At 2111' IAS Tenn, Part FRP2 ef the Supreme 6111111 of
the. State eINew 111 and for the County of
Kings, at the (30111111111151: at Civic 
New day efMa1'eII, 2019.

PRESENT:

111111. MARK I. PARTNOW1
I 113111111.



111 1113111 131111 10.111112103111111 ACTION 1.111 . 53

1301111111311 .
313121111111 3, 11, 5,11, 7, 9, 111, 1 1, 1-3 Index 11.11.. 371111115
"14,15,126111113 2.1 .

111-11 13113353 1 111111 2



The I111 IlewinE' 1121111113 1111111111111 ed 1 111.114 Sequence Numbers: 9,10,] I, I2, 13, 14
Papers Numbered

Notice of 11111111111101.1111 to Show Cause! 1

Motion and

 

 

 

 

 

 

 

 

 

 

 

I I9-24. 46?148. 62-693 I 98-193 
Opp?esin'g'Affidavits (IAI?'1'111atie'113) I 25-39. 40 49-63. '64 8'5 
Reply Affidavits (Af?rmations12042.1 . 
Affidavits?(Af?rnmtiens) I11 Oppositien I 87'. 88, 89.90

31111pIe111e11111I AI?1?111atIei1s-i11 u11111e17'S11pp111'L I 91. 921-933.

Sump-I31 Af?rmations- . I 42. 4'37 

Reply to 311111311131: I I . . 4.4-I I

Me'111111'a11'94. 9'5, 96 9.7 122 I41 I

Upen?the I111'egei11g11ape'1's, 11113 'isan .i'11 rem fereelosure action pom-111 eneegd' by the City
ei?New Yea] (the City) 1111' July 14, 2015,11111'suant I11 title I 1 ,cI1apter4-eftl1e Admmistiatwc
Cede 11f the City of New Yer-1L1, I10 ei'111?ulta11e11ust foreclose .011 I311 delinquent-
p1'0pe1'ti'es. The City 1111.111111e11eed this. fe'reeIesure; action by ?ling 't'we 'duplI'tIate original

verified lists-11f delinquent taxes (1121: Administrative: Code 11405 {These lists

included tax class oneand tax class-two properties designated on the Kings Co'un'ty'tax map,
sactien'13, 14, 15, 16, and 2] which We1e encutnl?iered by unpaid
tax liensfhelcl and City. These-tax liens Weye allegedly-due 2111121 unpaid fer a
peried" ogf'at least one year from the date-on which the tax, assessment, or .ot'l1er legal charge
represented "thereby became alien, as required by 11-404. Among.
these .p'r'cp?ert'iejs there. the. six that are-the. Subject ofthe eix inst-an1 motions, tiled
undei' motion Sequence numbers ll, 1.2-, 1'3, and 14', I I

The thesix. separate. at'i'ssue fa_iled to in te1fpiose- answers,
and, thus, "Were in default in this t?ereclochre-action. The owners claim that they-did. not
receive- actual notice oi'fthiagaction, With reapectto each of the six proper_tie_s,1hetaxes owed-
.represent: only a Small fraction ofthe- value of'the land. I

On November 2-7, 2017', this court signed a Judgment of Foreclosu1'e, whiCh was-
eutered. on December 1-4, 201?. The Judgment of Foreclosure pro?ded that the
'Coininiss1oner "of Finance was authorized to p1 epar and execute; a- deed conveying either to
the Cit}r or a Quali?ed thiid party designated by the Commissmnei zol Housing Preservation
and Development full and complete title to each of the properties included ,in the 111. ram
foreclosure action; and that, upon. the execution of such. a deed, the grantee. would have
possession- and: be seized of in- fee. simple. absolute in such land, and? the. owner
Would- he fibrecloacd 'ot?its right, title, interest, or equity cf redemption in the property as

provided ih Admin-isttatiVe Code 1 14 1'2 and-11?: 1 1-412. 1 except as otherwise provided in:

Administrative Code 11-424 and The. Judgment. of Foreclosure further
provided that Unless and until c-xeoutcd?a? deed 
parcels of real property pursuanttoAdministrative Code"? 11-412 ?to the City or to a third
.1 party "deemed quali?edand' designatedby- the-Commissioner of Housing Preservation and
Development, the owners of the land would continue to-havc' all of an owner.
The?City brought this in remtaxlicn foreclosure action-on the-basisthat the properties
at issue Were distressedproperties. The?. ability- of the City-- to institute in rear itaixllien
foreclosii're actions- on the basis "that parcels constituted distressed i'pr?opierti'es: originated in
1996-, When the Afriin ini'strative Code-was amended. by LooalLa-w No. 37. Under LocalLaw
No. Administrative? Code was amended to, among- o'thcr thing's, add the
de?nition of ?distressed property.? Local'Law?No. added Administrative.Code?t; 11,-
provides an; in rein foreclosure, procedures for distressed properties. Pursuant
to Adinini'stratiVe Code ii ?401 .i any parcel determined to begs disrressed property is-
an in foifeclojsurc..actit3n. Administrative. Code 1was] also .Eiddtid..
which prostidcs special procedures relatingto'tlfic linalju?dgmentrand: of Class one.
andic'la'sst'wo real properties. Otliclr'sccticiis,o'fthc. Administrative a-l'sdram'e'n'd'cd.
to incorporate?the changes in?amed" by these. new modified in. rem foreclosure procedures
?iwhicli.lpertain to distressed 

In l.997,_ Local Law No. '69 further amended Administrative: Code Iii-405. The

in support ot?thi?s amendment-noted thatLocal' Law-3.? oic 1996 ?Was oi?Critical

iimpostaneer-to the City?s e111 pro gram? beeause it- enabl?edlt?roiibled properties
to be placed in the-hands ofi'espzon'sible pr..iva.te.eWne1's for rehabi'litationiand. maintenance.?
It noted -:that I]he 1ehabilitation many of these distressed properties would Ip1obably be
. economically feasible only with loans received . . 31111111 Participation Lean
programs.?-

The Commissioher of Pi 11"an'ee- transferred" four. of the six prepert?i'es new at issue
pursuant: .to the Third Party Transfer Program. The Third Part-y Transfer Program is. a
pregramjoietiy a'd'111inis'tered by the New York CityDepartment ofI?Iensi-h Preservati'on'and
- Development 111111 the New York City Department. of Finance (the-D013) Which is.
used for. taxdelmquent dishessediesrdentiai propei ties in the C1131r The Third Party. Transfer
Program de1 was its authority 11 em the City discretion to convey eligible tax? fei'eelesed
pioper 131 111 quali?ed third paities designated by the Commissionei 111 Housing PreSewatien
and Development 131113111111 to atwe Code? -412 10:1) Adminisnative Cede
1] M412 1 (1-) provides that the court. is. to ?make a. ?nal 111dg111entauthouymg the award
?ef'pessession elf any. parcel of ?oi-lass one or class We -1'.eal property; described in the list of-
.delinqneri't tastes not. redeemed or W'it'l1drawnias' provided'in . chapter [four] andas-to which.
no answer is interposed.? Administrative Code 1i-412.l authorizes ?the
iCommissionerof Finance e'seeute'an'd cause tone-recorded a deed Conveying
either to the city 01' to third party deemed quali?ed and. designated- by'the-commissionerof

Ehotisiag preservation and development hill and complete title to sue-h lands.?

According to the. C'ityi. the purpes'e of the Third. Party Transfer Program is to
encourage. 11111111111 payment of tax' arrears, and, "if the arrears. are not pai?di. to transfer?.
distressed rej'sidential huiidi11gsi which have unpaid tax arrears, quickly tonew ownersiwho
have the expei'tise 1115 address problems and to? .eo1'11'plete' prompt of the
properties. Under- the Third. Party Transihr' Program, the Chi}! initiates in rem foreclosure
actions against tax delinquent buildings-in ?poor condition-and 
After'11e-1i'ie1113h'y? the Ci ty then oversees the Conveyance of the properties- to
new earners fhundlto be quali?ed. to rehabilitate and manage the-properties.
Under the Third Party Trans-fer Program, the C01n111issioner-ef Financeismay-eXeCUte
a-dee'd toiissesqnaii?edthitd partiesi pursuant to ?rules psomnlgated (28 eh 3L
withdut an intervening period ofCity ownership-i. 111* to the City itself (see Administrative-
Code 'i1-2412ii The rules (28- RCNY 8-035 establish standards that may be
considered-for citiali'iieation and selectionof third parties transfer. According
to- the C-ityi-thh aim 0f the Third'Party Transfer Program is to 
The Thild Pa1ty 'ran?sfe1 F1 ogram is intended to taiget only distressed prope1t1es that need
substantial 1el1ab111t?1t1on
I . The 1nre111'forec1osure pI?OGedut?e for distressed properties is; in. contrast to the
iproc?edur?e used by the-City to handle most'tax delinquencies "affecting buildings in fair or
igood cond1t1on which is to sell the tax lien to a titts'it which ?in turn, uses the liens as

:coI iateial to Issue bonds whose proceeds pay. off the City' 5 liens (isee Code

 11- 319) Under 'the Third Pa1ty Transfe: Program,- the CommissioneI of Housing.
authorized. to-remove distressed property from this tax-lien
disposmon process (see 11 401.1). Here the City did not proceed by
way 0111 sale oftax liens with respect to 1.1 _1e 5111316011310136111133 but 1'a1her; Claiming that the
were di-Stressed, it utitiiaed the; Third Party Transfer Program. to. obtain 1111-:
properties; by foreclosing upon them in-rem.

Ne'i'gjh?borhood Restore Housing Development. Fund Corporation (Neighborhood
Restore) is a tibii'duparty transferee Leda-111111111111 Party Transfer Program-1 By foreelesing
.in rem and hans ferring title to Neighborhood Restore pursuant-to the ThirdIParty Transfer
F'rogratnm the iJWnerS are completely dij-vestedof their property after-crediting
the tax de?biiene? there are no proceeds-of. sales of the properties paid to the oWners (see
Adnunlsuatwe Code 1 The oWner-gs are eompletely stripped 13111111 of their equity in
their propertzes 

I l. Motionseduence. Number 13

G11mer 1-Io'ldir1'g Corp; (Gilmer) moves, by order to show.- oause1 under motion
?-sequenee-ndn?ber order": enjoining the City and its agencies:-
andior Neighborhood Resto1e om eneunnbei mg or transferring 1eal plopel 1y loeatedat 23
iMaeDonough Street Biooklyn New Yol 11 112.1 _6 designated on the Kings County tax map
as Block: 1851 Lot 6.3 (the MaeDorlough Street pioperty); (2). vacating its default; 

e11e11d111g1he redempnon per 1011 to 1111011111 an opportunity to redeem the. MaeDonOugh Sheet

ptop?erty; (4) vacating-[the Judgment-of it related to.. theiMaeDoneugh Street
prOperty; and (5.) teetering its title? to the MaeDonough Streetpreperty.
Factual and Procedural Background.

G1i1ner is Corporation the MaeD'onoti'g-h Street property. The.
M'a'oDeneiigh IS-treet property is a 1I94fa111i'1y', rent-stabilized apartment building, with an
estimated value of tlnee million doliais Gil'me1' is owned by the Cailender family, and
the MaeDoneugh Street 11f1oIpe1ty has been' in the Callende1 family Since 1968 when Ronald
Cal-lentiet (who is now deceaseti), the father of _tIheI.pIresen1-I board members of Gi?hner,
IpsrehasediILI
The I/IaoDenough Street property wasiforinerl-y managed and. eontroiied by Michael
Call ender, who was the president'of [i'ihn'en Michael Callendei was 1Ie1novec-Ii. as the
president-z ofGiliner at a sha1ehoiders meetingII held on Au gust 20-] 8. Michael Caliender
is the brothe1 ?oi"LynneCa-lienderand Mare-1a Gal'lender, who "are the board members. of
'Gi'lmer. IaMa11 Jones "is 't-heseoond eousin members.

At'tIie?Ithne that this in 1?en1'tax foreelesure-aetion was coinine'need'by the ?ling of the
list of dehnouent taxes on July 14, 20 5, the MacDonotigh Sheet propertyhad an outstanding
tax bill of$100 688 a watei and sewer lien 1n the amount 111 $20, 061 1.4,f111 a total
LaMau Jones, in 11 51116111 11f ?davn by him, attests tha't 111 December
201?,all 1111111 addressed to G'i'linet was mailed 1062'? Bainbridge-?Street, Brooklyn, New

York, the-De?artlnent of" State process address en File with the 'Seoreta?ljf ei?Sta?te, and Was-

11111111111113.1110 his 'ei'ftiee located at, l? State Street, Suite 4000, New York-,New Yorle He
states that Since thattigme. the Departmental? State Gilmer-was changed
with'the Seeiget'aiy'Df State to He attests-that- he had aecess-teGil111er-?s
n1ail';a'11d was aware of the mail that Gilmer received. and that Gilmerimd not received any
to. the instant in rem foreclosure ?etien, which was commeneed against the
Street property. He asserts that this action-was improper-1y commenced as
against the MacDoneugh Stieet p1 cpeity since it was not a disnesse'd 13101301131
Administrative (lode 1.1 401. (.4) dei-?ines ?disttessed ptope1ty? as follows:

?Distressed property. Any pareel et class-oneer class We real

gpreperty' that is subject; to a tax lien 01-" liens with alien er liens

"to value ratio, as determined by the 

gequa] to. ?01? greater than ?fteen percent and that meets gene-of the

'fe'lIoWi-11-g tviao criteria: 

i. such games] has an. aver-age of ?ve or more hazardous ger

grimmedi-ately hazardous violations: of record ef'the housing

code per- =?awe11?i-ng-unitg: 01"

gii. sue?h pareel is tc a lien or liens f01".any_ eXnenses

g'i'ncurred by the department of" housing prese-r-vatien and

for the repair or the elimination of any dangerous

ii .ger unlawful conditions therein pursuant to section 29- 2144 et

gthis Cecile 111.2111 ameunt {11111511 to 01? greate1 than one thousand
:g'doliais.?

