New York Bona Fide Purchaser/Duty To Inquire - Trial Court Rulings

The following compilation of court rulings from various lower courts in the state of New York address, either directly or tangentially, the issue of the effect of possession of 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, and an August 1, 2014 post of cases from the various New York State intermediate appellate courts.

As stated in the earlier posts, 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..

New York State Lower Court Cases

Harris v. Thompson, 2009 NY Slip Op 51919 (Sup. Ct. Queens Cty. 2009) (case involved an alleged sale leaseback, equity stripping, foreclosure rescue ripoff where the screwed over homeowner, a disabled senior citizen ("Harris"), successfully obtained a preliminary injunction against a foreclosing lender ("AmTrust") halting a scheduled foreclosure sale):

• With respect to the claim pursuant to RPAPL article 15, defendant AmTrust claims that its assignor was a bona fide encumbrancer, and, thus, it is protected in its interest as holder of the Thompson mortgage.
  
  Plaintiff Harris argues that OSB was not a bona fide encumbrancer, insofar as she was in open and continuous possession and occupancy of the subject premises, and OSB made the mortgage loans to Leslie and Thompson without inquiring as to Harris' presence there.
  
  Plaintiff Harris alleges that an inquiry as to her status at the time of the making of the mortgage loans to defendants Leslie and Thompson, would have alerted OSB as to the alleged fraud being perpetrated upon her by defendants Banks, Leslie, Gray and Thompson.
  
  "A bona fide purchaser or encumbrancer for value is protected in its title unless it had previous notice of the fraudulent intent of its immediate grantor' (Fleming-Jackson v Fleming, 41 AD3d 175, 176 [2007]; see Real Property Law § 266; Fischer v Sadov Realty Corp., 34 AD3d 630, 631 [2006]; Karan v Hoskins, 22 AD3d 638, 638 [2005])" (Mathurin v Lost & Found Recovery, LLC, ___ AD3d ___, 2009 WL 2516872, 2009 NY App Div LEXIS 6077).
  
  "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 [1890]; see Leeds v State of New York, 20 NY2d 701, 703 [1967]; see also Greenpoint Sav. Bank v McMann Enterprises, Inc., 214 AD2d 647 [1995]).
  
  Under such circumstance, the purchaser or encumbrancer 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 its claim to be considered as a bona fide purchaser or encumbrancer (see Phelan v Brady, 119 NY 587, 591-592 [1890], supra; Vitale v Pinto, 118 AD2d 774 [1986]).
  
  When taken together, the allegations of plaintiff Harris in her complaint and in her affidavit are sufficient to state a cause of action against defendant AmTrust pursuant to RPAPL article 15 (see Mathurin v Lost & Found Recovery, LLC, ___ AD3d ___, 2009 WL 2516872, 2009 NY App Div LEXIS 6077, supra; LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 599-600 [2007]; see also Fischer v Sadov Realty Corp., 34 AD3d 630, 631 [2006], supra; cf. Merritt v Merritt, 47 AD3d 689, 689 [2008]; Fleming-Jackson v Fleming, 41 AD3d 175, 176 [2007], supra; Deutsche Bank Nat. Trust Co. v Fitzworme, 22 Misc 3d 1134[A]).
  
  That branch of the cross motion by defendant AmTrust pursuant to CPLR 3211(a)(7) to dismiss the complaint asserted against it is granted only to the extent of dismissing those portions of the complaint based upon OSB's negligence in underwriting the mortgage loans in amounts greater than or equal to the fair market value of the property and fraud.
  
  With respect to the motion by plaintiff Harris, the court may grant a preliminary injunction in its discretion where the plaintiff shows: (1) probability of success on the merits; (2) danger of irreparable injury in the absence of an injunction; and (3) balance of the equities in its favor (see CPLR 6301; W.T. Grant Co. v Srogi, 52 NY2d 496, 517 [1981]; Ying Fung Moy v Hohi Umeki, 10 AD3d 604 [2004]; Hightower v Reid, 5 AD3d 440 [2004]).
  
