Nassau County 2020/2021 School Taxes
As a result of COVID-19, Nassau County delayed the release of the 2020/2021 School Taxes to November 1, 2020. The first-half is now payable, with a 40-day grace period without penalty, until December 10, 2020.
Unclean Hands Rejected as Borrower Defense – Again
An oft used, but rarely successful foreclosure defense, is “Unclean Hands”. To succeed, the party against whom the accusation is made must be guilty of immoral or unconscionable conduct, and the defense is typically unsubstantiated. Occasionally, a borrower will raise the unclean hands defense, which is what happened in Wells Fargo Bank, N.A. v. Dara, 180 A.D.3d 844, 119 N.Y.S.3d 229 (2d Dept. 2020).
The borrower attempted to support its allegations of the lender’s “Unclean Hands” by claiming the lender was too aggressive in pursuing its case (i.e., it moved prematurely for summary judgment while the borrower was repeatedly seeking a mortgage modification). The effort was futile, as the court ruled that the borrower’s motion for summary judgment did not rise to the level of immoral or unconscionable conduct.
New Sick Leave Laws Come with New Employer Responsibilities
New York State Sick Leave (NYSSL) law, which requires employers to provide sick leave to employees, went into effect on September 30, 2020. New York City also passed a law expanding sick leave protections in conjunction with the passage of the NYSSL law, which comes with enhanced responsibilities for NYC employers with regard to notice, reporting, and domestic workers.
An employee’s entitlement to NYSSL varies depending on employer size and income. Affected employers range from those with four (4) or fewer employees and a net income of less than $1 million (who must provide 40 hours of unpaid sick leave each calendar year) to employers with at least 100 employees (who must provide 56 hours of paid sick leave each calendar year). Unused sick leave is not compensable upon an employee’s termination, resignation, retirement or other separation from employment.
NYSSL accrues at a rate of 1 hour every 30 hours worked and, while the accrual is effective as of September 30, 2020, employees may not use NYSSL leave until January 1, 2021. The passage of the new NYC law entitles domestic workers to now accrue and use paid sick leave. NYC’s new sick leave law requires employers to note employees’ sick leave usage and time accrued per pay period and total balance in writing each pay period.
Employees may use NYSSL for illness (mental or physical, injury, or health condition of the employee or the employee’s family member) and safety (absence due to an employee or employee family member being the victim of domestic violence, sexual offense, stalking, or human trafficking and the employee or the employee’s family member is participating in activities necessary to ensure the health or safety of the employee or the employee’s family member or to protect those who associate or work with the employee) purposes.
The disclosure of confidential information related to the illness or safety concern, and retaliation for use of the NYSSL are, of course, prohibited.
U.S. Treasury Issues Ransomware Advisories
The U.S. Department of the Treasury’s Office of Terrorism and Financial Intelligence issued a pair of advisories to assist U.S. individuals and businesses in efforts to combat ransomware scams and attacks, which continue to increase in size and scope.
Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an advisory, entitled Advisory on Ransomware and the Use of the Financial System to Facilitate Ransom Payments, to provide information on the role of financial intermediaries in payments, ransomware trends and typologies, and related financial “red flags”. It also provides information on effectively reporting and sharing information related to ransomware attacks.
Treasury’s Office of Foreign Assets Control (OFAC) also issued an advisory entitled Advisory on Potential Sanctions Risks for Facilitating Ransomware Payments, to highlight the sanctions risks associated with facilitating ransomware payments on behalf of victims targeted by malicious cyber-enabled activities.
The full text of both advisories may be found via https://home.treasury.gov/system/files/126/ofac_ransomware_advisory_10012020_1.pdf
New York Court Holds Principal of Title Agent Could Not Claim Fraud Against Title Insurer for Guaranty
The Supreme Court of New York, Kings County, dismissed a fraud claim brought by the principal of a title agency against a title insurance company, finding that any claim that the insurer misrepresented the terms of the guaranty was irrelevant because the principal reviewed the guaranty before signing. See, Chicago Title Ins. Co. v. Brookwood Title Agency LLC, 2020 WL 5369206 (N.Y. Sup. Ct. Sep. 04, 2020).
