NYCTL 2011-A Trust v. 249 Brighton Corp.

Opinion

NYCTL 2011-A Trust v 249 Brighton Corp.

2026 NY Slip Op 05320

September 16, 2026

Appellate Division, Second Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This decision is uncorrected and subject to revision before publication in the Official Reports.

NYCTL 2011-A Trust, et al., plaintiffs,

v

249 Brighton Corp., et al., defendants, New York City Department of Finance, et al., appellants; Brighton Plaza, LLC, nonparty-respondent.

Supreme Court of the State of New York, Appellate Division, Second Judicial Department

Decided on September 16, 2026

2024-10651, (Index No. 505234/15)

Colleen D. Duffy, J.P.

Linda Christopher

Barry E. Warhit

Elena Goldberg Velazquez, JJ.

Steven Banks, Corporation Counsel, New York, NY (Emily Keyes, Adam Dembrow, and Stephanie Fitos of counsel), for appellants.

Tsyngauz & Associates, P.C., New York, NY (Ryan C. Banich of counsel), for nonparty-respondent.

[*1]

DECISION & ORDER

In an action to foreclose a tax lien, the defendants New York City Department of Finance and New York City Environmental Control Board appeal from an order of the Supreme Court, Kings County (Derefim B. Neckles, J.), dated August 1, 2024. The order, insofar as appealed from, granted the motion of nonparty Brighton Plaza, LLC, to confirm a referee's report and to direct the distribution of surplus funds to nonparty Brighton Plaza, LLC.

ORDERED that the order is modified, on the law, by deleting the provision thereof directing the distribution of surplus funds in the amount of $247,478.70 to nonparty Brighton Plaza, LLC, and substituting therefor a provision directing the distribution of surplus funds in the amount of $100,000 to nonparty Brighton Plaza, LLC; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements, and the matter is remitted to the Supreme Court, Kings County, for a new hearing and further proceedings with respect to any remaining surplus funds in accordance herewith.

In April 2015, the plaintiffs commenced this action against the defendant 249 Brighton Corp., as well as the defendants New York City Department of Finance and New York City Environmental Control Board (hereinafter together the City defendants), among others, to foreclose a tax lien on certain real property located in Brooklyn (hereinafter the property). Pursuant to a judgment of foreclosure and sale entered in this action, the property was sold, resulting in a surplus (hereinafter the surplus funds).

In April 2018, nonparty Brighton Plaza, LLC (hereinafter Plaza), filed a notice of claim to the surplus funds on the ground that it had entered into a contract with the defendant 249 Brighton Corp. (hereinafter the former owner) to purchase the property prior to its foreclosure. In January 2023, the City defendants also filed a notice of claim to the surplus funds based upon judgments of outstanding violations issued by the New York City Environmental Control Board (hereinafter the ECB) against the former owner's other properties, unrelated to the property.

In a report dated February 26, 2024, after a hearing, a referee appointed to ascertain and report on the proper distribution of the surplus funds recommended, inter alia, that the surplus funds be awarded to Plaza. Plaza moved to confirm the referee's report and to direct the distribution of the surplus funds to it. The City defendants opposed the motion. In an order dated August 1, 2024, the Supreme Court, among other things, granted Plaza's motion. The City defendants appeal.

The surplus funds of a foreclosure sale stand in the place of the land for all purposes of distribution among persons having vested interests or liens upon the land (see Nutt v Cuming, 155 NY 309, 313; Chase Manhattan Mtge. Corp. v Hall, 18 AD3d 413, 414). "'[O]nly those judgments and liens which existed upon the property at the time of the . . . sale constitute liens against the surplus moneys'" (Mortgage Elec. Registration Sys., Inc. v Levin, 63 AD3d 890, 891, quoting Pindus v Newmat Leasing Corp., 71 AD2d 948, 949). Surplus money from a foreclosure sale is not a general asset of the owner of the equity of redemption but stands in the place of the property for the purpose of distribution among those having vested interests in or liens on the property (see Wells Fargo Bank, N.A. v Breuer, 203 AD3d 1103, 1105; NYCTL 1997-1 Trust v Stell, 184 AD3d 9, 14). Here, since the liens asserted by the City defendants were related to alleged ECB violations at the former owner's other properties and were unrelated to the property that had been foreclosed, the Supreme Court properly determined that the City defendants were not entitled to the surplus funds (see generally Nutt v Cuming, 155 NY at 313; NYCTL 1997-1 Trust v Stell, 184 AD3d at 14).

"[T]he execution of a contract for the purchase of real estate and the making of a part payment gives a contract vendee equitable title to the property and an equitable lien in the amount of the payment" (Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400, 405; see Heritage Art Galleries v Raia, 173 AD2d 441, 441). Although Plaza established its entitlement to certain surplus funds since it had been a purchaser of the property pursuant to a contract of sale executed before the foreclosure sale, its equitable lien on the property was limited to its down payment of $100,000 (see Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d at 405; Pindus v Newmat Leasing Corp., 71 AD2d at 950). Thus, the Supreme Court should have only awarded $100,000 of the surplus funds to Plaza.

The parties' remaining contentions are either not properly before this Court or without merit.

Accordingly, we remit the matter to the Supreme Court, Kings County, for a new hearing and further proceedings with respect to any remaining surplus funds in accordance herewith.

DUFFY, J.P., CHRISTOPHER, WARHIT and GOLDBERG VELAZQUEZ, JJ., concur.

ENTER:

Darrell M. Joseph

Clerk of the Court