Our alert of July 14, 2010, entitled “Service of Process – The Underlying Danger to Foreclosures”, made the point that process service mistakes are especially, and perhaps uniquely dangerous in the foreclosure case. The reason is that parties (usually borrowers) can emerge even after the foreclosure sale to first assert that they were not served with process. If successful in this assault, the foreclosure is void as to that borrower and the whole foreclosure will either be dismissed or at best returned to its beginning. So if the case had consumed three years (and it could easily have been more) the servicer will face further years to slog through the action with interest and expenses accruing all during that time.
A new case presents and confirms this precise situation: Emigrant Mortgage Company v. Westervelt, 105 A.D.3d 877, 964 N.Y.S.2d 545 (2d Dept. 2013).
A vintage 2008 $220,000 mortgage went into default in 2009 and a foreclosure was then initiated. The pleadings were personally delivered – in hand — to the borrower at the property in April 2009. The borrower defaulted, a judgment of foreclosure and sale was signed in December, 2009, the property sold in January, 2012. More than a year after the sale (in April, 2012), the borrower moved to vacate the judgment. This is not such an unusual situation and if the attack is defeated, the exercise was a typical annoying pitfall in the foreclosure process. But it is far more serious if the borrower is successful.
While the trial court denied the borrower’s motion, so that the foreclosure sale resisted attack, the appeals court reversed, which means the lender lost. The principles enunciated by the appeals court offer the lesson, although in the end it may be a non-lesson.
This is understood, which is why counsel endeavors to engage the most dedicated process servers. Who they in turn hire can sometimes be problematic, but even if they are very good, a borrower can misstate the facts or there is room for unavoidable error (more on that later).
This is restatement of our basic proposition as to why process service is singularly treacherous in the foreclosure action. If process service was no good, all that followed is rendered futile and the foreclosure falls, even when assailed years later.
This is a troublesome principle to lenders and servicers, but understandable. Service of process must be correct or the system is in jeopardy.
Here was the heart of the problem in this case, which can apply in any action. The borrower asserted a considerable discrepancy between the age and weight of the person served as opposed to what was in the process server’s affidavit.
If the process server really did not do his job, then justice prevails. But often, accurately assessing a person’s age or weight while fleetingly handing process through the door can be elusive. For example, a younger, slimmer person tired, disheveled, just having awakened and dressed in baggy clothing can appear older and heavier. Variations in description under such circumstances can occur.
In this case, reversal issued because the trial court declined to hold a hearing; it just found service good. So it was sent back to conduct that hearing. What will come of that is problematic.
The impact of all this upon the servicer is apparent, though. And it will happen again, regrettably with no remedy available beyond servicers’ counsel doing its best to employ the most skilled process serving firms available.
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.