Opinion
19-CV-3547-DLI-SJB
2019-08-08
The SECRETARY OF the U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, an agency of the United States of America, Plaintiff, v. The ESTATE OF Ella Mae KEY, also known as Mae Key, deceased, Unknown Heirs of the Estate of Ella Mae Key, also known as Mae Key, deceased, United States of America, on behalf of Internal Revenue Service, New York Department of Taxation and Finance, John Doe #1-5 and Jane Doe #1-5, all occupants, tenants, persons or corporations, if any, having or claiming an interest in or lien upon the premises being foreclosed herein, Defendants.
John Manfredi, Manfredi Law Group, PLLC, New York, NY, for Plaintiff.
John Manfredi, Manfredi Law Group, PLLC, New York, NY, for Plaintiff.
ORDER
SANKET J. BULSARA, United States Magistrate Judge
The Secretary of the U.S. Department of Housing and Urban Development ("HUD" or "Plaintiff") seeks permission to utilize 28 U.S.C. § 1655 and serve certain Defendants—namely, the Unknown Heirs of the Estate of Ella Mae Key—via publication notice. (Mot. for Service by Publication ("Pl.'s Mot."), Dkt. No. 7). This motion is denied.
28 U.S.C. § 1655 permits a court to order an "absent defendant to appear or plead by a day certain," if that defendant "cannot be served within the State" or "does not voluntarily appear." The statute permits a court to issue such an order—known as a "warning order"—in a case involving a claim or lien on property located within the district. 28 U.S.C. § 1655 ; 13F Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3632 (3d ed. 2019) ; see Levitt v. F.B.I. , 70 F. Supp. 2d 346, 351 n.37 (S.D.N.Y. 1999) (" 28 U.S.C. § 1655 provides a basis for bringing an in rem action in a district court and, in appropriate circumstances, adjudicating a claim to the property by a claimant who is not before the court. A plaintiff seeking to invoke Section 1655, however, must apply for a ‘warning order’ directing the absent defendant to appear or plead by a day certain."). The "warning order" must be served on the absent defendant "personally if practicable" and on "the person or persons in possession" of the property. 28 U.S.C. § 1655. If such personal service is "not practicable," then the court may authorize the use of "publication" service. Id. ; see Bache Halsey Stuart Shields Inc. v. Garmaise , 519 F. Supp. 682, 686 (S.D.N.Y. 1981).
The problem with HUD's motion is that it asks the Court to issue a warning order to unknown defendants. Defendants are the estate of Ella Mae Key and her unknown heirs. (See Compl. dated June 17, 2019, Dkt. No. 1). Counsel for HUD states that it has been unable to identify any heirs through a docket search. (Decl. of John Manfredi, attached as Ex. 1 to Pl.'s Mot., Dkt. No. 7 ("Manfredi Decl.") ¶ 7 ("A Surrogates search against Ella Mae Key a/k/a Mae Key reveals nothing found of record."); Compl. ¶ 33 (same)). Nothing in the statute permits issuance of a warning order to persons who are unknown, and HUD does not cite to a case or other authority to suggest that the statute authorizes publication notice to persons who amount to John Does.
The fact that this statute authorizes publication notice—a type of substitute for personal service—suggests that it cannot be used against unknown defendants. HUD asks this Court to permit immediate service via publication because the Defendants are unknown. (Manfredi Decl. ¶ 6). Bootstrapping the lack of knowledge of the Defendants' identities to justify publication notice is highly problematic. HUD here suggests publishing notice in Newsday to reach readers in the Eastern District of New York. (See Proposed Order, attached as Ex. 2 to Pl.'s Mot.). But without knowing who the Defendants are, the Court cannot know whether such publication—a form of service that is less than ideal—is appropriately broad. If none of the heirs to the decedent live or ever lived in Long Island, New York, there is no reason to believe that publication in Newsday has any chance of being effective:
[T]he inadequacies of "notice" by publication ... bear repeating here: "Chance alone brings to the attention of even a local resident an advertisement in small type inserted in the back pages of a newspaper, and if he makes his home outside the area of the newspaper's normal circulation the odds that the information will never reach him are large indeed. The chance of actual notice is further reduced when as here the notice required does not even name those whose attention it is supposed to attract, and does not inform acquaintances who might call it to attention."