Five years after the agent issued the loan policy, the insured mortgage was voided because of a fraud in the prior deed. After satisfying its obligations to the insured, the plaintiff insurer brought an action against the title agent and its principal. The principal asserted a counterclaim of fraud, claiming that plaintiff misrepresented that the guaranty would be limited to escrow shortages. The plaintiff then moved to dismiss the counterclaim.
Granting the motion and dismissing the counterclaim, the Court found that there was no evidence of a misrepresentation by the title insurance company. The court stated, in pertinent part, that “notwithstanding any representations that may have been made . . . the guaranty was presumably read by [principal] and signed by him. Thus, [principal] was afforded an opportunity to review the terms of the guaranty and the extent of its reach. Consequently, [principal] cannot establish justifiable reliance when he was giving the ability to read the guaranty.”
The principal’s position was further diminished by the first clause of the guaranty, which guaranteed the agency’s performance of its obligations under the issuing agency contract. Since that contract included an obligation to indemnify, such indemnification obligation was covered under the guaranty. The court also noted that the termination of the issuing agency contract did not extinguish the indemnification obligation of the contract or of the guaranty.
Real Estate Settlement Procedures Act FAQs
The Consumer Financial Protection Bureau Published a set of Frequently Asked Questions (“FAQs”) pertaining to compliance with the Real Estate Settlement Procedures Act (RESPA) and certain provisions of Regulation X.
After providing an introduction to RESPA Section 8, the FAQs cover prohibited payments, activities, gifts and promotions. As to the latter two topics, the conditions wherein gifts and promotions are considered “normal promotional and educations activities” are covered along with specific examples of “offensive” activities.
The FAQs distinguish a referral from marketing by providing that a referral includes a written or oral action directed to a person, whereas “a marketing service is not directed to a person; rather it is generally targeted at a wide audience. For example, placing advertisements for a settlement service provider in widely circulated media (e.g., a newspaper, a trade publication, or a website) is a marketing service.” The FAQs provide that “[w]hether a particular activity is a referral or a marketing service is a fact-specific question for purposes of the analysis under RESPA Section 8(a).”
The entire list of FAQs and answers may be found here: https://files.consumerfinance.gov/f/documents/cfpb_respa_frequently_asked_questions.pdf
The following updates are from Current Developments dated July 20, 2020, issued by First American Title Insurance Company:
Cemetery Lands
The Appellate Division, Second Department, in Matter of Ferncliff Cemetery Association v. Town of Greenburgh, held that “the sale of land designated for cemetery purposes to persons or entities with no affiliation to the cemetery, and with no authority of their own to operate a cemetery, constitutes an unequivocal act of abandonment of the right to use that land for cemetery purposes…[T]he right to use land as a cemetery is only a ‘privilege or license’ to make interments, which may be abandoned [citations omitted].” This case, 2020 NY Slip Op 02925, decided May 20, 2020, is posted at http://www.nycourts.gov/reporter/3dseries/2020/2020_02925.htm
Contracts of Sale/Breach
A contract of sale allowed for a structural inspection of the Plaintiff’s home prior to closing. If there were structural defects that would cost over $1,500 each to repair, the Defendant-purchaser could cancel the contract or have 10 days to enter into a further agreement with the seller. The Defendant provided notice of defects which would allow her to cancel, but she elected to defer the cancellation of the contract by 10 days. During that period, the seller indicated that she would not make any repairs or provide any concessions; the property would be sold “as is”. The Defendant attended the closing but refused to close.
The Plaintiff sued for breach of contract, and other causes of action. The Supreme Court, Schenectady County, granted the Plaintiff’s motion for summary judgment on the breach of contract claim. The Court awarded the Plaintiff damages representing the difference between the price under the Plaintiff’s contract with the Defendant and the price under the contract with the subsequent purchasers who took title, and additional interest accrued on the mortgages which had been outstanding. The Appellate Division, Third Department, affirmed the relief granted. According to the Appellate Division, when proceeding to a scheduled closing, the parties
“…agreed to be bound by the original contract and – notwithstanding defendant’s assertions to the contrary – defendant waived her right to demand concessions related to any of the defects revealed by the prior inspections [citation omitted]…Defendant’s refusal to complete the transaction constituted a breach of contract.”
