As vaccination rates increase, holds on foreclosure actions expire, and the courts slowly return to addressing their largely frozen foreclosure dockets, we can expect some familiar concerns to reappear. One common concern is the threat of dismissal pursuant to CPLR 3216 for unreasonable neglect to proceed. Given the severe disruption to mortgage litigation caused by the COVID-19 pandemic, and its effects on the staffing and continuity of many firms whose main focus is residential foreclosures, it would not be surprising to see an uptick in CPLR 3216 notices and/or CPLR 3216 dismissals. As with any dismissal, this poses a serious threat to lien enforceability and could lead to complete loss of the lien if, by the time of dismissal, the foreclosure is beyond or approaching six years since acceleration. Fortunately, the threat posed to mortgage liens is mitigated somewhat by the strict requirements imposed by the statutory language of CPLR 3216 and controlling case law.
Under CPLR 3216(a), “[w]here a party unreasonably neglects to proceed generally in an action . . . or unreasonably fails to serve and file a note of issue, the court, on its own initiative or upon motion, with notice to the parties, may dismiss the party’s pleading on terms,” although, unless specified in the order, “the dismissal is not on the merits.” While a defendant may file a motion or, as often happens, the court may act on its own initiative to seek dismissal for neglect to prosecute, litigants and the court must abide by three statutory pre-conditions before doing so, pursuant to CPLR 3216(b). The first two prerequisites are that (1) the issue must have been joined, and (2) one year must have elapsed since joinder or six months must have elapsed since issue of a preliminary court conference order.
The third prerequisite found in CPLR 3216(b) is more exacting. It states that a defendant or a court may seek dismissal for neglect to proceed only after serving a written demand by registered or certified mail, in which the defendant or the court demands that the plaintiff resume prosecution of the action and serve and file a note of issue within ninety days of receiving the demand, otherwise known as a “90-day demand.” Additionally, the written demand must state that the plaintiff’s failure to comply will serve as the basis for a motion to dismiss for “unreasonably neglecting to proceed.” Further, where the written demand is issued by the court, it “shall set forth the specific conduct constituting the neglect, which conduct shall demonstrate a general pattern of delay in proceeding with the litigation.” Id.
If the plaintiff fails to comply with the written demand issued by either the defendant or the court, the court may “take such initiative or grant such motion” to dismiss, unless the plaintiff shows “justifiable excuse for the delay and a good and meritorious cause of action,” pursuant to CPLR 3216(e).
A plaintiff who has delayed in prosecuting its foreclosure can take heart in the fact that “CPLR 3216 is extremely forgiving” in the way it is enforced. Baczkowski v D.A. Collins Constr. Co., 89 NY2d 499, 503 (1997). Courts cannot skip any steps in dismissing an action following a party’s default on a 90-day demand. For instance, in Cadichon v Facelle, 18 NY3d 230 (2011), the parties had entered into a stipulation that, inter alia, required plaintiff to file a note of issue by a certain date, with a 90-day notice appended to the stipulation demanding that plaintiff resume prosecution by the date stated in the stipulation. Plaintiff then failed to file a timely note of issue. Id. at 234. Four days later, the court marked the case “dismissed,” without issuing an order to that effect or other notice to the parties, and without a motion by the defendant or court seeking dismissal pursuant to CPLR 3216. Id. at 235. The Court of Appeals reversed the dismissal, finding that there was “no evidence in the record that the trial court made a motion to dismiss the action,” and that it was “apparent that the case was dismissed based upon the plaintiff’s failure to comply with the . . . stipulation and 90-day demand in doing so,” while categorizing the dismissal without an order as “at best, only a ministerial dismissal of the action without benefit of further judicial review.” Id. at 236. Further, the Court of Appeals held that where a case “proceeds to the point where it is subject to dismissal, it should be the trial court, with notice to the parties, that should make the decision concerning the fate of the case, not the Clerk’s office.” Id.
Appellate courts strictly enforce the requirement that a 90-day demand, even when issued in the form of a court order, must state that a plaintiff’s failure to comply “will serve as a basis for a motion” by the court to dismiss the action for failure to prosecute. U.S. Bank N.A. v Love, 187 AD3d 964, 964-965 (2d Dept 2020) (internal quotation marks omitted) (citing Deutsche Bank Natl. Trust Co. v Cotton, 147 AD3d 1020, 1021 [2d Dept 2017]; Element E, LLC v Allyson Enters., Inc., 167 AD3d 981, 982 [2d Dept 2018]) (affirming the lower court’s order restoring the action to the calendar, finding the lower court never issued a proper 90-day demand or a proper order of dismissal).
