ABANDONED FORECLOSURE ACTION?

Ten years of litigation.

Wells Fargo Bank NA v. Vittoris, NYLJ August 11, 2020, Date filed: 2020-07-29,     Court: Supreme Court, Queens, Judge: Justice Bernice Siegal,     Case Number: 22316/10:

"BACKGROUND
The salient facts of this matter are as follows: Plaintiff, Wells Fargo Bank, N.A., (hereinafter “Wells Fargo”) filed the summons and complaint in the within action on or about September 1, 2010. Plaintiff alleges substituted service on the Defendant on September 9, 2010. Plaintiff filed the affidavit of service with the Queens County Clerk on September 9, 2010. A Foreclosure Settlement Conference was held on March 22, 2011, at which time it was determined that no settlement could be reached and the matter was released from the Conference Part. George Vittoris’ (hereinafter “Vittoris”) filed an Answer on December 30, 2011. Plaintiff rejected Defendant’s answer on January 4, 2012, as untimely. Defendant served a Notice of Rejection on January 19, 2012. Plaintiff moved to hold Defendants in default and for an Order of Reference on October 12, 2012. On October 30, 2012, the area in which the subject property is located was declared a Federal Disaster Area and foreclosure activity was suspended. Plaintiff’s motion for an Order of Reference was denied without prejudice on March 5, 2013, due to the relief of Defendant Vittoris’ counsel. In the Order relieving counsel, the Court granted a sixty (60) day stay to allow Defendant Vittoris’ to obtain new counsel. The stay was subsequently lifted by Order dated December 10, 2014. Plaintiff moved again for an Order of Reference by motion dated August 26, 2014, which was granted by this Court on June 12, 2015. The Judgment of Foreclosure and Sale was issued on March 1, 2018.

DISCUSSION
Defendant brings the within motion to dismiss the action against Defendant, to vacate the Order of Reference granted on June 12, 2015 and the Judgment of Foreclosure and Sale granted on March 1, 2018, because Plaintiff failed to move for the entry of judgment within one year of Defendant’s alleged default, as required by C.P.L.R §3215(c).

C.P.L.R §3215(c) provides that, “[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned…upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed.” “The language of CPLR 3215 (c) is not, in the first instance, discretionary, but mandatory, inasmuch as courts ‘shall’ dismiss claims (CPLR 3215[c]) for which default judgments are not sought within the requisite one year period, as those claims are then deemed abandoned.” HSBC Bank USA, N.A. v. Grella, 145 A.D.3d 669,671 (2d Dep’t 2016), quoting Giglio v. NTIMP, Inc., 86 A.D.3d 301, 307-08 (2d Dep’t 2011). However, failure to take proceedings for entry of judgment within the one-year requisite period may be excused upon a showing of sufficient cause, which requires the plaintiff to “demonstrate that it had a reasonable excuse for the delay in taking proceedings for entry of a default judgment and that it has a potentially meritorious action.” HSBC Bank USA, N.A. v. Jean, 165 A.D.3d 632, 634 (2d Dep’t 2018) quoting Aurora Loan Serv., LLC v. Hiyo, 130 A.D.3d 763, 764 (2d Dep’t 2015). The determination of whether an excuse is reasonable lies within the sound discretion of the Supreme Court. See Giglio, 86 A.D.3d at 308; McHenry v. San Miguel, 54 A.D.3d 912,913 (2d Dep’t 2008).

Here, it is undisputed that Plaintiff did not take proceedings for entry of judgment within the one-year requisite period after Defendant failed to appear or answer by October 20, 2010. Substituted service upon Defendant was complete on September 10, 2010, and Defendant defaulted by failing to serve an answer within thirty days pursuant to C.P.L.R. S 320 (a). Thereafter, Plaintiff took no steps to seek leave to enter a default judgment against Defendant until it moved for an order of reference on October 9, 2012, nearly two years after Defendant’s default. As Plaintiff failed to take proceedings for the entry of judgment within one year after Defendant’s default, to avoid dismissal of the complaint insofar as asserted against Defendant, Plaintiff was required to make a showing of sufficient cause, which required that it demonstrate that it had a reasonable excuse for its delay in taking proceedings for the entry of a judgment and that it had a potentially meritorious action. See N.Y. C.P.L.R 3215 (c) (McKinney 2019); HSBC Bank v. Jean, 165 A.D.3d at 634, quoting Aurora Loan Serv., 130 A.D.3d at 764. Under the circumstances presented, Plaintiff failed to demonstrate that it had a reasonable excuse for its delay in taking proceedings for the entry of a judgment against Defendant. Although Plaintiff was suspended from moving forward with foreclosure activities due to FEMA’s declaration, that suspension did not constitute a reasonable excuse because it was issued on October 30, 2012, more than two years after Defendant defaulted. Moreover, the fact that Plaintiff’s motion for an order of reference was denied due to Defendant’s counsel filing an order to show cause to be relieved as counsel, also did not constitute a reasonable excuse for Plaintiff’s delay since Defendant’s counsel did not make such motion until December 14, 2012 — more than two years after Defendant defaulted. As Plaintiff failed to meet its burden to show sufficient cause why the action should not be dismissed insofar as asserted against Defendant, the Supreme Court should not have granted Plaintiff’s order of reference.

