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Court Dismisses Revised Foreclosure Action for Prejudicial Delay

In Lasalle Bank N.A. v. Daniels, 2019 N.Y. Misc. LEXIS 669, 2019 NY Slip Op. 50211(U) (Sup. Ct. Kings Co. Jan. 7, 2019), the court dismissed a lender’s revived attempt to foreclose on its mortgage, because the lender’s delay in pursuing its claims unfairly prejudiced third parties who had purchased the property in the interim.

The bank commenced the underlying mortgage foreclosure action in 2008. The defendants defaulted, but the court dismissed the action as abandoned in 2013 because the bank had failed to adequately prosecute the action and to seek a default judgment within one year.  As a result, the bank’s notice of pendency was vacated.  Meanwhile, a junior lender pursued its own foreclosure action, resulting in the judicial sale of the property to new purchasers who became the property owners.  After the judicial sale had closed and the deed transferring the property to the new owners had been filed, the bank obtained a court order restoring its original foreclosure action to the calendar, without notice to the new owners who had purchased in the meantime.

The new owners obtained leave to intervene in the revived foreclosure action and moved to dismiss that action on grounds of laches, which is defined as unreasonable, prejudicial delay in asserting one’s rights. The court granted the new owners’ motion, finding that they had “established as a matter of law that [the bank] should be estopped from assertion of rights on the subject property based on the doctrine of laches.”  The court found that at the time the new owners purchased the property, they were justified in believing that the bank’s mortgage was no longer enforceable because there was no pending foreclosure action or notice of pendency on file and the statute of limitations had seemingly expired.  Thus, the owners would be unfairly prejudiced if the bank were allowed to proceed with the foreclosure at this late date.  Ganfer Shore Leeds & Zauderer represented the successful property owners in this case.