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Inconsistent Property Description Does Not Invalidate Mortgage
Can a purchaser of a condominium unit at the condominium board's foreclosure sale take free of a prior mortgage by identifying errors or ambiguities in the mortgage documents? In 21647 LLC v. Deutsche National Trust Co., 2022 WL 4585302, the United States District Court for the Southern District of New York rejected a bevy of claims raised by the purchaser and held that the purchaser had constructive notice of the mortgage and took subject to the mortgage's priority.
21647 LLC purchased the subject condominium — Unit 49D — for $25,000 at a sheriff's sale held pursuant to the condominium's foreclosure of its lien for common charges. The unit apparently has a market value of $970,000. After the purchaser, 21647 brought an action to vacate the mortgage and for a judgment that the sheriff's sale extinguished the mortgagee's interest.
The root of the difficulties was the original mortgage agreement, which referred to both Unit 49 D and to another apartment in the same building, Unit 23B. When, in 2005, the original mortgagor applied for the $620,000 mortgage he had no interest in Unit 23B. Although the mortgage documents made numerous references to Unit 49D, the first page of the main form included a handwritten notation of Unit 23B, and its lot and block number, in the portion of the page entitled "space above this line for recording data." The legal description attached to the form referred to Unit 23B, and the mortgage was recorded against Unit 23B.
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