New York Bona Fide Purchaser/Duty To Inquire - Intermediate Appellate Court Decisions

The following compilation of cases from the various intermediate appellate courts in the state of New York address, either directly or tangentially, the issue of the effect of possession by an occupant of real property by one other than the seller/vendor on a prospective purchaser's status as a bona fide purchaser.

This post is a supplement to the July 31, 2014 post which compiled some of the cases on this issue from New York State's highest court, the New York Court of Appeals.

As stated in the earlier post, this compilation represents raw research only, and certainly does not purport to be an exhaustive list of cases dealing with the issue of possession and the duty to inquire when attempting to establish (or attack) one's status as a bona fide purchaser.

See Effect Of Persons In Possession Of Real Estate Other Than The Owner/Vendor On A Buyer's Status As A Bona Fide Purchaser - NY State Court Cases for a compilation of the full court rulings for the cases below and some other New York cases on this issue.

For other states, generally, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

See the National Consumer Law Center's Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams for an extensive review of one type of home equity ripoff to which the bona fide purchaser doctrine may apply.

See Foreclosure Rescue Scams (a chapter in a longer publication from the National Consumer Law Center) for a lawyer's guide to making a case on behalf of a victimized homeowner in attempting to void or set aside an abusive transaction.

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New York Intermediate Appellate Court Cases

Lucas v. J&W Realty and Constr. Mgt., Inc., 97 A.D.3d 642, 643 (2d Dep't 2012):

• As their first affirmative defense, the defendants Dwinell Bedard (hereinafter Bedard) and Golden First Mortgage Corp. (hereinafter Golden) alleged that they each held a prior interest in the subject property which was superior to the plaintiff's January 16, 2009, mortgage interest. In support of this affirmative defense, they offered a deed dated October 16, 2008, several months before the plaintiff acquired his mortgage, purporting to convey title to the property from J&W to Bedard, as well as a contemporaneous mortgage document in which Bedard purportedly gave Golden a mortgage on the property.
  
  Although Bedard and Golden (hereinafter together the respondents) did not record their respective ownership and mortgage interests until after J&W and the plaintiff had recorded their respective ownership and mortgage interests arising from the January 16, 2009, transactions, there was evidence that Bedard was in actual possession of the property when the plaintiff acquired his mortgage interest on January 16, 2009.
  
  However, the record contains two additional deeds with respect to the subject property which establish that J&W did not have title to the subject property to convey to Bedard on October 16, 2008, and Bedard did not otherwise acquire valid title to the subject property.
  
  Therefore, since Bedard did not acquire valid title to the subject property on October 16, 2008, he could not give Golden a valid mortgage interest in the property on that date.
  
  "The recording of a transaction involving real property provides potential subsequent purchasers with notice of 'previous conveyances and encumbrances that might affect their interests' " (Stracham v Bresnick, 76 AD3d 1009, 1010, 908 NYS2d 95 [2010], quoting Andy Assoc. v Bankers Trust Co., 49 NY2d 13, 20, 399 NE2d 1160, 424 NYS2d 139 [1979]; see Real Property Law § 291).
  
  "[W]here a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser" (Williamson v Brown, 15 NY 354, 362[1857]; see Maiorano v Garson, 65 AD3d 1300, 1303, 886 NYS2d 190 [2009]; Ward v Ward, 52 AD3d 919, 920-921, 859 NYS2d 774 [2008]).
  
  Similarly, a mortgagee is under a duty to make an inquiry where it is aware of facts "that would lead a reasonable, prudent lender to make inquiries of the circumstances of the transaction at issue" (LaSalle Bank Natl. Assn v Ally, 39 AD3d 597, 600, 835 NYS2d 264 [2007]).
  
  "Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish" (Phelan v Brady, 119 NY 587, 591-592, 23 NE 1109 [1980]; see 1426 46 St., LLC v Klein, 60 AD3d 740, 743, 876 NYS2d 425 [2009]; Ward v Ward, 52 AD3d at 920-921).
  
  Although the evidence in this case presented an issue of fact as to whether Bedard was in actual possession of the property when the plaintiff acquired its mortgage interest, which was sufficient to require an inquiry by the plaintiff into "the existence of any right which [the respondents were] able to establish" (Phelan v Brady, 119 NY at 592), such an inquiry would have revealed that neither Bedard nor Golden had any valid ownership interest in the property, let alone an interest that was "in potential conflict" with the plaintiff's mortgage (Maiorano v Garson, 65 AD3d at 1303; cf. Stracham v Bresnick, 76 AD3d at 1011).
  
  Under these circumstances, the plaintiff satisfied his burden of demonstrating, prima facie, that the respondents' first affirmative defense was without merit as a matter of law (cf. Vita v New York Waste Servs., LLC, 34 AD3d 559, 559, 824 NYS2d 177 [2006]), and the respondents failed to raise a triable issue of fact in opposition.
  
  The deeds and mortgage documents submitted by the parties established, as a matter of law, that the plaintiff's mortgage was superior to the purported interests claimed by the respondents.

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Stracham v. Bresnick, 76 AD 3d 1009, 908 NYS 2d 95 (App. Div., 2nd Dept. 2010):

• On May 18, 1992, the plaintiff entered into an agreement with the defendant Almar Roofing & Sheet Metal Corp., also known as Almar Roofing Corp. (hereinafter Almar), whereby he leased from Almar, for a period of 30 years, a certain parcel of real property which was encumbered with a mortgage held by the City of New York.
  
  On the same day, the plaintiff and Almar executed a contract of sale, which provided for the plaintiff's purchase of the same property from Almar, to be financed by a purchase money mortgage. Although the contract of sale designated May 18, 1992, as the closing date, no closing actually occurred.
  