Tlil-ie' City (10111: eti'esthat prep ejrty Wasnot 
to the statutory defijnitien. of Administrative Code '1 1401(4) since the total 
eerie housing Vieia?tions an the MaeDcnough 4.5, (117'2..4 per dwelling
and there Were-110.111.3111 Emergency Repair: charges [totaling ester $1,000.

thee-1131 preceedetl'With 11113 in 1:61.11 fereeloSure-ga?cticn-Ies 111111; Machnough

Street. wasa distressed property and included it in its; Third Party Transfer Program.
5.111111151114111 tn the 1111-3! 14- .. 20:15 commencement of this and the
Depait111enl0fE1111110nn1enta1 P1'0teet'10n (the DEP) entered. into a Payment Agreement, dated
May 1-2, 2016 (the DEP Ag1 ee1nent), with. respect. .10 1111' open balance 01? 842 042. 4? 1n water
and sewe-reharge3101~ th'el-servi'e'e-period '01?111117' 201.4 .10 June 3'11, 2016.. Under theDEP'
Agreement; (211mm: agreed 1'0- make "1 20' 1110111111111" payments 01? 82518 69 for unpaid water and
sewer- eharges, with the-total111111011111 10 equal 831,042.80 in prineipa-I and" $314,085.37 in
interest. A-gite'em'en-t previ'ded that the liailuretegsa'tis?fythis debtjmay result in the
inelus'ien ofti1e1-p1'0perty 111 a City taxjijiea sale. G'ijlj1'11er'i1'1ade-a (1011111 payment 11119811 ,000
and 23.1nstalln1ent payments undei the DEP Agreement, each 111' the 511111 eff $258. 69. The-
last 11131111111th payment was made by Gilm'ei 011 June 21, 2018 I

On. 'Ndvernbe?r .2, "21312,- G?i'lmeii', by Michael Cal'1e1'1d'er?, entered into a Property
?Cei'l'e-etien Tagsta'llment Ag1'ee11'1'ent (the Inst-ailment. Agreement) :With the DOE, which
3111111111111 101 an. installment payment plan to pay all 0'1" the then outstanding 
The total 11111111111111.1111 under the I11st1lflne11tAgreement 11115 $169,948.18. The amount of the
down payment 11'21'1as 825, 492-. 23, which was. paid by Gilmet', as. ewdeneed by a eepy 111 the.
cheek annexed to this 11101-1100 The installment Agr e'ement start date was Nevember 2, 2017,
and it p1011ded 101 40 inStaliments 1n the ameunt 0f87, 843 96 eaeh to be paid qua1teriy by
iGil'mer with the E151 installment date beginning on January 1, 2018 The-515101111 payment

ii'ne-l-nded the-sum 01" 85:00 for a f0ree-lesure penalty and-$35 fer a ibree'lesure' 'seareh fee,

These payments weLe made. by Giliner to remove. the MaeDonough Street oper 1y .tro'rn the
in 1.eni foreclosme action

Thegitistallment Agreement providedas follows:

urtder?Stand that if'any payment that am required to make
under thisiirstaii'inent Agreement is unpaidfor six 
agreement "will be in default-and. may be. cancelled and 11151-
property may be included in the-next tax Conducted by
the City of New York. The property 111aLr also lietionae eligible
1; 1'01 in rem foreeiosure . . . 
default may-lie avoided if 1-. pay all outstandinginstallments-and
our-Lent taxes and charges, ineludiLug-"interest, prior to the date of
the next tait liensal-e'folltiwing such default?

Despite the City 3 entry into the Installment Agleement with City did not-
remote the MaeDonough Street pioperty 11 om the list of delinquent _p'a'ttiels or request a
severance of it When submitting the to rein judgment roll 111- this 1n Lent feteoloSure aetion?
(see Code? 11-405 11-1409 Instead 
. appioxnnateiy three Lir'eelts after.- the Novembei 2, 201 7 Installment Agreement was. executed
and the by (3111111313 and before. the first 111513111?th Was
due, this court signed the. Judgment of Foree'losure, ithieh was, entered on December 124',
2017
LaMau Jones. asserts that Gilin'er relied on the grepresentations in the
Instaiinient EAjigre'ement and assumed the MaeDono'ugh .Streetproperty had. been removed

from the in 16171 He attests that Gilmer .did not receive any-frititi'ees relating to this.

Laetitia, not was G'ill'ne'r. told that the ?MacDontiu'gh Street property eras-"being placed inthe

30.

Third Partyi?i?hansihr Program. .He speei 111.1113? atteSts- that G'ilmer did not receive" a copy-of

the Judgment of Fo1eelosu1e dated Novembei .2017.

to Jones, it was. not until late Spring 2013311111 Gi1111111 became awa1e

of the'Judgn1entef oreelosura due. to estate litigation with: respeot'to. the estate- oi?R-?onald

father of Michael, Lynne, and. Marcia Calionder. Mr I ones asserts thaton or
about July2,201 8, an-attorney named Phillip Ma-hony, acting 01131111113113 behalf, spoke

with. (31131111141113 Corporation Counsel?s o??'oe and assured Gilmer-

that'Gilinei'IhItdgu1_1til the. endofSepte1nberZOl-13 i-n-whiehtto pay ail outstanding taxes and

Water charged;

A11 ematl 11-11111. M1. Jones to Sh ron Hatchet of 1116.001: attached a payment.

ooniinnation fol a- payment by- Giimel of. $770. 54 on June 2935,. 2UI8 Poi IIPD Altemativo

F11foree1nent P1og11n1 Chat ges 1111 the MaoDonouin St1 eet p1operty which had a; due date

of January 1 2019 By an email dated Italy 11, 2018 Sh ron 1111th11. infmmed M1. Jones

Ithat the 1115131111.1.11611t Agreement was than in dB?faul?ia- but be- brought ?P?I'O'date by

making a payih'ent of $719666?9 inatallments

of $71, 84.3 96 lequned whieh' totaled $23, 53.1 88 and
$48 434. 81 due fot (1111111111 taxes in addition to the installments. In an email. dated July 12,
2018 to Mahony and M1. Jon,es Sh 1o11 Hatcher stated that HPD approval has not

requned to bring the InStallinent Agreement up}- "date

11

(311111111 made 1 1 payments, tntaiing 468. '02 fer emergency 1e11ai1 liens and HPDY
1eg1stratlen fees f111n1 June. 1.5. 2018 111 01111111111 13, 2018. On 1111113 3,2018,1he City
submitted the piepnsed e11'nvey11'nee 11811111 MaeDnnough ,Street 1111111111111 8111 11111111111111 11111111
"City Council 15811 Code '1 1141.2. 2) he C1111111-1'iss111ner 11f 1F1nanee signed
a deed dated S-epteinbet 6., 2018,. transferring the MaeDeneugh Sttee't 111111111115! 111
Nerghbarhoed Restore. The City approved the transfer by Reselutmn N0 .525 1111 Septembei
12. 2,013. I I

- I11 Septemhel 10,2018, Residents of "Preperty
Transfer hadbeen sent. to the; tenants of the MaeD enough Street This nettee stated
111111 the'ewne1sh1p of thie'MaeDOnen gl1S111ee't property'had been transferred 111 Neighborhend
Resttne on: September 6, 2018 as 1111111 111 the C'ity? 3 Third Par Transfer Program
Censequently; Gilmel ?le-11 the insia111111111'11111,11y 11111e1 111 she-w cause dated Septen1be1128,_
2018-, I

G1aceW11ng1 the director 11111111 re'fundsunit 'nfthe'DOF; 5.1111113 that after 611111111 11le
its instantin?tj'en, the-DOFIssu'ed-a refund Cheek injth'e. 511111 cheek
Eint-he which W316 toGihner? 1111 13606111112122, 2.018. M51 'Weng
_111511_sta'1'e's thal 11 1111111111 sheekjt?et $270.54 was 11111111111 '11) Gil111er.i'11 11111112018. and a' refund
Checkifet? 13 was issued 1'11 1111111111131 2018. Ms. Wong as.s?er1s1ha1thefse 3111113 were re?lnded

1111111111151: thej'rlzwere 1111111 by' Gilme'r after the expiration 11171111: mandatory f011r+1n11nth

 

12

 the date of the entry cf the Judgment of Fereclosure. Gi'ltner claims
that it only received the check fer $3i348-J4.
1 IE Discussion
Initially, the court notes that Giinier?s claims that its?property is being. improperly
?taken by the City by means ef'in 176m tax fereclesnre-acnen and thei'Third Party Transfer
Program, is not an isolated. occurrence, but, rather; is a widespread occurrence. being
experienced? by many other property owners, who are being- inequitablfy stripped of their

valuable pr??erty rights. The City has. particularly targeted properties that" are etched by

 

Torinerities. Tlgeuconrt recognises that-heme? ownership-is an important means for families to-
build interg?iicratienasl. wealth. While the Thirdl'Party- Trans fer Programwas i 11.t?f1?l?d t0? 13E



a bene?cial fjiicgram, an overly broad and-in?: proper application of it that results inthe unfair

 

T-divestitur'e} ofeqully ill-01133.8 preperty cannot be permitted.

As pcinted cut. by Gilmer, tire-Third Party has-been 
recent articles;Whichlrave been? annexed-by Gilmer, Borough President
TEric-Adains Tsiloclting into'the use of the Third Party Transfer. Program by. the C'ity'to-scize'
under the veil of foreclosure and whether the-due process rights of'the owner's ef-
the being In this regard; it is noted that the-- MIXES owed 0? the
aeDon 011 gh property 'isminuseale compared to its market or assessed value-,and the
Toss of Party Transfer "Program. to transfer the-MacDonough Street- preperty would

Tresnlt in the 'ciognplete? loss of; Gi?lin'er?s equity in theMachn on gh Street property ab eve-the

13

 

a'm'oitnto'l'" taxes lowed. As discussed above, Gilmoreiahrm that it"was not; properly given
notice o'f'th?e in rem foreclosure action, and that the" Mae'Doitough Street property was not
distressed and was improperly made. a subject; of the Third. Party Transfer Program.
Moreover, Gilmei has espressed its Willingness and demonstrated its ability- to pay the"-
owed, but-the Ci'tyahas steadfast]yarefusw to perm-it it. to maker-such
'pay-ittett.t-. I.

I "Withiespeet to the issue. of trades, the City 'argo'es'that the Commissioner of Finance
Eeompl'ied Administrative Code 11-406 by mailing a notiee?oiF foreclosure fertile
property to the name and'address outlive assessment roll, as of May 
22015, to. Gilmei at the-property addres's..of 2'5 MaeDon'ough Street, and by oomplyingwith

?the publication and posting requirements? of this The City contends that it sent

 

proper eotnmeneement of this aetiUI?t 011 July '14, 2015

I Gilmeldoes not diSptIt?etha?L?il eventually" obtained "actual notice. 01?th f0r.eel_osttre
action thlough other means the time. that it entered into the Installment Agreement;
on Novembe; 2 2017'. [-51 owe-ear, the City docile riot. dispute that item/tier inforinm Gamer-of
gthe Judging?; of FOt?eCl'OStire, 1101" did it inform Gih?er that it did riot. ?intend to 
The City could have easily ascertained 
to its ?ling; oi his address with the Secretary of State. At theftime. that ?16' Judgments?

Foreelosore was signed on NoVember'ZT, 2017, Gilmer was not in default of the Installment

Agreement-and had paid the $25,492.23 detain payment. The City, 

 

14.

?faiied 1111 11211101111: the M?aeDeneugh Street. property 1111111 the Judgment 1-11" Foreclosure,
31311115111111.1119 Adl111111st1atweCede 1 14409. 11111 City threelosecl 1311
:the 11111 lien 3111311131 21111111" (311111.111 111111 1111113111111th .the 111311111111th Agreement, whereby the
:City agreed 10111113111 Giliner to 11121 1111-1 13113111161118 {0 311111333 117161313 ??3171. and 
the $2.5 #1922: (1011111. payment. The City permitted the Judgment of Foreelestufe to be. signed
:by the 13111111 w111e 1111121113 that't'he' 0111311g113h'eet'piiop'elfty WansUpp'oSed: to 13111111101311
1113111'ti1e 111 1e 11 111 its. 1111111: 111113. the Install'ineht Agreement. The

MaeDeneugh Street-1311113121111511011111 11131 _11a_ve_b.ee11 11111111111111 111 the 

 

:sinee the Agreement Was-"in plaeeat that 111111;.

F111 this-1111113111 while the City contends that the 1111111datory rede111ptim1 pei 1011 1131 the
MaeDeneugh Street 131131313113! exphed 1:311 April' 16 2131111,1 f0u1'11113nti1s 11111:3111 the date ofthe
:e11t1f3: 131? 131?ee'10'3111'e'1. in July 20-18, the City,- by its 35:
hythe Emails discussed above: chhtinuhd 1'13 represent that (311111131 111311111 Catch tip
1311 its messed 13111111111113 111111 bring the Ianta'li'n'1ent Agreement The. (3113131513
gcenti-nued 111 payments 17113111611111e1 111111011132 tendered 11 133111111 refund after Gilmer
filed its 11131115111 111_.eti1311. Gitmei' was misied by'iti'ie-C-ity into Installment

:Agreement was 111 effect-111111 that the: MheD-aneuigh Street property wou 111511111 be foreclosed.

 

The City?s failure 111 131311111131 Gi'1111e111311ee'iit determined that the? 111311111111th Agreement

thuid. net beih?hnered constitutes111islesd'ii1g e'1311duet (1'22 Marter'ofEinpOr-1um Mgr.- Corp.

 

[1111311114, 2013111113 (31313.61 [3.1111113111413111 16, 20.1.58 Was the next business day; 

1.5

 

11 City. of New Yer/it, 121 98.11934 Gi-llner?reliedon theinstallment
EAgteen-ient and the City?s. which resulted. .in its failure to act within the
EtouI?rnonth 11er1od when it had an absolute right to redemption pursuant to Administrative
Code ll 1107111) 11 City ofNew Yer}: 285 363?. 368 [131
EDept 2001]) Based on the representations by the Cit3/ and the Cit31? breach of the.
ti?nstallme?nt.agreement. by Judgment et Foreclosure; while. the Installment
tAgreernent was in effect, Gi-lmer was denied. its- due: process rights and its. opportunity to
Eexereise its 11 of? redemption with - respect to the. 'MaeDonoagh Street property;

- Furthermore the City improperly included the MaeD_onough Street preperty in the
ETth Patty Tiansier Program. despite the fact that it. was not distressed. Pursuant to

Code 1 140111111), . . . determined to'bea distressed- property"

 

?shall 'be'subje?t to. .an in. rem fereelosure aetion.?" The Cit-y argues that even though the
Ma eD 0110.113}; within them eaning oi?Adininistrative Code 
{3 1'1 1401 llwasrequued to .inelude itin the. in tern tax foreclosure-action based on [its tax.
ptufsrtantto Administrative Code ?Jl l-?405f-a) onee another property-en the
Esarne. tax block Was identi?ed for inclusion. Speci?cally, the: City asserts .?t?hat the
tvlacDonougit Street property-was required'to her-included because another-property, Lot 73,;
tahieh was. on the same Block 1851' as the MaeDonough Street property, was a distressed

it was later withdrawn-item this aettetl as a result [If-full payment.

