Opinion
Index No. E2020005150
10-22-2021
Thomas C. Wilmot, Sr., THOMAS C. WILMOT, JR., and LORETTA W. CONROY, Plaintiffs, v. Tony Kirik, and COUNTY OF MONROE, Defendants.
Attorneys for plaintiffs: HARRIS BEACH PLLC H. Todd Bullard, Esq. Attorneys for defendant Tony Kirik: UNDERBERG & KESSLER LLP Thomas F. Knab, Esq. Attorneys for defendant County Monroe: MONROE COUNTY LAW DEPT. Adam M. Clark, Deputy County Attorney
Unpublished Opinion
Attorneys for plaintiffs: HARRIS BEACH PLLC H. Todd Bullard, Esq.
Attorneys for defendant Tony Kirik: UNDERBERG & KESSLER LLP Thomas F. Knab, Esq.
Attorneys for defendant County Monroe: MONROE COUNTY LAW DEPT. Adam M. Clark, Deputy County Attorney
HON. DEBRA A. MARTIN, ACTING JUSTICE OF THE SUPREME COURT
Documents reviewed by the Court:
Documents Submitted By The Defendant Tony Kirik:
1. Notice of motion for partial summary judgment filed with Office of Monroe County Clerk on October 8, 2020;
2. Affidavit of Tony Kirik, sworn to on October 7, 2020 with exhibits A through D;
3. Attorney affidavit in support of motion for summary judgment by Thomas F. Knab, Esq. sworn to on October 8, 2020 with exhibits E through N;
4. Memorandum of law in support of defendant's motion for partial summary judgment dated October 8, 2020;
5. Reply attorney affidavit by Thomas F. Knab, Esq. sworn to on January 6, 2021 with an exhibit;
6. Reply memorandum of law in further support of defendant's motion for partial summary judgment and in opposition to plaintiffs' cross-motion for partial summary judgment dated January 6, 2021;
7. Supplemental affidavit of Thomas F. Knab, Esq. sworn to on March 19, 2021 with exhibits A through E;
8. Memorandum of law for declaratory judgment in defendant's favor on first cause of action dated March 19, 2021;
9. Affidavit in response to County of Monroe submission sworn to on May 26, 2021;
10. Tony Kirik's memorandum of law in response to County of Monroe's submission dated May 26, 2021;
11. Affidavit in response to June 4, 2021 motion to dismiss of County of Monroe by Thomas F. Knab, Esq. sworn to on June 9, 2021;
12. Attorney affidavit in opposition to plaintiffs' June 9, 2021 cross-motion by Thomas F. Knab, Esq. sworn to on June 16, 2021;
13. Defendant's memorandum of law in opposition to plaintiff's June 9, 2021 cross-motion dated June 16, 2021.
Documents Submitted by the Plaintiffs:
1. Notice of cross-motion for partial summary judgment filed with the Office of Monroe County Clerk on December 9, 2020;
2. Affidavit of Thomas C. Wilmot, Sr. sworn to on December 7, 2020;
3. Affidavit of H. Todd Bullard, Esq. sworn to on December 7, 2020 with exhibits A through D;
4. Memorandum of law of plaintiffs in support of their cross-motion for summary judgment and in opposition to defense motion dated December 9, 2020;
5. Reply affidavit of H. Todd Bullard, Esq. sworn to on January 19, 2021 with exhibits A and B;
6. Reply memorandum of law in further support of plaintiffs' cross-motion for summary judgment and in opposition to defense motion dated January 19, 2021;
7. Affidavit of H. Todd Bullard, Esq. sworn to on March 19, 2021
8. Memorandum of law in further support of plaintiffs' cross-motion for summary judgment and in opposition to defense motion dated March 19, 2021;
9. Reply affidavit by H. Todd Bullard, Esq. sworn to on May 11, 2021;
10. Notice of cross-motion seeking leave to amend pleadings per CPLR 3025 (c) filed with the Office of the Monroe County Clerk on June 9, 2021;