  In the absence of injunctive relief prohibiting defendant AmTrust from taking any steps to continue to prosecute the AmTrust action, encumber, rent, sell or transfer any interest in the property, or evict Harris, a later judgment herein, in Harris' favor, may be rendered ineffectual (see Hightower v Reid, 5 AD3d 440 [2004], supra).
  
  The equities lie in favor of preserving the status quo (see Ying Fung Moy v Hohi Umeki, 10 AD3d 604 [2004], supra).
  
  Accordingly, a preliminary injunction is granted to the extent that defendant AmTrust is enjoined from taking any steps to prosecute the AmTrust action, including scheduling a foreclosure sale, selling, transferring, conveying or encumbering title or seeking the eviction or removal of plaintiff Harris from the subject premises. The foregoing is conditioned upon plaintiff Harris paying the continued carrying charges, including hazard insurance premiums, and filing an undertaking in accordance with CPLR 6312.

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Williams v. Mentore, 2012 NY Slip Op 31965 (Sup. Ct. Queens Cty. 2012) (case involved an alleged sale leaseback, equity stripping, foreclosure rescue ripoff where the screwed over homeowner, a senior citizen ("Williams"), successfully convinced the judge to deny a foreclosing lender's ("Wells Fargo") motion for summary judgment in a foreclosure action):

• A mortgagee's interest in the property is protected unless it has notice of a previous fraud affecting the title of its grantor (see Real Property Law § 266; Thomas v Lasalle Bank Nat. Assn., 79 AD3d 1015 [2010]; Mathurin v Lost & Found Recovery, LLC, 65 AD3d 617 [2009]).
  
  In addition, as the Appellate Division, Second Department, in Stracham v Bresnick, (76 AD3d 1009 [2010]) explained:
  
  "`"[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 [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 [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 [1890]; see 1426 46 St., LLC v Klein, 60 AD3d 740, 743 [2009])."
  
  Summary judgment is not warranted here, particularly on the limited facts presented in the papers submitted and since no parties have been deposed.
  
  Furthermore, defendant Wells Fargo has failed to make a prima facie showing that it is protected in its title because it lacked notice of any fraud affecting the title of defendant London, and that plaintiff was not the victim of a fraudulent scheme by the individual defendants to deprive her of her ownership interest in the property.
  
  Plaintiff has raised triable issues of fact as to whether she is the victim of a scheme to defraud her of her property and equity therein, and whether her actual possession of the subject premises should have led defendant Wells Fargo to inquire further about defendant Bindra's ownership thereof and become alerted to the fraud allegedly perpetrated against her by the individual defendants (see Phelan v Brady, 119 NY 587, 591-592 [1890], supra; Maiorano v Garson, 65 AD3d 1300 [2009], supra; but see Fleming-Jackson v Fleming, 41 AD3d 175 [2007]).
  
  Defendant Wells Fargo offers the affidavit of its employee, Christen J. Beckman, indicating Wells Fargo obtained a title search relative to the subject property prior to the execution of the mortgage, and that the title search did not reveal any conflicts in title with defendant Bindra.
  
  Defendant Wells Fargo, however, has failed to present a copy of that title search in support of its motion (CPLR 4523; Maiorano v Garson, 65 AD3d 1300 [2009], supra; see also Commandment Keepers Ethiopian Hebrew Congregation of the Living God, Pillar & Ground of Truth, Inc. v 31 Mount Morris Park, LLC, 76 AD3d 465 [2009]).
  
  Instead, it offers a copy of the computer printout from Automated City Register Information System website of the Office of the City Register, New York City Department of Finance, which is not evidence in admissible form (CPLR 3212 [b]; see Alvarez v Prospect Hosp., 68 NY2d 320 [1986], supra).
  
