NY Appellate Court Stalls Foreclosure Action; Says Summary Judgment Premature Where Home's Purported Co-Owner Claimed To Be Victim Of Forged POA

A recent ruling by a New York intermediate appellate court reversed a lower court decision granting summary judgment in favor of a mortgage lender in a foreclosure action where a woman claiming to be a co-owner of the home alleged that her signature was forged on a power of attorney that purported to authorize her husband, the other co-owner, to engage in real estate and banking transactions on her behalf. She claimed that the allegedly forged power of attorney was then used to take her ownership interest in the home out of her name. The home was then allegedly pledged as collateral for a loan that ultimately ended up in default and subject to the foreclosure action at issue.

Because the appeals court found that several irregularities sufficient to "put a reasonable person on notice that something was amiss" were apparent on the face of the power of attorney, it found that the wife established, without contradiction in the record, that she may have an ownership interest in a property currently subject to foreclosure proceedings under a deed and mortgage that may be invalid. Accordingly, it ruled that summary judgment in favor of the foreclosing lender was premature, as the wife's allegations raised triable issues of fact.

In addition, the appellate court reversed the lower court's denial of the woman's motion to intervene in the action (since she wasn't an owner of record when the the mortgage loan was granted or when the foreclosure action was initiated, and since she didn't sign the mortgage or promissory note, she was not named as a defendant by the foreclosing lender). The appeals court found that the woman had "made a sufficient showing of a real and substantial interest in the outcome of the foreclosure action warranting her intervention" (Greenpoint Sav. Bank v McMann Enters., 214 AD2d 647, 648 [1995]), and that "As a person who "may be affected adversely by the judgment" in this action involving title to property, Sklar is entitled to intervene as of right (see CPLR 1012 [a] [3])."

The facts of the case are a little convoluted, but for those involved in unwinding or undoing a deed/title theft scam involving the use of a forged power of attorney, there may be something in this case that may be of interest.

For the ruling, see US Bank Natl. Assn. v Gestetner, 2010 NY Slip Op 04907 (App. Div. 3rd Dept. June 10, 2010).