RPAPL Article 15: The Ubiquitous Real Estate Dispute 'Weapon Of Choice'

Author:Mr Victor Metsch
Profession:Smith Gambrell & Russell LLP
 
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Article 15 of the New York Real Property Actions and Proceedings Law provides that: "Where a person claims an estate or interest in real property...such person... may maintain an action against any other person, known or unknown... to compel a determination of any claim adverse to that of plaintiff which the defendant makes[.]"

On an almost daily basis, our Courts publish decisions that demonstrate the broad panoply of disputes that are prosecuted under the RPAPL Article 15 "umbrella". Several recent examples follow:

Loeuis v. Grushin, 2015 NY Slip Op 01926 (2nd Dept. March 11, 2015) arose out of a proceeding " to quiet title pursuant RPAPL article 15, to declare two deeds and a mortgage null and void, to recover damages for fraud, breach of fiduciary duty, conversion, money had and received, and unjust enrichment, and to impose a constructive trust[.]"

The Appellate Division outlined the facts:

[T]he plaintiff alleges that on May 29, 1992, he and his sister, the defendant Denise Grushin, acquired title to the subject real property where the plaintiff resided using only the plaintiff's funds. According to the plaintiff, in 2003, he needed money for medical expenses and decided to refinance the mortgage on the subject property to acquire those funds. The defendant Denise Grushin suggested that her husband, the defendant Corey Grushin, handle the transaction, because he was a "real estate professional." The plaintiff alleges that when he executed the mortgage documents refinancing the property, he was not represented by counsel, and the "defendants slipped a quitclaim deed into the stack of numerous papers which defendants asked plaintiff to sign in connection with the 2003 [r]efinance [t]ransaction." Although that deed, dated May 12, 2003, placed the property in the sole name of the defendant Denise Grushin, the plaintiff alleges that his intent was not to convey the property, but rather, to refinance the mortgage.

The prior proceedings:

The plaintiff commenced the instant action on July 1, 2010. His amended verified complaint asserted causes of action to quiet title pursuant to RPAPL article 15, for a judgment declaring that the 2003 quitclaim deed, the 2006 deed, and the 2006 mortgage were null and void, a declaration that he owned the subject property, to recover damages for fraud, breach of fiduciary duty, conversion, money had and received, and unjust enrichment, and to impose a constructive trust on the property.

The defendants moved to dismiss the amended complaint pursuant to CPLR 3211(a), arguing, inter alia, that the action was time-barred. In support of the motion, the defendant Denise Grushin submitted an affidavit stating that the plaintiff executed the quitclaim deed to avoid foreclosure by a third-party mortgage creditor, and, thereafter, continued to collect $400,000 in rents from the premises, which he kept. The plaintiff opposed the motion based, inter alia, upon his affidavit, and cross-moved to preliminarily enjoin the defendants from transferring, conveying, mortgaging, or otherwise encumbering the subject property. The order appealed from denied [plaintiff's] motion and granted [defendants'] cross motion.

Defendants' arguments:

[T]he defendants' primary contention is that the causes of action accrued on May 12, 2003, when the quitclaim deed was executed, and therefore, the commencement of the action on July 1, 2010, over seven years later, was untimely...A defendant who seeks dismissal of a complaint on the ground that it is barred by the statute of limitations bears the initial burden of demonstrating, prima facie, that the time in which to commence the action has expired"...

Actual and constructive fraud:

The plaintiff alleged both actual and constructive fraud. The elements of a cause of action sounding in actual fraud are that the defendant knowingly misrepresented or concealed a material fact for the purpose of inducing another party to rely upon it, and the other party justifiably relied upon such misrepresentation or concealment resulting in injury...The statute of limitations for actual fraud is six years from the commission of the fraud or two years from the time the plaintiff discovered, or could with reasonable diligence have discovered, the fraud, whichever is later. Here, the second and third causes of action are not time-barred insofar as they allege actual fraud, since the action was commenced almost immediately after the plaintiff allegedly discovered the fraud in 2010.