 Code 1 1-405- C'a) provides that. ?[tjhe. commissioner of?nanee from
inn-e to tnneshall pr?epare slim, to be known .asa ?l'ist of delinquent taxes?. of all' parcels,- or
i111 pain?'s?wiihi?h a particular elass-or Classes, that are with'ina particular boroughdr seetion
of'atax map driipertion of a section of a tax map of the city and on "which there are tax "liens.
?ubjeet to foleelosule pursuant to tlrisiehapter,? and that ?no sueh portion shall bis-smaller.
than a blo?elcf?i Tax liens foredldSurr? aregen'erally tax liens that-hays been due and
inpaid for a pellod of at least. one-?year pui?sliatlt to Administrative- Code 11-404 or
ignore the property is distressed pursuant to Administrative. (Bode 11401.1 . Notably,
.t?he?City ineluiied in the tax lien _a'pay_1ne11t which wasnot due until. July 
2015, and paind-ents Were due on January 20'15,_ and,

thus, were not-i ens on the MeDOnoughf Street property for more than on'e'year pursuant to

i.

 

ddministrative igCod-er .1 1-404 (.21)

Moreover, 'thein-el'usion 'ofa property which is not distressed in an in' rem foreclosure
action thatis eat to the Third Party Transfer Program based upon't'he ?mere faetlthat-it'is
oin the same block as another property unrelated to it is. eornpiete'ly arbitrary and could-not
piossihly haveitziieen-th'e intent of? Administrative Code .1 17405 considering the dire
loss of the property withoutsany'reeovery of surplus monies sis-would; be.
o?btained- in a tax lien sale, Furthermorejit would result in disparate. treatment fer property
- joia'nersbased upon ?What block they lived Withotltregafrdto whether'or- Property-

uy'as distressed; $ujeh" unequal treatmentraiSes egual protection- concerns. (SEE US Const 14th-

l7

Amend?i [pioviding State shall make-.- or enforce any-law Which shall .. deny
to any-person iirvithin its jurisdiction the eqUal pr'otection of the [await]; NY Cease, art'l, 
{providing person-shall be of the laws-of this state or
any 

I The court is cognizant that irrhtefson City ofNew Ferric (3'52 US 103, 109 [1956]),
the United States Supreme Clout-t reie'cteti an equal p?roteet-ion ?challenge of an earlier
EAdini-nistrat-iv?e Code provision-,_ Title-Dz, Chapter 17, which Iprovi?dedthat when its Strict
foreclosure or?nvisions were invoked, they were required to be used against all 
isection :of'the City on which charges Were outstanding for fouryears; ?-Tha't'h'olding, however}
Eidid- not EldleSS and does not encompass-the. situation here,fWher-e the MacDonough Street
ioroperty-wa?siincludcd in the-"Ehird Party Transfer Administ?rative-Code:
11491;], despite not being a distressed property and where the provisions of the
iAdinihistrativ? Code pertaining speci?cally todistressedproperties Were applied 

'In any Event, the Commissioner ,of Finance mayr exclude-ore- thereafter 
laugh list a Jar?pert}! where there is anl'nstallment Agreement in 131309 AS 
entered- into the Installment Agreement with the City-a but Th 94391309011311
Was not or removed from the-list (see-Administrative 1 1--
4U9J. Moreover, th ere was nobasis forthe City to trans??r the MacD enough Street properly

pursuant to the Third Program to Neighborhood Restare'since it Wastoct a

 

diati?essed progeny (see Administrative Cede? 

1.8'

The traiisfer of the-Ma'eDonough Street property to Neighborhood Restore was
improper,and was al'se uneon'seienable-and shocking-to the misstatement-Hie eourt based on
the. amount ofthe lie-n versus the value of the 'MaeDonough Street property (see Athen-
iA?itt?ai?es-vAngina?Term, 3'4 Mise Ct, Queens County 1962] [setting aside
ht?oreelos?uregs?ile where-?iepnrc?hase price was grossly inadequateD. To permit 
to stand, where the Judgment of Foreclosure was impronerly'obtained. against the

MaeDonou?g'h 'gti'eet property and the MaeDonough Street property-was. net a distressed

property, would unfairly deprive Giliner of its equity- in the-"MacDonough Street property
sineedGi'lmer cannot recover any surplus monies above. the. taxes owed. (see Matthew 
ifsnirrpson, 65 10-95;, 1097 
Pursuan?t to CPI-11125015 Cl), ?l-tlhe court'- Wili?h rendered .. may
i'eliesreiauparty irons it upon such terms as may bejus'tf" on'tlie ground of excusable default
ishere motion forsueh relief ?is made Within eneyear "after serviceof'a copy" (if
the-judgment or order with writtennetiee of its en til-"5: party}1 Gilmer Claims
that it was-net sewed with'a' copy-of the Judgment of?For?eel'osure, andit is less. than eneyear
since the entryi?of the Judgment ef Foreclosure. defendant Seeking tofv-aeat?e .a default
must dein'ons'trzitte botha- reasonable and the existenjeeo'f am 
defense? Trusty Vita, 19' 382, 382 [2:1 Dept Gilmer has

. show-.11 that it. had entered into an Installment Agreement with the was in e_i'ffee't

at theftime that the City ,oljta?ifned the Judgment of Foreclosure. Gi?lmer has thus shown that

19

1.1111115 deptwed 01? the (1.1311011111111131 to; exercise its rightefredemption-since it was unaware

11f theJudgm?nt 131' F'ei?eeles'mfe tinting the 111111? 111'eI1tIhs aft-e1? its entry. Furti1ermere,_ the

transfer un'derthe Third. P'arty'Transfer Frog-111111 was-11111311113111 si-nee the?MaeDeneugh Street"
13111131111113; 116111 distressed 1310131111.. There-fore, Gi'hner has demenstrated 

11xc'us'e- and 11-15111-11111111111 defenSe.

I Ite the-grounds. set {(11111 in 11 0011.11. has the inherent-
?-autherity to Va?ate de-fauit judgment; granted by itf"?fe1" suf?cient reason-11nd in the interests

?111 31111111111111 Justice?? (M111181- ofC111111'ty- 11f0111111 1e 1065 1065-
I[4th' Dept 2009] quoting 1112111de 11 11111111111111. L11113111g Ce1p 1.0.0 621. 6'8 [2003131111

111-111 M1111-e1 11f C011111?y 0f011'1111. 111 L1111a'q111s1" 1996L111111g 1,55 1113311156? 1568 [4th

Dept 21117] [11 $111211 30 912 [2018]; M1111e1 001111131 efGeaesee [1911111111111], 125

147?" 1477 [4th Dept 20151111 112111111 904 [20.15]; ofCoumy of
0121111368 [811111111] 124 1330. 1331 [4111 Dept 2015.] 1.11 11111111111" 25 904 [2015]).

1112111 theie IS sufi' e1ent 1easen' 1.0 vacate the default. _?iudg111en1, and the intelest's ef'substantial

_I1u'st'iee 1111111111111: its 111111111111: has established that it" fully" intends 11111111111110 pay the

Itaxes, and1he1?? is an absence-Of any pi??jUdiee-te Restore. While the'eeurt is I
111indfu'l of tlie-I'111'pert11nt interest that the City has in ef?ciently collecting- delinquenttaxes,
'in the MaeDen'eu'gh Streetlpreperty 113 She-improperly

13111111 gu'i'shed.

20

Conclusion

Aceordjingl'yi Gilrneris motion is granted to the extent that. the Judgment of?
oreciosure is-vaeated With res peot- to' at e' MaeDonough' Streetproperty, the transfer. of the
.2 MaeDonou-ghEStreet property to Neighborhood Restore islV-aeated and set aside: and G'il-m'er's 
title to the MagicDonough Street: property is restored.

Motion Sequence Number 1-4

1055 Bergen .Street? Housing :Deveiopinen't Fund Corporation Beard (Bergen 
tinoves, by order to show cause, under motion seq.uene_e__number 14,. for an order: (-1).
:?amending theeaption to include Neighborhood Restore as 'a defendant; (2) preliminarin
enjoining NEiggfi?l'b?l?thOd Restore and'for its agents from conveying- or transferring the deed
:to real propert? located at [0515 Bergen. Street, B?rooklgn, New York 11216, designated? on
the Kings tax map as Bloe'lr 1212,, Lot 56 (the Bergen'Street property); ling the.
redemption Failed to ailow-it, as; the equity owner, an opportunity to redeem the Bergen
Street preper?; (4) vaeating its-default; and (5.) pursuantto CPLR 5015 and CPLR 3'17,
vacating of'the Judgment of it pertains to the Bergen Street
_;property_. I

Facts and Procedural Background

Bergen HDF ?has been the-owner ofthe.BergenStreet property sin ee June 25, 1997,

over 21 years ago, when it aeqirired it from The Bergen Street. property was. included

in this in rein and, foreclosed u,'pon'pur3uant. to the City?s Third Party

21' .

Transfer Progrfarn. The inclusion-of the Bergen. Streetproper-ty :in this. in rent. foreclosure
aeti'on was based upon $250,482.98 in delinquent real. property taxes and ether-"oharges,
including einet?ge'ney repair liens and Water and seWer'liens, dating bad; to 2007. The City
did not-make any speci?c _.all.egati'ens as" to Whether the Bergen Street property met the
de?nition :of property pursuant to Adlm'inistratitke Code 1' (4). Bergen
HDFC .d-iti noitjinterpose an answer, and, as noted aboare, ?the Judgment of ForeeloSure-with
.reSpeet to the ?ergen Street property, along with the other propertiesthat' were the-Subject
of'th'is action, was entered on 114$ 201?.

Shawn lit/[amen is the newly-elected president of Bergen HDFC, Mr. Maldonhas
submitted his sworn af?davit, 'in which he explains. that in the past, the Bergen Street
property was being managed. by an illegal board who incurred a's'u'bstan'tial' amount of? debt
in such manageinen?t; Specifically: Mr. Maiden asserts thatSynera-Pass and-Allan McGuire-
"in?sta-l-ied thems??lves as of?cers of the board and on behalfof the
Bergen Street property without-the consent of any. of the" shareholders of Bergen 
According to? M1 Maldon, "there are questions of Whether M's -. Pass an {:17 or'Mr._ MeGuire-w?ere.
even Bergen I-IDF-C, and whether, as a result, qualified to'h'aVe
even served on ithefboard'.

At a spe?i?a-l' shareholder. meeting held on September 4, eleeted
anew board, and elected Mr. Maiden as president. Mn. Maldon setsforth that the newly

elected board has devised a plan. to eliminate the debts- ?o?f?the BefgenStreet property and

22--

provide proper: management of Bergen HDFC in the future. Thenew board has been able.-
to-seenre fnlidiitglto pay off the Bergen. Street property is-eurrent-debts and arrange forathird
party to manage. the Bergen Street property on ?Bergen behalf to assure that the
Bergen. Street fproperty doesnot fall-intothis situation in the future. ._'B'erge_n HDFC was
unable to reoti?i?z this, situation earlier due to the factthat the. previous improperly elected
?board refused to hold elections.

The. Ber?gen Street property is now worth-millionsef'd'ol'l'ars, ant] the; debt owed. to: the
City is nowher? near its. value. Ber-gen HDFC asserts thatit Was never afforded the requisite
notice and dueiprooess in rem tax BergenHD'FC States-that
While his. thesharel'lolders- who stand-to losejtheir .intejr'ests'in'the Bergen Streetproperty, no
was served with notice of the .in 1"e1n fer-eelosure, the Summons?
and .eoinplaint; the notice of delinquent taxes; or any other notice. required under- the
Administrative: Code. It asserts- that it has. secured funding to open liens on the
Bergen Street-13191361131 and seeks to its property interest.

The was. transferred, pursuant to Administrative Code 11-
412.} and oaneptembe'r- 6,1201 8 to an interim owner.
Bergen contends that the City?s transfer of the- "Bergen Street property to
Neighborhood:R-estore, without payingga the. dijffer'e'nee- betWeen the debt owed and the

millions of do] er'gen Street'propert}! is '11 Ora-Worth, is ?tanta'm onnt. to robbery.?

23'

Bergen HDFC stands ready, willing, and. shit to pay' all of the. monies awed,
'NeVei'theiESs,_ the City re?lses- to accept payment, and, instead,- wishes to completely-strip
Bergen its equitable interest. in the Bergen Street property on the basis that
redemption is. new untimely. CcnSequentiy,_ "Bergen PIDFC filed its order to show cause,-
.d?ate?d Detcber 

- Discussion

With r_es:pect tc Bergen claim. at .a lack of actual notice, it. is noted that
pursuanttc AdigninistrativeCcde- the Ccmmi'ss?iicner of Finance was required
1:0. have-a copy?'?jfthejnctice'cf fcre'clcsiir'e ?mailed. ta allowsc?rs who may 'be entitied .tc:
receive such notice by virtue owner?s registration-er i-n' r'ent'card ?led in the cif? cc of.
ithecity collect?r- pursita-nt te [Administrative Code 11?416 or. 111.4417 of i . . chapter
"Where there is no aner?s registrati'cn err-in rem card ?led in. the office cf the city
c?all?t'itcr, then the notice is to the name and address, Elf-any, appearing in the:
latest. of assessed valuations.? (Administrative Code 11-4-06 The
of Fi'n-anCe- is also required-t0 comply with and-publication
requirements set faith in Administrative-Cede "1 

[The City has submitted the af?daxiitcf regularity of Jacques Commissioner
of Finance, dated October 2017., whiCh-states? that the! nctice? of was mailed
by certi'fi"ed mail and? regular mail err July 2.4, 2015 and July- 27, 2.0.15, The

affirmationcfregu-l'arity cfAndreaBgFeller, cct?pcrafien 

'24

24, 2013, sets i-?i?orth that since there was no: record of "Bergen HDFC'having requested-a
particular address for notice of foreciosure, the Commissioner ofiFinanee mailed- the notice
of forecloSure to Ber-gen HDFC ?at thepreoerty address, which was the name: and address
appearing-on the aesesslnent roll For-Mayzm-?. 'Ms. Feller. sets forth that in addition, the
Coinmissi'onerof Finance sentga notice of foreclosure to the real estate billing name and
address that ap?earedon-the assess__ment_ro.l_l, lat-the- property address Apt. 413.; as well asto
EI?aritleS's, a?'share'holcier of Bergen HDFC and to Shawn. Maiden at 127-4 48?? Street,
Brooklyn NY 1122.10. The affidavit. of regularity also sets "forth. that posting:
'requil?mnents were met.

