Fraudulent Documents

Today we wanted to direct your attention to a very interesting case out of the Appellate Division, 2nd Department which involved the analysis of the effects of a fraudulent executed Power of Attorney and Deed on the enforceability of a mortgage. The relevant facts of the case and a link to the Appellate Court decision are described below.

In 2001, Defendants Julia Mentore and Nitza Jones acquired real property in Brooklyn. Joseph Nykian, as attorney-in-fact for Mentore under a power of attorney executed in 2001, and Jones mortgaged the property to Ameritrust Mortgage Bankers, Inc. In 2009, Mentore purportedly executed to Nykian a second power of attorney with expanded authority. Nykian, as attorney-in-fact, then purportedly conveyed Mentore’s interest to Jones who, in turn, mortgaged the property to MERS, as nominee for Lend America. The proceeds of the 2009 mortgage were applied to satisfy the 2001 mortgage. In 2010, Jones and Nykian were indicted for, among other offenses, residential mortgage fraud and forgery. The indictment alleged that they, acting in concert, forged the 2009 power of attorney and stole Mentore’s interest in the property. They pleaded guilty.
Mentore, a Defendant in the foreclosure of the 2009 mortgage, asserted that as early as February 2014 she had advised the then holder of the 2009 mortgage that her signature on the 2009 power of attorney was forged, that the transfer of her interest to Jones was invalid, and of the convictions of Jones and Nykian.

In September 2014 the 2009 mortgage was assigned to the Plaintiff (Selene Finance, L.P), who commenced an action in 2015 for a judgment declaring that it held an equitable mortgage on at least one-half of the property. The Supreme Court, Kings County, while dismissing the complaint and declaring the 2009 mortgage null and void, granted the Plaintiff an equitable mortgage based on the doctrine of equitable subrogation for the amount of the pay-off of the 2001 mortgage. The Appellate Division, Second Department, affirmed the lower court’s ruling. According to the Appellate Division, “[a]s the defendant established that the 2009 deed was obtained by false pretenses and is void, the mortgage based on that deed…is also void [citations omitted].” Selene Finance, L.P. v. Jones, 2022 NY Slip Op 02145, decided March 30, 2022, is posted at https://www.nycourts.gov/reporter/3dseries/2022/2022_02145.htm

While the Court’s decision was unfortunate for the unwitting Plaintiff that ended up holding the fraudulent mortgage, this case highlights the importance of taking every precaution to confirm the validity and proper execution of any POA being used to either transfer title to or encumber Real Property.