New York

“Then I’ll huff and I’ll puff, and I’ll blow your house in!”

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Those famous words were said by the Wolf in the fairy tale Three Little Pigs. Sometimes, municipalities have to say those same words to homeowners whose buildings become so damaged that they have become “unsafe.”

The “unsafe structures” law

There is a common recognition that an unsafe or dangerous structure constitutes a threat to the public’s health, safety and welfare, and the sealing or removal of the structure is an exercise of a municipality’s police powers to protect the public. For this reason, municipalities enact building codes to ensure that owners keep and maintain their buildings.

In New York City, Administrative Code Section 26-236 provides that, immediately upon receipt of a report by an officer or building department employee that a structure is unsafe or dangerous, the Department of Buildings is to make a formal report, which triggers quick action. The next step is to notify the building owner within 24 hours of the duty to remedy the unsafe or dangerous condition. If no action by the owner is immediately taken, then the Buildings Department must order a survey of the unsafe structure, which survey (together with a report) acts as the basis of a law suit in the Supreme Court.

So important to the public is the remediation of an unsafe structure, that Administrative Code Section 26-239 states that the “determination of the issue in an unsafe structure proceeding shall have precedence over every other business” of the court. Once the trial has taken place (“without delay”), the court then issues a “precept” directed to the Superintendent of Buildings to repair or secure the unsafe structure.

Knock-down of the client’s building

The client bought a building in Brooklyn from a bank that had recently foreclosed on the property and took back the building (what is commonly referred to as an “REO” – real estate owned property in a bank’s inventory). At about the same time that the client bought the building, the City of New York determined that the building was an unsafe structure and notified the bank. The notice informed that a court proceeding would be held in the Supreme Court, Kings County on April 22nd to determine the building to be an “unsafe structure” pursuant to the New York City Administrative Code.

When the client bought the building, he had the intention of renovating it. The client hired an architect who drew up plans to utilize the skeleton of the building and its basic plumbing and heating systems. The plans filed with the Buildings Department provided for the rehabilitation and renovation of the building. The architect’s plans were allegedly approved by the Department. The architect then met with the Buildings Department’s Borough Commissioner on April 10th; assurance was allegedly made to the architect that a work permit based upon the approved plans would be issued, allowing the “rehab” of the building to start. Allegedly, the Buildings Department noted the approval of plans with the City’s Department of Housing Preservation and Development. Unfortunately, on April 15th, prior to the upcoming court date, the City demolished the building. To add insult to injury, the City placed a lien on the building for the demolition costs.

Claim and law suit

The building owner came to Richard A. Klass, Your Court Street Lawyer, for help. Now that the entire building was demolished, there was tremendous added expense to the rehab of the building, given that all new building systems would have to be installed and the shell was no longer there.

Notices of claim were filed with the City of New York and its agencies. Once the requisite period of time for the City to act on those notices passed, a law suit was filed against the City. The action listed several causes of action including negligence, trespass to property, interference with quiet enjoyment of property and violation of due process rights since the building was demolished before the court proceeding.

The City agreed to settle the law suit by payment for the loss of the building (based upon the difference in fair market values for the property pre-demolition and post-demolition) along with cancellation of the demolition lien.

by Richard A. Klass, Esq.

R. A. Klass
Your Court Street Lawyer

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Saved from the Auction Block

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A Kings County homeowner was unable to pay his mortgage. He had been in and out of bankruptcy and his Midwood-area house had been in foreclosure since 2007. A Judgment of Foreclosure and Sale had been entered in 2010. Now, the foreclosure auction was scheduled for September 13th. In laymen’s parlance, the auction sale date is the “drop dead” date for the homeowner to keep his house and, in the final days before the auction, the homeowner needed Richard A. Klass, Your Court Street Lawyer, to save the house from the auction block.

What is a Foreclosure Auction Sale

When there is a lien against real estate in New York, the plaintiff-lienor (usually a mortgage lender) can bring a foreclosure proceeding to foreclose that lien against the property in order to have the debt paid. This includes actions to foreclose a mortgage, mechanic’s lien for labor rendered or goods delivered by a contractor, a condominium building’s common charges, or homeowners’ association fees. The culmination of a foreclosure proceeding is the auction sale of the property to the highest bidder.

