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Purchaser of Mortgage Was Not a “Bona Fide Encumbrancer”—Another Previously Filed Mortgage Was the Operative Mortgage

The Second Department determined Deutsche Bank did not “win the race” to the recording office (so as to cut off another filed mortgage) and was not a “bona fide encumbrancer” because the person living in the mortgaged premises and paying taxes on the property was not consistent with Deutsche Bank’s mortgage:

“[T]o cut off a prior lien, such as a mortgage, the purchaser must have no knowledge of the outstanding lien and win the race to the recording office” … . * * *

” [W]here 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 [what] 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'” … . “Similarly, 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'” … . ” Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish'” … . Mortgage Elec Registration Sys Inc v Pagan, 2014 NY Slip Op 05309, 2nd Dept 7-16-14

 

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