| 1426 46 St., LLC v Klein |
| 2009 NY Slip Op 01784 [60 AD3d 740] |
| March 10, 2009 |
| Appellate Division, Second Department |
| 1426 46 St., LLC, Respondent, v Agnes Klein et al.,Appellants. |
—[*1] Balfe & Holland, P.C., Melville, N.Y. (Kevin Balfe and Amy J. Zamir of counsel), forrespondent.
In an action for ejectment, the defendants appeal from an order of the Supreme Court, KingsCounty (Bayne, J.), dated April 17, 2008, which granted the plaintiff's motion for summaryjudgment on the complaint and denied their motion for summary judgment dismissing thecomplaint.
Ordered that the order is modified, on the law, by deleting the provision thereof granting theplaintiff's motion for summary judgment on the complaint, and substituting therefor a provisiondenying the motion; as so modified, the order is affirmed, without costs or disbursements.
The defendant Agnes Klein and her husband, the defendant Erno Klein, have resided at 142646th Street in Brooklyn for more than 36 years. Mrs. Klein allegedly owned the premises in the1980s, but sold it to Barry Low in 1990 because she was experiencing financial difficulties. Mrs.Klein claims that in exchange for selling the premises to Low at a price significantly belowmarket value, he gave her a 99-year lease to occupy the second floor apartment. Under the termsof the lease, which was dated August 27, 1990, Mrs. Klein was required to pay annual rentconsisting of one half of the carrying costs of the premises, and one half of the payments due ona mortgage held by Citibank. However, the 99-year lease was not recorded until October 14,1997, more than seven years after it was executed.
Soon after purchasing the premises, Low defaulted on his payment obligations under theCitibank mortgage, and in 1991 the bank commenced a foreclosure action against him. It isundisputed that Mrs. Klein was not named as a defendant in the 1991 foreclosure action, and wasnot served with process. It is also conceded that Mr. Klein was not properly served with processin the foreclosure action. Citibank obtained a judgment of foreclosure and sale in its favor, andon October 14, 1994, the premises were conveyed by referee's deed to the successful bidder, whowas [*2]Low's sister, Ruchie Horowitz.
Ten years later, on October 14, 2004, Horowitz sold the premises to Jacob Daskal and BellaDaskal. On the same day, the Daskals executed a deed conveying the premises to the plaintiff, alimited liability company of which Jacob Daskal is the managing member. After taking title, theplaintiff commenced this ejectment action against the defendants seeking to regain possession ofthe second-floor apartment. The plaintiff thereafter moved for summary judgment on thecomplaint, contending, inter alia, that the 99-year lease was a nullity because it had not beenrecorded until after the commencement of the foreclosure action and the foreclosure sale. Thedefendants also moved for summary judgment dismissing the complaint, arguing that Mrs.Klein's rights under the 99-year lease had not been extinguished because she was not named orserved in the foreclosure action. The defendants also contended that Horowitz had recognizedthe 99-year lease by her conduct, inter alia, in failing to request monthly rent, or seeking theirremoval during the 10 years she owned the property. The Supreme Court granted the plaintiff'smotion for summary judgment and denied the defendants' motion, concluding that the defendantswere not necessary parties to the foreclosure action because their lease was not recorded at thetime that action was commenced, and that the unrecorded lease was void as against the purchaserat the foreclosure sale pursuant to Real Property Law § 291. We modify to deny theplaintiff's motion for summary judgment on the complaint.
Contrary to the Supreme Court's determination, the defendants were necessary parties to theforeclosure action. Pursuant to RPAPL 1311, the plaintiff in a mortgage foreclosure action isrequired to join, as a party defendant, any person "whose interest is claimed to be subject andsubordinate to the plaintiff's lien," including "[e]very person having an estate or interest inpossession . . . in the property as tenant in fee" (subd [1]). Accordingly, tenants arenecessary parties to a foreclosure action (see 6820 Ridge Realty v Goldman, 263 AD2d22, 25 [1999]; Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400,404 [1983]). The absence of a necessary party in a foreclosure action leaves that party's rightsunaffected by the judgment and sale, and the foreclosure sale may be considered void as to theomitted party (see 6820 Ridge Realty v Goldman, 263 AD2d at 26; Polish Natl.Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d at 406; see also Glass v Estate of Gold, 48AD3d 746, 747 [2008]; Board ofMgrs. of Parkchester N. Condominium v Alaska Seaboard Partners Ltd. Partnership, 37AD3d 332, 333 [2007]). Thus, a lessee who is not joined in a foreclosure action "retains theright to remain in possession of the property for the remainder of the term of his or her tenancy,regardless of whether the lease has been recorded. The failure to join a tenant as a party fails tocut off the tenancy" (2 Mortgages and Mortgage Foreclosure in New York § 32:12). Sincethe defendants were not properly joined as parties to the foreclosure action, the judgment offoreclosure and sale did not extinguish their tenancy rights.
