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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.

 

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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.

 

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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.

 

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THE INCLUSION OF ADDITIONAL INFORMATION IN THE ENVELOPE CONTAINING THE RPAPL 1304 90-DAY NOTICE OF FORECLOSURE DID NOT VIOLATE THE “SEPARATE ENVELOPE” RULE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the inclusion of additional information the the envelope with the RPAPL 1304 90-day notice of foreclosure did not invalidate the notice (in light of a recent Court of Appeals decision):

The Court of Appeals held that RPAPL 1304 does not prohibit the inclusion of additional information in the envelope that may help borrowers avoid foreclosure and is not false or misleading … .

Here, information about HAMP [Home Affordable Modification Program] was sent with the 90-day notice. This information was relevant to avoiding foreclosure and was not false or misleading. Therefore, pursuant to the Court of Appeals’ decision in Kessler ]39 NY3d 317] and the subsequent case law, the inclusion of this information with the 90-day notice did not violate the “separate envelope” requirement of RPAPL 1304(2). The plaintiff otherwise established that it sent the RPAPL 1304 notice as required by the statute. Thus, the plaintiff established, prima facie, that it complied with the notice requirements of RPAPL 1304. Wells Fargo Bank, N.A. v Smart, 2025 NY Slip Op 00476, Second Dept 1-29-25

Practice Point: The inclusion of additional information in the envelope containing the RPAPL 1304  90-day notice of foreclosure does not violate the “separate envelope” rule if the information is not misleading and may help the borrower avoid foreclosure.

 

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PROOF THE MORTGAGE WAS ASSIGNED TO PLAINTIFF WITHOUT PROOF THE NOTE WAS ALSO ASSIGNED BEFORE THE ACTION WAS COMMENCED IS NOT SUFFICIENT TO DEMONSTRATE STANDING TO FORECLOSE (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff did not demonstrate it had standing to foreclosure. Plaintiff proved the assignment of the mortgage to it, but did not prove the assignment of the note. In addition, plaintiff did not prove it physically possessed the note which had been indorsed to it:

While plaintiff’s papers established that the original noteholder, nonparty Realty Closing Solution LLC, assigned the note to nonparty 1Sharpe Opportunity Intermediate Trust (1Sharpe) on June 24, 2019, plaintiff did not establish that 1Sharpe assigned the note to plaintiff before this action was commenced. Instead, plaintiff established that 1Sharpe assigned the mortgage to plaintiff. Without also assigning the note, the assignment of the mortgage, by itself, is of no incident because “a transfer of the mortgage without the debt is a nullity” … . …

… [P]laintiff did not establish that it physically possessed the note indorsed to it. Plaintiff relies on an allonge from 1Sharpe included with the note in the complaint. However, plaintiff furnished no evidence, either by producing the physical note or through the attestations of its affiant … that this allonge, which was indorsed in blank, was “firmly affixed” to the note (UCC 3-202[2]…). 1S REO Opportunity 1, LLC v Harlem Premier Residence, LLC, 2025 NY Slip Op 00016, First Dept 1-2-25

Practice Point: Here the plaintiff demonstrated the mortgage was assigned to it but did not demonstrate the note was assigned to it before the action was commenced. Therefore the plaintiff did not prove it had standing to foreclose.

 

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THE FORECLOSURE ACTION WAS TIMELY COMMENCED WHEN THE SUMMONS AND COMPLAINT WERE FILED IN 2013; THE COURT ERRED IN DEEMING THE ACTION COMMENCED WHEN THE SUMMONS AND COMPLAINT WERE SERVED IN 2022 (THIRD DEPT). ​

The Third Department, reversing Supreme Court, determined the foreclosure action was timely, noting that the time the foreclosure action was commenced was when the summons and complaint were filed, not when they were served:

The sole issue this Court is tasked with addressing is whether the action was timely commenced. “An action to foreclose a mortgage is subject to a six-year statute of limitations (see CPLR 213 [4]), which begins to run from the due date of each unpaid installment, from the date the mortgagee is entitled to demand full payment, or from the date the mortgage debt has been accelerated” … . Acceleration occurs when, among other things, a lender demands payment in full by commencing a foreclosure action … . The operative date for determining whether a claim was interposed within the limitations period is the date of commencement, and “an action is commenced upon the filing of the summons and complaint, not service” … .

