Who Is The Plaintiff In The Foreclosure – It Really Matters

Putting aside MERS (a different and much longer subject than is our focus here), the question of who the plaintiff in the foreclosure is to be is a direction of overriding importance  – and on a new case highlights the point. [Security Pac. Natl. Bank v. Evans 31 A.D.3d 278, 820 N.Y.S. 2d 2(1st Dept. 2006)].

To explain, if ABC Bank is the owner of the mortgage, but servicing is handled by XYZ Servicer, when the file is given to counsel to begin the foreclosure, the directive will be to foreclose in the name of ABC Bank; correct and no problem here.

Danger lurks, though, because of all the mergers and acquisitions.  If ABC Bank merged into Goliath Bank, then the foreclosing plaintiff is “Goliath Bank as successor by merger to ABC Bank”.  There are other scenarios, of course, and the intricacies and technicalities of this can receive the attention of servicers’ in-house counsel and foreclosure counsel.

The real problem arises if either the servicer or counsel is somehow unaware or not advised of a merger.  That was apparently the situation in the noted case.  Security Pacific National Bank was the mortgagee of record.  Some time before the file went to counsel to foreclose, Security merged into Bank of America.  But Security, which no longer existed, was named as the foreclosing plaintiff.

Mindful that corporate status is another essential element of pleadings in New York, this misstep is important.  The borrower, however, never raised an issue about this until after the foreclosure when an eviction was pursued.

The foreclosure was upheld in the end – but only because an objection to the standing or capacity of a party to sue is a waivable defense.  The borrower did not raise the point in a pre-answer motion or an answer in the foreclosure, and so the defense evaporated.

It is apparent from the ruling, though, that had the borrower timely used the defense of the wrong plaintiff, the foreclosure would have been dismissed.  By the way, all this disarray consumed no less than 16 years(!), emphasizing the point that care in these matters is of the utmost importance.

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.