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Home > Underwriting > Title News > Eighteen Volume Twelve

SERIES: Eighteen VOLUME: Twelve DATED: December, 2003

~ RECORDING ACT (REAL PROPERTY LAW SECTION 290) PROTECTS GOOD FAITH PURCHASER ~

In a recently filed proceeding brought under Real Property Actions and Proceedings Law Article 15 to quiet title to real property, the appellate court reversed a lower court decision and determined that a good faith purchaser for value who recorded her deed one day before a prior but unrecorded interest in the property held superior title to the earlier transaction. In the action Rivas v. McDonnell et al (Appellate Division, Second Department, decided September 29, 2003) the Court reviewed an Article 15 action and reversed a decision of the lower court not to grant summary judgment to the plaintiff (who had recorded her deed first) with the following decision and order

"ORDERED that the order is reversed, on the law, with costs, the motion is granted, and the matter is remitted to the Supreme Court, Kings County, for further proceedings consistent herewith.

The New York Recording Act (Real Property Law § 290 Real Prop. et seq.) protects a good faith purchaser for value from a prior unrecorded interest in real property provided, inter alia, that the subsequent purchaser's interest is the first to be duly recorded . . . It is undisputed that the plaintiff recorded her deed one day before the defendants Dewey Perone and Josephine Cruz, the subsequent purchasers, recorded their deed. As a result, Perone and Cruz may not invoke the protection of the recording statute. Under these circumstances, whether the plaintiff as the prior purchaser paid a valuable consideration for the property is irrelevant. Accordingly, the Supreme Court erred in denying the plaintiff's motion for summary judgment.

In light of our determination, we remit the matter to the Supreme Court, Kings County, to remove the temporary receiver pursuant to CPLR 6405 N.Y.C.P.L.R., to direct the filing of an accounting by the temporary receiver, and for the entry of a judgment pursuant to RPAPL 1521(1) declaring the validity of the plaintiff's deed and the invalidity of the deed of Perone and Cruz."

~ BANK ESTOPPED FROM FORECLOSING A MORTGAGE AFTER IT RECORDED A MORTGAGE SATISFACTION ~

In a recent decision, First Union National Bank v. Tecklenburg (Appellate Division, 2nd Department, decided December 15, 2003), the appellate court reversed a lower court decision which had allowed a bank to bring a foreclosure action against a mortgagor after the bank had erroneously recorded a satisfaction of the mortgage being foreclosed. The relevant portion of the decision of the court is as follows:

"On November 4, 1977, the appellant executed a mortgage in favor of the plaintiff's predecessor which, following several consolidations, mergers, and acquisitions, was acquired by the plaintiff, First Union National Bank. On or about February 20, 1998, payoff funds received by the plaintiff were erroneously applied to the appellant's account and he was advised by letter dated March 4, 1998, that his mortgage had been paid in full. The appellant directed numerous inquiries to the plaintiff seeking an explanation of this unexpected transaction and was repeatedly assured that the mortgage had been paid off and a satisfaction of the mortgage would be forthcoming. On or about August 5, 1998, the appellant obtained a new mortgage from the defendant Champion Mortgage Co., Inc. (hereinafter Champion), after it too had confirmed with the plaintiff that the prior mortgage had been satisfied. On September 11, 1998, about one month after the closing on the new mortgage, the plaintiff advised the appellant that it had mistakenly credited his account with the payoff funds and the mortgage had not in fact been satisfied. Nevertheless, a mortgage satisfaction was subsequently recorded and the original mortgage documents were returned to the appellant. The purported mortgage now being in default, the plaintiff commenced this foreclosure action on December 24, 1998, and the appellant moved to dismiss the complaint insofar as asserted against him based on the doctrine of equitable estoppel.

A mortgage lender may be estopped from asserting rights under a mortgage to prevent a fraud or injustice to the person against whom enforcement is sought, who in justifiable reliance upon the lender's words or conduct has been misled to his detriment. . . . The elements of estoppel are, with respect to the party estopped, '(1) conduct which amounts to a false representation or concealment of material facts; (2) intention that such conduct will be acted upon by the other party; and (3) knowledge of the real facts. The party asserting estoppel must show with respect to himself: (1) lack of knowledge of the true facts; (2) reliance upon the conduct of the party estopped; and (3) a prejudicial change in his position' . . .

We find that all the requirements of an estoppel have been met and the appellant's motion should have been granted in its entirety. Contrary to the Supreme Court's determination, by securing a mortgage loan from Champion after the plaintiff mistakenly informed him that the mortgage it held had been satisfied, the appellant demonstrated that he underwent a detrimental change in his position . . . in justifiable reliance upon the plaintiff's misrepresentations . . . Specifically, he would now be required to make payments on two mortgages. Accordingly, the complaint, insofar as asserted against the appellant, should have been dismissed with prejudice."


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