There can be no doubt that as a general proposition foreclosing plaintiffs endeavor to prosecute foreclosures with diligence. Certainly in New York the progress is slow no matter how dedicated a lender and its counsel may be, exacerbated by borrower defensive tactics. But with interest incessantly accruing and threatening the equity, moving along apace is typically the foreclosing lenders’ goal.
Nonetheless, there are a (perhaps) surprising number of instances where foreclosures are dismissed as abandoned for lenders’ lax adherence to timeframes. Two recent cases present the scary result. [Quadrozzi Concrete Corporation Individual Account Plan and Trust v. Javash Realty, LLC, 164 A.D.3d 1491, 85 N.Y.S.3d 217 (2d Dept. 2018); HSBC Bank USA, N.A. v. Jean, 2018 N.Y. App. Div. Lexis 6528, 85 N.Y.S.3d 125 (2d Dept. 2018)]
We have trod this ground before but observing the results of these cases cannot be neglected. First, though, we set the foundation.
There is a section of New York’s practice statute [CPLR §3215(c)] mandating that a default judgment must be pursued within one year. The precise language is noteworthy: If a plaintiff “fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned…upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed.” This is serious stuff.
Foreclosing parties should by now recognize that the judgment of foreclosure and sale is something that comes later in the action so that the preliminary step of pursuing an order of reference is deemed to be pursuit of the judgment. Therefore, it is that order of reference stage which must be attended to in one year.
The problem can dissipate if the foreclosing party has an excuse for delay – a good one that is – and case law confirms that the determination of whether an excuse is reasonable is committed to the sound discretion of the motion court.
Quadrozzi is an extreme example, but still cannot be ignored. There, the foreclosure was commenced in 2004, the defendants did not file an answer – thus they were in default – but the plaintiff did nothing until it filed an amended complaint in 2015 (!) an extraordinary 11 year delay. There were, however, some communications between the borrower and the plaintiff, including a letter in 2007 from the borrower’s attorney to the plaintiff concerning taxes and mortgage payments as well as negotiations in 2010 for a new mortgage. While that might look like an excuse, this case tells us that it is not.
Rather, the court ruled it undisputed that the plaintiff failed to move to enter judgment within one year of the default and contrary to the plaintiff’s contention, it failed to offer a reasonable excuse for its delay in seeking judgment. The 2007 letter and any communications between the parties in 2010 did not constitute a reasonable excuse for the multiyear delay preceding those communications. Nor did that same evidence constitute a reasonable excuse for the multiyear delay subsequent to those communications. Even the payment of various sums due under the note over the years was not an excuse for the plaintiff’s neglect.
In a sense, the other case (the HSBC matter) may even be more frightening because the time periods were more constrained. There, plaintiff commenced the foreclosure in March 2012 and moved for an order of reference in September 2013. Plaintiff moved for judgment of foreclosure and sale in October 2015 at which time the defendant cross-moved to dismiss the complaint as abandoned – pursuant to CPLR 3215(c) for not having moved for judgment within one year.
The court found it undisputed that the plaintiff did not take proceedings for entry of judgment until it moved for an order of reference more than one year after the defendants’ default. Moreover, the plaintiff submitted no opposition to the defendants’ cross-motion to dismiss for abandonment and thus failed to make the requisite showing of sufficient cause by which it might excuse its delay. It would seem here that the foreclosing plaintiff had no excuse and if that was the reason it didn’t oppose the motion to dismiss, it certainly ran afoul of the statutory mandate.
In sum, while avoiding an 11 year delay might seem obvious, even 6 months could defeat the action if there is no excuse for that hiatus.
Foreclosing plaintiffs will want to focus upon this situation and avoid it.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2018), 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.