THE PROPERTY OWNER, MCWHITE, HAD BEEN DISMISSED FROM THE ORIGINAL FORECLOSURE ACTION AND HER INTEREST IN THE PROPERTY HAD NOT BEEN EXTINGUISHED BY THE JUDGMENT OF FORECLOSURE WHICH FALSELY NAMED HER AS A DEFENDANT; THE REFEREE’S DEED-HOLDER DID NOT STATE A CAUSE OF ACTION FOR REFORECLOSURE AGAINST MCWHITE AND MCWHITE WAS ENTITLED TO SUMMARY JUDGMENT ON HER QUIET TITLE CAUSE OF ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s deed-holder’s (I & I’s) complaint failed to state a cause of action for reforeclosure (RPAPL 1503, 1523) against McWhite, the owner of the subject property. McWhite had been dismissed from the original foreclosure action because plaintiff never moved for a default judgment. The foreclosure plaintiff was aware McWhite was not included in the foreclosure when it filed its judgment, which falsely indicated McWhite’s interest in the property had been extinguished. McWhite was entitled to summary judgment on her quiet title action:

Under the circumstances of this case, I & I failed to state a cause of action against McWhite for reforeclosure because the defect in the foreclosure action was due to the willful neglect of the foreclosure plaintiff as a matter of law. The underlying objective of foreclosure actions is “to extinguish the rights of redemption of all those who have a subordinate interest in the property and to vest complete title in the purchaser at the judicial sale” … . The defect in the underlying foreclosure action was that McWhite’s interest was not validly extinguished in the judgment of foreclosure and sale due to her effective dismissal from the action. … [T]he foreclosure plaintiff here knew that McWhite had been effectively dismissed from the action and that the judgment of foreclosure and sale could not validly extinguish her interest in the premises. The foreclosure plaintiff nevertheless made a conscious decision to proceed to judgment and sale without validly extinguishing McWhite’s known interest … . * * *

Here, the judgment of foreclosure and sale was void as to McWhite and the foreclosure sale did not transfer her interest in the premises to I & I. Moreover, McWhite established, prima facie, that the foreclosure action accelerated the mortgage debt, that the foreclosure action was dismissed as abandoned pursuant to CPLR 3215(c), and the commencement of a new foreclosure action would be time-barred by the applicable six-year statute of limitations (see CPLR 213[4] … ). In opposition, I & I failed to raise a triable issue of fact. Accordingly, the Supreme Court should have granted that branch of McWhite’s motion which was for summary judgment on the complaint in the quiet title action. McWhite v I & I Realty Group, LLC, 2022 NY Slip Op 06795, Second Dept 11-30-22

Practice Point: Here the foreclosure plaintiff was aware the owner of the subject property, McWhite, had been dismissed from the original foreclosure action because plaintiff never moved for a default judgment. Yet the foreclosure plaintiff filed the judgment of foreclosure falsely indicating McWhite’s interest in the property had been extinguished. The owner of the referee’s deed therefore could not bring a reforecloscure action (RPAPL 1503, 1523) against McWhite and McWhite was entitled to summary judgment on her quite title action.