Question of Fact About Whether Good Faith Lender, Which Recorded Its Mortgage First, Had a Duty to Inquire About a Prior Mortgage

The Second Department determined there was a question of fact about the priority of a mortgage held by a good-faith lender for value and recorded first:

“Under New York’s Recording Act (Real Property Law § 291) a mortgage loses its priority to a subsequent mortgage where the subsequent mortgagee is a good-faith lender for value, and records its mortgage first without actual or constructive knowledge of the prior mortgage” … . “[A] mortgagee is under a duty to make an inquiry where it is aware of facts that would lead a reasonable, prudent lender to make inquiries of the circumstances of the transaction at issue” … . Here, the moving defendants demonstrated, prima facie, that they have a first lien with respect to Lot 56 by submitting evidence that they were good faith lenders for value protected by Real Property Law § 291 … . However, in opposition, the plaintiff’s submissions … raised a triable issue of fact as to whether the moving defendants had a duty to inquire about whether the mortgage previously entered into …. was intended to encumber the entirety of [the property].   Wells Fargo NA v Savinetti, 2014 NY Slip Op 02428, 2nd Dept 4-9-14