Supreme Court incorrectly determined that plaintiff’s claim was interposed upon [defendant] Coppola when she was served with process in January 2022, rather than upon the filing of the summons and complaint in September 2013 … . Deutsche Bank Trust Co. Ams. v DiGioia, 2024 NY Slip Op 06403, Third Dept 12-19-24

Practice Point: The foreclosure action was commenced when the summons and complaint were filed in 2013, not when they were served in 2022.

 

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PLAINTIFF BANK WAS NOT ENTITLED TO SUMMARY JUDGMENT IN THIS REFORECLOSURE ACTION; THERE WAS A QUESTION OF FACT WHETHER WILLFUL NEGLECT BY PLAINTIFF BANK OR ITS PREDECESSOR IN INTEREST RESULTED IN THE DEFECT IN THE ORIGINAL FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff bank was not entitled to summary judgment in this reforeclosure action:

Where the interest of a necessary party has not been foreclosed upon in a judgment of foreclosure and sale, the purchaser of the foreclosed property has two potential remedies: a strict foreclosure action pursuant to RPAPL 1352, or a reforeclosure action pursuant to RPAPL 1503. RPAPL 1503 provides … that, when real property has been sold at a foreclosure sale ‘and it appears from the public records or from the allegations of the complaint that such judgment, sale or conveyance was or may have been, for any reason, void or voidable as against any person, including an owner of the real property mortgaged, the purchaser . . . may maintain an action as provided in this article to determine the right of any person to set aside such judgment, sale or conveyance or to enforce an equity of redemption or to recover possession of the property, or the right of any junior mortgagee to foreclose a mortgage'” … . “[T]o prevail in a reforeclosure action, the plaintiff must demonstrate that the defect in the original foreclosure action ‘was not due to fraud or wilful neglect of the [foreclosure] plaintiff and that the defendant or the person under whom he [or she] claims was not actually prejudiced thereby'” … .

Here, US Bank’s [plaintiff’s] predecessor in interest allowed the notice of pendency in the foreclosure action to lapse. During that lapse, Wilkshire obtained and recorded title to the property by a referee’s deed pursuant to the foreclosure of a lien for unpaid homeowners association dues. Subsequently, US Bank filed a new notice of pendency, which was not served upon Wilkshire. Thereafter, US Bank obtained an order and judgment of foreclosure and sale in the foreclosure action. On its motion for summary judgment in the instant action, US Bank failed to submit any evidence to establish, prima facie, that the defect in the foreclosure action was not due to willful neglect by itself or by its predecessors in interest. Thus, US Bank failed to establish its entitlement to judgment as a matter of law … . U.S. Bank N.A. v 18 Wilkshire Circle, LLC, 2024 NY Slip Op 06372, Second Dept 12-18-24

Practice Point: Consult this decision for some discussion of the remedies of “strict foreclosure” and “reforeclosure” under the Real Property Actions and Proceedings Law (RPAPL) where there was some defect in the original foreclosure proceedings.

 

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DEFENDANT BOUGHT THE FORECLOSED PROPERTY WITHOUT KNOWLEDGE THE JUDGMENT OF FORECLOSURE AND SALE HAD BEEN APPEALED; DEFENDANT WAS A PURCHASER IN GOOD FAITH AND FOR VALUE AND WAS THEREFORE INSULATED FROM THE EFFECTS OF THE APPELLATE REVERSAL (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant (Bartlett) was a purchaser in good faith and for value of the foreclosed property. The foreclosure was reversed on appeal. Defendant, as the fee owner of the property, was insulated from the effects of the reversal:

Where a judgment of foreclosure and sale is reversed on appeal, the successful appellant may seek restitution of the real property lost by the judgment (see CPLR 5015[d]; 5523). However, where the real property was sold pursuant to the judgment of foreclosure and sale, and the title is held by “a purchaser in good faith and for value,” recovery is limited to the value of the real property (id. § 5523). In the absence of a stay of the sale or an outstanding notice of pendency, title of the purchaser in good faith and for value “is . . . insulate[d] . . . from the effects of an appellate reversal” … .

