You are here: / Foreclosure
, , ,

THE NOTE WAS ENDORSED IN BLANK REQUIRING PLAINTIFF TO DEMONSTRATE POSSESSION OF THE NOTE AT THE TIME THE FORECLOSURE ACTION WAS COMMENCED; FAILURE TO DEMONSTRATE POSSESSION CONSTITUTED A FAILURE TO DEMONSTRATE STANDING TO FORECLOSE (THIRD DEPT).

The Third Department, reversing Supreme Court, determined the plaintiff mortgage company did not demonstrate standing to foreclose. The note was endorsed in blank, meaning that it was payable to any bearer of the instrument. Therefore the plaintiff was required to show possession of the note at the time the action was commenced. The evidence submitted was insufficient:

Despite being the originator of the note, the record fails to demonstrate whether plaintiff reacquired the note prior to commencement of this action in order to satisfy its moving burden. Plaintiff’s reliance on JP Morgan Chase Bank, N.A. v Venture (148 AD3d 1269, 1270-1271 [3d Dept 2017]) is misplaced. Although the type of indorsement was not identified in the decision that was handed down, we take judicial notice of the record filed in that matter and confirm that the note annexed to the complaint in Venture contained a special indorsement payable to only plaintiff … . This is materially different than here, where the note was indorsed in blank, meaning it was payable to any bearer of the instrument (see UCC 1-201 [b] [21] [B]), therefore requiring plaintiff to perform the additional step of proving possession at the time of commencement … . Neither the moving attorney affirmation nor the affidavit of merit for the loan servicer/attorney-in-fact are sufficient to do so. We further reject plaintiff’s contention that the complaint was sufficient to establish possession of the note at commencement, as the complaint contained conflicting allegations and was unverified, and therefore it lacked the evidentiary value to support such claim … . United Wholesale Mtge., LLC v Smith, 2025 NY Slip Op 02117, Third Dept 4-10-25

Practice Point: Consult this decision for some insight into the proof required to demonstrate a note, endorsed in blank, was possessed by the plaintiff at the time the foreclosure action was commenced. If the defendant raises plaintiff’s lack of standing as an issue, the plaintiff must prove possession at commencement in order to proceed.​

 

,

HERE THE “BORROWER” SIGNED THE MORTGAGE AGREEMENT AND THEN CONVEYED A TWO-THIRDS INTEREST IN THE PROPERTY TO TWO “OWNERS” WHO DID NOT SIGN THE MORTGAGE AGREEMENT; THE BANK SOUGHT TO RECOVER THE COSTS OF MAINTAINING THE ALLEGEDLY ABANDONED PROPERTY UNDER “QUASI CONTRACT” THEORIES; THE QUASI-CONTRACT CAUSES OF ACTION WERE DISMISSED BECAUSE THE MORTGAGE AGREEMENT WAS DEEMED TO COVER THE “BORROWER” AND THE NONSIGNATORY “OWNERS” (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Landicino, determined the bank’s (mortgagee’s) counterclaims for unjust enrichment, quantum meruit, an equitable lien and an equitable mortgage should have been dismissed. The bank was seeking reimbursement for costs associated with maintaining the mortgaged property which had allegedly been abandoned. Essentially, the Second Department held that the existence of the mortgage agreement, a contract, precluded recovery on the equitable theories, even though two of the three parties did not sign the mortgage agreement:

On September 6, 2005, the defendant Gladys Villa (hereinafter the borrower) executed a note that was secured by a mortgage on residential property located in Ossining (hereinafter the property). By bargain and sale deed dated March 8, 2006, the borrower retained a one-third interest in the premises for herself and conveyed the remaining interest to the plaintiffs, Miguel Auquilla and Hilda Guzman (hereinafter together the owners), as tenants in common. The borrower and the owners allegedly defaulted on their obligations under the note and the mortgage by failing to make the monthly payments due in December 2009, and thereafter. * * *

