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[NYSC] “Bona Fide Purchaser After Foreclosure, Inequitably Effected” WAMU v. EDWARD MURPHY

[NYSC] “Bona Fide Purchaser After Foreclosure, Inequitably Effected” WAMU v. EDWARD MURPHY


Excerpts:

Upon resolution of the jurisdictional issue raised by Murphy, he also seeks to add Luciano as a party defendant  because of his alleged “bona fide purchase” of the Millstone Road premises from the plaintiff after foreclosure. The application is granted and Luciano is added as a party defendant to this action because he is a necessary party in order for the Court to grant the proper and necessary relief in this lawsuit. CPLR §1001 provides that persons “who might be inequitably affected by a judgment” shall be made a party. Clearly, Luciano as the present owner of the Millstone Road premises may be “inequitably affected” by the jurisdiction question to be decided. Further, the events surrounding the dates of contract and sale of this property and the sale price are all issues requiring Court scrutiny as to Luciano’s claim to be a “bona fide purchaser” of the property for value.

Here, the closing on the sale of the Millstone Road premises occurred just 3 days prior to Murphy’s order to show cause seeking injunctive relief asserting the lack of knowledge of and Court jurisdiction over this foreclosure action. Obviously, any conversations, discussions, settlement negotiations or other communications between the plaintiff, Murphy and possibly Luciano concerning Murphy’s prospective actions as to this foreclosure action in which Luciano claims no knowledge as well as possible “bad faith” on the part of plaintiff are all issues which the Court needs to explore to assure the foreclosure process was fair and equitable.

Real Property Law §266 provides an innocent “bona fide purchaser” for value is protected in his/her title to property unless he/she had previous notice of the alleged fraud by the seller. See, Karan v. Hoskins. 22 AD3d 638, 803 NYS2d 666 (2nd Dept. 2005); Barnes v. West, 29 Misc3d 1230(A), WL 4941987 (2010). In the event, the Court finds that jurisdiction was not acquired over Murphy, Murphy’s remedy is to be put back into possession of the Millstone Road premises unless it has been purchased by a “bona fide” innocent and good faith purchaser, in which case Murphy’s remedy is limited to damages against the plaintiff.

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Finally, Murphy cannot be charged with equitable estoppel as his actions through his attorney have all been to avoid the very sale which the plaintiff conducted to Luciano. The Court in Bank of America, NA v 414 Midland Ave. Associates, LLC, AD3d ,911 NYS2d 157 (2nd Dept 2010) noted:

“Where an owner knows of a defect in title and fails to address it,
laches does not apply unless the facts are sufficient to constitute equitable
estoppel (see, Krakerv. Roll, 100 AD2d 424,433,474 NYS2d 527;
Washington Temple Church of God in Christ, Inc. v. Global Props &
Assoc., Inc., 15 Misc3d 1142[A], 2007 N.Y. Slip Op 51114[U], 2007 WL
1558884, aff’d. 55 AD2d 727, 865 NYS2d 641). Equitable estoppel arises when
a property owner stands by without objection while an opposing party asserts an
ownership interest in the property and incurs expense in reliance on that belief
(see, Andrews v. Cohen, 221 NY 148, 153, 116 NE 862). The property owner
must ‘inexcusably’ delay in asserting a claim to property knowing that ‘the
opposing party has changed his position to irreversible detriment’ ( Orange &
Rockland Utils v. Philwold Estates, 70 AD2d 338, 343,421 NYS2d 640,
mod. on other grounds 52 NY2d 253, 437 NYS2d 291, 418 NE2d 1310.”

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