M&T Real Estate Trust,, Appellant,v.James J. Doyle, II et al., Respondents.BriefN.Y.February 14, 20130 To be Argued by: HOWARD S. ROSENHOCH, ESQ. Estimated Time for Argument: (30 Minutes) STATE OF NEW YORK Court of Appeals M&T REAL ESTATE TRUST, Successor by Merger to M&T REAL ESTATE, INC., Plaintiff-Appellant, vs. JAMES J. DOYLE, II and JIM DOYLE FORD, INC., Defendants-Respondents. Erie County Index No.: I 2009/3364. Appellate Division Docket Numbers: CA 11-01572 and CA 11-01573. BRIEF FOR PLAINTIFF-APPELLANT M&T REAL ESTATE TRUST, Successor by Merger to M&T REAL ESTATE, INC. JAECKLE, FLEISCHMANN & MUGEL, LLP Attorneys for Plaintiff-Appellant M&T Real Estate Trust, Successor By Merger to M&T Real Estate, Inc. Avant Building, Suite 900 200 Delaware Avenue Buffalo, New York 14202 Telephone: (716) 856-0600 HOWARD S. ROSENHOCH, ESQ. VINCENT O. HANLEY, ESQ. Of Counsel Date of Completion: August 10, 2012. BATAVIA LEGAL PRINTING, INC.— Telephone (866) 768-2100 DISCLOSURE STATEMENT Appellant, M&T Real Estate Trust, Successor by Merger to M&T Real Estate, Inc., is a wholly owned subsidiary of Manufacturers and Traders Trust Company (the "Bank"). The Bank is a wholly-owned subsidiary of Wilmington Trust Corporation, which is a wholly-owned subsidiary of M&T Bank Corporation. Pursuant to 22 N.Y.C.R.R. 500.1(c), a complete listing of all parents, subsidiaries and affiliates of M&T Real Estate Trust is attached hereto. (The names of M&T Real Estate Trust and the parent companies are circled on the attached listing.) iv RELATED LITIGATION This appeal arose in connection with an action (this "Mortgage Foreclosure Action") brought by Plaintiff-Appellant M&T Real Estate Trust, successor by merger to M&T Real Estate, Inc., to foreclose certain commercial mortgages executed by Defendant-Respondent James J. Doyle, II which were given to secure indebtedness evidenced by two promissory notes executed by Defendant- Respondent James J. Doyle, II (collectively, the "Mortgage Notes"). The only litigation related to this Mortgage Foreclosure Action that is currently pending is an action for money judgment brought by Plaintiff-Appellant's affiliate, Manufacturers and Traders Trust Company ("M&T Bank"), in Supreme Court, Erie County, on September 28, 2011 under Index Number I 2011-605311 against Defendants-Respondents James J. Doyle, II and Jim Doyle Ford, Inc., and two entities related to Defendants-Respondents, Kane-Doyle, Inc. and Kay-Dee Realty, LLC (the "Action for Money Judgment"). In the Action for Money Judgment, M&T Bank seeks a money judgment against the defendants named therein based on two promissory notes, a Visa Business Access Line of Credit, and certain guaranty agreements which were either executed by or guaranteed by the defendants named in the Action for Money Judgment (collectively, the "M&T Bank Loan Documents"). v The M&T Bank Loan Documents are entirely separate and distinct from the Mortgage Notes upon which this Mortgage Foreclosure Action was brought. M&T Bank moved for summary judgment in the Action for Money Judgment by notice of motion dated March 2, 2012. After a number of adjournments, the motion is returnable in Supreme Court, Erie County, on September 6, 2012. vi TABLE OF CONTENTS Page DISCLOSURE STATEMENT .................................................................................. i RELATED LITIGATION ....................................................................................... iv TABLE OF CASES AND AUTHORITIES ........................................................... vii QUESTION PRESENTED ...................................................................................... ix PRELIMINARY STATEMENT ............................................................................... 1 FACTS ....................................................................................................................... 4 STATEMENT OF JURISDICTION & PRESERVATION ...................................... 9 ARGUMENT ........................................................................................................... 11 POINT I Under Long-Established Principles of New York Law, "Delivery" of a Deed Is Not Complete Without Acceptance .................................................................. 11 POINT II None of the Cases Relied Upon by Defendants- Respondents Regarding the Interpretation and Application of RPAPL § 1371(2) Supports Their Position ...................................................................................... 18 POINT III Conveyances by Referee's Deed Are Subject to the Same Acceptance Requirement That Applies to Conveyances Generally ............................................................ 24 CONCLUSION ........................................................................................................ 26 vii TABLE OF CASES AND AUTHORITIES Page Cases Arbor National Commercial Mortgage, LLC v. Carmans Plaza, LLC, 305 A.D.2d 622 (2d Dept. 2003) ............................................... 23 Brackett v. Barney, 28 N.Y. 333 (1863) ..................................................... 11, 13, 14 Crossland Savings, FSB v. Patton, 182 A.D.2d 496 (1st Dept. 1992), app. denied, 80 N.Y.2d 755 (1992) ................................... 24, 25 Eastern Steel Company v. Globe Indemnity Company, 185 A.D. 695 (1st Dept. 1919) ........................................................................ 9 First Federal Savings and Loan Association of Syracuse v. Ivy Ridge, Inc., 76 Misc. 2d 208 (Sup. Ct. Cayuga Co. 1973), aff'd, 50 A.D.2d 1057 (4th Dept. 1975) .................................................................................................... 