Accordingly, denial of the motion and dismissal of the complaint as abandoned is mandated. (CPLR 3215[c]; see Van Hoesen v. Dolen, 94 AD3d 1264,1267-1268 [2012]; Giglio v. NTIMP, Inc., 86 AD3d 301 [2011]; Mejia-Ortiz v. Inoa, 71 AD3d 517 [2010]; Shinn v. City of New York, 65 AD3d 621 [2009]; DuBois v. Roslyn Natl. Mtge. Corp., 52 AD3d 564 [2008].)

CONCLUSION
For the reasons set forth above, Defendant’s motion pursuant to C.P.L.R. S 3215 (c) to dismiss the action against Defendant, to vacate the Order of Reference granted on June 12,2015 and to vacate the Judgment of Foreclosure and Sale granted on March 1, 2018, is granted."

FORECLOSURE FAILURE - MUST TAKE A DEFAULT WITHIN ONE YEAR

Chase Home Fin., LLC v Fernandez, 2019 NY Slip Op 06589, Decided on September 18, 2019, Appellate Division, Second Department:

"The plaintiff commenced this mortgage foreclosure action on or about August 8, 2007. The defendant mortgagor, Judeson Fernandez, neither appeared in the action nor answered the complaint. In October 2008 the plaintiff moved, inter alia, for leave to enter a default judgment and an order of reference, but that motion was eventually marked off the calendar. In or about September 2010, the plaintiff once again moved, inter alia, for leave to enter a default judgment and an order of reference, but the motion was later withdrawn by the plaintiff following the issuance of Administrative Order 548/10 of the Chief Administrative Judge of the State of New York.

On or about February 11, 2013, the plaintiff moved a third time, inter alia, for leave to enter a default judgment and an order of reference. In an order dated May 16, 2013, the Supreme Court, upon denying the plaintiff's unopposed motion as inadequate, sua sponte directed dismissal of the complaint as abandoned pursuant to CPLR 3215(c).

Shortly thereafter, the plaintiff moved, inter alia, to vacate the portion of the May 16, [*2]2013, order that had directed dismissal of the complaint as abandoned. In an order dated April 15, 2014, the Supreme Court, inter alia, denied that branch of the plaintiff's unopposed motion. Nonparty Federal National Mortgage Association, as successor in interest to the plaintiff, appeals.

Since it is undisputed that the plaintiff failed to take proceedings for leave to enter a default judgment within one year after the borrower's default, the Supreme Court acted within its statutory authority in directing dismissal of the complaint as abandoned (see CPLR 3215[c]; Perricone v City of New York, 62 NY2d 661, 663).

In order to obtain vacatur of the Supreme Court's sua sponte order directing dismissal of the complaint, the plaintiff was required "to proffer a reasonable excuse for the delay in timely moving for a default judgment and to demonstrate that the cause of action is potentially meritorious" (HSBC Bank USA, N.A. v Grella, 145 AD3d 669, 671). Since the plaintiff's moving papers offered no reason for the plaintiff's decision to wait until October 2008 to move for leave to enter a default judgment, the court providently exercised its discretion in denying that branch of the plaintiff's motion."

FORECLOSURE FAILS DUE TO ABANDONMENT

A failure to secure a default judgment within one year has consequences under CPLR 3215 (c).

HSBC Bank USA, N.A. v Slone, 2019 NY Slip Op 05963, Decided on July 31, 2019. Appellate Division, Second Department:

"In October 2012, a prior action to foreclose the same mortgage that is at issue in this action was dismissed as abandoned. In March 2015, the plaintiff commenced this action against the defendants Robert Slone and Mary Slone (hereinafter together the appellants), among others, to foreclose the mortgage. The appellants failed to timely appear or answer the complaint. On July 1, 2015, the plaintiff and the appellants attended the first of several mandatory foreclosure settlement conferences pursuant to CPLR 3408. When no settlement was reached, on July 7, 2016, this action was released from the residential foreclosure conference part, and the plaintiff was permitted to proceed with this action.

On October 23, 2017, the appellants moved pursuant to CPLR 3215(c) to dismiss the complaint insofar as asserted against them as abandoned. The Supreme Court denied the motion, and this appeal ensued.

