11-36 31st Avenue Lender, LLC v RM Newman, LLC
Categories
Attorneys and Parties
Brief Summary
Commercial mortgage foreclosure and whether a lender properly served a post-sale motion seeking a deficiency judgment after the foreclosure auction.
The Supreme Court, Queens County, granted the plaintiff's motion to confirm the referee's report of sale and allowed entry of a deficiency judgment against Ronni Newman for $1,222,732.14.
The Appellate Division reversed the deficiency judgment entered against Ronni Newman and denied that branch of the plaintiff's motion seeking leave to enter the deficiency judgment.
The plaintiff served the deficiency judgment motion only through the New York State Courts Electronic Filing System, which did not satisfy New York Real Property Actions and Proceedings Law (RPAPL) 1371(2) [governs service of a motion for leave to enter a deficiency judgment simultaneously with a motion to confirm the sale, requiring notice to the party or the appearing attorney, and requiring personal service or another court-directed method]. That service defect is a complete bar to entry of a deficiency judgment.
Background
The plaintiff's predecessor commenced a mortgage foreclosure action against RM Newman, LLC and Ronni Newman concerning commercial property in Queens. After an order and judgment of foreclosure and sale was entered, the property was sold at public auction to the plaintiff for $2,100,000. The plaintiff then moved to confirm the referee's report of sale and sought leave to enter a deficiency judgment against Ronni Newman in the amount of $1,222,732.14.
Lower Court Decision
The Supreme Court granted the plaintiff's motion in an order entered February 7, 2024, and judgment was entered on February 15, 2024, in favor of the plaintiff and against Ronni Newman for $1,222,732.14.
Appellate Division Reversal
The Appellate Division dismissed the appeal from the order because the right of direct appeal terminated upon entry of the judgment, but reviewed the issues on the appeal from the judgment. It then reversed the judgment, denied the branch of the plaintiff's motion seeking leave to enter a deficiency judgment against Ronni Newman, and modified the order accordingly.
Legal Significance
This decision reinforces that strict compliance with New York Real Property Actions and Proceedings Law (RPAPL) 1371(2) [governs service of a motion for leave to enter a deficiency judgment simultaneously with a motion to confirm the sale, requiring notice to the party or the appearing attorney, and requiring personal service or another court-directed method] is mandatory. Electronic filing alone is not proper service for a deficiency judgment motion unless it satisfies the statute or a court-directed alternative. Failure to comply completely bars a deficiency judgment.
In New York foreclosure cases, a lender seeking a deficiency judgment must properly serve the motion under RPAPL 1371(2); filing the motion electronically on the court system alone is insufficient and will defeat the lender's ability to obtain the deficiency.