Rosenbaum v. City of New York

• Decision Date: 20 November 2006
• Citation: 861 N.E.2d 43,8 N.Y.3d 1
• Parties: Harold ROSENBAUM, Respondent, v. CITY OF NEW YORK et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

861 N.E.2d 43

8 N.Y.3d 1

Harold ROSENBAUM, Respondent, v. CITY OF NEW YORK et al., Appellants.

Court of Appeals of New York.

November 20, 2006.

Michael A. Cardozo, Corporation Counsel, New York City (Deborah A. Brenner, Leonard Koerner and Larry A. Sonnenshein of counsel), for appellants.

Derfner & Gillett, LLP, New York City (Donald A. Derfner and David P. Gillett of counsel), for respondent.

OPINION OF THE COURT

READ, J.

On this appeal, we are asked to decide whether a letter dated August 18, 1994 sent by the attorney for plaintiff Harold Rosenbaum to an attorney in the New York City Department of Housing Preservation and Development (HPD) satisfies General Municipal Law § 50-e. For the reasons that follow, we conclude that it does not.

I.

On August 31, 1993, plaintiff purchased 31-33 Mt. Hope Place, a 26-unit residential apartment building in the Bronx, from a trustee in bankruptcy. The purchase price was $5,000. On November 10, 1993, plaintiff and the City of New York executed an in rem installment agreement whereby plaintiff agreed to pay the City $66,298.39¹—$34,184 upon execution of the agreement and the balance in four quarterly installments commencing on January 1, 1994—representing all delinquent taxes, assessments and other legal charges and interest due on the building, computed to the date of the agreement.

In May 1991, however, Civil Court found that a dangerous condition existed at the building, and appointed an administrator pursuant to RPAPL article 7-A to oversee necessary repairs. The 7-A administrator borrowed $160,000 from HPD to pay for this work. The repairs were completed by February 1993, several months before plaintiff purchased the building.

By March 1994, several months after plaintiff bought the building and entered into the in rem installment agreement, he and HPD were wrangling over whether the City should or could create enforceable liens for the $160,000 loaned by HPD. On March 16, 1994, an HPD attorney in the agency's Judgment Enforcement Unit wrote plaintiff, via ordinary and certified mail, return receipt requested, to advise that he had not yet received apparently promised documents showing "that various HPD liens were somehow extinguished by [plaintiff's] purchase of the property"; and to warn that unless these documents were forwarded within 10 days, HPD would "commence enforcement of said liens."

On March 25, 1994, plaintiff replied that his attorney had told him that he had spoken to the HPD attorney, who had agreed to forward "documents that purportedly will show why the City believes it is entitled to place a lien on these premises," but that such papers had not been received. He expressed his understanding that

"the foreclosure of the mortgage, which pre-dates your alleged lien, wipes out your non-filed liens. In addition, the Bankruptcy Court approved the sale to me and when I bought, there [were] no such liens on file. Accordingly, [HPD's] negligence in not properly filing the liens cannot work to prejudice me."

He warned that he had "been informed that the continuation of the false liens is a slander on my title and is actionable"; and copied this letter to his attorney.

Also on March 25, 1994, the attorney representing the 7-A administrator notified HPD that a March 21, 1994 affidavit of expenses, which totaled $160,000, should have been sent to plaintiff rather than to him. He further suggested "that there was a superceding foreclosure and that, apparently, these alleged charges were not properly filed," and blind-copied his letter to plaintiff. On May 28, 1994, however, HPD filed a statement of account for the $160,000 in the office of the city collector.

On August 12, 1994, plaintiff's attorney wrote a second attorney at HPD—that is, not the same agency counsel to whom he and his client had talked or written the previous spring—stating that "[t]he subject of this letter is the liens for work allegedly performed . . . as set forth in the affidavit of" expenses dated March 21, 1994. He noted that "[a] tax search was done 7/21/94 in connection with a title application for the sale of the building," which revealed three liens totaling $160,000. Plaintiff's attorney asserted that when plaintiff purchased the building he did not know that $160,000 had been spent on repairs, or that the City intended to impose liens in this amount. He declared that "[t]he purpose of this letter is to request that these liens be canceled of record," and closed with the request that the HPD attorney "[p]lease contact [him] after [he had] reviewed the matter."

