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. REPLY 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: October 24, 2012. BATAVIA LEGAL PRINTING, INC.— Telephone (866) 768-2100 TABLE OF CONTENTS Page TABLE OF CASES AND AUTHORITIES............................................................. ii PRELIMINARY STATEMENT ...............................................................................1 ARGUMENT .............................................................................................................3 POINT I Rules of Statutory Construction Require Reversal of the Appellate Division's Decision ..........................................3 POINT II The Cases Cited by Defendants-Respondents Do Not Support the Appellate Division's Decision ..........................6 POINT III Affirming the Appellate Division's Decision Would Have Widespread Adverse Consequences....................10 CONCLUSION........................................................................................................13 ii TABLE OF CASES AND AUTHORITIES Page Cases Brackett v. Barney, 28 N.Y. 333 (1863) ....................................................................5 Buszozak v. Wolo, 125 Misc. 546 (Sup. Ct. Jefferson Co. 1925) ..............................5 Crossland Savings FSB v. Patton, 182 A.D.2d 496 (1st Dept. 1992), appeal denied, 80 N.Y.2d 755 (1992)..............................................5, 6 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)...........................................................5 Lennar Northeast Partners Limited Partnership v. Gifaldi, 258 A.D.2d 240 (4th Dept. 1999).......................................................................8, 9 National Bank of Sussex County v. Betar, 207 A.D.2d 610 (3d Dept. 1994) ......................................................................................................7 Ten Eyck v. Whitbeck, 156 N.Y. 341 (1898)..............................................................5 Statutes N.Y. RPAPL § 1371(2).................................................................................... passim Other Authorities 1 N.Y. LAW & PRACTICE OF REAL PROPERTY § 24:162.............................................5 4-37 WARREN'S WEED NEW YORK REAL PROPERTY § 37.08(1) (2011)...............................................................................................................5 PRELIMINARY STATEMENT This reply brief is submitted on behalf of Plaintiff-Appellant M&T Real Estate Trust, successor by merger to M&T Real Estate, Inc. ("M&T'") in response to the brief for Defendants-Respondents James J. Doyle, II ("Doyle") and Jim Doyle Ford, Inc. ("Doyle Ford"). 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). The sole question for the Court of Appeals is whether the Appellate Division, Fourth Department, was correct in holding 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 plaintiff's counsel to accept and retain physical possession of the deed at that time" (R. 6a (emphasis added)). All of the assertions contained in Defendants-Respondents' brief can be distilled to a single argument – that, notwithstanding the overwhelming weight of authority holding that there can be no "delivery" of a deed and, therefore, no "consummation" of a transfer of real property without acceptance on the part of the 2 proposed grantee, a special exception to that rule should be made in the case of conveyances of real property by referees in foreclosure. The exception Defendants-Respondents propose, however, was not provided for by the New York legislature, has not been recognized by any New York Court, and was not even articulated by the Appellate Division, Fourth Department in the decision that is the subject of this appeal. Furthermore, creating such an exception would set the stage for widespread confusion and uncertainty about an issue – the moment in time when a conveyance of real property takes effect – that, until now, has been settled law in New York for well over 100 years. For the reasons set forth below, the arguments made by Defendants- Respondents in their brief should be rejected, and the decision of the Appellate Division should be reversed. 3 ARGUMENT POINT I Rules of Statutory Construction Require Reversal of the Appellate Division's Decision In their brief, Defendants-Respondents cited authority for the rule of statutory construction requiring that statutory provisions be construed so as to give effect to the "plain meaning" of the words used. Defendants-Respondents' Brief, p. 13. Defendants-Respondents correctly point out in their brief that the rules of statutory construction in New York require that, where the statutory language employed has a definite meaning which involves no absurdity or contradiction, there is no room for construction, and courts have no right to add or take away from that meaning. Id. After reciting these general rules of statutory construction, Defendants- Respondents conclude that the Appellate Division's decision should be affirmed because the Appellate Division examined the circumstances of the case and held that the statutory requirements of "delivery" under RPAPL § 1371(2) have been satisfied. Defendants-Respondents' Brief, p. 15. M&T does not disagree with Defendants-Respondents' description of the general rules of statutory construction, but disagrees entirely with how the Appellate Division and Defendants- 4 Respondents believe those rules should be applied to the interpretation of RPAPL § 1371(2) and the facts of this case. To construe RPAPL § 1371(2) in the manner suggested by Defendants- Respondents, a court would have to disregard entirely the fact that § 1371(2) requires not only "delivery" of a referee's deed to trigger the