Regular readers of our alerts and articles are aware that we rail with some frequency against the need to publish the summons in a foreclosure case. When a defendant cannot be found, so that it is unknown whether that person is alive or dead, the summons must be published. This is a time consuming, potentially very expensive and often perilous effort. Before all the current statutes which delay foreclosures were passed, there was a case which strikingly highlights why this is so and, although there was victory in the end for the mortgage servicer, it was achieved at considerable, yea, remarkable cost. [Chase Manhattan Mortgage Corporation v Anatian, 22 A.D. 3d 625, 802 N.Y.S. 2d 743, (2d Dept. 2005)].
Here, the defaulting borrowers had fled the country to avoid their financial problems, a fact unknown to the foreclosing plaintiff. Because the borrowers could not be found, the servicer was forced to pursue that long procedure to obtain an order of publication. (So if borrowers really hide well, the lender or servicer suffers.) An incident of publication is the appointment of a lawyer to service as a Aguardian ad-litem@, on the theory that if the persons who cannot be found are dead, they could have heirs who in turn could be minors, or under some disability or in the military, thus needing the protection of a guardian.
As a practical matter, the attorneys for the foreclosing plaintiff prepare the papers which the guardian needs to file because those appointed in such a role may never have done it before or only do it on rare occasions. (Plaintiffs= counsel is always mindful that the foreclosure needs to move along and so preparing the papers promptly is a good idea). One of these documents is an answer by the guardian essentially saying he has no knowledge of any issues and does not in actuality oppose the case; so far nothing unusual.
On the eve of sale, however, one of the borrowers had died and the other returned from outside the country trying to stop the imminent foreclosure sale by sending a letter advising of the death of the other borrower. Quite properly, the sale went ahead nonetheless. (Death of a party after judgment does not impede the action.)
Some eighteen months later, and after the property was purchased at the foreclosure sale by third parties who expended considerable renovation funds on the property, the surviving borrower suddenly moved to vacate the foreclosure sale and all the events in the case up to that point. The claim was that the guardian ad-litem had appeared in the case and filed an answer on behalf of the missing borrowers when the order appointing the guardian only authorized him to appear and answer for the unknown heirs. This is monumentally obscure stuff and not well understood by many. The trial court (thoroughly flummoxed we suggest) found that because the guardian=s answer was for the borrowers (even though in addition to the unknown heirs) it was a defect necessitating opening up the entire foreclosure!
While this otherwise unrecognizable glitch may have been an error, it had no effect on the foreclosure case or on any of the parties. Case law in New York is consistent in saying that where there is a defect in the foreclosure, but it is not prejudicial to the rights of any party, in most instances it can be disregarded. The trial judge did not see it that way and the case then consumed another year or so for the appeals process to finally be completed.
Happily, the Appellate Division correctly found that the guardian=s miscue was inconsequential – and that the borrower=s delay of eighteen months in attacking the foreclosure sale was too long, barring her from any relief (under the doctrine of laches — which we can talk about on another occasion).
All was well in the end except for the passage of so much time and the significant costs associated with that. It suggests again (although it might not have mattered in this case) that when a servicer has any information or knowledge about some other address or location for a borrower, making that available could be a real money saver.
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.