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Home > Underwriting > Title News > Nineteen Volume Seven

SERIES: Nineteen VOLUME: Seven DATED: July, 2004


In a recently decided case, Ludwig v. Chautauqua Shores Improvement Association, Inc. (Appellate Division, 4th Department, decided March 19, 2004) the Appellate Court unanimously reversed a lower court decision which had upheld the enforceability of a recorded height restriction with the following memorandum and decision:

"It is hereby ORDERED that the judgment so appealed from be and the same hereby is unanimously reversed on the law without costs, the complaint is reinstated, the counterclaim is dismissed, the declaration and injunction are vacated and judgment is granted in favor of plaintiff as follows:

It is ADJUDGED AND DECLARED that plaintiff's residence does not violate the restrictive covenant of the Chautauqua Shores subdivision governing the height of single family dwellings.

Memorandum: Plaintiff appeals from a judgment dismissing the complaint after a bench trial, awarding judgment to defendants on their counterclaim declaring that plaintiff's residence is in violation of a restrictive covenant running in favor of defendants' property and granting a permanent injunction prohibiting plaintiff from constructing or maintaining a residence in violation of that restrictive covenant. We conclude that defendants' interpretation of the restrictive covenant is not supported by clear and convincing evidence and thus Supreme Court erred in enforcing the covenant against plaintiff.

'[T]he law has long favored the free and unencumbered use of real property, and covenants restricting use are strictly construed against those seeking to enforce them'. . . Therefore, a party seeking to enforce a restrictive covenant 'must prove, by clear and convincing evidence, the scope, as well as the existence, of the restriction'. . . 'The presence of an ambiguity in a restrictive covenant . . . requires the court to construe the covenant to limit, rather than extend, its restriction' . . . Moreover, where the language used in a restrictive covenant is equally susceptible of two interpretations, the less restrictive interpretation must be adopted . . .

The covenant at issue states that '[o]nly one single family dwelling not more than one and one-half stories in height . . . shall be placed on any lot.' The court incorrectly accepted defendants' interpretation of the covenant as prohibiting property owners from building homes of more than 1 1/2 stories in design, regardless of their height. The construction ignores the words 'in height' in the restriction' and thereby expands, rather than limits, its application. The words 'not more than one and one-half stories in height' are ambiguous in scope, and require clear and convincing proof of their meaning to render the restriction enforceable . . . Because defendants failed to present any such clear and convincing proof with respect to what number of feet constitutes a 'story in height,' the scope of the covenant 'is uncertain, doubtful, or debatable,' thus rendering it unenforceable as applied to plaintiff's residence . . .

Finally, we conclude that, based on the record before us, the doctrines of equitable estoppel and collateral estoppel are inapplicable."


In a recent decision, Bankers Trust Company of California v. Stewart Title Insurance Company (Appellate Division, 1st Department, decided April 1, 2004), the Appellate Court upheld the dismissal of an action brought against a title insurer by the defrauded assignee of an assigned mortgage with the following decision:

"Plaintiff bank is the assignee of a note and related mortgage in the amount of $127,500, evidencing a loan by FHB Funding Corp. to one Wendy Lovelace, secured by premises located in Jamaica, New York. However, the entire loan transaction was part of a criminal conspiracy involving the repeated sale of the same premises, and, once the mortgage proceeds were disbursed, the conspirators disappeared. Although plaintiff has commenced this action to recover its losses from the title insurer, it has not produced a copy of the purported insurance policy. Indeed, the record reveals that plaintiff purchased a mortgage replete with facial defects and irregularities. Moreover, there is no evidence that the abstract company which the conspirators had asked to undertake a title search was at all aware that the preliminary certificate would, upon being forwarded to the conspirators, be fraudulently altered to show Lovelace as the title holder, or that a purported closing had occurred on April 29, 1998. Thus, when the mortgage instrument and related documents were not submitted to the abstract company for filing, the Lovelace mortgage was not recorded, and no final mortgage title insurance policy was ever issued. Accordingly, the motion court properly found plaintiff's action devoid of merit."


We have been informed by our lobbyist that the Governor's Budget Bill contains a provision which will increase the filing fee for Form RP-5217 for residential and agricultural properties from the current $50.00 to $75.00 and will increase the filing fee for Form 5217 for commercial properties from $50.00 to $165.00. As everyone knows, due to the recent activity (or inactivity) in Albany, the budget bill has not yet been passed by the New York Senate or Assembly and may be delayed well into the month of July (or August or September or . . .). All parties involved in real estate closings may be well advised to escrow additional funds for closings recorded on or after July 1st so that this increase in filing fees can be accommodated.

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