Abandoned Foreclosure Cases and Dismissals for Want of Prosecution

Abandoned Foreclosure Cases and Dismissals for Want of Prosecution Christopher Fasano, Staff Attorney, MFY Legal Services, Inc. Jennifer Lerman, Staff Attorney, Staten Island Legal Services Derek Tarson, Foreclosure Project Director, Legal Aid Society of Rockland County 1 SUMMARY OF PRESENTATION Background Christopher Fasano CPLR 3215(c) Jennifer Lerman & Christopher Fasano Other Statutory Tools Derek Tarson 2 1

Background 3 The Shadow Docket When the Office of Court Administration implemented Administrative Order 548/10 on October 10, 2010, foreclosure law firms responded by delaying their filing of Requests for Judicial Intervention (RJIs). Cases were not scheduled for conferences and became mired in the shadow docket. In the months following AO/548/10, nearly 87 percent of foreclosure filings spent some time in the shadow docket. MFY Legal Services, Inc., Justice Deceived, p. 1 (July 2011). On average, for foreclosure cases filed between January 1, 2010 and September 30, 2013, there was a more than 160 day delay between the filing of service of process and the filing of the RJI. New York State Department of Financial Services, Report on New York s Foreclosure Process, p. 7 (May 2015). 4 2

The Foreclosure Backlog The Certificate of Merit requirement, which took effect on August 30, 2013, largely eliminated the problem of the shadow docket for new foreclosure filings. CPLR 3012 b. Nevertheless, the backlog persists. As of the last quarter of 2014, there were 83,236 foreclosure cases pending in New York State, representing nearly 30 percent of the civil caseload in New York. A Gail. Prudenti, 2014 Report of the Chief Administrator of the Court, p. 3 4 (2014). On average, there is a 343 to 430 day delay between the last settlement conference and the entry of a judgment of foreclosure and sale. New York State Department of Financial Services, Report on New York s Foreclosure Process, p. 10 (May 2015). 5 Abandoned Case Litigation is on the Rise The question of whether the plaintiff abandoned a foreclosure case is being litigated with greater frequency. 2015: 13 cases 2014: 5 cases 2013: 8 cases 2012: 6 cases 2011: 1 case 2010: 1 case 6 3

CPLR 3215(c) Dismissal of Complaint as Abandoned Upon Failure to Take Proceedings for Default 7 CPLR 3215(c) Default not entered within one year. If 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, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed. A motion by the defendant under this subdivision does not constitute an appearance in the action. 8 4

Conditions for Dismissal Under CPLR 3215(c) Defendant has defaulted Defendant s motion to dismiss the complaint for want of prosecution does not constitute an appearance Defendant can subsequently move to dismiss for lack of personal jurisdiction Plaintiff has failed to take proceedings for judgment within one year Dismissal is mandatory Unless Plaintiff can show sufficient cause... why the complaint should not be dismissed But Defendant can waive the default by serving an answer instead of moving to dismiss Myers v. Slutsky, 139 A.D.2d 709, 710, 527 N.Y.S.2d 464 (2d Dep t 1988). Dismissal can be sua sponte or by motion 9 Take proceedings Proceedings must manifest an intent not to abandon the case. U.S. Bank Nat. Ass n v. Dorestant, 131 A.D.3d 467, 469, 15 N.Y.S.3d 142 (2d Dep t 2015). Plaintiff does not have to obtain a default judgment within one year of the default. Plaintiff does not have to seek the entry of judgment within a year. Plaintiff must take the preliminary step toward obtaining a default judgment e.g. by seeking an order of reference. Wells Fargo Bank, N.A. v. Combs, 128 A.D.3d 812, 813, 10 N.Y.S.3d 121 (2d Dep t 2015); see also Dorestant. Failed attempts to take proceedings equivalent to abandonment? Portfolio Recovery Associates, LLC v. Ploski, 36 Misc. 3d 186, 947 N.Y.S.2d 769 (Westchester Cty. Sup. Ct. Apr. 10, 2012). 10 5

Sufficient cause Plaintiff must: Offer reasonable excuse for delay At Court s discretion Demonstrate merits of the action Giglio v. NTIMP, Inc., 86 A.D.3d 301, 308, 926 N.Y.S.2d 546 (2d Dep t 2011). 11 Tolling of the one year period Bankruptcy automatic stay of all non bankruptcy proceedings Foreclosure settlement conferences potentially Motions are held in abeyance during settlement conferences. 22 NYCRR 202.12 a(c)(7) Nature of settlement conferences evidence of ongoing negotiations demonstrated that the plaintiffs had not abandoned the action. Iorizzo v. Matthew, 25 A.D.3d 762, 764, 807 N.Y.S.2d 663 (2d Dep t 2006). 12 6