commencement of the 90-day statute of limitations provided for in the section, but also "consummation of the sale by the delivery of the proper deed of conveyance to the purchaser." N.Y. RPAPL § 1371(2) (emphasis added). By the plain meaning of § 1371(2), the New York State Legislature made it abundantly clear that delivery sufficient to constitute "consummation of the sale" is required to trigger the commencement of the 90-day period. The rule that a conveyance of real property is not complete without "acceptance" by the intended grantee is so fundamental and so commonly understood by practitioners in New York that one court described the rule as follows: It is academic that before a deed becomes effective as a grant there must be delivery and acceptance; a giving by the grantor and a receiving by the grantee, with the mutual intent to pass the title from one to the other. Delivery is the act of the grantor; acceptance is the act of the grantee. 5 *** Assuming delivery, there arises another question: Was there an acceptance of the deed by the grantee? One cannot impose a grant of real estate upon another by simply executing, recording, and mailing a deed. Buszozak v. Wolo, 125 Misc. 546, 550, 553 (Sup. Ct. Jefferson Co. 1925) (emphasis added). See also, Ten Eyck v. Whitbeck, 156 N.Y. 341, 352 (1898); 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); 4-37 WARREN'S WEED NEW YORK REAL PROPERTY § 37.08(1) (2011); 1 N.Y. LAW & PRACTICE OF REAL PROPERTY § 24:162. This settled rule under New York law applies equally to voluntary conveyances and conveyances by foreclosure referees. In that regard, the court in Crossland Savings FSB v. Patton, 182 A.D.2d 496 (1st Dept. 1992), appeal denied, 80 N.Y.2d 755 (1992), stated: It is uncontroverted that the defendant partnership unconditionally delivered the deeds at issue to counsel for Crossland on February 7, 1991. These deeds, which were duly acknowledged, were accepted and retained without objection by counsel on said date. Accordingly, under these circumstances, title to the property vested on that date thus commencing the 90-day time period set forth in RPAPL § 1371(2). 6 Id. at 496 (citation omitted) (emphasis added). Given that the language of § 1371(2) explicitly requires "consummation" of the sale for the 90-day period to begin to run and that, under the commonly understood plain meaning of the word "consummation" acceptance of a deed is required, the Appellate Division clearly misconstrued § 1371(2) when it held that the 90-day period began to run when the referee "signed the deed … notwithstanding the refusal of plaintiff's counsel to accept and retain physical possession of the deed at that time" (R. 6a). If the Legislature had intended the 90- day period to commence upon the signing of a referee's deed or at any time prior to the consummation of the transfer of title, the Legislature would have so provided. Accordingly, under the rules of statutory construction cited by Defendants- Respondents themselves, the Appellate Division's decision should be reversed. POINT II The Cases Cited by Defendants-Respondents Do Not Support the Appellate Division's Decision There is not a single reported case in New York holding that the 90-day period under RPAPL § 1371(2) begins to run notwithstanding an unequivocal rejection of a referee's deed by an intended grantee, and none of the cases cited by 7 Defendants-Respondents in their brief support the Appellate Division's decision that is now on appeal. For example, the court in National Bank of Sussex County v. Betar, 207 A.D.2d 610 (3d Dept. 1994), which Defendants-Respondents cite for the proposition that "[s]o long as the grantor parts with his control over the deed with the intention to pass title, a deed may be delivered …" (id. at 611-612), had no cause to address the "acceptance" component that is required for complete delivery and consummation of a real estate conveyance. In the National Bank of Sussex case, 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 other words, in the National Bank of Sussex case, the referee acted both as the transferor and agent for the transferee, so the "acceptance" of the deed by the transferee was not an issue. (A more detailed discussion of the National Bank of Sussex case is included in M&T's principal brief at pages 18-20.) Defendants-Respondents' reliance in their brief on the opinion in Lennar Northeast Partners Limited Partnership v. Gifaldi, 258 A.D.2d 240 (4th Dept. 8 1999), is equally misplaced. In their brief, Defendants-Respondents quoted the following language from the Lennar decision: 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. Id. at 243 (citations omitted). This statement by the court in Lennar was also quoted by the Appellate Division in the decision that is now on appeal, and it appears to be the crux of Defendants-Respondents' argument in their brief. Defendants-Respondents' argument, however, should be rejected for the following reasons: First, the statement by the Lennar court that is quoted above is nothing but dicta. The Lennar court was not faced with a situation where the purchaser or its attorney refused to accept the referees' deeds in question. On the contrary, it is clear from the Lennar opinion that 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 9 escrow." (A more detailed discussion of the Lennar case is included in M&T's principal brief.) Second, the two sentences of the Lennar decision that are quoted contradict each other. In the first sentence, the Lennar court stated that, "upon signing" the deeds in question, the referees were left with no title to convey. In the next sentence, however, the court stated that transactions were "consummated … by delivery of a proper deed of conveyance to Lennar's counsel." Id. at 243. The two statements cannot both be accurate. If, upon signing the deeds, the Referee was left with no title to convey, then the transactions in question could not have been subsequently "consummated" by the delivery of those deeds to Lennar's counsel. Only the second sentence comports with over a century of established case law in New York on the issue of consummation of real property transfers, and the Lennar decision provides no justification whatsoever for a departure from the established New York law on conveyances of real property. 