Newpar Estates, Inc. v. Barilla

Per Curiam. Plaintiff, mortgagor, brought this action to have expunged from the record a contract which the defendant, third mortgagee, allegedly in violation of his agreement, had recorded. Neither the plaintiff nor its president, the other parties to the contract, had acknowledged their signatures. Defendant, however, had procured the inclusion of the contract in the record by attaching it to an assignment and reassignment of the third mortgage and recording the assignment and reassignment. Defendant is a resident of Italy and the plaintiff had obtained an order for substituted service. The defendant appeared specially and moved to vacate the order on the grounds that the complaint did not state a cause of action within the terms of section 232 of the Civil Practice Act, entitling the plaintiff to service by publication. Special Term granted defendant’s motion and plaintiff appeals. The allegations of the complaint sufficiently set forth a cause of action under section 329 of the Real Property Law. Under that section, an owner of real property may maintain an action to have any instrument in writing relating to such real property which has been improperly recorded cancelled of record (Davidson v. Fox, 65 App. Div. 262). [188] The contract which is annexed to the complaint among other things grants to the defendant a right of first refusal for a 10-year period beginning July 1, 1951, in the event the plaintiff attempts to sell the premises subject to the third mortgage. Special Term has indicated in its opinion that “ [t]he contractual obligations and rights under the contract are personal between the parties ”. The contract not being acknowledged, the defendant could not have recorded it as a “ conveyance ”. (Cf. Beal Property Law, §§ 291, 292.) By attaching it to the assignment of the mortgage and by recording that assignment, defendant has placed the contract in the record of title to the premises. Thus the defendant has converted his “ personal right ” against the plaintiff into an equity which he may assert against any subsequent purchaser. ‘ ‘ In examining the title in the case at bar a purchaser would find a record of this contract as if it were a mortgage. This would necessitate his reading the document. He would thus have actual notice of the existence of the contract.” (Puglisi v. Belasky, 118 Misc. 336, 338.) Since the defendant would be entitled to specific performance of his right of first refusal as against the plaintiff (cf. 5 Corbin on Contracts, pp. 832, 833), a purchaser with notice of the defendant’s rights would likewise be subject to the same equity (cf. Wheeler v. Standard Oil Co., 263 N. Y. 34, 38). The defendant by recording the contract in violation of his agreement has converted his personal right into an “interest in or lien upon specific real * * * property within the state ” and plaintiff’s cause of action under section 329 seeks to have that interest or lien “ defined or limited ” within the meaning of subdivision 2 of section 232 of the Civil Practice Act. Plaintiff therefore was entitled to obtain an order of substituted service. The order appealed from should be reversed and defendant’s motion denied, with costs.