New York and Connecticut Business Litigation Lawyer & Attorney : Rogers & Tartaro Law Firm : Commercial Litigation : Westchester County NY, Fairfield County CT

Readers might have noticed that we like commenting on posts in the Wall Street Journal Law Blog. We don’t cover “Big Law” or “Big Business” nor do we usually comment on criminal law, all LB specialties, but some LB posts just stimulate thought and, in this case, memories.

So it is with the recent post by Dan Slater on how Judge Richard Posner, U.S. Court of Appeals, 7^th Circuit, allowed the “Ostrich Instruction” in a criminal jury trial (“Conrad Black’s Sentence Upheld; 7th Circuit OKs Ostrich Instruction”). We’ll pass on commenting on the criminal matter under discussion in the post.

Instead, the concept of an “Ostrich Instruction” reminded me of our firm’s experience with a civil matter, specifically an adverse possession matter that also involved a jury trial. I believe that without being aware at the time, we were confronted with a similar concept which, with apologies to Judge Posner, we will call the “Ostrich Defense.”

An earlier post on this blog generally described the concept of adverse possession ("Losing Your Property Rights Through Inattention". For the sake of brevity, we will now simply say it is a claim that you own part or all of your neighbor’s property after a prescribed period of claimed continuous possession; there is more to it, of course, and for the rest I refer you to the earlier post.

The “Ostrich Instruction,” in a criminal context, is explained by LB in its post with a quote from Judge Posner, who coined the term, as follows:

An “ostrich instruction,” Posner explains, “tells the jury that to suspect that you are committing a crime and then take steps to avoid confirming the suspicion is the equivalent of intending to commit the crime.” Posner also clears up a fallacy: The legend that ostriches bury their head in the sand when frightened, he says, is “pure legend and a canard on a very distinguished bird.”).

The situation involving our derivative “Ostrich Defense” was as follows: In New York, for adverse possession, it is a settled principle that when claiming ownership of a neighbor’s property, the claimant’s knowledge of the actual boundary lines is not all that relevant. However, acknowledgment of the boundary lines would soundly defeat the claim. 

In our adverse possession case, the claimant maintained he could not possibly have acknowledged the boundary lines because he never had knowledge of the boundary lines. This, despite signing numerous documents submitted to municipal authorities that did acknowledge the boundary lines. He claimed to have signed the documents in blank so he never could have had the requisite knowledge. 

There was, of course, cross-examination (by our firm’s other partner Beverley Rogers) and the jury found for our client, the property owner. On appeal, the claimant dropped the adverse possession claim and tried only for a prescriptive easement, where you have right to use but do not own the property. That failed too, the appellate case is 40 AD3d 577, 834 N.Y.S.2d 330 (2d Dep’t 2007).

Well, how do you cross-examine a witness who is relying on the “Ostrich Defense?” Persistently. In this particular case, it was a matter of allowing the claimant to bring out his own inconsistencies.

On the other hand, could the “Ostrich Defense” actually be effective? I have to concede it could be a legitimate and effective defense in a civil matter under the right circumstances.

But, that would be a different case and a different post.

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Many people remember the long-running Broadway (and national) show, Les Miserables, or, at least, its music. Some may also remember that it was based on Victor Hugo’s 19^th century novel Les Miserables and that both the old TV program and the movie, The Fugitive, loosely reflect the same novel in story and concept. The character, Inspector Javert, the detective who doggedly pursues the main character, Jean Valjean, for years, may be less-well remembered.

I was reminded by a recent court decision that many prospective plaintiffs need to contemplate whether they will have to become Javerts themselves in order to gain any benefits from their litigation. 