As an initial matter, contrary to the Supreme Court's determination, the appellants' failure to move to vacate their default in answering the complaint or appearing in this action did not operate as a waiver of their right to seek dismissal of the complaint pursuant to CPLR 3215(c). "A defendant may waive the right to seek a dismissal pursuant to CPLR 3215(c) by serving an answer or taking any other steps which may be viewed as a formal or informal appearance'" (Private Capital Group, LLC v Hosseinipour, 170 AD3d 909, 910, quoting Myers v Slutsky, 139 AD2d 709, 711; see HSBC Bank USA, N.A. v Grella, 145 AD3d 669, 671). Here, the appellants did not appear either formally or informally, since they did not actively litigate the action before the Supreme Court [*2]or participate in the action on the merits (see Private Capital Group, LLC v Hosseinipour, 170 AD3d at 910). Accordingly, the appellants did not waive their right to seek dismissal of the complaint pursuant to CPLR 3215(c).

CPLR 3215(c) provides, in part, that if the plaintiff fails to take proceedings for the entry of judgment within one year after the defendant's default, "the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion" (CPLR 3215[c]; see HSBC Bank USA, N.A. v Jean, 165 AD3d 632, 633; Myoung Ja Kim v Wilson, 150 AD3d 1019, 1020). "The language of CPLR 3215(c) is not, in the first instance, discretionary, but mandatory, inasmuch as courts shall' dismiss claims (CPLR 3215[c]) for which default judgments are not sought within the requisite one-year period, as those claims are then deemed abandoned" (Giglio v NTIMP, Inc., 86 AD3d 301, 307-308; see Ibrahim v Nablus Sweets Corp., 161 AD3d 961, 963; HSBC Bank USA, N.A. v Grella, 145 AD3d at 671). However, the failure to timely seek a default judgment may be excused if "sufficient cause is shown why the complaint should not be dismissed" (CPLR 3215[c]). To establish sufficient cause as required by CPLR 3215(c), a plaintiff must proffer a reasonable excuse for the delay in timely moving for a default judgment and demonstrate that it has a potentially meritorious cause of action (see HSBC Bank USA, N.A. v Grella, 145 AD3d at 671; Aurora Loan Servs., LLC v Hiyo, 130 AD3d 763, 764; Pipinias v J. Sackaris & Sons, Inc., 116 AD3d 749, 751; Giglio v NTIMP, Inc., 86 AD3d at 308).

Here, after this action was released from the mandatory foreclosure settlement conference part in July 2016, the plaintiff was authorized to proceed with the prosecution of this action. However, despite the fact that the appellants failed to answer or otherwise appear in the action after being served with process, the plaintiff took no steps to initiate proceedings for the entry of a default judgment against the appellants. The plaintiff's participation in the mandatory foreclosure settlement part conferences did not constitute the initiation of proceedings for the entry of a default judgment. Moreover, more than one year passed from the time that the plaintiff was authorized to resume prosecution of this action prior to the appellants moving in October 2017 to dismiss the complaint as abandoned (see HSBC Bank USA, N.A. v Grella, 145 AD3d 669; U.S. Bank, N.A. v Dorvelus, 140 AD3d 850, 852). In light of the plaintiff's failure to meet its burden to show sufficient cause why the complaint should not be dismissed as abandoned, it is not necessary to address the issue of whether the plaintiff demonstrated that it had a potentially meritorious cause of action (see U.S. Bank, N.A. v Dorvelus, 140 AD3d at 852)."

MORTGAGE FORECLOSURE - BANK WAITS MORE THAN ONE YEAR AFTER DEFAULT

Bank of Am., N.A. v Shami, 2019 NY Slip Op 04901, Decided on June 19, 2019, Appellate Division, Second Department:

"Notwithstanding the above, CPLR 3215(c) provides that "[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned . . . unless sufficient cause is shown why the complaint should not be dismissed." The language of CPLR 3215(c) is mandatory in the first instance, inasmuch as it provides that the court "shall" dismiss the complaint when the plaintiff has not sought a default judgment within the requisite one-year period, as the action is deemed to have been abandoned (see Ibrahim v Nablus Sweets Corp., 161 AD3d 961, 963; HSBC Bank USA, N.A. v Grella, 145 AD3d 669, 671; Giglio v NTIMP, Inc., 86 AD3d 301, 307-308; Kay Waterproofing Corp. v Ray Realty Fulton, Inc., 23 AD3d 624, 625). The statute gives the court discretion only where the plaintiff demonstrates "sufficient cause" as to why the complaint should not be dismissed (Ibrahim v Nablus Sweets Corp., 161 AD3d at 963; see HSBC Bank USA, N.A. v Grella, 145 AD3d at 671). To avoid dismissal of the complaint as abandoned under such circumstances, a plaintiff must offer a reasonable excuse for the delay in moving for leave to enter a default judgment, and must demonstrate that the complaint is potentially meritorious (see Ibrahim v Nablus Sweets Corp., 161 AD3d at 963; Wells Fargo Bank, N.A. v Bonanno, 146 AD3d 844, 845-846; Kay Waterproofing Corp. v Ray Realty Fulton, Inc., 23 AD3d at 625).