Prendergast v. Swiencicky, 2020 NY Slip Op 02686, decided May 7, 2020, is posted at
http://www.nycourts.gov/reporter/3dseries/2020/2020_02686.htm
Contracts of Sale/Escrow/Interest
The Supreme Court, New York County, held that the Plaintiff-contract vendor was, due to the contract vendee’s default under the terms of the contract, entitled to retain the deposit which was held by the escrow agent in an interest-bearing IOLA account. The Court further held that the Plaintiff was, under the contract, entitled to recover its attorneys’ fees. However, the Court declined to award the Plaintiff prejudgment interest under subsection (a) of Civil Practice Law and Rules Section 5001(“Interest to verdict…”).
“The terms of the purchase agreement, requiring that the deposit be placed in an interest-bearing account, so that the party entitled to the deposit would receive compensation for the deprivation of its use of the money in the form of the accrued interest, sufficiently demonstrates that additional interest paid at the statutory rate was not contemplated by the parties at the time the contract was formed, and that the interest accrued should be the exclusive remedy of the wronged party [citations omitted].” HFZ 301 West 53rd Street Owner LLC v. Xiuli Xue, 2020 NY Slip Op 31338, decided April 17, 2020, is posted at http://www.nycourts.gov/reporter/pdfs/2020/2020_31338.pdf
Contracts of Sale/Religious Corporations
Current Developments dated January 13, 2020 reported on an October 11, 2009 decision of the Supreme Court, Bronx County in which involving an agreement to sell St. James Episcopal Church, in Bronx County to the Plaintiff. The Defendant, The Corporation of the Rector, Churchwardens, and Vestrymen of Saint James Episcopal Church, holds title to the property in trust for the Episcopal Diocese. The Agreement, in part, states that
“Seller will as expeditiously as possible take all steps required under the Canons of the Episcopal Diocese of New York, The Episcopal Church in the United States, the New York Religious Corporations Law, Section 511 of the New York Not-For-Profit Corporation Law (the ‘Consent’) for the approval of this Agreement, and the transactions contemplated hereby, a justice of the Supreme Court of the State of New York (jointly, the ‘Consenting Parties’), including without limitation, application to the Standing Committee and to the Bishop of the Episcopal Diocese of New York and commencement of a proceeding in the Supreme Court of the State of New York for approval thereof…”
After the Standing Committee and the Bishop refused to approve the proposed sale, the Plaintiff sued for specific performance and to recover damages for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. The Supreme Court, Bronx County, in granting the Defendant’s motion for summary judgment, stated that
“[t]his court cannot substitute its judgment for that of the Diocese Canons. St. James complied with the terms of the Agreement, which required that it undertake to obtain the approval for the proposed sale by submitting a Notice of Intention to the Bishop and the Standing Committee…[I]t could not guarantee that approvals would be obtained…”
As to the cause of action for breach of the covenant of good faith and fair dealing, the Court found that “[p]laintiff has failed to show that St. James prevented performance of the Agreement or that it withheld any benefits of the Agreement from plaintiff, thus, it has not proved that St. James breached the covenant of good faith and fair dealing…” As to unjust enrichment, that cause of action “contemplates an obligation imposed by equity to prevent injustice in the absence of an actual agreement between the parties.”
The Appellate Division, First Department affirmed the lower court’s ruling in a decision entered July 9, 2020. According to the Appellate Division,
“…the motion court was correct that it could not order specific performance of the contract where the Bishop, Standing Committee and Diocese had refused to approve the sale (Religious Corporations Law Section 12(2) [citations omitted]. Furthermore, plaintiff’s claim for breach of the covenant of good faith and fair dealing was properly dismissed as duplicative of it breach of contract claim [citations omitted], and the claim for unjust enrichment was precluded by the existence of a valid express agreement with regard to the same subject matter [citations omitted].”