  Defendant Wells Fargo, furthermore, has failed to establish a prima facie showing that the deed from plaintiff into Bindra was not the product of fraud in the inducement or factum (cf. Cash v Titan Financial Services, Inc., 58 AD3d 785 [2009]).
  
  Moreover, plaintiff, in her affidavit in opposition to the motion, states among other things, that she has lived at the property for over 30 years, and indicated she never intended to sell her property, and always wanted it to remain in her family.
  
  Ms. Beckman, whose claimed knowledge of the relevant facts is based upon her review of the mortgage and closing documents, asserts that Wells Fargo did not become aware of any facts which raised suspicion of fraud or wrongdoing, and did not know plaintiff claimed to reside in the property at the time of the execution of the mortgage. She states the title search failed to reveal that plaintiff resided at the property. Again, no copy of the title search has been provided to the court.
  
  More importantly, Ms. Beckman admits that no representative of Wells Fargo visited the property prior to the execution of the mortgage.
  
  Defendant London, in his affidavit offered in support of the motion by defendant Wells Fargo, indicates that plaintiff has been in physical possession and occupancy of the premises "since it was sold to [him] in October 2008." He too has failed to explain whether he inquired as to whether plaintiff had any right or title to the property which was in conflict with that which he was to purchase.

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ATN Fulton, LLC v. Deep Dale Grocery, Inc., 2013 NY Slip Op 50268(U) (Dist. Ct. Nassau Cty, 1st Dist. 2013):

• The evidence demonstrates that both Mr. Rahman and Mr. Siddiqui knew of the tenants at the premises but never inquired with Deep Dale (Stop & Shop) about its lease.
  
  This court is constrained under the facts of this case to hold that ATN failed to exercise due diligence by not obtaining the lease held by Deep Dale.
  
  ATN entered into a contract of sale without requiring production of the leases. ATN agreed to take the property "AS IS" subject to existing tenancies. ATN and its principals never made proper inquiry concerning Deep Dale's lease even though it knew that Deep Dale (Stop & Shop) occupied the premises. Thus, ATN is estopped from trying to void the Deep Dale lease. See 1426 46 St., LLC v. Klein, 60 AD3d 740, 876 N.Y.S.2d 425 (2nd Dep't 2009), wherein the court stated:
  
  Although a lease for a term exceeding three years is a conveyance which may be recorded (see Real Property Law § 290[2]), an unrecorded conveyance is void only as against a subsequent good faith purchaser for value (see Real Property Law § 291). Moreover, "[a]ctual possession of real estate is sufficient notice. . . 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 N.E. 1109; see Ward v. Ward, 52 AD3d 919, 921, 859 N.Y.S.2d 774; Nethaway v. Bosch, 199 AD2d 654, 605 N.Y.S.2d 135).
  
  The Court of Appeals held in Phelan v. Brady, 119 NY 587 that actual possession is notice to the world of the tenant's rights in the real estate:
  
  It may be true, as has been argued by the plaintiff's counsel, that when a party takes a conveyance of property situated as this was, occupied by numerous tenants, it would be inconvenient and difficult for him to ascertain the rights or interests that are claimed by all or any of them.
  
  But this circumstance cannot change the rule. 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. (Governeur v. Lynch, 2 Paige, 300; Bank of Orleans v. Flagg, 3 Barb. 318; Moyer v. Hinman, 14 NY 184; Tuttle v. Jackson, 6 Wend. 213; Trustees of Union College v. Wheeler, 61 NY 88, 98; Cavalli v. Allen, 57 id. 517).
  
  Thus, ATN took the premises subject to the said Deep Dale lease. Failure to provide leases is not fraud.

