In July 2000, Citibank extended a $54,000 loan to a condominium owner, with an additional $38,000 loan extended the next year. These two loans were consolidated into one loan for a total of $92,000. Some seven years later, the condominium board filed a common charges lien against the unit.
In 2010, the plaintiff bought the unit for $15,100 at a foreclosure auction, subject to the “first mortgage of record against the premises.” The new owner sued Citibank seeking to have the second loan of $38,000 declared subordinate to the common charges lien and thus discharged when the unit was bought at auction. The trial court found that the entire consolidated loan was valid and the purchaser at auction had purchased the unit subject to the consolidated loan. After the Second Department affirmed, the purchaser appealed to the Court of Appeals.
In affirming, the Court of Appeals noted that lien priority was normally determined by the “chronology of recording.” However, in a case that deals with a condominium board’s common charges lien, the law excludes the “‘first mortgage of record.’” While acknowledging that case law existed that could be read to take the exception of the first mortgage literally, it refused to accept the buyer’s argument.