2520 Jerome Avenue, LLC v. The Corporation of the Rector, Churchwardens and Vestrymen of Saint James Episcopal, 2020 NY Slip Op 03844 is posted at http://www.nycourts.gov/reporter/3dseries/2020/2020_03844.htm
Deed an Equitable Mortgage
In 2009, Defendant Grigg obtained purchase money financing from the Plaintiff, [T]he [sic] loan provided that if the loan was not repaid within ninety days the lender could “file a joint deed in the property records…instead of following a regular foreclosure proceedings [sic].” The Defendant executed a deed from himself to himself and the Plaintiff. In 2010, the Defendant executed an allegedly fraudulent deed to himself from the Plaintiff and, then, a deed (the “Romond Deed”) to the Romond Defendants. Defendant Grigg defaulted under the loan.
The Plaintiff commenced an action for repayment of the note, seeking also rescission of the Romond Deed and a judgment holding that deed null and void. The Supreme Court, Nassau County, granted the Romond Defendants’ motion for summary judgment dismissing the complaint as to them. The Appellate Division, Second Department, affirmed the lower court’s ruling but also declared that the Romond Deed was valid. According to the Appellate Division,
“…the Romond defendants established, prima facie, that the joint deed was given as security for the loan from [the Plaintiff] to Grigg. Therefore, pursuant to Real Property Law Section 320 [“Certain deeds deemed mortgages”], the joint deed must be considered a mortgage, and [the Plaintiff’s] sole remedy for Grigg’s breach of its terms was to commence an action sounding in foreclosure. Moreover, under the circumstances at bar, the Romond defendants established that they were good faith purchasers of the subject property (see Real Property Law Section 290 et seq.; [citation omitted]).”
American Lending Corp. v. Grigg, 2020 NY Slip Op 03211, decided June 10, 2020, is posted at http://www.nycourts.gov/reporter/3dseries/2020/2020_03211.htm
Lien Law/Trust Fund Diversion
Under Lien Law Section 70 (“Definition of Trusts), “[t]he funds described in this section received by an owner for or in connection with the improvement of real property in this state…shall constitute assets of a trust for the purposes provided in section 71 of this chapter.” Lien Law Section 71 [“Purpose of the trust…”] provides, in part, that “[t]he trust assets …shall be held and applied for payment of the cost of improvement.” Lien Law Section 70(5) identifies categories of funds, received by an owner which is a trustee, which are deemed to be held in trust, including monies received under a building loan contract.
The Supreme Court, Onondaga County, granted the Plaintiff’s motion for a default judgment and awarded damages in an action claiming the diversion of trust assets. The Plaintiff alleged that $2,250,000 received by the owner of the property on which work was done from Defendant Robert Genovese and from entities he controlled were trust funds and that they were contributed for the benefit of those supplying labor or materials for the project. The Appellate Division, Fourth Department, reversed and denied the motion for summary judgment.
According to the Appellate Division, the lower court should have denied the application for a default judgment; the statements made by the Plaintiff in the complaint were not “proof of facts constituting the claim” for the diversion of trust assets, as required by subsection (f) of Civil Practice Law and Rules Section 3215 (“Default judgment”). Further, “[i]n this case, the record establishes that ‘the [$2,250,000] that [plaintiff] contends was a trust asset was actually a capital contribution of the owner. Therefore, [those] funds were not trust assets [citation omitted]’”. Rand Construction Corporation v. Cowboys Saloon Syracuse, LLC, 2020 NY Slip Op 03366, decided June 12, 2020, is posted at http://www.nycourts.gov/reporter/3dseries/2020/2020_03366.htm
Mechanics’ Liens/Bonding/Quasi-Contract
A subcontractor commenced an action seeking to foreclose on a mechanic’s lien and to obtain other relief. The defendants were the property owner, the general contractor and a mortgagee. The mechanic’s lien being bonded, the owner and the mortgagee moved for summary judgment dismissing the complaint as to them, claiming that they were no longer necessary parties to the action. The Supreme Court, Kings County, granted the motion. Under Lien Law Section 37 (“Bond to discharge all liens”), the parties to be joined as defendants in an action to enforce a bond are “the principal and surety on the bond, the contractor, and all claimants who have filed notices of claim.”