The mortgagee’s theory that the mortgage agreement does not govern the dispute since it was executed by the borrower and not by the owners is a novel one in this Court, but is ultimately unpersuasive. Although this Court has not explicitly recognized such a rule in this context, we now hold that there can be no quasi contract claim by a mortgagee against a third-party nonsignatory owner of property encumbered by a mortgage, the terms of which covers the subject matter of the dispute. Auquilla v Villa, 2025 NY Slip Op 02053, Second Dept 4-9-25

Practice Point: Where there is a contract which binds both signatories third-party nonsignatories, quasi-contractual theories of recovery are not available.

 

,

WHERE IT HAS BEEN MORE THAN A YEAR SINCE DEFENDANT FAILED TO ANSWER THE COMPLAINT, THE DEFENDANT IS ENTITLED TO NOTICE BEFORE ENTRY OF A DEFAULT JUDGMENT; HERE THE FAILURE TO GIVE DEFENDANT NOTICE RENDERED THE DEFAULT JUDGMENT A NULLITY (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined it had been more than a year since defendant Callahan had failed to answer the complaint and, therefore, Callahan was entitled to notice before a default judgment could be entered. No notice was given:

“Pursuant to CPLR 3215(g)(1), ‘whenever application [for judgment by default] is made to the court or to the clerk, any defendant who has appeared is entitled to at least five days’ notice of the time and place of the application, and if more than one year has elapsed since the default any defendant who has not appeared is entitled to the same notice unless the court orders otherwise'” … . “[T]he failure to provide a defendant who has appeared in an action with the notice required by CPLR 3215(g)(1), like the failure to provide proper notice of other kinds of motions, is a jurisdictional defect that deprives the court of the authority to entertain a motion for leave to enter a default judgment” … . As such, “‘the failure to provide a defendant with proper notice of a motion renders the resulting order and judgment entered upon that order nullities'” … . Flagstar Bank, FSB v Powers, 2025 NY Slip Op 01610, Second Dept 3-19-25

Practice Point: Where it has been more than a year since defendant failed to answer a complaint, the defendant is entitled to notice before entry of a default judgment. Failure to provide notice renders the judgment a nullity.

 

, ,

WHEN DEFENDANT’S ATTORNEY WAS SUSPENDED ANY FURTHER PROCEEDINGS IN THIS FORECLOSURE ACTION WERE STAYED; NEITHER PROCEDURE FOR LIFTING THE STAY WAS INVOKED; DEFENDANT’S MOTION TO VACATE SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined a stay of the foreclosure action was in effect because of the suspension of defendant McGrath’s attorney. Because plaintiff never served McGrath with the required notice to lift the stay, the summary judgment order should have been vacated:

When an attorney is suspended from the practice of law, “as with an attorney’s death, incapacitation, removal from an action, or other disability, CPLR 321(c) protects the client by automatically staying the action from the date of the disabling event” … . “The express language of CPLR 321(c) sets no particular time limit to the stay of proceedings that is automatically triggered by a qualifying event” … .

“[D]uring the stay imposed by CPLR 321(c), no proceedings against the party will have any adverse effect” … , and “[o]rders or judgments that are rendered in violation of the stay provisions of CPLR 321(c) must be vacated” … .

“[T]here are actually two ways in which a CPLR 321(c) stay may be lifted. One way is if the party that lost its counsel retains new counsel at its own initiative, or otherwise communicates an intention to proceed pro se” … . “The second way is by means of [a] notice procedure pursuant to CPLR 321(c)” … .