Schroeder v. City of N.Y. , 371 U.S. 208, 212, 83 S.Ct. 279, 9 L.Ed.2d 255 (1962) (quoting Mullane v. Cent. Hanover Tr. Co. , 339 U.S. 306, 315, 70 S.Ct. 652, 94 L.Ed. 865 (1950) ).
Even if the Court were to accept that Section 1655 may be used against unknown defendants, HUD has failed to establish that resort to the statute is appropriate. HUD, despite stating that it has conducted a docket search and has found no heirs of Ella Mae Key, admits that the property is currently occupied. (Compl. ¶ 39 ("Upon information and belief the Mortgaged Premises is occupied.")). HUD fails to explain if any steps were taken to determine whether any of the individuals in possession of the property are heirs. Moreover, the Complaint acknowledges that a "Ruth Key" acted as Ella Mae's "attorney-in-fact" in some of the relevant loan transactions, (id. ¶¶ 9, 13), and nothing is said about whether HUD attempted to locate her to determine if she is an heir or knows of any heirs. These failures demonstrate HUD has not established the necessary diligence to resort to the use of publication notice in Section 1655. Cf. Citizens & S. Nat'l Bank v. Auer , 514 F. Supp. 631, 633-34 (E.D. Tenn. 1977) ("Under the provisions of 28 U.S.C. § 1655, the plaintiff must prove to the satisfaction of the Court the impracticability of personally serving the absent defendant with the requested warning order. The Court does not now feel that the plaintiff has met such burden[.] There is no showing that any diligence has been exercised by the plaintiff in attempting to determine the present whereabouts of such defendants.... Accordingly, the plaintiff's application for the Court to issue a warning order to be served on the defendants ... by publication under the provisions of 28 U.S.C. § 1655 hereby is denied.") (quotations and citations omitted).
Furthermore, HUD is attempting to use Section 1655 to circumvent the requirements of state foreclosure law. It appears—though hardly clear from any of the papers filed, which are bereft of helpful statutory citations—that HUD is proceeding under New York Law to effectuate the foreclosure. Although HUD is a federal agency and has recourse to federal foreclosure law in certain cases—see, e.g. , 12 U.S.C. § 3757 et seq. —the Complaint cites to the New York Real Property Law notice procedures, suggesting it is seeking a New York law-based foreclosure. (See Compl. ¶ 40-41).
The mortgage itself states that it is governed by Federal law and the law of the state where the property is located, which is New York, (Mortgage, attached as Ex. B to Compl., Dkt. No. 1, ¶ 17], and makes representations about New York Lien law, (id. ¶ 24).
Under New York law and procedure, the estate is a necessary party to a foreclosure action when the mortgagor has died. Bayview Loan Servicing, LLC v. Sulyman , 130 A.D.3d 1197, 14 N.Y.S.3d 188, 190 (3d Dep't 2015) ("We find that decedent's estate is therefore a necessary party to this action, as the rights, interests and equities of all of the parties claiming an interest in the mortgaged premises should be settled and determined before any judgment of foreclosure and sale is entered[.]") (quotations and alterations omitted). Indeed, HUD recognizes as much by naming the mortgagor's heirs as Defendants in this case.
But having made that acknowledgement, HUD cannot use a federal notice provision to avoid its obligations to identify the potential heirs and estate representatives of the deceased mortgagor. Section 1655 does not provide a means to serve unknown persons. Those persons must first be identified, or a representative must be appointed to represent their interests. And to do that, HUD should have availed itself of New York Surrogate's Court.
