It is an unfortunate actuality that on many (perhaps most) occasions when a defaulting borrower answers a foreclosure complaint, he adds not an affirmative defense or two, but a host of them: ten, fifteen, twenty, even more. Is it likely that the foreclosing party was so wrong in so many respects that all these defenses are valid? Hardly. This is not to say that a plaintiff can never be in error, but it does not make fifteen or twenty mistakes. The reality, however, is that such is the way the mortgage foreclosure defense game is played.
The problem for the lender or servicer in such an instance is not so much that it will lose the case (it could if it stumbled), but that it incurs the increased expense in legal cost to refute every one of those affirmative defenses.
One of the common defenses when the “shotgun” approach is used is the assertion that the plaintiff failed to name a necessary party or neglected to join a necessary party.
A foreclosing lender obtains a foreclosure search, and a continuation search, so it would be difficult to accidently neglect to name a necessary party. But then, it can volitionally choose to do that if, for example, there is a very small judgment creditor, whose judgment is about to expire, and who cannot be readily served so that the cost of service would be more than the value of the judgment. This is but one of the number of examples where a plaintiff is free to make a choice about whether a particular defendant should be served. This often applies to tenants too. In any event, the ultimate question is whether refraining, or failing, to name a junior party who is deemed necessary supports dismissal of the complaint and is therefore a valid defense.
A new case [Liberty Dabar Associates v. Mohammed, 183 A.D.3d 880, 124 N.Y.S.3d 708 (2d Dept. 2020)] reminds of the established principle that the defense most often has no substance. First, there is the distinction between a necessary party and an indispensable party. A tenant, while necessary is not indispensable – an accepted maxim which the cited case confirmed.
Next, the absence of a necessary party in a mortgage foreclosure action simply leaves that party’s rights unaffected by the judgment of foreclosure and sale. (No harm is done and so leaving out that party has no particular meaning.)
Finally, even if a necessary party really should be included in the action (an entirely different subject), the remedy for such for such an event is not to dismiss a case, but rather to mandate joinder. [See 2 Bergman on New York Mortgage Foreclosures §12.02 , LexisNexis Matthew Bender (rev. 2021).]
In sum, the defense of failing to name a necessary party will most often be found without merit.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2019), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.