11. Affidavit of H. Todd Bullard, Esq. sworn to on June 9, 2021 with exhibits A and B;
12. Memorandum of law in support of plaintiffs' cross-motion and in response to the County's motion dated June 9, 2021;
13. Reply affidavit by H. Todd Bullard, Esq. sworn to on June 21, 2021.
Documents Submitted By Defendant County of Monroe:
1. Responding affirmation by Adam M. Clark, Deputy County Attorney, affirmed on April 29, 2021;
2. Affidavit by Mark Costello, Esq. sworn to on April 29, 2021 with exhibits A and B;
3. Notice of cross-motion to dismiss third cause of action of complaint filed with the Office of the Monroe County Clerk on June 4, 2021;
4. Reply affirmation by Adam M. Clark, Deputy County Attorney, affirmed on June 4, 2021;
5. Reply affirmation by Adam M. Clark, Deputy County Attorney, affirmed on June 16, 2021;
6. Reply memorandum dated June 16, 2021.
Plaintiff Thomas C Wilmot, Sr. and his two adult children, Thomas C. Wilmot, Jr. and Loretta W. Conroy ("the Wilmots"), are beneficiaries of a right of first refusal ("ROFR") filed in the Office of the Monroe County Clerk regarding the property at the heart of this litigation. They commenced this declaratory judgment action against Tony Kirik ("Kirik") after he purchased this property at a Monroe County tax foreclosure sale. This decision resolves the parties' rights under the ROFR.
Facts:
The facts are substantially undisputed. Two sisters, Mary Phillips and Jane A. Hunter ("the sisters"), owned 207 acres of undeveloped property on West Bloomfield Road in Mendon that bordered significant acreage owned by the Wilmots. In the interest of protecting their property and preventing a third-party purchaser from buying the sisters' land, in 2015 the Wilmots negotiated with the sisters to purchase all of their Mendon property for $620,000. This price was allegedly at a premium because it included the outright purchase of 62 acres by a warranty deed and a ROFR for the remaining 145 acres (hereinafter referred to as "the property"). Both the deed and the ROFR were filed in the Office of the Monroe County Clerk on April 5, 2016.
The ROFR stated that the Wilmots' right to purchase the 145 acres would be triggered under the following circumstance: "if Grantor [the sisters] is prepared to accept a bona fide offer from a prospective third party purchaser to purchase the Property, Grantor shall, before accepting such third party offer, first offer to sell the Property to grantee [the Wilmots] at the price and upon the terms and conditions contained in the bona fide offer by sending written notice of such offer to Grantee." And, further, that "[t]his ROFR, and the option and other rights conveyed hereunder, shall be considered a continuing right." The only exception allowed the sisters to transfer the property to named family members. The ROFR bound the sisters and their "successors and assigns," but did not extend to the Wilmots' successors and assigns, being limited to only the named Wilmots.
In 2019, Monroe County began in rem tax foreclosure against the property for back taxes and expenses of approximately $38,000. The County's procedures were to provide written notice of the foreclosure proceeding to the owner and anyone else having "a lien or other interest in the property." (aff. of Mark A. Costello, Esq. dated April 29, 2021, Dk No. 86.) As holders of a recorded ROFR, the Wilmots were entitled to written notification of the proceeding but, due to a mistake by the title company hired by the County's attorney, they were not notified. (id.) Importantly, the Wilmots claim they would have bid on the property to protect their interests if they had known about it.
On or about October 28, 2019, Kirik was the successful bidder at the foreclosure sale, purchasing the property for $250,000, most of which was returned to the sisters as surplus money.
Plaintiffs filed a Notice of Pendency and commenced this action in July 2020, alleging two causes of action against Kirik: (1) the ROFR runs with the land and Kirik cannot sell the property without honoring the Wilmots' interest; and (2) the foreclosure sale "triggered" the ROFR, so the Wilmots have the right to purchase the property from Kirik for $250,000. Plaintiffs claimed no adequate remedy in law, thereby invoking the Court's equitable powers.