Bergen? HDFC asserts that the City did not comply with the jurisdictional
requirements of Administrative Code 11?4035; It aSserts that there-is no proof of mailing
as to the nUii??S' for the owners who may be entitled to receive such notice as. per
14406 . While the af?rmation of CAndrea'Fellerstates that the
BOP 'sentn'otio?s of forecloSLtretoShawn Mal'do'n $312744?? Sheen-Bro okly?nl, NY 11219,
Mi'{Mal'tion stages, in his af?davit, that he has. no assoeiatiOn With that address and has no
idea of how tha-?addres?s was attributed to=hin1. Bergen maintains that not: have
actual notiee'of?this in rem foreclosure action. If the City did; in fact,- comply-with
Admit-1istrat?i-ve?fCede-?i '1 1?406 then the foreclosure would be a nullity and inefieetive
todiv'est?Berg?li 1?1131? of. (See Odessa}: 31y ofNaw Karla-42 i042

County 1964])

.25

The City argues that Whether or not Bergen HDF-C actually the noti'ee of-
fereelosure is melevantb eeattsie in Matte? Enters. v-Ctzy efNew ferret/'7 68-31
?701?702 [1991.]; rearg denied- 7?8 952 [?1991], cert "dented-503 US 9.06 
Court ofiAppeafls held that the tioti'eept'ovisi'on 'eifAdmini'strative- Code '1 19-406: (0) in. in
.re'mgtax foreel'o?ui?e aetions satisfies ?the min im?um due process.? It is well
estabiished that ??due process; is} satis?ed by "notice reaSonablf calculated, under all the.-
apprise interested-'13 arties of the aetion and after-d them an-
epporttin'ity to present their '0ng eaty [Maxim Dev; Group],
151 mm 1-5-11 1612- [4th Dept; 2017]., [Bavaria 9-2
129?, I298 [4th Dept'ZO 12]! appeaf withdretm?l 910 [20?13], quoting-Mutlone
Ceetra?l'?aee??vee' Bonk-cf: Trust 00;, 3:3 9' Us .306, 314 [19550]).

TlrejCitj?-heaeily reli'es'upon therpresumptieno'fregularity favoring the City upon the
granting of an. to rent Judgment. (see Administrative:Code~? .1 141.11,; 
Pttr'?su'ant. to Administrative- Cede? '1 1:41:11 with respeetto eta?ss'one and
eta-3's tree pro?erties, ?[ehery deed given pursttant to the-_ ptovis?ions' of this seetito'n?
Constitutes evidence that the action- and all proceedings therein and ail
pro?ee?edi?ngs 131101 thereto from and ineluding the assessment of the lands affected and-all
uet?iee?s retjuieet?l by law-were regular-and, in a'eeordahee-with all provisions of law relating?
thereto.? Administrative I 1-1412 'ptfovides that four months-from"

the-date-of erlt'r-St- o'fi'the. final judgment authorizing the-award of'poSSession of any parcel of

36.

class one or class two real property pursuant to the provisions; or this seetion, the-presumption
shall 'be- concl'tisiue.? IL also states thatian action to. set'eside- a deed may 'notgbe. maintained
?unless the action is commenced and-a notice-of pe?dency of t11e3_'e'ctio'11 is ?led in the- 'of?ee
of thepropertji ceunty clerk prior to the timethat'the presumption becomes conclusive as
aforesaid.? -

The .cotirt is cognizant of cases which action is 
than four nicotine efter-ajudgmeiit of foreclosure Wes entered-and the 
jrectelnptionpje'i?iOd underAdministrative?ode--? 1 14112.1 expired, it tsetse-harme-
p'ur'suanit to Code 11-4121 (-11) (see-eg. Witson =12 Rest-ore
L29 948}, '94-912?11 Stork, A03 494, 49-5 [1-51 Dept
20.10], 112 dents? ?1'04 [201 In Rein No. '4 7, 29 955',_
956 [2d Dept 2006], In Item Tax-Foreclosure Action- No.. 44, 23 fist Dept.
44, Borough 2.41, 2.432: st
11?412.] (11.), be construed
as a statute] of limitations ?that precludes the ?vacating of a default. judgment in these
circumstances? Indeed, the City concedes that. following the fourlrnonth inti'nd'atoiji
redemption petgiodi a property subject .to a three-leisurejudgment may still be redeemed in? its
discretion. in fe?corcianoe With Administrative Code" 11-424. Notably-2 the City did not.
acquire title bythe Judgment of Foreclosure; pursuant to the Third

Party Ti?ans'terj?rogram more than Four'mOnths.following- of'F'oreclceLtrei

27

Moreogreig an Unjusti?'ed taking and deprivation. 'dF'pt?o'pe'rty' rights. seensljitutes a
constitutionali?ohallenge which Subjectf'tio a Statute of limitations. the 'tegard for
property is. a i?ilndalnental tenet 'o'f'tlie United States. Constitution and the New
York Constitti'tion. Sinoethe righ1;_ to a fondamental ri'gh't'ijn. New York, all
subsequent gt?EEl?'tS of'p ower, are as to not?:r they adversely
affeot it. While the: City} has an interest in tax collection, the countervailing interest of
presorvilng?prtiperty ownership is paramount and mustbe protected.

transfer o'f the Bergen Street property; "pursuant; to til?Hie Third Party Transfer
Programgwouid Consti'ttite- a_n'u11'_iaWtii_l taking .ofprivate preperty compensation-
in Vi?i'?tion o'f?'Ber'gen constitutional, rights-under the-Takings Clanse of theFifth
Amendment to the United States Constitution and article], seotion'TE o'i?the New Yot?k'State
Cons?tution'. TheBorgen Sti??e?t property has a Value.substantial1y in exo'es's 'of'th'e'tax lien,
and its the City. in this in rem foreolosure action and its- transfer pursuant to the
Thitd Party fransi?er Program Will not permit Bergen HDFC to recoup that excess.
a tnicingoifproperty of. 21' value ?far-in estsol?a tax ii'en in Satisfactiono'f
the lien witho?utsafford'ing- the oWner an opportunity to. recover" theeXoess value would
constitute avit?i-ation o'foon'Sti'tuti'onaI rights? (Moira offn Rem Tax Forest?osm'e Aer-ion No.
37, Borongii .IoifQueem, '1 18- Misc 2d LOSL, 1.08:3 [Sup ?Ct, Queens County 1983]). ?The
Constitution . mandates-that [Bergen not Ibo-deprived oft-he Surplus without an.

opportunity to. Ere-coup it? 

28'

In NBZSIESH. (3'52 US at i 1.0), it was, held that it is constitutionally permissible ferthe
City" to retain pirepertyer the entire of its. sale, in the absence. of a timelyaetien'te
redeem- it er'tel geek any. surplus where. th that adequate steps were
taken to motif}; the earners .ef the charges due and the foreclosure proceedings! Here,
answer was i-nterpesedby Bergen HD FC. alleging a stihs'tantial "equitypver
the City?s Iienifer taxes- pursuant to AdminiStta?tiVe Code 11-409. (d)1 Bergen HDF-C
maintains that-tit had no actual. notice- of this action, and it has been denied the right to" any
surplus: abeveithe-ameunt due to the In any event, there is no. Sh'ew'in'g. that the
underlying deiault judgment was property Obtained by the City sinee- the City has not
attempted-t0 nialce. any showing. that the BergenStm? the statutory de?nitien
'ef'a distressed ipreper?ty.

Mere-eager, this is net 21 ease where a? landlord has made: neeffert to maintain the.-
preperity. Rather, the shareheiders and beat-mt Bergen HDFC. are desperately- seeking to
maintain. and iiehabil'itate the Bergen Street property andite pay all outstanding sums due,
'e?hviat'ing the any transfer under the Third Party Transfer Program.- Thus_,- to permit
such-a transfet; =i-n the thereof-these.theta would work a grave injustice re the shareholders-
'eF'Bergen HDFC fer ne' reasen and result in an unjustified windfall the City (see-
Admidistrativ? Cede 1 1-42 

The Beigen Street not a dilapidated, abandoned building that..-the. in rem.

fereelesnre prc?eess Was intended te target p'urSuant Administrative Cede? '1 .1 4401 i e't seq.

29

The intent'o'f the Third Program was to protect tenants thy-stab bu'i l_d'i_n gs
that are actuail-ly distressed and. ab?andoneds and .?it was designed to encourage the
rehabilitation and preservation.- {if-existing housing; This intent is depriving
property their property rights where they are actively seeking to preserve their
property. TheE-"conrt cannot countenance a result. where a. property owner unfairly- and
unjustly ineurs?theloss ot?his or-her property and his or .her- equity and investment in such
property. I I

Ber-?gen HDFC has. demonstrated a meritorious d'efense and a te?aSonable excuse,
of its-default (See .C-PLR 50 '5 Bergen hases?tablished
its ability tops}; the tax-es after the-redemption period ended-end the lack of any 
or Neighborhood Matter 'ofConnty 125 
at 1477'; Matter; quonnly'ofGenesee [Bet-loft], at 1331'). Considering the facts.
andeireu1nstan?ces-- of this-ease, the court concludes that ?the. entry of default judgment
based on the failureto taxes] would result in a disproportionately"harsh result? and
that-?this is. an?ap'propriate case in which to exercise [the Connie] broad equity. power to
vacate [the] de liaultjudgment? (Mortar-chonnty ome?orr'o [.996 Living" Trust] 
1.55 at. quotation marks omitted]; see ot?SOLMaIl'ErnfConnty ofontnido
[Mt?ddlebrook]: 59 As discussed above, the-court, has the 
to vacate the .Tu?dgment fForecIosure, obtained default,- 

reason and: in the {interests of substantial :ju'sltice?? (Motion of County of Ontario

.30

[Mtddiebro?ofr], '59? at 1065, quoting Woodrow 1.00 alt'6f81'; see aim? Mana- of
Caring; of Gene-@3129 [Sm-coin], 1'25. 147?;- MntternfC-?onnty ofGenesee 124
A133 dl'at 1 Here-vi the-re ?is sufficient reason to Vacate-the defaultjudgmentii the interests-
of-?sr1h?3tantialj1513tiee. Indeed,- to hold-otherwise would result in aperversion of the'intentand
purpose of- the relevant- Administrative Code provisions, defy principles of; ejquity, and
impose an unduly harsh; penalty uponlBer-gen 

Conclusion

Accordingly Bergen HDFC?Smotion 1's granted-Ito the extent that. of
Foreclosure is Titraeated with respect to thalB ergen Street properly, the transfer'o'f'the Bergen
Streetpropierty?to Neight)orhoodRestore.is vacated and. setaside, and Bergen l?lDFCi-s title
to the. Bergen-Sitreet property. is restored.

Motion Sequence 'Number 12;_

Marcia Lewis order to'sh'owemlse; under number 12, for
an order: \?aeating the udgmentj of Foreclosure withi'respeet to real p?ropertyloeated at
9'?2 Rutland' Read, Brooklyn, New York 21 1212, designated on-thez-K'ings County-tax map as
001(46. 1. Lot 4 (th R'ntland Road property) (Zj requiring the DOF and EH) to allow-her
tone}: the taxes-and tines 'asSessed; and (3-) directing the- C-ity to transfer the Rntland Road

property hack tie-her.

3-1-

Facts and Procedural Background

'83: ade?ed. dated December 6., 193'9, ever 39 years age, MsgLeWis beeallhe?the owner.
at the Rutl-aadER'ead property, Which is a [hut-family-dweliing. TheRut]andRead-preperty
was-inducted 111 this fereel?sut?ieia_etiea as: a. result of outstanding real property taxes
and either-- asse?ssments, dating baek in the amount of $139,369.25, he Rutland
Read property was 'fe'reelOSed u-peh pursuant ta the City?s Third Party Transfer'PIngram. 
Lewis did netginterpese an --anSWer in this, aetien?. As discussed above, the Judgment ef?
Fereeiesure-Waits-signed eh Nievembe?l 2017' and was entered on December 14, 201?.

Me. sets forth that she. Wanted to. enter intean agreement With the City-"topay
the taxes-[and 0011.161 secure a 'leante' completely pay fo the monies that
Were-owed. Ms Lewis asserts thiajt?shje; wee-pretreated: the Rutlattd Road
property 01' elitering into an installment. agreement within the fails?month mandatory
redemption te'Administrative cede '1 1-41-11 becausesheWas-?Unable
to obtain a lat?11:1 due to art error by the City. Spee'i?eailfy, the e?whet?ts name-en the ?nal
aesess'm?en't tell is listed as PhilIijSt'i'a?Ni'eh'ollS Realty the prior owner ofth?e
Rutter-1d Road Despite the fact that Ms; Lewis had? ?a d_eed'_te the Rutland. Read-
property, banks would net advance M's. Lewis a loan because the property
assessment rel-Iguana the BOP documents. listed- the-ewaet af'the Rutlan-d Read pro?erty as

Phillistiz?t Nice-551.15 "Realty Corp",

3.2

 thatshe was. t'eld hy'the DO-F that she did net-ewe the Rutland Read

pre?perty bee-arise the. true. ewner was Phillisti?a Nicholle Realty'.Cerp., and-that it not

provide 'her any inferlnat'ien. Only the Cityhad the power to eerreet the name en?th'e-
assessment relis.

In an at?empt-te- resehre the debt, Ms. 'Lewis, ?in May. 201-8, Vi'Sit'ed' both. the BOP and
HM). She was informed that th'e'RutIan'd' Read property was [101: registered, ai1d,'as
sueh, it was urilah'le to assist her untess- she registered it, In response, she'- registered the
Rutland Read pfreperty with ee'May 23 20 8-, which was suh'sethent'te theentry ef the
rudgmenr .ef'Ft-iureelesure en. December 5, 2017'.

inian attempt to save the Rue-ant]. Read meh-ies item 
hard money Columbia Capital Ce, 'in erder- tes'eeure funding to -'pfay- ejff'the- assessed
taXes' and l'ieris?jle'eeden ?theRutliand, Read preperty- A term sheet from Ce'lumbia Cap-ital
Ce. shears that?i'thas proposed" terms to her fer a eemmere?ia?l lean fer the-Rut-Iand'l'R'ea'd
preperty in the :a'm'eunt of $500,000.

