The Second Department determined defendant bank (Chase) was entitled an equitable lien against plaintiff’s property under the doctrine of equitable subrogation. Chase had issued a mortgage to a third party which was used to pay off plaintiff’s mortgage. The transaction with the third party was fraudulent under Real Property Law 265-a known as the Home Equity Theft Prevention Act. Supreme Court held that Chase should have heeded warnings signs about the validity of the transaction, but did not actively facilitate the third party’s fraud (Chase did not have “unclean hands”). To avoid plaintiff’s unjust enrichment, Chase was entitled to an equitable lien against the property equal to the mortgage that was paid off plus taxes and insurance:
Under the doctrine of equitable subrogation, where the “property of one person is used in discharging an obligation owed by another or a lien upon the property of another, under such circumstances that the other would be unjustly enriched by the retention of the benefit thus conferred, the former is entitled to be subrogated to the position of the obligee or lien-holder” … . The plaintiff contends that the Supreme Court erred in awarding Chase equitable subrogation because, in light of the determination that it was not a bona fide encumbrancer for value, Chase should have been denied equitable subrogation under the doctrine of unclean hands … . We disagree. The doctrine of unclean hands applies when the offending party “is guilty of immoral, unconscionable conduct” directly related to the subject matter in litigation and which conduct injured the party seeking to invoke the doctrine … . Here, although Chase was charged with knowledge of information which would have caused a prudent lender to inquire as to the circumstances of the transaction, the Supreme Court did not find that it had actual notice of the fraud or that it did anything to actively facilitate the fraud. There was no evidence that Chase “was a willing participant in a mortgage [rescue] scheme” … . Lucia v Goldman, 2016 NY Slip Op 08353, 2nd Dept 12-14-16
MORTGAGES (BANK WHICH ISSUED A MORTGAGE TO A THIRD PARTY THAT WAS USED BY THE THIRD PARTY TO PAY OFF PLAINTIFF’S MORTGAGE IN VIOLATION OF THE REAL PROPERTY LAW WAS ENTITLED TO AN EQUITABLE LIEN AGAINST PLAINTIFF’S PROPERTY IN THE AMOUNT OF THE ORIGINAL MORTGAGE)/REAL PROPERTY LAW (HOME EQUITY THEFT PREVENTION ACT, BANK WHICH ISSUED A MORTGAGE TO A THIRD PARTY THAT WAS USED BY THE THIRD PARTY TO PAY OFF PLAINTIFF’S MORTGAGE IN VIOLATION OF THE REAL PROPERTY LAW WAS ENTITLED TO AN EQUITABLE LIEN AGAINST PLAINTIFF’S PROPERTY IN THE AMOUNT OF THE ORIGINAL MORTGAGE)/HOME EQUITY THEFT PREVENTION ACT (BANK WHICH ISSUED A MORTGAGE TO A THIRD PARTY THAT WAS USED BY THE THIRD PARTY TO PAY OFF PLAINTIFF’S MORTGAGE IN VIOLATION OF THE REAL PROPERTY LAW WAS ENTITLED TO AN EQUITABLE LIEN AGAINST PLAINTIFF’S PROPERTY IN THE AMOUNT OF THE ORIGINAL MORTGAGE)/EQUITABLE LIEN (BANK WHICH ISSUED A MORTGAGE TO A THIRD PARTY THAT WAS USED BY THE THIRD PARTY TO PAY OFF PLAINTIFF’S MORTGAGE IN VIOLATION OF THE REAL PROPERTY LAW WAS ENTITLED TO AN EQUITABLE LIEN AGAINST PLAINTIFF’S PROPERTY IN THE AMOUNT OF THE ORIGINAL MORTGAGE)/LIEN LAW (EQUITABLE LIEN, (BANK WHICH ISSUED A MORTGAGE TO A THIRD PARTY THAT WAS USED BY THE THIRD PARTY TO PAY OFF PLAINTIFF’S MORTGAGE IN VIOLATION OF THE REAL PROPERTY LAW WAS ENTITLED TO AN EQUITABLE LIEN AGAINST PLAINTIFF’S PROPERTY IN THE AMOUNT OF THE ORIGINAL MORTGAGE)/EQUTABLE SUBROGATION, BANK WHICH ISSUED A MORTGAGE TO A THIRD PARTY THAT WAS USED BY THE THIRD PARTY TO PAY OFF PLAINTIFF’S MORTGAGE IN VIOLATION OF THE REAL PROPERTY LAW WAS ENTITLED TO AN EQUITABLE LIEN AGAINST PLAINTIFF’S PROPERTY IN THE AMOUNT OF THE ORIGINAL MORTGAGE)/UNCLEAN HANDS (BANK WHICH ISSUED A MORTGAGE TO A THIRD PARTY THAT WAS USED BY THE THIRD PARTY TO PAY OFF PLAINTIFF’S MORTGAGE IN VIOLATION OF THE REAL PROPERTY LAW WAS ENTITLED TO AN EQUITABLE LIEN AGAINST PLAINTIFF’S PROPERTY IN THE AMOUNT OF THE ORIGINAL MORTGAGE)