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Barber v. Cornell Univ. Coop. Extension of Orange County, 2012 NY Slip Op 52067 (Sup. Ct. Orange Cty. 2012):

• As the Court stated in Haleemeh M.S. ex rel. Mohammad S.F. v MRMS Realty Corp., 28 Misc 3d 443 (Sup. Kings, 2010):
  
  "Constructive notice" is described both as a legal inference and a duty of inquiry. "Constructive notice is a legal inference from established facts." (Bierzynski v. New York Central R.R. Co.., 31 AD2d 294, 297, 297 N.Y.S.2d 457 [4th Dept 1969], aff'd 29 NY2d 804 [1971] [quoting Birdsall v. Russell, 29 NY 220, 248 (1864)].)
  
  "Constructive notice ordinarily means that a person should be held to have knowledge of certain facts because he knows other facts from which it is concluded that he actually knew, or ought to have known, the fact in question." (Id. [quoting 42 NY Jur., Notice and Notices, § 3.)
  
  "Constructive notice also exists whenever it is shown that reasonable diligence would have produced actual notice." (Id.) "A person is chargeable with constructive notice of any fact which would have been disclosed by a reasonably diligent inquiry if circumstances are such as to indicate to a person of reasonable prudence and caution the necessity of making inquiry to ascertain the true facts and he or she avoids such inquiry." (Majer v. Schmidt, 169 AD2d 501, 503, 564 N.Y.S.2d 722 [1st Dept 1991].)
  
  "One who has reasonable grounds for suspecting or inquiring ought to suspect, ought to inquire, and the law charges him with the knowledge which the proper inquiry would disclose." (Fidelity & Deposit Co. v. Queens County Trust Co., 226 NY 225, 233 [1919].).

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HSBC Mtge. Servs., Inc. v. Alphonso, 2007 NY Slip Op 51657 (Sup. Ct. Kings Cty. 2007):

• HSBC has demonstrated that Point acquired the deed under circumstances giving rise to constructive/inquiry notice. HSBC argues that upon searching the public records, Point would have found Parnes to be the record owner of the premises even though Alphonso may have been in possession.
  
  "A reasonable purchaser, faced with title and possession apparently resting in two different people, would certainly investigate the matter further, rather than simply assume that the possessor of the property held an unrecorded and unencumbered title." In re Rodriguez, 261 B.R. 92, 94 (E.D.N.Y 2001); also see, Tompkins County Trust Co. v. Talandis, 261 AD2d 808 (N.Y.A.D. 3rd Dept., 1999) (purchaser has a duty to examine where person in open and notorious possession of the property is inconsistent with the title owner of record).
  
  Since Parnes was the record owner and Alphonso was in possession and the seller of the premises, Point was on notice to investigate further. Such an investigation would have revealed that the Parnes mortgage (dated January 6, 2004, recorded August 10, 2004) was already satisfied by proceeds from the HSBC mortgage (satisfied October 11, 2005).
  
  "Where 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 [which] 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 N.Y 354, 354 (1857); Vitale v. Pinto, 118 AD2d 774, 776 (N.Y.A.D., 1986).
  
  Once HSBC established that Point was on notice, and thus not a purchaser in good faith, the burden switched to Point to prove that there remained any issue of fact. see Davenport v. County of Nassau, supra . However, Point failed to provide any evidentiary proof to rebut the plaintiff's arguments.
  
  Maor states that he knew of the Parnes mortgage (in the amount of $420,000, dated January 6, 2004, recorded August 10, 2005) because it was in the public records but provides no evidence or claims of a further investigation as to the title or status of the property and/or mortgage. Hence, Point does not meet its burden of showing that there are issues of fact, rather, its principal, Maor, actually admitted to having knowledge that would lead a reasonable person to inquire further (see In re Rodriguez, supra ), but provided no reason or explanation as to why no further inquiry was ever undertaken.
  
  Consequently, HSBC has demonstrated that, as a matter of law, Point was not a bona fide purchaser for valuable consideration and in good faith,and thus cannot invoke the protection of the recording statute although they had won the race to record. Barrett v. Littles, 201 AD2d 444 (N.Y.A.D., 1994); see Real Property Law 291.

