Lender bank brought adversary proceeding in Chapter 7 bankruptcy to declare the debtor’s mortgage indebtedness non-dischargeable under section 523 (a) (2) (b) of the Bankruptcy Code on the basis the debtor made material misrepresentations on his loan application that tender relied upon when granting the non-income verification loan. The debtor conceded the statements on the loan application were false but contended the mortgage broker prepared the loan application and knew of the false statements. The debtor further contended the mortgage broker was the agent of the lender bank and therefore knowledge of the false statements was imputed to the  bank. The mortgage broker was paid a fee by the bank for placing the loan but was held to be an independent contractor since the broker was not an employee of the bank and could have placed the loan with other lenders. Therefore any complicity of the mortgage broker with the debtor in deceiving the lender bank was not imputed to the bank. The bank therefore relied on the materially false statements and debt was held by the Bankruptcy Court to be non-dischargeable.

Assignee of note and mortgage brought third-party claim against lender’s attorney / settlement agent for misapplication of loan proceeds. Lender requested copies of the attorney/settlement agent’s closing files and bank records substantiating disbursement of the loan proceeds. Attorney/settlement agent moved to dismiss the claims, moved to reargue the denial of dismissal, and moved for a protective order to quash assignee’s discovery demand. The court granted the assignee’s cross-motion for sanctions under local rules and assessed $5,000 in sanctions against the attorney/settlement agent. The attorney/settlement agent had a fiduciary duty to ensure the loan proceeds were disbursed in accordance with the lender’s instructions and had a fiduciary duty to account to the assignee for the loan proceeds deposited into his account as settlement agent. The attorney/settlement agent’s motions were therefore frivilous and in bad faith.

City of New York contracted to convey premises to defendant Allicott. The contract provided the parties’ successors, heirs, and assignees were bound by its terms. Prior to the closing defendant Allicott died. At the closing a relative of Allicott posed as Allicott and counter-signed the deed consenting to a limitation of use and occupancy. Allicott’s son took possession of the premises following the closing. The son paid the mortgage and taxes, resided in the premises and performed the grantee’s covenants in the deed. Five years later the City sought to declare the deed void on the basis the grantee’s signature on the deed was forged. The Court held a forged signature of a grantee does not render the deed void where there was no intent to defraud and no party was defrauded.