What happens to a foreclosure action when a party defendant passes away? Although I know how my readers will hate my lawyerly answer, I would have to say “well… it depends.” The answer depends on 1) whether it is the borrower, mortgagor, or a judgment creditor, 2) how title is held and/or 3) whether it is before the action, during the action or after final judgment of foreclosure and sale is granted. Just about the only thing I do know for sure is that it is not easy to navigate these situations and that they cause a rather considerable delay of any mortgagee’s foreclosure action.
If there is such a thing--the best case scenario is if the decedent held title to the property with another party defendant, either as joint tenants with rights of survivorship; as husband and wife (tenants by the entirety) or if the decedent deeded away the property prior to their death. In such cases, under operation of law, the remaining party in title is the sole owner of the property and the decedent and his estate representative can be dropped from the action. In some cases, the mortgagee must waive its rights to a deficiency judgment against the estate. In cases where substitution is easily accomplished, virtually the only delay would arise during the time the mortgagee is obtaining the proof of death and during the motion for substitution is pending.
The gold standard of proof of death is a death certificate or letters testamentary granted by a Surrogate. A death certificate of a party is obtainable by the mortgagee’s request to NYS Department of Vital Records or the City of New York Health and Mental Hygiene or a local Municipality where the death occurred. Based upon my experience, generally, a death certificate is not available until six (6) months after death. Letters of Testamentary and the underlying petitions can be obtained by a Surrogate Court Search. Under some conditions, the court will accept an obituary as proof of death, if published in a paper or on a funeral home website. In one case, this practitioner has proven death by a police report detailing the suicide of the party defendant. In another case, through a newspaper article reporting the fire of the property and the death of its owners.
If the property is held solely by the decedent or if the property is held as tenants in common then we run into a substitution of estate issues. The general rule is that death of a party divests the court of jurisdiction until such time as a representative of the estate is substituted. NY CPLR Section 1015 provides that if a party dies, but the claim against him/her is not extinguished by his/her death, the court shall order substitution of the proper party. The proper party would be served with the action and be afforded all the procedural safeguards mandated by due process.
If a person, who should be substituted, does not voluntarily appear in the Supreme Court action, mortgagees must petition the Surrogate to appoint the public administrator as representative of the estate. Lastly, just because the decedent has only one heir or names an heir in an unfiled will, it does not mean that party is the estate representative unless and until they are appointed as such by a court.
Effectively, the general rule means that you cannot bring an action against an estate, but only upon appointment of an estate representative, and their substitution in place and stead of the decedent, can an action be commenced, or a prior action was commenced, could proceed.
Alternatively (and luckily), if a Judgment of Foreclosure and Sale has been granted prior to the death of the party defendant, no substitution of the estate is required. The Judgment has full force and effect, can be executed and binds all persons claiming any interest under the mortgagor.
So, what happens to a foreclosure action when a party defendant passes away? Well…..it depends. Needless to say this is a very simplified summary of a complex issue affecting foreclosures. For further reading on this topic I recommend the below listed references: NY CLS CPLR § 1015 NY CLS CPLR § 1021 DLJ Mtge. Capital, Inc. v. 44 Brushy Neck, Ltd., 51 A.D.3d 857 Matter of Einstoss, 26 NY2d 181, Bova v Vinciguerra, 139 AD2d 797, 799,; Alaska Seaboard Partners Ltd. Partnership v Grant, 20 AD3d 436, 437, Federal Natl. Mtge. Assn. v Connelly, 84 AD2d 805 Perry v Levenson, 82 A.D. 94, 81 N.Y.S. 586 Campbell v. Goldome Realty Credit Corp., 209 A.D.2d 991