Here, the plaintiff did not serve McGrath with the notice to appoint “either personally or in such manner as the court direct[ed]” (CPLR 321[c]). It is undisputed that no attempt was made to personally serve the required notice, nor is it alleged that the Supreme Court directed that service of the notice be made in some other manner … . Moreover, it is undisputed that McGrath did not communicate an intention to proceed pro se … . Therefore, the automatic stay was not lifted until McGrath opposed the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale and cross-moved to vacate the summary judgment order … . HSBC Bank USA, N.A. v McGrath, 2025 NY Slip Op 01614, Second Dept 3-19-25

Practice Point: When a party’s attorney is suspended, the proceedings are automatically stayed. There are two statutory procedures for lifting the stay, neither of which was invoked here.

 

,

THE FAILURE TO INCLUDE THE PHONE NUMBER FOR THE NYS DEPARTMENT OF FINANCIAL SERVICES IN THE RPAPL 1304 NOTICE OF FORECLOSURE RENDERED THE NOTICE FACIALLY DEFECTIVE; DEFENDANT ENTITLED TO SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s cross-motion for summary judgment in this foreclosure action should have been granted. The bank did not demonstrate strict compliance with the notice-of-foreclosure requirements of RPAPL 1304. The notice did not include the phone number for the NYS Department of Financial Services’ toll-free helpline:

“Where an RPAPL 1304 notice fails to reflect information mandated by the statute, . . . the statute will not have been strictly complied with and the notice will not be valid” … . Here, at the time the RPAPL 1304 notices were purportedly sent to the defendant, the version of RPAPL 1304 in effect required the notice to include the following sentence: “If you need further information, please call the New York State Department of Financial Services’ toll-free helpline at (show number) or visit the Department’s website at (show web address)” … .

Both RPAPL 1304 notices purportedly sent to the defendant included the sentence: “If you need further information, please call the toll-free helpline at or visit the Department’s website at .” Since the notices failed to include the telephone number for the Department of Financial Services’ toll-free helpline—a piece of information specifically required by the version of RPAPL 1304 in effect at the time the notices were sent—the notices were facially defective, and the defendant’s motion for summary judgment dismissing the complaint insofar as asserted against her should have been granted … . Federal Natl. Mtge. Assn. v Williams-Jones, 2025 NY Slip Op 01081, Second Dept 2-26-25

Practice Point: Strict compliance with the mandated contents of a RPAPL 1304 notice of foreclosure is required. Here the failure to include the phone number for the NYS Department of Financial Services rendered the notice facially defective and warranted a grant of summary judgment to the defendant.

 

, ,

ALTHOUGH A COURT HAS THE DISCRETIONARY “INTERESTS OF JUSTICE” POWER TO VACATE ITS OWN ORDER, THAT POWER SHOULD ONLY BE EXERCISED IN UNIQUE OR UNUSUAL CIRCUMSTANCES NOT PRESENT HERE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined Supreme Court should not have vacated its own dismissal of the action in 2013 because (Wilmington) demonstrated none of criteria for vacation of a judgment or order described in CPLR 5015 (a);

“Under CPLR 5015(a), the court which rendered a judgment or order may relieve a party from it upon such terms as may be just, upon the ground of excusable default; newly discovered evidence; fraud, misrepresentation, or other misconduct of an adverse party; lack of jurisdiction to render the judgment or order; or reversal, modification, or vacatur of a prior judgment or order upon which it is based” … . “In addition to the specific grounds set forth in CPLR 5015(a), a court may, in its discretion, vacate its own judgment ‘for sufficient reason and in the interests of substantial justice'” … . “However, a court’s inherent power to exercise control over its judgments is not plenary, and should be resorted to only to relieve a party from judgments taken through fraud, mistake, inadvertence, surprise or excusable neglect” … . In other words, “[a] court should only exercise its discretionary authority to vacate a judgment in the interests of substantial justice where unique or unusual circumstances . . . warrant such action” … .

