Tompkins County Trust Co. v. Talandis

• Decision Date: 20 May 1999
• Citation: 261 AD2d 808,690 N.Y.S.2d 330
• Parties: 1999 N.Y. Slip Op. 4729 TOMPKINS COUNTY TRUST COMPANY, Appellant, v. Gerald R. TALANDIS et al., Defendants, and Vita Talandis, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 330

690 N.Y.S.2d 330

1999 N.Y. Slip Op. 4729

TOMPKINS COUNTY TRUST COMPANY, Appellant, v. Gerald R. TALANDIS et al., Defendants, and Vita Talandis, Respondent.

Supreme Court, Appellate Division, Third Department, New York.

May 20, 1999.

Harris, Beach & Wilcox (Mark B. Wheeler of counsel), Ithaca, for appellant.

Kerrigan & Wallace (James M. Kerrigan of counsel), Ithaca, for respondent.

Before: CARDONA, P.J., CREW III, PETERS, CARPINELLO and GRAFFEO, JJ.

GRAFFEO, J.

Appeal from an order of the Supreme Court (Relihan Jr., J.), entered May 5, 1998 in Tompkins County, which, inter alia, granted defendant Vita Talandis' cross motion for summary judgment in a mortgage foreclosure action and declared that her interest in the foreclosed property was senior to plaintiff's interest.

This foreclosure action involves a priority dispute between a mortgage lender and the occupant, defendant Vita Talandis (hereinafter defendant), of the premises at issue. Defendant and defendant Gerald R. Talandis (hereinafter Talandis) were married in 1961 and entered into a separation agreement in April 1981 which provided defendant with the exclusive right to occupy what had been the marital residence until the subject property was sold, at which time defendant's right of possession would be transferred to a "substitute residence". Defendant was to receive a second mortgage on the substitute residence equal to one half of the net proceeds of sale of the former marital residence. The separation agreement was incorporated into, but not merged with, the judgment of divorce granted in October 1982 and thereafter entered in the County Clerk's office. In August 1983, defendant selected a substitute residence (hereinafter the Nelson Road property) and Talandis acquired title to the property. The parties modified their agreement accordingly and, a little more than a year later, another amendment was executed by the parties to permit Talandis to retain ownership of the former marital residence in consideration of $14,000 to be paid to defendant by monthly payments pursuant to a promissory note. The amendments to the separation agreement were not filed.

At the time Talandis purchased the Nelson Road property in 1983, he obtained a $53,000 mortgage loan from Troy Savings Bank. In October 1986 Talandis refinanced with plaintiff, securing a $64,000 mortgage loan and satisfying the Troy Savings Bank lien. In 1992 Talandis defaulted on the loan and plaintiff secured a judgment of foreclosure, but before consummating a foreclosure sale in 1995 plaintiff consented to a $73,500 consolidated refinancing of the earlier mortgage and other moneys owed. When Talandis failed to make any of the payments on the consolidated loan, plaintiff commenced this foreclosure action. Plaintiff moved for partial summary judgment seeking a declaration that defendant's interest was subordinate to its lien and defendant cross-moved for summary judgment asserting that her rights were superior. Supreme Court denied plaintiff's motion and granted defendant's cross motion, finding that plaintiff was not a "bonafide purchaser for value" and, therefore, not protected by the recording statute (see, Real Property Law § 291) with respect to defendant's interest.

On appeal, plaintiff contends that its mortgage was senior to any interest that defendant acquired in the property because it obtained and recorded its mortgage without notice of defendant's unrecorded interest and was, therefore, a good-faith purchaser for value. Defendant, on the other hand, argues that her interest in the property upon which plaintiff sought to foreclose was senior to plaintiff's rights because plaintiff had actual and/or constructive notice of her possessory interest in the property.

Initially, we reject defendant's contention that the entry of the judgment of divorce provided constructive notice to plaintiff of her possessory interest. Notably, the record does not support a finding that the divorce was filed in the same manner as a conveyance pursuant to Real Property Law § 297-b (see, Domestic Relations Law § 234; see also, Mondello v. Mondello, 178 A.D.2d 587, 577 N.Y.S.2d 659; cf., State St. Bank & Trust Co. v. Hament, 213 A.D.2d 623, 626 N.Y.S.2d 204, lv. dismissed 86 N.Y.2d 778, 631 N.Y.S.2d 610, 655 N.E.2d 707; Scheinkman, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 14, Domestic Relations Law C234:4, 1999 Supp. Pamph., at 27). Such a filing would have protected defendant's right to possession by providing constructive notice in the chain of title to third parties.

As Supreme Court correctly surmised, reliance upon a chain of title search does not inoculate a lender where other evident circumstances, in the exercise of reasonable diligence, would disclose an existing legal or equitable interest (see, Sweet v. Henry, 175 N.Y. 268, 67 N.E. 574; Williamson v. Brown, 15 N.Y. 354, 1857 WL 7050). In the absence of disclosure based on constructive notice (see, e.g., Witter v. Taggart, 78 N.Y.2d 234, 573 N.Y.S.2d 146, 577 N.E.2d 338), the issue of actual notice of a possessory interest must be examined (see, Schenectady Sav. Bank v. Wertheim, 237 App.Div. 311, 261 N.Y.S. 193, affd. 263 N.Y. 585, 189 N.E. 710). Although a purchaser may have a duty to ascertain the extent of the interest of a...