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Second Department Holds that Consolidation Should be Denied Where One Action is the Subject of a Pending Meritorious Motion to Dismiss

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  • Posted on: Feb 24 2023

By Jonathan H. Freiberger

Many times, multiple actions are pending that involve similar facts and/or legal issues.  In such instances it may be appropriate to consolidate those actions pursuant to CPLR 602(a), which provides that “[w]hen actions involving a common question of law or fact are pending before a court, the court, upon motion, may order a joint trial of any or all the matters in issue, may order the actions consolidated, and may make such other orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.”  

A court may, in its discretion, grant consolidation to “serve[] the interest of judicial economy.”  Isa Realty Group, LLC v. EBM Development Co., 212 A.D.3d 427 (1st Dep’t 2023) (citations omitted).  Consolidation is appropriate to “foreclose inconsistent results” that may obtain in related actions pending independently.  Id.  Put another way, consolidation is “appropriate where it will avoid unnecessary duplication of trials, save unnecessary costs and expense, and prevent an injustice which would result from divergent decisions based on the same facts”, Best Price Jewlers.Com, Inc. v. Internet Data Storage & Systems, Inc., 51 A.D.3d 839 (1st Dep’t 2008) (citation omitted), or where discovery may be “streamlin[ed]”, Scarola Zubatov Schaffzin PLLC v. Dynamic Credit Partners, LLC, 210 A.D.3d 605, 607 (1st Dep’t 2022).  When factors favoring consolidation exist, a motion to consolidate should be granted “absent a showing of prejudice to a substantial right by the party opposing the motion.”  Calle v. 2118 Flatbush Avenue Realty, LLC, 209 A.D3d 961, 963 (2nd Dep’t 2022) (citations and internal quotation marks omitted).

On February 22, 2023, the Appellate Division, Second Department, decided HSBC Bank USA, N.A., v. Francis, a case that addressed consolidation in the context of a residential mortgage foreclosure action.  In HSBC, the Court held “as an issue of first impression … that consolidation should be denied where one of the cases to be consolidated is subject to a meritorious motion to dismiss.”  The facts of HSBC are simple, albeit a bit unusual.  In 2008, lender commenced a mortgage foreclosure action in which borrower defaulted.  While lender obtained a judgment of foreclosure and sale, it moved to vacate same in order to have a corrected judgment entered in its place.  The corrected judgment was never entered and the action was never discontinued or dismissed.  Fast forward to 2017, when lender commenced a new action to foreclose the same mortgage.  Borrower answered in the new action and moved to dismiss on statute of limitations grounds and for summary judgment “on her counterclaim pursuant to RPAPL 1501(4), inter alia, to cancel and discharge the subject mortgage.”  [Eds. Note: this blog has discussed statute of limitations in mortgage foreclosure actions [here], [here], [here], [here], [here], [here], [here] and [here] and RPAPL 1501 [here], [here] and [here].]  In response, lender cross-moved to consolidate the earlier and later actions to foreclose the same mortgage.

Supreme court granted lender’s cross-motion and denied borrower’s motion.  According to the Second Department, supreme court “reasoned that the cases arose from identical facts and circumstances, involved common questions of law and fact, and involved causes of action to foreclose on a residential mortgage [and, accordingly, c]onsolidation … would avoid unnecessary duplication of trials and the possibility of inconsistent verdicts since both actions arose from the same transaction or occurrence.”  Borrower appealed.

On appeal, the Second Department found the later filed action time-barred.  As this Blog has previously noted:

An action to foreclose a mortgage is governed by a six-year statute of limitations. CPLR 213(4)See also, Fed. Nat. Mort. Assoc. v. Schmitt, 172 A.D.3d 1324, 1325 (2nd Dep’t 2019).  When a mortgage is payable in installments, “separate causes of action accrue for each installment that is not paid and the statute of limitations begins to run on the date each installment becomes due.”  HSBC Bank USA, N.A. v. Gold, 171 A.D.3d 1029, 1030 (2nd Dep’t 2019).  … Once the mortgagee’s election to accelerate is properly made, “the borrower’s right and obligation to make monthly installments ceased and all sums became immediately due and payable.”  Fed. Nat. Mort. Assoc. v. Mebane, 208 A.D.2d 892, 894 (2nd Dep’t 1994) (citation omitted) The statute of limitations begins to run anew on the entire debt upon acceleration.  HSBC, 171 A.D.3d at 1030 (citations omitted).

Because borrower demonstrated, that the underlying loan was accelerated in 2008, and the later action was commenced in 2017 — more than six years later — the Second Department found that borrower met her burden of demonstrating the later action was untimely.  Thus, the burden shifted to lender “to raise a question of fact as to whether the statute of limitations was tolled or otherwise inapplicable, or whether the plaintiff actually commenced the action within the applicable limitations period.”  Supreme court found persuasive, lender’s argument that “the statute of limitations defense failed once the 2017 action was consolidated with the timely 2008 action.”  The Second Department disagreed.

After explaining the law on consolidation, the Second Department determined that “a precondition for merging two or more actions is that each action should itself be viable, meaning that neither is confronted with a pending—and apparently meritorious—motion to dismiss.”  Lender could not meet its shifted burden on the statute of limitations issue by “merely asserting that the 2017 action will become timely once it is merged with the timely 2008 action.” In so doing, the Court stated:

The purpose of consolidation under CPLR 602(a) is not to provide a party with a procedural end run around a legal defense applicable to one of the actions. In our opinion, in such instances, judicial discretion should not be used to cure the untimeliness of one action by tethering it to a related timely action. We hold, as an issue of apparent first impression that, in this case, the Supreme Court improvidently exercised its discretion in granting consolidation and that, in general, consolidation should be denied where one of the cases to be consolidated is subject to a meritorious motion to dismiss.

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Moreover, we note that, leaving aside the untimeliness of the 2017 action, there is an additional procedural challenge further demonstrating that consolidation is not appropriate in this instance. The actions are at very different procedural stages, with an order of reference and a judgment of foreclosure and sale having been entered already, though the judgment was vacated on motion, in the 2008 action. Additionally, the defendant failed to appear in the 2008 action but answered in the 2017 action. Were the actions merged, would the defendant be properly viewed as having defaulted in appearing in that merged action, or would she be properly viewed as having appeared in it? These two cases should not be consolidated where the defendant has defaulted in one but appeared and answered in the other.

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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