Once the hammer of the court-appointed referee drops, the homeowner’s right to redeem the property is gone! Then, it’s time for the homeowner to plan to move from the house or be ejected by the successful bidder. In this case, this homeowner needed to stop the auction sale — stop the drop of the hammer.

Old Foreclosure Cases

Recently, the foreclosure process in various counties has ground to an almost-halt, where foreclosure proceedings have been litigated in the courts in excess of three or four years (or even longer!). Depending on the perspective of the plaintiff-lienor or the defendant-homeowner, this is either a good or bad consequence of the slow process.

As a result of several factors, including the slower foreclosure process, bankruptcy, motions to vacate default judgments and requests for loan modification, the actual foreclosure auction sale date could wind up being many months or even years after the Judgment of Foreclosure and Sale has been entered by the court. Eventually, concern may arise about holding an auction sale so long after the Judgment has been entered. While the amount indicated in the Judgment may have been $100,000 at the time of the auction, the amount due to the plaintiff with accrued interest, property taxes, etc., may become $150,000.

In the Supreme Court decision of Bardi v. Morgan, 17 Misc.3d 927, 847 NYS2d 431 [Sup.Ct., Kings Co. 2007], Justice Kramer noted that a crucial component of the foreclosure process — which is often conducted on the default of the homeowner who never answered the Summons — is the referee’s accounting of the amounts due to the mortgage lender — which is done pre-judgment, providing a detailed snapshot of the mortgage debt. This accounting, done by an impartial appointee of the court, ensures the reliability and fairness of the foreclosure proceeding. This serves the function of accurately advising the court of the costs and disbursements expended during the process, thus enabling the court to determine whether the charges were taken in accordance with the law and ensure that there has been no overreaching by the plaintiff. An accurate, impartial and transparent accounting becomes particularly important when the purchaser is not a third party but is the foreclosing mortgage holder and the potential for self-dealing arises. In Bardi v. Morgan, the judge held as follows: “Accordingly, this Court holds that in any case where an auction sale has been scheduled more than one year after the entry of the judgment of foreclosure and sale, the Notice of Sale is invalid and the Clerk of this Court is directed to reject it, unless an amended and updated reference and a supplementary foreclosure judgment reflecting the corrected amount is provided.”

The Supreme Court for Kings County followed suit and enacted Rule 13 of Part F of the General Foreclosure Rules, which provides as follows: “Notices of Sale may be filed with the Clerk within one year of the entry of the Judgment of Foreclosure and Sale. Permission of the Court must be obtained for any filings made thereafter.”

Upset Price vs. Judgment Amount

The reasons this rule is so important become evident when considering the above example (Judgment is $100,000 but amount due with accrued interest is $150,000), including: (1) The homeowner may be relying upon the judgment amount in order to attempt to raise the money necessary, right before the auction sale, to satisfy the judgment; (2) The homeowner may need to know the amount due if he elects to file a bankruptcy case for estimation purposes; and (3) Prospective bidders would be interested so they know how much money to bring to the auction to bid on the property. At the auction sale, if the lender calls out a much higher “upset” price than the judgment amount, everyone except the lender will be surprised; it would be unfair for the lender to have so much control over the bidding process.

In our case here, upon presentment of the Order to Show Cause to stop the auction sale — because the lender proposed selling the house without having gotten permission from the Supreme Court — the lender retreated and agreed to cancel the sale. Now, the lender will have to go through the steps of obtaining an amended referee’s report of the amount due, along with the request from the court of issuance of a supplementary judgment. These steps will add several months to the process.

by Richard A. Klass, Esq.

copyr. 2012 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

Painting at top: The Captain’s Auction (by 1875), John Ritchie (fl. 1858-1875). This work is in the public domain in the United States because it was published (or registered with the U.S. Copyright Office) before January 1, 1923 and its copyright has expired.

R. A. Klass
Your Court Street Lawyer

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An Extra $1,500,000 for the Aged

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More than fifty years ago, a charitable woman executed her Last Will and Testament, bequeathing all of her assets to two Catholic charities in the event that her siblings did not survive her. The two Catholic charities named in the Will were the Columbus Hospital and St. Joseph Rest Home for the Aged, each to get 50% of her estate. Both of these institutions were founded or operated by Italian American Catholic Orders.