By a de??d dated. September 6, 2.018, the Rutland Read property Wes transferred. tje
Neighberheed?IE?CBS't'ere, 'purSuan't te the Judgment of cede
1 6,3 1 1?4 12.2;? Ms. Lewis states that she ?rst learned that shehe leng'erewn-ed
t?h?e Retland Read property ?when She wassenta eepy e'lf?a ?yer that was. pested at the Rutlahd
Read. preperty,whleh stated that en September 6, 20-18, the Rutla'n'd Read property was

transferred-.te Nei ghberheed. Restore as; pat-?t ef'the City ?s'Third'Par-ty Tran-stel: Program, The

33

Rutiand Road .pgroperty is worth signi?cantly more that are owed to the City.
Ms". Lewis has '?soiight to pay the. outstanding taxes, but the City has refused to accept any-
payment by Ms Le.wis.-. The City eontends?ih?t Ms. LeWis" mere- Willingness to pay arrears
at: this late: stage is insufficient. to diraeate the Judgment of Foreclosure and all-owr her to
redeem- the and Road property. Consequently, Ms..Lewis ?led her- instant ord'er'to show
cause, dated- 216, 2018;.
Dis'eu-ssio'n

The City contends'thatthe transfer of theRntland. Road property to Neighborhood
Restore eanno'tf: lie-set. aside because, pursuant to Admin'iStra'ti'Ve Code 11?412.] 
deed to Neighbiorhood Restore is presumptiveevidence- .th at this, action and at] proceedings

"therein were in with all proVi's'ions of law; and: si'neefon'r'month-s have

passed from the date of? entry ?of "authorizing the 'a'Ward of possession of
"the Rutl?an?d Regard has be?emhe'eoneh'sivri. The City asserts that
no action to-SetaSIde a deed may? be maintained where the presumption has alreadyibeeome
Conclusive. lil'o?veve'ri as previously t?o'or??nionth period For ma'nda'toly
'iteieas'e ofprope?rtyhas expiredi tlieLCity- has the'diseretion toxgrantor deny an :applioation for
release. ofr?eai piroperty taken in rem (see Adin?inistrativ?eCode 114-24 Hedi: City of
Now York, '19 MISC 3d 2008 NY Slip Op seesaw]; *7 [Sup Ct, QUeens County

2003]) '17h'e-Citydoes not "dispute that. Centaeted the at le?astMay'Z?lB,

3.4 .

prim-11111111.81111111111111 6, 2018 deed toNeighborhood l{estoire, in 1111' effort to retl'eem the
1711111111111 Road 51111111111131, but her effolfts 

The City relies upon King Heiding Chirp, VI City Dept. efHons. Preserr; chi 
Dev. (24 395:, 39.6 ["151 131311112005], [12 denied 6 .712 [2006]), which held that
?[11 111113th a eliowing of 11111111 'or illegality,? its ?.d'iseret'ion to -g1_'a111 er deny a release of
prop'e1 1y pu1suar1111?1 Ad111111is't'1 .at'ive Code of the City .111 New York 1 1? 424' 13 ?111130111111,
and thus it need 1101 state 11111311111 for 111qung Such a contends 111111.11 was, 
therefore, Within its discretion 10117111151731 the Rotland' Road property to Neighborhood
Restore, as q?ual'i?etl third party, rather than allo'Wi-ng M's. Lewis, to redeem the Rutiend
Road 11131111111113? four-1111111111 redemption period had expired.

AdminiEStteti-Ve'Code. .1 1?424 governs an application '1oI-1he City'- for the release-of
property by 111'. 1'1-3111. 13-11 fore'o'loSnre. 11.1 order to seek the release of'suoh property,
an applicant 11131151 es?tebhsh that 1111' or-sh'ej'i's- a party who'hed an- interest in the. 
property as ?eli'tl1erowr1er, mortgagee, lienor, or. 17:11 the. time of the city's
acquisition lilEl?BOf-?? Doet'o the Lewis was Unable: to establiS?h?thet she was
en owoer of the Road preperty (see.Administrative Code 11.44.24 [11} MS.
Lewis. as'Serts that her efforts to redeem 111e=R111laI11d Road "property 1111111" the I1 udjgment of
Foreclosure was prior to the end of the tour-4111111111 111entla1ory redemption period,
Wereheinpered?-beoeuse the BOP would not preride her with information becauSe-She- Was-

11ot'lis1e11 on its ireeords as the owner of '1he'Ru1len?d- Road. property; She-attests that-'the-IDDF-

3'5

told her to leetlty this error-With white informed her to reS?oi?ife this error with?the
DOF. I I

After m??k-in numerous.attempts, to' itasoive the issue of ownership} M's. Lewis, opt?Tin
advice from the City, paid fees Ltoreg'i'stet the Rutland: Road: property With H131), in order'to
presetVe het magnetship, Without knewin'g or being i?foji'med that she no longer had title to-
the-Rutlarid Road property due to the Judgment ofFo?teeiosui?Je. The City, in'steath 
Ms, Lewis" registration fees, thereby acknowledging and representing to her that she-
to rethin?het owner-Ship interest in the. RUtI-ai'id Road ptopetty. S'i'gni'?eantiy; this
took place. pitioiir to the time the deedWas-s-exeeuted transferring title to" the Rutland Road
property toIN'eih'liborhorod Restore; The-City Hester returned Ms. Lewis? registration tees,
The City tlhei'ebjiy litisl'ed and misrepresented to Ms. Lewis: that she'- eontintle'd to own the.
Rotiand Road p?ii?o'perty'.

a :gOVei'nmenta] subdivision sets. 01' eOmpOtts- itself wrongfully- or
negligently, indiiein'g reliance- by a; patty?ha'ho is. entitled to .1'ely'a'n'd who eh'attge?shis {or her]
position to his [oi her} detriment 'ot pliejec'liee, that subdivision should he. estopped. from
assetting a right o'r'defen'sexwmeh it Otherwise eoui'd have raised? (Sander New York City
Health. 11% HOWE. Corp, 38 662,668 (1976].; see arise-HM 'v-Ci'ty' {sf-New Fart? 151'.
1.032, 1033 [2d It" the City had noti?ed Ms.- Lewis that she could not
regis'tergtheRtitliaod Road property'b?eeause she no longer she Would have had the

opportunity up imtit Septembei"6-, .date on wl-iieh the Commissioner of Finance

.3 6

'd eededfthe Rut??andRoad property to Neighborhood Restore, to seek d'is'eretionaly relief ti'om
the City, notwithstanding. the fact that more than four. months had passed them the-date of
entry of the utilgment of Foreclosure. (see Administrative Code 1 1-424. Ifisuo'h' relief-
'had' been granted, Ms. Lewis e?oulti haveredeemed the 'Rut'land'Road property upon-.paym ent-
in full of the tax arrears and other fees (seer'dL). Thus, there is-an issue of equitable esteppel
raised here. (sage Matter 'qf Emporium Mgr. Carp?, 12-1 at Ms, Lewis has also I
asserted thatth?e-lCity?s failureto eorreet its error of listing the prior owner. as- the oWner-of
the Rutland Road property eaUSedhe?r to have-'a' problem in loan to aid her in
redeeming the?Rutland Road property:

he City argues that-the faettnat-Ms. Lewis hassubstantial equity 'in the Rational Road
property over its lien is irrelevant and does not prov-idea reason for-vacating the Judgment
of'F'ereelosureg .It- eon-tends that Ms. Lew-is forfeited-all of her equity in the Rutland Read.
property becauise' other failure: to inter-pose an answer in this in rem foreclosure action
pursuant; to AdininistratisreCode hisargurnent is rejected. The-lossof Ms.
.Lew'i-s? entire eqmty in the Rut-land Road property where-She never abandoned it,_ sought to
her arrerirs, and was ready, willing, and able toredeen'l it, the. .intentionof
the Third Party :T'r-ans ferPro gram. TheThird Party Transfer-Program is an anti-abandonment
program Whieh?has the. ameliorat?ive purpose-ref enabling troubled;properties: to be, placed- 
thehands prisrat'e oWner-s for. rehabilitation and maintenance, and was not

intended to perinit atpropeiity owner ofajll of the surplus monies above its-

3.7

lien by its uni'usri'?ed refusal to accept payments from a property owner-who has not
abandoned his?or her property and is seeking-to pay all arrears and maintain and rehabilitate
the'prope'rty'hi?m'self or herself "The City?s application of the Third Party Transfer Program.
to strip Ms. Lewis of herpre?perty rights in?the RutlandRoad property undermines the Third
intentand distorts its purpose so as to work engrave.
'injustice,upon Ms Lets-is.

In any ?event?, .the-- court has inherent authority to vacate. its own Judgment of
Foreclosure, ttihieh was obtained on Ms. Lew-is? default, ??for suf?cient reason and in the
I?int'erests [Middiebrook], 5.9 at
100 at 68;.see arise .Magter ofCoamyof'Gen?esea [Silicate],
at ef?enesee [Bartok], 124AD3C1 at Here, there
i?ssuf?Cient regitson to vacate the defa11lt5jud'g1r1e11t in the interests of substantial justice The
blatant 1nf'111n1t1es 111 the precedrn-e employed by the City to divest Ms Lewis of hei equity
in the, Rutland Road piopmty, and the City ?agrant disregald of Ms. Lewis rights- and
equity in the: Rigitland Road property, warrant an order vaeating the Judgment of Foreclosure
with respeet Read property.

Conclusion
I Ms. LeWis? iriotiou is. granted to the extentthat -.the- Judgment] of

Foreciostire is faceted with respeet to the 11111131111 Road property, the transfer; of the. Rut] and

33

Roadipreperty to Neighborhood Restore is vacated ant-iset aside, and Ms Lewis? title-to the.
Rutland Road property is restored.

Motion Sequence Number 9

Shurm'a 1 Corp, (Shanna) moves,- by order to Show cause, under motion ..

numberiQ, for an order: i dismissing this? action with reSpec?t to real property located. at 3' i5.
Harman, Street, York 1"1237, which issdesignated? on the Kings County tax
map as B?ioch'31139, Lot Street property);- or, inthe alternative, (2) 1aacating
that. portion of??th'e: Judgment of Foreclosure in this action, dated November 27', 2017,
pertaining to the HarritanStrect.property; (3) restraining-any future sale sir-transfercf?titleof
the I-Iann?an 'Str?eet property until further crder? of-the. (6i) tolling the redemption
period to allow 1t, as" the equity owner of the-Harman Street property, an opportunity to pay
off the iien'S .anciifor contest- the- amount claimed to'hc due.
_'Fa'cts and Precedural Background" 

The I?iarjman. Street property was foreclosed upon in this action, as noted
above, was .co11'1'menceci on July 14, to the City?s Third. Party, Transfer
Program, -.Shu11_ma did n'ot_'in'te'rpose an answer in this action; As discussed above, the
Judgment on November-2?, 3201?? and was entered on December
'14, 201-7, its instant order-to Show cause, datedAugust 31, 20193.

.SiiUrina-11ssert-s that the. charges which became liens-"on the Harman Street 

originated fining-an action which was comm enced Harm an Street-property'by PIP-D

39

under ind_es_nti1nber332r?08 in the Civil Court,_ Kings County (the. Civil Court action), The
Cirril Court aetlon resulted-in an ordten dated. September 10, 2009-, requiring ShUrma to pay
$9300 by Oetriber '31 2009 to get oatxofitheTA program. Shurmapaid thefunds as directed--
by'the Order. ?lihe?l?l'arman Street the?'Aprogram on 'Oetober'Zi 
2009i. Aeeord-igng to S'hurrn? as er en though the Harm an Street prop erty-was-removed. from 7A.
.admii'r'istratio'n; HPDI continued. to add. charges and to the Harrison Street property,
Shanna-also afgsserts the allegations used to include thel-larman Street property in th?eiTA
admin istrati on?pro gram were inconsistent with the-Violation reeords. Speci?cally, .Sh'urma.

elairns thatthe-??City undertook renovations that had nothing to 

'3Slr'ur'ina further elai-rns that-it'Was never given any notiiee prior-- to these renovations being

completed dwelling registration with Shurma has submitted an
engineer?s repent, prepared in. Ootober 2-008, which showed that'thef-neoe'ssary repairs Were
signi?cantly less than the charges assessed by the. City. Shanna? also has submitted an
estimate from a'l-ioensed centres-tingcompany, 'Tri.zoi1,.111o., dated May 20, 200.8, --wh'io'h

showed thatjthie. cost to correct all existing violations'and perform cosmetic. we'rlewould be

,56 II.

. Shurmairetai-ned Bruce Goldstein, Esq? to sue the. City regarding theliens on the 
Harman Street- pronerty thatxwere. a result of being: in the 7A program. HOWev'ei; Mr;

Goldstein fails-Ed tomOve-quiokly, and Shurrna changed? attorney's. By the time that Shanna

40

retainedia new?atterneyi Tarik Davis, 133uner Davis infermed Shanna. tha?t'it could eat)?.
di?spate the taxglien after the-tax, lien was sold. and t?ereelesttre?cnmmeneed.

In 2012,38hnt1na was given 1a 60?day netiee efi'ntent'ion to sell tax March
12, 2012-. Shanna waited for a, tax. lien foreclosure. to be none. was
enmmeneedengine tax lien :saliewas-he'ld. Shurma contends-that it never-received any notice
in mm foreclosure eat-i011. asserts that it ?rst learned Inf-this action
when if ?i notice, nearly six years later, directed towards;- its ?tenants,? dated Lily 19,.
201.8, which stated that i'f'tli'e OWn'er (lines not resolve its; payment at? delinquent taxes and.
ether-municipal: eh arges' within the next few months, thebuildin in be transferred to anew
eWnet?eele?eted?bY thronggh. the Third Party Transfer Program. Shurma. retained an;
who. i?infe'rmed it ?of the that had .hee'n entered on December 14,
20'1'7 in the-insgant in rem fereeleenre action and recorded on the Automatic City Register-
ln'fe'rtnatien Syistem.

Shurma rites; that .Inest Ufthe- ants are freer the 2008.19 2009 year, when theHarman'
Street property was in thei?tA program. However; the City failed tet?akeany collection aetien
it brought in 17e1njfereeiesure action On July-14,2015, almost Setter; years The
City a55e53ed agree-seven years et?intere'st?and fees". It is endiSputed that? S'hn'rma- is current
With all efjthe pgepetty takes for the Harman Street property. The Cityeeneedes that nearly
anion-he Hah?n?n Street property?s tax liens resulted from emergence repair? liens and ether

repair and. lnaiti?tenanee- charges placed on'the' Harman by HPD, as Well as

41

?nancial-laid hens fies City-funds given for repairs Made by the former TA admiriistrat?r of
the Iii-arman Stire'et property, These are the charges that Shurma? claims Were improperly
imposed on' the I?iarman Street property. Shurma' maintains that it was not given an
01313011111111th ?i'isiau-te-the charges :desp'ite'he'ing given a right to do so in an order-in. the Civil
Court action, dated September 2009-. Shurma? also a'SSerts. that "it- has. not bee-'11 giife-n
pro-per oredit [(31 many oti'lthe Char-ges- that it paid. The City elaims'that Shurma"s 
challenge the u?nderlyi-ng tax liens ?is now untimely; and-that it'Was-fentitied- to foreclose-on
theseli?ens by'biringing, this aeti on in rem against the Harman Street property, pursuant to the
Third Party- 'T1'a?nsfe1' Program.
Discussion

ies receiving notice ofthis-foreelOsur'e'aet-ion. The City attaches. aiprin?tout-
with tracking. Infinibers and a notioeof foreclosure dated July 201-7. On line? ?ve of. the
printout, tit: stat?es, under addressee,- S'h'urma'hl Corp..,- 3l5' Harman 'St-reeh; 
112-311-6924. 'Iiowever, this is .a 11111lti?L1nit- building, and this address has no apartment
number, .a'Ii-dii ls unclear who. received the doeuinenti The City argues-that actual notice is
immaterial, claiming. that it complied with the :in rem ?notice procedures set forth in
Administrative Code 1406,- w11ieh',_ as discussed altitnre1r have been 
constitutional c'luerproeess'requirements in Mot-tar Enters: (73? NYZd'at "1?0 143702?).

