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In an unusual application of the collateral estoppel rule, a New York court has dismissed a civil claim based on a verdict in a criminal case involving the same facts and issues. The ruling stopped a mortgage company’s effort to foreclose under a loan on a house that did not actually belong to the borrower. He had stolen it from his mother by forging her signature. Collateral estoppel is a doctrine intended to prevent the litigation of identical issues between the same parties in multiple courts. Courts use it both to preserve judicial resources and avoid inconsistent decisions whereby a court in one jurisdiction rules differently than a court in another jurisdiction. Courts rarely apply findings from criminal courts to civil actions (although evidence from the criminal case can be used) because one of the parties involves a government entity rather than the two parties litigating the civil case. In this case, however, Justice Carolyn Demarest of the Commercial Division of the Kings County Supreme Court found that the plaintiff held an interest in the criminal case because the jury’s determination on the validity of the mortgage directly coincided with plaintiff’s foreclosure action in the civil case. Demarest emphasized that the plaintiff was invited to participate in the criminal action because of the similarity of the disputes and its failure to do so did not bar the application of the collateral estoppel rule. In Altegra Credit Company v. Tin Chu, No. 25816/02, the plaintiff company sought to foreclose on a mortgage given to it by the defendant. The defendant’s mother, Wing Kwan Lee Gee, acting as an intervenor, argued that her son’s Altegra mortgage was fraudulent because he had illegally transferred the title of her home to himself by forging her signature and mortgaging it to Altegra. Upon receiving a complaint from Gee, the Kings Count district attorney filed charges against Chu and named Gee and Altegra’s predecessor in interest as complainants because of their interest in the outcome of the case. On Oct. 25, 2002, a jury found Chu guilty of grand larceny and forgery. Gee then argued that the criminal verdict obviated the need to relitigate the authenticity of the mortgage in the civil action. The court agreed and dismissed Altegra’s claims. The court spent little time finding that the issue in the criminal case — Chu’s guilt in forging and fraudulently transferring the mortgage — directly affected the validity of the mortgage Altegra intended to foreclose. And the stricter (“beyond a reasonable doubt”) standard of proof applied by the jury versus the lower (“more likely than not”) standard used in civil cases only made the application of the collateral estoppel doctrine stronger, said the judge. Demarest rejected Altegra’s claim that it lacked the opportunity to litigate the status of the mortgage during Chu’s criminal case. Such an opportunity must exist for collateral estoppel to apply. In representing the state, the district attorney also acted in the interest of Altegra, the court ruled. “More compelling, however, is the fact that this Plaintiff … was expressly advised, even before Defendant was indicted, of Defendant’s arrest and prosecution and was alerted that such prosecution might have an adverse effect upon Plaintiff’s rights.” At different stages of the criminal trial, the district attorney’s office, Gee’s lawyer, and Demarest’s clerk contacted Altegra for its input and participation, said Demarest. Altegra’s failure to respond undermined its claim that it did not have the opportunity to participate in the criminal proceeding, said the court. The court granted Gee’s request for summary judgment to dismiss Altegra’s foreclosure and voided Chu’s transfer of her mortgage to Altegra. Lee Wiederkehr of Delbello Donnellan Weingarten Tartaglia Wise & Wiederkehr in White Plains represented Altegra. Robert J. Smith in Manhattan represented the defendant.

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