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Washington Temple Church of God in Christ, Inc. v Global Props. & Assoc., Inc., 15 Misc 3d 1142[A], 2007 NY Slip Op 51114[U] [2007], affd 55 AD3d 727 [2008]:

• "A purchaser of an interest in land . . . has no cause for complaint under the [recording] statute when its interest is upset as a result of a prior claim against the land the existence of which was apparent on the face of the public record at the time it was purchased." (Andy Assoc. v. Bankers Trust Co., 49 NY2d 13, 20 [1979]; see also Trust Company of New Jersey v. Genser, 271 AD2d 524, 526 [2d Dept 2000].) "[I]n counties using a block and lot' indexing system, a purchaser is charged with record notice of all matters indexed under the block and lot numbers corresponding to the purchaser's property, regardless of whether such information also appears in his or her direct chain of title." (Farrell v. Sitaras, 22 AD3d 518, 520 [2d Dept 2005].) "Kings County . . . has used a block and lot' system since July 1, 1964." (Id.)
  
  "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, Ltd. v. Stefansky, 301 AD2d 562, 564 [2d Dept 2003]; see also Astoria Federal Savings & Loan Assoc. v June, 190 AD2d 644, 645 [2d Dept 1993].) Plaintiff's recorded deed provided notice that Plaintiff could assert a claim for relief against Defendants, so as to preclude a viable defense of laches. (See Stasson v. Casini & Huang Construction, Inc., 241 AD2d 448, 448 [2d Dept 1997].)
  
  Neither Global Properties, Spitzer, nor Ticor disputes Washington Temple's affidavit evidence that the Subject Property has been used as a parking lot from 1976, when it was acquired, until 2005, nor does anyone explain how that use could have escaped their attention as they proceeded with purchase transactions, respectively, of $180,000.00 and $400,000.00. "[A]ctual possession of land is sufficient notice to all the world of the existence of any right which the person so in possession is or may be able to establish." (Holland v. Brown, 140 NY 344, 347 [1893]; see also Miles v. DeSapio, 96 AD2d 970, 970 [3d Dept 1983]; Diamond v. Wasserman, 8 AD2d 623, 624 [2d Dept 1959].).

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Mazza v. Realty Quest Brokerage Corp., 185 Misc.2d 162, 168, 712 N.Y.S.2d 288, 293 (N.Y. City Civ.Ct. 2000):

• Defendant Perkinson argues that plaintiff had constructive notice of her life estate. In addition, she claims that plaintiff had a duty to inquire about her tenancy.
  
  
  ***
  
  Defendant Perkinson testified at her examination before trial that several people came to see the house, but she never let them in.
  
  "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 [1890]; Miles v De Sapio, 96 AD2d 970 [3d Dept 1983]; Nethaway v Bosch, 199 AD2d 654 [3d Dept 1993].)
  
  In addition, plaintiff and his father had sufficient facts to impose on them a duty to inquire as to defendant Perkinson's tenancy. Where a tenant is in possession of the property at the time of purchase, or in this case, at the time the mortgage was executed, the purchaser or mortgagee is required to inquire about the title. (Williamson v Brown, 15 NY 354 [1857].
  
   "[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, supra, at 362; Vitale v Pinto, 118 AD2d 774 [2d Dept 1986].).
  
  
  ***
  
  In addition, the fact that defendant Perkinson may not have told people who came to inspect the apartment about her life estate is of no consequence. Plaintiff has failed to show that defendant Perkinson had a duty to impart this information to these "unknown persons." Rather, plaintiff had a duty to inquire as to defendant Perkinson's interest in the property
  
   Furthermore, a search of the title record would have indicated that the subject property, with a value of over $100,000, had been purchased from Sadie Pedlar, the administratrix of Eric Pedlar's estate, for less than $40,000. This would have put plaintiff on notice that there might be a cloud on the title.
  
  
  ***
  
  Accordingly, under the facts presented herein, plaintiff is not a bona fide mortgagee and defendant Perkinson's life estate has priority over the second mortgage.