  A rider to the lease contained a clause providing that once the mortgage held by the City of New York was satisfied, the plaintiff's rent payments to Almar would be credited to the purchase money mortgage the plaintiff gave to Almar.
  
  The plaintiff and Almar's principal, the defendant Alan Bresnick, also agreed that once the rent payments were converted into mortgage payments, Bresnick would give the plaintiff the deed to the subject property. The lease and the contract of sale were recorded by the plaintiff on April 30, 1997.
  
  By deed recorded on October 28, 1997, before Almar's mortgage with the City of New York was satisfied, Almar transferred the subject property to the defendant Chukwuma Osakwe.
  
  In 2002, Osakwe, in turn, transferred the subject property to the defendant Angela Headley. To finance that purchase, Headley obtained a mortgage loan from the defendant Long Beach Mortgage Company (hereinafter Long Beach).
  
  In 2003, Headley transferred the subject property to the defendant 819 Dean Street Corp. In February 2005, the City of New York acknowledged the satisfaction of its mortgage.
  
  However, the closing referred to in the May 18, 1992, contract of sale never occurred, and the deed to the subject property was never delivered to the plaintiff. In March 2005, the plaintiff commenced this action, seeking, among other things, a judgment declaring that the deeds transferring title to Osakwe, Headley, and 819 Dean Street Corp. (hereinafter collectively the purchasers), and the mortgage held by Long Beach, are invalid.
  
  After a hearing before a court attorney referee, the Supreme Court entered a judgment which, inter alia, declared that the deeds transferring title and the mortgage were valid, and, in effect, dismissed the remainder of the complaint. The plaintiff appeals.
  
  The recording of a transaction involving real property provides potential subsequent purchasers with notice of "previous conveyances and encumbrances that might affect their interests" (Andy Assoc. v Bankers Trust Co., 49 NY2d 13, 20, 399 NE2d 1160, 424 NYS2d 139 [1979]; see Real Property Law § 291).
  
  In addition, "'[w]here a purchaser has knowledge of any fact, sufficient to put him [or her] on inquiry as to the existence of some right or title in conflict with that he [or she] is about to purchase, he [or she] is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his [or her] claim, to be considered as a bona fide purchaser'" (Maiorano v Garson, 65 AD3d 1300, 1303, 886 NYS2d 190 [2009], quoting Williamson v Brown, 15 NY 354, 362 [1857]).
  
  Similarly, a mortgagee is under a duty to make an inquiry where it is aware of facts "that would lead a reasonable, prudent lender to make inquiries of the circumstances of the transaction at issue" (LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 600, 835 NYS2d 264 [2007]).
  
  "Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in possession is able to establish" (Phelan v. Brady, 119 NY 587, 591-592, 23 NE 1109 [1890]; see 1426 46 St., LLC v Klein, 60 AD3d 740, 743, 876 NYS2d 425 [2009]).
  
  Title to the subject property was never conveyed to the plaintiff and, thus, he never became the owner of the property. Therefore, regardless of whatever notice the purchasers may have had as a result of the lease and contract of sale recorded by the plaintiff, the plaintiff did not have an ownership interest in the property that would defeat any of the conveyances to those parties or Long Beach's mortgage.
  
  Moreover, although the plaintiff resided on the subject premises, which was sufficient to require an inquiry by the purchasers and Long Beach into "the existence of any right which [the plaintiff was] able to establish" (Phelan v Brady, 119 NY at 591-592), such an inquiry would have revealed only the leasehold interest held by the plaintiff. Such a possessory interest was not "in potential conflict" (Maiorano v Garson, 65 AD3d at 1303) with the interests in the property acquired by the purchasers and Long Beach.
  
  Furthermore, a recorded contract of sale is enforceable against subsequent purchasers, but only for 30 days after the closing date (see Real Property Law § 294 [1], [4] [a]; [5], [8] [a]). Here, the plaintiff did not record the contract of sale until nearly five years after the date designated as the closing date in the May 18, 1992, contract of sale, and the contested conveyances of the subject property occurred even later. Accordingly, the Supreme Court properly declared that the deeds transferring title to Osakwe, Headley, and Dean Street, and the mortgage held by Long Beach, were valid.

Editor's Note:

The court states that "Title to the subject property was never conveyed to the plaintiff and, thus, he never became the owner of the property." While legal title may never have been passed by the execution of a deed, it certainly appears that, by reason of the execution of a valid contract between plaintiff and Almar, equitable title may have, in fact, been passed. (See Scotto v. Georgoulis, 89 AD 3d 717, 932 N.Y.S.2d 120 (App. Div., 2nd Dept. 2011) "Although no deed was conveyed to Scotto, the equitable title passed to him upon the execution of a valid contract, and Scotto's "interest in the real property thus came into existence by operation of law" (Ray v Ray, 61 AD3d 442, 444 [2009])."

In addition, citing Real Property Law § 294 [1], [4] [a]; [5], [8] [a], the court also states that "a recorded contract of sale is enforceable against subsequent purchasers, but only for 30 days after the closing date." (bold text is my emphasis) While true that subsection [5] states that the recording of the contract is only effective for 30 days after the closing date, the reality also is that Real Property Law § 294[8][a][1] specifically provides that said contract is only void as against a subsequent purchaser who has no other notice of an estate or interest of the contract vendee. (ie. "[...], such executory contract, memorandum or option shall be (1) void as against a subsequent purchaser in good faith and for a valuable consideration, who has no other notice of an estate or interest of the contract vendee or optionee in the premises to which such contract, memorandum or option refers, or of any claim thereof [...]"). (bold text is my emphasis)

By reason of plaintiff's continued possession of the premises pursuant to the recorded 30-year lease, coupled with the clause in the recorded lease referring to a purchase money mortgage given by plaintiff to Almar, whereby a credit for plaintiff's lease payments toward the purchase money mortgage will be given to plaintiff once the existing mortgage to New York City was satisfied, it appears to me (in my humble opinion) that there was more than sufficient notice that the contract of sale between plaintiff and Almar existed and may still have been valid and in effect (even though the recording thereof, standing alone, was no longer effective for purposes of giving notice) and, consequently, enough to defeat the subsequent purchasers and mortgagees of their subsequently-acquired interests.