AS Point?d' out-by hurm a, 1'1 owe-var, it die'fi es logic that Sher-ma would wi llfil-l 1y: ignore

notiice oi?an in rem foreclosure. action based. on emergency repair liens while consistently-

112

.. .. .

payingail of 11311331 estate. taxes. Signi?cantly, the City'alleges that there were numerous
violations, and attac'ites,_ as. exhibit 6.--to its .Oppos?ition, printout. of the violations- claimed to
he on'tliic' Harman Street proper-Ly, Which spans over '10 pages,_ However, the Violet-lens are
for a property located at 463 C-iasson Avenue (another property named in this foreclosure
action) and. not for the Harman Street-property,

While Sigu-rma argues that i't-was expecting a tax ti?en sale pursuant 
Code 11601 et Seq, the constitutionality of bringing an in root foreclosure action
as opposed to a foreclosure and sale-"has been .suStaincd by the United States
Nelson, 35-2 US City ofNew Perla. 42-? Misc 2d 1040,
??ue?ens County 1964]). Howeveiaijt hasbc?enzlheld that-this does not p?rec'iude
a property 'own'gcr from seeking to open a- defaLil't judgment Whoo? the??City'has arbitrarily
proceeded under anin rem-foreclosure, insteadofa taicliejn an'd the-property owner'may-
thatthe property be sold the recovery Of sale proceeds (see chass'e'o, 42-
Misc 2a at 10451),

As discuissed? above, pursuant to 1-5 a? default judgment-may be. vacated
wheretheproperty owner has-a meritorious defense an'dia reasonable-reacuscfor ?its default.
Moreover, the ?ourt-may exercise its vacateithe defau-ltj'ud'gment, and.
it has inherent:authority to vacate ?the Judgment of Foreclosure, obtained on: Shurmais
default, for s?f?'cien?t reason j?ustice-?-? (Matter ofCouety

of Ontario [Mt?ddiebreoir] A1136 at ?065, quoting Woodcoa, 100. at 6.8; see Jim

43

Matter [Sptcota], '125 at 1477'; Matter 
[Buttetc], at 13.31). default must be vacated in the interests of
subetentialjustiee. 'Sliurma seeks to redeem the Harman Street property, and the Third Party
Transfer 'Pro'grt?tm was 11 0t strip. a property 'ewrier ?of its property rights under the
circumstances 

"The. City relies upon. AdministratiVe Code. which, its pre?vihusly
-d-?iseussed, jpret?id'es that deed giver: pursuant to the provisions of this seetienehall
'begpresumptivegevidence that the action. and all therein and prier'
thereto. . .t were all predisiel?ts I'ef law relating-thereto," and
that ?{?ajfterzfem months frem thedate ?01? entry of the ?nal judgmentauthorizing the award
efpessesgientiif any parcel of class 011e__.j01jelass twin 
.ef'this presumptionshall bel'eenelh'sii'vei? Here, however; he deedhas yet been
given dr'tQ-a third patty.? It is noted that in the Cadet-3' relied updn by the City, there
we're-deeds gwen teth?ird pl?artie's. (see eg. Written; $29 at 94-8 2015] [Where
ithesprepertywa?s transferredby'the City'te Neighb'erhe'ediReetere] ADS at 495
[where the prepierty "was transferred by arde'ed ft?eth'th'e'DO?E to Neighborhood Restore]; In
Item Tax A'ctiott Ne, Jeff/?1 '29 at. 955] [Where the-- property-was 501d t0
Neighberhqed likestorei]; In Rent Tax Act-ten Ne, 44', 23 2950, 291 [where'-
the'd'eed committed title to the City]; Marta. of Tax Fo'reet'esure Acne)?: Ne. 44,- Borough of

Bret-ix, 2- 241 [where the. deed e'e?niteyed title to the Cityj).

44

As Set. above,- the Ju?d'gnlrent ef- that ?Unless and until the
Commissionerth Finance executes a deed conveying- parCEIs ef'real property pursuant to.
Administrative:- Cedei? 11-4112 to the City Uf?New York or, for class one and class t-we
properties,"pursuant to 1 the City efNew York-er tn}. 3' third party
deemed qualified and designated. by the Commissioner of H'eus'ing Preservation and
Development, :the; earners-0f "such lands shall continue to have all 1:11? 'the- rights. . . et?an
owner, . Here, he "deedha-s-yet been exeeuted and, thus, Shanna continueste have: all of
its tight-s as an hwner,

Mereeveig,Administrative Cede? 11?4121". provides as renews:

'the, eeminissiener ?nance dees- not- execute a deed.
eenveying .t'e3tl1'e-ei'ty er- te a- third '_pa1?ty a: parcel of Class .ene '01'
-elass? two real preperty- within eight months after the entry'ef
final judgment- a11'th'erizingtl1e award-0f possession of such
l-piaree-l pursuant to subdivision ef this section, the
of finance shall direct the eerperatj?idn' counsel "te
prepare and cause- to be entered an order 'dise-entinuing?the .in
rem. fereelesure action as to said property, canceling-the netiee
af?p endzen ey of each aetienjas to said p?rep'erty and vacating and,
setting. aside said ?nal judgment. The entry efsueh e1der- shall-
.reste1 all pa1?ties, including ewn?em, 11101 tgagees and any and all .
liene1-s receivers and ad1n1n1st1ate1s and enemnhraneers to the

status they held immedi-ata?ly heiere sueh ?nal judgment was
ente1 ed 

Here, the execute-a deedeenveying,the.Harman
Street property to City '01? to a third party within. eight months after the entry of ?nal
j"udg1nen_ten Ddeembeif 14,2017. The eourtnetes ?that the City was. unable to 
e'ffee'tuating any transfer ef the Harman Sheetpreperty due to the pendent-1y 

4:5

tn'oti'on.- Howe?ver, sincet-lte court ?nds that a-vae?atnr of the Judgment ott?llioi?eolosure is
warranted in the interests of substantial justice and Shanna seelrs'to redeem the Harman
Street property: the City must be permanently enjoined fromtransfer-ting. the Harman Street
property. Und??r these circumstances, the Judgment of Foreclosure must be vacated and set-
asi-de as to the-1% annan Street property and 'Shurma?s status as.- the- own er- of the Harman-Street
property must be restored.
Conclusion
Aeoorditrgiy, Shanna-"s motion is granted to "the extent that: the Judgment of
Foreel'osure is tiraoated with respect to thei?Iarman ,S?treetrproperty, and to the
Harman; Street inroperty is restored.
- Motion ?Sequence Number 1'1
1'9 Kin-g?land Avenue I?lousi'ng. Development Fund Corporation (Kingsland 
moves, cause, under motion sequence number I 11, for'an order: (l)?lvaeating
the Judgment of Foreclosure in thisaeti'on as. it pertains to real proporty located-at 19.
'K-ingslandAveiime, Brooklyn, New. York 1121 1., designated .0n the Kings. 00th tax map
as B'Iook 2.6 ("the Ki'ngsland' property]; and (2) dismissing this action; or, in the.
alternative, gen-tering an order, pursuant- to CPLR 3.211 granting it leave to interpose-

an answer; and .204). o'ining- Neighborhood Restore as a- de'fenclant, pursuant to CPLR 10.0.1.

46'

Facts and Procedural Background

The Kit?'igsland property 'is a six?family cooperative bdildi?n-g formed under the
provisions of at??tidleXI of the Law. - Kin-gs'lan'deDFC acquired the
progeny from the City almost 35 years ago,- hy a deed dated April 3 198.4.
Kingsland HDFC was Organized exclusively"for'the'purposeof developing a housingpriaject
for people having when it acquired the Kingsland.jprope'rty, there-were.
signs-heartrampage-s and ten ovations which had to bexperformed. The Kiitgsland property was
in desperate- need "of capital ,imntzoveme'nts at [that time; and the-initial shareholders. purchased
?their apartment; Tor$250 and had the renovations performed. The shareholders of Kingsland.

HDFC reside- at the Kin-galand property. I
As dismissed above, this-la rent foreclosure act'ionwas on-July?
14;, 2015. The hing-stand property was-includedfin this. in rein foreclosure action, pursuant.
to' thE-Third Patty Transfer Pt?lefam, based upon its having: delinquent real property taxes.
which'd'ated hae?k to October 2003.. Yudy Venture, thelpresident of Kingsland'H-DFC', attests
that he receiiresgthe mail for the and a't'no time did he receive any mail
?from the City or regarding tax foreclosure, nor did he ever-see any posting. anywhere

near, in, or arou?n?d the Kingsland prdperty. regat?dihga tax foreclosure action.

Subsequent to the hay 1.4. 20.13 commencement ofthis 
entered into an In Rem Installment Agreement withthe DOF with a starting-date of;

August 24,2015, to pay the $77,769.81 then outstanding; in real estate taxes and charges.

4-7

The In. Rem ln?stalhnent Agreement pretride'cl de?Wn payment. of and "32
quarterly .insta-l?iments. plus e-urt?ent taxes. The Was due on
October .112015 The-In Agreement"provided that if any of the required
payments wete made after the in rent tax ?fotjeeliofsure. action "was eem'm'eneedi but were.
insuf?di'ent?te ?auee-Wi?thdrawal ft'em sueh- aet'ien,'th'e property would remain in the action
and Would he sie'vet'ed_'ft'e'm the ?nal Judgme?t provided that the:
failure te'pa'y e?irtent taxes aslag?re?ed Would result in. the cancellation of the
agreement become eligible fet- fereeleeure' 01" the 'l ten fer
the Unpaid teal?estateftaxes and ether charges maybe "Said Mime-City,

Subsequfently, Kings-land HDFC. fetl behind hi it's inst-anthem payments because one
of the at}: Shai?e?heldei'e died, "leaving maintenanee arrears; 'Kingslan'cl HDFC
._e'eu'ght the ef'St. Nieheilas Alliance-Hand Brooklyn Legal Services ?Corp?. By an
email dated QUE-telnet 2017?, Samuel Chiet?at. from .B'reeltl'yh Legal. Services Corp.
con?rmed that: K-i'ngs'l'antl' HDFC- was deli?queht in it's_ payments under the In Rem
Installment Ag??eement and could not enterintej: another One; blit_.fthe_DO_F Would 
partialpaymentf fer'the back? taxes. He explained that Kihg-?sland HDFC had to 'pay off
$41 additional quarterly due in January. 2013' by. May
201' 8, and if KinEg-SLI'a'lld HDFC. .eeguld- pay the DOF 10,900 up front: and then 5;.900 thr?OUgh

May 20:18; the Kings land property Would be tetheVecI -'Ft?01n ia lien'eaiet lie-further ?stated-that-

4'8

King-sland needed to enter into an agreement with the DEP regarding monies owed
for waterfs eweir charges.

Mr. Vengtura states that he aisoihad a. conversation with SharonHatcher-of HPD, and
that she infortthed him that Kin-gsiand HDF-C. was current with. the In Rem .1-n5tal"linent
that he on had to makeapayment=arrangement 
which were not the subject-of this action. Kingslan'djiriDFC. claims that it paid in eXCess of
$61.;000 ofa ?lm-9481 debt.

Kin gsland IrIDi-iGentered into a Payment A greem tent with the; dated November
2. 2015', with a?payment agreement amount of $95,798.76. TheDEP'Payment Agreement
provided. "for a in staihnent._payment of 2 for 1.20 months for-a total payment?
of. $124,777.99; with. the on December 2015. This was the. Second
installment plat; entered into. by with the DEP.

It is un?i'isputed [that the DEP waterfsewcr- charges were not the. subject of this
foreclosure.action. :as originally filed on Jilly- Rather, the debt was the
owed to. the DOE, which King'sland had agreed to'pay, pursuant 'to'the?In
Rein Installmerit A greement datedAugUSt '24, 201-5. The Cit?" asserts?tlia?tni't'taciteti 
wateri?sewer chiar'ges by stating, in an in rem tax, foreclosure final. warning notice dated
October 6-. Z?lithatthe foreclostnze action was? ?due tojunp?aid property taxes andior water
and server charges." and/or other charges.? This final. notice stated that thei't'otal amount due

by Novemb?er?i "20. .1 including. interest throngh that date, Was $28 1 ,6 19.93, whiCh-co'n'sisted

4.9-

 

017a DQF iien iamount of $81,642.67, 51 Wata'rfw?stewatet lien amount-.01731.193477426: arid
a penalty of $500 King's-land HDFC, Ventura, as well as its secretary 
assert that ICi?ggSi?lilti HDFC newer-received notice.-

With Feispect to the. issue iif?u?tica to Kingsland tha City haa?aub?mitted-an

-af?rmationpfize'gt?aif'iiy'by Andrea B. Feiler (Wh D's-3'5 .natadablove, is. angassistant C?rpm?atian

who iifecites that notices of fofacilofsure write iaailad. t0 the. oW?et-of?each pritipe?rty
for which the. DOT had a mailing addr?aa, and refers to the af?davits {if Pamela P-al?kaf?
Cortijo,..an_ airtipmyee {if 'tha DOF, and Donald OiCOhn?-?ll, the executive vicawpresi'dent Of
Vanguard DiraECt, In ca a bulk" th?atprov'ities'mailing DOF. The

af?davits licfmjito. computer's; having genei'atad the mamas and addre'sSes for mailing. The.

mirti?cates af'hu'lk mailing [iUm'th'a United States. Postal Service state 

0'f_i_tams Were-Emailed. While the: City claims. that it. complied-With. the. requirements. {if
Admini?Sti?atiV? Codi: 1 L406, King'sil'andiHDFC maintains ?that it-n'evar? actually I'eceiif'e?d
any of'tlieSe- n'citi?ces.

