On 31 May 1988, a man (the testator) executed a last will and testament in which he devised and bequeathed a life estate interest in premises located at Hopkins Avenue, County of Kings, State of New York, (Hopkins Avenue property) to defendant, including the right for her to collect all rents as they become due for her own use and benefit.
On 25 November 1988, the testator died. On 17 March 1989, letters of administration of the estate of the testator were issued to the testator’s relative. Thereafter, as administratrix, she entered into a contract to sell the subject premises to a Brokerage Corp.
On 29 January 1991, the Surrogate’s Court, Kings County, issued an order authorizing the administratrix to proceed with the sale of the Hopkins Avenue property.
New York Probate Lawyers said the defendant has continuously resided at the Hopkins Avenue property, from sometime in 1975, to the present date. Since the death of the testator, she has collected rent from the occupant of the other apartment in the subject premises.
On or about 15 March 1991, an officer (the officer) of the Brokerage Corp., visited the subject premises and endeavored to speak to defendant. He gave her his business card. He also spoke to the tenant on the second floor who informed the officer that he was paying his rent directly to defendant. Thereafter, NYC Probate Lawyers said the officer received a telephone call from a lawyer who advised the officer that he represented defendant and that the testator had executed a will prior to his death in November of 1988 in which the testator gave defendant a life estate interest in the subject premises.
Plaintiff-one was verbally informed by the officer, at least two days prior to the closing of title, that there were some problems in the transaction. Plaintiff-one did not make any further inquiries as to the specific nature of the problems.
On 16 April 1991, title to the subject premises was conveyed by the administratrix, to the Brokerage Corp (the first mortgage). Manhattan Probate Lawyers said that plaintiff-one advanced all funds that were required for the purchase of the subject premises, a total exceeding $38,000. Despite the fact of the actual amounts outlaid, the mortgage note and mortgage delivered to the lender plaintiff-one were in the amount of only $28,000. No payments on the note and mortgage have been made. Plaintiff-one and the officer, acting on behalf of the Brokerage Corp., agreed that upon the resale of the premises, the plaintiff-one would be paid the monies he advanced at the original closing. The officer also agreed to pay the plaintiff-one approximately 43% of the expected profits from the resale.
Meanwhile, on 10 May 1991, a second mortgage has been executed by defendant Brokerage Corp. to plaintiff-two to secure the payment of $25,000.
On 21 October 1991, the last will and testament of the testator was filed in the Probate Department of the Kings County Surrogate’s Court. Thereafter, letters of administration c. t. a. were issued to defendant.
Now, plaintiff-two, individually and as executor of his father, deceased, moves for an order dismissing the defendant’s affirmative defenses and granting him summary judgment against the defendant; and for an order appointing a Referee to compute the sums due under the note and mortgage.
The defendant cross-moves for an order denying the plaintiff-two’s motion for summary judgment; and granting her summary judgment to the extent of finding that any foreclosure is subject to her life estate in the subject premises.
The instant action is an action to foreclose on the second mortgage.
On the foreclosure action brought by plaintiff-one, in which plaintiff-one was named as defendant but did not appear:
The action has been concluded on 19 November 1997 and determined that the first mortgage was subject to the life estate of the defendant; that plaintiff-one, the first mortgagee, had both actual and constructive notice of the life estate; that defendant was in actual, visible, open and notorious possession of the property; that the first mortgagee had both actual and constructive notice; that the first mortgagee’s actual knowledge of the life estate has no bearing on the finding with respect to the defendant’s possession of the premises.
Here, the subject mortgage was entered into prior to the will through which defendant claims her interest was made part of the public record. The mortgage was executed on 10 May 1991, and the will, as previously noted, was filed for probate in October 1991; for estate administration or estate litigation.