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Maiorano v Garson, 65 AD3d 1300,886 NYS2d 190 [App. Div. 2d Dept. 2009] (court denies lender's motion for summary judgment, finding that homeowner/couple raised a triable issue of fact in connection with their continued possession of premises after conveying said premises to another in connection with a sale leaseback, foreclosure rescue deal):

• Pursuant to Real Property Law § 266, a bona fide purchaser or encumbrancer for value is protected in his or her title unless he or she had previous notice of the alleged prior fraud by the immediate seller (see LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 599-600, 835 NYS2d 264 [2007]; Karan v Hoskins, 22 AD3d 638, 803 NYS2d 666 [2005]). Here, Fremont met its prima facie burden of establishing that it was a bona fide encumbrancer for value by showing that a title search revealed that Angelillo was the record owner of the subject property at the time of the closing, after Garson conveyed the deed to him, and that there were no recorded contracts affecting title (see Fleming-Jackson v Fleming, 41 AD3d 175, 838 NYS2d 506 [2007]; Emerson Hills Realty v Mirabella, 220 AD2d 717, 633 NYS2d 196 [1995]).
  
  However, the Maioranos raised a triable issue of fact sufficient to defeat Fremont's motion by pointing to their actual possession of the subject premises, as well as documents in Fremont's possession that should have led it to inquire further about Garson's ownership thereof.
  
  For example, Gene Maiorano submitted an affidavit in which he claimed that, in connection with the Garson-to-Angelillo transaction, an appraiser visited the subject premises. Maiorano claimed that he informed her that he was the "owner" of the premises, and was "considering doing a refinance." On a subsequent visit, Rosemarie Maiorano also informed the same appraiser that the plaintiffs were the owners of the property. The resulting appraisal report, which was in Fremont's possession, indicated that the subject property's occupant was the "owner," and that the underlying transaction was a refinance rather than a purchase.
  
  Moreover, an HUD-1 settlement statement prepared in connection with the Garson-to-Angelillo transaction, also in Fremont's possession, contained a typewritten entry for the "seller," reading "Rosemarie Maiorano," and containing her address at the subject premises. However, her name was crossed out by hand, and Garson's name, with the address of the subject premises, was handwritten adjacent thereto.
  
  "[W]here a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser" (Williamson v Brown, 15 NY 354, 362 [1857]; see Phelan v Brady, 119 NY 587, 591-592, 23 NE 1109 [1890]; but see Fleming-Jackson v Fleming, 41 AD3d 175, 838 NYS2d 506 [2007]).
  
  On this record, we conclude that the Maioranos succeeded in raising a triable issue of fact as to whether Fremont had knowledge of facts which put it "on inquiry" as to the existence of a right in potential conflict with its own (Williamson v Brown, 15 NY 354, 362 [1857]; see Doyle v Siddo, 31 AD3d 697, 818 NYS2d 474 [2006]; Vitale v Pinto, 118 AD2d 774, 500 NYS2d 283 [1986]). Accordingly, those branches of Fremont's motion which were for summary judgment dismissing the first and second causes of action insofar as asserted against it were properly denied.

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HSBC Mtge. Servs., Inc. v. Alphonso, 58 A.D.3d 598; 874 N.Y.S.2d 131 (App. Div. 2d Dept. 2009):

• Moreover, "[t]he intended purchaser must be presumed to have investigated the title, and to have examined every deed or instrument properly recorded, and to have known every fact disclosed or to which an inquiry suggested by the record would have led [citations omitted].
  
  If the purchaser fails to use due diligence in examining the title, he or she is chargeable, as a matter of law, with notice of the facts which a proper inquiry would have disclosed" (Fairmont Funding v Stefansky, 301 AD2d 562, 564, 754 NYS2d 54 [2003] [citations omitted]).
  
  Here, at the time Point purchased the property at issue, the person in possession of the property was not the owner of record. Point, therefore, had a reasonable duty of inquiry to investigate the apparent discrepancy (see Fairmont Funding v Stefansky, 301 AD2d 562, 564, 754 NYS2d 54 [2003]; Hicksville Props. v Wollenhaupt, 273 AD2d 356, 357, 711 NYS2d 729 [2000]). Consequently, Point had at least constructive knowledge of a mortgage.

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Ward v. Ward, 52 AD 3d 919, 859 NYS 2d 774 (App. Div., 3rd Dept. 2008):

• Plaintiff and defendant Barbara P. Ward were divorced in 2002 and, pursuant to the judgment of divorce, the marital residence was deemed marital property to be equitably distributed between the parties. Title was solely in Ward's name. The judgment granted plaintiff sole possession of the property until it was sold at a price of not less than the assessed value of $42,614, with the proceeds to be distributed equally after the payment of certain encumbrances. The judgment of divorce was entered in the Delaware County Clerk's office on January 11, 2002.
  
  Thereafter, unbeknownst to plaintiff, Ward gave a mortgage on the property in the amount of $80,000 to defendant Accredited Home Lenders, Inc. (hereinafter defendant), which was recorded in the Delaware County Clerk's office on October 2, 2006. After learning of the mortgage, plaintiff commenced this action against Ward and defendant seeking, among other things, to nullify the mortgage.
  
