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Plaintiff Claims In Rem Proceeding was Defective Due to Proceedural Errors


A Probate Lawyer said this case involves a poor estate administration. Plaintiff sues to foreclose a mortgage on certain property because of defaults in the payment of installments of interest by the mortgagor, XYZ Corp. The City of New York, as a party defendant, claims unencumbered title to the subject premises as the result of an In Rem foreclosure which was instituted in 1975 for tax arrears. Plaintiff alleges that the City of New York’s claim of title is a nullity and therefore that such claim cannot defeat this action to foreclose the mortgage.

The facts of the case are as follows:

On March 22, 1966, ABCD Bank became the owner and holder of a mortgage covering certain vacant and unimproved land located at Richmond Avenue and Drumgoole Road on Staten Island, New York.

An Estate Lawyer said that on or about October 8, 1974, the Comptroller of the Currency of the United States of America declared the ABCD Bank insolvent and the Federal Deposit Insurance Corporation (FDIC), an agent of the United States government, was appointed receiver. The FDIC, as receiver, became the assignee of the defunct bank’s assets, including the subject mortgage.

On October 28, 1975, an In Rem proceeding was commenced by the City of New York. This proceeding included the mortgaged property because of non-payment of taxes since January 1971. The In Rem foreclosure resulted in the ultimate vesting of title in the City of New York.

Evidently unaware of the In Rem proceeding and the vesting of title in the City of New York, the FDIC, as receiver, assigned the mortgage to the present plaintiff in November 1979. On December 1, 1979, plaintiff, as mortgagee, entered into an extension agreement with XYZ Corp. the purported owner of the mortgaged premises. The said mortgagor defaulted and this foreclosure action was commenced on March 28, 1980.

The City of New York, which had been joined as a necessary party defendant and the court stated that the papers submitted by the plaintiff and the defendant City of New York would be treated as motions for summary judgment.

Nassau County Probate Lawyers said that in essence, plaintiff claims that the City’s In Rem proceeding was fatally defective because of two alleged procedural errors: 1) no notice of the In Rem foreclosure was mailed to the FDIC which, as receiver for the ABCD Bank, held the mortgage for the subject premises; and 2) the City made an error in recording the In Rem deed in the Block-Lot index to deeds maintained in the Office of the County Clerk of Richmond County. Plaintiff also asserts that the mortgage lien held by the FDIC could not be extinguished by the City’s In Rem foreclosure because the federal lien allegedly had priority over the municipal lien.

A Staten Island Probate Lawyer said that it is the successor in interest to FDIC, plaintiff is in privity with the FDIC. Any judgment determining the rights of the FDIC in regard to the subject mortgage must be binding upon the plaintiff as assignee, provided that the privity arose after such judgment.

Section D17-12.0(b) of the Administrative Code of the City of New York provides that upon final judgment in an In Rem tax foreclosure proceeding, the City shall be seized of an estate in fee simple absolute which shall bar and foreclose any right, title, interest, claim or equity of redemption which any person may have had in the subject premises. However, an interested party may make application to the City for release of property acquired by an In Rem tax foreclosure. This application must be made within two years from the date that the foreclosure deed is recorded.

In the instant case, the City’s deed was recorded on January 19, 1977 and the mortgage lien held by the FDIC was therefore conclusively foreclosed two years later in January 1979. The present plaintiff received assignment of the mortgage in November 1979. This assignment was not only subsequent to the commencement of the In Rem foreclosure action, but it was also ten months after the City became conclusively vested with unencumbered title.

This statutory presumption of conclusivity two years after recording of the deed extends not only to the preclusion of any liens on the property but also to the legal regularity of all proceedings relating to the tax foreclosure.

Many cases have held that a jurisdictional defect or other error may void a tax foreclosure proceeding when the action is brought within two years of vesting of the deed. Once the statute of limitations has run, however, the only irregularity that can void the proceedings is if there were no taxes owing at the time of the foreclosure. In such a case, the foreclosure is a nullity because of the non-existence of the very predicate for bringing the proceeding. In the instant case, there is no allegation to rebut the presumption that taxes were indeed owing to the City since January 1971.


It is not disputed that in the tax foreclosure proceedings the City gave proper notice by publication and proper mailed notice to the owner and any other parties who had registered their interests in the property with the Office of the City Collector.

The FDIC failed to register with the City pursuant to section D17-17.0 although it was the holder of a mortgage lien on the subject property as a result of being appointed receiver for the ABCD Bank. Because of this failure to register its interests in the property, the FDIC was clearly not entitled to have tax bills or notice of foreclosure action mailed to it.


The City’s tax foreclosure deed was recorded in the index to deeds on January 17, 1977. Instead of recording this deed under “sub-block 5599X”, the then current designation of the subject parcel, the City states that the deed was inadvertently listed under “block 5599W”, the old designation of the property in question.

Constitutional due process requirements are violated when property involved in tax foreclosure proceedings is so erroneously described that it cannot reasonably be identified.

The recording of the deed under the old block designation should have brought realization to any interested party that the subject premises could be involved and affected. This Court is of the opinion that the City’s error in recording the tax foreclosure deed was not of such a magnitude as to mislead a person making a diligent title search. The City, therefore, did not violate due process requirements.


It is plaintiff’s contention that the mortgage lien held by the FDIC, and subsequently assigned to plaintiff, could not have been extinguished by the City’s tax foreclosure proceeding because the federal lien allegedly takes precedence over the municipal tax lien.

Until the mortgage lien was assigned to the FDIC pursuant to the receivership proceedings, there was no debt due to the FDIC as agent of the U.S., and therefore no lien which the U.S. could assert against the property.

The City of New York began the subject In Rem foreclosure on October 28, 1975. Section D17-4.0 of the Administrative Code at that time provides that the City could commence a summary tax foreclosure proceeding whenever a tax lien had been due and unpaid for a period of at least three years.

The City of New York could have instituted a summary foreclosure proceeding against the property while the mortgage was held by the ABCD Bank. Assignment of the mortgage to the FDIC in October 1974 was subject to the City’s existing power of summary foreclosure for the tax arrears dating from January 1971. The fact that the City did not in fact begin the In Rem foreclosure proceeding until after the FDIC acquired the mortgage lien is of no consequence. Accordingly, summary judgment is granted to the Defendant City of New York, dismissing the complaint.

he same dilemma regarding with your real property seek the assistance of the Richmond County Estate Attorneys of the Stephen Bilkis & Associates. It is also of important to address these concerns immediately without wasting any time since lapses may lead to deprivation when statutory limitations sink in.

To contact our Richmond County Estate Lawyers, call us at our toll free number or visit our office near you.

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