requires.… Where the petitioner is seeking a license for a permanent encroachment, 'a petitioner must demonstrate that…it is virtually unavoidable.'" "Equity further requires that the respondent who is compelled to grant access should not have to bear any costs resulting from the access to his or her property."

The court held a hearing with respect to the §881 license. The petitioner's general contractor testified as to how the party wall tie-backs would be installed and noted inter alia, that … "it is done with a hand tool. Screwing in the pin takes, … ten seconds, … a couple of seconds to screw it in and then putting the brick back may take a couple of minutes."

A respondent's engineer testified that if the "pull testing failed, the party wall would be exposed for a certain period of time" and "pull testing was needed 'to ensure that the anchors can adequately sustain the load for the application there being used in.'"

Another petitioner's engineer testified that "the pull testing would be a test of those … anchors once they're installed into the joist …" that they are not "done in every single (anchor)." They would "specify about 10 to 15 percent of them, to get a representative data essentially; … also a visual inspection as well, of the joists."

The petitioner agreed to pay the respondent's engineer to "observe the installation of the tie-backs to ensure the pull testing is done and the adequacy of the tie-back" and also stipulated that the plans "would be updated to provide for no more than six inches of debris with regard to structural load."

The court found that the "intrusion into the adjoining property by way of the tie-backs is minimal and…is necessary until a new building is erected…." Thus, the court held that the petitioner "is entitled to a license to install the party will tie-backs."

The court stated that the tie-backs were the "most reasonable option … under the circumstances and is 'virtually unavoidable.'" Therefore, the petitioner was entitled to a license to install and maintain the shed. The court believed that the shed would protect the "occupants of respondent's building, from potential danger from the demolition" and "will not result in a significant physical intuition because the rear yard is unoccupied." The court further held that the petitioner was entitled to a license for "access to conduct a preconstruction survey" and directed that petitioner provide the respondent with a "copy of the signed … preconstruction survey report, which will include photos and … descriptions of the existing conditions…."

A license fee "compensates the owner for the use the petitioner makes of his or her property and his or her temporary loss of enjoyment of a portion of his or her property." The court ordered the petitioner to pay a license fee of $1,500 per month, while the shed is installed. If the shed remains beyond 12 months, the license fee will increase to $2,000 per month. The respondent failed to show that such fee would be "inadequate compensation." The rear yard was "unoccupied" and the shed would not be a "significant physical intrusion" on the respondent's building.

Section 881 provides for reimbursement for "reasonable attorneys' fees incurred in a §881 action." The court explained that courts will "usually, and especially in a manner involving a large fee, be presented with an objective and detailed breakdown…of the time and labor expended, … (and) other factors he or she feels supports the fee requested." The amount of the fee is "left to the sound discretion of the trial court."

The respondent sought a significant legal fee award. The court found that the "exorbitant amount sought is not reasonable." The respondent's counsel's invoice had not provided a "'detailed breakdown' of legal work performed." The evidence did not show "the difficulty of the manner, the skill, time and labor required, her experience, ability and reputation, and the customary fee for similar services." The court emphasized that "reasonable fees" did not mean "all fees allegedly incurred." The court concluded that the respondent's counsel was entitled to $42,972.50 for the work "litigating this proceeding."

The court also awarded to respondent engineering costs of $12,568.75 for services by one engineering firm and $6,632.72 for a second engineering firm and directed that the petitioner reimburse the engineering fee for "oversight during the installation of the tie-backs."

Thus, the court ordered that the petitioner be granted a license "to install a… hed, party wall tie-backs and conduct a pre-construction Survey" and that the petitioner pay a monthly license fee of $1,500 until the date that the developer "has completely removed the…shed." The petitioner is to pay a monthly license fee of $2,000 per month after 12 months. The petitioner is to notify the respondent when all work has been completed and all protection excluding the tie-backs have been removed. The respondent's property has to be returned to its original condition, excluding the party wall tie-backs.

The petitioner was also ordered not interfere with the respondent's necessary access to its property and quality of life and take necessary measures to prevent damage to the respondent's property. The petitioner was further ordered to add the respondent as an additional insured under its insurance policy. The petitioner will be liable for any damages incurred as a result of the license. Additionally, the petitioner will indemnify the respondent from any "liability, claims, damages or losses, including reasonable attorney's fees," arising from the petitioner's work, "whether or not caused by the negligence of petitioner or its employees, agents, contractors or sub-contractors."

