Legal Precedent: Court Reverses Foreclosure Based on Invalid Deed

This week we wanted to draw your attention to an interesting decision out of the Appellate Division, Second Department, which reversed a lower court’s order that had granted Summary Judgment to a Mortgagee in a foreclosure action based, in part, on the fact that the deed transferring mortgaged Premises was executed after the Grantor’s date of death. 
The relevant facts of, as well as a link to, the case are set forth below.

The defendant/appellant in the instant matter is the administratrix of the estate of Kathy Briggs, who owned certain real property (hereinafter the “Premises”) prior to her death on November 26, 2003.   On or about March 22, 2004, the Premises was transferred via a deed (the “2004 Deed”) executed on behalf of Kathy Briggs by Alfred St. Dic, her purported attorney-in-fact, pursuant to a durable power of attorney (the “POA”), which recites that the POA was executed on December 18, 2003 (approximately 3 weeks after Grantor’s death of death).  Simultaneously with acquisition of title, the Grantees executed a Mortgage (the “2004 Mortgage”), which 2004 Mortgage was ultimately assigned to plaintiff/respondent, First Natl. Bank of Nev.   First Natl. Bank of Nev., thereafter, commenced an action to foreclose on the 2004 Mortgage for non-payment and, during the course of the foreclosure action, brought a motion for summary judgement. In opposition to the plaintiff's prima facie showing of entitlement to judgment as a matter of law, the defendant/appellant submitted the alleged fraudulent deed and argued that both the 2004 Deed and 2004 Mortgage were void, and that the true owner of the mortgaged property remained the estate of Kathy Briggs.  The Supreme Court granted the summary judgment motion enforcing the 2004 Mortgage and this appeal ensued.
 
The Appellate Court reasoned that since the power of attorney recites that it was executed by Kathy Briggs on a date subsequent to her death, there is a triable issue of fact as to the validity of the power of attorney and the deed purportedly executed pursuant to the power of attorney and therefore reversed the Lower Court’s order.
 
In support of its decision, the Appellate Court noted that “[i]f a signature on a power of attorney is forged, the document executed by the purported attorney-in-fact pursuant to the power of attorney is void (see Hoffman v Kraus, 260 AD2d 435, 436 [1999]; see generally Davis v Dunnet, 239 NY 338, 339-340 [1925]). If documents purportedly conveying a property interest are void, they convey nothing, and a subsequent bona fide purchaser or bona fide encumbrancer for value receives nothing (see Marden v Dorthy, 160 NY 39, 48 [1899]; GMAC Mtge. Corp. v Chan, 56 AD3d 521, 522 [2008]; Yin Wu v Wu, 288 AD2d 104, 105 [2001]; Kraker v Roll, 100 AD2d 424, 430-431 [1984]). A deed based on forgery or obtained by false pretenses is void ab initio, and a mortgage based on such a deed is likewise invalid" (Cruz v Cruz, 37 AD3d 754, 754 [2007]; see Crispino v Greenpoint Mtge. Corp., 304 AD2d 608, 609 [2003]).

To view this case, click the link below: 
https://www.nycourts.gov/reporter/3dseries/2010/2010_04737.htm

This case is another important reminder of the need to carefully review any POA being used to transfer or encumber real property to ensure that it was validly executed and remains in full force and effect at the time it is used to transfer or encumber any of the Principal’s property.