Howard v. Murray, 38 N.Y.2d 695 (1976)

An owner in possession of property can bring an action in equity to remove an apparent encumbrance on the property at any time while they are the owner in possession, and this right is not barred by the statute of limitations.

Summary

The Howards sued their attorney, Murray, seeking to rescind a mortgage, bond, and related agreements. The trial court found an attorney-client relationship existed but that Murray proved the fairness of the transaction. The Appellate Division affirmed, holding the action was barred by the Statute of Limitations. The Court of Appeals reversed, holding that the Statute of Limitations does not bar an owner in possession from bringing an action to remove an encumbrance on their property. The court remitted the case to the Appellate Division for review of the facts and the extent of relief, if any, to be granted.

Facts

George Howard, due to a heart condition, decided to retire to Florida in 1958. He owned a commercial building in Mount Vernon, generating approximately $15,000 net annual rental income. The property was valued at nearly $500,000 but was subject to a $280,000 first mortgage. Howard sought advice on selling the property and reinvesting the proceeds to increase his retirement income. His initial attorney then contacted the defendant, Murray, a tax attorney, who proposed a plan: Murray would loan Howard money in exchange for a mortgage, bond, and option to purchase the property.

Procedural History

The Howards sued Murray to rescind the mortgage, bond and agreements. The trial court found in favor of Murray, finding the agreement fair. The Appellate Division affirmed based on the Statute of Limitations. The Court of Appeals reversed the Appellate Division’s ruling regarding the Statute of Limitations and remitted the case for review of facts and determination of relief under Article 15 of the Real Property Actions and Proceedings Law.

Issue(s)

Whether the Statute of Limitations bars a property owner from bringing an action to discharge an encumbrance from the record when they are the owner in possession.

Holding

No, because an owner in possession has a right to invoke the aid of a court of equity at any time while they are so the owner in possession, to have an apparent, though in fact not a real encumbrance discharged from the record, and such a right is never barred by the Statute of Limitations.

Court’s Reasoning

The Court of Appeals relied on the principle that an owner in possession has a continuous right to seek equitable relief to remove encumbrances on their property, which is not subject to the typical Statute of Limitations defenses. The court cited Ford v. Clendenin, 215 N.Y. 10, 16, stating: “It is well settled that an owner in possession has a right to invoke the aid of a court of equity at any time while he is so the owner in possession, to have an apparent, though in fact not a real incumbrance discharged from the record, and such a right is never barred by the Statute of Limitations.” The court dismissed the argument that the rule didn’t apply because the property was leased, stating there’s no requirement for the owner to be in actual possession to seek remedies under Article 15 of the Real Property Actions and Proceedings Law. The court found that the complaint adequately stated a cause of action because the plaintiffs alleged they were the owners of record and the defendant claimed an adverse interest in the property. The Court clarified that it was for the lower courts to decide the extent of the relief to be granted. The Court affirmed the denial of counsel fees to the defendant. The practical implication of this holding is that property owners facing questionable encumbrances on their title have a potentially powerful tool to clear title, even if a significant amount of time has passed, so long as they maintain ownership and can demonstrate the existence of the encumbrance.