The Plaintiff argued that causes of action against the property owner for unjust enrichment and quantum meruit should be heard. However, according to the Court, “a property owner has no liability to a subcontractor on a quasi-contract theory unless it expressly consents to pay for the subcontractor’s performance [citations omitted]… [T]here is no allegation that [the owner] promised to pay plaintiff for any work it performed at the property.” JL Construction of New Milford, LLC v. Stewart Purchaser, LLC, 2020 NY Slip Op 31646, decided May 26, 2020, is posted at http://www.nycourts.gov/reporter/pdfs/2020/2020_31646.pdf
Mortgage Foreclosures/Notices – RPAPL Section 1304
RPAPL Section 1304 (“Required prior notices”) requires that “a lender, an assignee or a mortgage loan servicer [commencing] legal action against the borrower, including [a] mortgage foreclosure” send a notice, in the form specified in Section 1304, to the borrower at least ninety days before litigation on a “home loan” is commenced. The notice is required to be sent by registered or certified mail and by first class mail to the last known address of the borrower.
In Ventures Trust 2013-I-H-R by MCM Capital Partners, LLC v. Williams, the Appellate Division, Second Department, reversed the grant of a judgment of foreclosure and sale by the Supreme Court, Nassau County, for the failure to comply with the requirements of Section 1304. According to the Appellate Division,
“[t]he lender must submit proof of mailing (such as an affidavit of service or domestic return receipts with attendant signatures) or an affidavit either from the individual who performed the actual mailing or an individual with personal knowledge of the lender’s standard office mailing procedure [citations omitted]. Here, the unsubstantiated and conclusory statement of the plaintiff’s attorney in an affidavit submitted in support of the motion that RPAPL 1304 notice was properly mailed to the defendant is insufficient to establish compliance with the statute as a matter of law [citations omitted].”
This case, 2020 NY Slip Op 03561, decided June 24, 2020, is posted at http://www.nycourts.gov/reporter/3dseries/2020/2020_03561.htm
Mortgage Foreclosures/Statute of Limitations/MERS
In 2006, the Plaintiff executed a note to BNC Mortgage, Inc. and a mortgage to MERS, as nominee for BNC. The mortgage was assigned to Defendant U.S. Bank National Association, as Trustee, in 2007. A foreclosure commenced by the Defendant in 2007 was dismissed and later discontinued in 2010. A second foreclosure in 2010 was discontinued in 2018. In 2018, the Plaintiff sued to have the mortgage cancelled and discharged; the Plaintiff alleged that the obligation secured was not enforceable because the debt was accelerated by the 2007 foreclosure and, therefore, the statute of limitations had expired. In 2019, the holder of the mortgage, in its Answer, counterclaimed for the mortgage to be foreclosed.