In March 2008, the woman passed away, leaving more than $3,000,000 worth of assets in her estate. Since her siblings predeceased her, the Will left everything to the two Catholic charities.

Demise of Columbus/Cabrini Hospital

Columbus Hospital was founded in 1892 and operated a hospital in Manhattan. It was opened by a mission of the Missionary Sisters of the Sacred Heart of Jesus to address the needs of Italian immigrants. In 1973, Columbus Hospital and Italian Hospital merged to form Cabrini Medical Center. Cabrini Medical Center operated as a hospital on the same site as Columbus Hospital on East 19th Street until it filed for bankruptcy on July 9, 2009. Through the bankruptcy proceedings, Memorial Sloan Kettering Cancer Center purchased the buildings in which Cabrini Medical Center was formerly located.

Charitable mission of St. Joseph Rest Home for the Aged

Similarly to Cabrini, St. Joseph Rest Home for the Aged was founded by Nuns whose lives are committed, without compensation, solely to their charitable and religious convictions. Both charitable organizations — Cabrini and St. Joseph — were founded and operated by Nuns of Italian heritage. The Order of St. Joseph’s was founded in Rome by Italian Nuns and still has a mother house located in the Vatican. St. Joseph’s Rest Home for the Aged, which operates a licensed nursing home facility that accommodates forty women, was founded by the Catholic Sisters of The Order of St. Joseph’s and is located in Paterson, New Jersey.

Accounting proceeding

Because Columbus Hospital had ceased to exist, the executor of the deceased woman’s estate filed a judicial accounting with the Surrogate’s Court, requesting that the Surrogate give the 50% share originally meant for Cabrini Hospital to Memorial Sloan Kettering. The executor indicated that the bequest originally meant for Cabrini should be given to Memorial Sloan Kettering because the deceased had been treated there.
The Chairman of the Board of Directors of St. Joseph contacted Richard A. Klass, Your Court Street Lawyer, about objecting to the bequest to Memorial Sloan Kettering and, instead, requesting that the Surrogate pay the entire net estate to St. Joseph Rest Home for the Aged.

Cy Pres doctrine

There is a centuries’ old doctrine of cy pres (pronounced “sigh – pray”), which is a rule that when literal compliance with a Will or trust is impossible, the intention of a donor or testator should be carried out as nearly as possible. This is especially true when a bequest to a charity has “lapsed” as the result of the charity no longer existing to receive the bequest; then the Surrogate may designate another charity in its place.
In the seminal case of In re Brundrett’s Estate [1940], a percentage of the remainder of the estate was left to St. Mark’s Hospital, but the hospital was bankrupt in 1931 and ceased to operate as a hospital and perform the functions for which it was originally incorporated. The court held that the gift to the hospital was, therefore, ineffectual. The court then applied the doctrine of cy pres and paid over that charity’s portion to the other charitable ‘remaindermen’ named in the Will (the term ‘remaindermen’ refers to others who receive the residuary or balance of an estate).
Following the holding in In re Brundrett’s Estate, the court in In re Shelton’s Estate [1942] was faced with a similar issue as presented here. In that case, the decedent left moneys to a charitable institution located in Italy that was maintained by a New York religious corporation. After the death of the decedent, the New York religious corporation relinquished its maintenance of the Italian institution and discontinued all of its religious and charitable activities. Although its officers continued to function, it was a “charity in name only.” The court held that the discontinuance of the charitable and religious functions precluded authorization of payment of the legacy to the entity. However, the court recognized that the decedent had charitable intentions to provide a gift for religious purposes and invoked the doctrine of cy pres. In granting the legacy originally left to the Italian charity to the other charitable legatee, the court in In re Shelton’s Estate held: “By the application of that doctrine [cy pres] the surrogate holds that the legacy did not lapse and may be paid to The Cathedral Church of St. John the Divine in the City and Diocese of New York, the other charitable legatees named in the will and object of the generous bounty of the testatrix.”
After the objection to the judicial accounting by St. Joseph, with sufficient case law being presented in support of the request to pay the bequest of Cabrini Hospital over to St. Joseph, the executor agreed to pay 100% of the residuary estate to St. Joseph, roughly $3 million in total. The nursing home needs a new roof — now they’ll be able to afford it!
Richard A. Klass, Esq.

