Upon the foregoing papers, petitioner's application for an order (1) vacating the auction sale in the underlying foreclosure action, (2) staying any further auction or resale of the subject premises, and (3) directing the return of his down payment, is granted to the extent indicated.

Plaintiff commenced this action to foreclose a tax lien certificate on property known as 11 Lamped Loop, Unit 33R, Staten Island, New York (Block 2401, Lot 1102). On January 12, 2006, a foreclosure sale was held at which petitioner RAPHAEL BERGER was the successful bidder. He agreed to pay $61,000 to purchase the property. Pursuant to the Terms of Sale, petitioner deposited a down payment of $6,100 with the referee, and was required to pay the [*2]balance of the purchase price by February 12, 2006.

Subsequent to the foreclosure sale, petitioner ordered a title search of the property through Atlantic Land Title and Abstract, Ltd. (hereinafter "the title company"), and it was discovered that the property in question is a "recreation room" located in the sub-basement of a condominium building. Moreover, the title company advised petitioner that it would not write a title policy on the subject property since the Condominium Ownership Plan prohibits ownership of the premises by anyone who does not own a residential unit in the subject building. Based on this prohibition, petitioner refused to complete the sale and demanded the return of his down payment. Plaintiff refused and proposes to re-auction the property to a new purchaser.

By Order to Show Cause dated March 7, 2006, petitioner seeks, inter alia, to vacate the sale and compel the return of his down payment on the ground that the title thereto is encumbered, uninsurable and unmarketable due to the condominium's restrictions on ownership. In support of this application, petitioner has submitted his personal affidavit, in which he states that he wanted to purchase a residential unit in the subject condominium complex, but ended-up with a room in the basement that cannot be used as a residence.

In opposition, plaintiff contends that petitioner could have easily discovered the alleged title defect prior to the sale by conducting a title search, and that he is therefore bound to complete the purchase under the doctrine of "caveat emptor". According to plaintiff, petitioner chose to bid blindly on the property without conducting the necessary research, and was solely responsible for driving-up the auction price to $61,000. Notably, that sum is substantially more than the tax lien, thereby generating a significant surplus for the defendants in the foreclosure action. Plaintiff further contends that petitioner's refusal to complete the purchase pursuant to the "Terms of Sale" is wrongful as a matter of law, since there are no allegations of misconduct regarding the sale, which was appropriately conducted in accordance with the terms of the Judgment of Foreclosure. Finally, plaintiff contends that petitioner is not entitled to the return of his down payment since he defaulted on the purchase on the property.

"A court may exercise its equitable powers to set aside a judicial sale only where fraud, collusion, mistake or overreaching casts suspicion on the fairness of the sale" (Bank of New York v. Sheik, 279 AD2d 440, 441). Here, it is the opinion of this Court that the sale of the subject property to petitioner should be vacated on the ground of mutual mistake, and that the down payment must be returned.

It is undisputed that petitioner was under the mistaken belief that he was purchasing a residential unit. Moreover, the description of the property contained in the legal documents accompanying the foreclosure sale merely describe the premises as "11 Lamped Loop, Unit 33R, Staten Island, NY (Section, Block 2401, Lot 1102)". Thus, there is nothing in these documents which would put a prospective purchaser on notice that (1) this is a basement "recreation room" rather than a residential unit, (2) it cannot be used as a residence, or (3) ownership is restricted to persons owning residential units within the condominium building.

This mutual mistake of fact took place at the time of the foreclosure sale, which led to the "Terms of Sale" document, and the mistake is substantial. All of these circumstances do not reflect a true meeting of the minds of the parties (see, Gould v. Board of Education of Sewanhaka Central High School District, 81 NY2d 446, 453). In addition, because plaintiff was merely the purchaser of the underlying tax lien, it is not unreasonable to suggest that plaintiff was totally unaware of the designation of the property as a "recreation room" or the ownership [*3]restrictions imposed by the condominium's by-laws. In point of fact, plaintiff does not dispute either the true nature of the premises or the restrictions on ownership, and makes no representations as to its knowledge of either.

Given this apparent ignorance on the part of both parties, it is the opinion of this Court that it would be unconscionable to compel petitioner to complete the sale or to refuse to return his down payment.^[FN1] Manifestly, it is within the inherent equitable power of this Court to prevent its judgment from operating as an instrument of injustice (see Guardian Loan Co. v. Early, 47 NY2d 515, 520).

Accordingly, it is

ORDERED that the petition is granted to the extent that the sale is vacated and the referee is directed to refund the down payment of $6,100 to petitioner; and it is further

ORDERED that the balance of the petition is denied.

E N T E R,

Robert J. Gigante, J.S.C.

Dated: August 2, 2006