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Basile v. Erhal Holding Corp. - 148 A.D.2d 484, 538 N.Y.S.2d 831 (App. Div. 1989)

Rule:

A deed conveying real property, although absolute on its face, will be considered to be a mortgage when the instrument is executed as security for a debt. N.Y. Real Prop. Law § 320.

Facts:

Plaintiff Teresa Basile, the property owner,, mortgaged the property to Defendant Erhal Holding Corp. (Lender) in return for a loan at an alleged usurious rate. Basile filed an action, inter alia, to declare the mortgage null and void on the ground of usury. While the matter was awaiting trial, the parties entered into a stipulation of settlement in open court. Pursuant to the agreement, Basile agreed to a new mortgage, with a deed "in lieu of foreclosure" that was not to be recorded so long as the Basile fulfilled her obligations. When plaintiff defaulted on the new mortgage, the Lender recorded the deed. Plaintiff brought an action against defendant lender to declare the mortgage null and void. Upon the Lender's motion, the trial court ruled that Basile had waived her right of redemption with regard to the mortgaged property and denied Basile's cross motion for an order requiring the Lender to deliver the deed. Plaintiff appealed, seeking review of the order of the Supreme Court of Westchester County (New York).

Issue:

Did the plaintiff waive her right of redemption with regard to the subject premises?

Answer:

No

Conclusion:

The court ruled that the trial court erred in concluding that Basile, the mortgagor, had waived her right of redemption. The court held that, under N.Y. Real Prop. Law § 320, even though the deed appeared to be an unconditional conveyance of real property, it was really a mortgage because it was executed as security for a debt. Because the right to the equity of redemption attached to the mortgage, the settlement agreement, with the waiver of that right, was ineffective. The court ruled that, despite the settlement agreement, the mortgagor retained the right of redemption up until the property was actually sold.

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