This complaint was then amended to add a third cause of action, alleging "Monroe County In Rem Tax Foreclosure Act [Chapter 635 of the Monroe County Code], similar to In Rem tax provisions in the County of Erie and the City of Syracuse, contains a 'notice by request' provision that impermissibly shifts the burden to owners of property interests to file a notice with the County Director of Finance in order to receive notice of foreclosure proceedings." (Amended Complaint, Dk. # 12.) And, further, that "Plaintiffs are entitled to a declaration that the 'notice by request' provision was inadequate and not sufficient as a matter of law under the factual circumstances herein." (id.)
Kirik moved for partial summary judgment in his favor as to the second cause of action, declaring that the foreclosure sale did not trigger the ROFR and Kirik had no obligation to sell the property to the Wilmots. The Wilmots also moved for partial summary judgment as to the third cause of action, seeking a declaration that the "notice by request" provision in the Monroe County Tax Foreclosure Act violated due process, thus invalidating the sale. While these motions were pending, this Court issued an Order dated February 17, 2021, finding the County of Monroe to be a necessary party, and ordering plaintiffs to file a second amended complaint to add the County as a party, and for all parties to initiate or supplement their motions to address the first cause of action.
The County was added as a party and submitted a response to plaintiffs' motion for partial summary judgment declaring the County's law unconstitutional, submitting an affidavit of Mark Costello, the attorney responsible for conducting the foreclosure sale for the County. Mr. Costello investigated the circumstances surrounding this sale, including a review of the actions by the independent title company hired by the County, and concluded that the company "misidentified" plaintiffs' ROFR and
"[T]he title company failed to identify Plaintiffs as parties who were entitled to receive notice as part of the In Rem Action.
Indeed but for the mistake by the title company, Plaintiffs, as holders of recorded interest in the Property, under the County's normal foreclosure process, would have received notice of the foreclosure proceedings. Unfortunately, Plaintiffs did not receive the requisite notice."(affidavit of Mark Costello dated April 29, 2021, ¶ ¶12-13, Dk. #86.) Based on this admission that it was not the County's law that violated due process but an apparent mistake of the title company, the County moved to dismiss the plaintiffs' third cause of action for failure to state a cause of action pursuant to CPLR § 3211 (a) (7).
Finally, plaintiffs cross moved to amend their second amended complaint pursuant to CPLR § 3025 (c) to conform to the County's admission that a recorded RORF is an "interest" in property, that by virtue of their filed ROFR plaintiffs were entitled to notice of the foreclosure proceeding, and that they did not get it. (Notice of Cross Motion and affidavit of H. Todd Bullard dated June 9, 2021, Dk #95 and #101.)
During the pendency of the motions, the parties engaged in mediation but were unable to resolve what appears to be a case of first impression.
To summarize, the pending motions are:
1. Kirik's motion for partial summary judgment seeking a declaration in his favor as to the second cause of action, asserting he is a good faith purchaser of the property. He seeks a declaration that the Wilmots do not have an option on the property he purchased, that sale did not trigger the ROFR, and, therefore, he has no obligation to sell the property to the Wilmots for the purchase price of $250,000. As to the County's notice of the proceeding, Kirik contends that all statutorily-required notice was provided and Monroe County Chief Financial Officer filed the required affidavit of regularity. Accordingly, the sale and the judgment of foreclosure sale were valid.
2. The Wilmots' cross motion for partial summary judgment on their third cause of action. The Wilmots assert that the County's Tax Act is unconstitutional and denied them due process, that there was no adequate remedy of law, and that equity required the sale be set aside.
3. The County's cross motion to dismiss for failure to state a cause of action based on the apparent agreement among the parties that the constitutional issue is moot given its admission that it did not comply with the own policy due to the title company's error.