Here, the Supreme Court improvidently exercised its discretion in granting that branch of the Wilmington’s motion which was to vacate the 2013 dismissal order. Importantly, Wilmington did not adequately explain why it delayed nearly eight years before filing its motion … . Wells Fargo Bank, N.A. v Sulton, 2025 NY Slip Op 01128, Second Dept 2-26-25

Practice Point: CPLR 5015 (a) gives a court the discretionary power to vacate its own order “in the interests of substantial justice.” That power should only be exercised in unique or unusual circumstances, not present here.

 

,

SUBSEQUENT COMPLAINTS WHICH REPEAT THE ALLEGATIONS IN THE INITIAL COMPLAINT ARE “SUPPLEMENTAL,” NOT “AMENDED,” COMPLAINTS; DEFENDANT NEED ONLY ANSWER THE INITIAL COMPLAINT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant in this foreclosure proceeding was not in default. The defendant answered the first complaint but did not answer two subsequent complaints which were designated “amended complaints,” Amended complaints require an answer, but “supplemental complaints” do not require an answer. Here the “amended complaints” merely repeated the allegations in the original complaint, making them “supplemental,” not “amended,” complaints:

“Generally, an amended complaint supersedes the original pleading, the defendant’s original answer has no effect, and a new responsive pleading is substituted for the original answer. In contrast, a supplemental complaint does not supersede the original pleading and the answer which had already been served at the time the supplemental pleading was interposed remains in effect” … . Here, insofar as asserted against the defendant, the purported amended complaints merely repeated the same allegations against the defendant that were made in the original complaint and, thus, are properly characterized as supplemental complaints … . As the defendant had already answered the allegations asserted, no further answer was required within the meaning of CPLR 3025(d). Thus, the defendant was not in default. U.S. Bank N.A. v Deblinger, 2025 NY Slip Op 01126, Second Dept 2-26-25

Practice Point: “Amended” complaints require a new answer, “supplemental” complaints do not. Here, although the subsequent complaints were designated “amended,” they in fact were “supplemental” because they merely repeated the allegations in the first complaint.

 

, ,

THE FORECLOSURE ACTION BROUGHT IN 2011 WAS DISMISSED BECAUSE THE BANK FAILED TO COMPLY WITH THE NOTICE OF DEFAULT PROVISIONS IN THE MORTGAGE AGREEMENT; THEREFORE THE 2011 ACTION DID NOT ACCELERATE THE DEBT AND THE STATUTE OF LIMITATIONS FOR FORECLOSURE NEVER STARTED RUNNING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the mortgage was never validly accelerated when the foreclosure proceeding was brought in 2011. The 2011 action was dismissed because the notice of default was not served in accordance with the mortgage agreement (a condition precedent to foreclosure). Because the debt was never accelerated in 2011, the statute of limitations never started running and plaintiffs’ action to cancel and discharge the mortgage (RPAPL 1501 (4)) should not have been granted:

… [T]he defendants established … that the acceleration of the debt alleged in the complaint was a nullity due to the Supreme Court’s determination … that GMAC failed to establish … proper mailing of the notice of default, a contractual condition precedent to acceleration of the debt. Accordingly, the statute of limitations to foreclose the mortgage never accrued … . …

Contrary to the plaintiffs’ contention, CPLR 213(4)(b), as amended by the Foreclosure Abuse Prevention Act …, … does not preclude the defendants from asserting that the statute of limitations for an action to foreclose the mortgage has not expired. … [T]he defendants demonstrated that the statute of limitations had not previously accrued because the 2011 action was dismissed upon an expressed judicial determination made upon a timely interposed defense that the notice of default was not mailed in accordance with the terms of the mortgage agreement … . Nichols v U.S. Bank, 2025 NY Slip Op 00665, Second Dept 2-5-25

Practice Point: If a foreclosure action is dismissed because the bank did not comply with the notice of default provisions in the mortgage agreement, a condition precedent to foreclosure, the debt was never accelerated and the foreclosure statute of limitations never started running.

