New York Law Review

Tag: RPAPL 1371

  • M&T Real Estate Trust v. Doyle, 20 N.Y.3d 533 (2013): Delivery of Deed Requires Acceptance for Deficiency Judgment

    M&T Real Estate Trust v. Doyle, 20 N.Y.3d 533 (2013)

    For the purposes of determining the timeliness of a motion for a deficiency judgment under RPAPL 1371(2), “consummation of the sale by the delivery of the proper deed” occurs only when the grantee accepts the deed, not merely when the grantor presents it.

    Summary

    M&T Real Estate Trust sought a deficiency judgment after foreclosing on commercial mortgages. The defendants argued that M&T’s motion was untimely because it was filed more than 90 days after the referee initially mailed the deed to M&T’s attorney. M&T argued that the 90-day period started later, when the referee re-executed and delivered the deed which was then accepted. The New York Court of Appeals held that the 90-day period under RPAPL 1371(2) begins only upon acceptance of the deed by the grantee, reversing the Appellate Division’s decision and reinstating the County Court’s order and judgment.

    Facts

    M&T obtained a foreclosure judgment against James Doyle and Jim Doyle Ford, Inc. At auction, M&T purchased the property and planned to assign the bid to MAT Properties, Inc. The referee executed a deed naming MAT as the grantee and mailed it to M&T’s attorney. Before the deed arrived, M&T’s attorney, learning of a potential higher bidder, told the referee that MAT would not accept the deed and that the documents would be returned, which they were. Later, M&T instructed the referee to record the deed. The referee then re-executed a new deed, which was accepted and subsequently recorded.

    Procedural History

    County Court granted M&T’s motion for a deficiency judgment, holding that the motion was timely because it was filed within 90 days of the re-executed deed. The Appellate Division reversed, concluding that the 90-day period began with the initial delivery attempt. The Court of Appeals granted M&T leave to appeal.

    Issue(s)

    Whether, for purposes of RPAPL 1371(2), the “consummation of the sale by the delivery of the proper deed of conveyance to the purchaser” occurs when the referee (grantor) first executes and mails the deed, or only when the grantee (or its agent) accepts the deed?

    Holding

    No, the consummation of the sale occurs when the grantee accepts the deed, because acceptance is a necessary component of delivery under New York real property law.

    Court’s Reasoning

    The Court of Appeals relied on Real Property Law § 244, which states that a grant takes effect only from its delivery, and on common law principles requiring both presentment and acceptance for delivery. The court stated, “[t]he delivery of a deed without acceptance is nugatory…An intention to deliver on the one hand and to accept on the other, is necessary to give effect to the instrument.” The court emphasized that no statutory basis exists to treat a referee’s deed differently from other deeds. In this case, M&T’s attorney twice declined to accept the initially delivered deed. The court found this to be “opposing evidence” sufficient to rebut any presumption of delivery in May 2010. Only when the deed was re-executed and then accepted did the transfer occur, making M&T’s motion timely. The court distinguished this case from situations where the grantee accepts and retains the deed without objection, as in Crossland Sav. v Patton. The court emphasized that the key is not merely physical transfer, but the intention to accept the conveyance, quoting Ten Eyck v Whitbeck, “[t]he delivery of a deed is essential to the transfer of title, and there can be no delivery without an acceptance by the grantee”.

  • Kreisler v. Bartliff, 68 N.Y.2d 668 (1986): Deficiency Judgments and Mortgages on Multiple Properties

    Kreisler v. Bartliff, 68 N.Y.2d 668 (1986)

    When a single debt is secured by mortgages on both a corporate debtor’s property and an individual guarantor’s separate property, failure to obtain a deficiency judgment after foreclosing on the corporate property bars subsequent foreclosure on the guarantor’s property or further action on the guarantee under RPAPL 1371(3).

    Summary

    Plaintiffs loaned money to a corporation, secured by mortgages on corporate properties and a personal guarantee from the corporation’s principals, also secured by a mortgage on the guarantor’s property. After the corporation defaulted, plaintiffs foreclosed on the corporate property but did not seek a deficiency judgment. Subsequently, they attempted to foreclose on the guarantor’s property. The New York Court of Appeals held that the failure to obtain a deficiency judgment after the first foreclosure barred the second foreclosure action, as RPAPL 1371(3) deems the proceeds of the initial sale as full satisfaction of the debt, protecting guarantors from further liability in such situations. The court emphasized that the statute’s purpose extends beyond preventing multiple lawsuits to ensuring fair valuation of property in deficiency calculations.

    Facts

    1. Plaintiffs loaned $35,000 to Journey’s End Construction Corporation, receiving mortgages on three corporate properties as collateral.
    2. Sanford and Sue Kreisler, principals of the corporation, personally guaranteed the loan, as did Jeanette Palmer, who secured her guarantee with a second mortgage on her property.
    3. The corporation defaulted on payments in October 1975.
    4. Plaintiffs initiated separate foreclosure actions: one against the corporate property (Shirley property) and another against Palmer’s property (Sayville property).
    5. Palmer was named as a defendant in the corporate property foreclosure action.
    6. Plaintiffs obtained a Referee’s deed for the corporate property after foreclosure, but never moved for a deficiency judgment.
    7. Plaintiffs then scheduled a foreclosure sale of Palmer’s Sayville property.

    Procedural History

    1. Plaintiffs initiated foreclosure actions in Special Term.
    2. Special Term held that failure to move for a deficiency judgment in the corporate property foreclosure barred foreclosure on Palmer’s property.
    3. The Appellate Division affirmed this decision.
    4. The Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the failure to obtain a deficiency judgment after foreclosure on a corporate debtor’s property bars a subsequent foreclosure action on a guarantor’s property, when both secure the same debt.

    Holding

    1. Yes, because RPAPL 1371(3) deems the proceeds of the initial sale as full satisfaction of the mortgage debt when a deficiency judgment is not sought, thereby protecting the guarantor from further liability.

    Court’s Reasoning

    The Court of Appeals reasoned that while the original purpose of RPAPL 1371 was to avoid multiple lawsuits, amendments in the 1930s expanded its scope to protect mortgagors (and, by extension, guarantors) from unfair deficiency judgments during economic downturns. The court stated, “the proceeds of the sale regardless of amount shall be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist” (RPAPL 1371 [3]). The court emphasized that this protection extends to guarantors who provide additional security. Because Palmer was named as a defendant in the initial foreclosure action, she was entitled to the statute’s protection. The court rejected the argument that separate foreclosure actions are permissible when multiple properties secure a single debt, holding that unless the court orders otherwise, separate sales should occur with deficiency applications made after each sale to determine the remaining debt. The court explicitly disapproved of cases suggesting a contrary view, underscoring the importance of protecting guarantors and ensuring fair valuation in deficiency calculations.