New York Law Review

Tag: Right of Redemption

  • NYCTL 1999-1 Trust v. 573 Jackson Avenue Realty Corp., 13 N.Y.3d 573 (2009): Clarifying Redemption Rights in Foreclosure Actions

    NYCTL 1999-1 Trust v. 573 Jackson Avenue Realty Corp., 13 N.Y.3d 573 (2009)

    A property owner seeking to exercise their equity of redemption must make an unconditional tender of the full amount due before the foreclosure sale; depositing funds with the County Clerk without clear indication of intent to redeem is insufficient.

    Summary

    This case clarifies the requirements for a property owner to redeem their property before a foreclosure sale. Jackson failed to pay property taxes, leading to a tax lien acquired by the Trust. After Jackson paid the initial lien amount but not the accrued interest, the Trust initiated foreclosure proceedings. Jackson attempted to stay the foreclosure sale by depositing funds with the County Clerk without specifying the purpose. The Court of Appeals held that this action did not constitute a proper redemption because Jackson failed to make an unconditional tender of the full amount owed to the Trust. The decision emphasizes that simply depositing money is not enough; the intent to redeem must be clear and communicated to the mortgagee.

    Facts

    Jackson failed to pay real property taxes on its Bronx property.

    The Trust acquired a tax lien against the property for $2,412.75.

    Jackson paid the initial lien amount nearly three years later, but not the accrued statutory interest.

    The Trust commenced a foreclosure action to recover the outstanding balance.

    A foreclosure sale was scheduled for August 24, 2007.

    Jackson deposited $19,563.71 with the Bronx County Clerk before the sale, stating the purpose and beneficiaries were “to be determined.”

    Jackson informed the Trust that the deposit “stayed” the sale.

    The foreclosure sale proceeded, and a third party purchased the property.

    Procedural History

    Supreme Court granted summary judgment to the Trust and ordered foreclosure.

    Jackson appealed the judgment of foreclosure.

    Jackson moved to cancel the foreclosure sale, arguing a statutory stay was in effect.

    Supreme Court denied the motion.

    The Appellate Division affirmed the foreclosure judgment and the denial of the motion.

    The Court of Appeals granted Jackson leave to appeal.

    Issue(s)

    Whether Jackson properly stayed the foreclosure sale under CPLR 5519(a)(2) or (6) or RPAPL 1341.

    Whether Jackson effectively exercised its right to redeem the property before the foreclosure sale.

    Holding

    No, because CPLR 5519(a)(2) does not apply to judgments of foreclosure, and Jackson’s undertaking was not in a sum fixed by the court as required by CPLR 5519(a)(6). RPAPL 1341 is inapplicable as the case did not involve a partial foreclosure.

    No, because Jackson did not make an unconditional tender of the full amount owed to the Trust before the sale.

    Court’s Reasoning

    The Court found CPLR 5519(a)(2) inapplicable because it pertains only to judgments directing the payment of money, not foreclosure judgments. CPLR 5519(a)(6) was also not applicable, as the undertaking wasn’t in a sum fixed by the court.

    Regarding RPAPL 1341, the Court clarified that this provision applies only to partial foreclosures where future payments are anticipated. The statute authorizes a stay when a property owner pays a sufficient amount into court in situations “[w]here an action is brought to foreclose a mortgage upon real property upon which any part of the principal or interest is due, and another portion of either is to become due.” Since this was not a partial foreclosure, RPAPL 1341 did not apply.

    Addressing the right of redemption, the Court emphasized that a property owner must make an unconditional tender of the full amount due before the foreclosure sale to redeem the property. Simply depositing funds with the County Clerk, without clearly communicating the intent to redeem and without tendering the funds to the mortgagee, is insufficient. The Court explicitly disapproved of Appellate Division cases that had engrafted RPAPL 1341’s requirements onto the common-law right of redemption, stating, “To the extent LFJ, EMC and Green Point suggest that a property owner must comply with RPAPL 1341’s requirements—including a motion for a stay and a sum deposited with the court—as preconditions for redemption, those cases should not be followed. An unconditional tender of the full amount due is all that is required.”

