Holland v. Fulbert, Inc.

Larkin, J. (dissenting).

We respectfully dissent.

The majority relies upon the statement by the Court of Appeals in Dorff v Bornstein (277 NY 236, 240-241) "a bona ñde purchaser (other than the owner) on an unconditional sale of real property pursuant to a regular foreclosure acquires a clear and absolute title as against all parties to the suit”. In Dorff (supra) the trial court found that the mortgagor, in collusion with his son and daughter, willfully defaulted in order to precipitate a foreclosure of the first mortgage and cut off the lien of the junior mortgage. A short time after the foreclosure sale title was conveyed by the purchaser to the son and daughter of the mortgagor. On such a set of facts, the holding in Dorff (supra) was that the junior mortgage was cut *93off at the foreclosure and was not revived by the transfer of the property to the son and daughter of the original mortgagor. The court further held in Dorff (supra) that even if the foreclosure sale were tainted with fraud, account must be taken of intervening equities and that the title of a subsequent bona fide purchaser would not be subject to attack.

In an earlier case a second mortgagee brought an action alleging collusion and conspiracy by the mortgagor and others entered into for the express purpose of wiping out the second mortgage (Kossoff v Wald, 272 NY 480). In that case the mortgagor conceded that the purchaser on the foreclosure sale purchased and held title to the premises for the benefit of the original mortgagor. The Court of Appeals upheld Special Term’s dismissal of the complaint.

Although other real property writers take different views, at least one recognized work has stated: "The mortgagor, even though amply able to keep the mortgage from default is not required to do this. He may deliberately refrain from making payments on the mortgage so that it will be foreclosed enabling him to repurchase at the foreclosure sale and wipe out subsequent liens” (2A Warren’s Weed, New York Real Property [4th ed], § 27.04).

The very theory of mortgage financing would seem to support the fact that anyone, including the owner, could bid at the foreclosure sale. The security of the junior mortgagee is the value of the property and the second mortgagee may protect that security at the foreclosure sale. Even if the mortgagor were the successful bidder at the foreclosure sale, the result would be merely to wipe out the junior mortgagee’s security in the property and free the property from all subsequent liens. The obligation of the mortgagor on the mortgage note or bond would still remain and, indeed, the very property purchased free and clear by the mortgagor on the foreclosure sale would be subject to the remedies available to the holder of the bond or note.

Greenblott and Sweeney, JJ., concur with Reynolds, J.; Herlihy, P. J., and Larkin, J., dissent and vote to reverse in an opinion by Larkin, J.

Decision affirmed, with costs.