Mis-Indexed Judgment Lien

Today we wanted to bring your attention to an interesting decision out of the Appellate Division, 2nd Department which held, in part, that a subsequent Purchaser for value, as well as the Purchaser’s Mortgage Lender, acquired their respective interests subject to a prior judgment lien; the amount of which had been mis-indexed in the County Clerk’s office. The relevant facts of Myrtle 684, LLC v Tauber; 2020 NY Slip Op 07901 [189 AD3d 1431], along with a link to the case are set forth below:

In connection with an action to recover damages related to a Personal Injury claim, the Judgment creditor (Tauber) obtained a judgment against the then owner of real property, 684 Myrtle, LLC and other party defendants related to injuries allegedly sustained at 684/684B Myrtle Avenue, Brooklyn, New York (the “Property”), in the amount of $200,000.00. In the judgment entered on May 21, 2009, Tauber was awarded interest on the judgment from June 30, 2008, in the amount of $16,050.00 plus costs and disbursements in the sum of $1,195.00 for a total Judgment in the amount of $217,245.00. The judgment was thereafter docketed with the Kings County Clerk. However, the judgment was mistakenly entered into the docket for the amount of $16,050.00 - the amount of interest awarded - rather than the principal amount of $200,000.00 plus interest, costs and disbursements. After the docketing of the Judgment, the Property transferred hands several times in quick succession ending up with Title ultimately being held by the Plaintiff, Myrtle 684 LLC, by Deed dated January 21, 2016. On September 9, 2016, Investors Bank executed an amended, restated and consolidated mortgage and security agreement with plaintiff, which consolidated a prior mortgage executed in favor of Investors by a prior owner on December 14, 2012, with a gap mortgage, creating a single mortgage lien in the amount of $2,925,000.00.
On or about March 24, 2016, Tauber sent Plaintiff a notice and payment demand indicating that the approximate amount outstanding on the judgment with interest, costs and disbursements was currently $351,043.87 and thereafter proceeded to execution of the judgment and a sheriff’s sale of the subject property was scheduled. The Plaintiff and Investors Bank thereafter commenced litigation seeking to, among other relief, stop the sheriff’s sale and obtain a declaratory judgment that the value of the Judgment should be limited to $16,050.00 (ie. the amount set forth in the docket maintained by the Kings County Clerk’s office).
In denying all of the relief sought by the Plaintiff and Investor’s Bank, the 2^ndDepartment held that “any reasonable inquiry into the details of the judgment would have revealed that the $16,050 amount set forth in the judgment docket index is an incorrect amount, and that the actual amount of the judgment is the principal amount of $200,000, together with $16,050 in interest and $1,195 in costs and disbursements, for a total of $217,245, plus accumulating interest. There is no evidence in the record to suggest that either the plaintiff or Investors Bank undertook any such inquiry.”
https://www.nycourts.gov/reporter/3dseries/2020/2020_07901.htm

This case is a clear reminder that where a docketed judgment appears of record against a property owner’s name, the Purchaser, their Title Company and Lender, should always obtain a copy of the actual judgment so as to be able to confirm the actual amount of the judgment lien rather than relying solely on the docketing information set forth in the County Clerk’s office. Failure to do so can result in significant liability being owed to the judgment creditor by “innocent,” third party purchasers.