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Adam Leitman Bailey, P.C. Succeeds on Appeal by Overturning an Order Dismissing a Foreclosure Action and Tolling Interest

In 2011, the lender commenced a foreclosure action against the borrower. The lender ultimately moved for Summary Judgment and an Order of Reference, in response to which the borrower cross-moved for dismissal alleging that the lender lacked the capacity to sue in New York because the lender was not authorized to do business within the state.

In a devastating Decision and Order against the lender, the Court dismissed the complaint on the grounds that the lender did not have the capacity to sue and also tolled all interest and fees on the loan from 2013 onward, leaving the lender with a potential statute of limitations issue. The lender quickly changed attorneys and hired Adam Leitman Bailey, P.C. to take over for the appeal.  

Using Business Corporation Law § 1312(a), Adam Leitman Bailey, P.C. argued on appeal that the borrower failed to establish that the lender conducted continuous activities in New York that are essential to its corporate business, but, regardless, that the lender has since been authorized to do business in the state of New York. Adam Leitman Bailey, P.C. also argued that it was improper for the Court to toll interest and fees, as the borrower failed to prove any wrongful conduct on the part of the lender.   

In a Decision and Order, the Second Department adopted these arguments and held that the borrower failed to satisfy his prima facie burden of demonstrating that the lender lacked the legal capacity to sue, and, therefore, the complaint should not have been dismissed.  Moreover, the Second Department held that since there was no wrongful conduct on the part of the lender, the Lower Court improvidently exercised its discretion in compelling the lender to toll interests and fees on the mortgage.   

Jeffrey R. Metz, Esq., managing partner of Adam Leitman Bailey, P.C.’s Appellate Group, and Jackie Halpern Weinstein, Esq., managing partner of Adam Leitman Bailey, P.C.’s Foreclosure Group, secured this result for the lender.

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