Standing Claim Beats Lender Again – This Time For Lack Of Attention

How many ways can a foreclosing lender or servicer be defeated by a lack of standing claim?  Well, a recent case reveals yet another path, possible carelessness by lender’s attorney.  [Bank of New York v. Young, 123 A.D.3d 1068, 2 N.Y.S.3d 127 (2d Dept. 2014).]

As regular readers of these alerts are aware, a defense by a borrower of lack of standing on the part of the foreclosing mortgage holder is commonplace and facile – too often abetted by technicalities, landmines, questionable court analysis and downright blunders by some mortgage holder in the chain.  There is much to this subject, we have addressed it many times in the past and, it is apparent, will be constrained to do so on more than a few occasions in the future.  But the new case mentioned reveals a perhaps rare, but certainly galling, reason for standing to defeat the foreclosing lender.

In this case, the borrower of course failed to make mortgage payments and there was no issue about that.  Undaunted nonetheless, the borrower moved to dismiss the complaint asserting lack of standing (and lack of personal jurisdiction).  Whether the foreclosing plaintiff had an appropriate response to this charge is not at all clear because the plaintiff simply failed to oppose the motion.  Not surprisingly, then, the court granted the borrower’s unopposed motion and the foreclosure was dismissed.

Then awakened, the lender moved to vacate the offending order, which the trial court denied – and this was affirmed on appeal.

The rule was that a party seeking to vacate an order entered upon his failure to oppose a motion must demonstrate two things: (1) a reasonable excuse for the default and (2), a potentially meritorious opposition to the motion.

Here, the foreclosing plaintiff presented a bare allegation of law office failure which was found to be insufficient to show a reasonable excuse for a default upon the motion.

It is not certain whether there really was neglect on the part of plaintiff’s attorney, although if there was sufficient support for that it was apparently not forthcoming.  Having failed to meet the first test – the reasonable excuse – the court was not bound to address whether the plaintiff had a good cause of action so that a standing defense and lack of jurisdiction could be defeated.  The court was simply not required to face these latter issues.

In the end, whether the plaintiff had a good case or not became irrelevant.  It was obliged to oppose the borrower’s motion to dismiss and it did not do so.  Whether the blame lies with the lender in not responding to its attorney, or resulted from neglect on the part of lender’s counsel is not certain.  What is sure, though, is that carelessness on someone’s part allowed a standing defense to torpedo a foreclosure on an unopposed basis.

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.