BECAUSE THE HOLDER OF A FIRST MORTGAGE WAS A DEFENDANT IN THE TAX FORECLOSURE PROCEEDINGS, THE MORTGAGE HOLDER DID NOT NEED TO FILE ITS OWN FORECLOSURE ACTION TO ENFORCE ITS LIEN ON THE SURPLUS TAX-FORECLOSURE-SALE PROCEEDS (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Scheinkman, determined that HPD,  the holder of a first mortgage on property which was the subject of a tax foreclosure, was entitled to the surplus funds from the tax foreclosure sale. The issue was whether HPD’s action seeking the surplus was time-barred because it didn’t enforce the lien on the surplus within six years of the tax foreclosure sale. The Second Department held no further action to enforce the lien was necessary because HPD was a defendant in the tax foreclosure proceedings:

… HPD’s appearance in the tax lien foreclosure action put [the property owner] and anyone else interested in a potential surplus on notice of HPD’s claims. To require HPD to commence a separate foreclosure action, when an action to foreclose the tax lien was already pending, would serve no useful purpose. NYCTL 1997-1 Trust v Stell, 2020 NY Slip Op 02802, Second Dept 5-13-20