Bank of New York Mellon Trust Company, N.A. v Universal Development, LLC
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Attorneys and Parties
Brief Summary
Real estate and mortgage title litigation involving a lost or unrecorded mortgage, standing to enforce the note, and whether a later grantee could claim protection as a bona fide purchaser under the recording statutes.
The Supreme Court, Queens County, denied the branches of the plaintiffs' motion seeking summary judgment on the amended complaint insofar as asserted by Bank of New York Mellon Trust Company, N.A. (BNYM) against Bryan Hemmings and Violette Patrick and dismissal of their eighth and tenth affirmative defenses.
The Appellate Division reversed that denial insofar as appealed from and granted summary judgment to BNYM on the amended complaint against Hemmings and Patrick, while also dismissing the eighth and tenth affirmative defenses.
The plaintiffs established that the mortgage was presumptively duly executed because it bore a notarized certificate of acknowledgment, BNYM had standing because it possessed the note when the action was commenced, and Patrick was not a bona fide purchaser for value protected by the recording statutes because she did not pay valuable consideration for her interest.
Background
In 2013, the plaintiffs brought an action under Real Property Actions and Proceedings Law (RPAPL) article 15 [authorizes actions to quiet title to real property] concerning Queens real property. The amended complaint alleged that on December 9, 2003, Bryan Hemmings acquired title from Universal Development, LLC, and on the same day executed a $391,000 note in favor of Ameritrust Mortgage Bankers, Inc., secured by a mortgage on the property. The complaint further alleged that the original deed from Universal to Hemmings and the original mortgage were not found in the Office of the City Register and were presumed lost or destroyed. It was undisputed that Hemmings later conveyed the property to himself and Violette Patrick as joint tenants by deed recorded on December 7, 2004. BNYM sought a declaration that it held a first mortgage interest as of December 9, 2003, or alternatively an equitable first mortgage lien. Hemmings and Patrick asserted, among other defenses, that Mortgage Electronic Registration Systems, Inc. (MERS), acting as nominee, lacked authority to assign the mortgage interest to BNYM, and that any unrecorded or untimely recorded mortgage was barred as against them as record title holders and alleged bona fide purchasers.
Lower Court Decision
The Supreme Court denied the relevant branches of the plaintiffs' summary judgment motion. As a result, BNYM did not obtain judgment on its quiet-title and mortgage-interest claims against Hemmings and Patrick at that stage, and the eighth affirmative defense challenging assignment authority and standing, along with the tenth affirmative defense invoking the recording statutes, remained in the case.
Appellate Division Reversal
The Appellate Division held that the plaintiffs made a prima facie showing of entitlement to judgment as a matter of law. The copy of the mortgage bearing Hemmings's signature and a notarized acknowledgment created a presumption of due execution, and Hemmings and Patrick failed to rebut that presumption with clear and convincing proof. The court further held that BNYM established standing by showing possession of the note when the action was commenced, consistent with Aurora Loan Services, LLC v Taylor. Finally, the court held that the tenth affirmative defense failed because New York Real Property Law § 290 et seq. [New York Recording Act protecting a good-faith purchaser for value whose interest is first duly recorded against unrecorded property interests] only protects a bona fide purchaser for value, and Patrick was shown not to have paid valuable consideration for her interest. The order was therefore reversed insofar as appealed from, with costs, and the requested summary judgment and dismissal of the eighth and tenth affirmative defenses were granted.
Legal Significance
The decision reinforces three recurring New York mortgage-litigation principles: a notarized acknowledgment on a mortgage creates a strong presumption of due execution; standing to enforce a mortgage-related claim may be established through possession of the note at commencement; and recording-act protection is unavailable to a transferee who did not give valuable consideration, even if that transferee later becomes a record owner.
A mortgage claimant in a quiet-title action can prevail even where the original mortgage was lost or never recorded if it can prove due execution and possession of the note, and a later title holder cannot rely on the recording statutes without showing bona fide purchaser for value status.