Rachel owns a property and grants a deed to her son Paul, who does not record it. Later, Rachel grants a mortgage to Community Bank, which records immediately. Subsequently, Paul records his deed. The bank claims its mortgage has priority over Paul's ownership. Under New York law, what factor will be most critical in determining priority?
Correct Answer
A) Whether the bank had actual or constructive notice of Paul's deed when it made the loan
Under New York's race-notice statute, the critical factor is whether Community Bank had notice of Paul's unrecorded deed when it made the loan. If the bank had actual knowledge or other notice of Paul's interest, it cannot claim priority even though it recorded first.
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