The Supreme Court, Kings County, denied the Plaintiff’s motion for summary judgment. The mortgage did not authorize MERS to assign the note. “Since no proof was submitted that MERS was the lawful holder or assignee of the Note on December 7, 2007 or that MERS had the authority to assign the Note on behalf of BNC, Plaintiff failed to demonstrate that the Note was effectively transferred to U.S. Bank prior to the commencement of the First Action. [citations omitted]. Consequently, the Plaintiff failed to show by admissible proof that U.S. Bank had the authority to accelerate the Note in December of 2007.” Iqbal v. U.S. Bank National Association, as Trustee, 2020 NY Slip Op 31356, decided May 11, 2020, is posted at http://www.nycourts.gov/reporter/pdfs/2020/2020_31356.pdf
The following updates are from Current Developments dated September 10, 2020, issued by First American Title Insurance Company:
Common Charge Lien Foreclosure/Surplus Monies
In the foreclosure of a common charge lien, the holder of the first mortgage on the condominium unit claimed that it should be the first paid from surplus monies available for distribution following the foreclosure sale. Judgment creditors asserted that the first mortgagee was not entitled to share in the surplus because adding the mortgagee to the action was in error; the mortgage was not extinguished by the foreclosure and, it could itself be foreclosed. The Supreme Court, Kings County, denied a judgment creditor’s motion to reargue the Court’s Order and authorized the mortgagee to participate in the surplus money proceeding. According to the Court,
“the [Court’s Order] held that ‘the purchaser at the foreclosure sale took title free and clear of all liens and encumbrances as no one sought to vacate the judgment of foreclosure and sale…’ (emphasis added). The Judgment of Foreclosure and Sale provides that all defendants to this action, including [the first mortgagee], ‘are forever barred and foreclosed of all right, claim, title, interest and equity of redemption in the said premises and each and every part thereof.’ Unless the Judgment of Foreclosure and Sale is vacated, [the mortgagee] is subject thereto, and is, thus, entitled to participate in the surplus money proceeding.”
Board of Managers of the Bergen Homes Condominium v. Ivgi, 2020 NY Slip Op 32612, decided August 10, 2020, is posted at http://www.nycourts.gov/reporter/pdfs/2020/2020_32612.pdf
Lien Law
Deeds delivered to the Defendants on March 29, 2019 contained the trust fund clause authorized by subsection (5) of Lien Law Section 13 (“Priority of liens”). Mechanics’ liens for work completed prior to March 29 were filed by the Plaintiff on April 10, 2019 and on March 1, 2019. The deed was recorded on April 15, 2019. The Plaintiff sought to enforce its liens, arguing that a lien filed before a deed is recorded is valid. The Supreme Court, New York County, issued an Order vacating and discharging the mechanics’ liens, holding that “it is the date of conveyance, not recording, that controls the disposition of a mechanic’s lien subject to Lien Law Section 13(5).” Wonder Works Construction Corp. v. Bridgeton Amirian 13th St., LLC, 2020 NY Slip Op 32350, decided July 14, 2020, is posted at http://www.nycourts.gov/reporter/pdfs/2020/2020_32350.pdf
In another case dealing with the application of the Lien Law, Trump Tower Commercial LLC (“Trump”) is the lessor of space at 725 Fifth Avenue in Manhattan. A subcontractor, which alleged it was owed money for work performed at the tenant’s premises, sued Trump, for unjust enrichment. The Supreme Court, New York County, granted Trump’s motion to dismiss. According to the Court,
“Nowhere in the complaint does plaintiff allege that it contracted with defendant Trump, that it performed work at Trump’s behest, or that Trump assumed the obligation to pay for the services provided…[M]erely receiving a benefit from the plaintiff’s labor is insufficient to hold the landlord liable under a quasi-contract theory, such as unjust enrichment [citation omitted].”