Effect of dismissal Generally without prejudice But, effectively with prejudice where statute of limitations has run Because the dismissal is for want of prosecution, CPLR 205(a) s six month period to commence a new action does not apply Siegel, New York Practice (5th ed.) 294. 13 Withdrawn Motions A motion made within the one year period and later withdrawn does not satisfy the requirement that plaintiff take proceedings within one year of default. See, e.g., One West Bank, F.S.B. v. Corrar, 993 N.Y.S.2d 645, 2014 N.Y. Slip Op. 50865(U) (Kings Cty. Sup. Ct. May 30, 2014). 14 7

Delays After an Order of Reference is Granted A delay in moving for a judgment of foreclosure after an order of reference has been granted may result in dismissal. See, e.g., Citimortgage, Inc. v. Taveras, 993 N.Y.S.2d 643, 2012 N.Y. Slip Op. 52507(U) (Suffolk Cty. Sup. Ct. May 2, 2012) (dismissing the complaint as abandoned where plaintiff filed its motion for a judgment of foreclosure and sale more than a year after the referee issued its report). 15 Vacated Orders If the default judgment is later vacated, dismissal is not warranted. See, e.g., Norwest Bank Minn. v. Sabloff, 297 A.D.2d 722, 747 N.Y.S.2d 559 (2d Dep t 2002) (holding that plaintiff s efforts negated any presumption that the action was abandoned where within a year after default, plaintiff obtained an order of reference and a default judgment, which judgment was later vacated). 16 8

Notice Requirements If plaintiff s motion is made more than one year after the default, plaintiff must provide notice of the application for a default judgment to non appearing defendants. CPLR 3215(g). 17 When to Make the Motion to Dismiss The defendant can either move affirmatively to dismiss the complaint or cross move for dismissal when the defendant moves for an order of reference. If the delay is short, consider pairing the motion to dismiss with a motion for leave to file a late answer. See HSBC USA v. Lugo, 127 A.D.3d 502, 503, 9 N.Y.S.3d 6, 8 (1 st Dep t 2015) ( The Court accepted plaintiff s argument that its delay in prosecuting this case was attributable to ongoing settlement negotiations [t]hese same negotiations likewise justify the defendant s late answer. ). Be vigilant about the statute of limitations if the delay has been protracted. 18 9

Attacking the Motion for Default Judgment On any application for judgment by default the applicant shall file proof of the facts constituting the claim, the default and the amount due by affidavit made by the party CPLR 3215(f). Is the affidavit made by the party? Does the affiant have personal knowledge of the facts? 19 Other Tools To Obtain Dismissal of Abandoned Cases CPLR 3216, CPLR 3404, and 22 NYCRR 202.27 20 10

CPLR 3216 Want Of Prosecution A Weak Tool CPLR 3216, as it now reads, is extremely forgiving of litigation delay. (Baczkowski v. Collins Constr., 89 NY2d 499, 503 [1997].) 21 Requirements for Using CPLR 3216 At least one year has elapsed since joinder of issue; Defendant has served on plaintiff a written demand to serve and file a note of issue within 90 days; and Plaintiff has failed to serve and file a note of issue within the 90 day period. CPLR 3216(b). If Plaintiff serves and files a note of issue within the 90 day period, such action is deemed sufficient compliance, and any motion to dismiss based on the demand must be denied. 22 11

Contents of Written Demand Demand must be sent by registered or certified mail; Demand must require Plaintiff to resume prosecution of the action and to serve and file a note of issue within 90 days of receipt of such demand; and Demand must further state that the default by the Plaintiff in complying with such demand within such 90 days will serve as a basis for a motion by Defendant for dismissal for unreasonably neglecting to proceed. CPLR 3216(b)(3). 23 Court Order Can Substitute for Written Demand The certification order dated February 16, 2010, directing the plaintiff to file a note of issue within 90 days, and warning that the complaint would be deemed dismissed without further order of the Supreme Court if the plaintiff failed to comply with that directive, had the same effect as a valid 90 day notice pursuant to CPLR 3216. (Byers v Winthrop Univ. Hosp., 100 AD3d 817, 818 [2d Dept 2012]; see also Fenner v County of Nassau, 80 AD3d 555 [2d Dept 2011].) BUT SEE Cadichon v. Facelle (18 NY3d 230 [2011]), holding that where stipulation stated that failure to file note of issue within 90 days could serve as basis for the court to dismiss on its own motion, the failure of the trial court to issue a separate order of dismissal was grounds to reinstate the action. 24 12

