Mortgage Declared Void After Joint Tenant Dies

When one joint tenant passes away his interest goes to the other joint tenant, and extinguishes a mortgage Bank of America held on the property.

In 1999 Ms. Teresa Smith was the sole owner of a piece of property in Port Washington, New York. That February she conveyed, by quitclaim deed, her entire ownership in equal shares to herself and David Hassid, as joint tenants with the right of survivorship. Seven years later, in 2006, Bank of America, N.A., provided Mr. Hassid a $300,000 loan that was secured by a mortgage on the property. Ms. Smith was completely unaware of this mortgage on the property until 2009 when Mr. Hassid passed away.

It was then that Bank of America, N.A., declared the loan to be in default for non-payment. Ms. Smith commenced an action for a declaratory judgment arguing that after Mr. Hassid’s death the mortgage was extinguished. She felt she was the sole owner of the property by right of survivorship. When Mr. Hassid acquired the loan Bank of America accepted the mortgage on the property without first seeing that the joint tenancy was severed or that all joint tenants had signed. Regardless, Bank of America contended that not all the unities had been maintained in the joint tenancy.

In creating and maintaining a joint tenancy there are four unities that must always exist; time, title, interest and possession. Bank of America contended that Mr. Hassid’s mortgage destroyed the unity of interest, therefore the joint tenancy too. They argued that this mortgage served as written evidence that he intended to sever the joint tenancy. Furthermore, by destroying this joint tenancy the two owners became merely tenants-in-common. Ultimately meaning that Mr. David Hassid’s ownership would be passed to his estate and the mortgage would be valid.

The Appellate Division, Second Department, brought to light that a mortgage is only a lien on a property and not a transfer of title. The court found that Mr. Hassid’s mortgage on the property did not act to sever the joint tenancy. Upon his death his interest in the property went to Ms. Smith and Bank of America’s mortgage became null and void.

This case is cited as Smith v. Bank of America, N.A., (2nd Dept. 2012) Index #04463/2011. If you have any questions regarding this article, please contact Peter Moulinos at info@moulinos.com.

About Peter Moulinos
The founder and partner of Moulinos & Associates LLC. His experience as an attorney includes practice on matters involving commercial law, real estate law, litigation, international law, employment law, estate practice and trademark matters.

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