No one need be reminded in these unusual times that lenders and servicers are capable of making errors; it happens. Given the huge volume of mortgages, defaults and mortgages being assigned, that miscues arise from time to time should not be surprising.
Recalling that lenders will eventually pay property taxes when the borrower fails to do so (because the mortgage will be extinguished when the taxing authority takes the property for want of tax payments), a concern is addressed by a recent case where a lender assigned a mortgage and then – after the assignment – inadvertently paid the real estate taxes. [Banco Popular North America v. Lieberman, 75A.D.3d 460, 900 N.Y.S. 2d 82 (1st Dept. 2010)]
There are a number of obvious reasons why such an error could readily occur: one department is in charge of paying taxes, another handles assignments; the calendar says pay taxes and the assignment process suddenly accelerates instead of plodding along – among other scenarios.
The problem for the lender is that once the mortgage was assigned, the lender was without standing to sue to recover the overpayment per mortgage documents to which it was no longer a party.
But there was rescue (mostly) for the lender. The noted case ruled that the theory, the cause of action to recover the tax payment, was unjust enrichment. The borrower would be unjustly benefitted by the lender having unburdened the property from those taxes. Therefore, the lender could sue for that sum. Because, however, the guarantor in the case never guaranteed this kind of obligation, he was immune; and because recovery of lender’s legal fees was a provision in the mortgage – which no longer applied – recompense for that aspect was unavailable.
So, the lender’s error was not without unfortunate consequence, but the taxes could be recouped and that was the main point.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.