4. The Wilmots' motion to amend the complaint to conform to the undisputed fact that the County erred in failing to notify them of the proceeding.
DECISION
I. Kirik's motion for a declaration in his favor on the second cause of action-was the ROFR an option triggered by the foreclosure sale?
Despite the reference to an "option" in the ROFR documents, clearly, it was a right of first refusal not an option. An option "is an agreement to hold an offer open; it confers upon the optionee, for consideration paid, the [unilateral] right to purchase at a later date." Jarecki v Shung Moo Louie, 95 N.Y.2d 665, 668 [2001] [internal quotation marks and internal citations omitted]; see 1 Williston, Contracts § 5:16, at 721 [4th ed.]). "A right of first refusal is a dormant right that is triggered when an owner decides to sell the property to a third party at an agreed-upon price." (Tuminno v Waite, 110 A.D.3d 1456, 1457 [4th Dept 2013] [internal quotation mark and internal citation omitted].) A ROFR is a preemptive right, the upshot of which is to obligate the party who has received an offer to sell and decides to sell not to sell without first giving the other party the chance to purchase the property at the price offered (see LIN Broadcasting Corp. v Metromedia, Inc., 74 N.Y.2d 54, 60 [1989].) Accordingly, the distinction between a right of first refusal and an option lies with whether the beneficiary of the agreement can induce a sale. (Wildenstein & Co. v Wallis, 79 N.Y.2d 641, 648-49 [1992].)
The Wilmots' reliance upon the presence of the word "option" in their ROFR is misguided; the mere reference to an "option" in a ROFR was not determinative of whether the agreement constituted an option or right of first refusal (Tuminno v Waite, 110 A.D.3d 1456, 1457 [4th Dept 2013]). It merely constituted a future offer to purchase the sisters' property if, and only if, the sisters, their successors or assigns accepted an offer to sell to a third party. (see, Morrison v Piper, 77 N.Y.2d 165, 169-70 [1990].) If that event did not arise, the Wilmots would never have the opportunity to exercise their rights outlined in the ROFR. (Clarke v Caldwell, 132 A.D.2d 171, 173 [3d Dept 1987].)
The Court is unable to adopt the Wilmots' position that Monroe County's in rem tax foreclosure sale triggered their rights under the ROFR to purchase the property. Since neither the Fourth Department nor the Court of Appeals has addressed this issue, this Court must follow the decision of the Third Department on this point. (see Phelps v Phelps, 128 A.D.3d 1545, 1547 [4th Dept 2015].) In Huntington Nat. Bank v Cornelius, the Court held that a mortgage foreclosure action did not activate a right of first refusal because the use of the word "offer" in the right of first refusal "was intended to cover a conscious and voluntary choice by the owner to make the property available for sale." (80 A.D.3d 245, 249 [3d Dept 2010].) Logically, the reasoning in Huntington Nat. Bank would apply to the matter at hand. Moreover, there is precedent that a ROFR is not triggered by the mere transfer of the property, but only when the event specified in the contract establishing it occurs. For example, both the Fourth Department in Jackson v Valvo (179 A.D.2d 1038, 1039 [4th Dept 1992]) and the Third Department in Spiegel v Rickey (285 A.D.2d 879, 879 [3d Dept 2001]) held that the transfer of the properties by gift did not trigger the beneficiaries' rights of first refusal. Likewise, a partition action, as opposed to a partition sale, did not trigger the ROFR because it would not result in a transfer of the property to a third party. (Tuminno v Waite, 110 A.D.3d 1456, 1457 [4th Dept 2013].)
Based on this caselaw, the Court agrees with Kirik that the foreclosure sale did not trigger the ROFR and he is not obligated to sell the property now to the Wilmots for $250,000.
II. Declaration on the first cause of action-does the ROFR run with the land, obligating Kirik to comply with its terms in the future?