Credits:

Photo of Richard Klass by Robert Matson, copyr. Richard A. Klass, 2011.
Newsletter marketing by The Innovation Works, Inc.
Image on page one: Salzgitter, Städtisches Altenheim, 1961, Maria retirement home in Tann, in a hospital room with a Dutch nun. Licensed under the Creative Commons Attribution-Share Alike 3.0 Germany license. Attribution: Bundesarchiv, B 145 Bild-F010160-0001 / Steiner, Egon / CC-BY-SA.

copyr. 2012 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Getting it Done: The Importance of Entering Timely Defaults

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In 2004, a guy went out for a night of drinkin’ on the town. On the way home, he stopped in to one last bar to drink. At the bar, in a very drunk condition, he hit on a woman. After leaving the bar to go home, he saw standing by a nearby building a woman who he thought was the same one as the one in the bar. When the guy saw the woman on the street, thinking it was the one he saw in the bar, he grabbed and touched her. Unfortunately, it turned out that she was not the same woman—and she pressed charges of assault.
 
Naturally, the woman claiming assault not only sought criminal charges but also brought a civil action to recover damages from the guy. She brought the law suit against him through her lawyer in 2004. The defendant failed to answer the complaint after being served; however, her lawyer did not ask the judge to enter a default against the guy until 2006 – two years later. In support of the request for the default judgment, the lawyer stated that the woman had left New York to return to her native country because she was emotionally distraught over the assault and did not return until 2006. The judge granted a default judgment for the woman’s pain and suffering for $1,000,000.
 
The relevant New York statute governing default judgments, CPLR 3215, provides that, when a defendant has failed to appear in an action, the plaintiff may seek a default judgment against him. However, the plaintiff is required to do so within one year after the default, as required by subsection (c) thereof:
 
Default not entered within one year: If the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed. A motion by the defendant under this subdivision does not constitute an appearance in the action.
 
According to the above subsection, the court should have dismissed the complaint as abandoned, based upon the woman’s failure to take proceedings for the entry of default within one year. Numerous cases have held that dismissal of the complaint is required when there has been a failure to take timely proceedings for entry of default. See,Saunders v. Central Brooklyn Coordinating Council, Inc., 273 AD2d 294 (2d Dept. 2000); PM-OK Associates v. Britz, 256 AD2d 151 (1st Dept. 1998).

Plaintiff must show a justifiable excuse

The Second Department held, in Winkelman v. H&S Beer and Soda Discounts Inc., 91 AD2d 660 (1982), that, absent a justifiable excuse and a showing that the action is meritorious, the plaintiff’s failure to enter a default judgment against the defendant within one year of the latter’s default mandates dismissal of the action against defendant as abandoned. In the affirmation of the woman’s attorney, he stated:

“ That shortly after the Summons and Complaint was served, the Plaintiff, suffering from emotional stress and trauma based on the underlying assault and battery complained in this action, left the United States for her home country of Spain, as Defendant resided in the same neighborhood as Plaintiff, and Plaintiff, in fear of her safety and mental well-being, withdrew from the country. ”

In Herzbrun v. Levine, 23 AD2d 744 (1st Dept. 1965), the Court held that the plaintiff’s excuse that she was forced to move to West Germany shortly after the action was commenced was not sufficient cause to excuse the failure to comply with the provisions of CPLR 3215. In Sortino v. Fisher, 20 AD2d 25, 30 (1st Dept. 1963), the court stated that “[T[he duty of prosecuting …. (an) action rests upon the (person) who brings it, not the (party) who defends it.” In that case, the court stated that “there is an intimate relationship between the merit of an action and the fact that it has been neglected.” This is the reason why an affidavit is needed because it must be “as good as the kind of affidavit which could defeat a motion for summary judgment on the ground that there is no issue of fact.” As Justice Breitel wrote in the decision: “Given the delay, he has a double burden; to justify the delay and to lend credit to the proferred justification by establishing merit.” Further, “Even an action of great merit may be forfeited by prolonged delay. It is the right of a defendant to be free of a case which is not diligently prosecuted. For obvious reasons, it is very rare and quite perverse that an action of merit is not diligently prosecuted.”

