New York court blocks guarantor’s bid to shift mortgage recording liability
That omission set up the loss. The property later changed hands, and its new owner borrowed against it from JPMorgan Chase Bank, N.A. The Chase loan was recorded promptly. The borrower defaulted in February 2008, and Chase filed to foreclose that June. Only on July 2, 2008, did Sky record the original mortgage – by then, the newer Chase loan already sat ahead of it.
With the first mortgage unrecorded for so long, Fidelity lost the first-priority position it had insured. It paid Greenpoint for that loss and sued Sky along with the guarantor who had promised to stand behind Sky’s obligations.
The guarantor tried to move the loss down the chain. He brought third-party claims for common-law indemnification against Nationwide Court Services, Inc. (Nationwide), saying Sky had handed the mortgage to Nationwide to record and that Nationwide failed to do it. He argued he had done nothing wrong himself and owed Fidelity only because he had guaranteed Sky.
The panel decided the case on relationships, not fault. Common-law indemnification, it said, requires one of two things: liability imposed by law, such as vicarious liability, or an existing relationship between the parties, like the one tying a guarantor to the principal it backs. No contract is needed, but that separate duty has to be there.
The duty the guarantor pointed to ran from Sky to Nationwide, not from him to Nationwide. He alleged that “Sky provided Nationwide with the mortgage for recording” – Sky’s dealing, not his own. Even read in his favor, the pleading showed no direct link between him and Nationwide, and that gap sank the claim.
