Fee Title Falls,
But Mortgage Lien Stands
Beulah owned the property. She made a will leaving the property to her sister, Rovina, “subject to a life estate” in Beulah’s husband, Carroll. Beulah died in 1993 and, apparently, no proceeding was commenced concerning her estate. Carroll continued to live at the property. In 1999, Carroll deeded the property to his niece and nephew. Carroll died in 2002. The niece and nephew mortgaged the property to Delta Funding in 2003. In 2004, Rovina commenced an action to quiet title based on Beulah’s will. The action was transferred to Surrogate’s Court for a determination of the probate issues.
The Surrogate’s Court determined that the will was valid and, as a result, that fee title had devolved to Rovina. The niece and nephew were without title. But, the Surrogate’s Court also held that Rovina was guilty of laches in offering the will for probate, and that the delay prejudiced the lender’s rights under the mortgage. The Second Department panel agreed, stating that the delay “prejudiced the mortgagee, which did not know and could not have known at the time that it took the mortgage on the property that the plaintiff would challenge [the borrowers’] ownership interest.”
It may be precisely true that the lender “could not have known ... that the plaintiff would challenge” the title. But, examination of the deed chain would have revealed the failure of record title into Carroll, alerting the lender to the possibility that someone would challenge the title. While the decision appears to leave the niece and nephew personally liable on the note, as a practical matter it results in a windfall for them at Rovina’s expense. Unlike other cases involving a complete failure of title based on fraud or forgery, this one doesn’t turn on principles of equitable subrogation. Rovina had not made a prior mortgage that was paid off with the proceeds of the later mortgage. Laches requires both an unreasonable delay and knowledge that the opposing party has detrimentally changed his position. The opinion, however, fails to mention any evidence indicating when Rovina obtained knowledge of the assertion of title or the giving of the mortgage.