## Facts

- In August 1999, Levi Drimmer purchased real property in Brooklyn, financed by a $472,500 purchase-money mortgage from Emigrant Mortgage Company, Inc. (Emigrant Mortgage), Emigrant Bank’s predecessor in interest.
- The mortgage was executed in 1999 but was not recorded until February 2006.
- In September 2002, before the mortgage was recorded, Drimmer sold the property to Yosef Sternberg.
- Sternberg obtained a title report before closing; it did not disclose Emigrant Mortgage’s unrecorded mortgage.
- After the sale, Drimmer continued making monthly mortgage payments to the lender.
- Those payments included escrowed amounts for real estate taxes, and the lender paid the taxes from escrow in a manner reflected in the tax records.
- In August 2007, after learning of Drimmer’s sale to Sternberg, the lender accelerated the loan, demanded payment of the full balance from Drimmer, and stopped accepting monthly payments.
- After Emigrant Bank succeeded to the lender’s interest, it commenced an action against Drimmer and Sternberg, among other things, to foreclose the mortgage and for declaratory relief establishing the mortgage as a lien on the property.
- The Supreme Court, Kings County, granted Sternberg’s motion for summary judgment, dismissed the complaint against him, and declared that he was a good-faith purchaser for value who took the property free of the mortgage.
- Emigrant Bank appealed from the portions of the order and judgment granting Sternberg summary judgment and issuing the declaration in his favor.

## Issues

1. Whether Sternberg established, as a matter of law, that he was a good-faith purchaser for value who took title free of the plaintiff’s predecessor’s unrecorded mortgage.
2. Whether evidence concerning the lender’s tax-escrow payments and related tax-record entries created triable issues of fact as to Sternberg’s notice (including inquiry notice), making summary judgment improper.

## Decision

- The Appellate Division, Second Department, reversed the order and judgment insofar as appealed from.
- Sternberg’s motion for summary judgment dismissing the complaint as against him was denied.
- The complaint insofar as asserted against Sternberg was reinstated.
- The court held that Sternberg was not entitled to summary judgment because triable issues of fact existed regarding whether he lacked notice of the mortgage, including whether circumstances shown by the tax-payment and tax-record evidence required further inquiry.

## Legal Principles

- A party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law; if that showing is not made, the motion must be denied regardless of the opposing papers.
- Under New York’s recording statute, a later purchaser can take priority over an earlier, unrecorded interest only if the purchaser bought for value and in good faith, without notice of the prior interest.
- Good faith requires more than relying on the absence of a lien from the recording office or from a title report; the purchaser must show the absence of notice, including actual notice and inquiry notice.
- Inquiry notice arises when facts available to the purchaser would lead a reasonable buyer to investigate further; the purchaser is charged with what such an investigation would have revealed.
- Publicly available information outside the chain of title, including tax-related records suggesting another party’s financial involvement with the property, may be relevant to whether a purchaser had a duty to inquire.
- Where the record supports competing inferences about what the purchaser knew or should have known, the purchaser’s good-faith status generally cannot be resolved on summary judgment.

## Conclusion

The Appellate Division reversed the grant of summary judgment to Sternberg and reinstated Emigrant Bank’s claims against him because Sternberg did not establish, as a matter of law, that he purchased in good faith without notice of the unrecorded mortgage; evidence tied to the lender’s tax-escrow payments and the tax records raised factual questions about whether Sternberg had inquiry notice that could not be decided on summary judgment.


Emigrant Bank v. Drimmer [& Sternberg], 171 A.D.3d 1132, 99 N.Y.S.3d 79 (2019)