A-Val Architectural Metal Corp. v. Trump Tower Commercial LLC, 2010 NY Slip Op 34084, decided April 8, 2010, was posted on August 17, 2020 at http://www.nycourts.gov/reporter/pdfs/2010/2010_34084.pdf
Mortgage Foreclosures/Standing
The Appellate Division, Second Department, reversed the entry of a judgment of foreclosure and sale by the Supreme Court, Westchester County, holding that the Plaintiff lacked standing; therefore, the action should have been dismissed. Although the loan servicer, J.P. Morgan Chase Bank, N.A., took possession of the note secured by the mortgage before the action was commenced, the Plaintiff “failed to establish that Chase had the authority to act on its behalf at that time [citations omitted].” A power of attorney between the Plaintiff and Chase was dated May 3, 2013; the foreclosure was filed in 2009. US Bank N.A. v. Cusati, 2020 NY Slip Op 03943, decided July 15, 2020, is posted at http://nycourts.gov/reporter/3dseries/2020/2020_03943.htm
In another case dealing with standing to foreclose, the Defendant alleged that the Plaintiff, in possession of the mortgage note endorsed in blank by the original lender but not an assignment to the Plaintiff of the note, did not have standing. The Supreme Court, Kings County, granted the Plaintiff’s motion for summary judgment and denied the Defendant’s cross-motion to dismiss the complaint. The Appellate Division, Second Department, affirmed the lower court’s rulings. According to the Appellate Division, “[s]ince the plaintiff demonstrated its physical possession of the note at the time of commencement of the action by attaching a copy of the note to the complaint, it was not required to offer proof of a written assignment of the underlying note [citation omitted].” Bayview Loan Servicing, LLC v. Leibowitz, 2020 NY Slip Op 03886, decided July 15, 2020, is posted at http://www.nycourts.gov/reporter/3dseries/2020/2020_03886.htm
Holding that the Plaintiff had not established that it had physical possession of the note secured by the mortgage by the date on which the foreclosure was commenced, the Supreme Court, New York County, dismissed the action without prejudice. “While defendants seek dismissal with prejudice, such relief is not warranted, as a dismissal for lack of standing is not on the merits [citations omitted].” Deutsche Bank National Trust Company v. Morrow, 2016 NY Slip Op 33088, decided July 22, 2016, was posted on July 24, 2020 at http://www.nycourts.gov/reporter/pdfs/2016/2016_33088.pdf
Mortgages/Erroneous Satisfaction
In 2007, the Defendants executed a mortgage to MERS, as nominee for Tribeca Lending Corporation (“Tribeca”). In March 2009, the Defendants executed a mortgage to Huntington National Bank, and the two mortgages were consolidated into a single lien. On July 6, 2009, MERS, as nominee for Tribeca, executed a satisfaction of the 2007 mortgage, which satisfaction of mortgage was recorded. The consolidated note and mortgage were assigned to the Plaintiff in 2011. The Plaintiff commenced an action to foreclose the consolidated mortgage and to have the satisfaction rescinded. The Supreme Court, Nassau County, granted the Plaintiff’s motion for summary judgment and an order of reference. The Appellate Division, Second Department, affirmed. According to the Appellate Division, MERS did not have the authority to discharge the mortgage “since Tribeca was no longer a holder of the first note.” Wells Fargo Bank, N.A. v. Douglas, 2020 NY Slip Op 04425, decided August 5, 2020, is posted at http://www.nycourts.gov/reporter/3dseries/2020/2020_04425.htm
Sidewalks/Liability
In 2012, MERS assigned a mortgage to The Bank of New York Mellon), formerly known as The Bank of New York (collectively “BONY”). An action to foreclose the mortgage was commenced in 2014, a judgment of foreclosure and sale was entered in 2018, and on March 15, 2019 a Referee’s Deed was executed to BONY as the successful bidder at the foreclosure sale. Later in 2019, BONY sold the property. The Plaintiff sued BONY, MERS and the prior owners of the foreclosed property for damages due to injuries he sustained when falling on the sidewalk in front of or adjacent to the property on or about February 13, 2019. The Supreme Court, Bronx County, granted the motions of BONY and MERS to dismiss the complaint as to them. According to the Court,
“[a]lthough BONY and Pellerano [the foreclosed property owner] had been engaged in a foreclosure action at the time of the alleged incident, Pellerano retained the title of ownership and interest in the premises. The purpose of [a] judgement of foreclosure and sale is to divest the mortgagor of title which does not occur upon issuance of [a] judgement, but rather on competition [sic] of a sale authorized by [a] judgement. [citation omitted]. The final sale of the premises to BONY subsequent to the judgement of the foreclosure proceeding did not occur until March 15, 2019, which was approximately one month after February 13, 2019, the date on which the alleged incident occurred.”
Barrett v. Pellerano, 2020 NY Slip Op 32026, decided May 29, 2020, is posted at http://www.nycourts.gov/reporter/pdfs/2020/2020_32026.pdf
NYS Legislature
(1) NYS Legislature considers a bill authorizing additional taxes on “Pied-a-Terre” (secondary residences in New York City). The bill is being considered by both chambers of the Legislature. The proposed bill permits New York City to impose an annual property tax of .5% to 4% on residential properties over $5 million; 10% to 13.5% on residential condominiums and co-ops with assessed value in excess of $300,000.00.