The petitioner is to immediately report, in writing to respondent, any damage to respondent's property caused by petitioner's work, and cure any violations placed by any governmental or administrative agency resulting from the petitioner's work. The petitioner must reimburse the respondent for any such fines or penalties. Finally, the court awarded the respondent attorney fees in the amount of $42,972.50, less the legal fees already reimbursed and $19,201.47 for reasonable engineering fees and the petitioner must pay engineering fees for the observation of the installation.

Comment: Adam Leitman Bailey, counsel to the petitioner, emphasized that petitioner had demonstrated that the proposed protection measures were necessary and reasonable and interference with the respondent's property would be "nominal." He also noted the petitioner's willingness to pay for the engineering and legal costs incurred by the respondent. I was advised that a Notice of Appeal has been filed.

Tompkins 183 LLC v. Marsha Frankel, Supreme Court, New York Co., Index No. 159644/2019, decided Dec. 6, 2019, Rakower, J.

Foreclosure—Bank Purchaser of Loan Granted "Strict Foreclosure" Relief in Quiet Title Action Against Lienholder—Distinctions Between Strict Foreclosure and Reforeclosure—Strict Foreclosure is an "Absolute Right"

A plaintiff bank commenced an action to quiet title against a defendant, seeking relief pursuant to RPAPL §1352 (§1352). The parties had each moved for summary judgment. The court granted the plaintiff's motion and denied the defendant's cross motion.

The plaintiff is the fee owner of the subject property (property). The plaintiff had purchased the property pursuant to a referee's deed, following a foreclosure auction. The foreclosure action's notice of pendency (Notice), had been filed on Feb. 14, 2011, it was valid for 3 years. The Notice was not refiled until April 21, 2014. There was a "gap" in the record of the Notice. On March 25, 2014, during that gap, the defendant filed in the county clerk's office, an "abstract of judgment in the amount of $111,872.57" which had been granted to the defendant against the prior owner.

After the prior mortgagee obtained a final judgment of foreclosure and sale (judgment), the judgment was transferred to the plaintiff in April 2017 and recorded in August 2017. The plaintiff then purchased the property through a referee's deed dated April 25, 2018 and recorded on May 13, 2018. The total foreclosure amount was $1,195,310.83. The property sold for $1,092,218.93. Since the defendant had not been joined as a party in the initial foreclosure action, the defendant's lien "survived the execution of the (judgment)." At the time of the judgment, the plaintiff was owed pursuant to the mortgage $823,147.48, plus interest and other sums set forth in the judgment.

The defendant asserted that he lacked "actual or constructive notice of the judgment …" until the instant action was commenced in 2018.

The plaintiff asked the court to give the defendant a "period of time within which to redeem his interest in the Property, including the value of any improvements made to the property by plaintiff, or face foreclosure of any interest in the property, thereby clearing the remaining cloud on plaintiff's title to the property." The defendant counterclaimed, seeking a declaratory judgment that his lien was still valid against the property, that his lien "takes preference" to the plaintiff's mortgage lien and that the plaintiff failed to satisfy the defendant's lien on the property, "as well as damages in excess of $75,000 based on the plaintiff's failure to satisfy the Defendant's lien."

Plaintiffs in mortgage foreclosure actions are generally "required to join as a party to that action any person whose lien or incumbrance is claimed to be subject and subordinate to the plaintiff's lien." "When a necessary party is omitted from the foreclosure action, 'that party's rights are unaffected by the judgment and sale, and the foreclosure may be considered void as to the omitted party.'" However, "the purchaser of the foreclosed property has two potential remedies—the commencement of a strict foreclosure action pursuant to RPAPL §1352, or a reforeclosure action pursuant to §1503."

When purchasers choose to pursue strict foreclosure actions, §1352 "authorizes the court to issue a judgment that fixes a time period within which any person having a right of redemption or right to foreclose a subordinate lien must act to redeem or begin a foreclosure action. If the person having a right of redemption or a subordinate lien fails to redeem the property or commence a foreclosure action within the time period fixed by the court, such person shall be 'excluded from claiming any title or interest in such property and all title or interest of such person…shall thereby be extinguished and terminated.'" Thus, a judgment of "strict foreclosure cures a defect in the judgment or sale under the first foreclosure."

