Greenpoint Mortgage Funding, Inc. v McFarlane
Categories
Attorneys and Parties
Brief Summary
Mortgage foreclosure; whether a lender's long, unexplained delay in prosecuting the action justified equitably tolling interest on the loan.
The Supreme Court, Suffolk County, confirmed the referee's report, granted a judgment of foreclosure and sale, denied McFarlane's request to toll interest, and awarded the plaintiff interest running from May 1, 2007.
The Appellate Division modified the order and judgment of foreclosure and sale by deleting the award of interest from November 1, 2011, to September 13, 2022, and replacing it with a toll of interest for that period.
Because foreclosure is an equitable action, the court had discretion under CPLR 5001(a) [rule providing that interest in equitable actions is within the court's discretion] to deny or toll interest where fairness required it. The plaintiff failed to explain a six-year delay in restoring the case and a further four-year delay in seeking a default judgment and order of reference, and the defendant was prejudiced because interest kept accruing during those delays.
Background
In December 2004, Pete A. McFarlane executed a $700,000 note in favor of Greenpoint Mortgage Funding, Inc., secured by a mortgage on Suffolk County property. The plaintiff began this foreclosure action in October 2007. The complaint was directed dismissed by order dated November 1, 2011. The action was restored to the active calendar on January 31, 2018, and the plaintiff was directed to seek an order of reference within 90 days. The plaintiff did not move for leave to enter a default judgment and for an order of reference until September 2022. After a referee computed the amount due based on business records submitted through an affidavit from an employee of the loan servicer, the plaintiff moved in January 2023 to confirm the referee's report and for a judgment of foreclosure and sale. McFarlane opposed, arguing that interest should be tolled from November 1, 2011, through September 13, 2022, because of the plaintiff's extensive delay.
Lower Court Decision
The Supreme Court granted the plaintiff's motion to confirm the referee's report and for a judgment of foreclosure and sale, denied McFarlane's application to toll interest, confirmed the amount due, awarded interest from May 1, 2007, and directed the sale of the property.
Appellate Division Reversal
The Appellate Division dismissed the appeal from the intermediate order because the right to directly appeal that order terminated upon entry of the final order and judgment of foreclosure and sale, with review available under CPLR 5501(a)(1) [rule permitting review of prior nonfinal orders on an appeal from a final judgment]. On the merits, it held that the referee's report was properly confirmed because the plaintiff submitted admissible business records satisfying CPLR 4518(a) [business-records exception governing admissibility of records made in the regular course of business], and McFarlane's remaining evidentiary objection was unpreserved because it was raised for the first time on appeal. However, the court modified the foreclosure judgment to toll interest from November 1, 2011, to September 13, 2022, granted McFarlane's application for that relief, and remitted the matter for recalculation of accrued interest and entry of an amended judgment of foreclosure and sale.
Legal Significance
This decision underscores that New York foreclosure actions are equitable in nature and that appellate courts may toll mortgage interest when a lender's unexplained litigation delay unfairly increases the borrower's debt. It also confirms that a foreclosure plaintiff need not rely on any particular set of records to prove the amount due, so long as the evidence is admissible under the business-records rule and actually establishes the figures used by the referee.
A foreclosure lender that allows years of unexplained delay may still obtain judgment, but a court can use its equitable power to stop interest from accruing during the delay if the borrower is prejudiced.