Sanctions Imposed! (And By Court On Own Motion)

While any party to a mortgage foreclosure action can feel aggrieved by frivolous conduct during the case, anecdotally it should be accurate to observe that foreclosing plaintiffs feel that sting more often than defendants. Upon pursuing sanctions, however, experience confirms that most often courts refrain from imposing any penalty. But a recent case presents an example where sanctions were imposed – so egregious that the court did so upon its own motion, even without request from the foreclosing party. [U.S. Bank National Association v. Tait, 234 A.D.3d 889, ___ N.Y.S.3d ___ (2d Dept. 2024)] (A number of other compelling principles were addressed as well.)

This was an instance of a post-foreclosure sale motion to vacate the judgment. A party who brought that motion had taken title to the property after the filing of the foreclosure complaint and the lis pendens. In denying the motion, the court addressed the first meaningful maxim, which is that a party obtaining an interest subsequent to the filing of a lis pendens is bound to all proceedings in the action to the same extent as if he or she were a party to the foreclosure. That meant that the moving party was a stranger to the case and needed to move to intervene to even be heard. Having failed to do that was one basis to deny the motion to vacate.

Compounding the transparent nature of the motion to vacate was the circumstance that the moving party had first filed an order to show cause for this relief which was denied with a warning form the court that filing a subsequent motion could bring sanctions from the court. Undeterred, the moving party did just what the court indicated should not be done, and the motion was denied again.

The court noted that for sanctions to be awarded arising from frivolous conduct, the standard for such a showing is high and the underlying rule provides that a position will be deemed frivolous only when it is completely without legal merit and cannot be supported by a reasonable argument for a change in that law. The burden to show the frivolous conduct (pursuant to 22 NYCRR 130-1.1(c) lies with the party seeking sanctions.

In this case the burden was found to have been met and the court concluded that the moving party’s conduct was completely without merit. Although not requested by the plaintiff, the court on its own motion was empowered to make that imposition after a reasonable opportunity to be heard.

Whether the fact pattern in this case was much stronger than the usual situation or not, it does offer perhaps renewed hope that when there is utterly no basis for a course of action taken by a party, perhaps sanctions can be pursued.