11 In re Gorenflo, 351 B.R. 64 (Bankr. W.D.N.Y. 2006) ............................................ 12 Lennar Northeast Partners Ltd. Partnership v. Gifaldi, 258 A.D.2d 240 (4th Dept. 1999) ..................................................... 20, 22, 23 National Bank of Sussex County v. Batar, 207 A.D.2d 610 (3d Dept. 1994) .......................................................................... 18, 19, 20 Powderly v. Aetna Casualty & Surety Co., 72 Misc. 2d 251 (Sup. Ct. Monroe Co. 1972) ................................................................... 14 River Bank America v. Pan American Mall, Inc., 221 A.D.2d 327 (2d Dept. 1995) .......................................................................... 23 Savings Bank of Utica v. 561-575 Delaware Ave., Inc., 201 A.D.2d 946 (4th Dept. 1994) ........................................................... 24, 25 Ten Eyck v. Whitbeck, 156 N.Y. 341 (1898) ......................................... 11, 12, 13, 14 viii Statutes CPLR § 5501(a)(1) .................................................................................................2, 7 CPLR § 5602(a)(1)(i) ................................................................................................. 9 N.Y. RPL § 244 ................................................................................................. 12, 14 RPAPL § 1371(2) ................. ix, 1, 2, 3, 6, 7, 9, 10, 11, 14, 15, 18, 21, 23, 24, 25, 26 Other Authorities 1 N.Y. LAW & PRACTICE OF REAL PROPERTY § 24:162 ........................................... 11 4-37 WARREN'S WEED NEW YORK REAL PROPERTY § 37.08(1) (2011) .................................................................................... 11, 13 ix QUESTION PRESENTED Question: Was the Appellate Division, Fourth Department, correct in holding that M&T's motion for deficiency judgment was untimely because the real property transfer in question was consummated, within the meaning of RPAPL § 1371(2), when the Referee signed and mailed the May 2010 deed – even though counsel for the intended grantee expressly refused to accept and retain physical possession of the deed at that time? Answer: Plaintiff contends that the holding of the Appellate Division was erroneous and inconsistent with over 100 years of New York case law requiring "acceptance" of a deed as a prerequisite to consummation of a real property transfer. PRELIMINARY STATEMENT Plaintiff-Appellant M&T Real Estate Trust, successor by merger to M&T Real Estate, Inc. ("M&T'"), brought this action to foreclose certain commercial mortgages executed by Defendant-Respondent James J. Doyle, II ("Doyle") securing indebtedness in the original principal amount of $1,178,897.79. The mortgaged premises were sold at public auction by Peter A. Weinmann (the "Referee"), the referee appointed in the action, and M&T was the successful bidder at the foreclosure sale. When M&T moved for a deficiency judgment against Doyle and his company, Defendant-Respondent Jim Doyle Ford, Inc. ("Doyle Ford"), Doyle and Doyle Ford opposed the motion, asserting that the motion for deficiency judgment was untimely. The Erie County Court, by Order granted June 24, 2011, held that M&T's motion was timely under RPAPL § 1371(2) (R. 13), and, by Order and Judgment granted July 14, 2011, granted M&T's motion deficiency judgment in the amount of $426,657.11 against both Doyle and Doyle Ford (R. 18). Defendants-Respondents Doyle and Doyle Ford appealed from both the June 24, 2011 Order of the Erie County Court which held that M&T's motion for deficiency judgment was timely (R. 13), and the July 14, 2011 Order and Judgment which granted the deficiency judgment against Doyle and Doyle Ford (R. 18). 2 By Order granted March 23, 2012 (Case No. 11-01572) (R. 11a), the Appellate Division dismissed Defendants-Appellants' appeal with respect to the June 24, 2011 Order on the grounds that the Order would be brought up for review pursuant to CPLR § 5501(a)(1) in the appeal of the subsequent final Order and Judgment granted July 14, 2011. With respect to the appeal taken from the final Order and Judgment granted July 14, 2011, the Appellate Division issued its March 23, 2012 Memorandum and Order (Case No. 11-01573) (R. 5a) in which it reversed the Erie County Court's July 14, 2011 Order and Judgment, and held that M&T's motion for deficiency judgment was untimely. RPAPL § 1371(2) requires that a motion for deficiency judgment be made within ninety (90) days after "the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser … ." N.Y. RPAPL § 1371(2) (emphasis added). In its March 23, 2012 Memorandum and Order, the Appellate Division held that the 90-day period under RPAPL § 1371(2) during which M&T was permitted to move for deficiency judgment commenced when the Referee "signed the deed … notwithstanding the refusal of the plaintiff's counsel to accept and retain physical possession of the deed at that time" (R. 6a (emphasis added)). The Appellate Division's March 23, 2012 Memorandum and Order is an aberration in New York law – a decision that is inconsistent with over 100 years of 3 existing New York authority holding that in every conveyance of real property, whether by ordinary deed or referee's deed, acceptance of the deed is an essential element for "consummation" of the sale or other conveyance. Plaintiff-Appellant M&T has appealed from the Appellate Division's March 23, 2012 Memorandum and Order. The Court of Appeals, by