The "subprime mortgage crisis" a phenomenon that has sent tremors through world markets— has, in its arcane details and its large impact, left many puzzled. For those who wonder what the furor is all about, the story of 940 Fulton Street —a heretofore obscure and decidedly unremarkable 1930s residential/commercial property in Brooklyn —will perhaps help to clarify the situation. This property which consists of some three to six apartment units over two stores is in disrepair and has accumulated numerous building violations as well as nonpaying tenants. Nonetheless it became the sole source of the collateral for two mortgage loans of $536,000 and $134,000 that were granted to a borrower whose income at the time was $50,000 a year. The payment due on the larger of these mortgages was $4506.98 per month well in excess of the borrower's pre-tax monthly income of $4,166 dollars. Unsurprisingly, this property is now in foreclosure awaiting sale at auction. What was unexpected was the undercurrent of wrongdoing that was revealed through the foreclosure proceedings and which was made possible in large part by the fact that the mortgage lenders were willing to extend loans to individuals who were unlikely to be able to repay them.

There were a number of individuals and mortgage lenders who claimed to have an interest in this property. Several separate actions were commenced and motions were made ^[FN1] in these actions which this Court consolidated for the purposes of holding a hearing.

This Court finds the following facts based upon the testimony adduced at the hearing together with the exhibits introduced at this hearing and those annexed to the motions.

By deed dated November 9, 2001, Marsha Lee purchased 940 Fulton Street from Most Holding Corp., a corporate entity whose principal is Joseph Snell.

Joseph Snell did not testify at this hearing. Marsha Lee testified as to only one closing [*2]that took place on November 9, 2001 wherein she took the deed to 940 Fulton. Marsha Lee testified that she did not know anything about buying real estate before she bought this property. She was told to sign a number of papers which she did without necessarily knowing what they were. She was represented at the closing by a lawyer provided by Joseph Snell. She did not know the market value of this property. She did not know what the mortgage payments would be or the amounts of the utility bills and whether the utilities servicing the common areas were listed in her name. She had been told that the building would be managed for her and any necessary repairs would be made and that the mortgage debt would be paid from the rental revenue. Snell made promises to her that these properties would produce revenue. She said that she received some small amount of money from Snell from the revenue of the properties but she never made any mortgage payments.^[FN2]

Although Miss Lee had, this Court finds, knowingly assumed a substantial mortgage obligation ^[FN3] encumbering the 940 Fulton Street property , the deed to this property was not long to remain in her name. Joseph Snell claims that in March of 2002, Marsha Lee reconveyed the deed to 940 Fulton Street to 1557 Park Place Realty Corporation. Mr. Snell submits a deed as evidence of this transaction.

Marsha Lee acknowledged that the signature on the deed which purportedly reconveyed the 940 Fulton Street property to Joseph Snell may well have been hers and indeed, this Court so finds, but she denies appearing at a closing in March of 2002 and has no recollection of meeting with Mr Snell in regard to this property after he sold it to her. This Court finds credible her testimony in this regard and finds that she did not intend to reconvey this property and did not realize it had indeed been reconveyed to one of Snell's corporations. Indeed, no consideration is evidenced for this transaction.

Mr. Snell did not testify at this hearing and there is no evidence before this Court as to who may have been present at this purported March of 2002 closing wherein the property was allegedly reconveyed to Snell. Ms. Lee testified as to only one closing which is the one in which she received the deed to the property. The only attorney present at the closing was the attorney for the grantor corporation, Most Holding Corp. Ms. Lee did not have her own attorney.

Although this hearing also included testimony regarding the claims upon this property made by Mark Taylor, a tenant in the property who asserts that this property was conveyed to him by Snell's 1557 Park Place Corporation in July of 2003 ^[FN4], his claims to this property are [*3]entirely dependent upon whether the deed purporting to convey the property from Lee back to Snell's corporation was capable of transferring title. If the deed from Ms. Lee to Joseph Snell's corporation is void, title did not vest in that corporation and it could not convey title to Mr. Taylor. Accordingly, we will first proceed with the legal analysis of Ms Lee's claims.

In making this analysis we must first resolve the legal enigma created by Ms. Lee's candid admission that her signature on the deed appears genuine coupled with her credible assertion that she never intentionally signed a deed reconveying this property to Snell. In finding Lee's signature to be genuine but unknowing, it is not necessary for this Court to determine precisely how Ms. Lee's duly acknowledged signature appeared on the deed except to say that. it was obviously a result of a trick, scheme or artifice. This sort of sleight of hand is indeed not unknown and appears in a venerable, but still viable Court of Appeals decision before the turn of the last century. Marden v. Dorthy, 160 NY 39 (1899).