  Following service of defendant's answer, * [ * Ward defaulted in the action. ] plaintiff served various discovery demands. Defendant did not respond to these demands and moved for summary judgment dismissing the complaint against it. Plaintiff, in turn, cross-moved to strike defendant's answer and to preclude defendant from introducing evidence withheld during discovery. Supreme Court granted defendant's motion without considering plaintiff's cross motion. Plaintiff now appeals.
  
  For his cause of action against defendant, plaintiff alleged that defendant failed to diligently search the title to the property prior to recording Ward's mortgage and accepted the mortgage even though it was on notice of plaintiff's interest in the property.
  
  In support of its motion for summary judgment dismissing this claim, defendant submitted the affidavit of its attorney as well as that of a title searcher establishing that the public records did not disclose plaintiff's ownership interest in the property or the judgment of divorce, which was sealed and entered in the judgment docket only. Even accepting the proof submitted by defendant as true, it does not conclusively establish if defendant acquired actual or inquiry notice of plaintiff's interest.
  
  Whether a party has actual or inquiry notice of a competing interest is a relevant consideration in determining if that party is a bona fide purchaser entitled to the protection of the recording act (see Ithaca Assoc. Co. v Plataniotis, 274 AD2d 640, 642, 710 NYS2d 688 [2000]; Tompkins County TrustCo. v Talandis, 261 AD2d 808, 810, 690 NYS2d 330 [1999], lv dismissed 93 NY2d 1041, 719 NE2d 930, 697 NYS2d 569 [1999]; see also Real Property Law §291).
  
  A party will be deemed to have inquiry notice when it had " 'knowledge of facts that would lead a reasonably prudent purchaser to make inquiry' " (Morrocoy Mar. v Altengarten, 120 AD2d 500, 500, 501 NYS2d 701 [1986], quoting 1 Warren's Weed, New York Real Property §1.05, at 357).
  
  Notably, " 'actual possession of real estate is notice to all the world of the existence of any right which the person in possession is able to establish' " if such possession is inconsistent with the title of the apparent owner of record (Wardell v Older, 70 AD2d 1008, 1009, 418 NYS2d 196 [1979], quoting Ehrlich v Hollingshead, 275 App Div 742, 743, 87 NYS2d 682 [1949]).
  
  In the case at hand, the documents prepared in connection with the mortgage are relevant to ascertaining whether defendant knew or should have known of plaintiff's interest in the property. Such documents would reveal defendant's knowledge, if any, of Ward's marital status, the fact that she was not paying taxes or insurance on the property, as well as the fact that plaintiff occupied the property.
  
  Defendant, however, failed to produce such documents in response to plaintiff's discovery demands. Given that the facts necessary for plaintiff to oppose the summary judgment motion were exclusively within defendant's knowledge, defendant was not entitled to summary judgment (see Tenkate v Moore, 274 AD2d 934, 935, 711 NYS2d 587 [2000]; Reohr v Golub Corp., 242 AD2d 850, 851, 661 NYS2d 889 [1997]; see also CPLR 3212 [f]). In view of this, Supreme Court should have considered and ruled upon plaintiff's cross motion.

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Tompkins County Trust Company v. Talandis, 261 AD 2d 808, 690 NYS 2d 330 (App. Div., 3rd Dept. 1999) (failure to record certified copy of divorce judgment leaves ex-spouse out of luck against lender which foreclosed on subsequently-granted mortgage, despite her possession of premises and despite her exclusive right to occupy same granted pursuant to divorce judgment):

• This foreclosure action involves a priority dispute between a mortgage lender and the occupant, defendant Vita Talandis (hereinafter defendant), of the premises at issue. Defendant and defendant Gerald R. Talandis (hereinafter Talandis) were married in 1961 and entered into a separation agreement in April 1981 which provided defendant with the exclusive right to occupy what had been the marital residence until the subject property was sold, at which time defendant's right of possession would be transferred to a "substitute residence".
  
  Defendant was to receive a second mortgage on the substitute residence equal to one half of the net proceeds of sale of the former marital residence. The separation agreement was incorporated into, but not merged with, the judgment of divorce granted in October 1982 and thereafter entered in the County Clerk's office.
  
  In August 1983, defendant selected a substitute residence (hereinafter the Nelson Road property) and Talandis acquired title to the property. The parties modified their agreement accordingly and, a little more than a year later, another amendment was executed by the parties to permit Talandis to retain ownership of the former marital residence in consideration of $14,000 to be paid to defendant by monthly payments pursuant to a promissory note. The amendments to the separation agreement were not filed.
  
  At the time Talandis purchased the Nelson Road property in 1983, he obtained a $53,000 mortgage loan from Troy Savings Bank. In October 1986 Talandis refinanced with plaintiff, securing a $64,000 mortgage loan and satisfying the Troy Savings Bank lien. In 1992 Talandis defaulted on the loan and plaintiff secured a judgment of foreclosure, but before consummating a foreclosure sale in 1995 plaintiff consented to a $73,500 consolidated refinancing of the earlier mortgage and other moneys owed. When Talandis failed to make any of the payments on the consolidated loan, plaintiff commenced this foreclosure action.
  
  Plaintiff moved for partial summary judgment seeking a declaration that defendant's interest was subordinate to its lien and defendant cross-moved for summary judgment asserting that her rights were superior. Supreme Court denied plaintiff's motion and granted defendant's cross motion, finding that plaintiff was not a "bonafide purchaser for value" and, therefore, not protected by the recording statute (see, Real Property Law §291) with respect to defendant's interest.
  
