Suppose a lender erroneously discontinues a foreclosure action, discovers the mistake two years later, moves to vacate the discontinuance and restore the action, is successful but then faces an appeal from the borrower. Any danger here? Absolutely, advises a new case. [Indymac Bank, FSB v. Izzo, 166 A.D.3d 866, 89N.Y.S.3d 196 (2d Dept. 2018)].
To be sure, courts have the power to relieve from mistakes of this sort and miscues are generally viewed as something which should be corrected in the interest of justice. But the facts here did not come together to rescue the hapless lender.
Factually, observe that the action had begun in March 2008, the defaulting borrowers answered the complaint, the foreclosing lender moved for summary judgment and it was granted. A referee was appointed, the computation was made and the case proceeded to entry of judgment of foreclosure and sale in July 2009. Why the case then remained fallow is unstated, but in November 2013, four years later, the foreclosing plaintiff’s former counsel moved to cancel the notice of pendency, vacate the award of summary judgment and the judgment of foreclosure and sale and to discontinue the action. This order was granted in January 2015, and why not?
Two years after that, the once foreclosing plaintiff, upon a change of counsel realized what state it was in, that its foreclosure had been discontinued and so it moved to vacate the discontinuance and restore the action to the calendar. The borrowers, though, would have none of it – after all they were now in a very good position – but the trial court granted the plaintiff the requested relief and restored the action to the calendar.
Now we come to the appeal. The Appellate Division confirmed that while courts have discretionary power to relieve a party form a judgment or order for sufficient reason and in the interest of substantial justice, this power should be resorted to only to relieve a party from judgments taken through fraud, mistake, inadvertence, surprise or excusable neglect. Well, isn’t one of those what really happened here?
The court didn’t see it that way. Here it was found that the plaintiff argued the discontinuance as erroneous because prior counsel was confused by virtue of an impending substitution of counsel – thus the argument was that the error arose from law office failure. However, where law office failure is given as the reason for some error, there must be provided a detailed and credible explanation of that error. Conclusory and unsubstantiated allegations of office failure – which is all the lender’s new counsel offered – are insufficient. Thus, the uncorroborated representations of current counsel that the action had been erroneously discontinued by prior counsel did not constitute a detailed and creditable explanation warranting vacatur of discontinuance and restoration of the action.
In sum, the plaintiff was left with a case that had to be initiated all over again, which is certainly expensive and time consuming enough. Unmentioned was the possibility that the statute of limitations might be a total bar, but were that to apply it would just make a disaster an unmitigated disaster. Dismayingly, there is no real lesson here because obviously mistakes are already recognized as worthy of avoidance. This case just tells us how disconcerting it can be.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2018), 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.