Lenders and servicers should by now well understand the mandatory settlement conference procedure in New York for home loan mortgages in foreclosure. Time consuming though it may be, the good it can achieve is recognized – but it was not designed to be a methodology to ensnare a less than sedulous mortgage holder. That, however, is precisely what happened in a recent case and it offers a scary lesson. [U.S. Bank Nat’l Association v. Thurm, 2016 N.Y. App. Div. LEXIS 5048]
Here when the required settlement conference was held, the foreclosing plaintiff was not ready to proceed and so requested a thirty day adjournment to submit a formal motion in that regard – not unreasonable or unusual. While the court granted the request, it imposed the requirement that a failure to submit the motion within that time would result in dismissal of the action. For whatever reason, plaintiff indeed failed to submit the motion within thirty days and shortly thereafter the court dismissed the action as abandoned. (This was pursuant to 22 NYCRR 202.27)
Plaintiff then moved to vacate the dismissal but that was denied. Upon appeal the court affirmed and that sealed the plaintiff’s fate.
What happened here? What follows may seem like heavy going – and it is – but that is just the point. The variety of minutia the conference plateau can elicit is often a trap for the foreclosing party who may not be meticulous. (Stay with us on this).
Pursuant to the rule cited, a court has the authority to dismiss an action when in any conference all parties do not appear or proceed to announce their readiness to immediately go forward. The plaintiff in this instance was not ready to proceed at the conference and despite being given another thirty days to go ahead, it failed to submit a formal motion. Therefore, the trial court was affirmed on appeal to have properly dismissed the action as abandoned.
Then, a motion to vacate a dismissal must be supported by a reasonable excuse and a meritorious cause of action. Unfortunately for plaintiff, in its motion to vacate it relied on an affirmation from its new counsel that failure to proceed had been due to settlement negotiations with the defendant which were ongoing. But plaintiff’s new counsel had not been representing the plaintiff at the time of the conference and so had no personal knowledge of the facts regarding the default. The affirmation was therefore insufficient to establish the needed excuse. Compounding this deficiency – or failing to avoid it – when further evidence was presented as to a reasonable excuse, it was only upon a reply, and that being the first time it appeared the information was properly disregarded by the court.
Because no excuse was presented, the court did not have to reach a determination as to whether the plaintiff demonstrated a meritorious cause of action. Of course the plaintiff did have a meritorious cause of action – the foreclosure – but it failed to be ready for a conference and then didn’t make the motion necessary to cure that neglect. And it couldn’t present a valid excuse upon the motion seeking to vacate the dismissal – a mess all around.
Assuming there was no statute of limitations problem here, the net result is that the foreclosing party was mired in loss of time and incurrence of considerable expense. The outcome is not fatal, but it is more than disconcerting. So the conference process, designed to aid borrowers, completely slammed a careless lender. It is unfortunate, but lack of attention at the conference stage can lead to these things.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), 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.