Lenders and servicers know that discontinuing foreclosure actions is typically a mundane aspect of the process – they usually don’t have to think about it. But it is possible that a discontinuance could be denied – to the great harm of a lender or servicer, as a recent case discloses: Citibank, N.A. v. Bravo, 2019 N.Y.App.Div. Lexis 48, 90 N.Y.S.3d 673 (3d Dept. 2019).
The facts leading up to the discontinuance tell the story and then highlight the scary message.
This one started as a garden variety foreclosure action, the defaulting borrower answering the complaint asserting standing – that the plaintiff was not the holder of the note. The problem arose, though, when the foreclosing plaintiff failed to comply with discovery requests which led to an order precluding the plaintiff from offering proof of the indebtedness alleged in the complaint or that the plaintiff was the holder of the note.
With that preclusion order in hand, the borrowers moved for summary judgment dismissing the complaint and for a discharge and cancellation of the mortgage which the plaintiff had sought to foreclose.
Faced with this peril, the plaintiff moved to discontinue the action without prejudice, assuming that it would be discontinued and that they could begin anew and hopefully not run afoul of the discovery problems which put them in such danger. However, the trial court granted the borrowers’ motion and denied the plaintiff’s motion to discontinue.
On appeal, the Appellate Division affirmed.
The principles enunciated on the appeal are meaningful:
While fact patterns obviously can differ from case to case, the message here is that foreclosing plaintiffs may not be able to avoid consequences of errors made in a case by simply discontinuing the action and starting anew.
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.