  On appeal, plaintiff contends that its mortgage was senior to any interest that defendant acquired in the property because it obtained and recorded its mortgage without notice of defendant's unrecorded interest and was, therefore, a good-faith purchaser for value.
  
  Defendant, on the other hand, argues that her interest in the property upon which plaintiff sought to foreclose was senior to plaintiff's rights because plaintiff had actual and/or constructive notice of her possessory interest in the property.
  
  Initially, we reject defendant's contention that the entry of the judgment of divorce provided constructive notice to plaintiff of her possessory interest. Notably, the record does not support a finding that the divorce was filed in the same manner as a conveyance pursuant to Real Property Law §297-b (see, Domestic Relations Law §234 [2]; see also, Mondello v Mondello, 178 AD2d 587; cf., State St. Bank & Trust Co. v Hament, 213 AD2d 623, lv dismissed 86 NY2d 778; Scheinkman, 1988 Supp Practice Commentaries, McKinney's Cons Laws of NY, Book 14, Domestic Relations Law C234:4, 1999 Supp Pamph, at 27). Such a filing would have protected defendant's right to possession by providing constructive notice in the chain of title to third parties.
  
  As Supreme Court correctly surmised, reliance upon a chain of title search does not inoculate a lender where other evident circumstances, in the exercise of reasonable diligence, would disclose an existing legal or equitable interest (see Sweet v Henry, 175 NY 268; Williamson v Brown, 15 NY 354). In the absence of disclosure based on constructive notice (see, e.g., Witter v Taggart, 78 NY2d 234), the issue of actual notice of a possessory interest must be examined (see, Schenectady Sav. Bank v Wertheim, 237 App Div 311, affd 263 NY 585).
  
  Although a purchaser may have a duty to ascertain the extent of the interest of a person who is in possession of the premises (see, Sweet v Henry, supra; Nethaway v Bosch, 199 AD2d 654), in order for the possession to operate as the equivalent of actual notice, the possession must be "actual, open and visible occupation, inconsistent with the title of the apparent owner by the record; not equivocal, occasional or for a special or temporary purpose; neither can it be consistent with the title of the apparent owner by the record" (Holland v Brown, 140 NY 344, 347-348; see, Fekishazy v Thomson, 204 AD2d 959, 962, appeal dismissed 84 NY2d 844, lv denied 84 NY2d 812; see also, Schenectady Sav. Bank v Wertheim, supra, at 313).
  
  Therefore, the dispositive issues in this case are whether plaintiff was without knowledge "of facts that would lead a reasonably prudent purchaser to make inquiry" (Nethaway v Bosch, supra, at 654) regarding defendant's occupancy of the Nelson Road property, and whether defendant's occupancy and representations to plaintiff were inconsistent with Talandis' fee interest and thereby constituted actual notice of an adverse interest (see, Fekishazy v Thomson, supra, at 962; see generally, Yen-Te Hsueh Chen v Geranium Dev. Corp., 243 AD2d 708, lv dismissed 91 NY2d 921).
  
  Although it is undisputed that plaintiff was aware of the Talandises' divorce and defendant's presence at the property, plaintiff denied that it had any knowledge of the terms of the divorce judgment or separation agreement.
  
  Further, the record in this case indicates that the financial statement submitted by Talandis to plaintiff did not indicate that he derived any rental income from defendant, implying that there was no written lease with defendant. Defendant's four judgments against Talandis evidenced his considerable indebtedness to defendant, but did not suggest a possessory interest in the real property.
  
  While it is evident that defendant was under considerable pressure from Talandis to cooperate, defendant nevertheless failed to voice any possessory interest in the property during the course of negotiations and dealings to arrange the consolidated refinancing, which included several direct contacts between plaintiff and defendant prior to the loan closing.
  
  Earlier, in anticipation of the 1993 judgment of foreclosure sale, defendant searched for another residence and at some point, the property had been listed for sale for more than two years. Defendant's silence during the refinancing negotiations, while represented by counsel, and her further consent to the subordination of her four judgment liens against Talandis belied her future assertion of an equitable or legal interest in the property superior to that of plaintiff.
  
  We do not find that defendant's occupancy of the premises, in light of the totality of the circumstances, would give rise to a reasonable inference that she intended to assert an adverse claim inconsistent with Talandis' ownership; therefore, to the extent that it existed, defendant's interest was subordinate to plaintiff's 1995 mortgage. Cardona, P. J., Crew III, Peters and Carpinello, JJ., concur.
  
  Ordered that the order is reversed, on the law, with costs, defendant Vita Talandis' cross motion for summary judgment denied, plaintiff's motion for summary judgment granted and it is declared that defendant Vita Talandis' interest in the foreclosed property was subordinate to plaintiff's 1995 mortgage. [See, 176 Misc 2d 632.]

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Fekishazy v. Thomson, 204 AD2d 959, 612 N.Y.S.2d 276 (App. Div., 3d Dept., 1994):

• On April 24, 1984 Ruth Thomson, the owner of property located in Ulster County and improved by a multiple-unit residence, conveyed the property to herself and her son, Nicholas Amoroso, as tenants in common.
  
  On January 12, 1985 Ruth Thomson, as landlord, entered into a lease with defendant John E. Thomson, her husband, as tenant, for a portion of the premises from February 1, 1985 through January 30, 1999 at an annual rent payable in equal monthly installments. Amoroso did not sign the lease.
  
   By deed dated and recorded on May 6, 1986, Ruth Thomson and Amoroso conveyed sole title to Amoroso. On May 10, 1990 Ruth Thomson recorded the lease. Thereafter, on or about August 12, 1990, Amoroso entered into a purchase and sale contract with plaintiffs and conveyed the property, a two-family house, by deed dated September 18, 1990.
  
