ARLO 67 LLC v. Letitia James, Nonparty-Appellant. (2026)

DECISION & ORDER

In an action for the partition and sale of real property, nonparty Letitia James appeals from an order of the Supreme Court, Kings County (Robin K. Sheares, J.), dated February 27, 2025.  The order, in effect, denied that nonparty's motion pursuant to RPAPL 756–a to stay all proceedings in the action, including any sale of the subject real property.

ORDERED that the order is reversed, on the law and in the exercise of discretion, with costs, the motion of nonparty Letitia James pursuant to RPAPL 756–a to stay all proceedings in the action, including any sale of the subject real property, is granted, and all proceedings in the action, including any sale of the subject real property, are stayed pursuant to RPAPL 756–a for a period of six months.

The plaintiff commenced this action for the partition and sale of certain real property (hereinafter the subject property).  In a judgment dated February 2, 2023, the Supreme Court declared that the plaintiff had a 75% ownership interest in the subject property and directed that the subject property be sold at auction.  The plaintiff purchased the subject property at auction, although it is not clear whether the closing has occurred.

Thereafter, nonparty Letitia James, Attorney General of the State of New York (hereinafter the AG), moved pursuant to RPAPL 756–a(1) to stay all proceedings in the action, including any sale of the subject property, on the ground that the AG had a pending investigation into whether the plaintiff had engaged in deed theft regarding the subject property.  In an order dated February 27, 2025, after a status conference, the Supreme Court, in effect, denied the AG's motion.  The AG appeals.

“A federal, state or local government agency may move for a stay of any proceeding to recover possession of or quiet title to real property relating to a residential dwelling unit or property, based on a pending good faith investigation into the theft or fraud in the title to, or the financing of, the premises that is the subject of any proceeding.  Upon the agency's showing of the pendency of a good faith investigation, the court shall issue a stay of the proceeding, including staying execution of a warrant of eviction or enforcement of a judgment so long as the investigation is ongoing․  Every six months, the court shall schedule a status conference with the government agency and any other parties to the action to review any stay and to determine if the investigation is still continuing in good faith and shall continue the stay of the proceeding until the government investigation is closed” (id.).

The meaning of the good-faith investigation requirement in RPAPL 756–a(1) is an issue of first impression for this Court.  “[I]t is a bedrock principle of statutory interpretation that ‘the Court's primary consideration is to ascertain and give effect to the intention of the Legislature’ ” (Matter of Town of Southampton v New York State Dept. of Envtl. Conservation, 39 NY3d 201, 209, 184 N.Y.S.3d 706, 205 N.E.3d 426, quoting Matter of Mestecky v City of New York, 30 NY3d 239, 243, 66 N.Y.S.3d 207, 88 N.E.3d 365).  “Since ‘the clearest indicator of legislative intent is the statutory text, the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof’ ” (Matter of Wohl v Bruen, 238 AD3d 818, 821, 234 N.Y.S.3d 245 [internal quotation marks omitted], quoting Matter of LaLota v New York State Bd. of Elections, 183 AD3d 785, 788, 124 N.Y.S.3d 395).  “However, an examination of the legislative history is proper where the language is ambiguous” (Matter of Sapphire W. [Kenneth L.], 237 AD3d 41, 48, 227 N.Y.S.3d 624 [alteration and internal quotation marks omitted];  see Smith v Pro Camps, Ltd., 226 AD3d 936, 938, 210 N.Y.S.3d 173).  “ ‘[I]n the absence of a statutory definition, we construe words of ordinary import with their usual and commonly understood meaning’ ” (American Tr. Ins. Co. v Comfort Choice Chiropractic, P.C., 239 AD3d 1, 7, 229 N.Y.S.3d 514, quoting Nadkos, Inc. v Preferred Contrs. Ins. Co. Risk Retention Group LLC, 34 NY3d 1, 7, 108 N.Y.S.3d 375, 132 N.E.3d 568).

Here, both the plain meaning of the phrase “good faith investigation” and the legislative history of the enactment of RPAPL 756–a(1) indicate that this requirement is not meant to be onerous for the investigating agency (see Senate Introducer's Mem in Support of 2024 N.Y. Senate Bill S6577) and that the factual basis for the investigation “ ‘need not be sufficient to establish fraud or illegality, or even provide probable cause, as long as the futility of the process is not inevitable or obvious' ” (Matter of Fulton Commons Care Ctr., Inc. v James, 227 AD3d 717, 719, 211 N.Y.S.3d 145, quoting Matter of Evergreen Assn., Inc. v Schneiderman, 153 AD3d 87, 97, 54 N.Y.S.3d 135).  Rather, the agency must show only that the ongoing investigative approaches “ ‘bear a reasonable relation to the subject matter under investigation and to the public purpose to be achieved’ ” (id. at 718–719, 211 N.Y.S.3d 145, quoting Matter of Evergreen Assn., Inc. v Schneiderman, 153 AD3d at 98, 54 N.Y.S.3d 135).  However, the basis for the investigation must “be more than isolated or rare complaints ․ lest the powers of investigation ․ become potentially instruments of abuse and harassment” (id. at 719, 211 N.Y.S.3d 145 [internal quotation marks omitted];  see Myerson v Lentini Bros. Moving & Stor. Co., 33 NY2d 250, 258, 351 N.Y.S.2d 687, 306 N.E.2d 804).  Because RPAPL 756–a(1) requires a showing of good faith by the investigating agency, the presumption of good faith applicable when evaluating the justification for the issuance of an investigative subpoena does not apply (cf.  Matter of Fulton Commons Care Ctr., Inc. v James, 227 AD3d at 719, 211 N.Y.S.3d 145;  People v National Rifle Assn. of Am., Inc., 223 AD3d 84, 88, 203 N.Y.S.3d 255).

Here, the Supreme Court's determination that the AG failed to show a pending good-faith investigation was an improvident exercise of discretion.  Although the purported victim of deed theft denied having been defrauded, the AG met its burden of showing a good-faith factual basis to investigate whether the plaintiff had used illegal or fraudulent means to induce that individual to transfer his interest in the subject property, the futility of which process was not inevitable or obvious.  The AG showed that she was still seeking to interview the plaintiff's sole owner, which bore a reasonable relation to the subject matter under investigation.  The court's determination that the AG had not been forthright with the court about knowing the purported victim's whereabouts was unsubstantiated.

The AG's remaining contention need not be reached in light of our determination.

CONNOLLY, J.P., WARHIT, VOUTSINAS and GOLIA, JJ., concur.