New Penn Financial, LLC v Dancy
Categories
Judges
Attorneys and Parties
Brief Summary
Mortgage foreclosure procedure, specifically whether a successor referee could be appointed and whether the caption could be amended to substitute an alleged transferee of the plaintiff's interest.
The Supreme Court, Nassau County, granted the plaintiff's motion pursuant to CPLR 4314 [provision used to appoint a successor referee] to appoint a successor referee and granted leave to amend the caption to substitute U.S. Bank Trust National Association, not in its individual capacity but solely as owner trustee for RCF 2 Acquisition Trust, as the plaintiff.
The Appellate Division overturned only the portion of the order permitting substitution of U.S. Bank as the plaintiff, while leaving intact the appointment of the successor referee.
Under CPLR 1018 ["[u]pon any transfer of interest, the action may be continued by or against the original parties unless the court directs the person to whom the interest is transferred to be substituted or joined in the action"], substitution is discretionary, but the plaintiff failed to show that U.S. Bank actually had an interest in the action. Because that showing was missing, the trial court improvidently exercised its discretion in allowing the substitution.
Background
The plaintiff's predecessor in interest commenced a residential mortgage foreclosure action against Macky Dancy and others concerning property in Nassau County. Dancy did not appear or answer the complaint. In a June 27, 2018 order, the Supreme Court appointed a referee to compute the amount due and amended the caption to substitute New Penn Financial, LLC in place of the original plaintiff. Later, New Penn moved to appoint a successor referee and to amend the caption again to substitute U.S. Bank Trust National Association, not in its individual capacity but solely as owner trustee for RCF 2 Acquisition Trust, as the plaintiff.
Lower Court Decision
The Supreme Court granted both branches of the motion: it appointed a successor referee and allowed the caption to be amended to replace New Penn Financial, LLC with U.S. Bank as plaintiff.
Appellate Division Reversal
The Appellate Division modified the order by denying the branch of the motion seeking leave to amend the caption to substitute U.S. Bank as the plaintiff. The court otherwise affirmed, holding that appointment of a successor referee was proper but that substitution of U.S. Bank was not supported by proof that U.S. Bank held an interest in the action.
Legal Significance
This decision reinforces that, in a foreclosure action, a party seeking substitution after an alleged transfer of interest must present evidence establishing the proposed substitute's interest in the case. Even though CPLR 1018 gives trial courts discretion to substitute or join a transferee, that discretion must be supported by a factual showing of a valid transfer.
A foreclosure plaintiff may obtain a successor referee without difficulty, but it cannot substitute a new plaintiff under CPLR 1018 unless it proves that the proposed substitute actually acquired an interest in the mortgage action.