  At closing, plaintiffs purchased a title insurance policy (hereinafter the policy) from National Attorneys' Title Insurance Company, the predecessor in interest of defendant TRW Title Insurance Company of New York, Inc. (hereinafter TRW). The policy excepted coverage for, inter alia, "[l]eases of record as noted herein" and "[r]ights of present tenants and occupants on a month to month basis as per contract of sale". No lease of record was noted in the policy.
  
  Plaintiffs commenced this action seeking declarations that the lease was not valid and that TRW was liable to indemnify them for counsel fees and costs associated with the action. John Thomson counterclaimed for a declaration that the lease was valid. TRW moved to dismiss the complaint pursuant to CPLR 3211. Plaintiffs and John Thomson each cross-moved for summary judgment. Supreme Court denied TRW's motion as well as plaintiffs' cross motion but, after determining that the lease was valid and ruling that he was entitled to joint occupancy, use and possession with plaintiffs, granted John Thomson's cross motion. TRW thereafter moved for reargument, which Supreme Court granted but adhered to its prior decision. TRW appeals.
  
  TRW's primary contention is that the lease instrument, recorded more than five years after the lessor's conveyance of the property, was not within the direct chain of title of the subject premises and therefore does not constitute a defect or encumbrance affecting plaintiffs' title to the premises.
  
  Plaintiffs, while not directly disputing this contention, argue that TRW was put on "inquiry notice" of the existence of the lease based upon Ruth Thomson's tenancy, even though that tenancy was incorrectly shown on the sales contract as "month-to-month" "no written lease", because the lease was a matter of public record in the chain of title of the subject premises and, therefore, plaintiffs had an absolute right to rely on the expertise of TRW to locate it and raise it as an objection.
  
  "The recording statutes in a grantor-grantee indexing system charge a purchaser with notice of matters only in the record of the purchased land's chain of title back to the original grantor (see, Andy Assocs. v Bankers Trust Co., 49 NY2d [13], supra, at 24; 4A Warren's Weed, op. cit., Recording, § 1.04, at 10; Aiello v Wood, 76 AD2d 1019; Doyle v Lazarro, 33 AD2d [142], supra, at 144, affd without opn 33 N.Y.2d 981, supra). Buffalo Academy [Buffalo Academy of the Sacred Heart v Boehm Bros. Inc., 267 N.Y. 242] recognized that a `purchaser is not normally required to search outside the chain of title' (Doyle v Lazarro, supra [emphasis added]; accord, Steinmann v Silverman, 14 N.Y.2d 243, 247), and is not chargeable with constructive notice of conveyances recorded outside of that purchaser's direct chain of title where, as in [Ulster] County (see, Real Property Law § 316-a), the grantor-grantee system of indexing is used (see, Andy Assocs. v Bankers Trust Co., 49 NY2d, supra, at 24; 4A Warren's Weed, op. cit., Restrictive Covenants, § 3.05, at 33-34;  5A Warren's Weed, op. cit., Title Examination, § 5.18, at 67-68) (Witter v Taggart, 78 N.Y.2d 234, 238-239).
  
  "The concept of `chain of title' has been largely moulded [sic] by judicial decisions as to the scope of a reasonable burden of searching the records. This has been, in turn, influenced by the indexing practices of recording offices. In consequence, it is commonly held that a purchaser is required to search the records only from the date on which a prior owner acquired title to the date on which he [or she] parted therewith. This rule excludes from the `chain of title' any instrument recorded before acquisition, or after a recorded relinquishment." (Powell, Real Property ¶ 916 [abridged].)
  
  Although the lease was recorded some four months before the conveyance of the property from Amoroso to plaintiffs, given the current grantor-grantee recording system utilized in Ulster County, we find this recording insufficient to charge plaintiffs with constructive notice of the lease (see, Real Property Law § 291) because it was recorded after Ruth Thomson's recorded relinquishment of her title to Amoroso.
  
  Consequently, the lease instrument was outside the "chain of title". As subsequent purchasers, plaintiffs were not required to search in the grantor-grantee indexing system outside their direct chain of title (see, Buffalo Academy of Sacred Heart v Boehm Bros., supra; Doyle v Lazarro, supra).[1]
  
  Plaintiffs also contend that TRW was put on inquiry notice (see, Witter v Taggart, supra, at 241) of the existence of the Thomson lease because Ruth Thomson, a prior owner of record, was listed in the sales contract as a month-to-month tenant.
  
  "`The general rule is that actual possession of real estate is notice to all the world of the existence of any right which the person in possession is able to establish'" (Wardell v Older, 70 AD2d 1008, 1009, quoting Erlich v Hollingshead, 275 App Div 742; see, Phelan v Brady, 119 N.Y. 587, 591-592; Nethaway v Bosch, 199 AD2d 654).
  
  Because it is not common practice for title insurance examiners to physically inspect the premises prior to the issuance of title insurance policies, most policies except the rights of persons in possession (see, Herbil Holding Co. v Commonwealth Land Tit. Ins. Co., 183 AD2d 219, 224, 226) to avoid the notice problem that arises out of actual possession.
  
  In this case, however, the policy issued by TRW's predecessor in interest, as previously noted, excepted only "[r]ights of present tenants and occupants on a month-to-month basis as per contract of sale". Therefore, the rights of all persons in possession, particularly those in possession pursuant to a lease, were not excepted. Thus, TRW was chargeable with the same notice from the occupants' actual possession of the property as plaintiffs.
  
