Melahn v. Hearn

• Decision Date: 21 March 1983
• Citation: 460 N.Y.S.2d 103,92 A.D.2d 319
• Parties: John A. MELAHN, Appellant, v. Robert F.M. HEARN, also known as R.M. Hearn, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 103

460 N.Y.S.2d 103

92 A.D.2d 319

John A. MELAHN, Appellant, v. Robert F.M. HEARN, also known as R.M. Hearn, Respondent.

Supreme Court, Appellate Division Second Department.

March 21, 1983.

Gellert, Ehlers, Dietz & Marlow, Poughkeepsie (Amanda T. Green and George D. Marlow, Poughkeepsie, of counsel), for appellant.

James V. Brands, Poughkeepsie (Henry S. Goldman, Pound Ridge, of counsel), for respondent.

Before DAMIANI, J.P., and LAZER, MANGANO and GIBBONS, JJ. MANGANO, Justice.

The question presented on this appeal is whether the common law doctrine of the delinquent purchaser, first applied in Oliphant v. Burns, 146 N.Y. 218, 40 N.E. 980, is still viable in this State. The doctrine of the delinquent purchaser prevents the owner of real property from using his purchase of a tax title to cut off a mortgagee's lien after the mortgagee's period of redemption has expired. In our view, the language of subdivision 1 of section 1024 of the Real Property Tax Law leads to the conclusion that the question presented must be answered in the negative.

In June, 1973 defendant mortgaged certain real property owned by him to plaintiff's assignor. In August, 1977 defendant allegedly defaulted on his monthly mortgage payment, and likewise defaulted on all subsequent payments. Prior to this alleged mortgage default, defendant had failed to pay his county taxes for the year 1973. The Dutchess County Commissioner of Finance then sold the property for unpaid taxes to Dutchess County on January 7, 1975. On March 1, 1978 the property was conveyed to the county by tax deed, the property not having been redeemed from the tax sale and the statutory period of redemption having expired. Thereafter, at public auction, defendant purchased the same property from the county for a sum equal to the amount the county had invested in the property, together with the accrued interest and all other charges resulting from the tax sale. In September, 1980 defendant then conveyed the premises to a third party, whose deed was recorded on October 29, 1980.

This action to foreclose the mortgage was commenced by service of a summons and complaint on October 30, 1980 and issue was thereafter joined. By notice of motion dated January 5, 1981 plaintiff moved for summary judgment. Upon the whole record, Special Term denied the motion and granted summary judgment to defendant. The court concluded that plaintiff's assignor had the right to redeem the subject property from the tax sale anytime within 36 months of that sale (Real Property Tax Law, § 1024, subd. 1), and that, absent such a timely redemption, the conveyan by tax deed vested in the tax title grantee an absolute estate in fee and extinguished the prior mortgage lien.

We agree with the holding of Special Term. Subdivisions 1 and 2 of section 1024 of the Real Property Tax Law provide as follows:

" § 1024. Additional period for redemption in case of mortgaged land.

"1. The holder of any mortgage upon real property duly recorded at the time of the sale thereof for unpaid taxes may redeem such real property or any part thereof from such sale at any time after the sale and before the expiration of six months after the time of filing of the evidence of the giving of the notice pursuant to subdivision two of this section, or if the notice is not given or evidence of the giving thereof is not filed, then at any time within thirty-six months after the sale, and not thereafter, redeem the real property so sold, or any part thereof from such sale. The redemption shall be made by filing with the county treasurer a written description of the mortgage, and by paying to him for the use of the purchaser, or those claiming under him, the same amount which such holder would be required to pay upon redemption of such real property if he were an occupant thereof. In case of failure to redeem within the time herein specified, the sale and conveyance thereof shall become absolute and the mortgagee and all other persons claiming title by virtue of any mortgage barred from redemption forever. The holder of such mortgage shall have a lien upon the real property so redeemed for the amount so paid with interest from the time of payment, in the same manner as if it had been included in the mortgage.

"2. A purchaser, or any person claiming under him, receiving a conveyance from the county treasurer pursuant to section ten hundred eighteen of this chapter may, if the real property be mortgaged for the purpose of reducing the period of redemption, give a written notice of such sale to the record holder of the mortgage requiring him to pay the amount necessary to redeem the lands within six months after the time of filing of evidence of the service of such notice with the county treasurer. Such notice must be given within one year from the expiration of the time to redeem. Such notice shall be given either personally or by mail in the manner required by law in respect to notices of non-acceptance or non-payment of notes or bills of exchange" (emphasis added).