The first cause of action in the amended complaint alleged that the ROFR runs with the land so Kirik cannot sell the property without first offering it to the Wilmots. The Court's order of February 17, 2021 instructed the parties to address this cause of action since their previous motions had neglected to do so. For reasons set forth below, the Court declares that the ROFR does not run with the land.
The Court declines to adopt Mr. Kirik's position that the County Tax Act § 635-1 (27) extinguished the Wilmots' ROFR. As the Wilmots properly contended, the third decretal paragraph of the judgment of foreclosure sale expressly provided that the premises sold to Kirik was sold subject to "[e]asements, covenants, agreements, reservations, and restrictions of record, if any, insofar as the same may be in force and effect." (aff of defendant's attorney, exhibit N, at 9, III[d].) Accordingly, the Court must examine the common law to determine whether Kirik is bound to the terms of the ROFR.
It has long been held that despite the parties' intention that a covenant run with the land, it will only be found to do so if, after strictly construing the restrictive language against those seeking to enforce it, clear and convincing evidence demonstrates that (1) the grantor and grantee intended the covenant to run with the land; (2) the covenant touches or concerns the land; and (3) there is "privity of estate" between the person claiming a benefit under the covenant with the right to enforce it and the party who has the burden found within it. (Neponsit Prop. Owners' Assn v Emigrant Indus. Sav. Bank, 278 NY 248, 254-55 [1938]; see Smith v Estate of LaTray, 161 A.D.2d 1178, 1179 [4th Dept 1990].) "'The key inquiry is whether the covenant in purpose and effect substantially alters the legal rights that would otherwise flow from the ownership of the land, and are connected with the land." (Village of Philadelphia v FortisUS Energy Corp., 48 A.D.3d 1193, 1195 [4th Dept 2008] [internal quotation marks and citations omitted.])
An examination of the language used by these parties and the circumstances surrounding their agreement confirm their intent regarding the first prong of the test; they clearly meant to bind the sisters and the sisters' successors and assigns except for the transfer to specifically named relatives, which did not occur. (Def attorney aff., exhibit E.) Moreover, the ROFR was entered into at the same time the sisters sold a portion of their farmland to the Wilmots for a premium and it addressed the entirety of the remaining farmland. These are compelling indicators they intended the agreement would run with the land. (see Harrison v Westview Partners, LLC, 79 A.D.3d 1198, 1201 [3d Dept 2010].)
Likewise, there is little question regarding the third prong requiring privity because Kirik derived his property from the sisters, the signatories of the ROFR, via a tax foreclosure sale. (See, Malley v Hanna, 65 N.Y.2d 289, 291-92 [1985]. Here "vertical privity" arose because the chain of title confirmed that Kirik, whom the Wilmots sought to enforce the ROFR against, derived his title through a continuous lawful succession from the original grantor. (Orange & Rockland Util. v Philwold Estates, 52 N.Y.2d 253, 263 [1981]; see Bay St. Landing Homeowners Assn., Inc. v Meadow Partners, LLC, 169 A.D.3d 985, 988-89 [2d Dept 2019].)
However, the second prong of the test is not met since the ROFR does not touch or concern the land. In evaluating whether a covenant touches the land, the question is whether the covenant alters "the legal rights which otherwise would flow from ownership of land and which are connected with the land." (Neponsit Prop. Owners' Assn. v Emigrant Indust. Sav. Bank 278 NY 248, 258 [1938].) The test is whether the covenant "directly affects the uses to which the land may be put and substantially affects its value." (Orange and Rockland Util., Inc. v Philwold Estates, Inc., 52 N.Y.2d 253, 263 [1981].) The ROFR at issue does not meet this test since it neither affects Kirik's use of the land, nor substantially affects its value. (Village of Philadelphia v FortisUS Energy Corp., 48 A.D.3d 1193, 1195 [4th Dept 2008]; see Johnson v Nisbet, 68 A.D.3d 1333, 1336 [3d Dept 2009].) Therefore, Kirik is not obligated to offer the property to the Wilmots if he chooses to sell it in the future.
