Caseflicks

Appellate Division of the Supreme Court of the State of New York • 2010

Lend-Mor Mortgage Bankers Corp. v. Nicholas

69 A.D.3d 680 | 893 N.Y.2d 566

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Takeaway

In short, this case confirms that a later mortgage prevails over an earlier unrecorded mortgage when the later lender gives value, records first, and has no actual or inquiry notice of the prior lien.

Background

Lend-Mor Mortgage Bankers Corp. received a $244,000 mortgage on the subject property. At that time, Ameriquest Mortgage Company held an earlier mortgage on the same property, but Ameriquest had not recorded it and it did not appear in the chain of title.

Lend-Mor recorded its mortgage after giving value. Its title search disclosed no Ameriquest lien on the property. Moreover, the borrower’s mortgage application and credit report indicated that Ameriquest’s mortgage encumbered a different property.

Lend-Mor moved for summary judgment declaring that its mortgage had priority over Ameriquest’s mortgage. Ameriquest cross-moved for a contrary priority declaration and, separately, sought discovery from Lend-Mor. The Supreme Court granted Lend-Mor summary judgment and denied Ameriquest’s request for a priority declaration. Ameriquest appealed.

Issues

Issue #1

Whether Lend-Mor’s later-recorded mortgage had priority over Ameriquest’s earlier but unrecorded mortgage.

Holding

Yes. Lend-Mor was a good-faith mortgagee for value that recorded first without actual or constructive notice of Ameriquest’s unrecorded mortgage.

Reasoning

Under New York’s Recording Act, Real Property Law § 291, an earlier mortgage loses priority when a subsequent mortgagee gives value, records first, and takes without actual or constructive knowledge of the earlier unrecorded lien. A lender has constructive, or inquiry, notice only when it knows facts that would reasonably prompt further investigation into the earlier interest.

Lend-Mor made a prima facie showing that it satisfied those requirements. It gave valuable consideration for its mortgage, recorded that mortgage, and obtained a title search that revealed no Ameriquest mortgage in the property’s chain of title.

The available loan-related documents also did not alert Lend-Mor to an Ameriquest lien on this property. Instead, both the mortgage application and the credit report identified the Ameriquest mortgage as encumbering a different property. Thus, Lend-Mor lacked both actual notice and facts sufficient to place it on inquiry notice.

Ameriquest did not submit evidence creating a triable factual dispute over Lend-Mor’s good faith or notice. The Supreme Court therefore properly declared Lend-Mor’s mortgage superior and properly denied Ameriquest’s cross motion seeking the opposite declaration.

Issue #2

Whether the Appellate Division should review Ameriquest’s request to compel discovery from Lend-Mor.

Holding

No. That discovery request remained pending because the Supreme Court had not decided it in the appealed order.

Reasoning

An appellate court reviews determinations made in the order before it. Because the Supreme Court neither granted nor denied the discovery branch of Ameriquest’s cross motion, there was no ruling on that issue for the Appellate Division to review.

The discovery request therefore remained pending and undecided in the Supreme Court. The Appellate Division expressly declined to reach its merits.