Ohio High Court Voids Mortgage Obtained By Man On Property Swindled From Mom; Unwitting Lender Burned By Lack Of Diligence

In Columbus, Ohio, the Youngstown Vindicator reports:

• The Ohio Supreme Court sided with the estate of a Trumbull County woman whose son had defaulted on a mortgage he obtained on property that was not rightly his. According to court documents, Dale Ellis fraudulently obtained quit-claim deeds about a decade ago on six lots from his mother, who had agreed to give him only one.

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• Ellis subsequently secured mortgages on all six lots, starting in 1999, a few weeks after the fraudulent deeds were recorded, according to documents. His mother eventually discovered the fraud and filed a lawsuit in Trumbull County Common Pleas Court seeking the return of five of the six lots.

• Shortly before he was served with the complaint, but after the mortgage provider had received its copies, Ellis obtained another loan from a different provider on the lots, using the proceeds to pay off the other mortgages, according to documents. [...] Ellis defaulted on the final mortgage he took out, and the provider filed foreclosure actions against him and his mother’s estate, according to documents.

While there were no facts established to indicate that the final lender had any actual knowledge of the fraud perpetrated by Ellis against his mother at the time of giving the mortgage loan to him, the court ruled that, given the specific facts of the case, the final lender was considered to be "charged with notice" of the swindle, thereby making its mortgage subject to being voided.(1)

For the story, see High court sides with estate of mother defrauded by son (The high court said a records check should have been made before a mortgage was provided).

For the Ohio Supreme Court decision, see Beneficial Ohio, Inc. v. Ellis, Slip Opinion No. 2009-Ohio-311 (February 3, 2009).

(1) In the event the lender obtained a title insurance policy when issuing the loan, the insurance company may wind up coughing up the cash to indemnify the lender for the loss due to the title screw-up.