Payment to Court of More than Amount Necessary to Redeem Property Was Insufficient Both to Stay Foreclosure Sale and to Redeem Property
Even though the defendant remitted to the Court (but not the plaintiff) more than the amount necessary to redeem the property before the foreclosure sale, the Court of Appeals ruled that the property owner did not properly stay the sale nor did it exercise its right to redeem. In NYCTL 1999-1 Trust, et. al., v. 573 Jackson Ave. Realty Corp., the defendant 573 Jackson Avenue Realty Corp. (“Jackson”) failed to pay certain real property taxes on its property located in the Bronx and in May 1999, the plaintiff Trust acquired a tax lien against the property in the amount of $2,412.75 from the City of New York. Although nearly three years later, Jackson paid that amount to the Trust, the lien was not discharged because statutory interest had accrued in the interim and the interest amount remained unpaid.
The Trust commenced an action to recover the balance owed, including interest and attorneys’ fees. The Supreme Court granted summary judgment in favor of the Trust and appointed a referee to calculate the total amount owed, which was done by the referee and the Supreme Court ultimately confirmed the referee report awarding the Trust $9,307.50. A judgment of foreclosure and sale was entered in May 2007 and Jackson appealed from said judgment.
The foreclosure sale was scheduled for August 24, 2007 and a week before the sale, the Trust forwarded a payoff letter to Jackson indicating that the sum of $19,070.74 could be paid to redeem the property prior to sale. Instead of remitting full payment to the Trust, Jackson deposited $19,563.77 with the Bronx County Clerk on August 16, 2007. Jackson advised the Trust that it had filed an undertaking with the County Clerk that “stayed” the foreclosure sale. The sale, however, proceeded and the third party bought the parcel with a high bid of $160,000.
Subsequently, Jackson moved the cancel the foreclosure sale and to enjoin the referee from conveying title the to third-party claiming that property had been sold in violation of CPLR 5519 and RPAPL 1341. The Supreme Court denied the motion, the Appellate Division affirmed both the foreclosure judgment and the Supreme Court’s denial of the motion and the Court of Appeals granted leave to appeal.
First, the Court of Appeal ruled that Jackson’s deposit of $19,563.77 with the Bronx County Clerk did not automatically stay the sale under CPLR § 5519(a)(2) and (a)(6). The Court reasoned that CPLR 5519(a)(2) is relevant only where “the judgment or order directs payment of a sum of money” and therefore is not applicable to a foreclosure judgment. Also, the Court ruled that Jackson could not rely upon CPLR 5519(a)(6) as its “undertaking was not ‘in a sum fixed by the court’ as required by that provision.”
Turning next to Jackson’s claim that there was a stay under RPAPL 1341, the Court of Appeals noted that the Appellate Division found that this provision did not apply as the provision was not self-executing and requires that a court order the stay. The Court of Appeals, however, ruled that “we reject Jackson’s argument for a more fundamental reason – RPAPL 1341 simply had no application here.”
The Court of Appeals cited the relevant portion of RPAPL 1341 as follows:
Where an action is brought to foreclose a
mortgage upon real property upon which any
part of the principal or interest is due, and
another portion of either is to become due,
and the defendant pays into court the amount
due for principal and interest and the costs
of the action, together with the expenses of
the proceedings to sell, if any, the court
shall:
. . .
"2. Stay all proceedings upon judgment, if
the payment is made after judgment directing
sale and before sale; but, upon a subsequent
default in the payment of principal or
interest, the court may make an order
directing the enforcement of the judgment for
the purpose of collecting the sum then due.
The Court of Appeals ruled that RPAPL 1341 is, “by its plain terms,” limited to partial foreclosures. The Court noted that in typical mortgage foreclosure cases, after a default, the entire balance is accelerated and immediately due and consequently, there is no portion that is “to become due” in the future. Thus, the Court of Appeals ruled that since the action to foreclose the Trust’s tax lien does not involve a partial foreclosure, RPAPL 1341 was inapplicable.
Nonetheless, the Court of Appeals noted that although RPAPL 1341 does not apply outside the partial foreclosure context, recent Appellate Division cases have “engrafted that statute’s requirements onto a property owner’s common-law right of redemption.” The Court explained that “[t]he equity of redemption, which long predates the RPAPL, allows property owners to redeem their property by tendering the full sum at any point before the property is actually sold at a foreclosure sale.” All that is required is “an unconditional tender of the full amount due.”
But this is not what occurred in this case – the Court of Appeals noted that Jackson conceded that it only sought to stay the sale through its deposit with the County Clerk and that it did not tender the sum to the Trust. Jackson informed neither the Court nor the Trust that it was making full payment to redeem the property. Rather, Jackson informed the Trust that its deposit “stayed the sale.” As Jackson did not “redeem the property by unconditionally tendering the total amount owed,” the Court ruled that the property was properly sold at auction.
