The Second Department, reversing (modifying) Supreme Court, determined the transfer of property by deed did not transfer title, but rather was a security interest for a loan (a mortgage):
… [T]he … deed never conveyed legal title to the plaintiff, but merely created a security interest in the subject property. “A deed conveying real property, which, by any other written instrument, appears to be intended only as a security in the nature of a mortgage, although an absolute conveyance in terms, must be considered a mortgage; and the person for whose benefit such deed is made, derives no advantage from the recording thereof, unless every writing, operating as a defeasance of the same, or explanatory of its being desired to have the effect only of a mortgage, or conditional deed, is also recorded therewith, and at the same time” (Real Property Law § 320).
Here, the … stipulation clearly recited the existence of a prior debt, authorized the decedent to continue occupying the property subject to certain terms and conditions, obligated her to maintain the property, and, most importantly, expressly authorized her to “retain ownership of the subject [p]roperty” … upon full repayment of the debt. Contrary to the plaintiff’s contention, such characteristics bear all the hallmarks of a security interest—not an outright conveyance of legal title … . RTT Holdings, LLC v Nacht, 2022 NY Slip Op 03916, Second Dept 6-15-22
Practice Point: Here a deed transferring the property was deemed to have created a security interest for a prior debt which was acknowledged in a stipulation. Legal title, therefore, was not transferred by the deed.