III. The Wilmots' motion to amend their pleadings to conform to the proof and the County's motion to dismiss.
The County admitted that its In Rem Tax Foreclosure Law required it to provide written notice of the tax foreclosure sale to the Wilmots because their ROFR was recorded, and it failed to do so. The Wilmots moved to conform their pleadings under CPLR 3025 (c), modifying their theory of why the tax foreclosure sale was defective and should be vacated.
CPLR 3025 (c), entitled Amendment to conform to the evidence, provides that a "court may permit pleadings to be amended before or after judgment to conform them to the evidence, upon such terms as may be just including the granting of costs and continuances." Noting "New York's liberal pleading rules, which permit the pleadings to be amended to conform to the proof at any time, provided that no prejudice is shown", the Court of Appeals held that the right to seek amendment is triggered when the inaccuracies of the pleadings become apparent, absent prejudice. (see Fitzpatrick v American Honda Motor Co., 78 N.Y.2d 61, 69 [1991].) Accordingly, the Fourth Department upheld the trial court's decision to permit amendments to pleadings to conform to the proof on cross motions for summary judgment in U.S. Bank N.A. v Liebel (154 A.D.3d 1302, 1303 [4th Dept 2017]). The trial court may exercise its discretion in granting these motions and are overturned only for abuse as a matter of law. (Kimso Apts., LLC v Gandhi, 24 N.Y.3d 403, 411 [2014]) Furthermore, "[i]t is an abuse of discretion to deny a motion to conform unless the opposing party can allege demonstrable and real surprise or prejudice." (General Elec. Co. v A.C. Towne Corp., 144 A.D.2d 1003, 1004 [4th Dept 1988] [internal citations omitted].)
Applying this liberal standard, the Court finds that the Wilmots must be permitted to amend their second amended complaint to conform to the proof since neither the County, nor Kirik submitted proof that they were surprised or prejudiced by the amendment. The test for prejudice is not whether a party's position will be negatively altered, rather, "there must be some indication that the [party] has been hindered in the preparation of [the party's] case or has been prevented from taking some measure in support of [its] position." (Pitt v Hague Corp., 191 A.D.3d 1344, 1344 [4th Dept 2021] [internal quotation marks and citation omitted.) The burden of establishing prejudice falls upon the party opposing the amendment. (see Caceras v Zorbas, 74 N.Y.2d 884, 885 [1989]; see also Siegel, NY Prac. § 404 [5th ed.]). From the beginning of this litigation, the Wilmots have claimed the sale of the property should be vacated due to lack of notice to which they were entitled because of the recorded ROFR. As a result of the County's acknowledgement of its error, the Wilmots' theory of lack of notice shifted only slightly, eliminating the need to interpret and test the validity of the statute. The parties have had full opportunity to address the issue of notice and it is ripe for resolution.
By allowing the amendment of the third cause of action to conform to the proof submitted, the County's motion to dismiss for failure to state a cause of action is moot.
IV. Declaration on the third cause of action as amended-should the sale be set aside?
The Court finds that two innocent parties were impacted by the County's acknowledged error. The Wilmots were beneficiaries of a recorded ROFR for which they paid a premium and were entitled to advance written notice of the foreclosure sale. If they had received notice, the Wilmots would have participated in the sale to protect their bordering land. Kirik, the successful bidder and good faith purchaser, seeks to confirm his entitlement to the benefit of his bargain.
