Foreclosure Law Update: When Property Owners Lose Right to Redeem Mortgage

This week the Home Team wanted to draw your attention to an interesting case out of the Appellate Division, Second Department, which Appellate Order reversed a Lower Court’s decision and held, in part, that, absent a showing of fraud, collusion, mistake or misconduct by the foreclosing party, a property owner’s right to redeem a mortgage in a foreclosure proceeding had expired immediately upon the foreclosure sale. 
The relevant facts of, as well as a link to, the case are set forth below.

Plaintiff, Liberty Dabar Associates, commenced a foreclosure action on February 15, 2013, to foreclose on a mortgage issued to Defendant, Jennifer Mohammed. During the course of the foreclosure proceeding, the Supreme Court issued an Order granting Plaintiff’s motion for summary judgment and referred the matter to a referee to compute the total amount due Plaintiff.  A Judgment of Foreclosure and Sale was subsequently issued, and the property was sold by the referee at auction on May 18, 2017.

In June 2017, the Defendant and an alleged non-party tenant (“Emmanuel”) of the property filed a motion to vacate the judgment of foreclosure and referee’s sale of the property as well as to compel the Plaintiff to accept Defendant’s offer to redeem the mortgage by way of payment via a pending refinance of the property.  In support of this motion, Defendant and Emmanuel argued, among other things, that Emmanuel was a tenant of the property and, thus, a necessary party to the action who had failed to be served but made no allegation of fraud, collusion, mistake or misconduct by the Plaintiff.  Justice Sylvia Ash granted the Defendant and Emmanuel’s motion, and this appeal ensued.

In reversing the lower Court’s order, the Appellate Court noted that  “…even if Emmanuel were a tenant and, thus, a necessary party, it was not an indispensable party whose absence mandated dismissal of the complaint (see Wells Fargo Bank, N.A. v Mazzara, 124 AD3d 875, 876, 2 NYS3d 553 [2015]; Glass v Estate of Gold, 48 AD3d 746, 746-747, 853 NYS2d 159 [2008]; Polish Natl. Alliance of Brooklyn v White Eagle Hall Co., 98 AD2d 400, 406 [1983]). HN3 "The absence of a necessary party in a mortgage foreclosure action simply leaves that party's rights unaffected by the judgment of foreclosure and sale" (Glass v Estate of Gold, 48 AD3d at 747).”  The Appellate Court went on further to state that given that “Defendant and Emmanuel made no showing of fraud, collusion, mistake, or misconduct casting suspicion on the fairness of the sale” there was no basis for the Lower Court to grant Defendant and/or Emmauel the right to redeem the mortgage under the facts of this case and, therefore, reversed the Lower Court’s Order and upheld the foreclosure sale.
https://www.nycourts.gov/reporter/3dseries/2020/2020_03006.htm