Conflicting transactions in an apartment: Mizrahi Tefahot was negligent, and the mother's right prevailed over the pledge

Background and facts: conflicting transactions in an apartment and a pledge in favor of Mizrahi Tefahot

The details here are based on a report on the mako website of October 24, 2019, written in cooperation with the Psakdin website. The full text of the judgment was not found openly online. According to the report, the judgment was given in the Haifa District Court, by Judge Daoud Mazen. The case number, as it appears in the link to the judgment in the article, is 13092-01-16.

According to the report, a single mother bought an Amidar apartment in 2003. She did not register a cautionary note and was not registered as the owner with Amidar. About three years later, a couple bought the same apartment from the previous owners, and took a mortgage from Mizrahi Tefahot.

In 2015, the couple did not keep up with the mortgage payments, and the bank acted to enforce the pledge. The mother, who lived in the apartment, filed a claim for a declaration that she is the owner of the apartment.

The parties' arguments

According to the plaintiff, she bought the apartment lawfully, three years before the couple. The bank argued that the plaintiff herself caused the problem, because she did not register her rights. According to the bank, it could not have known about them before approving the mortgage, and so its pledge prevails.

What the court decided: the bank did not act in good faith

According to the report, the court held that the plaintiff's earlier transaction prevails. It was held that the bank was negligent and acted in bad faith, because it ignored warning signs.

The report lists the signs the court pointed to:

• The couple were registered as owners even before they paid the full consideration.
• There was a family connection between the couple and the sellers.
• The plaintiff lived in the apartment.
• The bank received a lawyer's letter describing her as a tenant, without asking for the lease agreement or a sworn statement.

The claim was allowed. According to the report, the bank was ordered to pay legal costs and attorney's fees of NIS 15,000.

What it means for Mizrahi Tefahot customers

According to the judgment as reported, a bank registering a pledge on an apartment is required to check the actual state of the rights, including who holds the property. A general letter does not replace an examination when there are suspicious signs. A person who holds an apartment and did not register his rights is exposed to risk, which is why registering a cautionary note is important.

Further rulings on mortgages and enforcement appear in the rulings database and on the page Civil Claim 2311-06 Yeshinovsky: scope of mortgage enforcement.

Sources

• mako (in cooperation with Psakdin): report on the judgment, October 24, 2019

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

The full text was not found openly online; details according to a report, not yet verified against the text of the decision

How to cite

Case number not stated in the source, Haifa District Court. Source: Net HaMishpat (Israeli courts database), case Case number not stated in the source.