10 POINT III Affirming the Appellate Division's Decision Would Have Widespread Adverse Consequences In their brief, Defendants-Respondents argue that affirming the Appellate Division's decision here will not upset over 100 years of New York case law because the decision pertains only to delivery of deeds for purposes of RPAPL § 1371(2). Defendants-Respondents' Brief, p. 16. Defendants-Respondents argue further that affirming the decision will not create confusion, but rather will "add clarity to the foreclosure process." Id. These assertions are entirely without merit. Affirming the Appellate Division's decision – even if the decision were limited to the foreclosure area − would create widespread confusion and uncertainty. Contrary to Defendants-Respondents' assertions in their brief, the impact of the Appellate Division's decision goes far beyond the issue of the commencement of the statute of limitations under RPAPL § 1371(2) for commencement of deficiency judgment proceedings. Under RPAPL § 1371(2), the 90-day period does not begin to run until the sale by the referee is "consummated," so a judicial determination that the 90-day period began to run necessarily requires a determination that the sale transaction was consummated. Accordingly, by holding that the statute of limitations commenced when the referee "signed" the deed, the 11 Appellate Division also held that the conveyance of real property by the referee was consummated upon the signing of the deed − notwithstanding the intended grantee's unequivocal refusal to accept the deed. Given the express language of RPAPL § 1371(2), these two issues cannot be separated, as Defendants- Respondents propose. If left in place, the impact of the Appellate Division's decision will be widespread and significant. There is no logical reason to assume that its impact will be limited to referees' deeds in foreclosure because there is no statutory basis for distinguishing referees' deeds from other deeds when determining the moment at which title transfers. Even if limited to conveyances by foreclosure referees, the Appellate Division decision will cause considerable confusion and uncertainty in in the foreclosure area. The questions raised by the Appellate Division's decision include, for example: If a foreclosure referee can unilaterally consummate a conveyance of title to a purchaser by simply signing and mailing a referee's deed to a purchaser, what recourse does the purchaser have if the premises are destroyed by fire or other casualty between the date of the auction sale and the date the referee signs the deed? 12 If referees can consummate transfers of title by simply signing and mailing the referee's deed to the purchaser, what recourse does the purchaser have if the referee's deed does not properly name the purchaser or accurately describe the premises? If title transfers automatically upon the signing of a referee's deed, how will purchasers know when title is transferred, so as to be in a position to arrange for adequate property and liability insurance coverage? If foreclosure purchasers do not have to accept a referee's deed to consummate the transfer of title, how will the purchaser know when the risk of loss from fire or other casualty is shifted to the purchaser? If a foreclosure purchaser discovers environmental contamination that was not disclosed at the time of the auction sale, is the sale nevertheless "consummated" upon the signing of the referee's deed – making the purchaser strictly liable for the cost of environmental remediation under applicable federal and state environmental laws? If the referee can transfer title to the purchaser unilaterally by simply signing and mailing the referee's deed to the purchaser, what 13 opportunity would the purchaser have to examine title to be sure that there are no liens or encumbrances affecting title which were not disclosed to the purchaser in the terms of sale announced at the auction sale? If the referee's deed is executed, mailed to the purchaser, but lost in the mail, is the sale of real property still "consummated"? All of these questions and problems – and many others – will arise if the Appellate Division's decision is affirmed. CONCLUSION 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 by the intended grantee August 9, 2010. The Appellate Division, in overturning that decision, disregarded well over a century of established case law in New York. The adverse consequences of the Appellate Division's decision are likely to be widespread and significant. Defendants-Respondents have urged the Court of Appeals to affirm the Appellate Division's decision below because an affirmance would absolve them 14 of their liability to repay substantial sums of money that were borrowed from M&T and have never been repaid. For the reasons stated in its principal brief and in this reply brief, 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 of the Erie County Court which granted the deficiency judgment against Defendants-Respondents Doyle and Doyle Ford. Dated: Buffalo, New York October 24, 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 1066848