Furthermore, the court should not have determined, as a matter of law, that the lease wasvoid as against Horowitz, who purchased the premises at the foreclosure sale, because it wasunrecorded. Although a lease for a term exceeding three years is a conveyance which may berecorded (see Real Property Law § 290 [2]), an unrecorded conveyance is voidonly as against a subsequent good faith purchaser for value (see Real Property Law§ 291). Moreover, "[a]ctual possession of real estate is sufficient notice . . .to all the world of the existence of any right which the person in possession is able to establish"(Phelan v Brady, 119 NY 587, 591-592 [1890]; see Ward v Ward, 52 AD3d 919, 921 [2008]; Nethaway vBosch, 199 AD2d 654 [1993]). Here, in support of its motion for summary judgment, theplaintiff offered no evidentiary proof that its predecessor-in-title, Horowitz, was a good faithpurchaser who took title without actual or constructive notice of the defendants' unrecorded leaseinterest.[*3]
We also reject the plaintiff's contention that the lease wasextinguished by operation of CPLR 6501, which provides that a person whose conveyance isrecorded after the filing of a notice of pendency "is bound by all proceedings taken in the actionafter such filing to the same extent as a party." In support of its motion for summary judgment,the plaintiff failed to offer sufficient evidence to establish that a notice of pendency was indeedfiled in connection with the foreclosure action. Moreover, while "[i]nterests acquired prior to thefiling of the notice of pendency but not recorded until after the notice was filed" are generallybound by the foreclosure judgment and sale (Polish Natl. Alliance of Brooklyn v WhiteEagle Hall Co., 98 AD2d at 404), an unrecorded interest in a conveyance is not defeated ifthe plaintiff in the foreclosure action knew of it prior to the filing of the notice of pendency(see Lamont v Cheshire, 65 NY 30 [1875]; New Falls Corp. v Board of Mgrs. of Parkchester N. Condominium,Inc., 10 AD3d 574 [2004]). Even assuming that Citibank filed a notice of pendencyupon the commencement of its foreclosure action, neither the plaintiff nor the defendants haveoffered sufficient evidence to establish whether Citibank had actual or constructive notice of theunrecorded lease prior to the filing of the notice. Accordingly, it cannot be determined as amatter of law that the lease was extinguished because it was recorded after the alleged filing of anotice of pendency (see New FallsCorp. v Board of Mgrs. of Parkchester N. Condominium, Inc., 10 AD3d 574 [2004]).
In addition, regardless of whether the lease was extinguished by the foreclosure judgmentand sale, the plaintiff is not entitled to summary judgment because a triable issue of fact exists asto whether the lease was revived by attornment. "When a tenant holds under an unexpired leasesubject to a mortgage, which is subsequently foreclosed, and after the sale in foreclosure free ofthe lease pays rent to the purchaser, there is an attornment. Under these circumstances the tenantwill be deemed to hold from the new owner upon the same terms as he previously held from thelandlord" (1 Dolan, Rasch's Landlord and Tenant—Summary Proceedings § 2:5, at107-108 [4th ed]; see Real Property Law § 224 [3]; Ripple's of Clearview v LeHavre Assoc., 88 AD2d 120, 122 [1982]). Although the defendants contend that they wereentitled to summary judgment because they established an attornment as a matter of law, theirevidentiary submissions simply raise triable issues of fact as to whether they complied with thepayment obligations of the subject lease, and whether Horowitz, who purchased the premises atthe foreclosure sale and owned it for 10 years without seeking to dispossess them, clearly andunequivocally accepted attornment (see Holm v C.M.P. Sheet Metal, 89 AD2d 229,233-234 [1982]). Skelos, J.P., Dillon, Angiolillo and Eng, JJ., concur.