New York Court Denies Motion for Summary Judgment from Property Purchasers and Holds Deed May Be Void Ab Initio

The Surrogate’s Court of New York, Queens County recently denied respondents’ motion for summary judgment and held there were issues of fact as to whether a deed conveying a property from a man in a nursing home may be void ab initio.  See In re Rosenblatt, 57 Misc. 3d 1209(A) (N.Y. Sup. Ct. 2017).  In the case, the seller entered a nursing home in 2004 after suffering a stroke.  Although the facts surrounding the conveyance are disputed, at some point in 2011, a real estate broker entered into a contract with the seller whereby the seller was to convey his real property in exchange for $75,000.  Among the terms of the contract was a provision that the broker could not assign the contract without the seller’s prior written consent.  Three weeks after executing the contract, the broker assigned the contract to Kami Homes, Inc. (“Kami”) in exchange for $55,000, however, the seller did not give prior written consent to the assignment.  Six months after the closing, Kami sold the property to a third party for $365,000.  The decedent passed away later that year, and the petitioner brought this action to vacate the deed.  Kami, Kami’s president, the third party, and the lender to whom the third party mortgaged the property all brought motions for summary judgment to dismiss the action against them.

The Court found that there were issues of material fact and denied the motions.  First, the Court held that the respondents’ claim that they recorded a “facially valid acknowledged deed” from the seller was “misguided.”  The facts surrounding the transaction—including conflicting testimony from the participants, the relationship between the broker and the attorney he retained for the seller, and that apparently no one advised the seller that Kami was going to pay an additional $55,000 for the right to the contract—indicated that “a scenario exists that [the participants] knew from the inception that this was to be a so-called ‘contract flip’ or ‘wholesaling’ of the subject real property and they concealed it from the decedent.”  Moreover, the contract required the seller’s prior written consent before any assignment, which was not obtained even though the assignment “seemingly benefited everyone other than” the seller.

Second, even without all of these issues surrounding the respondents’ failure to disclose material facts to the seller, the Court held that there was an issue of fact as to whether the seller had the mental capacity to enter into the contract.  Although the respondents produced an affidavit from the seller that he did not suffer from any mental disabilities, this document was purportedly executed almost a year after he signed the contract and two weeks before his death.  More importantly, his medical records stated that he had dementia and other issues that indicated that he lacked the capacity to sell the property.  Finally, the Court denied the motions of the third-party purchaser and the mortgagee, holding that “their claims that they are a bona fide purchaser and a lender for value provides no respite if the deed from the decedent to Kami is ultimately determined to be void ab initio” for the foregoing reasons.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com or Clarissa Gomez at cgomez@riker.com.