Our client, a major New York-area Credit Union, hired outside counsel to file a residential foreclosure action involving a home loan. The complaint, filed by another law firm, was not verified by an officer or employee of the foreclosing lender.  Rather, it was signed only by the attorney.  Defendant homeowner failed to file an answer to the complaint.

CPLR §3408(a) requires a specialized request for judicial intervention (RJI) be filed after a foreclosure action is commenced. The RJI triggers a mandatory settlement foreclosure conference.  This is required regardless of whether an answer is filed.  Here, former counsel delinquently waited nearly two years to file the RJI. By then, it had been well over one year since mortgagor’s default.  The prior law firm failed to move for entry of judgment following default.  Since it also did not seek some other form of judicial intervention prior to the one year expiration, the court dismissed the case and directed the clerk to cancel the lis pendens.   

Credit Union discharged its former attorney and engaged Weltman & Moskowitz to clean up the mess.  We immediately filed an order to show cause seeking entry of an order restoring the case to the calendar and restoring the lis pendens.  This relief is permitted under CPLR §5015(a), which provides: “[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just.” In particular, the court is permitted to vacate a judgment or order on the grounds of “excusable default, if such motion is made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party, or if the moving party has entered judgment or order, within one year after such entry.”

The court granted the order to show case, clearing the first hurdle.  Then Credit Union faced an additional challenge.  It had to demonstrate both a reasonable excuse for its former lawyer’s default and a meritorious claim.  We were able to successfully establish that Credit Union satisfied both.

Under CPLR §§2005 and 5015(a), a court has “discretion in the interests of justice to excuse delay or default resulting from law office failure.”  Here, lender was able to demonstrate its reasonable reliance upon its prior attorneys of the case status, even though counsel’s errors were only later discovered.  The court was impressed that Credit Union took immediate steps to fix the problem by hiring replacement counsel.

The court also found that lender’s claim had merit.  Since the original complaint had not been verified, it could not be considered an affidavit of merit.  But in support of the order to show cause our client’s affidavit of merit did the trick.  The motion was granted, and the case reinstated and the lis pendens restored.

Lender had been significantly prejudiced for nearly three years.  No mortgage payments were made during this time while legal fees continued to pile up. The Credit Union was faced with another approaching deadline. CPLR §6513 provides that “a notice of pendency shall be effective for a period of three years from the date of filing.  Before expiration of a period or extended period, the court, upon motion of the plaintiff, and upon notice as it may require, for good cause shown, may grant an extension for an additional period.  An extension shall not be filed, recorded and indexed before expiration of the prior period.” The order to show cause not only reinstated the Notice of Pendency of the foreclosure action, but provided for the necessary extension as well.

Statistics demonstrate that a typical New York foreclosure action can last more than 1,089 days until entry of foreclosure judgment.  Even if counsel proceeds diligently, follows proper procedures and meets all statutory deadlines, the case can be expected to continue for more than three years.  Another cause for delay is that rulings on motions are not typically rendered immediately.  Attorneys are cautioned to watch the calendar and extend the lis pendens period well in advance of the case’s three-year anniversary. 

Lawyers and clients can learn valuable lessons here.  Clients should be regularly informed.  Weltman & Moskowitz keeps clients up-to-date, whether with email status reports or by forwarding pertinent pleadings and correspondence.  In this way, transparency is assured and clients are not kept in the dark.  

Significantly, courts will no longer tolerate rubber stamping, particularly in foreclosure cases.  Even though defendant defaulted and was enjoying the benefit of living rent/mortgage free for more than two years, the case was dismissed.  The take away is that lawyers must pay close attention and cross their t’s and dot their i’s in foreclosure cases.  

About Weltman & Moskowitz, LLP:

Richard E. Weltman and Michael L. Moskowitz are co-founders of Weltman & Moskowitz, LLP, a business law firm serving New York, New Jersey and Long Island.  They concentrate on creditor’s rights, bankruptcy, commercial litigation, business divorce, partnership dissolution, and alternate dispute resolution, as well as on limited liability companies and corporations, including counseling, structure, governance, and preparing and negotiating many types of secured lending, leasing, shareholder, buy-sell, technology, and joint venture agreements. Michele Jaspan is an senior associate with the firm. Michael, Richard or Michele may be reached at 212.684.7800 or 201.794.7500, or at mlm@weltmosk.com, rew@weltmosk.com or mkj@weltmosk.com.