In Marden, the plaintiff sought to cancel a deed which purported to convey her residence to her daughter along with certain mortgages that encumbered the property. The lower court held that the plaintiff never executed or acknowledged the deed because she signed her name on the paper without any knowledge or information that the paper was a deed to her home. She never had any intention of selling, conveying or encumbering her home and her signature was procured by the defendant son-in-law by some " trick or artifice perpetrated by him in some way or manner which does not appear and is unknown to the plaintiff.'" Id. at 46-47 The lower court further found that the plaintiff " never acknowledged the execution of said instrument in any manner, and never appeared before the officer whose certificate of her acknowledgment is affixed to said instrument for the purpose of acknowledging the execution thereof. That the signature to said certificate of acknowledgment is genuine, but the same was in some manner obtained by the . . . defendant [son-in-law] , in what way does not appear, but without any acknowledgment by the plaintiff to the same officer, and without her authority given in any manner whatever.'" Id. at 46-47.

In light of these findings, the Marden Court readily disposed of the claims of the mortgage lenders to the effect that they were entitled to equitable relief since they relied on a deed that had a genuine signature. The Marden Court indicated that this argument assumes that the plaintiff actually made a deed and responded that "a party cannot make a deed without some assent of the will. It must be a conscious act, accompanied by intention, and every one of these elements are wanting . . . It does not follow in such a case that because the signature is genuine that the party signed a deed or other contract. It is simply a spurious paper, and of no more effect than any other forgery." Id. at 49. Significantly, the Marden Court also observed that the instrument was never acknowledged. Finally the Marden Court noted that the instrument was found never to have been delivered.

Under our facts, this Court finds that here as in Marden there was no execution of the deed and no acknowledgment of same notwithstanding that signature on the certificate of acknowledgment was genuine. Rather, this Court finds that the signature on the [*4]acknowledgment, like the signature on the deed, was somehow obtained without Lee's knowledge or authority.

No evidence whatsoever was offered by Snell to establish the delivery of this deed. Since there is no evidence that the deed was legitimately executed and acknowledged, and in fact there is no evidence that a closing was ever held with respect to this transfer there can be no presumption of delivery. "Transfer of title is accomplished only by the delivery of an executed deed; execution of the deed without delivery is legally insufficient to effect such a transfer." Manhattan Life Ins Co v. Continental Ins. Companies, 33 NY2d 370, 372(1974).

This Court therefore holds that Mark Taylor who purportedly took title to this property from Snell's corporation which had no title to convey to him cannot lay claim to any right, title or interest in this property which remains in the possession of Marsha Lee. While it is true that when a property owner is fraudulently induced execute and deliver a deed, title passes to the fraudulent grantee who is then clothed with all the evidences of good title and may convey the property to purchaser in good faith. Marden v. Dorthy, supra, 160 NY at 50-51, such is not the case where as in Marden, it would be "preposterous to assert upon the facts found that [Snell's corporation] whose name appears as grantee on the spurious deed , ever had any title, or that [it] ever was clothed by anyone with the slightest power or authority to [convey this] property. In the face of the findings that [Ms. Lee] never executed, acknowledged or delivered the deed, [it cannot be asserted] that [Snell's corporation] had any title to convey." Id..

However even as title remains in Ms. Lee's name so do the purchase money mortgages she knowingly took in order to pay for this property but against which she has not made any payments. While it is tempting, in light of the lenders' irresponsible lending practices, to lay the entire blame at their feet, it cannot be said that the borrower was beyond reproach. Even while painfully inexperienced in these areas she is still held to knowledge of the old and time tested maxims, "let the buyer [borrower] beware" and "there are no free lunches". This is particularly true in this matter where the mortgage was taken upon an investment property as opposed to a primary residence.

Accordingly the stays entered with respect to the foreclosure proceedings against this property are lifted and the foreclosure proceedings in the Lasalle Bank matter and the Olympus Servicing matter are to move to completion. 1557 Park Place Realty Corp v. Mark Anthony Taylor [ind. #41458/04] is dismissed and all motions made in this matter are denied and any notice of pendency filed therein is vacated.,^[FN5]

This constitutes the decision and order of the Court.

J.S.C. [*5]