Order granted June 28, 2012, granted Plaintiff-Appellant's motion for leave to bring this appeal. (R. 3a). The sole question for the Court of Appeals is whether the Appellate Division, Fourth Department, was correct in holding that M&T's motion for deficiency judgment was untimely under RPAPL § 1371(2). This brief is submitted on behalf of Plaintiff-Appellant M&T. 4 FACTS Plaintiff-Appellant M&T brought this action to foreclose certain commercial mortgages executed by Defendant-Respondent Doyle securing indebtedness in the original principal amount of $1,178,897.79, payment of which was guaranteed by Doyle's company, Doyle Ford. Pursuant to a Judgment of Foreclosure and Sale granted by the Erie County Court on August 6, 2009 (R. 102), the mortgaged premises were sold at a public foreclosure auction on September 24, 2009 by the Referee, and M&T was the successful bidder (R. 111). On May 6, 2010, M&T assigned its foreclosure bid to its affiliate, MAT Properties, Inc. ("MAT Properties"). (R. 98, ¶ 10). On May 10, 2010, M&T's counsel, Vincent O. Hanley ("Plaintiff's Counsel"), sent the Referee a proposed referee's deed and other materials and requested that the Referee sign and return them to him. (R. 163). However, Plaintiff's Counsel subsequently telephoned the Referee on or about May 13, 2010, before receiving the signed referee's deed and other papers from the Referee, and informed the Referee that MAT Properties was not prepared to accept a referee's deed at that time because a potential purchaser had expressed an interest in acquiring the foreclosure bid from MAT Properties by assignment. (R. 164). The Referee indicated during the telephone conversation with Plaintiff's Counsel that he had already signed the proposed referee's deed forwarded by Plaintiff's Counsel 5 and placed it in the mail on May 12, 2010 addressed to Plaintiff's Counsel. Plaintiff's Counsel then informed the Referee that he had not yet received the papers in the mail, and that, when the deed and other papers arrived in the mail, he would not accept them on behalf of MAT Properties, and would be returning them to the Referee. (R. 164). Upon receiving the signed referee's deed and other papers mailed by the Referee, Plaintiff's Counsel promptly returned the documents to the Referee along with a cover letter dated May 17, 2010 reiterating that MAT Properties would not accept the referee's deed at that time. (R. 164). The Referee, upon receiving the returned documents, accepted and retained possession of them without objection. (See R. 164). By letter dated July 26, 2010, Plaintiff's Counsel informed the Referee that MAT Properties was at that time willing to accept delivery of a referee's deed. (R. 164). In response to the July 26, 2010 letter, the Referee initially sent Plaintiff's Counsel the referee's deed that had been signed back in May 2010. However, upon receiving the referee's deed dated in May 2010, Plaintiff's Counsel contacted the Referee by e-mail and requested that the Referee re-execute a deed so that the deed would be dated "concurrently with its delivery." (R. 165; R. 170). In response, the Referee re-executed a referee's deed dated August 9, 2010, and Plaintiff's Counsel arranged to have the new deed picked up from the Referee's 6 office. (R. 165). Plaintiff's Counsel physically received the referee's deed dated August 9, 2010 on August 9, 2010, and Plaintiff's Counsel accepted and retained the referee's deed dated August 9, 2010 without objection. (R. 165; R. 99, ¶ 11). M&T brought a motion for deficiency judgment against the Defendants- Respondents on September 3, 2010. (R. 151, ¶ 5). The motion was made returnable in Erie County Court on September 29, 2010. (R. 94). By their attorneys, Gross, Schuman, Brizdle & Gilfillan, P.C. (John K. Rottaris, of counsel), Defendants-Respondents appeared on the return date of Plaintiff-Appellant's motion for deficiency judgment and opposed the motion, including the submission of an opposing affidavit of John K. Rottaris, Esq. dated October 13, 2010. (R. 15; R. 139). In opposing the motion, Defendants-Respondents asserted, among other things, that Plaintiff-Appellant's motion for deficiency judgment was untimely under RPAPL § 1371(2). (R. 140-141). The Erie County Court granted an Order on June 24, 2011 determining, among other things, that Plaintiff-Appellant's motion for deficiency judgment was timely made under RPAPL § 1371(2) because it was brought within 90 days of the consummation of the sale of the mortgaged premises by the Referee pursuant to the Referee's Deed dated August 9, 2010. (R. 15-16). The court then granted a subsequent Order and Judgment on July 14, 2011 determining the fair and reasonable market value of the mortgaged premises as of the date of the mortgage 7 foreclosure sale, and adjudging Defendants-Respondents liable to Plaintiff- Appellant for the deficiency in the amount of $426,657.11. (R. 20). Defendants-Respondents Doyle and Doyle Ford appealed from both the June 24, 2011 Order of the Erie County Court which held that M&T's motion for deficiency judgment was timely (R. 14), and the July 14, 2011 Order and Judgment which granted the deficiency judgment against Doyle and Doyle Ford (R. 19). By Order granted March 23, 2012 (Case No. 11-01572) (R. 11a ), the Appellate Division dismissed Defendants-Appellants' appeal with respect to the June 24, 2011 Order on the grounds that the Order would be brought up for review pursuant to CPLR § 5501(a)(1) in the appeal of the subsequent final Order and Judgment granted July 14, 2011. With respect