Akasa Holdings, LLC v. 214 Lafayette House, LLC
2019 NY Slip Op 6447 (2019)
Rule of Law:
A bona fide purchaser of real property does not acquire title free and clear of a prior recorded encumbrance if a reasonably prudent inquiry, prompted by an apparent gap in the chain of title within the property's block and lot indexing history, would have revealed the encumbrance.
Facts:
- As of July 1971, Aaron and Rosalyn Epstein owned four contiguous properties, including 57 Crosby Street (then Lot 9) and 214 Lafayette Street (then part of Lot 30).
- Between February 1972 and August 1979, 57 Crosby Street (Lot 9) was merged into Lot 30, which then encompassed 55 Crosby, 57 Crosby, and 214 Lafayette Streets.
- In July 1979, the Epsteins conveyed all four properties (Lot 28 and the enlarged Lot 30) to Spacemakers Two, with this deed indexed against Lot 28 and Lot 30.
- On July 1, 1981, Spacemakers Two conveyed 214 Lafayette Street (part of Lot 30) to Artsbar Associates and concurrently granted Artsbar a non-exclusive easement for ingress and egress by foot over a six-foot-wide strip of land along the southern border of 57 Crosby Street (part of Lot 30), which was recorded and indexed against Lot 30.
- In March 1983, Spacemakers Two conveyed 57 Crosby Street (part of Lot 30) to Parking Lot Partnership, a deed indexed against Lot 30 that did not mention the 1981 easement.
- In May 1984, Lot 30 was subdivided, with 57 Crosby Street being re-designated as Lot 9; however, the subdivision documentation was indexed only against Lot 30 and not against the revived Lot 9.
- In April 1999, Parking Lot Partnership conveyed 57 Crosby Street (Lot 9) to Walter Chatham, a deed indexed against Lot 9 that did not mention the 1981 easement.
- In March 2011, Walter Chatham conveyed 57 Crosby Street (Lot 9) to Akasa Holdings, LLC (Plaintiff), with the deed indexed against Lot 9 and making no mention of the 1981 easement.
- In August 2014, at the instance of 214 Lafayette House LLC (Defendant), the Office of the City Register indexed the 1981 easement against Lot 9 (57 Crosby Street) and Lot 28 (216 Lafayette Street), with a notation indicating an earlier omission.
Procedural Posture:
- Akasa Holdings, LLC (Plaintiff) commenced an action to quiet title under Article 15 of the RPAPL in the Supreme Court, New York County (trial court/court of first instance).
- 214 Lafayette House, LLC (Defendant) moved for summary judgment dismissing the complaint.
- The Supreme Court, New York County, granted defendant's motion for summary judgment dismissing the complaint.
- Plaintiff (Akasa Holdings, LLC) appealed this order to the Appellate Division, First Department (intermediate appellate court).
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Issue:
Does a purchaser of real property acquire it free and clear of a previously recorded easement if the easement was not indexed under the property's current block and lot number due to a prior lot subdivision and re-designation, but a standard title search would reveal a significant gap in the chain of title that would, upon further reasonable inquiry, lead to the discovery of the easement?
Opinions:
Majority - Friedman, J.P.
No, a purchaser does not acquire property free and clear of a previously recorded easement under such circumstances, as the purchaser had constructive notice of the easement because a reasonably prudent inquiry suggested by a significant gap in the property's chain of title would have led to its discovery. The court affirmed that defendant established, prima facie, its title to the 1981 easement, which was properly recorded and indexed against Lot 30 when both 57 Crosby (the servient estate) and 214 Lafayette (the dominant estate) were part of that lot. Applying the principle that a purchaser is charged with record notice of all matters indexed under the block and lot numbers and must investigate facts suggested by the record, the court found that a 40-year title search for Lot 9 in March 2011 would have revealed a "glaringly apparent break" in the chain of title for 57 Crosby between 1971 and 1999. This significant gap, an unacceptable result under industry standards, would have compelled a reasonably prudent prospective purchaser to expand the search beyond Lot 9. A further inquiry, such as a grantee search under "Parking Lot Partnership," would have uncovered the 1983 deed indicating 57 Crosby was "P/O 30" (part of Lot 30), thus leading to a search of Lot 30 records, which would have readily revealed the 1981 easement. The court determined that whether an indexing error occurred was not dispositive, as the visible gap in the chain of title for Lot 9 triggered the duty to inquire. Therefore, plaintiff, having constructive notice, lacked standing as a bona fide purchaser to void the easement. The court modified the lower court's order to include a declaratory judgment in defendant's favor.
Analysis:
This case significantly clarifies the scope of constructive notice in real property transactions, particularly in jurisdictions with "block and lot" indexing systems. It establishes that a purchaser's duty to conduct due diligence extends beyond a superficial search, compelling further inquiry when an apparent gap or anomaly in the chain of title is present. The decision underscores that even ministerial errors or complexities in indexing will not protect a purchaser from constructive notice if a diligent and prudent investigation would have revealed the encumbrance. This ruling places a greater onus on purchasers and title professionals to scrutinize property histories, especially for parcels that have undergone re-subdivision or re-designation, potentially impacting the standard practices for title searches in New York City and similar jurisdictions.