  Nevertheless, it is our view that the actual possession by Ruth Thomson did not provide notice of the lease. The possession that will be equivalent to actual notice must be "inconsistent with the title of the apparent owner by the record" (Holland v Brown, 140 N.Y. 344, 348; see, Schenectady Sav. Bank v Wertheim, 237 App Div 311, 313, affd 263 N.Y. 585).
  
  The record owner in this case expressly provided in the contract of sale that the premises were being sold subject to Ruth Thomson's month-to-month tenancy. Ruth Thomson's possession of the premises was entirely consistent with her rights as a month-to-month tenant and, therefore, her actual possession was not inconsistent with the title of the apparent owner by the record. Her possession, therefore, could not provide notice of the lease.
  
  Furthermore, because John Thomson's residence in the apartment with his wife was entirely consistent with her month-to-month tenancy, and not inconsistent with the title of the record owner, his possession, like his wife's, could not establish actual notice of the lease (cf., Pope v Allen, 90 N.Y. 298, 302; Diamond v Wasserman, 8 AD2d 623, 624). TRW's failure to inquire under these circumstances does not defeat its claim that plaintiffs, as subsequent bona fide purchasers for value, were entitled to the protection of the Recording Act (Real Property Law § 290 et seq.; see, Sweet v Henry, 175 N.Y. 268, 276; Wardell v Older, supra; see also, United States v McCombs-Ellison, 826 F Supp 1479, 1493-1494).
  
  Accordingly, we grant judgment in TRW's favor[2] and declare that the lease from Ruth Thomson to John Thomson does not constitute a defect or encumbrance affecting plaintiffs' title to the premises for the purposes of determining TRW's liability under its title insurance policy and that TRW should be discharged of all responsibility to plaintiffs under its title insurance policy. In anticipation of such a declaration, plaintiffs requested in their brief that we take the additional step of declaring the lease to be invalid and unenforceable as against them. However, plaintiffs failed to appeal Supreme Court's order that granted summary judgment to John Thomson and awarded him joint occupancy, use and possession of the premises pursuant to the lease. Under these circumstances, we lack the authority to grant their request for affirmative relief (see, Hecht v City of New York, 60 N.Y.2d 57).

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Nethaway v. Bosch, 199 A.D.2d 654; 605 N.Y.S.2d 135 (App.Div. 3d Dept. 1993):

• Isabella's motion for summary judgment dismissing the complaint as to her was granted, resulting in this appeal by plaintiffs. Isabella's motion was based upon her rights under the recording act (see, Real Property Law § 290 et seq.) as an alleged bona fide purchaser for value and, therefore, she was required to establish that she purchased the property for valuable consideration without knowledge of facts that would lead a reasonably prudent purchaser to make inquiry (see, Berger v Polizzotto, 148 AD2d 651, 652, 539 N.Y.S.2d 401, lv denied 74 N.Y.2d 612, 546 N.Y.S.2d 556, 545 N.E.2d 870).
  
  
  ***
• "'The general rule is that actual possession of real estate is notice to all the world of the existence of any right which the person in possession is able to establish'" (Wardell v Older, 70 AD2d 1008, 1009, 418 N.Y.S.2d 196, quoting Erlich v Hollingshead, 275 A.D. 742, 87 N.Y.S.2d 682; see, Phelan v Brady, 119 NY 587, 591-592, 23 N.E. 1109).

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Vitale v. Pinto, 118 A.D.2d 774; 500 N.Y.S.2d 283 (NYS App. Div. 2d Dept. 1986):

• The plaintiff leased the premises at 1697 Schenectady Avenue from its owner, Salvatore Pinto, for a six-year period commencing November 1976. The lease included an option to purchase the property free from all encumbrances, although the owner retained the right to mortgage the property for up to $15,000 during the term of the lease; for this option the plaintiff paid $4,000.
  
  The plaintiff did not record the lease.
  
  In January 1981, Pinto, along with the defendant Lucy Ferrare, executed a blanket mortgage to mortgagee Lloyd Capital Corp. with respect to both the Schenectady Avenue property and a piece of property owned by Ferrare, to secure a loan of $ 38,825; the mortgage was recorded in February 1981.
  
  The mortgagee was aware that the Schenectady Avenue property was tenant occupied but was told by the owner, Pinto, that the plaintiff was a month-to-month tenant with no written lease.
  
  In August 1982 the plaintiff attempted to exercise her option to purchase, but was unsuccessful. She then brought the instant action against Pinto seeking specific performance of the option and conveyance of the property free of all encumbrances and against the mortgagee for a declaration that the mortgage was void as it affected the Schenectady Avenue property.
  
  The plaintiff was granted summary judgment as to Pinto, who was ordered to convey the property free of all encumbrances except the mortgage in question. After trial, the mortgage in question was declared null and void as it affects the Schenectady Avenue property.
  
  The trial court properly ruled that the recording statute (Real Property Law § 291) is not applicable under these circumstances to make the plaintiff's unrecorded lease subordinate to the mortgagee's interest in the property.
  
  The plaintiff was in open possession of the property; therefore, the mortgagee was on notice of all rights to the property plaintiff could establish (see Phelan v Brady, 119 NY 587, 591-592; Leeds v State of New York, 20 NY2d 701, 703).
  
  Thus, the mortgagee "is presumed either to have made the inquiry, and ascertained the extent of [the] prior right, or to have been guilty of a degree of negligence * * * fatal to [its] claim [that it is] a bona fide purchaser" (Williamson v. Brown, 15 NY 354, 362).
  
  Having failed to inquire of the tenant as to her interest in the property, the mortgagee is guilty of a degree of negligence fatal to its claim that it is a bona fide purchaser.
  
