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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: November 25, 2018

Court Erred in Vacating Order Discontinuing Action

On November 21, 2018, the Second Department issued an opinion in IndyMac Bank, FSB v. Izzo, 2018 NY Slip Op. 08014, holding that an IAS court erred in vacating an order discontinuing a foreclosure action, explaining:

In March 2008, the plaintiff commenced this action to foreclose a mortgage given by the defendants Teresa E. Izzo, also known as Theresa E. Izzo, and Robert G. Izzo (hereinafter together the defendants) to secure a note. After issue was joined with respect to the defendants, the plaintiff moved, inter alia, for summary judgment on the complaint, to strike the defendants’ answer, and for an order of reference. The Supreme Court granted the plaintiff’s motion, and, in July 2009, entered a judgment of foreclosure and sale, inter alia, directing the sale of the subject property.

In November 2013, the plaintiff’s former counsel moved, inter alia, to cancel the notice of pendency, to vacate the order awarding summary judgment and the judgment of foreclosure and sale, and to discontinue the action. By order entered January 27, 2014 (hereinafter the order of discontinuance), the Supreme Court granted the plaintiff’s motion, vacated the order granting summary judgment and the judgment of foreclosure and sale, and thereupon discontinued the action.

Approximately two years later, after a change of counsel, the plaintiff moved to vacate the order of discontinuance and to restore the action to the active calendar. The defendants opposed the motion and cross-moved to impose sanctions pursuant to 22 NYCRR 130-1.1. By order entered May 25, 2016, the Supreme Court granted the plaintiff’s motion and denied the defendants’ cross motion. In an order entered June 7, 2016, the court, inter alia, granted the same relief. The defendants appeal from the orders entered May 25, 2016, and June 7, 2016.

While courts have discretionary power to relieve a party from a judgment or order for sufficient reason and in the interest of substantial justice, a court’s inherent power to exercise control over its judgments is not plenary, and should be resorted to only to relieve a party from judgments taken through fraud, mistake, inadvertence, surprise or excusable neglect.

Here, the plaintiff asserted that the action was erroneously discontinued by prior counsel due to confusion generated by an impending substitution of counsel. Where a party asserts law office failure, it must provide a detailed and credible explanation of the default, and conclusory and unsubstantiated allegations of law office failure are insufficient. Contrary to the plaintiff’s contention, the uncorroborated representation by its current counsel that the action was erroneously discontinued by prior counsel did not constitute a detailed and credible explanation warranting vacatur of the order of discontinuance and restoration of the action. Accordingly, the Supreme Court should have denied the plaintiff’s motion to vacate the order of discontinuance and to restore the action to the active calendar.

(Internal quotations and citations omitted) (emphasis added).

This decision shows that sometimes (but not always) a court will excuse mistakes, but there must be a reasonable explanation for the failure. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have made a mistake that you want a court to fix.

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