to the appeal taken from the final Order and Judgment granted July 14, 2011, the Appellate Division issued its March 23, 2012 Memorandum and Order (Case No. 11-01573) (R. 5a ) in which it reversed the Erie County Court's July 14, 2011 Order and Judgment, and held that M&T's motion for deficiency judgment was untimely. In reversing the Erie County Court's Order and Judgment, the Appellate Division, Fourth Department, expressly held that the 90-day period under RPAPL § 1371(2) during which M&T was permitted to move for deficiency judgment commenced when the Referee "signed the deed … notwithstanding the refusal of 8 the plaintiff's counsel to accept and retain physical possession of the deed at that time." (R. 6a (emphasis added)). Plaintiff-Appellant M&T moved for leave to appeal the Appellate Division's decision to the Court of Appeals. The Court of Appeals, by order granted June 28, 2012, granted M&T's motion for leave to appeal. (R. 3a). 9 STATEMENT OF JURISDICTION & PRESERVATION The Court of Appeals has jurisdiction to review the March 23, 2012 Memorandum and Order as of right pursuant to CPLR § 5602(a)(1)(i) because this is an action that originated in County Court, Erie County, New York. The Appellate Division, Fourth Department March 23, 2012 Memorandum and Order finally determined the action, and there is no appeal as of right from the March 23, 2012 Memorandum and Order. The sole question raised here is an issue of law – i.e., the interpretation of RPAPL § 1371(2). Eastern Steel Company v. Globe Indemnity Company, 185 A.D. 695 (1st Dept. 1919). The Appellate Division's misapplication of the law concerning whether acceptance of the referee's deed is an essential element for "consummation" of the sale and commencement of the 90-day statute of limitations for bringing a deficiency judgment motion under RPAPL § 1371(2) raises a legal issue of statewide importance that can only be resolved by Court of Appeals review. The question of whether M&T's motion for deficiency judgment was timely made was raised and preserved as follows: In M&T's attorney's affidavit in support of the motion for deficiency judgment, M&T asserted that the referee's deed was delivered on August 9, 2010 and that 90 days had not elapsed between 10 the said delivery of the referee's deed and the making of the motion for deficiency judgment (R. 99); Defendants-Respondents, in opposing M&T's motion for deficiency judgment, asserted that the motion was not timely made (R. 140-141); the Erie County Court, in its June 24, 2011 Order, specifically held that M&T's motion for deficiency judgment was timely made under RPAPL § 1371(2) (R. 15- 16); and the Erie County Court, when it issued its July 14, 2011 Order and Judgment, granted M&T's motion for deficiency judgment against Defendants- Respondents (R. 19-21). Furthermore, the question presented here – i.e., whether the 90-day period under RPAPL § 1371(2) during which M&T's motion for deficiency judgment was required to be brought commenced when the Referee signed and mailed the May 2010 deed, notwithstanding the intended grantee's refusal to accept the deed – was preserved because this is precisely the same issue that was before the Appellate Division when it issued the March 23, 2012 Memorandum and Order. (R. 5a). 11 ARGUMENT POINT I Under Long-Established Principles of New York Law, "Delivery" of a Deed Is Not Complete Without Acceptance RPAPL § 1371(2) requires that a motion for deficiency judgment be made within ninety (90) days after "the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser..." N.Y. RPAPL § 1371(2). Defendants-Respondents Doyle and Doyle Ford argued, and the Appellate Division, Fourth Department, held that the 90-day period under RPAPL § 1371(2) began to run when the Referee signed and dropped the initial proposed referee's deed in the mail in May of 2010 addressed to Plaintiff's Counsel. Under long-established principles of New York property law, the term "delivery" requires both delivery and acceptance of the deed. Ten Eyck v. Whitbeck, 156 N.Y. 341, 352 (1898); 4-37 WARREN'S WEED NEW YORK REAL PROPERTY § 37.08(1) (2011). Simply put, a conveyance of real property in New York is not accomplished unilaterally. Brackett v. Barney, 28 N.Y. 333, 340 (1863); First Federal Savings and Loan Association of Syracuse v. Ivy Ridge, Inc., 76 Misc. 2d 208, 209 (Sup. Ct. Cayuga Co. 1973), aff'd, 50 A.D.2d 1057 (4th Dept. 1975); 1 N.Y. LAW & PRACTICE OF REAL PROPERTY § 24:162. Accordingly, delivery of a deed must include an acceptance of the deed by the intended grantee 12 in order for the delivery to be complete and the transfer of real property to be consummated. The standard for consummation of real property transfers in New York is statutory. New York Real Property Law ("RPL") § 244, which was enacted by the Legislature in 1909, established the requirements for consummation of transfers of title to real property. Section 244 provides: § 244. When grant takes effect. A grant takes effect, so as to vest the estate or interest intended to be conveyed, only from its delivery; and all the rules of law, now in force, in respect to the delivery of deeds, apply to grants hereafter executed. N.Y. RPL § 244. Two controlling principles follow from the language of RPL § 244. First, a deed becomes effective only upon delivery, and second, delivery will be defined by the same standards of law in effect prior to the effective date of the statute. In re Gorenflo, 351 B.R. 64, 66 (Bankr. W.D.N.Y. 2006). The law of New York in effect prior to the enactment of RPL § 244 was made perfectly clear by the New York Court of Appeals in its 1898 decision in Ten Eyck v. Whitbeck, which stated, in pertinent part: The delivery of a deed is essential to the transfer of title, and there can be no delivery without an acceptance by the grantee. The question of delivery, involving as it does acceptance, is always one of intention, and where there is a conflict in the evidence, it becomes a question of fact to be determined by a jury. There must be both a 13 delivery and acceptance with the intent of making the deed an effective conveyance. (Jackson v. Phipps, 12 Johns. 