Service Of Process – The Underlying Danger to Foreclosures

We hesitate to repeatedly make this point, – in part because it is not something the servicer does (it’s for the lawyers) – but process service problems in foreclosure happen all the time and pose a significant, genuine threat to the course of a mortgage foreclosure action.  And when service of process is successfully assaulted, the cost in time and money to the lender or servicer can be especially dismaying – a point highlighted by a new case where a judgment of foreclosure and sale was vacated [Deutsche Bank Nat’l Trust Company v. Pestano, 71 A.D.3d 1074, 899 N.Y.S.2d 269 (2d Dept. 2010)].

First, a few principles, then a quick review of what happened here, then a wrap up to underscore the continuing peril.

When a party is served, the affidavit of the process server typically is good evidence of the efficacy of that service (its called prima facie evidence) but,  if the person supposedly served submits a sworn denial of receipt of process with some explanation to back it up, then the affidavit of the process server is rebutted and there has to be a hearing where jurisdiction is established by a preponderance of the evidence.

So what happened here?  In attempting to serve the borrower at the house, the process server stated that he served the borrower’s daughter.  If the borrower’s daughter was a person of suitable age, and was indeed present at her mother’s home, then this service would be good.  In this case, though, the borrower swore that the daughter was not staying at her home on the date of service which the court found (understandably it would seem) to be sufficient to rebut the process server’s affidavit.  This led to a hearing and a ruling that service was no good.

What makes this particularly disconcerting is that the claim of lack of service came after the judgment of foreclosure and sale had issued.  That is one of the particular dangers in the process service equation in the foreclosure case.

Servicers need not be reminded that foreclosures in judicial foreclosure states – New York in particular – can be exceptionally time consuming.  Process service, of course, occurs at the outset of the case.  But a judgment might not be obtained for a year and a half or two years or more (of course it varies).  If the efficacy of process service is not raised until late in the case – such as after the judgment of foreclosure and sale and maybe on the eve of the auction – a finding that process was no good can lead either to dismissal of the entire action, or pushing it all the way back to the beginning.  Either way, in an extreme situation, another year or two or more of prosecuting the foreclosure is on the horizon – wholly unpalatable.

And all this applies even if the borrower had no defense to the action, even though it may be beyond any question that the borrower had indeed defaulted on the mortgage.  The reason is that if a party is served, but is late to answer, in order to open up a case that party must show both an excuse for being late and a meritorious defense.  But if no jurisdiction was obtained at all – that is, if service was improper – then the question of a valid defense never arises; the person is just not in the case.

What might be the answer to this commonplace dilemma?  There is no foolproof method.  Highly professional process servers, truly dedicated to their work should be able to get to the truth most often and determine who is who so this variety of errors can be avoided.  But no one is perfect, and slippery defendants find ways to create smoke screens that can confuse everyone.  It is a tough issue.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.