Similarly, trial courts cannot issue conditional orders of dismissal when attempting to enforce CPLR 3216. See, e.g., Deutsche Bank Natl. Trust Co. v Henry, 189 AD3d 1357 (2d Dept 2020). In Henry, the trial court held a status conference and issued a conditional order of dismissal stating that more than one year had passed since joinder and the plaintiff had unreasonably neglected to prosecute the action. Id. at 1357. Further, the order stated that “this action is dismissed pursuant to CPLR 3216 and the County Clerk is directed to cancel the Notice of Pendency unless Plaintiff files a note of issue or otherwise proceeds by motion for entry of judgment within 90 days of the date hereof.” Id. The plaintiff failed to comply with the conditional order of dismissal and the action was administratively dismissed without further notice. Id. The trial court denied plaintiff’s motion to restore. Id. The Second Department reversed the lower court and restored the matter to the active calendar, noting that “a conditional order may have the same effect” as a valid 90-day demand, meaning that it could only serve as the basis for a future motion. Id. at 1358 (emphasis in original). Yet, in Henry, as well as failing to qualify as a valid order of dismissal, the lower court’s conditional order also failed to qualify as a valid 90-day demand because “it failed to state that the plaintiff’s failure to comply with the notice will serve as a basis for a motion by the court to dismiss the action for failure to prosecute.” Id. (emphasis in original and internal quotation marks omitted) (quoting Deutsche Bank Natl. Trust Co. v Bastelli, 164 AD3d 748, 750 [2d Dept 2018]; Deutsche Bank Natl. Trust Co. v Cotton, 147 AD3d at 1021; CPLR 3216[b]). The appellate court held that the lower court “should not have administratively dismissed the action without further notice to the parties and without benefit of further judicial review.” Id. (citations omitted).
Under similar circumstances in HSBC Bank USA, N.A. v Arias, the Second Department reversed the lower court and restored the action to the active calendar, where the motion court issued a conditional order that purported to serve as a 90-day demand pursuant to CPLR 3216, but “was defective as it did not state that the plaintiff’s failure to comply with the demand would serve as a basis for the Supreme Court, on its own motion, to dismiss the action for failure to prosecute.” Id. at 1159 (citations omitted). Further, as in Henry, the court found that the action was improperly “ministerially dismissed without a motion or notice to the parties, and there was no order of the court dismissing the action.” Id. (citations omitted).
Even where the procedural requirements for dismissal pursuant to CPLR 3216 have been met, courts may decline to issue an order of dismissal. See Davis v Goodsell, 6 AD3d 382, 383-385 (2d Dept 2004) (citations omitted) (noting that a plaintiff’s failure to comply with a 90-day demand may be excused under the court’s discretion for a variety of reasons, “including where a defendant, after having served the 90-day notice, demands additional pretrial discovery from the plaintiff, or where a defendant, prior to having served such a notice, has obstructed the plaintiff’s own efforts to obtain legitimate pretrial disclosure from the defendant”). For instance, as recently found by the Second Department, where a party defaults on a 90-day demand, a subsequent motion to dismiss may still be denied even where the defaulting party fails to substantiate a reasonable excuse for non-compliance. Chase Home Fin. v Shoumatoff, ___AD3d___, 2021 NY Slip Op 01537 (2021). The court in Shoumatoff found that the defendant in the foreclosure action established that they served the 90-day demand on the foreclosing plaintiff in accordance with the requirements of CPLR 3216, and that the plaintiff failed to comply with the demand. Id. at *1. In opposition to the defendant’s subsequent motion to dismiss, the plaintiff was required to demonstrate a justifiable excuse for its delay and a good and meritorious cause of action. Instead, the plaintiff “advanced only a conclusory and unsubstantiated claim of law office failure” as its excuse, which the court found “would justify dismissal of the complaint.“ Id. However, the court noted that “even when presented with an unjustifiable excuse, a court still retains some residual discretion to refuse dismissal of a complaint as a penalty under CPLR 3216.” Id. at *2 (citing Baczkowski v D.A. Collins Constr. Co., 89 NY2d at 504). Taking into account its “residual discretion,” the court looked to the procedural history of the case, finding that plaintiff had a meritorious cause of action and that the defendant suffered “minimal prejudice” from the delay. Id. The court also noted that plaintiff clearly intended to prosecute the action based on an earlier, defective summary judgment motion, and that some of the delay in the case was not attributable to plaintiff, where plaintiff’s denied summary judgment motion had been removed from the court’s calendar and re-assigned to a different judge mid-motion, and then remained dormant before being eventually restored to the calendar and denied. Id. On those grounds, the appellate court reversed the lower court’s order of dismissal and remitted the action for further proceedings. Id.
Given the current state of the law, plaintiffs should be on the lookout for defective 90-day notices, improper conditional orders, and other extenuating circumstances that could justify denial of a CPLR 3216 dismissal motion, even where the plaintiff doesn’t necessarily have a reasonable excuse for defaulting on the 90-day notice. It is only a matter of time until the trial courts resume normal operations, and courts will unquestionably find themselves with a large backlog of foreclosure actions that have been largely unable to progress for over a year. With these conditions in mind, it would not be surprising to find both defendants and the courts seeking to employ CPLR 3216 to obtain dismissal. Fortunately, as detailed above, plaintiffs can rely on the strict prerequisites for a CPLR 3216 dismissal to preserve their claims.