418; Jackson v. Leek, 12 Wend. 105; Brackett v. Barney, 28 N. Y. 333, 340; McIlhargy v. Chambers, 117 N. Y. 532, 539, 541; Younge v. Guilbeau, 3 Wall. 641.) While the presumption is that a deed was delivered and accepted at its date, it is a presumption that must yield to opposing evidence. ... But these presumptions may be repelled by proof of attendant facts and subsequent circumstances, such as the possession and control of the property by the grantor, the declarations of the supposed grantee which are inconsistent with the transfer of the title, which, with the acts and conduct of the parties in relation to the property, are all circumstances to be considered in determining whether there has been a delivery and acceptance of the deed. Ten Eyck, 156 N.Y. at 352; see also 4-37 WARREN'S WEED NEW YORK REAL PROPERTY § 37.08(1) (2011). Brackett v. Barney, a case decided by the Court of Appeals in 1863, went even further in articulating the requirement for acceptance of the deed by the intended grantee, stating: The delivery of a deed without acceptance is nugatory; (Crosby v. Hillyer, 24 Wend. 284) and the mere taking of an instrument into his hands by the grantor and retaining it, of itself amounts to nothing, where the circumstances show that he did not receive or hold it as an effective conveyance. (Jackson v. Richards, 15 Wend. 617.) The question of delivery, involving acceptance, is always one of intention depending on the circumstances of the transaction. (Bell v. Ingestree, 12 Ad. & Ellis, N. S., 317; Chouteau v. Suydam, 21 N. Y., 179) In some cases the intention is clear, in others it is 14 doubtful; but the intention always determines the character of the act. An intention to deliver on the one hand and to accept on the other, is necessary to give effect to the instrument. Brackett, 28 N.Y. at 340-341. It is clear, therefore, that under RPL § 244 and the common law of New York upon which it was based that complete "delivery" of a deed requires both actual delivery of the instrument and acceptance by the intended grantee. Without (1) some form of actual delivery of the instrument and (2) acceptance by the grantee, there has been no "delivery," and thus no effective conveyance. Ten Eyck, 156 N.Y. at 352; Powderly v. Aetna Casualty & Surety Co., 72 Misc. 2d 251, 255 (Sup. Ct. Monroe Co. 1972). In this case, the facts are not in dispute, and those facts clearly show that there was no acceptance by MAT Properties of the referee's deed until Plaintiff's Counsel accepted the referee's deed dated August 9, 2010. The May 2010 aborted attempt by the Referee to transfer title to the mortgaged premises clearly did not constitute the "consummation" of the sale which is sufficient under RPAPL § 1371(2) to commence the running of the 90-day period in which to bring a motion for deficiency judgment. In May 2010, Plaintiff's Counsel unequivocally refused to accept the proposed deed – by informing the Referee by telephone of the rejection of the proposed delivery before the deed even reached his office. Upon 15 receiving the proposed deed, Plaintiff's Counsel rejected and promptly returned it to the Referee with a cover letter in which he reiterated the rejection. Furthermore, the Referee accepted and retained the returned deed, and ultimately executed a new referee's deed on August 9, 2010 that was delivered to and accepted by Plaintiff's Counsel on behalf of MAT Properties on August 9, 2010. (R. 165). Moreover, it is abundantly clear that neither party to the real estate transaction in question intended to consummate a transfer of title in May of 2010. Plaintiff's Counsel's rejection on behalf of MAT Properties was clear and unequivocal. The Referee's intentions with respect to his interactions with Plaintiff's Counsel in May 2010 were equally clear, as are evidenced by: (1) the Referee's willingness to accept and retain the returned May 2010 deed, and (2) the Referee's execution of a subsequent referee's deed dated August 9, 2010 which the Referee acknowledged in his affidavit was done so that the referee's deed would be dated "concurrently with its delivery." (R. 165 (emphasis added)). The only deed that was received and retained on behalf of MAT Properties by Plaintiff's Counsel without objection was the referee's deed dated August 9, 2010. (R. 165; R. 152, ¶ 7). The conveyance of the mortgaged premises to MAT Properties was not consummated until August 9, 2010, and the 90-day period under RPAPL § 1371(2) for bringing a motion for deficiency judgment, therefore, did not begin to run until that date. 16 The concept that acceptance of a deed is required for consummation of a real property transfer is so basic to the law of real property conveyances that it is rarely challenged. The rule is not based on archaic abstract principles, but rather on sound practical considerations. If the law were otherwise, owners of contaminated or other undesirable properties could disclaim ownership of and