New York Law Review

Tag: Notice of Pendency

  • Goldstein v. Gold, 48 N.Y.2d 830 (1979): Pleading Requirements for Conspiracy to Discourage Bidders at Foreclosure Sale

    Goldstein v. Gold, 48 N.Y.2d 830 (1979)

    A complaint alleging conspiracy to discourage bidders at a foreclosure sale, even with largely general allegations, states a cause of action sufficient to withstand a motion to dismiss for insufficiency of the pleading.

    Summary

    This case concerns a dispute over a mortgage foreclosure and allegations of a conspiracy to discourage bidders at the foreclosure sale. The Court of Appeals held that while general allegations of conspiracy typically require evidentiary support to survive summary judgment, they are sufficient to state a cause of action and withstand a motion to dismiss based on the insufficiency of the pleading. The court reinstated the plaintiff’s second cause of action, which alleged a conspiratorial postponement of the foreclosure sale.

    Facts

    Angelo Sardo was a party defendant in a mortgage foreclosure action. Travitsky purchased Sardo’s fee interest at a Sheriff’s sale after the filing of a notice of pendency related to the foreclosure. The plaintiffs brought a cause of action alleging a conspiracy to discourage bidders by postponing the foreclosure sale.

    Procedural History

    The lower court dismissed the second cause of action in the complaint. The Court of Appeals modified the order, reinstating the second cause of action, and otherwise affirmed the lower court’s decision.

    Issue(s)

    1. Whether the notice of pendency was constructive notice to Travitsky of the mortgage foreclosure action, binding him to the outcome of the foreclosure action.
    2. Whether the allegations of conspiracy to discourage bidders by postponing the foreclosure sale were sufficient to state a cause of action and withstand a motion to dismiss based on insufficiency as a pleading.

    Holding

    1. Yes, because Angelo Sardo was properly made a party defendant in the foreclosure action, and the purchase of Sardo’s fee interest at the Sheriffs sale, which occurred after the filing of the notice of pendency, charged Travitsky with constructive notice of the foreclosure action, and he became bound by the foreclosure action to the same extent as if he had been made a party.
    2. Yes, because the largely general allegations of conspiracy to discourage bidders by postponing the foreclosure sale, for the purposes of a motion to dismiss based on insufficiency as a pleading, do state a cause of action.

    Court’s Reasoning

    The Court reasoned that because Angelo Sardo was a party to the foreclosure action and the notice of pendency was filed before Travitsky purchased Sardo’s interest, Travitsky was bound by the foreclosure action. CPLR 6501 states that a person whose conveyance or incumbrance is recorded after the filing of the notice of pendency is bound by all proceedings taken in the action after such filing to the same extent as a party. As such, Travitsky’s rights were extinguished by the foreclosure sale, assuming the sale was properly conducted.

    Regarding the conspiracy claim, the Court acknowledged the general allegations of conspiracy might not survive a summary judgment motion without evidentiary support. However, the Court emphasized that the standard for a motion to dismiss based on the pleading’s insufficiency is lower. For the limited purpose of assessing the complaint’s sufficiency, the allegations were deemed adequate to state a cause of action, requiring the reinstatement of the second cause of action.

  • Dittmar Explosives, Inc. v. A. E. Ottaviano, Inc., 20 N.Y.2d 498 (1967): Amending Pleadings to Assert Trust Fund Claim After Lien Lapse

    Dittmar Explosives, Inc. v. A. E. Ottaviano, Inc., 20 N.Y.2d 498 (1967)

    A court may allow a plaintiff to amend their complaint, even after trial, to assert a claim under the trust fund provisions of the Lien Law, despite the original mechanic’s lien lapsing due to failure to file a notice of pendency.

    Summary

    Dittmar Explosives, an unpaid materialman, sued to foreclose a mechanic’s lien against the general contractor, Ottaviano, and its surety. The lien had lapsed because Dittmar failed to file a notice of pendency within the statutory timeframe. At trial, Dittmar sought to amend its complaint to assert a claim under the trust fund provisions of the Lien Law. The trial court dismissed the action, holding that the lien had lapsed and that it lacked the power to grant relief under the trust fund provisions because the action was not brought on behalf of all beneficiaries. The Court of Appeals reversed, holding that the trial court had the power to allow the amendment and should exercise its discretion to determine whether to grant it, considering the defendants’ delay in raising the defense and the potential for recovery under the trust fund theory.

    Facts

    Ottaviano was the general contractor for a highway construction project and subcontracted work to Curly Construction Co. Curly purchased explosives from Dittmar Explosives for the project but failed to pay the full amount. Dittmar filed a mechanic’s lien for the unpaid balance. The lien was discharged by a bond filed by Ottaviano and its surety. More than six months later, Dittmar extended the lien by court order, but did not file a notice of pendency. Dittmar then initiated an action to foreclose the lien. Curly went bankrupt and paid Dittmar a small portion of its claim. At trial, Ottaviano raised the issue of the lien’s lapse due to the lack of a notice of pendency.

    Procedural History

    The trial court dismissed Dittmar’s action to foreclose the mechanic’s lien. The Appellate Division affirmed the dismissal. The Court of Appeals reversed the Appellate Division’s order and remanded the case to the Supreme Court, instructing it to consider Dittmar’s application to amend its complaint.

    Issue(s)

    Whether the trial court erred in holding that it lacked the power to allow Dittmar to amend its complaint to assert a claim under the trust fund provisions of the Lien Law after the mechanic’s lien had lapsed.

    Holding

    Yes, because the trial court has discretion under CPLR 3025(c) to permit amendment of a complaint during or even after trial, even if the amendment substantially alters the theory of recovery.

    Court’s Reasoning

    The Court of Appeals reasoned that while the mechanic’s lien had indeed lapsed because Dittmar failed to file a notice of pendency within six months as required by Section 18 of the Lien Law, this did not preclude Dittmar from pursuing a claim under the trust fund provisions of the Lien Law. The court emphasized the broad discretion afforded to trial courts under CPLR 3025(c) to allow amendments to pleadings, even after trial, and even if such amendments substantially alter the theory of recovery. The court noted that CPLR states that leave to amend should be granted “freely”. The court distinguished the issue of whether the court *had* the power to allow the amendment from whether the court *should* exercise that power, stating that it was reversing the trial court because the trial court incorrectly believed it lacked the power to allow the amendment. The Court acknowledged the defendants’ argument regarding undue delay but noted that Dittmar sought to amend its complaint as soon as the defense of the lien’s lapse was raised. The Court also addressed the potential statute of limitations issue under Lien Law § 75, clarifying that the dispute over the completion date of the work created a factual issue to be resolved at trial. The Court cited National Bank of Deposit v. Rogers, 166 N.Y. 380, 387-388, noting that where a motion to test the validity of a complaint is reserved until trial, “the court usually will permit amendment and allow the case to be heard and determined on its merits”.