Since a foreclosure action is equitable in nature, it "triggers the equitable powers of the court." (Wilczak v City of Niagara Falls, 174 A.D.3d 1446, 1448-49 [4th Dept 2019]; Mortgage Elec. Registration Sys., Inc. v Horkan, 68 A.D.3d 948, 948 [2d Dept 2009]; see Meadowlands Portfolio, LLC v Manton, 118 A.D.3d 1439, 1440 [4th Dept. 2014]; Thompson v Naish, 93 A.D.3d 1203, 1204 [4th Dept. 2012]). Accordingly,
"It is well settled that, even after a judicial sale to a good faith purchaser, [a] court may exercise its inherent equitable power over a sale made pursuant to its judgment or decree to ensure that it is not made the instrument of injustice... Although this power should be exercised sparingly and with great caution, a court of equity may set aside its own judicial sale upon grounds otherwise insufficient to confer an absolute legal right to a resale in order to relieve [a party] of oppressive or unfair conduct. Generally, such discretion, which is separate and distinct from any statutory authority, is exercised where fraud, mistake, exploitive overreaching, misconduct, irregularity or collusion casts suspicion on the fairness of the sale. It may also be exercised where the price is so inadequate as to shock the court's conscience or where the judicial sale has been made the instrument of injustice."(Altshuler Shaham Provident Funds, Ltd. v GML Tower LLC, 129 A.D.3d 1439, 1442 [4th Dept 2015] [internal quotationmarks and citations omitted].)
Appellate Courts have repeatedly upheld lower court decision to set aside a foreclosure sale after finding mistakes and irregularities in a foreclosure process. (see Wells Fargo Bank, N.A. v Pickett, 187 A.D.3d 965, 966 [2d Dept 2020] [sufficient evidence of misconduct to cast suspicion on the fairness of the sale]; Paragon Fed. Credit Union v Skarla, 186 A.D.3d 840, 841-42 [2d Dept 2020] [referee, in excess of his authority, altered the terms of the judgment of foreclosure and sale by selling the subject properties as one parcel]; Bear Stern Asset-Backed Sec. I Trust 2006-IMI v Ceesay, 180 A.D.3d 504 [1st Dept 2020] [plaintiff never sent a statutorily compliant prior notice of foreclosure]; JP Morgan Chase, N.A. v Rajendran, 141 A.D.3d 631, 632 [2d Dept 2016] [referee committed a mistake by re-opening the bidding]; Cicorelli v Hickey's Carting, Inc., 66 A.D.3d 626, 627 [2d Dept 2009] [referee changed the terms of the sale]; Mercaldo v Navarro, 50 A.D.3d 980 [2d Dept 2008] [ex-wife had not received notice of the foreclosure action]; Fleet Fin., v Gillerson, 277 A.D.2d 279, 280 [2d Dept 2000] [inconsistent provisions of the judgment of foreclosure, the change in the law, and other evidence that the parties had differing beliefs regarding the responsibility for paying outstanding tax liens]; Wayman v Zmyewski, 218 A.D.2d 843, 844 [3d Dept 1995] [mistake in changing the location of the foreclosure sale cast suspicion on the fairness of the sale].)
Here, it is uncontroverted that the County erred in failing to notify the Wilmots of the foreclosure sale of the property that was the subject of their recorded ROFR for which they paid a premium. The land in question borders the Wilmots' other property and they took affirmative steps to secure ownership of the sisters' land to protect all of the surrounding property from development and preserve its rural setting. The Wilmots affirmed that they would have participated in the tax foreclosure sale if they had been made aware of it and that they have no remedy in law. The balancing of the equities must take these factors into account along with the recognition that the uniqueness of this parcel of land and the Wilmots' stated interest to preserve it as such renders money damages a wholly inadequate remedy.
The Wilmots paid $620,000 for 62 acres along with the ROFR, whereas, Kirik paid $250,000 for the remaining 144 acres of farmland.
Kirik maintains that equity should not be applied to cure the County's error because the Wilmots were provided with due process because the supreme court's Judgment of Foreclosure and Sale stated that the County's in rem procedures were followed. But, of course, that court was unaware of the fact that an error prevented the County from following its procedures. Furthermore, any argument that the County met its "notice by request" requirements was totally refuted by the County attorney's admission that the Wilmots were entitled to notice. However, even without this admission, the Court finds that the statutory requirements were not met and the Wilmots were not afforded the due process to which they were entitled.
