The Strategy Of Discontinuance And A Good Ruling


15 June, 2021


Mortgage Lender and Servicer Alerts


While discontinuing a mortgage foreclosure action is usually just a ministerial act, it can also be a meaningful strategy.  In that regard, we have warned in the past that discontinuance might not be all that easy – it can be successfully opposed.  A recent case, however, highlights some helpful principles for lenders in that regard.  [Green Tree Servicing LLC v. Shiow Fei Ju, 182 A.D.3d 840, 122 N.Y.S.3d 764 (3d Dept. 2020)]

To be discussed here are strategy and mechanics, strategy to be the initial subject.

Sometimes the foreclosing party realizes that it may be in some difficulty because of delay, or it may be unable to prove service of some notice or it may have detected some other infirmity – upon which basis it would prefer to begin the action all over again. 

To show how prudent this can sometimes be as a strategy, note an actual case where a borrower opposed a foreclosure on the ground that the lender had not sent the required 30-day notice.  When the trial court ruled against the plaintiff upon summary judgment by determining that proof of the 30-day notice had not been made, the lender elected to appeal the decision.  That consumed a year, much expense and resulted in affirmance, that is, the appeals court agreed that proof of the notice was not made.  Now the lender was faced with a trial on that subject with no assurance that it could prove mailing of the notice, this after all the time and expense.

Instead, when the original motion was lost, the lender could have simply discontinued the action, making sure that it could prove this occasion service of the notice, thereby saving so much time and expense.  This is, of course, but one example of when discontinuance can selectively be of aid to the foreclosing party.

As noted, and as confirmed by the recent case, an action may be voluntarily discontinued upon terms and conditions as the court deems proper.  Absent a showing of special circumstances, including prejudice or other improper consequences, a motion for voluntary discontinuance is generally granted.

That noted, we have in these pages cited cases wherein the lender’s motion to discontinue was denied.  It can happen and that presents danger.  The lesson of those cases was what should be avoided, whenever that is possible.  The recent case mentioned, however, shows how some borrower opposition to discontinuance may not be so potent after all.

Here, the action had been pending for approximately three years at the time the discontinuance motion was made.  The borrower argued that it was prejudiced by the delay but the court believed no evidence of prejudice or any other improper consequences flowing from the discontinuance existed.  In particular, the borrower wanted to pursue discovery, but the court held that such could be attended to in a subsequent foreclosure action.  So, delay alone, while portentous, is not a basis to deny discontinuance of an action.

In addition, the borrower had filed a counterclaim, wanted to preserve that, and objected to the discontinuance on that ground.  Here, though, the court found that the argument about the counterclaim lacked merit because the borrower had not pursued a default (the plaintiff didn’t answer the counterclaim) on her counterclaim within one year. Therefore the claim was deemed to have been abandoned.

Still further on that point, the interposition of a counterclaim in and of itself is not deemed dispositive with respect to discontinuance.  Rather, the discontinuance must work a particular prejudice against a defendant.  In this case, defendant was not prejudiced because she would be able to assert her counterclaim in any subsequent foreclosure.

Care in timing a discontinuance is still very much in order, but the principles expressed here can, in some cases, be helpful.  


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.