Six days later, on August 18, 1994, plaintiff's attorney wrote the HPD attorney again. After outlining plaintiff's and his prior dealings and dispute with HPD, plaintiff's attorney complained that the "sole notice" relative to the $160,000 was the March 21, 1994 affidavit of expenses. Indeed,

"[t]o date no bill was ever sent to the record owner. The sole awareness was a new title search relative to a sale that indicate[s] that these charges were placed as financial aid[] liens on May 28, 1994 (see copy of tax search attached).

"Clearly there is no legal basis for these liens. I explained this to you and to date no one has provided any reason for the City's failure to follow the law and yet to slander [plaintiff's] title by placing these liens on the property almost one year after title passed.

"Unless these liens are removed forthwith then [the owner] may lose his current sale and be substantially damaged. If an action is brought due to [the] City's unlawful refusal to remove the illegal liens, then the owner is entitled not only to costs but legal fees as well. I hope this will not be necessary.

"Please review and reply."

On October 14, 1994, plaintiff and his attorney met with HPD representatives, including both of the HPD attorneys with whom they had dealt previously. Plaintiff's attorney followed up this meeting with a letter to the HPD attorney whom he had written in August "to confirm the City's position with respect to these alleged liens." After setting forth his understanding of the City's view in 11 numbered paragraphs, he stated that

"[i]f after you have reviewed this and the law, you still do not vacate these clearly improper and unenforceable liens from this property on or before 10/18/94, then I will have no choice but to direct my client to commence an action not only to discharge same, but for all damages, including counsel fees and punitive damages for the City's punitive refusal to comply with the law.

"Be guided accordingly."

Plaintiff sued the City on October 21, 1994. The first cause of action sought to discharge the liens; the second alleged slander of title, "caus[ing] a loss of a sale and resultant profit to plaintiff, attorneys['] fees and costs" believed to exceed $500,000. The complaint did not allege special damages.

On January 16, 1995, plaintiff served a notice of claim on the Comptroller of the City of New York.² The notice specified the "nature of the claim" as inclusion of plaintiff's building in an in rem tax foreclosure action "when there were no taxes or other charges legally due," which was brought about by the failure of city employees "to properly file, docket and bill for alleged work done on the premises and [who] are now precluded from doing so as claimant was a bona fide purchaser who purchased with no notice nor record notice of these alleged liens." Plaintiff further stated that his claim arose on December 16, 1994 and was continuing, and that he had been damaged in the amount of $500,000. Plaintiff's property had apparently remained on the list (called the list of delinquent taxes) of parcels on which there were tax liens subject to foreclosure (see generally Administrative Code of City of N.Y. § 11-405). On December 16, 1994, the City commenced an in rem tax foreclosure proceeding, which was withdrawn five months later on May 19, 1995 (see id. § 11-413).

In 1998, plaintiff moved for partial summary judgment to discharge the 7-A liens, and the City subsequently cross-moved for summary judgment dismissing the complaint. Supreme Court granted plaintiff's motion, denied the City's cross motion and severed the second cause of action for slander of title. The Appellate Division modified Supreme Court's order to the extent of denying plaintiff's motion for partial summary judgment, and subsequently certified to us the question whether its order was properly made.

The appeal "turn[ed] on how and when a 7-A lien [was] created and when a purchaser [was] put on notice of the forthcoming lien" (Rosenbaum v. City of New York, 96 N.Y.2d 468, 473, 730 N.Y.S.2d 774, 756 N.E.2d 62 [2001]). We concluded that the lien was created when HPD filed a statement of account in the office of the city collector, as required by section 27-2144(b) of the New York City Administrative Code; and that to take priority over other liens and encumbrances, HPD must have previously filed the purchase or work orders reflected in the statement of account in a building-specific index, as required by section 27-2144(a). These indices "furnish[] notice to prospective purchasers and lenders that public monies have been spent and a lien is forthcoming. If HPD fails to furnish this notice, the forthcoming lien cannot be enforced retroactively against them provided they took in `good faith'" (96 N.Y.2d at 473-474, 730 N.Y.S.2d 774, 756 N.E.2d 62 [citation omitted]).

In this case, the City admittedly neglected to file the relevant purchase or work orders in a timely fashion; therefore, plaintiff did not have constructive notice of any impending 7-A liens when he purchased the building. Because the City failed to raise a triable issue of fact as to plaintiff's actual notice, we did not address whether he would have been subject to the lien had he actually known about the loans. Thus, we reversed the Appellate Division's order, granted plaintiff partial summary judgment on his first cause of action...