Court Opinion

ID: 5879631
Source: CourtListenerOpinion
Date Created: 2022-01-13 02:12:46.598579+00
Date Added: 2024-06-11T08:44:58.200750
License: Public Domain

Rosenberger, J., dissents
in a memorandum as follows: Plaintiffs principal is a real estate operator who purchases properties with substantial tax arrearages. He limits his investments to those properties in which in rem proceedings have not been commenced. On October 8, 1979, plaintiff purchased a building located at 2244 Crestón Avenue, in Bronx County. The contract documents acknowledged the existence of unpaid taxes. The seller represented, in the contract, that no lis pendens had been filed or in rem proceedings commenced to foreclose on the tax liens. The purchase price for the property was $3,000.
Plaintiff had ordered a policy of title insurance from defendant. It does not appear that plaintiff specifically requested of defendant a search for lis pendens or in rem proceedings regarding unpaid taxes. It also does not appear that plaintiff had, when ordering the policy, or at any other time, notified defendant of his practice of purchasing properties with tax arrearages, but upon which lis pendens had not been filed or in rem proceedings commenced. The policy, which was issued *848on November 15, 1979, expressly excepted unpaid taxes and the mortgage to which the property was subject from coverage. Also excepted were several lis pendens.
On December 5, 1978, the City of New York had commenced an in rem proceeding to foreclose against tax-delinquent properties in The Bronx. Included among those properties was the property on Crestón Avenue which had been purchased by plaintiff. The proceedings were commenced by filing a list of delinquent taxes in the office of the Bronx County Clerk, pursuant to Administrative Code of the City of New York § D17-5.0. This filing had the same force and effect as the filing and recording of an individual, separate lis pendens and of an individual, separate complaint, on behalf of the city, as to each of the properties listed, including the one which is here concerned. Although this list of delinquent taxes was filed in the County Clerk’s office, it was never docketed in the block indexes of notices of pendency of action against the block in which the property was located as required by Administrative Code § D17-5.0 (d).
In late September of 1981, a judgment of foreclosure was entered in the in rem action. Title was vested in the City of New York by Commissioner’s deed, recorded October 15, 1981.
In December 1981, the defendant offered its help to the plaintiff in redeeming the property during the statutory redemption period (Administrative Code § D17-25.0 [i]). In addition, defendant offered to institute an action against the city in plaintiff’s name. Defendant’s letter, containing this latter offer, advised that any relief granted might depend on the willingness of defendant to pay the already past-due taxes, interest and penalties. Arrangements were made with the city for the redemption of the property upon payment of the sums due. The plaintiff did not make the required payment. The plaintiff had, in fact, paid nothing in reduction of tax arrears or current taxes during the entire period of his ownership of the property.
Former section D17-5.0 (d) of the Administrative Code (1976) required such filing in the block index, by the County Clerk, in order to "constitute due filing, recording and indexing of * * * said list of delinquent taxes”. CPLR 6501 requires that the indexing entry actually be made in the block index in order for a notice of pendency to be effective. Plaintiff’s theory is based upon the alleged failure of the defendant to except from coverage the lis pendens or notice of pendency of the in *849rem action. A substantial factual issue concerning whether that notice of pendency was ever effective has been raised. This issue, alone, should be sufficient to bar summary judgment to the plaintiff.
Special Term correctly noted that the existence of the in rem proceeding did not create a cloud on title. The court went on, however, to opine that the proceeding created an encumbrance. A lis pendens " 'does not, of itself, create an incumbrance apart from the equity on which the action is founded.’ ” (Simon v Vanderveer, 155 NY 377, 382 [1898].) Even had the city’s filing with the County Clerk been properly indexed, it would have created no more than the equivalent of a lis pendens and a complaint, neither of which constitute a cloud on title. The existence of the unpaid taxes constitutes "the equity on which the action is founded.” These unpaid taxes were well known to the plaintiff prior to its contracting to purchase the subject property and were specifically excepted from coverage under the defendant’s policy.
The plaintiff’s reliance upon the holding in Wacht v Hart (120 App Div 189 [1st Dept 1907], affd 198 NY 629 [1910]) is misplaced. In that case the court held (p 191) that under an agreement to convey property subject to a mortgage, the principal of which was then past due and unpaid, the purchaser was not required to accept "the tender of a deed, subject to a mortgage under foreclosure, where the costs of the foreclosure were at least an incumbrance upon the property”. The additional liability for costs of the foreclosure constituted an additional burden to be imposed on the purchaser contrary to the terms of the contract. In the instant case, there were no such costs to create an additional burden. The plaintiff had an opportunity to pay the taxes, interest, and penalty which he knew and acknowledged to have been due. Nothing more need have been paid to redeem the property.
Quite apart from the issue of the effectiveness of the purported lis pendens,, the insurance contract in issue provides, inter alia, that the defendant will pay upon a claim arising "Where there has been a final determination adverse to the title, upon a lien or incumbrance not excepted in this policy.” (Emphasis added.) The lien for unpaid taxes was excepted. There was no encumbrance.
I would modify the judgment of Supreme Court to the extent of denying plaintiff’s motion for summary judgment on the first cause of action, granting defendant’s motion for *850summary judgment on the first cause of action, and otherwise affirm.