responsibility for such properties by simply delivering a deed to an unwilling third-party. Furthermore, if dropping a deed in the mail were sufficient to consummate a transfer of title, the intended grantee would not even know precisely when the transfer occurred. Without knowing when it acquired title, an intended grantee would not be in a position to arrange for appropriate property and liability insurance coverage, nor would it even be possible to determine when the risks associated with ownership of real property (such as those related to third-party claims arising out of dangerous conditions on the property, or those associated with losses from a fire or other casualty) shifted from the grantor to grantee. For all of these practical reasons, New York law requires that an intended grantee accept the proposed deed in order for delivery of the deed to be complete and the transfer of title to be "consummated." The fact that Plaintiff's Counsel prepared the proposed May 2010 deed and requested that the Referee sign it does not change the analysis or the result in any way. Acceptance of a deed is required, regardless of which party drafted the 17 document. Nor is it relevant that MAT Properties rejected two proposed deeds before ultimately accepting and retaining the deed dated August 9, 2010 without objection. In their brief submitted in the appeal below to the Appellate Division, Fourth Department, Defendants-Respondents pointed to an inconsistency between the referee's deed (dated August 9, 2010) and the Referee's Report of Sale (dated May 11, 2010), noting that the Referee's Report of Sale dated May 11, 2010 indicated, in the past tense, that the Referee had executed and delivered a deed to the purchaser. However, the Referee explained the reason for that inconsistency in his affidavit dated October 18, 2010, stating: *** 5. When [Plaintiff's Counsel] asked me to re-execute the Referee's Deed so that it would be dated concurrently with its delivery, it did not occur to me that my failure to also re-date and re-execute the previously executed Referee's Report of Sale might cause confusion. 6. If the court so directs, I would be happy to execute an amended Referee's Report of Sale for clarification. *** (R. 165). While the inconsistency in the dates may have caused some initial confusion, the inconsistency was explained by the Referee and the Erie County Court found that explanation to be sufficient. Furthermore, the facts concerning the attempted delivery of the May 2010 deed and the delivery and acceptance of 18 the referee's deed dated August 9, 2010 were made clear by submission of affidavits by both the Referee and Plaintiff's Counsel, and those facts were not disputed by the Defendants-Respondents. POINT II None of the Cases Relied Upon by Defendants- Respondents Regarding the Interpretation and Application of RPAPL § 1371(2) Supports Their Position Although Defendants-Respondents, in their brief submitted in the appeal below to the Appellate Division, cited nine New York cases, they did not cited a single reported New York decision involving facts similar to those in this case (i.e., where a proposed referee's deed was rejected by the intended grantee or its attorney and physically returned to the referee). The reason for that is that there is not a single reported case in New York holding that the 90-day period under RPAPL § 1371(2) began to run notwithstanding an unequivocal rejection of a referee's deed by an intended grantee and the physical return of a proposed referee's deed to the referee. The cases which Defendants-Respondents cited in their brief submitted to the Appellate Division in the appeal below were decided on facts so clearly distinguishable from the facts of this case, that they lend no support whatsoever to Defendants-Respondents' argument. For example, Defendants-Respondents cited National Bank of Sussex County v. Batar, 207 A.D.2d 610, 612 (3d Dept. 1994), 19 for the proposition that a "delivery to the grantee need not be effected by manual transfer but can also be shown by circumstances amounting to a constructive transfer." However, the National Bank of Sussex County case involved a situation where the referee and the purchaser (through its attorney) had expressly agreed that the referee would act as agent for the purchaser and would record the referee's deed on behalf of the purchaser. In describing the arrangement, the court in National Bank of Sussex County stated: In his October 2, 1991 letter to plaintiff's attorneys, the Referee stated: "In regard to the Referee's deed, you need to submit a Gains Tax Affidavit and an E & A. Please fill out same for purchaser, execute in the appropriate spot and return to me for signature with the appropriate filing fees and I will file for you" (emphasis supplied). By this letter, the Referee offered to act as plaintiff's agent for the recording of the deed. Plaintiff manifested its consent to the Referee's agency through its attorneys' November 12, 1991 letter to the Referee, in which one of plaintiff's attorneys enclosed the necessary documents and stated that he understood that the Referee would record the deed. Plaintiff's out-of-State attorneys, as plaintiff's agents, had the authority to delegate their ministerial duty of recording the deed to the Referee, who in effect became plaintiff's subagent for this purpose. Therefore, the Referee's retention of the deed for the benefit of plaintiff, was not inconsistent with his manifest intention to pass title, evidenced by his execution of the deed, and constituted constructive delivery of it to plaintiff, as grantee, as of November 12, 1991. 