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In re Rodriguez, 261 B.R. 92 (E.D.N.Y 2001):

• New York Real Property Law § 291 states that "[e]very [conveyance of real property] not so recorded is void as against any person who subsequently purchases . . . the same real property . . . in good faith and for a valuable consideration."
  
  However, a purchaser with either notice of an unrecorded prior interest in the property, or one with knowledge of facts that would lead a reasonably prudent purchaser to make inquiries concerning such an interest may not avail himself of the benefit of Section 291. Chen v. Geranium Development Corp., 243 A.D.2d 708, 709, 663 N.Y.S.2d 288, 290 (2d Dept.1997); Reynolds v. Springer Service Station, Inc., 151 A.D.2d 466, 467, 542 N.Y.S.2d 256, 257 (2d Dept.1989).
  
  
  ***
  
  A reasonable purchaser, faced with title and possession apparently resting in two different people, would certainly investigate the matter further, rather than simply assume that the possessor of the property held an unrecorded and unencumbered title. Tompkins County Trust Co. v. Talandis, 261 A.D.2d 808, 810, 690 N.Y.S.2d 330, 333 (3d Dept.1999) (purchaser has duty to examine where person in open and notorious possession of the property is inconsistent with the title of the owner of record); Vitale v. Pinto, 118 A.D.2d 774, 776, 500 N.Y.S.2d 283, 285 (2d Dept.1986) (mortgagee who was aware of tenant in possession had duty to inquire into tenant's interest in the property); Mazza v. Realty Quest Brokerage Corp., 185 Misc.2d 162, 168, 712 N.Y.S.2d 288, 293 (N.Y.City.Civ.Ct.2000).

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Morse v. Howard Park Corp., 50 Misc. 2d 834, 272 NYS 2d 16 (Sup. Ct. Queens Cty. 1966):

• The doctrine of constructive notice was best defined in the case of Williamson v. Brown (15 N.Y. 354) which is the landmark decision in this area. There the court defined constructive notice in a manner which has been often quoted not only by the courts of this State, but also by the courts of sister states.
  
  The court stated (p. 362): "If these authorities are to be relied upon, and I see no reason to doubt their correctness, the true doctrine on this subject is, that where 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. This presumption, however, is a mere inference of fact, and may be repelled by proof that the purchaser failed to discover the prior right, notwithstanding the exercise of proper diligence on his part." Therefore, "To charge a party with notice, the circumstances known by him must be such as ought reasonably to have excited his suspicion, and to have lead him to inquire." (Baker v. Bliss, 39 N.Y. 70, 74.)
  
  In later cases, the Court of Appeals has reaffirmed the definition of constructive notice laid down in Williamson (supra). For example, in Fidelity & Deposit Co. v. Queens County Trust Co. (226 N.Y. 225, 233), the court stated: "One who has reasonable grounds for suspecting or inquiring ought to suspect, ought to inquire, and the law charges him with the knowledge which the proper inquiry would disclose. Actual notice may be proved by direct evidence or it may be inferred or implied. Actual knowledge is not required. Actual notice embraces all degrees and grades of evidence, from the most direct and positive proof to the slightest circumstance from which a jury would have been warranted in inferring notice. If a person has knowledge of such facts as would lead a fair and prudent man, using ordinary thoughtfulness and care, to make further accessible inquiries, and he avoids the inquiry, he is chargeable with the knowledge which by ordinary diligence he would have acquired. Knowledge of facts, which, to the mind of a man of ordinary prudence, beget inquiry, is actual notice, or, in other words, is the knowledge which a reasonable investigation would have revealed. (First National Bank of Paterson v. National Broadway Bank, 156 N.Y. 459; Baker v. Bliss, 39 N.Y. 70; Williamson v. Brown, 15 N.Y. 354; Anderson v. Blood, 152 N.Y. 285; Peck v. Bank of America, 16 R. I. 710.) ".
  