Here, in support of its cross-motion, Bartlett established, through an affidavit of its member, that Bartlett acquired title to the property subsequent to a foreclosure sale, without actual knowledge of a successful appeal by the plaintiffs in the underlying action that resulted in a vacatur of the judgment of foreclosure and sale … . The affidavit also demonstrated that the plaintiffs had not obtained a stay of the foreclosure sale in the underlying action. Under these circumstances, Bartlett established … that it was a purchaser in good faith and for value entitled to the protection of CPLR 5523 … . Puretz v Mae, 2024 NY Slip Op 06227, Second Dept 12-11-24

Practice Point: A buyer of foreclosed property who had no knowledge the judgment of foreclosure had been appealed is insulated from the effects of a reversal on appeal. The buyer, as a purchaser in good faith for value, is the fee owner of the property.

 

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PLAINTIFF DID NOT DEMONSTRATE DEFENDANT WAS PROPERLY SERVED OR EVEN NOTIFIED OF THE FORECLOSURE ACTION; THE COURT NEVER HAD JURISDICTION OVER DEFENDANT AND THE MOTION TO EXTEND THE TIME TO SERVE HER SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined plaintiff in this foreclosure action did not demonstrate defendant was properly served with the summons and complaint. Therefore the court never had jurisdiction over the defendant:

… [T]he plaintiff was on notice in December 2018 that service upon the defendant allegedly was defective when the defendant moved to dismiss the complaint for lack of personal jurisdiction. The plaintiff nonetheless waited nearly 10 months thereafter to move for an extension of time to serve the defendant. Moreover, the plaintiff’s motion was made more than two months after the hearing before the special referee concluded, even though the evidence at the hearing demonstrated that the defendant had been residing in Canada for decades … . Although the statute of limitations had already expired by the time the plaintiff moved for an extension of time, the plaintiff failed to demonstrate that it diligently prosecuted this action … . “Moreover, . . . the plaintiff submitted no evidence that [the defendant] had actual notice of the action against her within the 120-day service period” … . Further, the plaintiff failed to rebut the inference [*3]of substantial prejudice to the defendant that arose from the protracted delay in obtaining such notice … . Accordingly, the Supreme Court improvidently exercised its discretion in granting that branch of the plaintiff’s motion which was pursuant to CPLR 306-b to extend the time to serve the summons and complaint upon the defendant.

Since the defendant was not properly served with the summons and complaint and the plaintiff failed to demonstrate entitlement to an extension of time to effectuate service, the Supreme Court should have granted the defendant’s motion pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against her. “The court does not have personal jurisdiction over a defendant when a plaintiff fails to properly effectuate service of process. In those instances in which process has not been served upon a defendant, all subsequent proceedings will be rendered null and void” … . HSBC Bank USA, N.A. v Labin, 2024 NY Slip Op 05963, Second Dept 11-27-24

Practice Point: Consult this decision for the analytical criteria for determining whether a motion to extend the time to serve a defendant with the summons and complaint should be granted.

 

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PLAINTIFF DID NOT DEMONSTRATE STANDING TO FORECLOSE; THE NOTE WAS NOT PROPERLY ENDORSED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff in this foreclosure action did not establish standing to foreclose. Although the plaintiff proved it had possession of the note at the time the proceeding was brought, it did not demonstrate the note was properly endorsed:

Although the plaintiff established, prima facie, that it had possession of the original “wet ink” note prior to commencing the instant action …, the plaintiff failed to demonstrate that the note was properly endorsed. “Where there is no allonge or note that is either endorsed in blank or specially endorsed to the plaintiff, mere physical possession of a note at the commencement of a[n] . . . action is insufficient to confer standing or to make a plaintiff the lawful holder of a negotiable instrument for the purposes of enforcing the note” … . Here, the instant note bore no endorsements and had no allonges attached. Deutsche Bank Natl. Trust Co. v PJK Holdings, LLC, 2024 NY Slip Op 05787, Second Dept 11-20-24

Practice Point: If standing to foreclose is contested, a plaintiff must show (1) it was in possession of the note at the time the proceeding was brought and (2) the note was properly endorsed in blank or specifically to the plaintiff.

 

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