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Land America Commonwealth Title Insurance Company v. Dorothy Kolozetski

Supreme Court of New Hampshire
992 A.2d 681 (2010)
ELI5:

Rule of Law:

A conveyance, such as a mortgage, made by a person with a limited interest in an estate purporting to convey a greater interest than they possess is not void; rather, it effectively passes to the grantee all the interest which the grantor could have lawfully conveyed.


Facts:

  • Dorothy and John Kolozetski owned a home in Newport as joint tenants with rights of survivorship, which was subject to a mortgage held by Sugar River Bank.
  • In 2005, Dorothy Kolozetski filed for divorce.
  • During the divorce proceedings, John Kolozetski forged his wife's signature on a notarized power of attorney.
  • Using the fraudulent power of attorney, John obtained a $150,000 loan from Lake Sunapee Bank, secured by a new mortgage on the entire property.
  • Lake Sunapee Bank used part of the loan proceeds ($50,554.25) to pay off the original mortgage with Sugar River Bank.
  • John Kolozetski received the remaining balance of the loan and used the funds to purchase personal luxury items, including a hot tub and two vehicles.

Procedural Posture:

  • During divorce proceedings, the Newport Family Division issued a non-hypothecation order preventing parties from encumbering property.
  • The family division found John Kolozetski in contempt for violating the order by obtaining a mortgage.
  • Lake Sunapee Bank, the new mortgagee, intervened in the divorce proceedings.
  • The final divorce decree directed that debtor-creditor issues between Dorothy Kolozetski and Lake Sunapee be resolved in the superior court.
  • Lake Sunapee Bank filed suit in superior court (trial court) to recover its loan.
  • The parties agreed to sell the property, and after initial distributions, the proceeds from John's one-half interest ($74,865.80) were placed in escrow.
  • Land America, the title insurer for Lake Sunapee, substituted itself as the plaintiff.
  • The superior court ruled in favor of Land America, awarding it the escrowed funds.
  • Dorothy Kolozetski (appellant) appealed the superior court's order to the New Hampshire Supreme Court.

Locked

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Issue:

Does a state statute (RSA 477:22) that saves a partial conveyance apply to a mortgage fraudulently obtained by one joint tenant on the entire property, thereby encumbering that tenant's one-half interest in favor of the mortgagee?


Opinions:

Majority - Hicks, J.

Yes. A statute that saves a conveyance to the extent of the grantor's actual interest applies to a mortgage fraudulently obtained by one joint tenant on the entire property, effectively passing title to that tenant's one-half interest to the mortgagee. The plain language of RSA 477:22 provides protection to a grantee when a person purports to convey a greater interest than they possess. Here, John Kolozetski, as a joint tenant, held a 'limited interest' but purported to convey the entire property by using a forged power of attorney. While he could not encumber his wife's interest, he could lawfully convey his own undivided one-half interest. The court reasoned that the unilateral act of mortgaging the property without his wife's consent severed the joint tenancy, converting it into a tenancy in common. Therefore, pursuant to the statute, the mortgage was not void but instead successfully passed title of John's one-half interest to Lake Sunapee Bank.



Analysis:

This decision clarifies the application of a 'saving statute' in the context of a fraudulent conveyance by a co-tenant. It affirms the principle that a unilateral mortgage by one joint tenant severs the joint tenancy, transforming it into a tenancy in common. The ruling provides a degree of protection for lenders who are victims of fraud, allowing them to recover against the fraudulent party's share of the property. This balances the interests of the defrauded lender against the innocent co-owner, whose own property interest remains unencumbered and protected.

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