20 Id. at 612 (citation omitted). In our case, there was no such agency relationship between the Referee and MAT Properties and, therefore, there is no basis whatsoever on which to conclude that there was a "constructive delivery" of the referee's deed to MAT Properties in May of 2010. Similarly, the Defendants-Respondents' reliance in the appeal below on the opinion in Lennar Northeast Partners Ltd. Partnership v. Gifaldi, 258 A.D.2d 240 (4th Dept. 1999), was entirely misplaced. In their brief submitted in the appeal to the Appellate Division, Defendants-Respondents quoted that portion of the Lennar decision that stated: "When the Referees signed the deeds presented by Lennar's counsel, they were left with no title to convey to any other party." Id. at 243. Read by itself, the court's statement might imply that the transfer of title by a foreclosure referee occurs when the referee's deed is signed. However, that clearly is not the court's holding in Lennar. Lennar involved foreclosure sales of two properties by two separate referees in two separate actions. The plaintiff, Lennar, was the successful bidder at the foreclosure sales held in each of the two actions. Immediately upon the conclusion of the auction sales, the respective referees executed deeds to Lennar and physically delivered those deeds to Lennar's attorney. Approximately one year after the respective auction sales, the deeds were recorded and Lennar then moved for confirmation of the sales and for deficiency judgment against the defendants. The defendants moved to dismiss 21 Lennar's motions for deficiency judgment on the grounds that the 90-day statute of limitations imposed by RPAPL § 1371(2) had run because the referees' deeds were delivered to Lennar's counsel at the time of the auction sales approximately one year before Lennar brought its motions for deficiency judgment. Lennar argued that its counsel had not accepted the deeds at the time of the auction sales, but rather had been holding the deeds "in escrow" for approximately one year (between the date of the auction sale and the dates the respective deeds were recorded). The court rejected Lennar's argument as being unsupported by the record because there was no proof that an escrow existed. In that regard, the court stated: For an instrument to be held in escrow, there must be (a) an agreement regarding the subject matter and delivery of the instrument, (b) a third-party depositary, (c) delivery of the instrument to a third party conditioned upon the performance of some act or the occurrence of some event, and (d) relinquishment by the grantor. Merely "[c]alling an act an escrow does not necessarily make it such. ..." Here, the Referees, who were the grantors on behalf of the court, imposed no conditions on delivery, nor is there any mention of escrow in either the terms of sale or any correspondence between Lennar's counsel and the Referees. Indeed, Lennar's counsel acknowledged that Lennar was free to record the deeds at any time…. When the Referees signed the deeds presented by Lennar's counsel, they were left with no title to convey to any other party. In our view, each transaction was "consummated" on the dates of the auction for each property by delivery of a proper deed of conveyance to Lennar's counsel. Because Lennar failed to raise an issue 22 of fact to overcome the presumption of delivery and acceptance on the respective auction dates, we conclude that delivery to Lennar's attorney was "absolute." Id. at 243 (citations omitted). There is an extremely important distinction between the facts in Lennar and the facts in this case. Lennar's attorney accepted and retained the referees' deeds without objection and then, a year later, claimed that he had not accepted delivery of the deeds, but rather was holding them "in escrow." MAT Properties' attorney never accepted or retained the May 2010 deed, but rather informed the Referee before receiving the proposed deed in the mail that it was being rejected, and then promptly returned the proposed deed to the Referee with a cover letter reiterating the rejection. No portion of the court's decision in Lennar changes the well- established requirement for acceptance of a deed by the grantee for consummation of the transaction, nor does anything contained in the Lennar decision support the Defendants-Respondents' claim that M&T's motion for deficiency judgment was untimely. In finding that the conveyances in question were consummated upon delivery of the referees' deeds to Lennar's counsel, the court in Lennar noted that Lennar's counsel took and retained possession of the deeds without returning them to the referee, stating: "Neither Referee was in possession of the deed he signed at any time thereafter; both deeds remained in the possession of Lennar's counsel." 