Alternatively, "an action for reforeclosure under RPAPL §1503, when read together with §1523(1)—provides that 'a judgment of reforeclosure may be issued only where it appears that there was a defect in the original foreclosure proceeding…which was not occasioned by the fraud or willful neglect of the plaintiff." "In contrast, (§1352) places no such limitation on the right to obtain a judgment of strict foreclosure."

The defendant's lien was "subordinate to the mortgage under which plaintiff purchased the property" and the defendant had not been joined in the sale to plaintiff and therefore the defendant's lien survived the foreclosure.

The plaintiff now sought relief pursuant to §1352 i.e. strict foreclosure. The court stated that if the plaintiff had pursued a reforeclosure pursuant to RPAPL §1503, "then the question of whether plaintiff's failure to join Defendant to the foreclosure action despite Defendant's March 25, 2014 filing of an abstract of judgment … constituted fraud or willful neglect might have precipitated a genuine, material factual dispute to be resolved by a trier of fact." Here, the plaintiff pursued strict foreclosure pursuant to §1352, which embodies "no limitation for fraud or willful neglect." See 6820 Ridge Realty LLC v. Goldman, 701 NYS 2d 69 (A.D.2d 1999). Thus, the court held that subject action "appears to qualify for strict foreclosure under … §1352, notwithstanding any argument that plaintiff should have known of Defendant's lien prior to completing the foreclosure sale."

The defendant had argued that "reforeclosure and strict foreclosure statutes should be read together and the requirements for one remedy should be imported onto another." The court found no legal "support for that in the statutory language or the (admittedly limited) case law interpreting it." Moreover, New York law "recognizes distinctions between the remedies, including the key point that strict foreclosure is an absolute right, whereas reforeclosure is not."

The court acknowledged that New York courts have stated that "strict foreclosure and reforeclosure are harsh remedies" and state courts have "opted to 'narrowly interpret RPAPL §§1352 and 1503.'" However, such "warnings were used in the context of questions regarding the scope of the application of the statute, such as whether an easement holder or a tenant—as opposed to a lienholder—fell within the 'class of persons against whom a strict foreclosure or reforeclosure may be brought.'" Since this action involved a "mortgage holder and a junior lienholder," the case was clearly "eligible for strict foreclosure under…§1352."

Since the right to strict foreclosure is "absolute and unqualified by any restriction as to fraud or willful neglect,…" there was "no material dispute; even if it were patently clear plaintiffs had engaged in fraud or willful neglect, that would not bar relief under the statute."

Although the terms of sale pursuant to which the property was sold to the plaintiff placed the plaintiff on actual notice that prior liens continued to attach to the property, that notice provision did not "affect the outcome of this Action." Such terms of sale simply "warned plaintiff that the Property was being sold to them in an 'as is' condition and that it may be subject to 'prior liens, if any,' which did not in and of itself put plaintiff on notice of the existence of specifically Defendant's lien." The same was true with respect to a limitation embodied in the judgment.

The plaintiff admitted that the defendant's lien continues to "remain valid and is a cloud on plaintiff's title…; indeed, that is exactly why plaintiff brought this Action." The court held that the terms of the judgment "simply warned plaintiff of the hypothetical possibility of this exact complication, which plaintiff is entitled to remedy though RPAPL §1352." Accordingly, the court granted the plaintiff's motion for summary judgment of strict foreclosure. The court gave the defendant a 60-day period within which the defendant must notify the plaintiff of "his intent to exercise his right of redemption and pay the mortgage debt, along with the value of improvements made to the Property, to maintain his interest in the Property."

Comment: The court also noted other differences between an action pursuant to RPAPL §1352 and 1503, "including that a reforeclosure action may be maintained 'even after the right to foreclose the superior mortgage or a right of redemption would be time-barred,' and that a reforeclosure judgment may 'direct a new sale of the premises,' whereas, under a strict foreclosure judgment, the court simply directs a fixed time within which the defendant has an opportunity to redeem."

U.S. Bank N.A. v. Haskins, U.S. District, S.D.N.Y., Case No. 18-CV-8478, decided Dec. 18, 2019, Karas, J.

Scott E. Mollen is a partner at Herrick, Feinstein.