Some Authority Indicates That CPLR 3216 Can Apply After Action is Placed on Trial Calendar [T]he 90 day notice requirement of CPLR 3216(b)(3) is inapplicable to motions to dismiss for neglect to prosecute based solely on delays in the prosecution of an action which occur after the action has been placed on the trial calendar. The dismissal of the plaintiff s action is therefore authorized by the terms of CPLR 3216(a) based on the Plaintiff s delay in prosecuting the action after its placement on the Trial Calendar, irrespective of any compliance (or noncompliance) with a 90 day notice. Hillegass v. Duffy, 148 AD2d 677, 679 [2d Dept 1989]; see also Rosenburgh v. Univ. of Rochester, 60 AD2d 756, 756 57 [4 th Dept 1977]; Travelers Indem. Co. v. Central Trust Co., 49 AD2d 1024, 1025 [4 th Dept 1975].) *NOTE*: In view of the Court of Appeals recent rulings construing CPLR 3216 strictly (e.g. Cadichon v. Facelle, 18 NY3d 230 [2011]), these older Appellate Division decisions may no longer be good law. 25 Standards for Restoration of Case If a case is dismissed pursuant to CPLR 3216 (or CPLR 3215[c]), the order of dismissal can only be vacated under CPLR 5015(a)(1), which provides that an order can be vacated only if: The motion to vacate is filed within one year of default; and A reasonable excuse exists; and A meritorious cause of action exists. BUT BEWARE CPLR 205(a), stating that a new action may be commenced within 6 mos. (not withstanding SOL) if the judge does not set forth on the record the specific conduct constituting the neglect. 26 13

CPLR 3404 Dismissal of Abandoned Cases The Misunderstood Statute 27 Marking A Case Off The Calendar CPLR 3404 provides that a case marked off or struck from the calendar or unanswered on a clerk s calendar call, and not restored within one year thereafter, shall be deemed abandoned and shall be dismissed without costs for failure to prosecute. Lopez v. Imperial Delivery Service (282 AD2d 190 [2d Dept 2001]) clarifies that CPLR 3404 does not apply to pre note of issue cases (accord Johnson v. Minskoff & Sons, 287 AD2d 233 [1 st Dept 2001]) ; nonetheless trial courts sometimes continue to use this statute for cases not on the trial calendar. 28 14

Restoration of Cases Under 3404 Liberal Unlike cases dismissed under CPLR 3215 or CPLR 3216, restoring a case that has been marked off the calendar is subject to a very relaxed standard. Within a year of the marking off, before the automatic dismissal, a case may be restored merely by the plaintiff requesting restoration. There is no necessity of demonstrating a reasonable excuse, lack of prejudice, or a meritorious cause of action (Basetti v. Nour, 287 AD2d 126, 135 [2d Dept 2001]). 29 Restoration After One Year Has Elapsed Relaxed Standard and Indefinite Cases dismissed as abandoned one year after having been marked off, pursuant to CPLR 3404, are dismissed by an entry by the clerk without the necessity of an order. With no order, the one year limit to vacate in CPLR 5015(a) is inapplicable. After the year has elapsed, the plaintiff need only show: A reasonable excuse for failure to timely restore A meritorious cause of action A lack of intent to abandon the action A lack of prejudice to the opposing party There is no time limit after which cases dismissed pursuant to CPLR 3404 cannot be restored. 30 15

3404 Can Leave Cases Hanging in Limbo Lopez reasoned that a case could remain inactive for years and then be revived by a motion to restore before it had even reached the trial calendar, which is contrary to the trial court's role of expeditiously moving the case to the trial calendar. To the extent that a purge calendar is needed by trial courts to dispose of stagnant cases, Lopez recommended the use of 22 NYCRR 202.27. 31 22 NYCRR 202.27 Failure to Appear at Scheduled Call of Calendar 32 16

Failure to Appear at Scheduled Call Where a plaintiff does not appear (and defendant(s) and/or their counsel do appear) at a scheduled call of a calendar or at any conference,... the judge may note the default on the record... and dismiss the action and may order a severance of counterclaims or cross claims. 22 NYCRR 202.27(b) Where neither party appears, the judge may make such order as appears just. 22 NYCRR 202.27 (c) 33 Objectives of 22 NYCRR 202.27 Lopez notes that the two objectives of Section 202.27 are: [T]o encourage efficient trial court control of cases and [T]o promote the disposition of cases within reasonable periods of time. (Lopez, 282 AD2d at 196.) In determining that the court erred in dismissing an action after it was marked off, pursuant to CPLR 3404, the Second Department observed that it did not advocate that dismissals pursuant to 202.27 should increase, but that a default should be treated consistently with what it is, a serious failure to recognize the importance of the orderly disposition of cases (Basetti, 287 AD2d at 134.) 34 17

Uses of 22 NYCRR 202.27 202.27 is a useful rule if a judge calls status conferences for foreclosure actions and plaintiff s counsel fails to proceed and misses one or more of the conferences. Like CPLR 3216 and CPLR 3215[c], an order of dismissal pursuant to 202.27 can only be vacated under CPLR 5015(a)(1), which provides that an order can be vacated only if: The motion to vacate is filed within one year of default; and A reasonable excuse exists; and A meritorious cause of action exists. As advocated in Lopez, 202.27 is a useful tool for a purge calendar, and will prove more difficult for a plaintiff to restore the case. 35 Recommendation If, at a calendar call at which the plaintiff fails to appear, the judge talks about marking the case off the calendar, it is worthwhile to suggest to the judge that you submit a proposed order. In that way, you can ensure that 22 NYCRR 202.27 is cited, rather than CPLR 3404. By doing so, you will ensure that the plaintiff s burden in restoring the case is greater, and reduce the chance that the case will come back to haunt you. 36 18

Questions?? 37 19