Thus was I thinking when I read the decision reported recently in the private blog of the Real Property Law Section of the New York State Bar Association. A New York County Appellate Division decision (for out-of-staters: first level of appeal after a trial in the court of general jurisdiction, the Supreme Court), held that a renewal judgment is entered as of the date it was granted, and the liens of mortgages (recorded prior to that date) receive priority over that judgment. Gletzer v. Harris, 2008 WL 678589 (Sup.Ct., N.Y. Co.). The controversy arose when a judgment creditor applied for renewal of a judgment lien for a second ten-year run and was ultimately granted the renewal but nunc pro tunc (retroactively) to a date four years earlier.

The decision is somewhat technical and its impact may not be appreciated without a great deal of background. However, the decision affords the opportunity to fill-in some of that background by reviewing fundamentals that should be reviewed with a client before commencing a lawsuit. One can start with a very fundamental question: what do you win when you win at trial?

In most cases, you win a judgment. If it is a money judgment, you hope that the defendant will simply pay it. And, many do pay, which in that case ends the discussion. If the defendant doesn’t pay it, what have you won? 

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Only a few days ago we thought we were being lawyerly and careful in observing that it’s not often that the tables will be turned on a foreclosing lender as they were in the LaSalle case on which we were commenting at the time. The Law Blog of the Wall Street Journal recently reported another lender had been “dinged” (LB’s term) in court. The LB post provides a link to the Wall Street Journal news story.

The situation, in this case, involved some letters that were possibly forged and used as a basis to threaten foreclosure. The lender’s explanation, as reported in the WSJ news story was that the letters were re-created electronically by an employee.

The WSJ also reports that an executive of Countrywide Financial, the lender, testifying before Congress, admitted that sometimes employees made mistakes but denied that the lender intentionally abused its homeowners. 

I would give Countrywide the benefit of the doubt. Mistakes are probably more common than outright, systematic abuse. But, in our post we were making a limited point: that the borrower/homeowner, threatened or in the midst of foreclosure, should consult an attorney and explore all options. That is just as true when dealing with “employees’ mistakes” as it is in the case of intentional wrong-doing.  

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The tables have apparently been turned on the lender in a foreclosure case involving allegations of  predatory lending and coercion to accept a sub-prime mortgage. The case, reported by the Real Estate Section of the Westchester County Bar Association in its private blog is LaSalle Bank NA v. Shearon, 19 Misc.3d 433, 850 N.Y.S.2d 871, 2008 N.Y. Slip Op. 28032 (Sup.Ct. Richmond Co. 2008), and was before the New York Supreme Court in Richmond County.  

(For our non-New York and non-lawyer readers: the Supreme Court is not the highest court in the State, it is the trial court in this case;  and Richmond County is better known as Staten Island.)

In LaSalle, the Court refused to grant summary judgment to the foreclosing lender, instead, granted summary judgment to the borrower and scheduled a hearing on what damages were to be awarded to the borrower.  The damage award possibilities included: voiding the mortgage, returning all payments, returning all expenses of making the loan and attorneys fees. The Court found the lender had violated N.Y. Banking Law section 6-L (“High Cost Home Loans”). Apparently, the following acts of the lender brought on the reversal of fortunes:

• Lending in excess of the purchase price to finance points and closing fees;
• Leaving the borrower with negative equity;
• financing fees and points in excess of 3% of the loan;
• failure to undertake due diligence regarding borrower’s ability to pay a high-cost mortgage;
• Not issuing to the borrower a required consumer caution notice.

The borrower had been loaned $355,100 to purchase property for $335,000. The contract reflected a “seller’s concession” of $20,100. A $5,000 deposit had been lost in the shuffle.

Interestingly, the borrower did not make a cross-motion for summary judgment. This was an instance where the Court “searched the record” and exercised its authority to grant summary judgment to either of the parties, not necessarily the one making the motion.  For our non-lawyer readers, a summary judgment motion involves a contention by the side making the motion that the facts are not disputed and the Court can decide the case on the law without a trial.  In this case, the lender made the motion.  

The Supreme Court decision and any award of damages are subject to appeal so we don’t know whether any of this will stand. Still, it’s a remarkable turn of events at this point in the case.

