| Wachovia Bank, N.A. v Swenton |
| 2015 NY Slip Op 08728 [133 AD3d 846] |
| November 25, 2015 |
| Appellate Division, Second Department |
[*1]
| Wachovia Bank, N.A.,Respondent, v Katherine Swenton et al., Defendants. Marie ChristineSotomayor, Intervenor-Appellant. |
Dorf & Nelson LLP, Rye, N.Y. (Jonathan B. Nelson of counsel), forintervenor-appellant.
Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., Garden City, N.Y. (BruceJ. Bergman, Alan J. Waintraub, and Nicole L. Milone of counsel), for respondent.
In an action to foreclose a mortgage, the intervenor appeals, as limited by her brief,from so much of an order of the Supreme Court, Suffolk County (Asher, J.), dated March28, 2013, as denied those branches of her motion which were to vacate the judgment offoreclosure and sale and compel the plaintiff to accept her proposed answer.
Ordered that the order is reversed insofar as appealed from, on the law, with costs,those branches of the motion of the intervenor which were to vacate the judgment offoreclosure and sale and compel the plaintiff to accept her proposed answer are granted,and the judgment of foreclosure and sale is vacated.
The plaintiff commenced this action to foreclose a mortgage which was executed bythe defendant mortgagor Katherine Swenton, also known as Katherine Gentile Swenton(hereinafter the mortgator), on January 23, 2004, but not recorded until September 1,2006. Prior to the plaintiff recording the subject mortgage, the mortgagor conveyed theproperty to Joseph Rosati by deed recorded on February 24, 2006. Rosati then conveyedthe property to Island Real Estate Development and Island Properties & Associates,LLC (hereinafter together Island Properties), by deed recorded on May 26, 2006. IslandProperties then conveyed the property to the intervenor and another person by deedrecorded on January 31, 2007, approximately four months after the plaintiff recorded itsmortgage.
Although the intervenor was a record owner of the subject property at the time thisaction was commenced, she was not named as a defendant in this action or served with acopy of the summons and complaint. After a judgment of foreclosure and sale wasissued, the intervenor moved, inter alia, for leave to intervene in the action, to vacate thejudgment of foreclosure and sale, and to compel the plaintiff to accept her proposedanswer. In an order dated March 28, 2013, the Supreme Court granted that branch of theintervenor's motion which was for leave to intervene in the action, but denied theremaining branches. The intervenor appeals from so much of the order as denied theremaining branches of her motion.
"[T]he lien of a mortgage is extinguished upon the sale of the real property affectedthereby unless the purchaser has knowledge, either actual or constructive, of theexistence of the mortgage" (Baccari v De Santi, 70 AD2d 198, 201 [1979];see Real Property Law § 291; HSBC Mtge. [*2]Servs., Inc. vAlphonso, 58 AD3d 598, 599-600 [2009]). "The New York Recording Act(Real Property Law § 290 et seq.) protects a good faith purchaserfor value from a prior unrecorded interest in real property provided, inter alia, that thesubsequent purchaser's interest is the first to be duly recorded" (Transland Assets, Inc. v Davis,29 AD3d 679, 679 [2006]; see Sprint Equities [NY], Inc. v Sylvester, 71 AD3d 664,665 [2010]).
The intervenor is correct that she has a potentially meritorious defense to this action,despite the fact that the plaintiff's mortgage was recorded before the deed conveying theproperty to her was recorded, if she can establish that Rosati and/or Island Propertieswere bona fide purchasers for value who did not have notice of the plaintiff's mortgagewhen the property was conveyed to them (see O'Neill v Lola Realty Corp., 264App Div 60, 64-65 [1942]). This is because a bona fide purchaser for value who acquirestitle without notice of an unrecorded and unsatisfied mortgage is then able to confer goodtitle to a third party, notwithstanding the fact that the third party has notice of facts whichwould have prevented him or her from acquiring good title from the original grantor(see id. at 64-65; see also Joseph Rasch & Robert F. Dolan, 2 NYLaw & Practice of Real Property § 28:20 [2d ed June 2015]["Purchaser with notice from purchaser without notice"]; 1-1 Bruce J. Bergman,Bergman on New York Mortgage Foreclosures § 1.21 [Oct. 2015]). To notallow the bona fide purchaser for value who acquires title without notice of anunrecorded and unsatisfied mortgage to convey good title would be to prevent him or herfrom being able to sell the property (see O'Neill v Lola Realty Corp., 264 AppDiv at 64; Jospe v Danis, 138 App Div 544, 546-547 [1910]).
In light of the fact that the intervenor has established a reasonable excuse for failingto appear in this action, as well as a potentially meritorious defense, that branch of hermotion which was to vacate the judgment of foreclosure and sale should have beengranted, the judgment of foreclosure and sale vacated, and that branch of the intervenor'smotion which was to compel the plaintiff to accept her proposed answer should havebeen granted (see CPLR 317, 3012, 5015 [a] [4]). Mastro, J.P., Austin, Malteseand Barros, JJ., concur.