Breach of fiduciary duty:

The second and third causes of action also allege a constructive fraud based on a breach of a fiduciary duty. The defendants, who are the plaintiff's family members, had a fiduciary relationship with him...The statute of limitations for a cause of action alleging a breach of fiduciary duty does not begin to run until the fiduciary has openly repudiated his or her obligation or the relationship has been otherwise terminated...The defendants' repudiation of their fiduciary obligation occurred, at the earliest, in 2006, when Denise Grushin conveyed the property to herself and her husband, and they mortgaged the property for $700,000 and took those proceeds. Further, the plaintiff did not suffer damages until 2006, when the defendants encumbered the property with a $700,000 mortgage without his consent[.]

The statute of limitations for a cause of action sounding in breach of fiduciary duty is dependent on the relief sought.* * *Since the plaintiff's right to the subject property is in issue, awarding damages would not be adequate. Therefore, the six-year statute of limitations for causes of action sounding in equity should be applied...Since the second and third causes of action accrued in 2006, when the defendants allegedly acted contrary to their fiduciary obligations, to the plaintiff's detriment, those causes of action, interposed four years later in 2010, are not time-barred.

Quit title claim:

The first cause of action, to quiet title pursuant to RPAPL article 15, is not time-barred, since the plaintiff was seized or possessed of the premises within 10 years before the commencement of the action and is in essence seeking a determination that the quitclaim deed which he executed in 2003 was part of a mortgage transaction, and not a conveyance of title[.]

Conversion:

The fourth cause of action, alleging conversion based upon fraud, is not time-barred, since it is governed by the statute of limitations set forth in CPLR 213(8)...

Money had and received:

The fifth cause of action, seeking damages for money had and received...is equitable in nature and, therefore, the applicable statute of limitations is six years...Since the defendants' receipt of money occurred in 2006, and the action was commenced in 2010, the cause of action is not time-barred. Similarly, the sixth cause of action, sounding in unjust enrichment, is equitable in nature, and is not time-barred...

And constructive trust:

The seventh cause of action alleging a constructive trust is equitable in nature and governed by a six-year statute of limitations...The elements of a cause of action to impose a constructive trust are (1) a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment...The cause of action accrued on the date of the "wrongful transfer" of the subject property...A determination of when the cause of action accrued depends upon whether the constructive trustee acquired the property wrongfully — in which case the cause of action accrued on the date of acquisition — or whether the constructive trustee wrongfully withheld property acquired lawfully from the beneficiary — in which case the cause of action accrued when the trustee breached or repudiated the agreement to transfer the property...The allegations in the instant case indicate that the transfer of the property in 2003 from the joint names of the plaintiff and Denise Grushin to the sole name of Denise Grushin was made in reliance upon the parties' fiduciary relationship to facilitate a mortgage transaction, rather than as a conveyance of title...The allegedly wrongful transfer harming the plaintiff occurred in 2006, when Denise Grushin transferred the property to herself and her husband, and acting together, they encumbered the entire property — including the plaintiff's one-half equitable interest. Since the action was commenced in 2010, the cause of action to impose a constructive trust is not time-barred.

DeMaio v. Capozello, 2015 NY Slip Op 00719 (2nd Dept. January 28, 2015), was an action to determine a claim to real property that arose out of:

"[A] long-running dispute over certain real property. [T]he plaintiff tendered a deed to the property to the defendants Robert Capozello and Anna Capozello...After a dispute arose between the plaintiff and the Capozellos regarding the property, the plaintiff commenced this action against the Capozellos. During the pendency of the action, the Capozellos executed a deed purporting to transfer title to the property to Stephen Zangre, who was added as a defendant in the action."

Upon a prior appeal:

[The Second Department] held that the plaintiff was entitled to summary judgment on the issue of whether the deed he had given to the Capozellos was intended to represent only a security interest in the property. Because the deed was intended to represent only a security interest, it was, by operation of law, only a mortgage. [And the Appellate Division also held] that there were triable issues of fact as to whether Zangre was a bona fide purchaser for value without notice of the instant proceedings...

The Court set forth the prior proceedings:

The plaintiff subsequently moved, inter alia, for summary judgment on the fourth cause of action in his amended complaint, which was for a judgment declaring that any deed held by Zangre is null and void, and does not transfer title to the subject property to Zangre. The Supreme Court denied that...

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