23 Id. at 241. Accordingly, the Lennar decision actually supports Plaintiff-Appellant's position here by establishing that RPAPL § 1371(2) requires delivery and acceptance for a sale to be consummated so as to trigger the 90-day period within which a motion for deficiency judgment may be made. Neither Arbor National Commercial Mortgage, LLC v. Carmans Plaza, LLC, 305 A.D.2d 622 (2d Dept. 2003), nor River Bank America v. Pan American Mall, Inc., 221 A.D.2d 327 (2d Dept. 1995), two other cases applying RPAPL § 1371(2) that were cited by Defendants-Respondents in connection with their appeal to the Appellate Division, lends any support whatsoever to their position. In both of those cases the grantees had clearly accepted and retained the deeds in question. In River Bank America, the court stated, in pertinent part: We agree with the Supreme Court that the 90-day period within which to seek a deficiency judgment under RPAPL 1371(2) commenced upon the Referee's delivery of the deeds to the successful bidder, not when the successful bidder assigned its bid and then redelivered the deeds to its assignees. Id. at 327. The court in Arbor National was apparently faced with precisely the same fact scenario because it based its decision on the holding in River Bank America, quoting the same language quoted above. Arbor National, 305 A.D.2d at 623. In neither of these cases was the court faced with a situation in which 24 proposed deeds were rejected by the intended grantees. The holdings in these two cases, therefore, simply do not apply here. POINT III Conveyances by Referee's Deed Are Subject to the Same Acceptance Requirement That Applies to Conveyances Generally The fact that the attempt at transferring title in May of 2010 was made by a court-appointed referee does not alter the analysis. The cases interpreting RPAPL § 1371(2) require precisely the same elements for consummation of a transfer by referee's deed that apply to real property transfers generally – (1) actual delivery of the deed, and (2) acceptance of the deed by the purchaser. See Crossland Savings, FSB v. Patton, 182 A.D.2d 496, 496 (1st Dept. 1992), app. denied, 80 N.Y.2d 755 (1992). Under § 1371(2), acceptance occurs where the purchaser accepts and retains a referee's deed without objection. See id.; see also Savings Bank of Utica v. 561-575 Delaware Ave., Inc., 201 A.D.2d 946, 947 (4th Dept. 1994). In the majority of cases interpreting RPAPL § 1371(2), acceptance is not at issue, so acceptance is rarely discussed. However, in those cases where acceptance was at issue, the New York courts have consistently held that acceptance and retention of a referee's deed without objection is essential for a sale by a referee to be "consummated." For example, the First Department held that unconditional delivery coupled with acceptance and retention by the grantee's counsel constitutes 25 a valid "delivery" under RPAPL § 1371(2), thus triggering the 90-day period during which a deficiency judgment may be brought. Crossland Savings, 182 A.D.2d at 496. In Crossland Savings, the court considered whether February 7, 1991 was the proper date to begin the 90-day period for making a motion for deficiency judgment and held that the period did begin to run on that date because there was physical delivery of the deed on that date coupled with acceptance and retention of the deed by plaintiff's attorney without objection. Id. The Fourth Department itself also previously recognized the acceptance and retention standard for purposes of RPAPL § 1371(2). Savings Bank of Utica, 201 A.D.2d at 947. In Savings Bank of Utica, the plaintiff argued that receipt of a deed by plaintiff's local counsel, coupled with physical retention of the deed by counsel pending a gains tax affidavit, does not constitute "delivery" under § 1371(2). Id. at 946-947. The court rejected the plaintiff's argument, holding that "delivery" under § 1371(2) is met where plaintiff's local counsel "accepted and retained the deed without objection and filed it on behalf of purchaser." Id. at 947 (emphasis added). It is apparent from Savings Bank of Utica, that it was the physical delivery of the deed coupled with the acceptance and retaining of the deed without objection that constituted "delivery" sufficient to trigger the 90-day period in which to move for deficiency judgment. Id. 26 CONCLUSION The only issue in this appeal is whether a sale of the mortgaged premises was "consummated" within the meaning of RPAPL § 1371(2) on May 10, 2010, as Defendants-Respondents asserted in their appeal below to the Appellate Division. The case law in New York – whether pertaining to conveyances generally or conveyances by referees' deeds – clearly requires acceptance of a deed in order for a conveyance to be consummated. In this case, the proposed May 10, 2010 referee's deed was unequivocally rejected on behalf of MAT Properties by Plaintiff's Counsel before it even reached his office and was then promptly returned to the Referee. The Erie County Court correctly determined that there was no consummation of the transfer of title by the Referee until the referee's deed dated August 9, 2010 was delivered by the Referee and accepted on behalf of MAT Properties by Plaintiff's Counsel on August 9, 2010. Plaintiff-Appellant's motion for deficiency judgment, which was brought on September 3, 2010 (R. 151, ¶ 5) and made returnable in Erie County Court on September 29, 2010 (R. 94), was brought well within 90 days after the consummation of the sale of the mortgaged premises on August 9, 2010. For all the reasons stated above, Plaintiff-Appellant M&T respectfully requests that the Court of Appeals reverse the decision of the Appellate Division in its March 23, 2012 Memorandum and Order and reinstate the Order and Judgment 27 of the Erie County Court which granted the deficiency judgment against Defendants-Respondents Doyle and Doyle Ford. Dated: Buffalo, New York August 10, 2012 Respectfully submitted, JAECKLE FLEISCHMANN & MUGEL, LLP By: /s/ Vincent O. Hanley Howard S. Rosenhoch, Esq. Vincent O. Hanley, Esq. Attorneys for Plaintiff-Appellant M&T Real Estate Trust Avant Building, Suite 900 200 Delaware Avenue Buffalo, New York 14202-2107 (716) 856-0600 1061511