In the case at bar the purchaser did not utilize the procedure outlined in subdivision 2 of section 1024 of the Real Property Tax Law to accelerate the mortgagee's redemption period and consequently, the mortgagee received the benefit of the longer 36-month redemption period contained in subdivision 1 of section 1024. However, when the mortgagee herein failed to redeem the subject premises within that 36-month period, he lost his mortgage interest by virtue of the express language of subdivision 1.

It is true that in Oliphant v. Burns, 146 N.Y. 218, 40 N.E. 980, supra, which is relied upon by the dissent, the Court of Appeals upheld the mortgagee's lien over the tax title asserted by a delinquent purchaser even though the period of redemption contained in the governing statute at that time, viz, one year (see L.1874, ch. 610, § 6) ¹ had expired ². Specifically, that statute provided, with respect to the length of the mortgagee's period of redemption after tax sale as well as the consequences resulting from the mortgagee's failure to redeem within that period, as follows (L.1874, ch. 610, §§ 6, 7):

" § 6 At any time within one year after the date of said sale the * * * mortgagee * * * may redeem the same * * * At the expiration of one year from the time of such sale, the purchaser * * * shall be entitled to a lease of such premises, provided no redemption thereof has been made * * * and if such land shall not be redeemed within such year, the supervisor * * * shall execute to the purchaser, his executors, administrators or assigns, a lease * * * of the lands and tenements so sold, for such term as the same shall have been sold, and such lease shall be presumptive eviden that such tax was legally imposed, and of the regularity of all the proceedings and of the sale.

" § 7 * * * and the occupant and all others interested shall be barred of all right and title to the premises".

However, a careful reading of that statute reveals that although it superficially resembles subdivision 1 of section 1024 of the Real Property Tax Law, it differs strikingly from subdivision 1 in two crucial areas: (1) as opposed to the one year period of redemption contained in the older statute, subdivision 1 grants a redemption period to a mortgagee after a tax sale, ranging from one and one-half to three years, depending on whether and when the statutory notice set forth in subdivision 2 of section 1024 is given (Real Property Tax Law, § 1024, subds. 1, 2; § 1010); and (2) subdivision 1 contains more specific and emphatic language than that utilized in the older statute regarding the consequences suffered by a mortgagee who fails to redeem within the specified period of redemption after a tax sale, viz., "In case of failure to redeem within the time herein specified, the sale and conveyance thereof shall become absolute and the mortgagee and all other persons claiming title by virtue of any mortgage barred from redemption forever." Nor were subdivisions 1 and 2 of section 1024 of the Real Property Tax Law applicable in the case of Pines v. Novick, 168 App.Div. 155, 153 N.Y.S. 891, which is also cited by the dissent.

Thus, in enacting subdivision 1 of section 1024, the Legislature significantly extended the redemption period after a tax sale to a mortgagee in comparison with section 6 of chapter 610 of the Laws of 1874, and evinced by its words a clear mandate that finality should be afforded to tax sales no later than three years after the sale. Under these circumstances it seems clear that the Legislature did not intend to graft the common law doctrine of the delinquent purchaser, as set forth in Oliphant v. Burns, 146 N.Y. 218, 40 N.E.2d 980, supra and Pines v. Novick (supra), onto this statute. Rather, it appears to us that the language of section 1024 of the Real Property Tax Law is very plain in delineating the redemption rights of a mortgagee. It does so in simple and absolute terms by failing to even hint that any exception to its provisions exists and by expressing a clear intent to set up a redemption procedure whose provisions apply even when the tax purchaser is the mortgagor-delinquent taxpayer.

The dissent additionally argues that a "further constituent" of the doctrine of the delinquent purchaser is the concept of estoppel. In the context of this case the dissent frames the concept of estoppel as follows: "The party seeking to extinguish a lien by the assertion of tax title may be estopped to do so because the title was obtained through a violation of that party's duty to act consistent with the mortgagee's interest in the property and because of the mortgagee's reliance on the fulfillment of the duty to pay taxes". The dissent is further of the view that only actual knowledge of a tax sale can "undercut the reliance aspects of the doctrine", and that since the record is silent on this issue, an issue of fact exists which must be resolved at trial.

We...