Richard A. Klass, Your Court Street Lawyer, brought a motion, termed an “Order to Show Cause,” to vacate the default judgment and dismiss the action. The motion stated that the excuse of the plaintiff for not entering the default within one year (that the woman suffered from emotional stress) had absolutely nothing to do with the requirement that her attorney should have moved for the default within one year since he proceeded on the Verified (or sworn) Complaint of his client and did not need any further sworn affidavits from her to obtain the default judgment.

In response to the Order to Show Cause, the plaintiff capitulated and agreed to settle the ‘Million Dollar’ case for a mere $7,500 to avoid further litigation!

by Richard A. Klass, Esq.
Your Court Street Lawyer
 
©2007 Richard A. Klass. Art credits: page one, Bauer mit zusammengebrochenem Pferd by Giovanni Fattori.

copyr. 2011 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Bringing an Action for Specific Performance of a Real Estate Contract of Sale

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Typically, the sale of real estate involves the signing of a contract of sale between the owner of the real estate and the prospective buyer for a certain dollar amount. Each side is eager to close the transaction — the seller wants the money from the closing to purchase another property and the buyer wants to move into the house.

Sometimes, the seller/owner of the real estate attempts to delay or cancel the contract of sale for various reasons, including that another party has come along offering more money to purchase the property than the contract price. The buyer is put into a position of bringing an action to enforce his/her rights under the contract of sale to purchase the property.

The right of the prospective buyer to bring an action for “specific performance” is an important one, which is based upon an old, “common law” theory that real estate is considered a “unique asset,” for which a money judgment against the seller for breach of contract cannot recompense. The courts recognize that a certain piece of real estate cannot be replicated or replaced with another or with money.

The action to force the sale of real estate based upon a breach of contract starts with the filing of a Complaint with the Supreme Court in the county in which the property is located. At or about the same time, the buyer will file a “Notice of Pendency” with the County Clerk. The “Notice of Pendency” or, as commonly known as the “Lis Pendens,” is a document which serves as notice to the entire world that the buyer is laying an equitable claim to the ownership of the property and that an action is pending to determine the buyer’s potential ownership rights therein. Any person who later contracts to purchase the property is effectively “on notice” of the buyer’s claim and is taking substantial risk in proceeding in any transaction with the seller/owner of the real estate.

After the action is filed, the seller will have an opportunity to answer the Complaint. Then, typically, one of the parties will move for “summary judgment,” asking the judge to decide whether there was a breach of the contract of sale and whether the buyer is indeed entitled to the specific performance of the contract of sale. If the judge decides that the buyer is entitled to purchase the property, then the judge will issue an Order directing the seller/owner to proceed to closing and tender a Deed to the buyer.

It is important for the prospective buyer to move quickly to file the Notice of Pendency when it appears that a breach of the contract of sale has or will occur, in order to ensure that there is constructive notice of the action for specific performance; otherwise, the buyer, albeit entitled to money damages, will no longer have the right to the property.

by Richard A. Klass, Esq.
 

copyr. 2004 and 2010 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

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Bringing an Action for Specific Performance of a Real Estate Contract of Sale by Richard A. Klass, Esq. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License. For permissions beyond the scope of this license, please contact Mr. Klass. Insert the words “reprint permission request” in the subject line of the email.

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Bringing an Action for Specific Performance of a Real Estate Contract of Sale

Author Name:
Richard A. Klass, Esq.

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About the Author:
Richard A. Klass, Esq. maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York. He may be reached by phone at (718) COURT-ST [(718) 268-7878)] with any questions. Prior results do not guarantee a similar outcome.

Additional articles by Mr. Klass may be found on the firm’s website.
Back issues from Mr. Klass’ quarterly newsletter, Law CURRENTS are available on the firm’s website.
Articles from Law CURRENTS may be available for reprint. Please see individual articles for license information.

 

R. A. Klass
Your Court Street Lawyer

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