In re Vill. Of Fleischmanns

• Decision Date: 21 October 2010
• Parties: In the Matter of the Foreclosure of Tax Liens by VILLAGE OF FLEISCHMANNS. Village of Fleischmanns, Appellant; Delaware National Bank of Delhi, Respondent.
• Court: New York Supreme Court — Appellate Division

909 N.Y.S.2d 564 77 A.D.3d 1146 In the Matter of the Foreclosure of Tax Liens by VILLAGE OF FLEISCHMANNS. Village of Fleischmanns, Appellant; Delaware National Bank of Delhi, Respondent. Supreme Court, Appellate Division, Third Department, New York. Oct. 21, 2010.

Bond, Schoeneck & King, P.L.L.C., Albany (Robert H. Feller of counsel), for appellant.

Coughlin & Gerhart, L.L.P., Binghamton (Robert H. McKertich of counsel), for respondent.

Before: MERCURE, J.P., MALONE JR., McCARTHY, GARRY and EGAN JR., JJ.

MERCURE, J.P.

Appeal from an order of the County Court of Delaware County (Becker, J.), entered December 14, 2009, which, in a proceeding pursuant to RPTL article 11, among other things, granted respondent's motion to vacate a default judgment of foreclosure.

This tax foreclosure proceeding involves a theater that is located in the Village of Fleischmanns, Delaware County and owned by Brian Dowd and Richard Dowd. Respondent is the holder of a mortgage that covers the property and has a balance of over $60,000. In November 2007, petitioner executed and filed a list of real property parcels affected by delinquent tax liens pursuant to RPTL 1122 that included the subject property. Thereafter, petitioner commenced this proceeding by filing a petition and notice of foreclosure on the property, which was then the sole remaining parcel on the list. The petition provided that the property could be redeemed by payment of delinquent taxes by May 5, 2009. It is undisputed that petitioner published notice of the foreclosure proceeding and mailed copies of the petition to respondent, as required by RPTL 1124 and 1125, and that respondent received actual notice of this proceeding.

Respondent and the Dowds failed to pay the delinquent taxes during the redemption period or file an answer in this proceeding. In September 2009, petitioner moved for a default judgment with respect to the subject property. Upon separate motions by respondent and Brian Dowd to vacate the judgment of foreclosure or for leave to redeem the subject property by paying the delinquent taxes, County Court stayed execution of the judgment of foreclosure and sale.¹ Following hearings, County Court denied Dowd's motion, but found that foreclosure would work an undue hardship on respondent. Thus, the court exercised its equity jurisdiction to deny petitioner's motion for a default judgment, and directed petitioner to accept payment of $19,250.82 in unpaid taxes on the property within five days of the court's order. Petitioner appeals, and we now reverse.

In an RPTL article 11 foreclosure proceeding, an unpaid tax lien is presumptively valid, and the respondent bears the burden of establishing any affirmativedefense, procedural defect or invalidity of the lien ( see RPTL 1134; Kennedy v. Mossafa, 100 N.Y.2d 1, 8, 759 N.Y.S.2d 429, 789 N.E.2d 607 [2003];Matter of County of Orange [Al Turi Landfill, Inc.], 75 A.D.3d 224, 236, 903 N.Y.S.2d 60 [2010] ). Moreover, in moving to vacate a default in a tax foreclosure proceeding, the respondent is required to demonstrate both a reasonable excuse for the default and a meritorious defense ( see Matter of Clinton County v. Miner, 39 A.D.3d 1015, 1016, 833 N.Y.S.2d 715 [2007] ). Here, respondent asserted that it did not pay the overdue taxes pursuant to its normal practice because, prior to the May 5, 2009 redemption date, its mortgage processor telephoned petitioner and was informed that the taxes had been paid. Further, respondent argued that equitable principles mandated that it should be permitted to redeem the property because petitioner mailed Richard Dowd a letter after expiration of the redemption period that provided him with a further opportunity to redeem the property by paying all unpaid taxes by June 30, 2009. Petitioner disputed that it provided respondent with erroneous information regarding payment of the taxes on the property, but conceded that it did not provide respondent with a similar, additional opportunity to redeem the property by the end of June 2009.

Assuming without deciding that respondent's averments constituted a reasonable excuse for its default, we conclude that it has failed to establish a meritorious defense. Respondent's arguments essentially amount to an assertion of the defense of equitable estoppel. It is well settled, however, that "estoppel is not available against a governmental agency in the exercise of its governmental functions" ( Pless v. Town of Royalton, 81 N.Y.2d 1047, 1049, 601 N.Y.S.2d 455, 619 N.E.2d 392 [1993] [internal quotation marks and citations omitted]; see Matter of New York State Med. Transporters Assn. v. Perales, 77 N.Y.2d 126, 130, 564 N.Y.S.2d 1007, 566 N.E.2d 134 [1990]; Matter of E.F.S. Ventures Corp. v. Foster, 71 N.Y.2d 359, 369-370, 526 N.Y.S.2d 56, 520 N.E.2d 1345 [1988] ). Indeed, estoppel is "foreclosed in all but the rarest cases" ( Matter of New York State Med. Transporters Assn. v. Perales, 77 N.Y.2d at 130, 564 N.Y.S.2d 1007, 566 N.E.2d 134 [...