DIVORCE DIVESTED HUSBAND OF POWER
When T and D got divorced, the parties entered into an agreement whereby T would get to keep their Jane Street condominium. According to a stipulation of divorce, T would have “sole ownership and exclusive use and occupancy” of the apartment, while D would continue paying the mortgage. The latter also agreed to provide a quitclaim deed to the unit so as long as that transfer didn’t jeopardize the existing loan arrangement with his lender.
The agreement pertinently provided, as follows:
"The parties agree that the Wife [T] shall be entitled to sole ownership and exclusive use and occupancy of the Jane Street property. The parties further agree that the Husband [D] shall solely be responsible for and shall continue to make all of the mortgage payments on the Jane Street property pursuant to the terms of the existing mortgage until said mortgage is fully satisfied. It is the intention of the parties that the Wife have sole legal title to the Jane Street property. Husband shall promptly execute and cause to be promptly recorded a quitclaim deed to the Wife provided such execution and/or recording does not cause a termination or modification of the terms of the existing mortgage. In the event that the Husband is unable, for any reason, to execute and/or record such quitclaim deed, the Husband agrees and covenants that notwithstanding the joint ownership of the Jane Street property, he will not act in any way or manner or through any deed or omission, whether directly or indirectly, to interfere with the Wife's exclusive use and occupancy of the said property, including the sale of the said property by the Wife should she so choose ….”
T waited some 15 years before demanding that the deed be transferred to her, and conceded that one of the reasons for the late demand was that her former husband was experiencing some financial issues.
In fact, it appears that the former spouse defaulted on other loan obligations in the approximate amount of $2 million. When the creditor sought to enforce its subsequently secured judgment against the Jane Street property, the creditor claimed, among other things, that T suffered from “unclean hands,” and waited too long to enforce her rights to the condo (“laches”). The creditor also asserted that since the title remained in the couple’s joint names, it was not on notice of any purported claim held by T and was damaged as a direct and proximate result (as it extended credit based, in part, on the former husband’s joint ownership of the Jane Street property).
While the New York County Supreme Court believed there was some merit to the creditor’s argument, the Appellate Division, First Department, didn’t agree.
Since ownership to the Jane Street unit exclusively vested with T upon the stipulation of divorce, the AD1 was of the view the creditor couldn't enforce its judgment against that property. In the absence of any fraud, which was neither alleged nor established here, the appellate court concluded that T was “entitled to what she bargained for in settling her divorce: a 100% interest in the subject property that is beyond the reach of [D], and of [the creditor].”
As for the creditor’s argument that it was wrongfully duped by the joint ownership recording of the property in the public record, the AD1 faulted the creditor for not undertaking the appropriate “due diligence,” particularly since D was not listed as the sole owner of the unit. It noted:
“[T]he deed on its face invites further inquiry. [D] was not ‘the’ owner of the subject property named in the deed, as [the creditor] asserts in its brief. Rather he was, with [T], one of two owners on the deed. The record is silent on whether [the creditor] inquired about [T], much less about the two parties' respective interests in the subject property. To be sure, matrimonial judgments are generally not open to public inspection …, but that did not prevent [the creditor] from asking [D] for proof about [T] and the parties' respective interests in the Jane Street apartment.”
And that ended up foreclosing that.
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DECISION