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Using Real Property Law §329 To Cancel Certain Recorded Instruments

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  • Posted on: Oct 26 2018

In the prior Blog article GET RID OF A STALE MORTGAGE BY BRINGING AN ACTION UNDER RPAPL 1501(4), we discussed provisions of New York’s Real Property Actions and Proceedings Law that permit a mortgagor to remove, of record, the lien of a stale mortgage on real property.

New York’s Real Property Law contain a similar provision that permits the court to cancel certain recorded instruments that are clouds on title but were not recordable or were not required to be recorded.  Thus, RPL §329 provides:

An owner of real property or of any undivided part thereof or interest therein or an owner of rent to accrue from a tenancy or subtenancy thereof, may maintain an action to have any recorded instrument in writing relating to such real property or interest therein, other than those required by law to be recorded, or any recorded assignment of rent to accrue from a tenancy or subtenancy of such property or interest therein declared void or invalid, or to have the same canceled of record as to said real property, or his undivided part thereof or interest therein, or as to the rent to accrue therefrom belonging to him.

It is not uncommon for a County Clerk to accept for recording, an instrument that should not be recorded because “the Clerk has a statutory duty that is ministerial in nature to record a written conveyance if it is duly acknowledged and accompanied by the proper fee [and a]ccordingly, the Clerk does not have the authority to refuse to record a conveyance which satisfies the narrowly-drawn prerequisites set forth in the recording statute.”  Merscorp, Inc. v. Romaine, 24 A.D.3d 673 (2nd Dep’t 2005) (citations omitted), affirmed, 8 N.Y.3d 90 (2006).

For example, in Newpar Estates, Inc. v. Barilla, 4 A.D.2d 186 (1st Dep’t 1957), the Court found that plaintiff’s complaint stated a cause of action under RPL §329.  The complaint in Newpar alleged that a contract containing a “right of first refusal” on the sale of real property, which, by agreement was not supposed to be recorded and was not in “recordable” form because it was not properly acknowledged, was nonetheless recorded  The Newpar defendant “procured the inclusion of the contract in the record by attaching it to an assignment and reassignment of the third mortgage and recording the assignment and reassignment.”  Newpar, 4 A.D.2d at 190.  The Newpar Court found that, by recording the contract, defendant “converted his ‘personal right’ against the plaintiff into an equity which he may assert against any subsequent purchaser.”  “Since the defendant would be entitled to specific performance of his right of first refusal as against the plaintiff, a purchaser with notice of the defendant’s rights would likewise be subject to the same equity (citations omitted).”

On October 24, 2018, the Supreme Court of the State of New York, Appellate Division, Second Department, decided Silverberg v. Bank of New York Mellon, an action brought under RPL §329.  The plaintiff in Silverberg was the defendant in a mortgage foreclosure action commenced in 2008 by Bank of New York (the “Foreclosure Action”).  In 2011, the Second Department in the Foreclosure Action , held that Bank of New York did not have standing to bring the Foreclosure Action “because its purported assignor…MERS…, the nominee and mortgagee of record for the underlying mortgage instruments, was not a lawful holder or assignee of the note and, therefore, did not have the authority to assign the underlying note to the Bank of New York.”

After the decision in the Foreclosure Action, the Silverbergs commenced the subject action “to cancel of record, inter alia, two 2008 assignments of mortgage from MERS to the Bank of New York and to declare them void and invalid.”  Supreme court granted defendants’ motion to dismiss the complaint pursuant to CPLR § 3211(a)(1) “determining, inter alia, that the [Silverbegs] lacked standing to challenge the validity of the assignments of mortgage because they were neither parties to the mortgage assignments nor third-party beneficiaries of the assignments.”

In reversing supreme court, the Silverberg Appellate Division found that, as owners of the property subject to the assignments, the Silverbergs “have standing under Real Property Law § 329 to challenge the recorded assignments and seek to have them removed as a cloud on their title (citations omitted)”.  The Second Department found that supreme court erred in relying on principals of contract law to resolve the issue of standing when as “an owner of real property,” the Silverbergs were expressly conferred standing by RPL §329.

Because the assignments in question were found to be invalid and otherwise were a cloud on the Silverbergs’ title to their property, RPL §329 permitted the assignments to be removed of record.

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