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Defendant Failed To Prove that the Sales Price Was Unconscionable

By Scott E. Mollen

December 10, 2019 

In his Realty Law Digest, Scott E. Mollen discusses… a foreclosure case: “NYCTL 1998-2 Trust v. Alanis Realty LLC.”

Foreclosures—Defendant Failed To Demonstrate Reasonable Excuse For Default and Meritorious Defense—CPLR 317 Does Not Require Showing a Reasonable Excuse For Default and Was Inapplicable—Failure To Receive Notice of Summons and Complaint Served on Secretary of State Pursuant to Limited Liability Company Law §303 is Not Reasonable Excuse Given Defendant’s Failure To Maintain Current Address On File With Secretary of State For at Least Five Years—Defendant Failed To Prove that the Sales Price Was Unconscionable

A trial court had denied a defendant property owner’s motion to vacate a judgment of foreclosure and sale. The Appellate Division, First Department (court) affirmed. A proposed intervenor’s cross motion to intervene which had been denied, was held to be moot and therefore dismissed as “academic.”

The defendant “failed to demonstrate a reasonable excuse for its default of a meritorious defense to this foreclosure action….” The court explained that CPLR 317, does not require “the showing of a reasonable excuse for default” and was inapplicable to the subject action. See Admin. Code of City of NY §11-340.

The defendant owner of the foreclosed property argued that it had never received notice of the summons and complaint which was served on the Secretary of State pursuant to Limited Liability Company Law §303. The court held that the defendant’s excuse was not a reasonable excuse, since the defendant had failed “to keep a current address on file with the Secretary of State for at least five years….”

The court further held that the defendant owner’s “proposed answer and its principal’s affidavit contain only conclusory assertions, which do not establish a meritorious defense….” It noted that the defendant’s “claimed willingness to pay the tax lien well after the property was sold at auction is not a defense…” and the defendant did not provide “any support for its contention that the sales price was unconscionable….”

Finally, the court held that the proposed intervenor, “as the subsequent purchaser of the property, should have been permitted to intervene.” However, since the court had affirmed, the issue was “academic.”

Comment: Jeffrey Metz, a partner at Adam Leitman Bailey, P.C. and counsel for 598 Eagle LLC, the foreclosure purchaser/proposed intervenor, stated: “This is an important case that protects the rights of innocent foreclosure purchasers because it confirms that failure to update a business’s address will not negate service on the Secretary of State, that CPLR 317 does not apply in New York City tax foreclosures, and that a property owner cannot overturn a foreclosure sale by offering to pay the amount due after the auction is complete.”

NYCTL 1998-2 Trust v. Alanis Realty LLC, App. Div., 1st Dept., Case No. 260269/14, decided Oct. 10, 2019, Renwick, J.P., Gische, Kapnick, Gesmer, Moulton, JJ., All concur.

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