It would be unrealistic to expect an outcome such as this to happen very often in foreclosures. However, the case does illustrate that the careful borrower should consult an attorney and examine all options, whether available through negotiations with the lender or through the appropriate legal process.

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For condominium board members or concerned unit owners, a concise, clear summary of how to collect unpaid condominium common charges appears in the New Jersey Law Blog of Stark & Stark. To read the entire article by Robyn Nolan Howlett, click here.

Current headlines about the troubled mortgage market lead us to suggest just a bit of additional perspective. Overextended financing undoubtedly affects some condominiums as it does individual homes. That means, in some cases, the obvious option, foreclosure, is not such a good option. 

As pointed out in the article, the first mortgage has priority. If the owner’s equity has declined to zero, foreclosure proceedings will not recover the unpaid common charges. In fact, the equity need not decline quite to zero because the process of foreclosure may itself erode what little equity is left.

If the unit owner has personal property, which in legal jargon includes money in the bank, one of the other options mentioned in the article, a contract action, may be more effective. A better option still, also mentioned, may be to negotiate some sort of payment schedule so the unit owner can retain ownership and “catch-up.” It may not be an easy negotiation if the owner is also negotiating with a bank, but all parties may benefit by avoiding the costs and declines in value that accompany a foreclosure proceeding Still, whichever option is chosen, we concur with Ms. Howlett’s conclusion that prompt action by the Board is critical.

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I was recently reminded that property owners are still losing property rights through inattention – or embroiling themselves in costly lawsuits to retain their property rights. The legal mechanisms of “adverse possession” and “prescriptive easement” can have such consequences. And, the “best practice” for avoiding the consequences is amazingly simple: just pay attention to your property. 

The memory trigger for this commentary was an e-mail newsletter of “current developments” offered as a helpful service by a New York title company, First American Title Insurance Company of New York. A recent issue described still another adverse possession case on Long Island. An adverse possession case triggers strong memories in our firm because one particularly intense case lasted through 13 days of trial. 

Adverse possession, in plain language and greatly simplified, is the legal means by which a person can obtain title to real property without paying for it. The adverse possessor simply acts as if he or she owns it for a long enough period of time – for example, in New York 10 years, in Connecticut 15. A prescriptive easement is similar but involves not ownership but use – you can gain the right to continue a use in perpetuity on property you do not own. Although these concepts may sound odd and unfair to a person unfamiliar with real property law, they have sound bases in logic and, once examined, actually involve fair and reasonable principles of law. Ownership and the right to use property should not remain ambiguous or subject to challenge indefinitely so under appropriate circumstances the law provides a way to “settle” either title (adverse possession) or the right to use (prescriptive easement).

Of course, actually invoking these concepts is not so simple and there are rigid legal requirements subject to highly technical definitions and rules. For example, under New York law: To obtain legal title, the would-be adverse possessor bears the legal “burden” to offer proof that is “clear and convincing.”  This is a level proof somewhat less than “beyond a reasonable doubt” that we know about from criminal cases but certainly greater than the “preponderance of the evidence” required in most non-criminal legal disputes. If claiming the land without a deed or other documentary proof, the offered proof must demonstrate that possession was “hostile and under a claim of right,” “actual,” “open and notorious,” “exclusive,” and “continuous” for the statutory period (i.e., 10 years in New York). In addition, the would-be adverse possessor must demonstrate, with the same level of “clear and convincing” proof, that the property was “usually cultivated or improved,” and “protected by a substantial enclosure.”

To obtain a prescriptive easement, it is not necessary to show possession, only use. And, there are no requirements involving “usual cultivation and improvement” and “substantial enclosure.” Nor, does the use have to be exclusive. For example, you may be entitled to nonexclusive use of your neighbor’s path. However, a prescriptive easement cannot be obtained if the use is carried on by permission. If the other standards are met by the would-be prescriptive user, the owner bears the burden of establishing that the use was carried on by permission.

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