  Real Property Law § 291 will act to void an unrecorded conveyance of an interest in property as against a recorded subsequent lien only when the subsequent transaction is made in good faith and the subsequent purchaser is a bona fide purchaser; such is not the case here. However, because the lease permitted the owner to mortgage the property to the extent of $ 15,000, even had the mortgagee made proper inquiry and discovered the lease, it would have been entirely proper to secure a $ 15,000 loan with a mortgage on the property. Thus, the mortgagee's security interest in the property should not be entirely subordinated to the plaintiff's right under the lease option; only that part of the blanket mortgage beyond $ 15,000 must be subordinated to the plaintiff's right to the property.
  
  The owner was ordered to convey the property to the plaintiff by order of Special Term. That conveyance must be deemed to have been encumbered by a $ 15,000 mortgage. Furthermore, the mortgagee's interest need not be voided; a declaration that the mortgagee's lien is subordinate to the plaintiff's interest to the extent it exceeds $ 15,000 provides sufficient protection to the plaintiff. Moreover, as to the remainder of the lien, the plaintiff retains her rights as against Pinto who was obligated to deliver the property free of all encumbrances.

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Miles v. De Sapio, 96 A.D.2d 970; 466 N.Y.S.2d 848 (NYS App. Div. 3d Dept. 1983):

• Where there are conflicting claims between a prior unrecorded deed and a subsequent purchaser, if the purchaser "has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser" (Williamson v Brown, 15 NY 354, 362; accord 487 Elmwood v Hassett, 83 AD2d 409, 412, app dsmd 55 NY2d 1037).
  
  Furthermore "[the] general rule is that actual possession of real estate is notice to all the world of the existence of any right which the person in possession is able to establish" (Erlich v Hollingshead, 275 App Div 742; see, also, Holland v Brown, 140 NY 344, 347; Phelan v Brady, 119 NY 587, 591-592; Wardell v Older, 70 AD2d 1008, 1009).
  
  Here, plaintiffs knew that defendants lived in a large house trailer on the property through which the purported easement passed and that their claimed easement immediately adjoined (within a matter of feet) defendants' house trailer. It is further uncontested that the physical appearance of the dirt road or right of way crossing defendants' property was only 10 feet in width, as opposed to the 30-foot wide easement.
  
  Plaintiffs admit they did not inquire of defendants as to defendants' possible rights or title in the disputed property, and there is no indication in the record that if such an inquiry had been made, defendants' interest would not have been disclosed.
  
  An easement is clearly a conveyance of real property subject to the recording act and related case law, which expressly conditions the superiority of the rights of the subsequent grantee on his having purchased "in good faith" (Real Property Law, § 291; Ward v Metropolitan El. Ry. Co., 152 NY 39; Pallone v New York Tel. Co., 34 AD2d 1091, affd 30 NY2d 865).
  
  Accordingly, plaintiffs had sufficient facts in their possession to be on inquiry notice to defendants' interest in the disputed parcel. Their failure to inquire as to defendants' rights removed them from the protection of the recording act, and defendants' prior title in the property should prevail.
  
  
  ***
  
  Accordingly, since, on these undisputed facts, plaintiffs were at least on inquiry notice as to defendants' prior interest, the judgment granted plaintiffs a 30-foot easement over defendants' land should be reversed, plaintiffs' complaint dismissed, and the matter remitted to County Court for further proceedings on defendants' counterclaim.

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Matter of XAR Corp. v Di Donato, 76 AD2d 972 (N.Y. App, Div. 3d Dept. 1980):

• Petitioner contends that it is entitled to the protection of the recording acts, and that the agreement is not a lease, but an easement or license which was extinguished upon the transfer of title by Pioneer Village Development Corporation to petitioner.
  
  The recording statutes protect only a subsequent purchaser in good faith and for a valid consideration. Actual "knowledge and notice of any facts which would put a prudent man upon inquiry, impeaches the good faith of the subsequent purchaser". (Brown v Vokening, 64 N.Y. 76, 82.)
  
  Here, petitioner admits that it had knowledge of the existence of the sign, and made no inquiry of respondents concerning their rights or interests. Petitioner's reliance on the representations of its grantor in the purchase agreement that there were no liens or encumbrances other than those set forth in the agreement is misplaced. The terms of the agreement do not establish that any inquiry was, in fact, made concerning the status of the sign or signs on the premises.
  
  If inquiry was, in fact, made, the terms of the agreement only establish that petitioner was deceived by the grantor. This, however, does not relieve petitioner of its duty to inquire of respondents as to their rights in the premises. Petitioner was, therefore, not entitled to the protection of the recording statutes.
  
  Although invariably labeled "leases", agreements to erect advertising signs or to place signs on walls or fences are easements in gross (Rochester Poster Adv. Co. v Smithers, 224 App Div 435; Rochester Poster Adv. Co. v State of New York, 27 Misc 2d 99, affd 15 AD2d 632, affd 11 N.Y.2d 1036). "Although such an easement is a personal privilege, it is more than a revocable license." (Borough Bill Posting Co. v Levy, 144 App Div 784, 789.) The agreement herein was based on a valuable consideration which had been paid by respondents, and both parties were bound by its terms. So long as respondents paid the stipulated price for the use of the property, they were entitled to the use of the premises for the purposes mentioned in the agreement and for the full time mentioned therein. When petitioner purchased this property, it knew of the existence of respondent's advertising sign on the property.
  
  Under the circumstances, it was not important that the instrument executed between the respondent and Pioneer Village Development Corporation was not recorded, or that the deed to petitioner was silent on the subject of respondents' right in the premises. The location of the sign on the premises petitioner was about to purchase was notice to it of any rights respondents might have under its agreement with petitioner's grantor, and petitioner took its title subject to them (Rochester Poster Adv. Co. v Smithers, supra)..