    The Court noted that Jackson only sought to stay the sale through its deposit, never claiming it had fully satisfied the debt or making an unconditional tender.

  • Carney v. Philippone, 30 N.Y.3d 334 (2004): Redemption Rights After Tax Sale Under Onondaga County Tax Act

    Carney v. Philippone, 30 N.Y.3d 334 (2004)

    Under the Onondaga County Tax Act, a tax certificate holder must provide an owner with a six-month notice to redeem before seeking a deed, within the two-year redemption period, while an occupant must be served six months before the three-year redemption period expires; this aligns with due process and legislative intent.

    Summary

    This case concerns the interpretation of the Onondaga County Tax Act, specifically addressing when the right to redeem property expires after a tax sale. The Carneys failed to pay property taxes, leading to the sale of tax certificates. The central issue involves a malpractice claim against their attorney, Philippone, for allegedly failing to advise them to file for bankruptcy before the redemption period expired. The New York Court of Appeals clarifies the interplay between different sections of the Act, emphasizing the importance of providing actual notice to property owners while adhering to statutory redemption periods to balance the collection of taxes with preventing property forfeiture. The court ultimately determines that notice must be given six months before the two-year or three-year redemption periods expire for owners and occupants, respectively.

    Facts

    The Carneys owned property in Manlius, NY, and operated Sunnyside Nursing Home and Sunnyside Adult Home on the property. In 1993 and 1994, they failed to pay real estate taxes, leading to the sale of tax certificates to Onondaga County, which later resold them to Tax Certificate Associates, Inc. (TCA). The Carneys also took out a mortgage with Adirondack Capital Management, Inc. (ACM), defaulting later and leading to foreclosure proceedings. The Corvettis, principals of ACM, purchased the tax sale certificates from TCA. The Corvettis then sent the Carneys a six-month notice to redeem. Advised by Philippone, the Carneys filed for bankruptcy protection, but the bankruptcy court found the redemption period had already expired.

    Procedural History

    The Carneys’ bankruptcy trustee sued Philippone for malpractice in federal court, alleging that his late advice caused them to lose their property rights. The District Court granted summary judgment for Philippone, finding collateral estoppel based on the Bankruptcy Court’s decision and agreeing that the redemption period expired before Philippone was hired. The Second Circuit reversed, finding collateral estoppel inapplicable and certifying questions about the interpretation of the Onondaga County Tax Act to the New York Court of Appeals.

    Issue(s)

    1. Under the Onondaga County Tax Act, is an owner’s right to redeem their property strictly limited to two years after a tax sale, even without a notice to redeem, or does the right survive until six months after such notice, even if that extends beyond two years?

    2. Does the term “occupant” in Section 8 of the Onondaga County Tax Act include an individual operating a business on the property but not residing there? If so, does an individual who is both an owner and an occupant have three years to redeem the property?

    Holding

    1. No, the owner’s right to redeem is not strictly limited to two years without notice; however, the tax sale purchaser must provide the owner with a six-month notice to redeem before requesting a deed, but this notice must be served within the initial two-year redemption period, because the legislative intent was to provide notice while adhering to existing redemption timelines.

    2. Yes, the term “occupant” includes an individual operating a business on the property. However, an individual who is both an owner and an occupant does not have three years to redeem; they are still held to the two-year redemption period applicable to owners, because the rationale for the longer occupant period (lack of direct tax notices) does not apply to owners.

    Court’s Reasoning

    The Court of Appeals based its decision on two principles: interpreting the Legislature’s intent and construing tax sale statutes liberally in the owner’s favor. The court analyzed Sections 6, 8, and 9 of the Onondaga County Tax Act. It noted the legislative history of the Act, particularly the 1971 amendment requiring personal service of a notice to redeem, aimed at providing due process. The court reasoned that the Legislature intended to provide actual notice to property owners before the transfer of property to the tax certificate holder. "Thus, we conclude that a tax certificate holder must give an owner or occupant a six-month notice to redeem, as provided in section 6, and that without such notice there can be no transfer of the property to the tax certificate holder." The court harmonized the notice requirement with the two- and three-year redemption periods in Section 8 by ruling that the notice must be served six months before the expiration of these periods. As for the definition of “occupant,” the court looked to the Real Property Tax Law definition at the time the Act was amended, which included those operating a business on the property. However, it held that an owner-occupant is still bound by the two-year owner redemption period, as the purpose of the longer occupant period is to account for a lack of direct notice, which an owner would inherently have. The court also noted that the Act provides a five-year outer limit for application for conveyance, preventing perpetual clouds on title. It explicitly highlighted the need for legislative review of the Onondaga County Tax Act due to the inconsistencies and ambiguities identified throughout the case.