Real Property Tax Law § 1125 (1) (a) mandates personal notice of the commencement of a tax foreclosure proceeding to "each owner and any other person whose right, title, or interest was a matter of public record." (emphasis added.) The Monroe County Code (Chapter 635-1 § 15) provides:
"Notice to owner, mortgagee, lienor or claimant. (1) At any time after the enactment of this act, any owner of real property in the county, any mortgagee thereof or any person having a lien or claim thereon or interest therein may file with the director of finance a notice stating his name, residence, and post office address and a description of the parcel or parcels in which such person has an interest, which notice shall continue in effect for the purposes of this section for a period of five years, unless earlier cancelled by such person.
(2) After the completion and filing of the list or lists of delinquent taxes and properties, as herein provided, and after posting of the public notice of foreclosure described in sections fourteen and fifteen hereof, the tax foreclosure attorney shall mail to each such person at the address given and filed pursuant to subdivision (1) above, or in the absence of such filing at the last known address of such owner, lienor, mortgagee or claimant as the same appears upon the current tax rolls or the records in the office of the director of finance, a copy of such public notice of foreclosure." (emphasis added)
Based on the above, the Wilmots, whose "right" was a matter of public record, and who had "a claim thereon or interest therein" to the subject property, were entitled to notice even though they did not file a request for notice because, as adjacent property owners, their addresses were in the tax rolls, as well as on the ROFR, itself.
Kirik also raises the untimeliness of the Wilmots' actions without explaining how they were tardy in moving to set aside the deed and secure a declaration of their rights; the Wilmots, who were not notified of nor parties to the foreclosure, filed their declaratory judgment action seeking to set aside the referee's deed within the two year statute of limitations set forth in Real Property Tax Law § 1137 and Monroe County In Rem Tax Foreclosure Act § 28. (see Matter of City of Hudson, 114 A.D.3d 1106, 1106 [3d Dept 2014].) Since the Wilmots were not the property owners, Real Property Tax Law § 1131, setting forth a 30-day statute of limitation to vacate the default, did not apply. (Id.)
This Court chooses to follow the recognition by the Court of Appeals that "[a] prayer for general relief is as broad as the equitable powers of the court, and under it the court may properly shape its decree in accordance with the equities of the case." (Weil v Atlantic Beach Holding Corp. 1 N.Y.2d 20, 29 [1956] [internal citation and quotation marks omitted]). A sense of justice, grounded in concepts of fairness, requires the Court vacate the foreclosure and sale, set aside the referee's deed transferring the premises to Kirik, and order the County to hold a new foreclosure sale.
Accordingly, it is hereby:
ORDERED, that as to the first cause of action, the Court declares that the ROFR does not run with the land; and it is further
ORDERED, that as to the second cause of action, the Court declares that the ROFR was not an option triggered by the foreclosure sale; and it is further
ORDERED, that the Wilmots' motion under CPLR 3025 (c) to conform its second amended complaint to the proof is granted and the third cause of action is modified to reflect the County's admission that the Wilmots were entitled to notice under the applicable laws and that the County failed to notify the Wilmots of the commencement of the in rem tax foreclosure proceeding; and it is further
ORDERED, that the County's motion to dismiss pursuant to CPLR 3211 (7) for failure to state a cause of action is denied as moot; and it further
ORDERED, that the Court declares that the Wilmots were denied due process and invokes its broad equitable powers to set aside the Judgment of Foreclosure Sale, index number E2019002697 and signed by Justice Ark on August 15, 2019, only as to the property at issue, with the owner identified as "Hunter, Jane A." and a description of "W Bloomfield Rd Pittsford NY 14534", and vacates the resulting referee's deed to Kirik; and it is further
ORDERED, that the County cause a new foreclosure sale to be held in compliance with all notice protocols as soon as practicable.