That the judgment of foreclosure and sale in a foreclosure action is “final” sounds reasonable and appropriate, as well as unremarkable. (That it can be appealed does not change its character as final.) And the concept tends to sound pedantic or academic – just some scholarly or technical, procedural observation. But it actually has great practical meaning in the foreclosure realm, as two recent cases confirm anew. [Retained Realty, Inc. v. Koenig, 166 A.D.3d 691, 88 N.Y.S.3d 48 (2d Dept. 2018); Archibald v. Wells Fargo Bank, N.A., 166 A.D.3d 573, 87 N.Y.S.3d 298 (2d Dept. 2018)].
We speed to the principle: A judgment of foreclosure and sale is final as to all questions at issue between the parties and all matters of defense which were or might have been litigated in the foreclosure action are concluded. A corollary compelling point is that defenses which should have been raised before the entry of the judgment of foreclosure and sale, but were not, should not be entertained by the court after the fact.
What does all this mean in the real world? In Archibald v. Wells Fargo Bank, supra, the lender bank initiated a foreclosure, the defendant answered, summary judgment was granted, summary judgment was confirmed on appeal and apparently a judgment of foreclosure and sale issued. Undaunted in defeat, the borrower began a bar claim (quiet title) action to declare the mortgage void, founded upon the assertion that the borrower had rescinded the mortgage loan pursuant to the federal truth in lending act (15 U.S.C. §1601, et seq.). That may or may not have been true, but the now defendant bank moved to dismiss this bar claim action and was successful – based upon the rules of finality of the judgment. Anything the borrower had previously argued, or in this case could have argued but did not, are barred by the entry of the judgment of foreclosure and sale. All those things are res judicata and are disposed of. Finality of the foreclosure judgment meant that the borrower lost in its effort to start its own action attacking the mortgage.
In Retained Realty, Inc. v. Koenig the procedures were a little more obscure, but the aphorisms were the same. In that foreclosure, the plaintiff had obtained an order of reference and thereafter moved for judgment of foreclosure and sale which was granted without opposition. The defendants, however, later moved to dismiss the complaint on the ground that the plaintiff failed to comply with a local rule in Kings County (Part F, Rule 8), requiring that a motion for judgment of foreclosure and sale must be brought within one year of entry of the order of reference.
The short version of the result is that in affirmance on appeal, the court ruled that the local rule could not warrant dismissal of the complaint because the borrowers moved for dismissal only after the judgment of foreclosure and sale had already been entered upon their default. Because the judgment was final as to all questions and issues which could have been litigated, the claim of late application for the judgment was simply gone.
None of this means that borrowers cannot continue to assail foreclosure actions with vigor, but once the judgment of foreclosure and sale has been obtained, it is too late to reargue issues already disposed of or advance arguments that could have been made but were not, as borrowers are wont to do.
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.