Motion Sequence No. 3

Pursuant to CPLR 2219 (a), the following papers were read on this motion: NYSCEF Doc Nos 69-112.

Defendant moves via order to show cause, pursuant to CPLR 5015(a) and 3012(d), to vacate the default judgment dated May 30, 2023 and entered on June 5, 2023 (NYSCEF Doc. No. 19). After review of the papers and the transcript of the oral argument in this matter, defendant's motion is GRANTED for the reasons set forth below.

On July 28, 2020, plaintiff commenced this RPAPL 1501(4) mortgage discharge/quiet title action, via the filing of a Summons and Complaint. The Complaint noted that an action seeking to foreclose on the same mortgage was commenced on June 25, 2018 (Index #512478/2018, the "Active Foreclosure Action"). Plaintiff served the herein action's Summons and Complaint upon defendant on August 27, 2020, via delivery to defendant's managing agent, who was authorized to accept service. Upon defendant's failure to answer, plaintiff moved for a default judgment, which was granted by Order dated May 30, 2023, and entered on June 5, 2023. On August 4, 2023, defendant filed an order to show cause seeking to vacate the default judgment (the "First OSC"). The First OSC was denied without prejudice to refile by Decision and Order dated September 24, 2024, and entered on October 18, 2024. On October 31, 2024, defendant filed the instant order to show cause, again seeking to vacate the default judgment (the "Second OSC" or "Instant OSC").

CPLR 5015(a)(1) states that "[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person with such notice as the court may direct, upon the ground of excusable default ." CPLR 3012(d) states that "the court may extend the time to appear or plead, or compel the acceptance of a pleading [*2]untimely served, upon such terms as may be just and upon a showing of reasonable excuse for delay or default."

In support of the Second OSC, defendant submits the affidavit of its Vice President who states that due to the COVID-19 pandemic, defendant had a significant reduction in staffing and as a result, it inadvertently did not forward the Complaint to its loan servicer. Defendant also submitted an affidavit from the Litigation Representative of its loan servicer who stated that it first learned of the existence of this action on July 17, 2023, when plaintiff served and filed a motion to dismiss the Active Foreclosure Action, on the basis of the Judgment in this action discharging the mortgage. In opposition to the Instant OSC, plaintiff concedes the existence of the Active Foreclosure Action, notes the dismissal of the Prior Foreclosure Action, alleges that its dismissal constituted the expiration of the statute of limitations to foreclose on the subject mortgage, and labels the Active Foreclosure Action as untimely.

Defendant first moved to vacate the default judgment eighteen (18) days after learning of its entry and then refiled the Second OSC thirteen (13) days after the entry of the First OSC's denial Order. Plaintiff does not allege, nor demonstrate, prejudice from vacatur, and does not explain why this Court should diverge from its strong public policy in favor of resolving cases on the merits (see Brennan v County of Rockland, 205 AD3d 911, 913 [2d Dept 2022]). It is an improvident exercise of discretion to deny a motion to vacate a default judgment, given the strong public policy in favor of resolving cases on the merits, where a defendant's default was not willful, and defendant demonstrates that it did not intend to abandon the action; where a plaintiff is not prejudiced; and where a defendant sets forth a potentially meritorious defense (see Ahmad v Aniolowiski, 28 AD3d 692, 693 [2d Dept 2006]; see also Brennan, 205 AD3d at 913). Defendant's ongoing prosecution of the Active Foreclosure Action and its expeditious motions to vacate the default judgment upon becoming aware of its entry, evince an intent to not abandon this action, and a lack of willfulness.

Crucially, here, defendant's proffered defense is not simply potentially meritorious, but established as a matter of law. "Because the expiration of the statute of limitations is an essential element of an action pursuant to RPAPL 1501(4), the existence of a pending foreclosure action precludes a RPAPL 1501(a) action" (4 Stella Mgt., LLC v Citimortgage, Inc., 204 AD3d 868, 869 [2d Dept 2022]). It is undisputed that the Active Foreclosure Action was pending at the time of commencement of this instant action and at the time plaintiff's motion for default judgment was presented to the Court.^[FN1] Moreover, the Complaint demonstrated actual knowledge of the existence of the Active Foreclosure Action. Accordingly, as there existed a pending foreclosure action at the time the default judgment was issued, defendant's motion to vacate the default judgment is granted pursuant to CPLR 5015(a)(1) and 3012(d) (see Stewart Tit. Ins. Co. v Bank of New York Mellon, 154 AD3d 656, 661 [2d Dept 2017]; A&F Scaccia Realty Corp. v New York City Dept. of Envtl. Protection, 200 AD3d 875, 878 [2d Dept 2021]).

Furthermore, in support of the Instant OSC, defendant has argued for this Court to use its "inherent discretionary power to relieve a party from a judgment or order for sufficient reason and in the interest of substantial justice" (see Aurora Loan Services, LLC v Dorfman, 170 AD3d 786, 788 [2d Dept 2019]). CPLR 5015(a) "does not provide an exhaustive list as to when a [*3]default judgment may be vacated. Indeed, the drafters of that provision intended that courts retain and exercise their inherent discretionary power in situations that warranted vacatur but which the drafters could not easily foresee" (Woodson v Mendon Leasing Corp., 100 NY2d 62, 68 [2003]).

In support of plaintiff's motion for a default judgment, plaintiff asserted entitlement to a judgment on its RPAPL 1501(4) claim and referenced the dismissal of a prior commenced and dismissed first foreclosure action, bearing Index #46945/2007 (the "Prior Foreclosure Action"). This was required to demonstrate the expiration of the statute of limitations required to enforce the subject mortgage. However, despite its knowledge of the Active Foreclosure Action, plaintiff's default judgment motion papers inexplicably contained no mention of said action, which would have necessitated a denial of that motion.

In Cohn v PROF-2013-M4 Legal Tit. Tr., 211 AD3d 805, 806 [2d Dept 2022], the Second Department affirmed the vacatur, in the interests of substantial justice, of a default judgment entered in a quiet title action, where "[t]he court found that the basis upon which it granted the default judgment—the plaintiff's representation that the related foreclosure action had been dismissed—was no longer true at the time that the plaintiff moved for the default." Here too, this Court granted plaintiff a default judgment based on plaintiff's representation that the Prior Foreclosure Action was dismissed, when plaintiff knew, and failed to divulge, the pendency of the Active Foreclosure Action, in its default judgment papers (see also HSBC Bank USA, N.A. v Alexis, 195 AD3d 600, 601-602 [2d Dept 2021]). Thus, defendant's motion to vacate the default judgment is also granted pursuant to the Court's inherent discretionary power in the interest of substantial justice. Accordingly, the Court need not reach Defendant's remaining arguments.^[FN2]

It is therefore, ORDERED that defendant's motion is GRANTED. Defendant is to serve a copy of this Order with Notice of Entry upon plaintiff within thirty (30) days of this Order's entry. Defendant shall also file a proposed order containing the relief sought in its application within thirty (30) days of this Order's entry.

This constitutes the Decision and Order of the Court.