 

,

ALTHOUGH THE PLAINTIFF BANK DID NOT INITIATE PROCEEDINGS TO TAKE A JUDGMENT WITHIN ONE YEAR OF DEFENDANTS’ DEFAULT IN THIS FORECLOSURE ACTION, THE DEFENDANTS HAD FILED AN UNTIMELY ANSWER WHICH WAIVED THE DEFENDANTS’ RIGHT TO SEEK DISMISSAL OF THE COMPLAINT PURSUANT TO CPLR 3215 (C) (SECOND DEPT). ​

The Second Department, reversing Supreme Court in this foreclosure action, determined the defendants waived the right to seek dismissal of the complaint pursuant to CPLR3215 (c) (based on the bank’s failure to take proceedings for the entry of a default judgment within one year) by submitting an untimely answer:

In May 2016, the plaintiff commenced this action to foreclose the mortgage against … [defendants].. The defendants filed an untimely answer on December 9, 2016. * * *

Pursuant to CPLR 3215(c), “[a]n action is deemed abandoned where a default has occurred and a plaintiff has failed to take proceedings for the entry of a judgment within one year ]thereafter” … . It is not necessary for a plaintiff to actually obtain a default judgment within one year of the default in order to avoid dismissal pursuant to CPLR 3215(c) … . Nor is a plaintiff required to specifically seek the entry of a judgment within one year … . As long as the plaintiff has initiated proceedings for the entry of a judgment within one year of the default, there is no basis for dismissal of the complaint pursuant to CPLR 3215(c) ,,, .

A defendant may waive the right to seek dismissal pursuant to CPLR 3215(c) by serving an answer or taking “‘any other steps which may be viewed as a formal or informal appearance'” … . Here, the defendants waived their right to seek dismissal of the complaint insofar as asserted against them by serving an untimely answer in the action … .Deutsche Bank Natl. Trust Co. v Garriques, 2025 NY Slip Op 00648, Second Dept 2-5-25

Practice Point: Here the plaintiff bank did not initiate proceedings to take a default judgment within one year of defendants’ default. Defendants however where not entitled to dismissal of the complaint on that ground (CPLR 3215 (c)) because they had submitted a late answer.

 

,

EVEN THOUGH THE BANK’S MOTION FOR AN ORDER OF REFERENCE WAS REJECTED AS DEFICIENT, THE MOTION CONSTITUTED INITIATING PROCEEDINGS FOR A DEFAULT JUDGMENT WITHIN ONE YEAR OF DEFENDANTS’ DEFAULT; THE BANK’S MOTION TO VACATE THE DISMISSAL OF THE COMPLAINT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s motion to vacate the dismissal of the foreclosure action should have been granted. The bank’s motion for an order of reference made within one year of defendant’s default was a sufficient step toward taking a default judgment within the meaning of CPLR 3215 (c), even though the motion was rejected as deficient:

… [T]he plaintiff initiated proceedings for the entry of a judgment by moving for an order of reference within one year of the defendant’s default in the action … . “‘The fact that the Supreme Court rejected the motion as defective is beside the point, as the mere presentment of it established the plaintiff’s intent to proceed toward the entry of judgment and not to abandon the action'” … . Since the plaintiff did not fail to take timely proceedings for a judgment against the defendant within the meaning of CPLR 3215(c), the plaintiff was not required to demonstrate an excuse for its purported delay in moving to vacate the dismissal order … . Moreover, the plaintiff’s motion, inter alia, in effect, pursuant to CPLR 2221(a) to vacate the dismissal order was not subject to any specific time limitation … . … Supreme Court should have granted the plaintiff’s motion … pursuant to CPLR 2221(a) to vacate the dismissal order and to restore the action to the active calendar … . Wells Fargo Bank, N.A. v Wint, 2025 NY Slip Op 00698, Second Dept 2-5-25

Practice Point: Here the bank’s unsuccessful motion for an order of reference met the criteria for initiating proceedings to take a default judgment within one year of defendants’ default.

 

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2025 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy