Monday, January 03, 2005

New York foreclosure proceeding declared invalid by federal court in bank fraud case

In Pacheco v. Serendesky, 2004 WL 2998622, 2nd Cir.(N.Y.), the Second Circuit Court of Appeals has vacated a lower court’s opinion and allowed a purchaser of property in the Bronx, New York to pursue a claim as a bona fide purchaser after she had notice that the property was subject to a criminal RICO seizure.

The case began when one of two joint tenants, John Serendesky, plead guilty to bank fraud and money laundering charges. The plaintiff, Barbara Pacheco, the appellant, allegedly acquired an interest when she purchased the Premises at a foreclosure sale.

The result of this ruling demonstrates that rare conundrum where the government (or investor following the filing of a lis pendens) must understand the scope of third party rights. In this case the government could become co-owners of real property with the spouse of the criminal defendant!

On November 10, 1998, Serendensky and Caporale purchased the Premises as joint tenants after acquiring a $115,000 mortgage from Parmann Mortgage Associates, LLP. The deed of conveyance was recorded with the Office of the City Register of the City of New York, Bronx County, on March 4, 1999. The Parmann mortgage was recorded with the City Register on the same day.

A year and a half later, on August 31, 2000, Serendensky and Caporale refinanced their mortgage with a $168,000 loan from Wilmington National Finance, Inc. The Wilmington mortgage was recorded on November 30, 2000, and afforded Wilmington a first-priority lien against the Premises.

Meanwhile, on October 5, 2000--between the time when Serendensky and Caporale refinanced their mortgage and the time the Wilmington mortgage was actually recorded--the government filed an indictment charging Serendensky with conspiracy to commit bank fraud, in violation of 18 U.S.C. §  371, and conspiracy to launder money, in violation of 18 U.S.C. §  1956(h). Each count of the indictment also had a corresponding forfeiture count alleging the forfeiture of "[a]ny right, title, and interest held by JOHN SERENDENSKY, a/k/a ‘John Vitolano,’ in the real property and appurtenances known as 228 Revere Avenue, Bronx, New York." The indictment alleged that Serendensky had acquired the Premises with the proceeds of his criminal activity.

October 25, 2000--still before the Wilmington mortgage was recorded-- the government filed a notice of pendency with the City Register. Mirroring the forfeiture counts of the indictment, the notice of pendency explained that the government was seeking forfeiture of Serendensky’s interest in the Premises.
This ruling makes clear that the rights of a joint tenant survive the effects of a seizure which provide notice related to the other joint tenant.

mortgage fraud