Here, the plaintiff took no proceedings for entry of a default judgment within one year following the appellant's default in the action. In claiming otherwise, the plaintiff refers to matter dehors the record, which will not be considered (see Schondorf v Brookville Energy Partners, 303 AD2d 396). Further, contrary to the plaintiff's contention, its conclusory and unsubstantiated assertions that its delay was attributable to compliance with certain administrative orders instituted after the relevant time period, i.e., more than one year following the appellant's default in the action, and waiting for receipt of additional documentation, were insufficient to excuse the lengthy delay (see BAC Home Loans Servicing, LP v Broskie, 166 AD3d 842, 843; HSBC Bank USA, N.A. v Jean, 165 AD3d 632, 634; Wells Fargo Bank, N.A. v Cafasso, 158 AD3d 848, 850; HSBC Bank USA, N.A. v Grella, 145 AD3d at 672).

Since the plaintiff failed to proffer a reasonable excuse, this Court need not consider whether the plaintiff had a potentially meritorious cause of action (see Federal Natl. Mtge. Assn. v Heilpern, 164 AD3d 654, 656; U.S. Bank, N.A. v Dorvelus, 140 AD3d 850, 852)."

A DE FACTO DISCONTINUANCE

It appears that although a foreclosure action is not formally discontinued, the effective abandonment of that action is a "de facto discontinuance" which militates against dismissal of the new action pursuant to RPAPL 1301 (3). 

U.S. Bank Trust, N.A. v Humphrey, 2019 NY Slip Op 04445, Decided on June 5, 2019, Appellate Division, Second Department:

"The plaintiff, U.S. Bank Trust, N.A. (hereinafter U.S. Bank), commenced this action in October 2014 to foreclose a mortgage, against, among others, the defendant Lionel Humphrey (hereinafter the defendant). The defendant moved, inter alia, pursuant to RPAPL 1301(3) and CPLR 3211(a)(1) to dismiss the complaint on the ground that there was another action pending to foreclose upon the same mortgage. In support of the motion, the defendant submitted evidence that in October 2010, HSBC Mortgage Services, Inc. (hereinafter HSBC), commenced an action to foreclose the subject mortgage against the defendant, among others (hereinafter the 2010 action), the defendant had joined issue in the 2010 action, and the 2010 action remained pending. U.S. Bank, to whom the subject mortgage was assigned shortly before it commenced the instant action, opposed the defendant's motion and submitted evidence that the plaintiff in the 2010 action, HSBC, had signed a stipulation discontinuing that action in August 2013. U.S. Bank submitted additional evidence that the stipulation was sent to the defendant, and there had been no further prosecution in the 2010 action. In the order appealed from, the Supreme Court denied the defendant's motion. The defendant appeals.

RPAPL 1301(3) provides that "[w]hile [an] action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought." The purpose of the statute is "to shield the mortgagor from the expense and annoyance of two independent actions at the same time with reference to the same debt" (Central Trust Co. v Dann, 85 NY2d 767, 772 [internal quotation marks and emphasis omitted]; see Old Republic Natl. Tit. Ins. Co. v Conlin, 129 [*2]AD3d 804, 805; Hometown Bank of Hudson Val. v Belardinelli, 127 AD3d 700, 701; Aurora Loan Servs., LLC v Lopa, 88 AD3d 929, 930). Under the circumstances of this case, we agree with the Supreme Court's determination that the defendant was not entitled to dismissal of the complaint pursuant to RPAPL 1301(3). The record supports the conclusion that the plaintiff's assignor, the former mortgagee, effectively abandoned its prior action to foreclose the mortgage. Although the 2010 foreclosure action was not formally discontinued, due in part to the defendant's failure to sign the stipulation of discontinuance, "the effective abandonment of that action is a de facto discontinuance' which militates against dismissal of the present action pursuant to RPAPL 1301(3)" (Old Republic Natl. Tit. Ins. Co. v Conlin, 129 AD3d at 805; see Credit-Based Asset Servicing & Securitization v Grimmer, 299 AD2d 887, 888; see also Bank of N.Y. Mellon v Adam Pl0tch LLC, 162 AD3d 502, 503; see also Wells Fargo Bank, N.A. v Irizarry, 142 AD3d 610, 611)."