A's nota?? abov?e-, ?on the Judgm?mt QfForecios'ur-a was signed, and
"on December 14, 20.137, the. Judgmentof-Fo'ra'Gl-osare'waa entered in the Of?Cc of'the Kings
County Claik Mr: V'e?iittir'a attests. that King'sland HDFC was newer served with the
Judgment 'Qchii'ec'lasurai. The City doashat ciaim that it'served thaJudgmant Q't?Forec'ioSure
an Kingsla?nd {at-otherwise provided withnatice of'the Ju'dgmant

of Foreclosure

~50

By a let:te_r dated July 20,. 2018', directed to they-tenants of the Kin gsland' property (who
are actually of Kingsland HDFC), the City informed them that if the owner
does-not, reset?Niels tax problem. within the next few months, the. Kingsland. property-may be
transferred toa new owner pursuant to-the' Third Party Transfer Program, The City, in this.
letter, invited ?hein to a prewt-ransfer tenant-meeting-to be held on August 21-, .2013. Mr;
Ventnraattes'ts: that by the-time'that he received this letter, the. City had already. cutoff the:
time forthe- redemption ojf'the; Ki?ngsland property,

By a deed dated September 6, 20 18', title-to the Kingsland property was transferred to
Neigliborhood?Restore pursuant to th e- ThirdParty Transfer'Prograln'. Kingsland HDF has
expressed its; ititention to: pay all. of the monies owed in Will be able to obtain
from the-saleof?i?a vaeant unit. The City has refused to allow Kingsland to redeem the
- Kingsland pro?erty, asserting that it Sis-too late. fer it todo so. Consequently, Kings-land
its instant order-to show cause, dated September- 14,2018,

Discussion-

Th'e' Kinigsilanid property does not meet theistatu'tory de?nition ofa dietitess'ed property
(seizAd1nih-i?str?rtitte 1?401 Ithas-a-total ofthr'e'e-Violatimis ofreeord Consisting-
o?f'two el'ass?B gvioi'a?tion?s and one class A violation. It has been fully. .renO?vfated with. the
fonds from King'si'and shareholders, Who. stand to lose; their ho?rne's by this
foreclosure. action. All Systems. of the Kingsl'and property have been

upgraded and replaced ?shareholders, The Kingsland property ?is'

5.1

located in area, and it is worth- approximately ?ve million
dollars. Porsu?nt to 1140.1 *1 (e3 parcel . determined "to be-
a distressed property-shall be subject teen in rem foreclosure Since theKingsland
prop erty was not a distressed property, the City improperly included the Kin gslaod property
in this in rem foreclosure action and the'Third Party Transfer Program.

The City argues that in foreclosure is not limited to dietr'e'ssed properties.
tii?errEs-Wasoo basis for the City to'traos-fer the Kingsland property, pursuant. to the
Third Party Ti'ansi?er Program2 to Neighborhood. Restore since it. was not a distressed
property. Adiri-inis?trative Code 11?401.- 1' expressly-provides that if the-Commissioner
thata parcelis notadiStre?s?sed property-3 as de?ned in; Administrative
1 1-401 tll?ora-reel-shall not lee-subject to-A'clmirrisrrative Code 11-401.. 1- (C)
or .1 14,121 (J). A ?nding that the-properW-meets the-statutory de?nition of?a distressed
properly,r is aniandatory-prereqlliSi-te for subjeetiog if to the-"in rem foreclosure procedure
pursuant to Adinioistrative Code 11-401. 1' (see Administrative Code 11401.1 

The integration to includeonly distressed propertiesin. this in rem foreclosure-proee?dure-
and the Third Party Fransfer Program is further evidenced by the testimony before the New 
York City Coulieil Committee oni'onusing- and? Buildings in support of Intro No. 6.?91 the bill
Which became ??Loeal Law-No, and amended the relevant provisions of Administrative
Code seq. The March 1.996 testimony of the then New York City 

Con?iuni'ssiooer better-ah C. Wright. and the April" 22, '1 99.6 testimony of? former New York

52

6111' Human i?se'sour'ees Administration Commissioner L'illiam Barrios-Pooh set ?forth thatithe'
goals oi.? this 'Ele'gisiation was to: identi?/ ?troubled .buildi-ngs""-and ?prevent abandonment?
This testimoi?ty also set fo1th that the legislation p1oviding for the Par-1y T1 ansf?e1
Program was a ?tough p1ovisionjwl1ioh ?Iwould be utilised where .ovvner are inesponsible 
and tenants-111111: being- harassed and not provided with essential services or ?where
buildings 1111: 11111111111}; to become economically viable without complete tax and 111o1tgage
11331111131111ng This is not the situation with the Kin gsland property where-istioh' property- is-
not distressed? where the shareholders are ?the-lowners. of the eooPerative units who have
rehabilitated the'Ki11gsia11'dproperty and have essential services_-, and where-Kingsland 
has not abandoned the Kingsland preperty, but is actively seeking to pay off the tax liens.

Thus to permit a transier of the Kingsiand p1 operty under the Third Party 
Program, where such a transfer 111113 Contraiy to the legi-siative intent of the Third Party
"Trans-tier Program, would-work. a grave injustice.?- to the shareholders of-Ki-ngsland 
who stand to lose-1h air-11 0111133 113 a resultzof the City?s application of the Third Party
Transfer Program tothe.Kings?l?a?nd ?[Ah1 'adverSe-judgment in rem directly-affects
the property owner hy-divestinghim [or her] her] rights. in the property before. the
court? (Matter 13f Foreclosure. of 1:11: Lisa's, 1.65 13113311 1112, .1120 [2d Dept-"2018] [internal
quotation marks -

Furthermore, since the Kingsland property was nota distressedproperty, its transfen

under the? Transfer Program; would 1.111 fairly :and-eompleteiy deprive Kingsland

53.

 

I-IDFC- of all of its equity in the -I<Cin_gsland? property since, under the Third Party Transfer
Pregram, King-sland HDFC cannot recover any surplus monies above the taxes outed (sea
Manners, 65 at 1,097). The transjt?er- of the in gsland property-to Neighborhood Restore
is also unconscionable and-shocking to the conscience. of the-.courtbased on the amount of
the City?s lien yersu?s the substantial value of the-Kingsland property. In add'itionysinee the
is not a distressed property, the. taking of- it: through the'Th'ird Part-y
Transfer Program would constitutean unlawful taking of private preperty without just
compensation in violation constitutional rights under the Takings
Clause of the Fifth Amendment to'ithe United, States. Constitution and article section of
the New York State Constitution.

Moreover, the City asserts that-anOctober 1'4, 2013 payment by Kingsland 
the was returned- for insuf?cient Funds, but it admits that Kingsland-
made payments on December 28,. 20 February 1, 
the. In Rem. histallment Agreement, which amounted to: approximately $515,345. These
payments were accepted by. the? City subsequentto the-entry of?the Judgment'of'Forec-iosure'
on December 14,. 201?. TheCi'ty asserts that these; funds paid'a total 
$36,000 for the real property taxes out due. pursuant to the In Rem
in stat sneer .Agjreetjn ent.

Signi?cantly: the City concedes that after the eXpiration of the 'Four- men th' mandatory

redemption period,- it Continued to acceptt?nrther payments. from King-slant! HDFC ?'omApril

5'4.

16, 2018 through August 201 metering approximately $213,000, but it asserts-{that- it. did not
credit thesepayinents to The City did not reject these payments?
or notify King'slanti any Way that. iteou'l'd no longer-redeem the. Kingsland property,
instead, the City retained them-payments. The City claims thatit held these monies ?in
that ii? King'si'and HDFC had completely redeemed the Kingsland' property,
it would haveihen posted these payments to Kingsland and reinored'the
King's land property from this foree-ios'Lire action. 'IT-his-is ineonsisten'tw-ith' the City?s present
pos-itien'th atK?ings?lanjd eou'l ti not redeem. the, Kin gs] and property after the mandatory
fetireinont'h redemption pei?iod'expired, Moreover, by the retention ofthese monies, the City
HDFC into believing that. it could still .inaltepayrnents under-the In Rem
installment Agreement and that'the In Rem Installment Agreemeni was still in effect.
King-slant] HDFC asserts that if it Would have knewn that the City was no. longer honoring
the in Rein installment Agreement and that it Was planning to transfer the Kings-land
preperty, :seug?ht'to redeem the Kingsland property porsu'ant to Administrative
-Gode.?' 11-41131 Thus; the; nonfeaSanee?wouid result in a manifest
injustice here (see Matter of?mporiam Mgt; Corp, 121 ADBtlat 983).-

Kingsland has a. meritorious defense anti-a'rea'sjon'abie excuse,
warranting the v?ae?atur of? its default (?see 5015 Ki?ngslia'nd HDFC. has
eStablished its-ability to. pay the taxes by selling? off one of the units in the; Kingeland

property, and there is no prejudice to. the City or Neighborhood Restore by permitting

5'5

Kingsland to, redeem its property atxthis time (see Matter ofCozmty of Genome
.125 at 1477'; Matter ofConaty ofG-euesee [Bartlett], at. 1331).
Bergen upon t11e facts and circumstances -.h,erel, the-court ?nds that-?the entry' of a default
judgment basedon the failure. to pay. [the taxes] would result in. a disproportionater harsh
result? and that ?thisyis an appropriate casein: which to exercise [the court?s] broad equity
power-to vacate [the] default judgment?- (Matter of Conan; (if-?Ontario 1996'
Living Trust]? .155 at. 156.8- [interna1 quotation marks omitted] see also Matter of
[Middle-brook], 59' ADBd-a't 1065:).

As- above, the court has inherent authority to vacate the Judgment of
obtained on 141DFC ts d.efau1t,_ sufficient -'re_ason' and in the
interests? (Matter ry?COnmj? .oan-tan'o [Mid?ebrook?-SQ at
1065, {looting Woodman see- .afso Marrerz-ofCtmai?y ofGenesee [Sp?icoz?a],
1.2.5 ofGenesee [Buffet]; 124 131133 (1 at 13:31). Here? there
is suf?cient reason to-?uaeateg the? default judgment in; the interests: of substan?al justice.
Indeed, to hold othei?Wise would result in. a grave injustiee-to Kingsland 1-113ch grossly.
dis-tort the intent and purpose of the relevant Administrative.Code provisionst run counter-to-
the express} to distressed properties, and defy

principles 

=56

C'enclu'siun

Kin gs} and s- etien: is granted to the extent that the Judgment of"
F'ereelesure is vacated with resp eet to the the? "transfer ei?ithe K-ingsl'an'd
'pteperty-te Neighborhood Restete'is Vacated and set aside; and Kingsland tit-te- to
the Kingslahci. preperty is restored.

Motion Sequence Number 10

4.63 Clja?ssen Attentte Ir'Iejusihg Development Fund Corporation ('Ciasson 
1neves,hy order fer-an order: )pursuant
.te-the the United the, New'Yerk C-on-stitutien, 
and CPLR preliminarily and permanently restraining the City andi?er their attorneys,
empieyees, agents, "representatives, third-party agents, af?liates; subsidiaries? 
assigns, eonstiltents, and all these acting i'n?e'oneert With them from conveying,
transfie?rringmr in any we); effecting, alt'eri'hg, 0r title, and. interest in
end located at 463 C'l'assloh Avenue, Brooklyn, New York 1' 123 8, designated
en the Kings County tax the]: 83 Week 1985, Let (?the Classes Atenue property); andtZ) 
eem?pel-ling the City te ?accept the funds nie?ees'sa'ly to remove the Classeh Avenue; property
hem-the effects of the Judgment UtiF'ereeitJSUre'dated 2'01 7? end to diseentimie

this aetien as it reietes. to the :Cia'sse?u Avenue property.



Facts and Procedural Background

Classon- beeam e. owner of. ?the. Classen? Avenue- property by a deed-
dated March 261', 11992,.and has. owned the Gleason-Avenue pmpe?rty lg?er a-ppreXimatE-ly 
years. (Ila-satin a lew?incmne. organized under article XI cf the
Private Housing Finance Law. The Classen Avenue property has: 1 0 in which several
live.

As previens-ly discussed; this? in rein foreclosure- action was commenced by the City
social}? 14, 201.5. The Classen Avenue property was included in'this in rem foreclosure
to the bird-Party Transfer Pre gra? 1n, based-upon municipal arrears
at the time-30f the ccmmencement of this action in the amount dating back to
December 200'! . These arrears were: comprised of a DOF lien the real property takes; and
other charges in the a fer sewer charges in the--
eminent riffs 1 6:3 

01333911. detached inthis-fereelesure-action. It claims that the?reason for its
default was that it never-received. neti'ce of this action. The. City states that .110 reque'sthad 
been made by Classen to where it wanted notice cffereelesure-t?ebe sent. "It-asserts-
t-li'at', there-trite, tllre-g-?DOFJ pursuant tcAclmini-strative- C'ede.? tethe.
name-arid address in the-assessment tell,- namely, Cl'as'son atitl'ie Classon Avenue
property-g and to the real estate billing namez'ancl? address in the assessment 

Cias'sen HDFC at'the- Classejn Ave_1_1u_e.prcperty at Apartment 'It. i'naintai-ns that whether

58-

 

 

or not "(9121.55.er actually of this-zforeeiosure ?action -'is..i1uinaterial- sihee
the DOF'eoiuplied with statuiory notiee requirements,

As discossed abeve, the ?Judgment iof'Foreeiesure was) signed on November 27', .2017
and Was entered OugDe'o'embei' 1.4, 20117. Classorl .oiaims that it was ?rst noti?ed of
the Jtidgnient-of Fere'e-losure in late August 201-8 when the City invited it" to a town-hail
meeting. It asserts that until that time, it had no idea of the. existenee of this. foreclosure
action. Cia'sson HDFC has submitted. the af?davit of one of its shareholders, Willie
Ri?ehardsoh, attestingto thie. 

Classoh HDFC notes that, the City (has taken? the position that the four-month
Illatl'd?tm?y red.e'irrpt'ibr1.period already Expired on April 16,2018, feur months frem the date
ef?rhe entry prioii to this August On
August 31, 2018, the City informed Classdn it intended to convey the Classon
Avenue-property ?to Neighborhood. ReStore, pursuant to the Third?Party?Transfer-' Program,
that HPD Sehe'd'uied closing-Tor September .6, 2018 to transfer properties-included
in thelJudgment of Foreclosure to Neighborhood Restore, including the Classdn. AVen'ue
prooerty.

It- is undisputed that the ClaSSon AveniJe property'i's Worthconsiderably mere than the
tax that Cla?sson the City. Clas?sori contends that the City?s

atte'iuptto- take. the Classon Avenue property from it and transfer it. to Neighborhood Restore

59

amounts "to an unremunera?tcd taking- in violation of the United States Constitution and the
New York State. Constitution; . i

C-la?sson produced certi?ed checks, totaling $500,000, white it has sought
to pay theCrity. This amount. is: well above. the sum required tot'fully. satisfy the
outstandingarrearson the ClaSSion Avenue-property. Classon asserts that his ready,
willing, and-able to pay- all taxes and charges owed, and that there is no moral or legal
justi?cation forthe City to. he permitted to take-away and. transfer the Ciasson Avenue
property, resulting in .Cilasson- loss-and forfeiture of the Classon Avenucproperty,

Classon HDFC ?led its order to Show cause, dated September Since the
order to show cause, signed bytheeourt, included a-temporary restraining-order, preventing
the. City from transferring-.- the Cl'asson Avenue property, pending the determination of'
Classon motion, the City did not. transfer the Classon Avenue property to
Neighborhood Restore.