Moreover, the affidavit submitted by the certified real estate appraiser (the Appraiser) is not probative. The appraiser testified at an examination before trial that he had no recollection of visiting the premises or who he saw at the premises; that since the appraisal report signed by him is written in somebody else’s handwriting, he might not have been the person who inspected the premises; that the bank requires him to inspect both apartments in a two-family house; that if he cannot obtain access to the second apartment he might ask the tenant of the apartment he gained access to about the second apartment, or assume that the second apartment is similar to the first apartment; that there is no way of telling from the report whether access was gained to the second apartment, since he would not list this information in the report because the bank would give him problems; that he generally does not interview the people who provide him with access; that the report was prepared for another entity and not the plaintiff-two; that he refused to sign the first affidavit that was prepared for him because it listed details that he had no recollection of; and that he should have not signed the second affidavit because he had no recollection if he ever spoke to anybody at the subject premises.
Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to the entire world, of the existence of any right which the person in possession is able to establish.
In addition, plaintiff-two and his father had sufficient facts to impose on them a duty to inquire as to defendant’s tenancy. Where a tenant is in possession of the property at the time of purchase, or in this case, at the time the mortgage was executed, the purchaser or mortgagee is required to inquire about the title. Where a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser.
The information listed on the appraisal report, on which plaintiff-two admits reliance, indicates: the first unit occupant is listed as “owner” with “0” lease, and “0” rent paid. The second unit occupant is listed as “tenant” with “no lease” total rent “$775.” In order for the appraiser to have listed the interest of the first unit as “owner”, he had to have knowledge of some possessory interest in the premises by defendant as that other than as tenant.
Here, the appraisal report is sufficient to put plaintiff-two on inquiry as to the existence of some right or claim of title, and, at such time, the duty to inquire is imposed on plaintiff-two to decipher the extent, if any, of the adverse claim.
On the claim that only possession which is inconsistent with the title of the apparent owner imposes a duty of inquiry; and that defendant’s possession was not on its face inconsistent with that title:
Although the appraisal report indicates otherwise, taking plaintiff-two’s argument to its logical conclusion, a mortgagee would never have to inquire about the tenant’s interest in a property, since the mere possession by a tenant of an apartment in a house would not by itself indicate that the tenant has an interest in the estate. A mortgagee cannot enter into a mortgage with blinders on. A mortgagee has to inquire about the possessory interest of the tenants of the subject premises.
Here, plaintiff-two has failed to show that he made any inquiry at all. Plaintiff-two has failed to demonstrate any affirmative steps taken in an effort to determine the validity of title at the time of this transaction. Rather, it appears that plaintiff-two simply relied on the appraisal report which was conducted in relation to the initial purchase by the Brokerage Corp., one month prior to the second mortgage.
Plaintiff-two cannot avoid the operation of the rule that defendant’s occupancy of the premises and the appraisal report listing “owner” as one of the two occupants put him on notice as to her interest in the property. The fact that defendant may not have told people who came to inspect the apartment about her life estate is of no consequence. Plaintiff-two has failed to show that defendant had a duty to impart this information to these unknown persons. Rather, plaintiff-two had a duty to inquire as to defendant’s interest in the property.
What’s more, a search of the title record would have indicated that the subject property, with a value of over $100,000, had been purchased from the administratrix of the testator’s estate for less than $40,000. This would have put plaintiff-two on notice that there might be a cloud on the title.
The cases cited by plaintiff-two in support of his contentions are distinguishable from the herein case.
In the first case cited, the record owner provided in the contract of sale that it was subject to a month-to-month tenancy. Such a tenancy is not inconsistent with the title of the apparent owner. In the case at bar, the plaintiff-two had no information with respect to defendant’s tenancy, and failed to make any inquiry.
In another cited case, the Court found that the mortgagee had priority over the defendant occupant’s claim to the property. Defendant had been present during the negotiations to arrange consolidated refinancing for the property and had not imparted her possessory interest to plaintiff. The Court found that defendant’s silence, coupled with her consent to the subordination of her four prior judgment liens against her ex-husband, belied her future claim to a possessory interest in the property superior to plaintiff. In the case at bar, the defendant did not take part in the mortgage process.
Henceforth, the court finds that plaintiff-two is not a bona fide mortgagee and defendant’s life estate has priority over the second mortgage. Plaintiff-two’s motion for an order striking the affirmative defenses of the defendant is denied; the defendant’s cross motion is granted to the extent of finding that her life estate has priority over plaintiff-two’s mortgage; plaintiff-two is granted a judgment of foreclosure subordinate to the life estate of defendant.
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