"The Surrogate's Court has complete jurisdiction over all matters relating to the estates and affairs of decedents." 1 N.Y. Practice Guide: Probate & Estate Admin. § 4.01 (2018); see N.Y. Surr. Ct. Proc. Act § 201(3) ("The court shall continue to exercise full and complete general jurisdiction in law and in equity to administer justice in all matters relating to estates and the affairs of decedents, and upon the return of any process to try and determine all questions, legal or equitable, arising between ... any party and any other person having any claim or interest therein, over whom jurisdiction has been obtained as to any and all matters necessary to be determined in order to make a full, equitable and complete disposition of the matter by such order or decree as justice requires."). "To the extent plaintiff's action is brought to foreclose on a note and mortgage executed by an individual now deceased it appears to this court that the proper manner to proceed with this action is to make a formal inquiry of ... Surrogate Court, and if Surrogate's Court confirms that no will or estate has been filed, to make application for an administration proceeding and, if necessary, the appointment of the Public Administrator in the ... Surrogate Court." Wells Fargo Bank, N.A. v. Successor Tr. of Gwen Harleman , 68 N.Y.S.3d 381, 57 Misc.3d 1219A (Sup. Ct. 2017). The Surrogate's Court may adopt a temporary administrator, guardian ad litem, or public administrator to represent and identify any heirs, and service of the foreclosure action would then be made upon that administrator or guardian. Lambert v. Estren , 7 N.Y.S.3d 169, 171, 126 A.D.3d 942 (2d Dep't 2015) ("In most instances a personal representative appointed by the Surrogate's Court should be substituted in the action to represent the decedent's estate.... [I]n the event no such representative exists, an appropriate appointment may be made by the Supreme Court and that individual may be substituted in place of the decedent[.]"); see, e.g., JP Morgan Chase, Nat'l Ass'n v. McDonald , 46 Misc.3d 315, 998 N.Y.S.2d 275, 277 (Sup. Ct. 2014) ("[JP Morgan Chase, the mortgagee,] submitted an ex parte Motion for an Order to Appoint a Temporary Administrator on October 9, 2013.... The Court granted the Motion and signed an Order dated October 30, 2013, which was filed on December 23, 2013, appointing Jana McDonald, Esq. as Temporary Administrator for the Estate of Donald T. Garrow, and Suzanne Knight Debottis, Esq. as Guardian Ad Litem for the heirs-at-law, next-of-kin, etc of Donald T. Garrow. [JP Morgan Chase] was further granted leave to file and serve an Amended Complaint and Supplemental Summons, on the Temporary Administrator, Guardian Ad Litem and Nancy L. Garrow, wife of the decedent."). Rather than availing itself of such relief, HUD has taken the approach of a simple docket search of the probate docket, and without exercising adequate diligence, sought resort to the disfavored remedy of publication notice in federal court. "When it becomes apparent that there are potential defendants, who are incompetents, infants or missing heirs, who will be affected by the judgment, it is the obligation of the plaintiff in the first instance to ascertain the whereabouts of these defendants and only upon a showing of due diligence will an order of publication issue." First Union Nat'l Bank v. Estate of Bailey , 7 Misc.3d 1027A, 801 N.Y.S.2d 233 (Sup. Ct. 2005) (citing to N.Y. C.P.L.R. § 315, which like Section 1655, provides for publication notice as substitute notice). "In the event that their whereabouts cannot be ascertained, or they are located and are not legally competent to protect their own interests in the suit, it is incumbent upon the plaintiff to seek the appointment of a guardian and/or temporary administrator to ensure their interests are protected." Id. HUD "has absolutely no knowledge whether the deceased even has any heirs. This issue needs to be investigated and service by publication on ‘unknown heirs’ ... will not cure the need for the appointment of a personal representative for the decedent's estate." Wells Fargo Bank, NA v. Ramdin , 89 N.Y.S.3d 883, 885, 62 Misc.3d 392 (Sup. Ct. 2018).
This Court will not permit HUD to use Section 1655 and circumvent the need to proceed in Surrogate's Court to ascertain whether the mortgagor has any heirs. The motion for permission to use publication notice is denied.
SO ORDERED.