On September 7, EMS, Classon HDFC contaCEed HPD, seeking HPD's 
allow itsl?ateredemption of propetvty. An 8'
item Caytnary O?Garro notedthat Class'on'HDFC had. requested topay-all DOF
charges, This email set. forth that the total 'charges-zoWed, Were'then $115,526 for the 
totallie'nand $69,529 This entail
further set, Forth, the list of items that needed in order to review Class-on- 

requeSt, which included; ?c'on oWnerahipx? ID, a Copy-o-f'the deed-,a certi?cate of

620

incorporation, a Copy of therlproperty registratioh,ian attempt anchor detailed "plans-to clear
violations onthe Classoo Avenue. property, and the source of funds to satiety arrears-With
supporting doeun-?ientatioa Classion- HDFC submitted a late redemption application to pay
the outstanding tax arrears for property, along with these listed items,

Next-orthe'less, by-a letter datediFebruary 4,2019, HPD-dehied Classoo late
redei'hptioh application. In this. letter, HPD acknowledged that it had receiVed a'eopy of
Cia'ss'oa ID, the deed, the certi?cate of incorporation, a copy of the property 
registration, and a letter setting forth-Classes ?plans to elearthe Classon Avenue
property?s Housing- Maintenanoe Code violations. further a'oltnoW'led'g?e'd that on
.8, it .eoii?rmed, the tiling of the Dismissal Request Form by lasSon 

claimed, however, in this February. 4, 2019 letter, that the late redemption
"application. did notin?e?iu?de sufficient proof ot?Cl-assoo source offends to satisfy the
arrears or- 1:1 roof. thatthe Housing.Maintenance-Code violations were. sut?eie?ntlix?
cleared. stated thatit had teatlested 'tirorn Classoo H-DFC proofoffunds
to pay" the Cla?ssoo Avenue tax; arrears, and Classon- HDFC had
provided the first page of an onl-in'e; printo?tit of a Chase Bank that-did'oot
sho'w'the name often-account- holder or any reference-EOE] a'sson 
that it subsequently requestedao of?cial bank statement from an of-?Classon 
and Classoa FIDFC provided a letter trom'S'ig'oatLilje Bank stating thatthi's letter served as a

confirmation that ?-Classon HDFC, a sub" aee'o'tm't under Jef?ey Zwiek ?and Associates as

61.

Escrow Agent,? :had halanoe?? of $500900. HPD olaimedjthat it was unable
to Verify th'e'Se- p?u'rp'orted funds due: to ?Sig-nature. Bank?s-- I set forth that
although C-la's'son it never submitted adequate -
proof olifu'ndis? ahow?ing that it. was able to pay 

this February 4,2019 letter, further failed to. meet
the housing eo?d'e violation eflear?a?no'e- threshold that. it requires ,o f?l-atofredemption-applicants.
"It set forth that a's- Avenue property had 172 violations (45
class lat-violations, .83 Glass violations) Itstated that in Grd'er'to
meet. its violations oil'eara'noethreshold,Classon I-iDPC-w?a?s req?ui'red'to either: clear 30%
oi?tli'e total 138 violations, bringing. the't'otal remaining violations down
to 341; or (2) bring- thetotal number of class and class C-v?i?ole?rtio?ns down to two. per
dWellzing?unit. HPD claimed that-after time
to clear it conducted tWo inspections o?f?the 'ClassonA-s'enue- propertyin
determined that the-threshold. Was not- met, "as the: Classon Avenue
property had total Violation count of? .109 (2-5 class Animations, 4:2.olass B-violations, and
42elassC: vi?olati'onS) and 8.4 class violations and class vio'lationsper dwelling unit,

Discussion

Administrative Code 11-424 governs a late-redemption-.applioation to the City for

the release o'l?property acquired by in rem tax.- i?oredlosUre. Inorder to seelg the release of

such property, an applicant- must establish that he or isheis ajparty who had an interest in the

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.suhj ect real property as owne?n mortgagee, lienor, or eneumbraneer at the time of the
city's acquisition thereof? (Administratite Code -1 1424 An applicant" is also
required to ?le? one pp licat-ion with the Department ofCitywide Administrative Services-pay
the required fees and submit. specific supporting documentation, including a certi-ti ed search
of the City Register, stating the recoird-"ing. date of the City's. deed and the basis of the
-applicant?s interest in the. real. property (see-Administrative Code~? 1 194724 
There is no requirement inAdminist-rative Code 111-424 that an applicant provide
proot?of its source offends-to satis?? outstanding arrears or proof-thati?IousingMaintenance
Code-violations are sufficiently cleared. The City elites no section of the Administrative
Code, which sets forth any such requirements. The City relies upon 19 RCNY 
'19 13-02(13) however; doesnot-address the lateredemptionlof property acquired
'i rem, but only addresses-the entry into an installment a gree'mentto property?s arrears
?during the period i's-entered pursuant to Administrative
Code? I {14412.1 (13) authorizing the award of possession ot?the property)- and ending upon the
expiration oft?our months immediately tbliowing such'datef,? tour-month mandatory
redemption period.?
.119' RCNY 13-02 (in) (-2) p'i??tivid'es the DOF ?receives a request for an-
.installment agreement for a class One or class tWo- property against which an intern
foreclosure judgment has. been entered, the may refer euchiapplieatimi t'o for-

.a recommendation as to whether?such installment agreement should, be granted.? The 'Citjrr

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asserts that here, to and'that the factors listed
in 19- 13-02 fer evaluating whether HPD should recommend that an-
installment ag?reement be granted ?should arise he used in Idet'ermining whether a. late
redemption should be; permitted'._ l9 RCNY 1.3402:- the factors tofbe
included as the basis. for such recommendation, the Code
violations1 including butnot limited,tor'claSsB violationsnand cgl-ass CViolat'ions' (?119 RCNY
13?02 However, doesnotstatethat'an owner is required.
to clear 80%- of?the total violations, or bring the. total number- of class and class 
violations down to two per dweilingunit In fact, there. is no; requirement that'the owner
clear the-aevirilations priorito't-heen'try into an installment agreement. The City 'colnc'e'des'that.
Classon HDFC- submitted. a letter setting forth. its plans 'to clear the Clafssion Avenue
Housing violations, In view of..CIasson_ Horse-rs plan to?:
correct its Housing Maintenance Code violations, the fact that someIrionsin'g?Maintenance
not have yetbeen cleared did not Valid basis for the City to.
have-denied ClasSon 'l-ate redemption application.

Anotherfactor listed in 19 RCNY 13 ~02 for installment
agreement shouid be HPD invoked in deciding- Cia?sson application
toe late redemption capacity ofthe owner" ('19 RCNYIB-OZ. M).
The City? e] aims that although Classon HDFC made-numerous assertions thatithadthc funds

to pay all arrears, it did to support this-contention. The

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City'??i?10WingBS that-Classon HDFC submitted aletter which-stateti-
that Cla?s?sen HDFC had aha-lance as e'i?lthe' November 8.,
2018-. City-"states- that HP-D. rejected this not ?an 'offi?eial.
bank statement.? The City does net cemlnent an the series cf of?cial adding
up to $500,000, drawn tin Ciassen Signature Bank accountidated September 
2018, and made-payable re. theDOF, which demonstrateIii-assen- ?nancial capacity
te- pay the -_ar_rea-r-s Owed.

Moreover, 19 RCNY 13-02 (2) is oniy applicable where the owner seeks to enter
into an installment.agreement. with the City. There is no basis. to require :the ewner to
demonstrate. its ?nancial capacity to make future; payments. it? there is no? inatallment
agteement andt-he amount of. ar?rearshas been paid in [1111* UnderAdminisjt'ratiw Cede i. 
no reason to require thatan e'Wner of financial capacity- in fa? late
redemption applicatien"because the owner either payelthe amount eWed antithe property- is.
redeem ed, or it {tees not an d, ._the-_preperty 

1'9 RCNY Payments,? gevelrn'slatelredempticn payments. It
prev-ides as tbilews:

App} ie'atien. fortrel'easeaef'property- by?th?e City. Receipt and
deposit by the New Yerk City Department of Finance of :a
payment-made. with respect to a property that War-3 acquired by
the'City-t'hreugli in. rent not cause the-rei'eaae-tif
theit?jity'szin't'ere at ?in theprop erty unless-such payment has been

made in co?tnplian?ee with-the. previsiens of 1' [?42.4 of. the
Administrative Code ef?th?e City 0.wa York;

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(11) Application to vacate and. set aside ?nal judgment For class
one and class; two properties. If a payment. of. arrears. of real
property taxes and other real property related-ch arges is tendered
for a .pmperty- classi?ed as class-onei-or' class two under 1802
of the Real P1ope1 Ly Tax Law With respect to Which a ?nal
Judgment in foreclosure has been entered pu1suant to 11:41.2 1
oi.- the. Code.- of the City of York 1uo1e
than 10.111 months after the. dateofentry of such ?nal judgment,
receipt and deposit by the New. York. City Department- of
Finance-ofany such payment-shall not constitute receipt. of the
payment requieedrte sac-ate andset asidesueh ?naljuclgment.?

Thus, 19- 13?01 makes clear that the release of the. in
property acquired throughin rem foreclosure requires nothing more. than compliance with
Administrative Code 11-3124. While 19 RCNY 1.3-0] pertainsto'classone and
class?two priopeatiesthat are .distressedand sobj ed. to the Third. Party Transfer Program, states
that the-receipt and deposit by the BOP of all arrears after the leer?111011111 mandatory
redemptionperiodhas passedjwilI not payment required to: vacate
and set aside such. f-i 11a 1' jud gment, the City eonCed es that it grants discretionary rede'mptien.
to class one and elas's two properties (to Which. the-special piocedures?of Ad min istrative Code
11-4111 applies) after the fourumonth .mandatow redemption period has passed.

The City-argues. that it has broad diseretion'to grant or deny anapplioation to redeem
property after the mandatory four?month redemption period has expired. even
where the-City- has broad. discretion, i'suel'i discretion is not completely unfettered and cannot-

be abused: 11131313. denial ef-C.lasson application had =11ore'asonable basis in

law, and Was arbitrary and capricious.

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While- the City relies. upon the fact thats'ome-Housing Maintenance (lode violations
remain on the .Classon Avenue property,_ a person?s re'a-l'pr'opel'ty Cannot be taken from them
merely-because? of the existence. of Housing Maintenance Code violations- on the. property.
Cl'asson' has not abandoned-the Classon Avenue .propei'tygbut, as acknowledged by
in its February 4,2019 letter-1hassubmitted a" letter setting- forth itsplans to Clear-the
Cl-asson Avenuesproperty-?s Housing Maintenance Code violations. A'srdiseu'ssed above,.the
purpose of the Third Party is to prevent the abandonment of?trotibled
buildings. It was intended to be Utilized where ownersare irreSpio'ns'ible and: are unwilling
-o_r unable to eorreet violations and to pay off?tax; liens. It Was. not intended. to cause the
forfeiture of the valuable property'r-ights of ?owners who are willing and -.atile to eorreet
violations and pay off tax liens,

Classon HDFC is. actively attempting to pay offal] of its arrears to the City, whichhas 
refused to aoeept its payments. "The. City! instead, seeks to transfer the. Classon Avenue.
property to-Ne-ighborhood Classon HDFC'of'all of'its equity in the Classon
Avenoeprop?ertyt Theftrans-fer of the Classon Attenuejproperty, pursuantto theiTh'ird Part5; .
Transfer. Program, wduld eonstittue an unlawful taking of .pritrate- property withriut..ius.t
compensation. in Violet-i on of Clas son under-the Takings Clause
of the Fifth Amendm?e'ntto' the-?United States Constitution and art-i oil I, seetion 'th New
York State-I Cie?nStitution. The Cla's'son Aventl'eipropert?y has a? value substantially in excess

ofthe tax lien, and its tail-ting by the City in this int-em foreclosure action and "its transfer



pursuant to the-Third Program will not permit C-Iassen HDFC tel-recoup. that
excess. Moreover, such a transfer would take away the-.- rights of '_'Class_en 
sharehelders in the Gleason Avenue property, where they reside.

The eeurt 111 try" eXere?i?se its bread-equity power'te vaea?t?e the'defau'ltjudgm'ent, and it
has inherent antherit'y "te- Vaeate' its e?wn Judgment eij'erejelesurel. obtained en Gleason
default, reason and in. the-interests "of substantial justice?? (Matter
Weedeon, 68;
see-also Mutter GGHESQB [Spitetu], 125 ADBdat 14-77; Matter ef County- ofl
Generals[Bertha], Here, die-fault must be vaeat'etl'i'n
the interests of substantial jUStiee. Clas?Sen HDFC hasestablished its ability tepa?y theztaxes
after the -'redemptienvperied ended and the laek of any prejudice te the Matter of
CountygofGlmesee [Spieeta]_, d-at 1-477; Matte-Ref (301th ofG?uaae'e [Barrett], 124
1331-). Mereever,__ Classen-I-IDFCseeir?s te. redeemthe Clea-sen Auer?nie-fpreperty,
and the Third Party Trans-fer Program was not intended testri-p a property owner of its
preperty rights under the circumstances. presented-here.

entry of a default-judgment baa ed on the failure .tez'p ay [th'e'taxes] would-result
the disprepertienatelyhar?s?h result,? and ?this. is an appre'priate ease in wh?iehte exercise [the
eeun?s] bread equity power to vacate [the] default judgment" (Matter ofCeeaez 'Of?aterie
[Landqam ?996 Living ?ask], at1568 [internal q?uetatien marks 
attire Matter of County 0f 59 [at 1065'). To hold: etheruiis'e
would defy p?rine'iplEs {if-equity and fundamental fairness, andre'sult?in an unduly haieh 'au'tl
unjuSt res?ult,?whieh was net the purpes?e of intent ef?the Third Party Transfer Program.

as?

Dfue temporary restraining otiifei'; the City has not 3461? transterred title of the-
prepetty' Restore. Inasmuch as no. deed has yet been
executed and the?com?t ?nds that the vacatur of? with respcet to
the Cl'as'sonAvenne property is I-IDFC. continues to have all ofsits rights-
as an attract in" the Classon Avenue. prepenyi. Furthermore, since the Commissioner of
Finance did not execute a deed .coii.veyii'1g the Classen Avenue property- to the City or. to a
third party within '=eight months after the entry of ?nai' judgment 1-4, 201"? and
the court ?nds that snch- a transfer cannot bepetmi'tted, this fcreelosure action must
against theClaSs?on AVenue Adminisu'atiue. Code 1-41-11
Under these circu'i'nstane'es,the: mustbe vacated and set aside:
as to the ClasSonAvenue property, and Classen-?HDFCisstatus as the-owner ef-the. Classon
Avenue. property must be restated.

emits

Aeeordinglya Cl-asson motion is granted to the entent that the Judgment of
Foreclosure is vacated with respect to the Ciass'on? Avenute property, and Class?on 
Avenue pro-petty is restored.

This constitutes the decision, judgment 'of'th'e eeurt.

    
 

ER IWI 

I. S. 

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