Plaintiff-banks in foreclosure actions must be leery of belated personal jurisdiction challenges from not only defendant-borrowers but also from third-party intervenors.  Defendant-borrowers sometimes deed their interest to a property to a third-party, whether by an arms-length sale or otherwise.  If the new owner, the intervenor, challenges the bank’s jurisdiction over the defendant-borrower and seeks dismissal of the action on that basis, the bank should be able to rebut such a challenge on multiple grounds. 

As a threshold matter, CPLR 6501 provides that a person whose conveyance is recorded after the filing of a notice of pendency – such is often the case with an intervening subsequent property transferee – will be bound by all prior proceedings taken in the action to the same extent as if they were a named party to the action. Novastar Mtge., Inc. v. Mendoza, 26 A.D.3d 479 (2d Dept. 2006). 

In addition, upon transfer of title, the borrower is no longer a necessary party because it no longer has a stake in the outcome.  Bank USA, N.A. v. Pape, 178 A.D.3d 683, 684 (2d Dept. 2019); McCarty v. Downes, 161 A.D. 667, 670 (1st Dept. 1914).  Whether the bank obtained personal jurisdiction over that borrower is immaterial, in these instances, particularly where the bank waives a right to a deficiency judgment, a right generally not pursued, in any event.. 

Next, the personal jurisdiction defense is "personal" to the borrower and may not be “used” by the intervenor to argue that the intervenor is entitled to the dismissal of the intervenor/action.  Bass v. D. Ragno Realty Corp., 111 AD3d 863, 864 (2d Dept. 2013).  As the Second Department has held, “such a claim is personal in nature and may only be raised by the party allegedly improperly served” U.S. Bank N.A. v Gotterup, 203 AD3d 982, 983 (2d Dept. 2022).

Put simply, the service of process as to the borrower – a party that is indisputably not a necessary party – is not relevant as it pertains to an intervening subsequent title holder.  Plaintiff-banks should be aware of the arguments at their disposal in response to dismissal efforts by an intervenor.