Bergman on Foreclosure: Process Is Everything

Bergman on Foreclosure: Process Is Everything

By:  Bruce J. Bergman

Member, Berkman, Henoch, Peterson, Peddy & Fenchel, P.C.;

Author, Bergman on New York Mortgage Foreclosures, 3 vols, LexisNexis Matthew Bender (rev. 2011)

Well, not quite everything, because there is just so much that is important in prosecuting a mortgage foreclosure case - seemingly endless rules, regulations, law and practice.  But the assertion that "process service is everything" is slammed home by the holding in a new, if otherwise unremarkable case: where personal jurisdiction over the borrower is lacking, a motion to set aside the foreclosure sale must be granted - even after a deed to the property was already delivered. [U.S. Bank N.A. v. Bernhardt, 88 A.D.3d 871, 931 N.Y.S.2d 266 (2d Dept. 2011) [enhanced version available to subscribers].]

Note too that the importance of process service is magnified in the mortgage foreclosure case (in judicial foreclosure states) because of the inherent structure of the actions.  Foreclosures must wade through various plateaus before reaching a conclusion - the foreclosure sale.  And nowadays this process can often consume years.  Therefore, if an infirmity in process service is not revealed until the end of the case, the potential to render years of effort (and expense) meaningless emerges.

We used the word "unremarkable" in assessing the new case because those who delve into these issues with regularity know that a judgment in a case where there is no jurisdiction over the owner of the property means the foreclosure sale could not have been valid to grant title.  But the court at the trial level (happily for the lender) did not quite recognize that.  The appeals court did, however.  Thus, while the trial court preserved the foreclosure sale even absent jurisdiction, the Appellate Division did not.

Here is the quick story and the practical upshot of it all, although that may be nearing the obvious by now. 

The borrower in this case was exceptional even among the typically outrageous.  Moreover, it was clear that the trial court was exasperated with the borrower's conduct.  When the borrower moved to vacate the foreclosure sale because she had not been served, there was apparently no doubt about that and the court so ruled.  But the court wanted to use its equitable powers to preserve the sale because of the borrower's conduct and therefore ruled that the sale was good.  It was that part of the holding that the appeal court reversed - because if there is no jurisdiction, then the judgment is void and then the sale, based upon that judgment, had to likewise be void.  It is this latter principle that is not new. 

What it underscores and instructs, though, is that obtaining jurisdiction over the borrower-owner is critical, dispositive.  The process server just has to be sure and so too does counsel reviewing that service.  There is simply no room for error on this point because if anyone stumbles, the whole case can fall.  Of course in the end mortgage holders and servicers need to rely upon the dedication of their counsel and counsel's ability to in turn engage process servers with a like level of devotion to task.  It is not so easy. 

Did you attend the complimentary webinar by author Bruce J. Bergman on November 3?  Entitled New Developments in New York Mortgage Foreclosure Law, it can be heard again - and is also available for a limited time for first-time listeners at (CLE Credit only available to original registrants.  Register with the Communities today to hear about future opportunities.) subscribers can search Bergman on New York Mortgage Foreclosures. Non-subscribers can purchase Bergman on New York Mortgage Foreclosures at the LexisNexis Bookstore.

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A graduate of Cornell University and Fordham University School of Law and widely recognized as New York's leading authority on mortgage foreclosures, Bruce J. Bergman practices also in the areas of real estate, title and commercial litigation. Author of New York's definitive text on the subject, the 3-volume Bergman on New York Mortgage Foreclosures (LexisNexis Matthew Bender), which he updates semiannually, Mr. Bergman is also known for his regular real estate update column on mortgage foreclosure for the New York Law Journal, as well as regular columns in the New York Real Property Law Journal, Servicing Management, the MBA's Mortgage Servicing Magazine and as a contributing author to the New York Lawyer's Deskbook as well as Real Estate Titles (New York State Bar Association). In all he has written more than 380 articles in his field which have appeared in scholarly journals and professional publications throughout the country.  Mr. Bergman is a fellow of the American College of Mortgage Attorneys, a member of the American College of Real Estate Lawyers, Scribes, The American Society of Writers on Legal Subjects, The USFN, The New York Land Title Association, the American, New York State, Suffolk County and Nassau County Bar Associations (Past Chair Real Property Law Committee, former Associate Dean of Nassau Academy of Law, Past Director) and was a City Councilman, City of Long Beach (1980-1988).  He is an advisor to the New York Times on matters relating to mortgage foreclosure and wrote the chapter on New York foreclosure law for the multi-volume The Law of Distressed Real Estate. He is AV rated byMartindale-Hubbell, his biography appears in Who's Who In American Law and he is listed in Best Lawyers In America and New York Super Lawyers.

Information referenced herein is provided for educational purposes only. For legal advice applicable to the facts of your particular situation, you should obtain the services of a qualified attorney licensed to practice law in your state.

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