  • Lupoli v. Vescio, 31 A.D.2d 734 (N.Y. App. Div. 1968): Notice Requirements for Pledge Sales After Default

    Lupoli v. Vescio, 31 A.D.2d 734 (N.Y. App. Div. 1968)

    When a loan agreement constitutes a pledge of stock and a mortgage, upon default, the pledgee must provide notice to the pledgor of the sale of both items and the opportunity to redeem, as per Article 9 of the Lien Law, even if the agreement states that title to the stock passes to the pledgees upon default.

    Summary

    Lupoli sued Vescio concerning a loan agreement where Lupoli pledged stock in Vescio’s corporation and a mortgage on the corporation’s property as collateral. Upon Lupoli’s default, Vescio attempted to take ownership of the pledged assets without providing notice or an opportunity to redeem. The court determined that the agreement constituted a pledge and that Vescio, as the pledgee, was required to comply with Article 9 of the Lien Law, which mandates notice and an opportunity for redemption before the sale of pledged items. The court held that a provision stating transfer of title upon default does not waive the notice requirement.

    Facts

    Lupoli and Vescio entered a loan agreement. As part of the agreement, Lupoli pledged 500 shares of stock in Vescio’s corporation and a first mortgage on the corporation’s premises as collateral for the loan. The loan agreement included a provision stating that upon Lupoli’s default, title to the stock would pass to Vescio. Lupoli defaulted on the loan. Vescio attempted to take ownership of the stock and mortgage without providing Lupoli with notice of sale or an opportunity to redeem the pledged assets.

    Procedural History

    The initial court determination was appealed to the Appellate Division. The Appellate Division modified the lower court’s ruling, declaring that Ray Lupoli (presumably a successor to Vescio) held the stock and mortgage as a trustee for the plaintiff and as a successor-pledgee. The court further directed Ray Lupoli to comply with Article 9 of the Lien Law regarding both the stock and the mortgage.

    Issue(s)

    Whether a provision in a loan agreement stating that title to pledged stock passes to the pledgee upon default constitutes a waiver of the pledgor’s right to notice and opportunity to redeem under Article 9 of the Lien Law before the sale of the pledged stock and mortgage?

    Holding

    No, because the pledgee must still comply with Article 9 of the Lien Law, which provides the pledgor with notice and an opportunity to redeem the pledged items, regardless of any clause stating that title passes to the pledgee upon default.

    Court’s Reasoning

    The court determined that the loan agreement constituted a pledge of both the stock and the mortgage. As such, the pledgee (Vescio) was obligated to provide notice to the pledgor (Lupoli) of the sale of the pledged items upon default, as well as the opportunity to redeem as afforded by Article 9 of the Lien Law. The court explicitly stated that “The provision in the agreement that, upon the plaintiff’s default, title to the stock would pass to the pledgees did not constitute a waiver of notice with respect to such stock.” This is consistent with the protective measures afforded to debtors under pledge agreements, ensuring they have a chance to recover their assets before a sale. The court referenced Toplitz v. Bauer, 34 App. Div. 526, 530, and Jones, Pledges (2d ed., 1901), §§ 501, 610, to support its holding, indicating this is a long-standing principle of pledge law. The ruling reinforces that contractual language cannot circumvent statutory requirements designed to protect debtors in pledge agreements. This case underscores the importance of following statutory procedures when dealing with secured transactions and the disposition of collateral after default. The court’s decision safeguards the pledgor’s rights and prevents the pledgee from unjustly enriching themselves through a summary transfer of ownership without providing the debtor a chance to redeem their assets.