(2) NYS considers expanding the mortgage recording tax to mezzanine debt and preferred equity. Mezzanine debt and preferred equity are common in corporate finance and mergers and acquisition financing.
(3) NYS Legislature adopts Bill to amend General Obligation Law to reform the statutory
short form power of attorney for purposes of estate planning and gift riders. Bill is waiting to be delivered to the Governor for signature.
NYS Department of Taxation
(1) NYS Department of Taxation – rulings on Mansion Tax. When a purchaser enters into a contract to purchase a building lot from a developer, and also enters into a construction contract with the developer to build a residence, the entire consideration paid or to be paid will be used to determine if Mansion Tax is due. If the entire consideration exceeds $1 million, under certain circumstances, the Mansion Tax will be assessed.
Municipal News
(1) City of Port Jervis increases fee for “certified tax searches” to $250.00.
(2) Bronx County Clerk Luis Diaz suspended amid investigation of New York State Attorney General’s Office.
(3) City of Mount Vernon is delaying the recording process by weeks by refusing to provide a stamped City transfer tax receipt. This has impeded title insurance and agents from recording deeds.
(4) NY City Office of the City Register institutes a new indexing and verification process. Conflicts between indexed information and contracts will be identified and corrected before recording. Examiners will correct minor indexing mistakes instead of rejecting the document
Title Insurance
(1) On October 6, 2020, the Supreme Court of the State of New York officially placed OneTitle National Guaranty Company into liquidation. The Department of Financial Services has been named as Liquidator. All OneTitle policies will be cancelled, effective November 5, 2020.
(2) TIRSA Rate Manual, Section 27 “Endorsements” provides that there will be no charge for the following endorsements:
• Construction Loan Endorsement
• Policy Authentication Endorsement
• Standard New York Endorsement (Loan Policy)
• Standard New York Endorsement (Owner’s Policy)
• Leasehold Endorsement (Loan Policy)
• Leasehold Endorsement (Owner’s Policy)
• Reverse Mortgage (Loan Policy) change as of March 16, 2020
• Cooperative Endorsement (Loan Policy)
• Cooperative Endorsement (Owner’s Policy)
• TIRSA Junior Loan Policy Endorsement 2
• Co-insurance Endorsement
MSAs
On October 7, 2020, the Consumer Financial Protection Bureau (CFPB) issued revised guidance on the Real Estate Settlement Procedures Act of 1974, available here: https://www.consumerfinance.gov/about-us/blog/cfpb-provides-clearer-rules-road-respa-marketing-service-agreements/
This guidance addresses two basic matters of significance, in addition to some general re-statements of previously explained CFPB regulatory approaches.
- It rescinds a “Compliance Bulletin” issued during the previous administration as Compliance Bulletin 2015-05, “RESPA Compliance and Marketing Services Agreements”.
- It makes an explicit connection between the defrayment of costs and whether an educational item or activity is a “normal promotional and educational activity”.
Regarding the compliance bulletin that was rescinded was a bulletin wherein the CFPB essentially said that Marketing Service Agreements (agreements for one settlement service provider to market another) were inherently suspicious as exceptions to RESPA’s Section 8 prohibition on payment for referrals: being practically difficult to implement and monitor, and being natural vehicles for the cloaking of referral payments.
The new guidance also associates the defrayment of costs associated with mandatory continuing education requirements to maintain a license with a failure to meet the conditions in Regulation X for “normal promotional and educational activities”.
CONTRIBUTED BY
Jason Bergman – Vice President & Senior Underwriting Counsel
Benchmark Title Agency, LLC
Vincent Danzi – Senior Vice President & Senior Counsel
First Nationwide Title – An AmTrust Financial Company
John Hughes – President and Owner
The Great American Title Agency, Inc.