  
  ***
  
  The doctrine of constructive notice, as applied in real property cases, is generally applied in three areas. It has been used to charge purchasers of real property with notice of other recorded documents affecting their property even where the purchaser was unaware of these documents. (See Bentley v. Gardner, 45 App. Div. 216.) It has also been applied to charge a purchaser with knowledge where a third person is in possession of the land under a previous unrecorded title at the time the purchaser took title to the land. (Schenectady Sav. Bank v. Werthein, 237 App. Div. 311.) And it has most often been applied in cases involving foreclosure of mortgages executed after unrecorded mortgages or contracts of sale had been made by the mortgagor with other persons. (See Ardisko, Ltd. v. Taconic Holding Corp., 10 A D 2d 973; Cassia Corp. v. North Hills Holding Corp., 278 App. Div. 960; see, also, Builders Equity v. Larkport Bldg. Corp., 17 Misc 2d 967.)
  
  The applicability of the doctrine to actions involving real property was discussed in Parker v. Conner (93 N.Y. 118). That case involved the question of whether the doctrine should be applied to purchasers of chattels, but the court, in discussing the applicability of the doctrine to real property transfers, stated (p. 124) "The doctrine of constructive notice has been most generally applied to the examination of titles to real estate. It is the duty of a purchaser of real estate to investigate the title of his vendor, and to take notice of any adverse rights or equities of third persons which he has the means of discovering and as to which he is put on inquiry. If he makes all the inquiry which due diligence requires, and still fails to discover the outstanding right, he is excused; but if he fails to use due diligence, he is chargeable, as matter of law, with notice of the facts which the inquiry would have disclosed. (Williamson v. Brown, 15 N.Y. 354, and cases cited; Acer v. Westcott, 46 id. 384; 7 Am. Rep. 355.)".

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Mortgage Elec. Registration Sys., Inc. v. Pagan, 2014 NY Slip Op 5309 (App. Div., 2d Dept. 2014):

• Moreover, Deutsche Bank failed to demonstrate that it is a bona fide encumbrancer for value (see Real Property Law § 266; Phelan v Brady, 119 NY 587; Maiorano v Garson, 65 AD3d 1300).
  
  "[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 [what] 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'" (Lucas v J & W Realty & Constr. Mgt., Inc., 97 AD3d 642, 643, quoting Williamson v Brown, 15 NY 354, 362; see Maiorano v Garson, 65 AD3d at 1303; Ward v Ward, 52 AD3d 919, 920-921). "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'" (Lucas v J & W Realty & Constr. Mgt., Inc., 97 AD3d at 643, quoting LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 600)."
  
  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'" (Lucas v J & W Realty & Constr. Mgt., Inc., 97 AD3d at 643, quoting Phelan v Brady, 119 NY at 591-592; see 1426 46 St., LLC v Klein, 60 AD3d 740, 743; Ward v Ward, 52 AD3d at 920-921). Here, notwithstanding the absence of the alleged quitclaim deed, Julia was residing at the subject real property at all relevant times, and allegedly was paying the taxes on the subject property at those times. Julia's occupation of the premises was inconsistent with the purported ownership of the premises by Mendez, her former brother-in-law.
  
  A proper inquiry by Deutsche Bank would have disclosed, at the least, Julia's equitable interest in the subject property based on the stipulation of settlement executed by Julia and Kenneth in connection with their divorce action (see NYCTL 1998-1 Trust v Gabbay, 16 Misc 3d 732; see also Rogers v Rogers, 63 NY2d 582). Having failed to inquire of Julia as to her interest in the property, Deutsche Bank "is guilty of a degree of negligence fatal to its claim that it is a bona fide purchaser" (Vitale v Pinto, 118 AD2d 774, 776; see Maiorano v Garson, 65 AD3d at 1303; cf. Lucas v J & W Realty & Constr. Mgt., Inc., 97 AD3d at 643; Stracham v Bresnick, 76 AD3d 1009, 1011).