September 12, 2017

Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. – USFN Member (New York)

The proposition that a borrower in a mortgage foreclosure action is not entitled to a jury trial is a reasonably well known one, although a new case underscores how encompassing the principle can be. [Security Pacific National Bank v. Evans, 148 A.D.3d 465, 49 N.Y.S.3d 122 (1st Dept. 2017)].

The underlying maxim is that mortgage foreclosure is an equitable action and, consequently, there is no right to a trial by jury. This is so — even if the complaint includes a request for money damages or a deficiency judgment — because such relief is incidental to the mortgage foreclosure process. The deficiency remedy is primarily equitable in nature and the money judgment is merely ancillary to the case. Thus, no right to a trial by jury is afforded, and that extends to guarantors on the note. Moreover, a borrower’s assertions of defenses of fraud or usury do not create an ability for a jury to decide the issue. Likewise, interposition of a counterclaim (for what might not otherwise be equitable relief) does not give rise to a jury demand.

The prohibition against the availability of a jury extended yet further in Evans. There, parties to a foreclosure sought specific performance of their settlement agreement as well as injunctive relief. Equitable relief was being pursued and no entitlement to a jury remained. Even were the borrower-defendant to have suddenly asserted a money damage claim — while at the same time withdrawing equitable claims — that could not revive or create a right to a jury trial that had been waived through equitable claims applying to the same transaction. The conclusion is meaningful and certainly a welcome one for lenders.

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